Trying to simplify investments,--Please help

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Rajsx
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Trying to simplify investments,--Please help

Post by Rajsx » Sun Apr 01, 2018 5:53 pm

- I find the number of mutual funds in my all Vanguard 6 million Portfolio have crept up & want to simplify & over time go towards a 3 Fund Simple Portfolio. We recently sold commercial real estate & the $725 k proceeds are sitting in cash.

Our overall asset allocation TARGET needs to be Stocks 50/ Bonds 45/ Short Term 5,
At present we are at Stocks 40/ Bonds 38/Short Term 22. Short Term Cash includes multiple CDs & Cash

I am 61(Almost 62) & DW 57, are empty nesters, retired (disabled), think we are (gratefully) financially independent by multiple retirement calculators, will start withdrawing from Portfolio in yr 2021 when I turn 65. 2 kids are launched & are out of the house.
Presently drawing private disability ins. payments which cover our annual expenses of $150k. We project the expenses to remain the same adjusted to inflation.

His Trad IRA -
Total International Bond Ind -114k
Total International Stock Ind - 8k

His Rollover IRA -
Total Bond Market Ind -746k
Total International Bond Ind - 213k

His Rollover IRA -
Short Term Inv Grade -175k

His Roth IRA -
Intermediate Term Investment Grade -57k

His Roth IRA -
Intermediate Term Investment Grade -32k
Short Term Investment Grade - 10k

His Taxable -
Short Term Corp Bond Ind - 220k
Short Term Investment Grade -8k
Total International Stock Ind - 307k
Total Stock Market Ind - 1052k

Her Taxable -
Developed Market Ind - 140k
Short Term Investment Grade - 205k
Total International Stock Ind - 394k
Total Stock Market Ind - 519k

Her Trad IRA -
Intermediate Term Inv Grade - 56k
Total Bond Market Ind - 29k
Total International Bond Ind - 57k
Total International Stock Ind - 9k

Her Rollover IRA -
Short Term Investment Grade -19k
Total International Bond Ind -231k

Her SEP IRA -
Intermediate Term Inv Grade - 33k

Her Roth IRA -
Intermediate Term Investment Grade - 47k

OUTSIDE INV.
Bank Cash - 969k
Bank CDs - 358k


I request any/all suggestions & opinions towards decreasing the number of Mutual Funds & in general simplifying our portfolio, towards above given Asset Allocation &
I will be happy to provide any other information .....

Thanks in advance
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Duckie
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Re: Trying to simplify investments,--Please help

Post by Duckie » Sun Apr 01, 2018 7:22 pm

Rajsx wrote:We recently sold commercial real estate & the $725 k proceeds are sitting in cash.
Was that $725K already included in the taxable accounts/outside investments or is that extra?
I request any/all suggestions & opinions towards decreasing the number of Mutual Funds & in general simplifying our portfolio, towards above given Asset Allocation
You want an AA of 50% stocks, 45% bonds, 5% short-term/cash, with unknown international. You currently have about 35% of stocks in international so I followed that ratio. That breaks down to 33% US stocks, 17% international stocks, 45% bonds, and 5% cash. The following example combines several accounts and uses Vanguard funds. You could have:

Taxable bank accounts -- $300K -- 5%
5% Cash/CDs

His taxable at Vanguard -- $2114K -- 35% <-- Includes $527K from above bank accounts.
18% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)
17% (VWIUX) Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (0.09%)

Her taxable at Vanguard -- $1758K -- 29% <-- Includes $500K from above bank accounts.
15% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)
14% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

His Traditional IRA at Vanguard -- $1256K -- 21% <-- Includes both Rollover IRAs.
21% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.05%)

Her Traditional IRA at Vanguard -- $434K -- 7% <-- Includes Rollover IRA and SEP IRA.
7% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.05%)

His Roth IRA at Vanguard -- $99K -- 2% <-- Combines both Roth IRAs.
2% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

Her Roth IRA at Vanguard -- $47K -- 1%
1% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

My comments:
  • Selling some of the mutual funds in the taxable accounts could mean a major tax-hit, so you may not want to do this, but it will give you an idea of what you could have.
  • I put stocks in the Roth accounts instead of bonds because in general it's better to put assets with higher expected growth (stocks) in Roth accounts and assets with lower expected growth (bonds) in pre-tax accounts. That's because you've already paid the taxes in the Roth accounts so future growth is tax-free.
  • I didn't give you international bonds because I don't think they're necessary.
Something to think about.
Last edited by Duckie on Thu Jun 14, 2018 6:01 pm, edited 1 time in total.

