Large inheritance -- looking for advice

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lookingforadvice739
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Large inheritance -- looking for advice

Post by lookingforadvice739 » Thu Jun 07, 2018 12:02 pm

Hi everyone -

I'm new to posting, but I've been an occasional "lurker" on the forum after reading The Bogleheads' Guide to Investing about a year ago.

I'm 30 years old and my dad died late last year, leaving me ~$5m between his portfolio/retirement accounts and life insurance money. I worked hard in my 20's and, under the "FIRE" philosophy, saved up about $1m of my own money. Almost all of my money had been split between ETFs and a high-yield savings account, so my personal experience with different options is a little limited.

My dad's portfolio (which has now been merged with mine) includes ~50 individual stocks, a few ETFs, and six mutual funds. My portfolio was primarily ETFs. I don't feel up to the task of monitoring all those individual stocks, so my current plan is to sell the majority, if not all of them. And I'm not sure how to handle the mutual funds. My head starts to spin when I try to figure out what my allocations *should* be. My general goals are to be as tax-efficient as possible, earn 6%+ annually on average (reasonable?), and keep enough somewhat liquid so that I won't have to sell off a ton of stock in the case of a market downturn.

I've met with a few potential financial advisors (active money managers), however going from paying $0 for financial assistance to potentially paying $30, $40, even $50,000 annually is a pretty big stretch for me. Even looking at credentials and reviews/references, it's hard to determine who I can trust and if their services will make up for the costs. I've always monitored my own finances actively, so throwing money at it and having someone else do all the heavy-lifting doesn't necessarily appeal to me. That being said, I'm feeling overwhelmed.

My cost of living is relatively low. Expenses have been high this year because of my dad's death, but in a normal year I would say $30,000 is more than enough for me to live on (last year I spent $22,000). I'm working on a book, so I don't have a consistent source of income at the moment. I'm required to take RMDs from the inherited IRA (~$17,000 annually before tax). I need a new car and at some point in the next five years I'd like to pursue one of my business ideas, so those would be the only potentially large dips into the money.

I'd love to hear thoughts on how to best proceed, advice on allocations, etc. I don't really have anyone I can talk with about this outside of one or two people working at my financial institutions. I can post more details if need be. Thanks in advance for your thoughts...

Amy

Easy Rhino
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Re: Large inheritance -- looking for advice

Post by Easy Rhino » Thu Jun 07, 2018 4:06 pm

I'm sorry for your loss!

i'd like to be the first to link the bogleheads wiki on managing a windfall:

https://www.bogleheads.org/wiki/Managing_a_windfall

As for individual stocks and funds, I believe you get a stepped up cost basis on both individual stocks and I think mutual funds, so at least there's not much capital gains hit from selling

sport
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Re: Large inheritance -- looking for advice

Post by sport » Thu Jun 07, 2018 4:15 pm

One possibility is that you can use Vanguard's Personal Advisor Service. The cost is no more than 0.30% of the amount they manage. I believe it might even be less for the amount of your holdings. The nice thing about this service, aside from the lower cost, is that you can discontinue the service at any time. So, you can have them set up your investments and help you decide on an asset allocation. Once it is all in place, and you are comfortable with it, you can discontinue the service and just continue on the road they have laid out for you. There are other do-it-yourself options available to you. However, if you are feeling overwhelmed, Vanguard's PAS may be just what you need to get things in order. It is also worth knowing that Vanguard will not try to sell you any high-priced investment products that you don't really need. Some other advisors may try to do that. So, if you go with any other advisor, be on guard for such advice.

soccerrules
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Re: Large inheritance -- looking for advice

Post by soccerrules » Thu Jun 07, 2018 4:21 pm

sorry for your loss.

The one piece of advice that I have read on this board often would be -- Take your time. There is really no reason to rush. Financially speaking, you have the potential of hurting yourself more by moving to quickly, than by waiting and gaining wisdom.

I am sure you are overwhelmed and you need to take time to grieve your fathers passing and then understand the enormous gift he has provided for you. Then start considering next steps.

It would not inappropriate to take $30-40K and buy a car, take care of repairs/expenditures that have been delayed- and maybe even a 1-2 week vacation to clear your mind. (that is about what you would pay an FA for 1 years management)

It appears you having a savings mindset if you have $1M already put aside from your own efforts. By taking your time and looking at how to set up your new portfolio- you really could be set for life.

Best of luck
Don't let your outflow exceed your income or your upkeep will be your downfall.

livesoft
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Re: Large inheritance -- looking for advice

Post by livesoft » Thu Jun 07, 2018 4:26 pm

I'd sell ALL the stocks as soon as possible and not attach any sentimental value to them. The ones in a taxable account: Get them gone before any of the capital gains get bigger. Clearly, you know enough to tell which stocks are US and which are foreign, so you can figure out the current asset allocation and use a Total US or a Total Int'l ETF or mutual fund to replace any of the individual stocks.

There are many investors on this forum with mid-7-figure portfolios that are completely do-it-yourself. A one million portfolio is scaleable to a $10 million portfolio with virtually no changes.

Update your will and estate plan.
Wiki This signature message sponsored by sscritic: Learn to fish.

kaeltor
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Re: Large inheritance -- looking for advice

Post by kaeltor » Thu Jun 07, 2018 4:31 pm

livesoft wrote:
Thu Jun 07, 2018 4:26 pm
I'd sell ALL the stocks as soon as possible and not attach any sentimental value to them. The ones in a taxable account: Get them gone before any of the capital gains get bigger. Clearly, you know enough to tell which stocks are US and which are foreign, so you can figure out the current asset allocation and use a Total US or a Total Int'l ETF or mutual fund to replace any of the individual stocks.

There are many investors on this forum with mid-7-figure portfolios that are completely do-it-yourself. A one million portfolio is scaleable to a $10 million portfolio with virtually no changes.

Update your will and estate plan.
OP I am sorry for your loss.

I agree with what livesoft has posted.

With the amount you have you can withdraw. EDIT: Withdrawal rate has been corrected to 2-2.5% per Foolmeonce and other posters.

Find what you enjoy in life, you are set from a financial perspective.
Last edited by kaeltor on Mon Jun 11, 2018 1:03 pm, edited 2 times in total.

delamer
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Re: Large inheritance -- looking for advice

Post by delamer » Thu Jun 07, 2018 4:36 pm

I am sorry about your father.

Have you determined if all/any of the assets you inherited received a step up in their cost basis?

CedarWaxWing
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Re: Large inheritance -- looking for advice

Post by CedarWaxWing » Thu Jun 07, 2018 4:39 pm

sport wrote:
Thu Jun 07, 2018 4:15 pm
One possibility is that you can use Vanguard's Personal Advisor Service. The cost is no more than 0.30% of the amount they manage. I believe it might even be less for the amount of your holdings. The nice thing about this service, aside from the lower cost, is that you can discontinue the service at any time. So, you can have them set up your investments and help you decide on an asset allocation. Once it is all in place, and you are comfortable with it, you can discontinue the service and just continue on the road they have laid out for you. There are other do-it-yourself options available to you. However, if you are feeling overwhelmed, Vanguard's PAS may be just what you need to get things in order. It is also worth knowing that Vanguard will not try to sell you any high-priced investment products that you don't really need. Some other advisors may try to do that. So, if you go with any other advisor, be on guard for such advice.
Or as an alternate plan, the use of a target dated fund could be less expensive over all. Using that for perhaps a year just to get oriented and to do some leisurely reading of the great books, especially the bogleheads.org book list would be a low key way to be invested and also to get some solid education as to how NOT to need an advisor.

https://www.bogleheads.org/wiki/Books:_ ... t-up_books is a good place to start, and reading the "starting" books would be good if you have not already read them.

Selling the stocks asap... as already recommended would seem very prudent.

