Newly retired - need to make a big change

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Highfeehater
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Newly retired - need to make a big change

Post by Highfeehater » Fri Aug 10, 2018 10:56 pm

HI everyone. I am new to this forum; wish I’d known about it years ago. I retired in May, and to consolidate our assets, my financial advisor suggested to rollover our accounts to SEI. He gave us the spiel I’ve read about elsewhere on this forum, and now I regret it. I need some advice – here’s my info. Go easy on me – I feel dumb enough already. :oops:

We are a married couple – he Is 65 and recently retired, waiting until 70 for SS. She is 63, retired, making about $15K/yr teaching nursing retreats and tutoring. We live conservatively, using cash/savings until we set up new portfolio, and can make it on $2500/mo.

Emergency funds: $220K in money market; excess was to be used for possible new home purchase, now on back burner. Can reinvest some of this.
Debt: None. Home is paid off, one Visa card paid monthly
Tax Filing Status: Married Filing Jointly
Tax Rate: 12% Federal, 6% State
State of Residence: Michigan
Age: he is 65, she is 64 in Oct.

Desired Asset allocation: Looking at 30% total US stock Market Index Fund; 20% total Intl Stock Mkt Index; and 50% total Bond market index fund – all Admiral funds or Vanguard Target Retirement Fund (2020 or 2015). Income Fund? I am open to any advice. Even thinking about going 25%/15%/50% on allocations.
Desired International allocation: 20% of stocks

Current portfolio is approx $1.1 million. This does not include our emergency fund/bank account. His 401K and her 403B were recently rolled over to SEI Investments into traditional IRAs upon advisor’s advice. Both Roth IRAs were also rolled over to SEI – this is the great mistake that woke me up. Expense ratios and fees are way too high. :annoyed

Current SEI account holding Roths and traditional IRAs consists of 13 funds. Avg expense ratio is 1.2% + .7 to the advisor – totaling 1.9%.
Names of funds can be listed but I figured it was moot: the decision to get out and do it myself has been made, but I can list them if needed.

Current retirement assets:
Taxable
Cash for investing- approx. $100,000 (from emergency fund). He also has a small pension $800/mo, which began in Jan 2018 and is deposited into checking acct.
Non-qualifying – Joint-Allianz Deferred Variable Annuity $76,888 7%
Joint Columbia Contrarian Core Fund C (LCCCX) 1.79% Expense Ratio (ER) $28,841 3%
Tax-Advantaged
his: 401K recently rolled over to SEI Traditional IRA avg 1.2% ER + .7% advisor fee $524,526 48%
his Roth IRA: now in SEI (same 13 funds and fees) $72,805 7%
hers: 403B rolled over to SEI Traditional IRA (same 13 funds and fees as his) $305,200 28%
hers: Roth IRA now in SEI (same funds and fees) $74,400 7%
TOTAL: $1,081,94.00 100%

Contributions: no regular contributions right now.

Question 1 – what would be a good portfolio? I have listed a few I am considering, but am open to your advice and expertise. I have been moderately aggressive, but with these assets and my age, I am more concerned than before about capital preservation, but not averse to a little risk, am realizing how much I hate fees! I don’t constantly monitor my accounts to watch gains or losses; I don’t monitor accounts in bear markets unless there is something I need to do. I generally buy and hold and ride the market. Since 2001, we have maxed out any contribution we could, saved a ton in taxes, and built to where we are now (I started over in 1998 with $50,000). My tax advisor is also a CFP, and we like and trusted him – but this recent SEI rollover has me reeling.

Question 2 – I want to create a small stream of income - is there any particular fund or method I should explore?
My plan is to live on the small pension along with savings and my wife’s income, and use these “low-income” years until I am 70 to convert IRA funds to Roths, working with my tax advisor. At 70 ½ I will start taking RMDs. At 70, my SS will be approx. $2845, starting Jan 2023. My wife’s SS will be $2143, starting Oct 2024. Neither of us has heath issues, no meds, and we live a healthy lifestyle (when I went on Medicare in Jan, she opened a HSA with $4500, and can max it again next year).

I’ve done a ton of reading and research this past week and still feel underprepared. I’ve made some blunders in the past, but this recent SEI rollover on the advice of our advisor really woke me up. At this point, he holds 100% of the accounts. He knows I am upset and he offered to work with me to transfer my SEI funds to wherever I want, waive his fee, and only get charged $100 each for my 4 accounts. It’s been awkward for both of us, but I heard from his secretary today, asking what accounts I want the assets sent to. I feel fortunate, and that it could’ve been a lot worse. I still plan on using him as my tax advisor, and doing my own investing.

Thank you for your help and advice. I am a new Boglehead. Ted :moneybag
Last edited by Highfeehater on Mon Oct 01, 2018 3:37 pm, edited 1 time in total.

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BL
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Re: Newly retired - need to make a big change

Post by BL » Fri Aug 10, 2018 11:33 pm

When you say 30% US, 20% international, 50% fixed income, do you realize that in Boglehead-speak, 20% International is 20% of 50% equities, or 40% International. Since the usual advice is 20-40% (sometimes 50) international, you are certainly within the guidelines but may be higher than you thought.

If you like having advice, but not paying so much, you may want to consider Vanguard's PAS which is 0.3%/year and they put you in low-ER index funds, and don't try to sell you annuities, or other expensive products. I believe you can contact them and have them make a plan that you can accept or reject with no extra cost.

Otherwise the 3-fund portfolio sounds fine, once you get the AA figured out.

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celia
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Re: Newly retired - need to make a big change

Post by celia » Sat Aug 11, 2018 3:46 am

Welcome to the forum. Don't do anything yet. You likely will get a range of opinions here (with rationale) for you to consider.

There are two "bad" things with this current portfolio, as you likely know. First is that the rule of thumb for making your assets last a lifetime is that you should only withdraw 4% a year. But if you do that with this portfolio and give 1.9% to the advisor/investment company, that leaves you with 2.1% to use for taxes and living expenses. :( This money is meant for your and your wife's retirement and, obviously, it is not right if a third party gets almost half of it.

The other problem is that most people, even financial advisors, (and most of us) don't understand variable annuities and their assorted fees. You should try to get out of that asap with the minimum costs that you can. However, I wouldn't be surprised if there are high surrender fees that start at 7% if closed during the first year, declining 1% a year after that. Were you informed of that?

The good thing is that your "advisor" is willing to make you partly whole again. Since none of your new holdings at SEI are much more than half a year old, your "loss" on the funds will be less than the yearly Expense Ratio. It is probably best to just cash everything out to see if the "advisor" will make you whole, as much as possible. If you have Vanguard or another investment company pull the current assets, they may or may not be able to sell them (call and ask Vanguard first) and they won't know about any advisor fees that should be refunded. So I would probably cash out everything first. When you are sure the maximum in fees that can be refunded has been refunded, then open new accounts at Vanguard and have them pull the money for you.