Rajsx
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Re: Trying to simplify investments,--Please help

Post by Rajsx » Sun Apr 01, 2018 8:07 pm

Thanks Duckie, for helping me in what seems like an exhaustive exercise at rearranging my investments to keep it simple.

- Yes, the building sale proceeds are already given in the Outside accounts.
- I gradually will try to get out of International Bonds, which were courtesy of Advisors at Vanguard.

Appreciate your opinion
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Watty
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Re: Trying to simplify investments,--Please help

Post by Watty » Sun Apr 01, 2018 10:07 pm

One thing to do would be to make sure that the mutual funds in the taxable account are set to not automatically reinvest dividends and capital gains distributions. This will help you get to the point where any capital gains in the taxable accounts are all long term capital gains.

It was not clear what your tax brackets are but if the disability insurance is not taxable then you may be able to sell some of the investments in the 0% long term capital gains tax bracket or do some Roth conversions in a low tax bracket either now or after you are 65 if the disability payments stop then.

It looks like you will have substantial RMD's when you turn 70 so it would be good to consider what tax bracket you will be in then. If you are not planning on giving a lot of money to charity then you might want to consider doing Roth conversions in higher tax brackets, even up to the 24% tax bracket but that is not at all clear. You could use some of the funds in the taxable account to pay for that.

Rajsx
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Location: Florida

Re: Trying to simplify investments,--Please help

Post by Rajsx » Mon Apr 02, 2018 7:03 am

Thanks Watty, appreciate the good pointers you shared.

Yes, the taxable returns are being directed to a settlement fund in that account,
Disability payments are not taxable, this year the marginal tax rate was 25%
This year the cap gains of the property sale may end up into a substantial tax bill, I plan to do the Roth Conversions starting next year.
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Rajsx
Posts: 355
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Location: Florida

Re: Trying to simplify investments,--Please help

Post by Rajsx » Tue Apr 03, 2018 10:59 am

BUMP, any other suggestions please

Thanks
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Peter Foley
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Re: Trying to simplify investments,--Please help

Post by Peter Foley » Tue Apr 03, 2018 4:20 pm

I'm not familiar with disability insurance payments. Is that taxable income?

What is your current marginal tax rate?
What do you expect that rate to be when you start withdrawals?

Where I heading with this is the potential for Roth conversions.

I (again) second Duckie's well thought out recommendations. While he does not specifically mention this, some of the accounts could be combined. There is no longer any reason I can think of to have multiple Roth accounts for example.

Rajsx
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Location: Florida

Re: Trying to simplify investments,--Please help

Post by Rajsx » Tue Apr 03, 2018 5:39 pm

Thanks Peter for chiming in,

- Disability Payments are not taxable, this is a private policy (Not Social Security Disability)
- In 2017 the Marginal Income Tax rate was 25%, difficult to say but I think this rate may continue after age 70 1/2
- The real estate sale this year will increase my tax payments, hence, I postponed the roth conversions to start next year onwards.
- Yes, Duckie gave a very sensible plan, I have started to & will gradually implement it.

Anything else I am missing, any other insights ?
We do not stop laughing because we grow old, we grow old because we stop laughing !!

Rajsx
Posts: 355
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Location: Florida

Re: Continuing to simplify investments,--Please help

Post by Rajsx » Tue Apr 17, 2018 4:25 pm

....Continuing to simplify my investments,

I am at 51% 49% Stocks/Bonds, with $5,615,276 Total assets at Vanguard, I have already invested the $725k I talked about in my earlier post.