In a target dated fund, and perhaps a three years living expenses account in a CD ladder might take the pressure off while you get oriented to your situation and continue your book writing if you wish, or at least until you find some other income source that you are satisfied with.

senex
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Re: Large inheritance -- looking for advice

Post by senex » Thu Jun 07, 2018 4:49 pm

Condolences to you.

You accumulated and managed $1M by age 30 -- which means you have excellent financial skill & discipline -- possibly more than the great majority of "professionals." If you keep the asset allocation you have now, and just multiply all your numbers by 6 (because you're going from ~1M to ~6M), you'll be golden.

I agree with previous posters: there is no need to rush. It's fine to take a couple years before adjusting into your final state. It's fine to take even longer if there are tax complications (but hopefully you have a step-up basis on almost everything, and thus few taxable gains).

If you hang around bogleheads long enough, you hear lots of horror stories about people who hired an "advisor" when overwhelmed, and the advisor got them tangled into an even worse mess. If you think it's hard to disentangle the current state, just let an "advisor" control the portfolio for a while -- it may become quite costly & byzantine.

I would say "good luck" but you've already demonstrated a great deal of skill. Keep up the good work.

HJG0989
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Re: Large inheritance -- looking for advice

Post by HJG0989 » Thu Jun 07, 2018 5:58 pm

livesoft wrote:
Thu Jun 07, 2018 4:26 pm
I'd sell ALL the stocks as soon as possible and not attach any sentimental value to them. The ones in a taxable account: Get them gone before any of the capital gains get bigger.
I second this. My spouse and I each lost a parent in 2009 when the market was low. We should have sold then and moved the money into index funds. We now have more than a million in capital gains. This mistake will cost us a lot of money to correct.

I am sorry for your loss.

Best of luck to you.

letsgobobby
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Re: Large inheritance -- looking for advice

Post by letsgobobby » Fri Jun 08, 2018 12:11 am

Yes, the easiest way to proceed is to sell every individual stock and any inherited fund that isn't core to your portfolio. Reinvest per your IPS; if you don't have one, write one.

After selling everything above, what would you have left?

If you're comfortable managing $1 million you can probably manage six.

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BL
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Re: Large inheritance -- looking for advice

Post by BL » Fri Jun 08, 2018 12:32 am

I also agree on selling all inherited equities. It is fine to leave them in money market or other fixed income until you have had time to recover from your loss and then decide what you want to do. There is no need to rush this. I would trust advice from Vanguard and perhaps a few elsewhere but it is difficult to find a fee-only competent adviser rather than walking into a salesperson or charlatan. Be aware that you now have a target on your back for insurance, investment or others who want a share of your money.

This little treasure of a book on personal investing covers a lot in a few pages:
https://www.etf.com/docs/IfYouCan.pdf

You might want most of your bonds in IRA to help keep down taxable RMDs a bit. The rest could be in tax-free munis as needed, maybe in your state if available.

You will need to consider umbrella insurance.

cheesepep
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Re: Large inheritance -- looking for advice

Post by cheesepep » Fri Jun 08, 2018 2:43 am

To some of the weird people above, more capital gains means good, not bad. No matter if you are paying taxes on them, you are earning money, not losing.

gotester2000
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Re: Large inheritance -- looking for advice

Post by gotester2000 » Fri Jun 08, 2018 2:57 am

How much percentage of 5M are those 50 stocks?

It maybe worth to take your time to analyse those stocks which your dad may have spent a lifetime accumulating - they maybe worth holding.

You have made your own million in less than 10 years, so you know how to manage a large sum - you dont want to continue this work?

inbox788
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Re: Large inheritance -- looking for advice

Post by inbox788 » Fri Jun 08, 2018 3:36 am

lookingforadvice739 wrote:
Thu Jun 07, 2018 12:02 pm
I'm 30 years old and my dad died late last year, leaving me ~$5m between his portfolio/retirement accounts and life insurance money. I worked hard in my 20's and, under the "FIRE" philosophy, saved up about $1m of my own money.

My head starts to spin when I try to figure out what my allocations *should* be. My general goals are to be as tax-efficient as possible, earn 6%+ annually on average (reasonable?), and keep enough somewhat liquid so that I won't have to sell off a ton of stock in the case of a market downturn.
...
My cost of living is relatively low...in a normal year I would say $30,000 is more than enough for me to live on (last year I spent $22,000).

I'm working on a book, so I don't have a consistent source of income at the moment. I'm required to take RMDs from the inherited IRA (~$17,000 annually before tax). I need a new car and at some point in the next five years I'd like to pursue one of my business ideas, so those would be the only potentially large dips into the money.

I'd love to hear thoughts on how to best proceed, advice on allocations, etc. I don't really have anyone I can talk with about this outside of one or two people working at my financial institutions. I can post more details if need be. Thanks in advance for your thoughts...

Amy
Sorry for your loss. It's worth repeating, take your time. Make ultraconservative moves or leave things alone until you're ready. Take 3 month, 6 months, 1 year or more if you need.

You don't need to feel overwhelmed. It's a lot to take in, but if lived to be 100, you would need $30k*70=$2.1M cash, which you have thrice over. You can afford a $30k car, and to spend $30k on one of your business ideas, and neither will impact your situation much. Go slow and decide how much risk you need to take and are willing to take. In nearly most situations, it's worth taking a little more risk. So long as your wind up with an AA between 30/70 and 80/20, you'll do fine. Do you know your current AA?

Leesbro63
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Re: Large inheritance -- looking for advice

Post by Leesbro63 » Fri Jun 08, 2018 8:03 am

I’m sorry that you lost your father so young. That being said, it sounds like he left you with much more than “just” $5m. It appears that he left you with a good financial sense and an accumulation mentality. Which might be worth even more than the $5M. You can do this!

I’d sell all the stocks and do a simple 2 or 3 fund portfolio, with maybe a 60/40 or even 70/30 asset allocation. You’re young enough to be 100% stock, but you’re not gonna like watching $6M go down during your first bear market with that level of wealth. Some bonds will cushion that and still leave enough horsepower to turn your $5M into an even much larger amount as you age. Keep it simple. $6M is not much different to manage than $1M. You will want to set it and not tinker, as that much money can generate big cap gains taxes if you trade. Take a lesson from Warren Buffett who usually holds forever to avoid cap gains taxes. DO NOT PAY 1% ($60,000/year) to a “financial advisor”. You can do this yourself. Take your time. A big part of the best way to honor your father’s life is to further his obvious good financial sense.

HJG0989
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Re: Large inheritance -- looking for advice

Post by HJG0989 » Fri Jun 08, 2018 8:18 am

Duplicate.
Last edited by HJG0989 on Fri Jun 08, 2018 8:34 am, edited 1 time in total.

kmurp
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Re: Large inheritance -- looking for advice

Post by kmurp » Fri Jun 08, 2018 8:18 am

Be sure you get the inherited IRA titled properly.
Agree with the many opinions to sell the individual stocks.
Very much agree with you using the Vanguard personal advisory service even for just one year to help you get things set up. It will cost a relatively small amount for you to have things done properly.

HJG0989
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Re: Large inheritance -- looking for advice

Post by HJG0989 » Fri Jun 08, 2018 8:32 am

cheesepep wrote:
Fri Jun 08, 2018 2:43 am
To some of the weird people above, more capital gains means good, not bad. No matter if you are paying taxes on them, you are earning money, not losing.
Selling the stocks early on and reinvesting in index funds would still result in capital gains, but a lot of the gains would never be taxed if passed on to heirs or if sold in small increments for living expenses. Tax planning is an important part of investing.

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Raymond
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Re: Large inheritance -- looking for advice

Post by Raymond » Fri Jun 08, 2018 9:09 am

Sorry about your father.