I suggest you "work with" the advisor in a cordial relationship until you have the maximum amount of money back that you can get. Then I would leave him as he hasn't shown that he gives good tax advice. Putting the same assets in a tax-deferred account and a Roth does not make good tax sense. Our wiki page on Tax-efficient Fund Placement explains why Roth IRAs should have stock funds and why tax-deferred IRAs should have bonds. Of course, there is not enough room in Roth to hold all the stock fund(s) you want, so some of the stock funds will need to be in taxable or tax-deferred IRAs.

Offhand, you appear to be the perfect candidate for doing Roth conversions. Did your advisor explain what or how much to convert to make the Roth conversions be optimal for your situation? If you don't do any, you may have several years in the 10% tax bracket followed by being in a higher tax bracket after you are both 70.5. Since you said
Since 2001, we have maxed out any contribution we could, saved a ton in taxes, ...
I hope you realize you didn't literally "save" on taxes, but deferred them until your retirement years. The taxes still need to be paid on each withdrawal/conversion from the traditional IRAs. Let's estimate the taxes here:

Currently your traditional IRAs are 76% (48%+28%) of your portfolio or about $836,000 ($1,100,000 * .76). Assume for a minute you were born in the same year, then your combined RMDs, which start at about 3.65% of the account value would be $30,514. They increase each year after that until the rate of withdrawal is more than the rate of growth on the account. (Note that we have not taken growth on the accounts into account.)

When you both start taking the maximum Social Security, your yearly income would be:
30,514 RMDs for 2 people
9,800 his pension
34,140 his SS (2845 * 12), of which 85% of it is taxed=29,109
25,716 her SS (2143 * 12), of which 85% of it is taxed=21,859
This gives a taxable income of $91,282. After taking the standard deduction of $24,000, this gives you 67,282 which puts you in the 12% tax bracket. Note that we have not taken growth of accounts into effect or inflation (the tax brackets will be adjusted for inflation each year). Since an additional $10,000 in RMDs/income will push you into the 22% tax bracket for the amount over that, I suggest that you start withdrawing what you need for living expenses now and convert to the top of the 12% bracket each year. That means you can have taxable income of $77400+24,000 (standard deduction for MFJ) = 101,400. [Remember to include only 85% of your SS if you should start it before age 70.]

To see how much you can convert this year, you will first need to see what capital gains/interest/dividends your taxable accounts have incurred/ will incur this year. Then add:
15,000 her wages
9,800 his pension
12,000 IRA withdrawals for living expenses (to conserve some taxable assets, which can also be used for living expenses)
After you transfer the assets to Vanguard, you can set up a monthly withdrawal of $500 for each of you so it can be automatic. Consider that your income stream, and withhold some for taxes.

Since you say you need 30,000 (2,500 * 12) for living expenses, after accounting for capital gains/interest/dividends, the rest of the money (up to $101,400) can be converted.

bearwithbear
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Re: Newly retired - need to make a big change

Post by bearwithbear » Sat Aug 11, 2018 7:32 am

OP,

Welcome to the forum. I believe that your age (65) means that you are still able to claim spousal at 66 and letting your own continue to grow till 70.
Have you checked any of the calculators for this? It would mean that your spouse would claim before you turn 66 then you would get half her PIA. Note that PIA is what should would get at her full retirement age.

Bear

retiredjg
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Re: Newly retired - need to make a big change

Post by retiredjg » Sat Aug 11, 2018 9:09 am

Highfeehater, you are one lucky man (couple). I've never heard of an advisor who will give you your money back. Jump on that offer to pay only $400 to get out of this mess and consider it the cost of your financial education. It's a very small price to pay to get into a better portfolio and with reduced costs, you will make up that money in no time.

If you are comfortable with 50% stocks and 50% bonds, almost any combination of many will do just fine. 30 US/20 Foreign, 35/15, 40/10 - all of those are within the usual suggestions. If you were to buy a Vanguard Target fund or LifeStrategy fund, it would be like 30 US/ 20 Foreign. If you want 20% of your stocks to be foreign, the right numbers would be 40 US/10 Foreign.

You also mention some Target Retirement funds - any would be fine. Pick the fund by the stock to bond ratio you want. I don't know the other two offhand, but Target Retirement Income is 70% 30% stocks and 30% 70% bonds.

Vanguard also has the LifeStrategy series - these 4 funds are like the target funds in composition, but the stock to bond ratio does not migrate to more bonds over time.
Last edited by retiredjg on Sat Aug 11, 2018 12:41 pm, edited 1 time in total.

Highfeehater
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Re: Newly retired - need to make a big change

Post by Highfeehater » Sat Aug 11, 2018 9:12 am

BL wrote:
Fri Aug 10, 2018 11:33 pm
When you say 30% US, 20% international, 50% fixed income, do you realize that in Boglehead-speak, 20% International is 20% of 50% equities, or 40% International. Since the usual advice is 20-40% (sometimes 50) international, you are certainly within the guidelines but may be higher than you thought.

wow –Thank you BL and Celia for these posts. I’ll be honest – my head is spinning. My wife’s 403B was in a Vanguard Fund (!) doing really well, and she called 3 days ago to see if she could cancel the SEI rollover – and the check had been mailed to SEI just 5 days prior. My 401K was turned over on June 27th. So that’s how new and recent this is for us. I have ordered a few of the books you all recommend, and they’re on the way.

So, BL, thanks for the Boglehead language clarification. I did mean 40% International but I’m thinking now it is a tad high – maybe I should go more to about 30%. I‘m even thinking of going with 40% equities /60% bonds overall.

And yes, I’m considering using a Vanguard advisor, because obviously I still have a lot to learn and I know this is a crucial period for me, tax-wise. I thought I was set, and fully planned to do all this retirement transition with my other advisor. So now I suddenly feel like everything is upside-down, I am aware of the timeline, and I really don't know the tax laws. I'll address this more in my reply to Celia. Thanks again. This is helping a lot.

Highfeehater
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Re: Newly retired - need to make a big change

Post by Highfeehater » Sat Aug 11, 2018 9:43 am

OK - response #2. Obviously learning the mechanics of posting, quoting etc. Actually my wife is doing this part - she's a gem. :D I can do anything mechanically, electrically, hydraulically in a house, yard, boat, car, etc - but words and numbers aren't so much my thing. I need to say this to stop beating myself up.

Retiredjg, thank you for what you said. I am convinced the Vanguard products are the way to go, and I’ll look into it. It really did ease my mind when he offered to waive his fees. Like I said, it was hard and awkward because prior to this I thought he hung the moon, and until I retired, he got his money from the products and the fees we paid for him doing our taxes. He didn’t charge the .7% fee, so it was much less visible; just as you all say.

Bear – my wife was born in 1954, and from everything I’ve seen, that spousal benefit option was for people born in 1953 or before, I believe.