I have some Bank CDs of around $350k with varying maturity dates + $60k in high yield Online Savings for Emergency Fund

My present Portfolio is as follows

His Taxable Account - -Total 1,688,969
VWIUX Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares - $228,512
VTIAX Vanguard Total International Stock Index Fund Admiral Shares - $310,647
VTSAX Vanguard Total Stock Market Index Fund Admiral Shares - $1,149,808

Her Taxable Account - Total $2,088,562
VTMGX Vanguard Developed Markets Index Fund Admiral Shares -$142,909
VWIUX Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares - $826,731
VTIAX Vanguard Total International Stock Index Fund Admiral Shares - $402,259
VTSAX Vanguard Total Stock Market Index Fund Admiral Shares - $716,662

His & Her IRAs -VBTLX Vanguard Total Bond Market Index Fund Admiral Shares —$168,7628

His & Her ROTH IRAs - VTIAX Vanguard Total International Stock Index Fund Admiral Shares -$150,113


Any thoughts on this Portfolio, any opinions ?
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Duckie
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Re: Trying to simplify investments,--Please help

Post by Duckie » Tue Apr 17, 2018 5:45 pm

Rajsx wrote:Any thoughts on this Portfolio, any opinions?
This looks good to me. Ignoring the $60K emergency fund, currently you have 31% US stocks, 17% international stocks, 46% bonds, and 6% cash.

Taxable bank accounts -- $350K -- 6%
6% Cash/CDs

His taxable at Vanguard -- $1689K -- 28%
19% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)
5% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)
4% (VWIUX) Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (0.09%)

Her taxable at Vanguard -- $2089K -- 35%
12% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)
7% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)
2% (VTMGX) Vanguard Developed Markets Index Fund Admiral Shares (0.07%)
14% (VWIUX) Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (0.09%)

His & Her Traditional IRAs -- $1688K -- 28%
28% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.05%)

His & Her Roth IRAs -- $150K -- 3%
3% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

Have the multiple IRAs been combined yet?

Rajsx
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Location: Florida

Re: Trying to simplify investments,--Please help

Post by Rajsx » Tue Apr 17, 2018 7:27 pm

Thanks again Duckie, with your suggestions I am gradually getting there.

Combining our IRAs are my next step, I will be calling my Flagship Rep for that.
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ray.james
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Re: Trying to simplify investments,--Please help

Post by ray.james » Tue Apr 17, 2018 8:04 pm

You might want to consider a Joint taxable account... It simplifies a lot of things for a couple with simple will. Further, implementing a 2-4 fund portfolio is very easy.

Her Taxable:
2% (VTMGX) Vanguard Developed Markets Index Fund Admiral Shares (0.07%) - Is this a TLH or sitting on a lot of gains? If not rolling this with total international is not a bad idea. 2% will not sway portfolio much.

Edit: We went from separate to joint - needed some forms to be filed but funds rolled intact.
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

Rajsx
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Location: Florida

Re: Trying to simplify investments,--Please help

Post by Rajsx » Tue Apr 17, 2018 8:39 pm

Yes James, selling Developed Market Index will result in lots of Cap Gains Tax.

What are the gains of a Joint Taxable account vs Separate Accounts ??

Thanks
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Rajsx
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Location: Florida

Re: Trying to simplify investments,--Please help

Post by Rajsx » Wed Apr 18, 2018 8:04 am

What are the benefits of a Joint Taxable account vs Separate His & Her Accounts ??
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ray.james
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Re: Trying to simplify investments,--Please help

Post by ray.james » Wed Apr 18, 2018 6:46 pm

Rajsx wrote:
Wed Apr 18, 2018 8:04 am
What are the benefits of a Joint Taxable account vs Separate His & Her Accounts ??
1 account rather than 2 a tax time
Stepped up basis when one of the spouse passes away.(need to check your state law)
In case of death the ownership passes to other person automatically. - no will/estate
asset allocation/re-balancing easier in one account than two- this is mental benefit.
Automatic power of attorney-- or ownership?

You would still be able to login to your individual login and both will see it. (plus "your" individual IRA/Roth.)
When in doubt, http://www.bogleheads.org/forum/viewtopic.php?f=1&t=79939

Rajsx
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Location: Florida

Re: Trying to simplify investments,--Please help

Post by Rajsx » Wed Apr 18, 2018 6:50 pm

Thanks James, that sounds good.

We do have a Trust & a Estate Plan & I do not know whether Trust Accounts will come in the way. I will research it further.

I wonder if other married Forum members have a single Taxable account, to make it easier for themselves.
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