I would think that a person smart enough and hard-working enough to accumulate $1 million by the age of 30 would be able to manage $5 million without needing to use the services of "financial advisors", but that's just me.

I personally would NOT talk to "wealth advisors" or "personal bankers" at your local financial institutions - you'll never hear the end of sales pitches for God-knows-what kind of crap, which all just happen to spin off nice commissions for the salesperson, whether or not they actually benefit you :greedy

Are you married? Children or anyone who depends on you financially? You may want to consult an attorney to set up a living trust.

You may need an accountant for tax planning, and to file your father's Form 1040 (income before death) and Form 1041 (estate return), if these have not already been done.

Consider umbrella insurance to protect your assets, so review your insurance coverages (home, auto, and if necessary, term life insurance.) Do not tell the insurance people about your inheritance (see sales pitches above).

Get a new car, as long as you don't go nuts.

Agree with the recommendations to sell the existing stocks if you find them to be a PITA to keep track of, or they don't fit your asset allocation. I wished I'd done that after my mother died in 2011, and moved the proceeds into my existing index funds. I still have a couple of the stocks, and now I'd have to pay a lot in capital gains tax to unwind them.

Tell as few people as possible about your situation, or you'll be inundated with requests for "loans", "buy me stuff", "I have a great business idea I need you to fund", and so on.

You may consider posting your information using the format in this link:

"Asking Portfolio Questions" - just copy and paste it into this thread.

Best wishes to you.
"Ritter, Tod und Teufel"

megabad
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Re: Large inheritance -- looking for advice

Post by megabad » Fri Jun 08, 2018 10:42 am

Condolences.

Personally, I would not use an advisor. No one is as trustworthy as you with your (or your father's) money and you seem comfortable with DIY.

As livesoft and other have indicated, the first thing I would do is liquidate all stocks and active funds as soon as possible.

After this, as others have said I might take a short bit of time trying to figure out what my plans were on grand scale (bigger than new car). Is charity important to you (or to your father)? Do you have family needs? New home? etc. For a short time this may mean that some of your assets are in money market fund sweep account and that's fine. After you determine your goals, I would invest in a simple low cost portfolio accordingly. Personally I am pretty aggressive with funds in excess of what I need to survive so my AA might look 80% Vanguard Total Stk Mkt Ind, 10% Vanguard Total Int, 10% Intermediate Term Tax Exempt. Personally lean light on international due to FITC reduction/income limit. Would lean toward mutual funds not ETFs since your assets may allow you to go institutional at some point. All this is a personal decision depending on your goals though.

You may already know these things but...be aware that your change in wealth may affect aspects of your life (especially if people know about it directly or indirectly). Would advise that you consult with attorneys and close your fathers estate as soon as attorney recommends and keep many death certificates and all paperwork regarding his estate forever. Would advise an increase in your umbrella policy. Would advise that you start thinking about tax planning sooner rather than later as your tax situation has changed as well. Depending on your family situation you may want to consider trusts as well.
Last edited by megabad on Fri Jun 08, 2018 10:50 am, edited 1 time in total.

lookingforadvice739
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Re: Large inheritance -- looking for advice

Post by lookingforadvice739 » Fri Jun 08, 2018 10:50 am

Wow, thank you all for the thoughtful answers! A few notes from my end:

- I really appreciate all of the "don't rush" suggestions. Every day that I'm without an exact plan I feel like I'm failing and not doing right by his money. But taking my time and making the best choices seems like the obvious answer...
- I will definitely do some research on Vanguard's Personal Advisor service -- that's quite a bit less than other active managers. It would still be a pretty big chunk of money, though (unless I have them set it up and then drop the service). Also will look at the target dated fund -- that's not something I'm as familiar with.
- Currently I'm only using Schwab as my brokerage - maybe it would be in my best interest should be split things up
- Before my dad died, my asset allocation was something like 85% stocks/15% "safe"/accessible investments/cash. I've never actually held any bonds. Now everything is all over the place...
- My dad's 401K was some sort of proprietary fund so it got totally cashed out when I moved it to the inherited IRA at Schwab. Something like $550k cash just sitting at the moment :|
- Yes -- all the stocks got a step-up in basis based on his date of death
- "How much percentage of 5M are those 50 stocks?" - About 31% of the 5M ($1.58M total, with gains of $140k). I should have mentioned that about 5 of those individual stocks were actually mine, but I believe everything here counts as "long-term gains"
- Will likely get the individual stocks sold (although definitely feel some sentimental value on a few of them). There's just such a variety of gain/loss since he died that I'm not sure how things will pan out. But I'll try to put in the time to research and see what's being held in the ETFs prior to selling or deciding to keep.
- In terms of this year's income, I was also required to take his HSA out in full for 2018 (~$50k)
- I think after this I need a complete portfolio revamp, but I think the idea that my original $1m portfolio is scaleable is a great way to think about it.
- I've never done any kind of estate planning, but that's on the to-do list. At least I know what not to do after going through all this! (Hey everybody -- make sure you have a designated beneficiary on all your accounts!! Oy)
- Not married, no kids (unless you count my dog). Although theoretically I'd like that to change sometime in the next decade.
- I definitely agree with the tax planning as a big portion of this. Hopefully I can find somebody who will be able to help in this respect. I think this year is going to be a mess no matter what I do.
- Hadn't considered umbrella insurance before but I think that's a really valuable suggestion
- Trying to keep all of this on the down-low...I've already had multiple scammers contact me and a few people from the past 'coming out of the woodwork'
- I'll be looking at the books and links that were suggested!

Whew, that was a lot of notes! Here's the current "big picture":

Emergency funds: Cash is sitting around in various accounts at the moment, but nothing specifically set aside as my emergency fund.
Debt: Estimating about ~$20,000 needed for home repairs, attorney, accountant, estate/probate fees. No other outstanding debt.
Tax Filing Status: Single
Tax Rate: 22/24% Federal, 5.5% State
State of Residence: WI
Age: 30
Desired Asset allocation: 80% stocks / 20% bonds - this is flexible. Trying to figure out what to do.
Desired International allocation: xx% of stocks - Unsure

All the expense ratios are "net" rather than "gross"

Current retirement assets
(2.93%) SEP IRA ($179k)

- 0.01% Cash
- 0.09% One individual stock
- 0.35% iShares MSCI Eurozone ETF (EZU)(0.49%)
- 1.62% iShares S&P 500 Growth ETF (IVW)(0.18%)
- 0.86% Vanguard Small Cap Growth ETF (VBK)(0.07%)

(0.18%) Contributory IRA ($11k)
- 0.09% Cash
- 0.09% iShares MSCI Eurozone ETF (EZU)(0.49%)

(14.57%) Inherited IRA ($890k)
- 9.05% Cash
- 0.95% Three individual stocks
- 0.66% iShares Russell 1000 (IWD)(0.20%)
- 0.46% iShares Russell Mid Cap (IWR) (0.20%)
- 0.61% First Eagle Global Fund Cl A (SGENX) (1.11%)
- 0.54% Oppenheimer Developing Markets Fd Cl A (ODM1Z)(1.32%)
- 0.20% Delaware Diversified Income Fd Cl A (DPDFX)(0.70%)
- 0.53% Dodge & Cox Balanced Fd (DODBX)(0.53%)
- 1.09% American Fd Growth Fd of America CL F1 (GFAFX)(0.70%)
- 0.48% Royce Premier Fund (RYPRX)(1.16%)

-----
(31.42%) Estate Account ($1.92m) - will be here until estate closes
- 31.42% Sch Treas Obligation (SNOXX)