And Celia - I am re-reading and slowly digesting all your wisdom. I’ll be responding to that soon. Thank you all!!

pkcrafter
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Re: Newly retired - need to make a big change

Post by pkcrafter » Sat Aug 11, 2018 10:33 am

Highfeehater wrote:
He knows I am upset and he offered to work with me to transfer my SEI funds to wherever I want, waive his fee, and only get charged $100 each for my 4 accounts.
What is he charging you $400 for? It might be an account closing fee of $100 for each of your accounts, but you should check because there will be closing fees and they may be on top of that $400.
It’s been awkward for both of us, but I heard from his secretary today, asking what accounts I want the assets sent to. I feel fortunate, and that it could’ve been a lot worse. I still plan on using him as my tax advisor, and doing my own investing.
Be careful with transfers of tax-advantaged accounts. You want a custodian to custodian transfer and they are best initiated by the receiving fund company. You do not want a check sent to you from your friendly advisor. I'd also suggest doing one at a time to avoid confusion.

Also check with Fidelity and Schwab for transfers as they are both aggressively trying to get potential Vanguard customers and they may offer and incentive to go with them. Both carry low-cost funds you need. Call them and mention you are considering Vanguard, but wanted to see what they can offer.

Paul
Last edited by pkcrafter on Sat Aug 11, 2018 11:08 am, edited 1 time in total.
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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dwickenh
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Re: Newly retired - need to make a big change

Post by dwickenh » Sat Aug 11, 2018 10:57 am

retiredjg wrote:
Sat Aug 11, 2018 9:09 am
Highfeehater, you are one lucky man (couple). I've never heard of an advisor who will give you your money back. Jump on that offer to pay only $400 to get out of this mess and consider it the cost of your financial education. It's a very small price to pay to get into a better portfolio and with reduced costs, you will make up that money in no time.

If you are comfortable with 50% stocks and 50% bonds, almost any combination of many will do just fine. 30 US/20 Foreign, 35/15, 40/10 - all of those are within the usual suggestions. If you were to buy a Vanguard Target fund or LifeStrategy fund, it would be like 30 US/ 20 Foreign. If you want 20% of your stocks to be foreign, the right numbers would be 40 US/10 Foreign.

You also mention some Target Retirement funds - any would be fine. Pick the fund by the stock to bond ratio you want. I don't know the other two offhand, but Target Retirement Income is 70% stocks and 30% bonds.

Vanguard also has the LifeStrategy series - these 4 funds are like the target funds in composition, but the stock to bond ratio does not migrate to more bonds over time.
I think you meant to say 30% stocks and 70% bonds for Target Retirement Income.


Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

Carl53
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Re: Newly retired - need to make a big change

Post by Carl53 » Sat Aug 11, 2018 12:00 pm

Highfeehater wrote:
Sat Aug 11, 2018 9:43 am

Bear – my wife was born in 1954, and from everything I’ve seen, that spousal benefit option was for people born in 1953 or before, I believe.

If you are 65, then you were born in late 1952 or early 1953. This makes you, not your wife eligible to file a restricted SS application. She would file when you turn 66 and then you would file a restricted spousal application to receive 50% of her full retirement benefit. Once you reach 70, file for your own higher benefit. Her benefit will be permanently reduced but you will have four years collecting perhaps $1000 or more per month as a spouse in addition to her benefit. Use Mike Piper's new calculator, https://opensocialsecurity.com/ , or one of several others talked about on this forum to ascertain the best strategy.

delamer
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Re: Newly retired - need to make a big change

Post by delamer » Sat Aug 11, 2018 12:14 pm

The section in the Bogleheads’ wiki on lazy portfolios is worth your time: https://www.bogleheads.org/wiki/Lazy_portfolios

So is the section on safe withdrawal rates: https://www.bogleheads.org/wiki/Safe_withdrawal_rates

As others have mentioned, you can have Vanguard, Schwab, or Fidelity initiate the transfer of assets for you. But if you intend to keep using your tax guy, let him know what’s coming. You are fortunate that he is responsive to your concerns, and you can get out without incurring a lot of fees or resistance.

Good luck.

retiredjg
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Re: Newly retired - need to make a big change

Post by retiredjg » Sat Aug 11, 2018 12:39 pm

dwickenh wrote:
Sat Aug 11, 2018 10:57 am
I think you meant to say 30% stocks and 70% bonds for Target Retirement Income.


Dan
Thank you Dan. You're right. :happy

bearwithbear
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Re: Newly retired - need to make a big change

Post by bearwithbear » Sat Aug 11, 2018 12:51 pm

OP,

Sorry if I wasn't clear. Carl53 explained it very well. And Mike Piper's calculator is a good one.

Bear

Highfeehater
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Re: Newly retired - need to make a big change

Post by Highfeehater » Sun Aug 12, 2018 10:12 am

pkcrafter wrote:
Sat Aug 11, 2018 10:33 am
What is he charging you $400 for? It might be an account closing fee of $100 for each of your accounts, but you should check because there will be closing fees and they may be on top of that $400.
My current understanding is that it is an exit fee of $100 for each account (2 Roths, 2 IRAs) that went to SEI. Tomorrow I will email him and have him exit the funds and them into cash as he offered, and when I’m ready (and I know the fees are removed) I will transfer them custodian to custodian initiated by the new fund. He’s knows me, and is realizing now that I do truly hate fees, as I’ve been grousing about for years, and says he wants me to feel comfortable with my allocations. So yes, if I get out of this for $400, I will be extremely fortunate, and getting quite an education.

Highfeehater
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Re: Newly retired - need to make a big change

Post by Highfeehater » Sun Aug 12, 2018 10:15 am

bearwithbear wrote:
Sat Aug 11, 2018 7:32 am
Welcome to the forum. I believe that your age (65) means that you are still able to claim spousal at 66 and letting your own continue to grow till 70.
Have you checked any of the calculators for this? It would mean that your spouse would claim before you turn 66 then you would get half her PIA. Note that PIA is what should would get at her full retirement age.
Wow - these tax and SS nuances make choosing a fund seem easy!

Referencing Celia's post, which I also plan to respond to today - I know I really have to weigh out my income and withdrawals carefully to stay at the top of 12% tax bracket the using IRA distributions And now, Bear, you have added a wrinkle I didn't even know existed.
I did that SS spousal benefit calculation that I didn’t realize I was eligible for, and compared that with the Alternative Claiming strategy calculation of starting at 70 without the spousal benefit. The present value decreased $58,655. Like you said, it did decrease the monthly benefits too – esp my wife’s, but I get that.

But this was confusing: The alt strategy calculation (starting at 70 without the spousal benefit, as I’d been planning to do ) also gave me a monthly amount that equals $1209 less per year than my SS statement indicates I’d get at 70, so I have to question its accuracy.

I also read this at https://www.fool.com/retirement/2018/04 ... nefit.aspx “ On the other hand, let's say that two spouses were entitled to benefits of $1,500 and $1,100 on their respective work records. In this case, no spousal benefit would be paid, since the lower-earning spouse's benefit is already greater than half of the higher earner's benefit.” My wife’s benefit is more than half of what mine is. So that’s confusing too.

In my travels online yesterday (doing this non-stop except to sleep), I also learned about Deemed SS filing, which also seems to apply to us. Can you or someone clarify this for me?

So thank you for this new option - all this would give me more income now and in the near future. So I guess my next of many questions is: I was planning to maximize my withdrawals from my IRA in these “leaner” years while I was waiting for my SS at age 70 – vs this strategy of maximizing my overall income from SS. Any feedback from anybody about that?

Thank you all so much. I appreciate your insights and expertise!!

Highfeehater
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Re: Newly retired - need to make a big change

Post by Highfeehater » Sun Aug 12, 2018 12:09 pm

HI Celia - thank you for your thoughtful and thorough response. It taught me a lot, and led me to much research. I do want to work cordially with my advisor, who I feel is a good guy at heart. He just believes his own party line. Those high fees are my motivation to trudge through this now.

The variable annuity, which I've never liked, was purchased in 05 with $45K. I’ll look into that. It too is on the target list, but maybe the last thing to go because it is so hard to understand. I'll find out, though.

I read these Wiki pages. Thinking in terms of using "good tax sense" to determine AA, and, for example's sake, using a 50% equity/50% bond mix for the portfolio (1 IRA and 1 Roth) are you saying to shift assests as follows? Instead of having a pie chart in the Roth and IRA both having the same allocation of 50% bonds, 30% US stock and 20% Intl stock, it would be, for example, the Roth having 25% bonds, 45% US stocks and 30% Intl stock; while the IRA holdings would be 75% bonds, 15% US stock and 10% Intl stocks. This keeps the entire portfolio a 50/50 mix while shifting interest and bond funds more into the tax-deferred acct and stock funds more into the Roth. It also keeps the equities ratio the same - a 60/40 US to Intl split. Make sense?

Re tax deferment, you're right: saving taxes was not the right wording - while I was working, investing in my 401Ks in order to get my taxes to 0% seemed like a smart move at the time....but now I'm looking at a pinch at 70.5.

I do plan to going up to the high side of 12% bracket this year and do some Roth conversions. We were planning to meet with my "advisor" later this year to discuss how much I could pull out this year to do this. My plan is to contact him tomorrow, have the accounts cashed out, and held until I can have Vanguard or whoever (just saw a commercial today for a no-fee Fidelity index fund acct) initiate the custodian-to-custodian transfer.

I would appreciate hearing your thoughts on the SS options Bear mentioned, as this income would change what I could do with my IRA withdrawals.

Withdrawing IRA funds now within the 12% bracket & creating an income stream, instead of living on my cash, makes much more sense and hopefully will save me some tax headdache at 70.5

Totally appreciate all responses!!!

Highfeehater
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Re: Newly retired - need to make a big change

Post by Highfeehater » Sun Aug 12, 2018 1:55 pm

while reading a Boglehead wiki post - https://www.bogleheads.org/wiki/Asset_a ... e_accounts - I realized that the scenario I mentioned in my last post will only work if the two funds have equal value. My basic question, though, still stands - would the AA in my scenario be considered Tax-efficient?

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BL
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Re: Newly retired - need to make a big change

Post by BL » Sun Aug 12, 2018 3:32 pm

You might want to read this little book on taking SS:
Social Security Made Simple: Social Sec ... Mike Piper

(Watch out for older version from before tax changes.)

I believe the default SS estimate uses working until you draw SS for their numbers, not quitting earlier, so it could be wrong if you .
They do have a calculator where you can put some zeros in for future years, AFAIK.

bearwithbear
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Re: Newly retired - need to make a big change

Post by bearwithbear » Sun Aug 12, 2018 5:48 pm

OP,
Since you were at least 62 on Jan 01, 2016 you can file a restricted application for spousal benefits.
That means, as long as your spouse has claimed her social security benefit and you have turned 66 you can get half of her PIA and your benefit will continue to grow.
If you were younger than 62 on Jan 01, 2016 then “deemed” becomes an issue for spousal benefits.
Mike Piper – Oblivious Investor – has a book: “Social Security Made Simple” that explains this and more.
Bear

Kevin8696
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Re: Newly retired - need to make a big change

Post by Kevin8696 » Sun Aug 12, 2018 9:22 pm

Welcome to the Forum !!

Regarding your proposed allocation to International Stocks, consider the following facts:

1. Diversification: Over 40% of the revenues of the S&P 500 come from international ops. So, the S&P 500 already has international covered.

2. Performance: International stocks as a class have underperformed the US Market over the past 20 years... 5.66% vs 7.52% using Vanguard International Stock Index fund (VTIAX) and Vanguard Total Stock Market Fund (VTSAX).

3. Volatility: International stocks as a class have been more volatile than the US Market over the past 20 years... Std Deviation of 21.2% vs 17.6% using the above funds.

4. Correlation: International stocks and the US Market are highly correlated... 0.90 over the past 20 years using the above funds. (1.00 is perfect correlation).

5. Currency Risk: International stocks are denominated in foreign currencies. Dollar is up this year, international stocks are down. Last year it was the opposite. Why take the risk of the changes in the exchange rate ?

And now the rhetorical question: Since the S&P 500 is already internationally diverse, why add an international stock fund to your portfolio that underperformed the US Market, was more volatile than the US Market, was highly correlated to the US Market, and is loaded with currency risk ?


Lastly, I attribute all of the above observations to Jack Bogle.

Please read his book "The Little Book of Common Sense Investing". He boils it all down. Available on Amazon.

Personally, I'm 67, retired at 62, and love my 2 fund Vanguard portfolio.... 1 fund for equities, 1 fund for fixed income.

Kevin

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Re: Newly retired - need to make a big change

Post by Grt2bOutdoors » Sun Aug 12, 2018 9:29 pm

Kevin8696 wrote:
Sun Aug 12, 2018 9:22 pm
Welcome to the Forum !!

Regarding your proposed allocation to International Stocks, consider the following facts:

1. Diversification: Over 40% of the revenues of the S&P 500 come from international ops. So, the S&P 500 already has international covered.

2. Performance: International stocks as a class have underperformed the US Market over the past 20 years... 5.66% vs 7.52% using Vanguard International Stock Index fund (VTIAX) and Vanguard Total Stock Market Fund (VTSAX).

3. Volatility: International stocks as a class have been more volatile than the US Market over the past 20 years... Std Deviation of 21.2% vs 17.6% using the above funds.

4. Correlation: International stocks and the US Market are highly correlated... 0.90 over the past 20 years using the above funds. (1.00 is perfect correlation).

5. Currency Risk: International stocks are denominated in foreign currencies. Dollar is up this year, international stocks are down. Last year it was the opposite. Why take the risk of the changes in the exchange rate ?