(44.35%) Individual Portfolio ($2.71m) (mine merged with my dad's)
- 0.54% Cash
- 25.29% Individual stocks
- 0.31% iShares MSCI Emerging Markets ETF (EEM)(0.69%)
- 0.38% iShares MSCI Eurozone ETF (EZU) (0.49%)
- 0.46% iShares Russell 1000 (IWD) (0.20%)
- 3.33% iShares S&P 500 Growth ETF (IVW) (0.18%)
- 1.24% iShares US Technology ETF (IYW)(0.44%)
- 4.93% Schwab US Broad Market ETF (SCHB)(0.03%)
- 3.26% Vanguard Small Cap Growth ETF (VBK) (0.07%)
- 0.25% Oppenheimer Developing Markets Fd Cl A (ODM1Z)(1.32%)
- 0.97% American Fd AMCAP Fund F1 (AMPFX)(0.74%)
- 0.77% American Fd Europacific Growth Fd Cl F1 (AEGFX)(0.85%)
- 0.62% T Row Price Gwth Stock Fd Adv (TRSAX)(0.92%)
- 0.97% Baron Partners Fund (BPTRX)(1.34%)
- 1.03% Davis NY Venture Fd Cl A (NYVTX)(0.89%)

(6.55%) Remaining cash (~$400k) in estate checking, personal checking, or 1% money market account

New annual contributions
$5500 Contributory IRA
Will max out a 401k if I ever go back to W2 employment
Last edited by lookingforadvice739 on Fri Jun 08, 2018 2:49 pm, edited 3 times in total.

GAAP
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Re: Large inheritance -- looking for advice

Post by GAAP » Fri Jun 08, 2018 12:01 pm

livesoft wrote:
Thu Jun 07, 2018 4:26 pm
I'd sell ALL the stocks as soon as possible and not attach any sentimental value to them. The ones in a taxable account: Get them gone before any of the capital gains get bigger.
My experience with my mother's estate says the same. Take the tax hit once and be done with it. Otherwise, you've got a multi-year hassle.
soccerrules wrote:
Thu Jun 07, 2018 4:21 pm
The one piece of advice that I have read on this board often would be -- Take your time. There is really no reason to rush. Financially speaking, you have the potential of hurting yourself more by moving to quickly, than by waiting and gaining wisdom.
Choosing to sell is not the same as choosing to buy, changing your AA, etc. As you sell, put the money into short-term, low-risk investments -- you'll get slightly better than money market rates and have enough time to build a real strategy going forward. That strategy can be quite simple and yet effective -- there's no reason to pay someone for a less effective, hard to understand strategy that costs more.

Incidentally, one of the unsung additional costs of a complex strategy is the need to hire someone to do your taxes each year. Simple strategies don't require that.

letsgobobby
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Re: Large inheritance -- looking for advice

Post by letsgobobby » Fri Jun 08, 2018 1:21 pm

You will want to fix your post so that each individual holding is described as a percent of your TOTAL portfolio.

Leesbro63
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Re: Large inheritance -- looking for advice

Post by Leesbro63 » Fri Jun 08, 2018 1:35 pm

To Lookingforadvice (Original Poster):

I just sent you a private message link that is a spoof on a segment in the John Goodman movie, "The Gambler". The spoof is done by a guy named JL Collins, who has his own blog to promote Boglehead-like thinking. Due to language, I can't post the link here, but I'm wondering how many other Bogleheads have enjoyed the JL Collins clip.

lookingforadvice739
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Re: Large inheritance -- looking for advice

Post by lookingforadvice739 » Fri Jun 08, 2018 2:40 pm

letsgobobby wrote:
Fri Jun 08, 2018 1:21 pm
You will want to fix your post so that each individual holding is described as a percent of your TOTAL portfolio.
Thanks, I fixed it!

letsgobobby
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Re: Large inheritance -- looking for advice

Post by letsgobobby » Fri Jun 08, 2018 3:36 pm

From that work I think you can see the value of simplifying within each account. For instanace, your SEP IRA is now less than 3% of your portfolio (that must be a strange feeling) and it makes sense for that to hold one and only investment. For example, it could hold Vanguard Total Bond Index Admiral shares (just as an example). Your own IRA should hold just one investment.

The fewer holdings the better. You should have good reasons for deviating from a three fund portfolio (TSM, TISM, TBM). Make sure you know what they are before adding complexity. Speaking from personal experience, managing your own assets along with inherited assets and inherited IRAs with various RMDs, etc., gets time-consuming. Keep it simple. You don’t need an advisor, but you do need a plan.

steady_sailing
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Re: Large inheritance -- looking for advice

Post by steady_sailing » Fri Jun 08, 2018 3:47 pm

Dear Lookingforadvice,

My condolences for your loss. I recently joined this forum because I am going through the same situation as you. My inheritance windfall is much smaller than yours, but it feels like a big deal to me too - quadrupling my net worth. Despite this difference, I see that we have almost the same cost of living. Maybe you, like me, are hoping to continue living modestly while enjoying increased financial security and an enhanced ability to donate to your favorite charities and be generous with your friends and family. Whatever your financial goals, they are now more attainable than they were, and I wish you the best in achieving them. It's been both a grieving process for my father as well as a stressful situation to suddenly be responsible for thees additional assets, but it's also been a blessing that I am grateful for. I hope you are feeling some of that last bit too.

Tax considerations will be a much bigger concern for you than they are for me, but I do agree that your personal asset allocation should be scaleable. Your dad's investment approach doesn't need to be your investment approach also. My dad had a number of individual stocks too. I plan to sell them all. I hope you find the information and support you need here to help you with these tough decisions. I hope we both do.

What else... make sure your estate plan is in order (will, trust, power of attorney, healthcare power of attorney), and make sure you have beneficiary designations on all your accounts, and TOD (transfer on death) arrangements for any accounts or property (including real estate and vehicles, if allowed by your state).

My best to you.

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Re: Large inheritance -- looking for advice

Post by FoolMeOnce » Fri Jun 08, 2018 3:54 pm

You've gotten good advice and seem to be on a good track processing it.

This, however, is wrong:
kaeltor wrote:
Thu Jun 07, 2018 4:31 pm
With the amount you have you can withdraw .04% (~240k) per year forever and your 6m will still grow.
The 4% "rule" is based on having more than $0.00 left after 30 years.

(Though if you withdrew ".04%" you'd probably be fine... :wink: )

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Meg77
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Re: Large inheritance -- looking for advice

Post by Meg77 » Fri Jun 08, 2018 3:58 pm

lookingforadvice739 wrote:
Fri Jun 08, 2018 10:50 am
- I will definitely do some research on Vanguard's Personal Advisor service -- that's quite a bit less than other active managers. It would still be a pretty big chunk of money, though (unless I have them set it up and then drop the service). Also will look at the target dated fund -- that's not something I'm as familiar with.
After reading your details, I don't think you need this. I think you already have a pretty good portfolio that could just use some tweaking over time: selling individual stocks you don't like; selling expensive mutual funds; consolidating overlapping funds into fewer funds. NONE of this is urgent and NONE of it is going to make or break you financially. None of it is worth paying $30K+ per year (plus more as the portfolio grows) either.
lookingforadvice739 wrote:
Fri Jun 08, 2018 10:50 am
- Currently I'm only using Schwab as my brokerage - maybe it would be in my best interest should be split things up
No. Keep everything with Schwab. Their website and fees are arguably better than Vanguard, and dealing with multiple statements and mandatory distributions is just a hassle.
lookingforadvice739 wrote:
Fri Jun 08, 2018 10:50 am
- Before my dad died, my asset allocation was something like 85% stocks/15% "safe"/accessible investments/cash. I've never actually held any bonds. Now everything is all over the place...
Desired Asset allocation: 80% stocks / 20% bonds - this is flexible. Trying to figure out what to do.
I'm 34 and only 5% bonds plus 1% cash, but I'm still accumulating and saving a big chunk of my income/portfolio each year (in other words my portfolio growth is still driven primarily by new contributions). Given you have moved from the accumulation stage to the FIRE stage of life, even though you are still young, I would recommend moving to a more conservative allocation to start. 30%-40% cash/fixed income makes sense in my view (one could argue 50/50 is more than adequate to meet your needs and dramatically reduce volatility and risk to boot).