And now the rhetorical question: Since the S&P 500 is already internationally diverse, why add an international stock fund to your portfolio that underperformed the US Market, was more volatile than the US Market, was highly correlated to the US Market, and is loaded with currency risk ?

The same reason why you would not go all-in on any one asset class/sector when it's trading at high valuations. Look at real estate in 2006, look at internet stocks in 1999, look at real estate today, look at tech and biotech today. Trees don't grow to the sky forever, except for realtors. :twisted:


Kevin
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Newly retired - need to make a big change

Post by Bronco Billy » Sun Aug 12, 2018 9:37 pm

I feel your pain and your not ALONE. My FA put me into 3 annuities and the rest in high er SEI funds. After 2 years SEI and my FA had made more money than me. Its a lot easier to give the FA money than to get it back. I finally cashed out and moved it to Scottrade then to Vanguard. For sure you will get some good advice here but dont have a knee jerk reaction. My advice would be to contact VG or FIDO and let them help you get it transferred correctly. So many different annuity's but sure its in your name. i called and had mine moved to house account. I also had a free 10% free withdrawal and taking that each year. I am sure now you are here @ BH it will all work out. Good luck.

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Re: Newly retired - need to make a big change

Post by celia » Sun Aug 12, 2018 10:48 pm

Highfeehater wrote:
Sun Aug 12, 2018 1:55 pm
while reading a Boglehead wiki post - https://www.bogleheads.org/wiki/Asset_a ... e_accounts - I realized that the scenario I mentioned in my last post will only work if the two funds have equal value. My basic question, though, still stands - would the AA in my scenario be considered Tax-efficient?
Good catch!
Instead of having a pie chart in the Roth and IRA both having the same allocation of 50% bonds, 30% US stock and 20% Intl stock, it would be, for example, the Roth having 25% bonds, 45% US stocks and 30% Intl stock; while the IRA holdings would be 75% bonds, 15% US stock and 10% Intl stocks.
That is a good improvement, but if the value of your TIRA and Roth were equal, all the bonds in the TIRA and all the stocks and international funds in Roth would be optimal!

Since your portfolio is:
10% taxable (if annuities are cashed out to their current value)
76% tax-deferred
14% Roth

then you would fill up your Roth with stock funds, fill up taxable with international, and put the bonds in tax-deferred along with the remaining stocks and international.

However, this might make your taxable too volatile for you. So you could make taxable be half international and half bonds.

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Re: Newly retired - need to make a big change

Post by Highfeehater » Sun Aug 12, 2018 10:50 pm

Thank you Kevin - I should've clarified that I was talking about the Total US Stock Index Fund (VTSAX) and Total International Stock Index Fund (VTIAX). So even though VTSAX only has .1% foreign holdings, you (and Jack Bogle) understand that 40% of the revenue already reflects international exposure? Thanks for that. And yes, I have ordered and am awaiting that book and the SS book, any day now.

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Re: Newly retired - need to make a big change

Post by Highfeehater » Sun Aug 12, 2018 10:58 pm

Celia - thank you, sounds great. I will split the taxable account between bonds and international, using Vanguard Index Funds. I'll be calling Vanguard tomorrow, along with former advisor. Feel free to post any other ideas. I really appreciate everybody's support.

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Re: Newly retired - need to make a big change

Post by Highfeehater » Sun Aug 12, 2018 11:04 pm

Bronco Billy wrote:
Sun Aug 12, 2018 9:37 pm
I feel your pain and your not ALONE. My FA put me into 3 annuities and the rest in high er SEI funds. After 2 years SEI and my FA had made more money than me. Its a lot easier to give the FA money than to get it back. I finally cashed out and moved it to Scottrade then to Vanguard. For sure you will get some good advice here but dont have a knee jerk reaction. My advice would be to contact VG or FIDO and let them help you get it transferred correctly. So many different annuity's but sure its in your name. i called and had mine moved to house account. I also had a free 10% free withdrawal and taking that each year. I am sure now you are here @ BH it will all work out. Good luck.
Billy - glad you're getting out of it. Haven't talked to anybody at Allianz about my annuity yet, but I'm going to. If I have to, I'll do the withdrawals too, but I've had it since '05, so it should be a little less hassle. I heard a good phrase today, from Ice Cube: "A setback is just a setup for a comeback."

This whole thing is making me a better investor, and definitely a more wealthy man. Thanks for the support. Hang in there.

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Re: Newly retired - need to make a big change

Post by celia » Sun Aug 12, 2018 11:13 pm

Before you pull taxable funds away from SEI, find out what the long and short term gains/losses are for this year. In particular, what tax form will they send you and what should be the numbers be on it? You will need to take this into account when looking for the top of the 12% bracket. If you do convert before the end of the year, don't do your complete conversion early. Say you do 75% of it after your money is at Vanguard. Then re-run all your latest numbers in December to confirm how much space is left in the 12% bracket. Don't worry if it doesn't come out as close as you expect. I used to do the calculation each year and usually ended up a thousand short or a thousand over. If you go over, it is only the overage that is taxed at the higher tax bracket, so don't sweat it. Tax software is usually released in early December.

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Re: Newly retired - need to make a big change

Post by celia » Sun Aug 12, 2018 11:24 pm

In regards to one spouse taking a spousal benefit from SS, if both spouses are about the same age, it appears that the person with the higher PIA should hold off until 70. At/after their Full Retirement Age (FRA), they file and suspend (I think this is where your birthday determines if you are eligible to file and suspend). Then the lower-PIA spouse files (at/after FRA) for a spousal benefit, allowing their own to grow until 70. The PIA for each person and the time between their birth dates determine if this is better for them or not.

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Re: Newly retired - need to make a big change

Post by Highfeehater » Sun Aug 12, 2018 11:39 pm

Celia Thanks. That is perfect! I was worried about possibly going over a bit. Great to know it is only the overage that gets taxed. I'll do the 75% conversion first. I have heard several different versions of the SS spousal benefit. I am awaiting the book and plan to visit the local SS office. Thanks again. I'll sleep better tonight and have lots to do tomorrow with this.
Last edited by Highfeehater on Wed Aug 15, 2018 11:16 pm, edited 1 time in total.

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Re: Newly retired - need to make a big change

Post by Kevin8696 » Mon Aug 13, 2018 1:10 am

Highfeehater wrote:
Sun Aug 12, 2018 10:50 pm
Thank you Kevin - I should've clarified that I was talking about the Total US Stock Index Fund (VTSAX) and Total International Stock Index Fund (VTIAX). So even though VTSAX only has .1% foreign holdings, you (and Jack Bogle) understand that 40% of the revenue already reflects international exposure? Thanks for that. And yes, I have ordered and am awaiting that book and the SS book, any day now.
That's correct. In 2016 the percent of sales of the S&P 500 derived from overseas countries was 43.2%. See attached link.

https://us.spindices.com/indexology/dji ... obal-sales

More on currency risk... in 2017 the Total Int'l Stock Index Fund (VTIAX) had total return of 27.55% versus 21.19% for the Total US Stock Index Fund (VTSAX). So, did international really beat the US by 6.36% in 2017 ? Nope.... the Dollar was down 10%. When you adjust for the change in the exchange rate, VTIAX was up just 17.55% versus 21.19% for VTSAX.

The dollar has rebounded in 2018. As of Friday, VTIAX has YTD return (loss) of (3.92%) versus 7.60% for VTSAX. And yes, the dollar is up 6% so far this year.

As Jack Bogle says... do you buy your groceries and pay your bills in Dollars ? or Yen ? or Euros ? or Pounds ? Why take currency risk ?

Kevin

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Re: Newly retired - need to make a big change

Post by Highfeehater » Mon Aug 13, 2018 9:55 pm

Update - I contacted Vanguard and the process has begun! Allocations aren't set yet, but SEI funds are being put to cash accounts to get ready for transfer. I'm working with a pleasant Vanguard rep who was a lot of help. I also called Allianz and learned my annuity can be cashed in for full price for a $40 fee - I'll wait on that til it's tax-efficient.

Using "Asset Allocation in Multiple Accounts" wiki, I graphed 4 accounts using the flowchart in Portfolio 3. I have his Roth ($72,644) and her Roth ($74,977) and his IRA ($623,040) and her IRA ($367,500), totalling $1,138,161. I have no taxable account. That will have to be set up later.

I based my AA on the entire 4 account portfolio, and starting with his Roth, I filled it with Total US Stock Market Index Fund VTSAX ($72,644); then filled her Roth with VTSAX ($74,977). Then moved to his IRA and put the rest of VTSAX in it ($307,643). Continuing with that IRA, I put the 10% of Total International Stock Market Index VTIAX ($113,816) in it, then using the Total Bond Market Index Fund VBTLX, filled the rest of his IRA. Then moved on to her IRA and filled it with the rest of the VBTLX ($367,500).

This entire portfolio allocation gives me a 50/50 stock/bond split with 20% of stocks being International Index. All funds are Vanguard Admiral. So, using the famous three Index funds, Boglehead AA and tax-efficient fund placement, and all the help from this forum, this is what I've come up with.

Tomorrow I'm going to work on doing it all again in case I can start a taxable account at the same time, working with about $100K from my emergency fund/money market account.

Thanks, folks. Comments are appreciated.

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Re: Newly retired - need to make a big change

Post by Kevin8696 » Tue Aug 14, 2018 12:18 am

Congratulations on the move to Vanguard !! With balances in Vanguard funds over $1 million, you qualify for the "Flagship" level of service. Be sure they set you up for that. Good friend of mine just moved similar size accounts to Vanguard from Ameriprise. He's happy as can be !!

While you are pondering a taxable account, it's worth noting the Vanguard Prime Money Market Fund (VMMXX) is paying just over 2%, which is pretty good in today's world. Nice place to park some bucks. I recently moved my emergency fund dollars into that fund from a credit union.

Best of Luck to you,
Kevin

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Re: Newly retired - need to make a big change

Post by FiveK » Tue Aug 14, 2018 12:56 am

Highfeehater wrote:
Mon Aug 13, 2018 9:55 pm
Update - I contacted Vanguard and the process has begun! Allocations aren't set yet, but SEI funds are being put to cash accounts to get ready for transfer. I'm working with a pleasant Vanguard rep who was a lot of help. I also called Allianz and learned my annuity can be cashed in for full price for a $40 fee - I'll wait on that til it's tax-efficient.

<snip>
Great work on what you have done! Congratulations!

What do you mean by "wait on that til it's tax-efficient"? Note that annuity earnings must be withdrawn before your contribution amount and are taxed as ordinary income. If you put that money into taxable stock funds, the qualified dividends and long term capital gains are taxed less than ordinary income. Or perhaps you know all that and 2019 will be a more tax-efficient year to take the hit on annuity earnings?

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Re: Newly retired - need to make a big change

Post by celia » Tue Aug 14, 2018 2:53 am

Highfeehater wrote:
Mon Aug 13, 2018 9:55 pm
I also called Allianz and learned my annuity can be cashed in for full price for a $40 fee - I'll wait on that til it's tax-efficient.
There may be a time limit for being able to un-do the purchase. They obviously won't let you wait a year to un-do your annuity since they will then expect their commission. So I suggest you call them back and find out if there is a deadline/restriction in your case.

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Re: Newly retired - need to make a big change

Post by Highfeehater » Tue Aug 14, 2018 8:35 am

Thanks for your responses everyone.

What I meant by waiting until it is more tax efficient was to not surrender the Allianz annuity this year because it will put $34000 (earnings on the $45k contribution from 2005) more into my income bracket for 2018, and I was planning to use IRA withdrawals later this year to take my income to the high 12% tax bracket, convert to my Roth accounts and help with my future IRA RMDs. But as I think this out, I believe it would be the perfect time to surrender this annuity.

When I retired earlier this year I maxed out my 401k and deferred everything I could and am currently showing only appx. $25k in income plus $8800 in pension payments, $5000 for my wife(her $15k gig starts next year). Thats about $43k. Leaves me lots of room to do both.

And BTW, after writing this I just called Allianz back and asked about their fees - 3.2%, plus $40/yr to maintain it. So no-brainer there. I will surrender the annuity and put the gains in a taxable fund.

So Kevin, thanks for the tip about VMMXX, and the "Flagship" level. Feels good.

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Re: Newly retired - need to make a big change

Post by Kevin8696 » Fri Aug 24, 2018 7:45 am

Highfeehater wrote:
Tue Aug 14, 2018 8:35 am
Thanks for your responses everyone.

So Kevin, thanks for the tip about VMMXX, and the "Flagship" level. Feels good.
Highfeehater... Glad to be of assistance in your transition.

Regarding international stocks.... I would encourage you to look at the performance of Vanguard Total International Stock Index Fund (VTIAX) as compared to Vanguard Total Stock Market Index Fund (VTSAX). YTD performance of VTSAX is 8.69% versus (4.22%) for VTIAX... a 12.91% difference !!

The under performance of VTIAX is largely due to the weaker performance of international stocks, and is also due to the strengthening of the dollar in 2018. Personally, the last thing I want in my retirement portfolio is volatility caused by the never-ending changes in currency exchange rates.

Be sure to check what Jack Bogle has to say about international stocks when you read "The Little Book of Common Sense Investing".

Kevin

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Re: Newly retired - need to make a big change

Post by Highfeehater » Fri Aug 24, 2018 12:26 pm

Thanks Kevin. I am currently in a transition period waiting for the funds to arrive at Vanguard. We have accounts all set up. They have been a great help. Meanwhile I have been devouring the books and Boglehead forums, taking in all the info I can before I make any allocations; studying every moment I can and waiting for more books to arrive - I even dream about allocations. Some questions I had earlier have been answered in my reading. It would have been more efficient to have read everything first, as you all suggested, but I was in a " move fast mode". I am absolutely loving all of it and appreciate everything the Bogleheads have done for everyone. I, too, want to be able to pass it on someday.