You don't NEED to take the extra equity risk to meet your goals, or even a fraction of your goals. If 30% or $1.5M of this is put in bonds, the bond income ALONE would pay you enough to live on ($45k before taxes each year with today's total bond mkt yield of 3%). The dividends off the equities will exceed $70K on top of that. Even if you never touch the principal you'll have a 6 figure income indefinitely.

Mentally you should shift to preservation mode now since you're living off the portfolio. Besides we're in one of the longest bull runs in history; sooner or later we WILL see a 30%+ decline in stocks. Why go through more of that pain psychologically if you don't have to if you have? Given these are inherited funds I think the emotional factors do matter even more than usual.
lookingforadvice739 wrote:
Fri Jun 08, 2018 10:50 am
- "How much percentage of 5M are those 50 stocks?" - About 31% of the 5M ($1.58M total, with gains of $140k). I should have mentioned that about 5 of those individual stocks were actually mine, but I believe everything here counts as "long-term gains"
- Will likely get the individual stocks sold (although definitely feel some sentimental value on a few of them). There's just such a variety of gain/loss since he died that I'm not sure how things will pan out. But I'll try to put in the time to research and see what's being held in the ETFs prior to selling or deciding to keep.
Individual stocks are not evil, despite what many here would claim. After all, our prized index funds are comprised of individual stocks. They are also very tax efficient and have a ZERO expense ratio. Even a low expense ratio on $1.6M compounded over time will add up to serious money. I'm not saying I'd start trading stocks or buy more - or even that I'd keep them all - but don't pay gains you don't have to just to rush to dump good companies' stocks. Having one major concentration is a risk, but if you have 50 stocks with an average of around $32K, each one is a tiny fraction of your portfolio - just like they would be within an index fund.
lookingforadvice739 wrote:
Fri Jun 08, 2018 10:50 am
Current retirement assets
(2.93%) SEP IRA ($179k)

- 0.01% Cash
- 0.09% One individual stock
- 0.35% iShares MSCI Eurozone ETF (EZU)(0.49%)
- 1.62% iShares S&P 500 Growth ETF (IVW)(0.18%)
- 0.86% Vanguard Small Cap Growth ETF (VBK)(0.07%)

I'd sell all this and just dump it into a total stock market index fund. (International stocks are better in taxable accounts)

(0.18%) Contributory IRA ($11k)
- 0.09% Cash
- 0.09% iShares MSCI Eurozone ETF (EZU)(0.49%)

Ditto - dump this into a total stock market index fund.
(14.57%) Inherited IRA ($890k)
- 9.05% Cash
- 0.95% Three individual stocks
- 0.66% iShares Russell 1000 (IWD)(0.20%)
- 0.46% iShares Russell Mid Cap (IWR) (0.20%)
- 0.61% First Eagle Global Fund Cl A (SGENX) (1.11%)
- 0.54% Oppenheimer Developing Markets Fd Cl A (ODM1Z)(1.32%)
- 0.20% Delaware Diversified Income Fd Cl A (DPDFX)(0.70%)
- 0.53% Dodge & Cox Balanced Fd (DODBX)(0.53%)
- 1.09% American Fd Growth Fd of America CL F1 (GFAFX)(0.70%)
- 0.48% Royce Premier Fund (RYPRX)(1.16%)
Ditto again - no gains to sell, so I'd dump this into a total stock market index fund. Gets rid of some pricey funds and some individual stocks and simplifies a LOT. Alternately, you could also put this whole thing in a small cap or extended market index fund and check that off the list. Bottom line is that you don't want to have to rebalance across accounts if you can avoid it. Smaller accounts are better held in a single fund/asset class for simplicity.
-----
(31.42%) Estate Account ($1.92m) - will be here until estate closes
- 31.42% Sch Treas Obligation (SNOXX)

This cash could be moved to a total bond market fund when you get the money. 30% fixed income = achieved! If you want a higher equity allocation, dollar cost average into it. You don't want to risk buying at the high with such a large chunk of your financial world (even though statistically it should work out if you do)
.

(44.35%) Individual Portfolio ($2.71m) (mine merged with my dad's)
- 0.54% Cash
- 25.29% Individual stocks
- 0.31% iShares MSCI Emerging Markets ETF (EEM)(0.69%)
- 0.38% iShares MSCI Eurozone ETF (EZU) (0.49%)
- 0.46% iShares Russell 1000 (IWD) (0.20%)
- 3.33% iShares S&P 500 Growth ETF (IVW) (0.18%)
- 1.24% iShares US Technology ETF (IYW)(0.44%)
- 4.93% Schwab US Broad Market ETF (SCHB)(0.03%)
- 3.26% Vanguard Small Cap Growth ETF (VBK) (0.07%)
- 0.25% Oppenheimer Developing Markets Fd Cl A (ODM1Z)(1.32%)
- 0.97% American Fd AMCAP Fund F1 (AMPFX)(0.74%)
- 0.77% American Fd Europacific Growth Fd Cl F1 (AEGFX)(0.85%)
- 0.62% T Row Price Gwth Stock Fd Adv (TRSAX)(0.92%)
- 0.97% Baron Partners Fund (BPTRX)(1.34%)
- 1.03% Davis NY Venture Fd Cl A (NYVTX)(0.89%)

OK here is where it gets more complicated. Selling/consolidating sooner rather than later will minimize your gains - unless/until a recession hits anyway. So there's no rush, but also no reason to delay. Dump the expensive active funds and consolidate into something approximating the 3 fund portfolio, or your version of it. As I said before though, if the individual stocks are good solid options (S&P500 stocks for example) and represent less than 3% of your total portfolio, there's no reason to sell them. But if you can do so with minimal gains, go ahead.

SCHB is the best fund on this list - put more in there and forget about IVW and IWD and the other funds which just mimic the S&P 500 index anyway but charge 10-20x the fee. The S&P is driven largely by technology stocks too, so IYW is just doubling down on that exposure - again for a very high fee. Bottom line: SCHB and whatever cheap version they have of the total international ETF is really all you need. Depending on how your new tax bracket shakes out, you might want to consider a muni bond fund for your state if one is available for a chunk of your fixed income. If not, just put it in total bond and pay the taxes - it's not the worst thing in the world, and the tax savings are not worth the hassle of managing (or paying someone to manage) an individual muni bond ladder in my opinion.


(6.55%) Remaining cash (~$400k) in estate checking, personal checking, or 1% money market account

This is too big an emergency fund given you spend $30K a year or so. Having $100K in cash makes sense to me - 3 years of living expenses - but beyond that, invest the cash according to your target AA.
Good luck! You're in a great position. Remember it's a blessing and try not to let it stress you out. Once it's all sorted out you can set up an automatic monthly transfer to your checking account and forget about it. :beer
Last edited by Meg77 on Fri Jun 08, 2018 4:13 pm, edited 1 time in total.
"An investment in knowledge pays the best interest." - Benjamin Franklin

kaeltor
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Re: Large inheritance -- looking for advice

Post by kaeltor » Fri Jun 08, 2018 4:03 pm

FoolMeOnce wrote:
Fri Jun 08, 2018 3:54 pm
You've gotten good advice and seem to be on a good track processing it.

This, however, is wrong:
kaeltor wrote:
Thu Jun 07, 2018 4:31 pm
With the amount you have you can withdraw .04% (~240k) per year forever and your 6m will still grow.
The 4% "rule" is based on having more than $0.00 left after 30 years.

(Though if you withdrew ".04%" you'd probably be fine... :wink: )
Why wouldn't he be able to apply the 4% rule again?