I do notice the difference in the performance of the US Total Stock Market Index (VTSAX) and the Total International Stock Index (VTIAX) and understand why. I have already planned to cut the percentage of VTIAX because of the volatility. Are you suggesting that it would be a good move to go with a two fund approach and not use VTIAX at all? I am seriously listening to all you Bogleheads and am taking advice seriously. I also set up a taxable account and plan on putting my emergency account in VMMXX instead of my local Credit Union which pays little.

Thanks for helping me with this transition. I do want to get it right.

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Re: Newly retired - need to make a big change

Post by Kevin8696 » Fri Aug 24, 2018 1:37 pm

Highfeehater wrote:
Fri Aug 24, 2018 12:26 pm
Thanks Kevin.
I do notice the difference in the performance of the US Total Stock Market Index (VTSAX) and the Total International Stock Index (VTIAX) and understand why. I have already planned to cut the percentage of VTIAX because of the volatility. Are you suggesting that it would be a good move to go with a two fund approach and not use VTIAX at all? I am seriously listening to all you Bogleheads and am taking advice seriously. I also set up a taxable account and plan on putting my emergency account in VMMXX instead of my local Credit Union which pays little.

Thanks for helping me with this transition. I do want to get it right.
It's good to take asset allocation seriously, since it can be the most important investment decision that you make. I am a firm believer in the Two Fund approach, which I picked up from Jack Bogle... using a broad stock index fund (S&P 500, or Total US Stock Market), and a good bond index fund... such as the Vanguard Total Bond Market Index Fund (VBTLX), or the Vanguard Intermediate-term Bond Index Fund (VBILX).

Unfortunately, none of the intermediate to long term bond funds have done well in 2018, during this period of rising interest rates. Additionally, with the recent (and continuing) increases to short-term rates by the Federal Reserve, the spread between short-term rates (like VMMXX) and the bond fund interest distribution payments is shrinking. Current annualized yield on VMMXX is 2.07%. Current annualized distribution yield on VBTLX is 2.77%.

Like many folks out there today, I believe that the risk to principal in the intermediate term bond funds does not justify the return. VMMXX has literally no principal risk as rates increase, while VBTLX and other similar funds have oodles of risk to principal. YTD total return for VMMXX and VBTLX are 1.15% and (0.86%) respectively, as VBTLX has taken principal hits due to rising interest rates. Yes, the higher rates will help VBTLX eventually, but in the meantime that fund is taking two steps forward and three steps back. A few months ago I moved the bond portion of my portfolio to VMMXX, with a modest return of 2% and no interest rate risk. When the dust settles on bond rates, I'll move back into VBTLX.

Back to asset allocation.... the following link will take you to an interesting tool... the Vanguard Retirement Nest Egg Calculator.

https://retirementplans.vanguard.com/VG ... ggCalc.jsf

I found this tool to be very helpful in deciding on a retirement distribution strategy, and in choosing an asset allocation that fits the distribution strategy... so that I don't run out of money before I stop having birthdays.

Hang in there... when it's all in place, you will sleep well !!

Kevin

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Re: Newly retired - need to make a big change

Post by Highfeehater » Fri Aug 24, 2018 2:09 pm

Makes good sense. Thanks so much. I am so focused on staying the course I tend to believe that its not kosher to jump out of one bond fund to another but your advice helps. I am trying to stay in the parameters of you Bogleheads and I also see the increased risk for a modest return in VBTLX compared to VMMXX. Sooner or later the intermediate bonds will pick up, as you say. I want to be careful not to stray from a true Boglehead approach and still allocate smartly!

I'll get on the calculator link and play with numbers. Thanks for your help and ideas. Ted

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Re: Newly retired - need to make a big change

Post by Chip » Sat Aug 25, 2018 4:28 am

Highfeehater wrote:
Fri Aug 24, 2018 12:26 pm
I do notice the difference in the performance of the US Total Stock Market Index (VTSAX) and the Total International Stock Index (VTIAX) and understand why. I have already planned to cut the percentage of VTIAX because of the volatility. Are you suggesting that it would be a good move to go with a two fund approach and not use VTIAX at all?
I would suggest that using YTD performance of different funds is probably one of the worst ways to construct a portfolio. You can't invest in past performance, only future expected returns.

Before making your allocation decision, at least understand what happened to Japanese investors who only invested in their home market after the huge returns they received in the 80s. I'm not saying it will happen here, but you shouldn't completely discount the possibility.

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Re: Newly retired - need to make a big change

Post by Chip » Sat Aug 25, 2018 4:34 am

Kevin8696 wrote:
Fri Aug 24, 2018 1:37 pm
Unfortunately, none of the intermediate to long term bond funds have done well in 2018, during this period of rising interest rates. Additionally, with the recent (and continuing) increases to short-term rates by the Federal Reserve, the spread between short-term rates (like VMMXX) and the bond fund interest distribution payments is shrinking. Current annualized yield on VMMXX is 2.07%. Current annualized distribution yield on VBTLX is 2.77%.
Why would you use distribution yield instead of the SEC yield of 3.12%?

How will you know when "the dust settles"?

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Re: Newly retired - need to make a big change

Post by Kevin8696 » Sun Aug 26, 2018 12:33 pm

Chip wrote:
Sat Aug 25, 2018 4:34 am
Kevin8696 wrote:
Fri Aug 24, 2018 1:37 pm
Unfortunately, none of the intermediate to long term bond funds have done well in 2018, during this period of rising interest rates. Additionally, with the recent (and continuing) increases to short-term rates by the Federal Reserve, the spread between short-term rates (like VMMXX) and the bond fund interest distribution payments is shrinking. Current annualized yield on VMMXX is 2.07%. Current annualized distribution yield on VBTLX is 2.77%.
Why would you use distribution yield instead of the SEC yield of 3.12%?

How will you know when "the dust settles"?
Chip,

I used the annualized distribution yield as it reflects actual cash income to the investor, as opposed to "hypothetical" income in SEC yield.

The Vanguard site includes the following comment in the definition of SEC yield... "This hypothetical income will differ (at times, significantly) from the fund's actual experience; as a result, income distributions from the fund may be higher or lower than implied by the SEC yield."

Since VMMXX uses 7-day SEC yield, which is the annualized return of actual distributions, I used a similar comparison for VBTLX.

As for the dust settling... we will know it has settled when it settles.

Kevin

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Re: Newly retired - need to make a big change

Post by Chip » Sun Aug 26, 2018 1:35 pm

Kevin8696 wrote:
Sun Aug 26, 2018 12:33 pm
I used the annualized distribution yield as it reflects actual cash income to the investor, as opposed to "hypothetical" income in SEC yield.
SEC yield is far from hypothetical and is a standardized way of comparing bond funds. If you don't believe that, imagine a 10 year premium bond which pays 5% interest on original principal but costs $117 per $100 of face value. Next, a 10 year discount bond paying 1.5% interest on original principal but sells for $75. Which is the better buy? The answer is the discount bond. SEC yield will tell you that. But if you compare distribution yields you would incorrectly choose the premium bond.
As for the dust settling... we will know it has settled when it settles.
Right. I suppose they'll ring a bell to tell us?

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Re: Newly retired - need to make a big change

Post by Kevin8696 » Sun Aug 26, 2018 3:21 pm

Chip wrote:
Sun Aug 26, 2018 1:35 pm
Kevin8696 wrote:
Sun Aug 26, 2018 12:33 pm
I used the annualized distribution yield as it reflects actual cash income to the investor, as opposed to "hypothetical" income in SEC yield.
SEC yield is far from hypothetical and is a standardized way of comparing bond funds. If you don't believe that, imagine a 10 year premium bond which pays 5% interest on original principal but costs $117 per $100 of face value. Next, a 10 year discount bond paying 1.5% interest on original principal but sells for $75. Which is the better buy? The answer is the discount bond. SEC yield will tell you that. But if you compare distribution yields you would incorrectly choose the premium bond.
Chip,

Yes, the SEC yield is a standardized, mandated calculation. However, neither standardization nor an SEC mandate makes it any less hypothetical.

In my analysis of VBTLX and VMMXX, I chose not to use the SEC yield, since that calculation assumes that there will be no change in the value of the bonds in the portfolio. As we have clearly seen in 2018, when rates go up, bond values go down... and yield to maturity changes with every change in the price of a bond.

In today's world, relying on the assumption that bond prices will be unaffected by the current trend of rising interest rates does not seem to be a very good approach.

I was comparing VBTLX, a bond fund with an 8.4 yr avg maturity and 6.1 yr duration, to VMMXX a $1 denominated money market fund with no interest rate risk. As such, I was focused on the annualized distribution yield for comparison purposes... to illustrate how flat the yield curve has become this year.

It does not look to me like the intermediate-term bond investors are being adequately compensated for the interest rate risk they are taking in a 6+ yr duration fund, versus no interest rate risk in a money market fund.

Kevin

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Re: Newly retired - need to make a big change

Post by Highfeehater » Fri Sep 07, 2018 11:26 am

Time for an update. I definitely have made some changes. I have had my nose in the books and on the forums all day and late nights, put on a few pounds , gotten less work done around the house and have not gone fishing for months but I think I am in a better place and feel much more empowered and in control. After reading the books I understand I asked questions that were answered in them, so thank you all for your patience and help along the way! I took Celia’s advice and took in a lot of different advice, ideas and thoughts. I tried to make my moves smart ones based on this input.

Summary of things I have done working with Vanguard to move each individual account over from SEI: VG initiated the move. I had informed my ex-advisor of the plan and he worked with them. The cost was $75 per account (x4) to move and $1350.00 in fees to advisor which he returned. Since there was no contributions or withdrawals there should be no tax implications.

I surrendered the Allianz annuity for the full amount, added about $34,000 to this year’s income and it truly only cost me a $40 surrender charge and saved me 3.2% in fees. Yes!

The other non-qualified account (Columbia-Threadneedle Fund LCCCX) currently valued at $29,000 was moved to my VG taxable joint account. It has ER of 1.7% so my plan is to sell that next year and use it as income along with IRA withdrawals. I could also, since I have room before I hit the top of the 12% tax bracket, sell it this year, add it to my income and be done with it. Any ideas or advice?

Whatever room I have left before I reach the upper 12% limit I will convert IRA funds to Roth funds in December.

I also transferred my $100,000 emergency fund from my credit union to the VG taxable and filled it with VMMXX. Thanks Kevin for the suggestion. It’s in a much more profitable place.

Now for my allocations and funds in my retirement accounts: I think I spent more time wrestling with myself to get this right. I know it can be modified along the way but I found it to be the hardest part of this endeavor.

I changed from my original plan of 50/50 with 20% of equities to International. I decided on a 45/55 stock to bonds. My Sweetheart felt more comfortable with this so I went ahead with it. I personally am a 50/50 guy but maybe I should act my age. HA! So after tons of reading, going back and forth and reading literally 1000’s of posts in these forums about whether or not to own INT’L in the mix, I decided to forego them, for several reasons. First of all, Kevin suggested I just think about it so I had it on my radar. I think the diversification of the US Stock reaches into the foreign enough. The correlation between the two funds is quite high and what Jack Bogle explained about currency risk made sense to me. Reading and re-reading The Little Book Of Common Sense Investing solidified this decision. It also helped me deciding on the 2 fund portfolio. I really don’t need the extra volatility-I am in good shape.

I hope to put another $100,000 into the taxable account in the near future and am still thinking about its place. Until then, I need to plan to focus on taking this year’s income to the high 12% and plan each year to do conversions from TIRA to Roth. You all have had a big impact on how I was thinking. Any questions, comments, improvements? I listen to them all. I am on the forum quite often- it’s a new passion!

retiredjg
Posts: 33912
Joined: Thu Jan 10, 2008 12:56 pm

Re: Newly retired - need to make a big change

Post by retiredjg » Fri Sep 07, 2018 11:55 am

Oh dear. Looks like we've created another monster!

Thanks for the update. Very impressive. :wink:

Kevin8696
Posts: 155
Joined: Mon Oct 08, 2012 7:45 pm

Re: Newly retired - need to make a big change

Post by Kevin8696 » Fri Sep 07, 2018 12:54 pm

Glad that things are coming together for you. And nice to hear that I (we) could be of assistance.

Best of Luck in your retirement !!
Last edited by Kevin8696 on Fri Sep 07, 2018 4:59 pm, edited 1 time in total.

ExitStageLeft
Posts: 924
Joined: Sat Jan 20, 2018 4:02 pm

Re: Newly retired - need to make a big change

Post by ExitStageLeft » Fri Sep 07, 2018 4:58 pm

Great news, now go fishing!

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sergeant
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Re: Newly retired - need to make a big change

Post by sergeant » Fri Sep 07, 2018 5:47 pm

Good job, and thanks for the updates. Don't worry about the international stock choice, many here agree with you. Disclosure: I'm about 30% international so obviously think differently.
Lincoln 3 EOW!

pkcrafter
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Re: Newly retired - need to make a big change

Post by pkcrafter » Fri Sep 07, 2018 6:48 pm

Highfeehater, nicely done. You could be poster boy for new readers!

I don't think this was mentioned, but I assume you have gotten rid of the Columbia Contrarian fund in taxable. Not only does it carry a 1% advisory fee in the expense ratio, it is also not tax efficient.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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