ExitStageLeft
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Re: Large inheritance -- looking for advice

Post by ExitStageLeft » Fri Jun 08, 2018 4:11 pm

If it was mentioned above I missed it, but I suggest managing the assets DIY but perhaps hiring a CPA until you've got most of the stocks sold off. Myself, I would probably DIY that as well but it's probably worth a consultation at least with a tax professional.

ExitStageLeft
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Re: Large inheritance -- looking for advice

Post by ExitStageLeft » Fri Jun 08, 2018 4:12 pm

kaeltor wrote:
Fri Jun 08, 2018 4:03 pm

Why wouldn't he be able to apply the 4% rule again?
I think he'd probably prefer the 4% rule to the 0.04% rule. 8-)

kaeltor
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Re: Large inheritance -- looking for advice

Post by kaeltor » Fri Jun 08, 2018 4:16 pm

ExitStageLeft wrote:
Fri Jun 08, 2018 4:12 pm
kaeltor wrote:
Fri Jun 08, 2018 4:03 pm

Why wouldn't he be able to apply the 4% rule again?
I think he'd probably prefer the 4% rule to the 0.04% rule. 8-)
Lol, yea that was a mistake on my part.

Murgatroyd
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Re: Large inheritance -- looking for advice

Post by Murgatroyd » Fri Jun 08, 2018 5:11 pm

Amy,
Please also accept my condolences. Here’s a process to consider...

My DW’s father passed 2 years ago and left us about half your amount. There were over 100 individual stocks. It was a mess. We’re with Fidelity and I would assume Schwab has similar information. Take a look at the equity/bond/cash mix. Then look at how your mix compares to the market. I would guess based on your summary it’s pretty similar. If that’s true there is truly no hurry to sell. As a couple have said, you are going to have capital gains whether with the current assets or new ones you would switch to.

Take your time looking at what you own. If you are over indexed in particular sectors, say dad liked energy for the dividends, sell the weakest ones to get the overall portfolio into balance. Think about selling small holdings.Then, look at one or two holdings per week and decide if they are good to keep or not.

There is no hurry. Certainly work to get the fees lower.
Enjoy life.
Regards,

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Re: Large inheritance -- looking for advice

Post by livesoft » Fri Jun 08, 2018 5:20 pm

Murgatroyd wrote:
Fri Jun 08, 2018 5:11 pm
As a couple have said, you are going to have capital gains whether with the current assets or new ones you would switch to.
Yes, one will have capital gains eventually, but there is a big difference between minimal capital gains now in something that is not an index fund compared to big capital gains in something that is not an index fund in the future.

We have seen many many posts over the years at bogleheads.org (and it is even hinted at by other responses in this thread) that legacy stocks holdings are a real PITA to unload once they have a lot of unrealized capital gains because the taxes that would be incurred in a taxable account cloud one's thinking and adds to the decision-making process: pay taxes now or keep a bad holding that doesn't go with ease of portfolio management.

This is a big reason why one would recommend selling holdings in a taxable account NOW that have already received the step-basis and BEFORE the capital gains issue becomes problematic. It is quite a different thing to have unrealized capital gains in something that should have been unloaded long ago and having unrealized capital gains in a nice, passively-managed, tax-efficient, low-expense ratio index fund that one would want to hold forever.

Of course, in a tax-advantaged account where realized capital gains are not really taxed when one sells a holding and uses the resulting cash to buy something else in the account, the above doesn't matter as much. There is no clouding of the mind when it comes to selling now or later.

And as for clouding of the mind, let me ask this: What does "sell the weakest ones" mean? What does weakest in this context mean? How does one determine whether a holding is weak or not? I point this out because at least with an index fund, there is no such subjective thinking.

Finally, lots of little holdings of less than about 4% to 5% of the total portfolio value also cloud one's thinking. Now is not a bad time to dispense with these and fold the money into bigger positions of more than 10% of the portfolio value. Already made was the suggestion to have one single fund in the smaller accounts. The largest tax-deferred account can have one fund of each asset class in order to do all rebalancing in that account. The taxable account can have just a couple of funds plus later their tax-loss harvesting partners, but that is getting too advanced for this thread.

To add: I have told my children that if they end up inheriting any investments from me that they should attach absolutely zero sentimental value to them and should sell them and invest in the things that match their own investment plan and asset allocation. After all, my asset allocation of an old man is not the asset allocation of a millennial. For those worried my kids will go off and start day trading after selling all my index funds: Don't worry. My kids are invested right now all in index funds, too.
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Re: Large inheritance -- looking for advice

Post by Finridge » Fri Jun 08, 2018 6:27 pm

livesoft wrote:
Thu Jun 07, 2018 4:26 pm
I'd sell ALL the stocks as soon as possible and not attach any sentimental value to them. The ones in a taxable account: Get them gone before any of the capital gains get bigger. Clearly, you know enough to tell which stocks are US and which are foreign, so you can figure out the current asset allocation and use a Total US or a Total Int'l ETF or mutual fund to replace any of the individual stocks.

There are many investors on this forum with mid-7-figure portfolios that are completely do-it-yourself. A one million portfolio is scaleable to a $10 million portfolio with virtually no changes.

Update your will and estate plan.
Exactly this.

Your focus should be on what you want your portfolio to be going forward. Focus on looking into this and finding a portfolio model you are comfortable with. I suggest the three-fund portfolio of Vanguard index funds or mutual funds. https://www.bogleheads.org/wiki/Three-f ... uard_funds

Also, see this: https://www.bogleheads.org/wiki/Managing_a_windfall

And this: https://personal.vanguard.com/us/insigh ... ns?lang=en

Sell of the inherited investments and reinvest them into your portfolio model as soon as possible--don't be so fast that you don't coordinate what you are doing with the attorney and CPA handling the estate, but the sooner you do this, the less of a tax hit their should be.

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cockersx3
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Re: Large inheritance -- looking for advice

Post by cockersx3 » Fri Jun 08, 2018 7:22 pm

livesoft wrote:
Fri Jun 08, 2018 5:20 pm
Murgatroyd wrote:
Fri Jun 08, 2018 5:11 pm
As a couple have said, you are going to have capital gains whether with the current assets or new ones you would switch to.
Yes, one will have capital gains eventually, but there is a big difference between minimal capital gains now in something that is not an index fund compared to big capital gains in something that is not an index fund in the future.

We have seen many many posts over the years at bogleheads.org (and it is even hinted at by other responses in this thread) that legacy stocks holdings are a real PITA to unload once they have a lot of unrealized capital gains because the taxes that would be incurred in a taxable account cloud one's thinking and adds to the decision-making process: pay taxes now or keep a bad holding that doesn't go with ease of portfolio management.

This is a big reason why one would recommend selling holdings in a taxable account NOW that have already received the step-basis and BEFORE the capital gains issue becomes problematic. It is quite a different thing to have unrealized capital gains in something that should have been unloaded long ago and having unrealized capital gains in a nice, passively-managed, tax-efficient, low-expense ratio index fund that one would want to hold forever.

Of course, in a tax-advantaged account where realized capital gains are not really taxed when one sells a holding and uses the resulting cash to buy something else in the account, the above doesn't matter as much. There is no clouding of the mind when it comes to selling now or later.

And as for clouding of the mind, let me ask this: What does "sell the weakest ones" mean? What does weakest in this context mean? How does one determine whether a holding is weak or not? I point this out because at least with an index fund, there is no such subjective thinking.

Finally, lots of little holdings of less than about 4% to 5% of the total portfolio value also cloud one's thinking. Now is not a bad time to dispense with these and fold the money into bigger positions of more than 10% of the portfolio value. Already made was the suggestion to have one single fund in the smaller accounts. The largest tax-deferred account can have one fund of each asset class in order to do all rebalancing in that account. The taxable account can have just a couple of funds plus later their tax-loss harvesting partners, but that is getting too advanced for this thread.

To add: I have told my children that if they end up inheriting any investments from me that they should attach absolutely zero sentimental value to them and should sell them and invest in the things that match their own investment plan and asset allocation. After all, my asset allocation of an old man is not the asset allocation of a millennial. For those worried my kids will go off and start day trading after selling all my index funds: Don't worry. My kids are invested right now all in index funds, too.
This is great advice - very well explained.

The first thing I would do is as livesoft and others have suggested - sell all of the non-tax-deferred holdings as soon as possible, while the capital gains are still small. I would then open a Vanguard brokerage account (if one does not already exist) and just dump all of the funds into the default money market (ie safe) option, until I figured out what to do next. Usually I tell people to hold off on making major decisions like this (see below), but the benefits of doing this before accumulating more capital gains in investments one may not want long-term seem worth it to me, assuming the capital gains after the step-up are still small.

I received a seven-figure windfall before, and totally understand the sense of being overwhelmed by these major financial changes. Know that this will eventually fade, as you learn more about investing and get accustomed to the new situation. The critical "trick" is to not make any major money moves until you hit that point. I know it's hard - in any other context, one would be expected to "do something" to feel like you're making progress. However, know that for most people, making major changes too quickly generally causes more problems than it solves. Sounds weird, but I'm telling ya - resisting the urge to **do something** major until you are truly ready is 100% the best option.

Note that with this level of assets, OP would qualify for a free financial plan consultation with one of the Vanguard PAS reps. I did this after I received my windfall, and found it to be helpful and very low-pressure. They will meet with you (ie via a telecon), talk with you about your goals and current financial state, work with you to help you establish a good asset allocation for your situation. They will then prepare a good financial plan based on your input, and will recommend funds and fund locations (ie taxable vs tax deferred) that will meet your asset allocation and help you get there. Of course, since it's Vanguard all the funds are low-fee index funds of which most of us on BH are fans...

Note that this is all free based on the amount of assets OP would have with them. If OP wants PAS to manage the transfers and handle the account without OP's involvement, that's when they charge the 0.3% AUM fee. Not a bad price compared to other financial advisors, if one is not inclined to it it themselves. In my case, I found it to be a great set of "training wheels" as I learned about investing. Once I learned enough, I cancelled PAS and began doing it on my own. (Very easy to cancel, BTW - all it took for me was a single email.)

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David Jay
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Re: Large inheritance -- looking for advice

Post by David Jay » Fri Jun 08, 2018 7:28 pm

lookingforadvice739 wrote:
Fri Jun 08, 2018 10:50 am
- I will definitely do some research on Vanguard's Personal Advisor service -- that's quite a bit less than other active managers. It would still be a pretty big chunk of money, though (unless I have them set it up and then drop the service).
Yes, exactly. Vanguard is very good about letting you drop the service (not like some local, small town FA). Use the service to set things up, ask questions and get comfortable. Keep it for maybe 6 months or a year - as long as it takes to get really comfortable.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

larryslocum1982
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Re: Large inheritance -- looking for advice

Post by larryslocum1982 » Fri Jun 08, 2018 11:28 pm

Get a fee only planner. Pay for a few hours of advice and not based on assets.
Also subscribe to a good newsletter with long term focus. The newsletter approach has done great for me. But be careful, there are only a few good newsletters out there.

larryslocum1982
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Re: Large inheritance -- looking for advice

Post by larryslocum1982 » Fri Jun 08, 2018 11:29 pm

Get a fee only planner. Pay for a few hours of advice and not based on assets.
Also subscribe to a good newsletter with long term focus. The newsletter approach has done great for me. But be careful, there are only a few good newsletters out there.

FoolMeOnce
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Re: Large inheritance -- looking for advice

Post by FoolMeOnce » Sat Jun 09, 2018 9:56 pm

kaeltor wrote:
Fri Jun 08, 2018 4:03 pm
FoolMeOnce wrote:
Fri Jun 08, 2018 3:54 pm
You've gotten good advice and seem to be on a good track processing it.

This, however, is wrong:
kaeltor wrote:
Thu Jun 07, 2018 4:31 pm
With the amount you have you can withdraw .04% (~240k) per year forever and your 6m will still grow.
The 4% "rule" is based on having more than $0.00 left after 30 years.

(Though if you withdrew ".04%" you'd probably be fine... :wink: )
Why wouldn't he be able to apply the 4% rule again?
Because after 30 years, there might be $10 left. That is considered a success in the Trinity study, the basis for the 4% rule if I'm not mistaken. You said to expect the original $6m to grow while withdrawing 4%. That is not a reasonable or evidence-backed expectation. With a horizon of more than 30 years, it gets riskier to withdraw 4% per year.

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BL
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Re: Large inheritance -- looking for advice

Post by BL » Sun Jun 10, 2018 12:54 pm

David Jay wrote:
Fri Jun 08, 2018 7:28 pm
lookingforadvice739 wrote:
Fri Jun 08, 2018 10:50 am
- I will definitely do some research on Vanguard's Personal Advisor service -- that's quite a bit less than other active managers. It would still be a pretty big chunk of money, though (unless I have them set it up and then drop the service).
Yes, exactly. Vanguard is very good about letting you drop the service (not like some local, small town FA). Use the service to set things up, ask questions and get comfortable. Keep it for maybe 6 months or a year - as long as it takes to get really comfortable.
+1
This could be quite a load off your shoulders, and still give you a low-ER, diversified, simple portfolio.

Yes, there may be other good advisers out there, but finding a competent, trustworthy, fiduciary, fee-only adviser is not a simple task. It could instead result in a complicated, expensive portfolio that would be even more expensive and difficult to unwind. Even other recommended brokerages could get you into these "solutions", if you don't know what you want and say "no" as needed.

kaeltor
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Re: Large inheritance -- looking for advice

Post by kaeltor » Sun Jun 10, 2018 1:24 pm

FoolMeOnce wrote:
Sat Jun 09, 2018 9:56 pm
kaeltor wrote:
Fri Jun 08, 2018 4:03 pm
FoolMeOnce wrote:
Fri Jun 08, 2018 3:54 pm
You've gotten good advice and seem to be on a good track processing it.

This, however, is wrong:
kaeltor wrote:
Thu Jun 07, 2018 4:31 pm
With the amount you have you can withdraw .04% (~240k) per year forever and your 6m will still grow.
The 4% "rule" is based on having more than $0.00 left after 30 years.

(Though if you withdrew ".04%" you'd probably be fine... :wink: )
Why wouldn't he be able to apply the 4% rule again?
Because after 30 years, there might be $10 left. That is considered a success in the Trinity study, the basis for the 4% rule if I'm not mistaken. You said to expect the original $6m to grow while withdrawing 4%. That is not a reasonable or evidence-backed expectation. With a horizon of more than 30 years, it gets riskier to withdraw 4% per year.
You can always decrease how much you withdraw with market fluctuations. It depends on market performance. There's been follow up studies to the Trinity study and they are putting the number between 3-4% still...

Furthermore if you FI/RE early on you can still find other ways to make money by pursuing productive hobbies etc...

Check out http://earlyretirementextreme.com/, that's where most of my ideas of FI/RE came from

gotester2000
Posts: 594
Joined: Sun Nov 12, 2017 1:59 am

Re: Large inheritance -- looking for advice

Post by gotester2000 » Sun Jun 10, 2018 1:40 pm

Managing 50 stocks is not easy but 1.58M in 50 stocks will give you dividends more than your current annual expenses.

NancyABQ
Posts: 228
Joined: Thu Aug 18, 2016 3:37 pm

Re: Large inheritance -- looking for advice

Post by NancyABQ » Sun Jun 10, 2018 2:10 pm

Meg77 wrote:
Fri Jun 08, 2018 3:58 pm
lookingforadvice739 wrote:
Fri Jun 08, 2018 10:50 am
- Currently I'm only using Schwab as my brokerage - maybe it would be in my best interest should be split things up
No. Keep everything with Schwab. Their website and fees are arguably better than Vanguard, and dealing with multiple statements and mandatory distributions is just a hassle.

I second this. I would keep it at Schwab. If you really want to move it later, fine. But you are used to Schwab, and they have good customer service, so I'd leave it there for now.

In addition, I'd give Schwab a call and mention to them that you just got all this new money and will be making a bunch of transactios while cleaning it up. Ask them for some free trades, and if they are reluctant, then mention that you might look into transferring it somewhere else that will give you some free trades.

I doubt you will need to resort to the threat of transferring; in my experience they are pretty liberal with free trades. Each account would be considered differently for free trades, so make sure you get some free trades on each account separately. In particular the inherited IRA and the taxable brokerage account ought to be eligible.

User avatar
randomizer
Posts: 1540
Joined: Sun Jul 06, 2014 3:46 pm

Re: Large inheritance -- looking for advice

Post by randomizer » Sun Jun 10, 2018 3:01 pm

Three-fund portfolio! No need for financial advisers.
87.5:12.5, EM tilt — HODL the course!

FoolMeOnce
Posts: 351
Joined: Mon Apr 24, 2017 11:16 am

Re: Large inheritance -- looking for advice

Post by FoolMeOnce » Sun Jun 10, 2018 9:57 pm

kaeltor wrote:
Sun Jun 10, 2018 1:24 pm
FoolMeOnce wrote:
Sat Jun 09, 2018 9:56 pm
kaeltor wrote:
Fri Jun 08, 2018 4:03 pm
FoolMeOnce wrote:
Fri Jun 08, 2018 3:54 pm
You've gotten good advice and seem to be on a good track processing it.

This, however, is wrong:
kaeltor wrote:
Thu Jun 07, 2018 4:31 pm
With the amount you have you can withdraw .04% (~240k) per year forever and your 6m will still grow.
The 4% "rule" is based on having more than $0.00 left after 30 years.

(Though if you withdrew ".04%" you'd probably be fine... :wink: )
Why wouldn't he be able to apply the 4% rule again?
Because after 30 years, there might be $10 left. That is considered a success in the Trinity study, the basis for the 4% rule if I'm not mistaken. You said to expect the original $6m to grow while withdrawing 4%. That is not a reasonable or evidence-backed expectation. With a horizon of more than 30 years, it gets riskier to withdraw 4% per year.
You can always decrease how much you withdraw with market fluctuations. It depends on market performance. There's been follow up studies to the Trinity study and they are putting the number between 3-4% still...

Furthermore if you FI/RE early on you can still find other ways to make money by pursuing productive hobbies etc...

Check out http://earlyretirementextreme.com/, that's where most of my ideas of FI/RE came from
ERE's wiki notes that a 4% safe withdrawal rate is only for 30 years, and goes in to suggest that this is overly aggressive in light of newer research.

https://wiki.earlyretirementextreme.com ... rawal_rate

Further, these SWRs are about the chance of total depeletion of funds; they are not withdrawal rates at which one should expect their starting balance to increase, let alone have that guaranteed, as you wrote (though it might well increase). OP does not seem like someone who will suddenly spend 4% per year of this large inheritance, but I just wanted to correct misadvice.

kaeltor
Posts: 101
Joined: Sat May 12, 2018 11:20 am

Re: Large inheritance -- looking for advice

Post by kaeltor » Mon Jun 11, 2018 10:03 am

FoolMeOnce wrote:
Sun Jun 10, 2018 9:57 pm
kaeltor wrote:
Sun Jun 10, 2018 1:24 pm
FoolMeOnce wrote:
Sat Jun 09, 2018 9:56 pm
kaeltor wrote:
Fri Jun 08, 2018 4:03 pm
FoolMeOnce wrote:
Fri Jun 08, 2018 3:54 pm
You've gotten good advice and seem to be on a good track processing it.

This, however, is wrong:



The 4% "rule" is based on having more than $0.00 left after 30 years.

(Though if you withdrew ".04%" you'd probably be fine... :wink: )
Why wouldn't he be able to apply the 4% rule again?
Because after 30 years, there might be $10 left. That is considered a success in the Trinity study, the basis for the 4% rule if I'm not mistaken. You said to expect the original $6m to grow while withdrawing 4%. That is not a reasonable or evidence-backed expectation. With a horizon of more than 30 years, it gets riskier to withdraw 4% per year.
You can always decrease how much you withdraw with market fluctuations. It depends on market performance. There's been follow up studies to the Trinity study and they are putting the number between 3-4% still...

Furthermore if you FI/RE early on you can still find other ways to make money by pursuing productive hobbies etc...

Check out http://earlyretirementextreme.com/, that's where most of my ideas of FI/RE came from
ERE's wiki notes that a 4% safe withdrawal rate is only for 30 years, and goes in to suggest that this is overly aggressive in light of newer research.

https://wiki.earlyretirementextreme.com ... rawal_rate

Further, these SWRs are about the chance of total depeletion of funds; they are not withdrawal rates at which one should expect their starting balance to increase, let alone have that guaranteed, as you wrote (though it might well increase). OP does not seem like someone who will suddenly spend 4% per year of this large inheritance, but I just wanted to correct misadvice.

Ok, so what can one do? Assuming you have the funds to retire early, and the 4% rule doesn't work like you mentioned... is there no hope of retiring early? (In Op's case for example)

delamer
Posts: 6402
Joined: Tue Feb 08, 2011 6:13 pm

Re: Large inheritance -- looking for advice

Post by delamer » Mon Jun 11, 2018 10:18 am

kaeltor wrote:
Mon Jun 11, 2018 10:03 am
FoolMeOnce wrote:
Sun Jun 10, 2018 9:57 pm
kaeltor wrote:
Sun Jun 10, 2018 1:24 pm
FoolMeOnce wrote:
Sat Jun 09, 2018 9:56 pm
kaeltor wrote:
Fri Jun 08, 2018 4:03 pm


Why wouldn't he be able to apply the 4% rule again?
Because after 30 years, there might be $10 left. That is considered a success in the Trinity study, the basis for the 4% rule if I'm not mistaken. You said to expect the original $6m to grow while withdrawing 4%. That is not a reasonable or evidence-backed expectation. With a horizon of more than 30 years, it gets riskier to withdraw 4% per year.
You can always decrease how much you withdraw with market fluctuations. It depends on market performance. There's been follow up studies to the Trinity study and they are putting the number between 3-4% still...

Furthermore if you FI/RE early on you can still find other ways to make money by pursuing productive hobbies etc...

Check out http://earlyretirementextreme.com/, that's where most of my ideas of FI/RE came from
ERE's wiki notes that a 4% safe withdrawal rate is only for 30 years, and goes in to suggest that this is overly aggressive in light of newer research.

https://wiki.earlyretirementextreme.com ... rawal_rate

Further, these SWRs are about the chance of total depeletion of funds; they are not withdrawal rates at which one should expect their starting balance to increase, let alone have that guaranteed, as you wrote (though it might well increase). OP does not seem like someone who will suddenly spend 4% per year of this large inheritance, but I just wanted to correct misadvice.

Ok, so what can one do? Assuming you have the funds to retire early, and the 4% rule doesn't work like you mentioned... is there no hope of retiring early? (In Op's case for example)
The OP is only 30 years old. Hopefully he’ll live another 50 to 60 years.

For his portfolio to have a survival probability comparable to that for a 30 year portfolio withdrawn at 4%, he needs to lower his withdrawal rate to 2%/2.5%.

The longer your portfolio needs to support you, the lower your withdrawal rate should be.

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