Transferring $1.2 Mil taxable to Vanguard

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PQ12$
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Transferring $1.2 Mil taxable to Vanguard

Post by PQ12$ » Tue Oct 16, 2018 1:56 pm

<t>Hi: I've been lurking about Bogleheads for years and finally jumping in. Need some good advice from this group prior to moving my $1.2 mil taxable account from my Registered Investment Advisor to Vanguard. Currently I am paying a 1% assets under mgt. fee plus an average of 1% for his choice of funds. I am 70% in stocks and 30% bonds, all accounts (except one at $130K) can be transferred in kind to Vanguard.<br/>
<br/>
Performance has been ok but don't think my finances require alot of high-end mgt. and am tired of paying 2% off the top. Like the idea of going all index and just letting it sit until we need it, and doing the minimal work to balance and tax loss harvest myself. In that vein it is worth mentioning -- I took a big hit from the sale of some company stock awhile back so we have $400K in losses to carry forward re: cap gains calculations, so wondering if harvesting is very important given I already have such a big nut to work off. Also, fyi I am not a Betterment/robo candidate in case you are - just not ready for that world.<br/>
<br/>
My situation is this: 55 years old, married, currently running a part time consulting business. We have no debt, $1 mil in an IRA with Vanguard (85% Vanguard Index funds, 15% Index bonds), $2 mil in real estate and the $1.2 mil in the taxable account. Based on our current earnings/burn rate we will not touch principal of this taxable account until age 62, when we plan to retire and I estimate I'll then need $100K per year going forward from the taxable. Hope to not touch the IRA until we have to, which I think is age 72.</t>

My specific questions are these:

- Given most of my funds can transfer in kind to Vanguard, should i just do that before year-end 2018 and then figure out when to sell based on cost basis so that I can begin to move this money into an all-index portfolio? I want to get out of the 1% advisor fee for 2019.

- I have some concerns about how my advisor will respond to this news, and worry -- not much but a little, that I will be quickly on my own once I break it to him. Anybody have any experience how these guys react to this? He's a good guy but this will mean $12-15K less in his firm's pocket every year, plus the other money they make we don't know about.

- Given my advisor has been tax/loss harvesting for years, and the big loss I am carrying forward, I'm tempted to just have the advisor liquidate to cash and start anew with Vanguard. Is this crazy? I have trouble imagining there is a big cap gains issue here for me, or significant costs for buying/selling, but how do I conduct a more careful analysis before pulling the trigger? As you can probably tell I'm anxious to get this money into a low fee world and just let it sit and not touch it for 6-7 years, pulling it out slowly and over time.

- Based on my needs starting at age 62 to begin drawing $100K per year from this taxable account, how would you allocate it with Vanguard based on my situation?

retiredjg
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by retiredjg » Tue Oct 16, 2018 4:23 pm

-
Given most of my funds can transfer in kind to Vanguard, should i just do that before year-end 2018 and then figure out when to sell based on cost basis so that I can begin to move this money into an all-index portfolio? I want to get out of the 1% advisor fee for 2019.
Since you have the large carryover loss, I would liquidate where you are. This will avoid any transaction fees for selling the things you don't want at Vanguard. Of course, there is no reason to liquidate things you actually want to keep.

- I have some concerns about how my advisor will respond to this news, and worry -- not much but a little, that I will be quickly on my own once I break it to him. Anybody have any experience how these guys react to this? He's a good guy but this will mean $12-15K less in his firm's pocket every year, plus the other money they make we don't know about.
Your advisor may try to talk you out of this. He may have all kinds of reasons why your move is dumb. He might even offer to drop his fee a little. Just say "thank you but I've decided to move" and say nothing else. Do not let him draw you into a conversation. Have Vanguard do the work of moving the money. Your advisor is unlikely to be involved but someone there will be.

- Given my advisor has been tax/loss harvesting for years, and the big loss I am carrying forward, I'm tempted to just have the advisor liquidate to cash and start anew with Vanguard. Is this crazy? I have trouble imagining there is a big cap gains issue here for me, or significant costs for buying/selling, but how do I conduct a more careful analysis before pulling the trigger? As you can probably tell I'm anxious to get this money into a low fee world and just let it sit and not touch it for 6-7 years, pulling it out slowly and over time.
IN your case, I think liquidating is fine since you have the losses to cover it all. The issue will be if you are unwilling to put that money right back into stocks and bonds on the day it arrives at Vanguard. You are already in the market and you should just slide in a sideways move into other funds. If you are not comfortable with that, move the assets in kind and sell as you get comfortable.

- Based on my needs starting at age 62 to begin drawing $100K per year from this taxable account, how would you allocate it with Vanguard based on my situation?
There is not enough information to address this. See the format shown in the link at the bottom of this message for how to ask that kind of question.

delamer
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by delamer » Tue Oct 16, 2018 4:32 pm

Make sure you have cost basis information for all your investments before you do any transferring (or selling). Once you leave your current advisor, he has no incentive to cooperate with you in providing that information. Hopefully, it is available on your account statements.

I don’t see any harm in just transferring everything to Vanguard and the making your decisions about reallocating yoir portfolio. As you said, why not get out from underneath the fee?

If you contact Vanguard, they will make all the arrangements to do the transfer. It is common courtesy to let your advisor know what is happening, but an e-mail would suffice. And I wouldn’t notify him until immediately before (or even as) the transfer occurs.

I do not know the ins-and-outs of carrying forward losses. But given the amount of money you are talking about, I’d consult with a CPA as you make your decisions. Why save $12,000 by getting rid of the advisor, and then spend $25,000 in taxes that could have been avoided?

Here are some examples of low cost, index based that you could consider: https://www.bogleheads.org/wiki/Lazy_portfolios

Most of the decision depends on your risk tolerance, although since you are spending it down beginning in 7 years, I wouldn’t be too heavy in stocks.

You do realize that at the rate of $100,000 per year, the account may only last 15 years or so (less with an extended bear market)?

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Dale_G
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by Dale_G » Tue Oct 16, 2018 4:44 pm

You didn't say how many positions you have in the taxable account, but you will have "Flagship" status at Vanguard and therefore 25 free trades a yearfor stocks. After 25 trades, about $2 per trade for stocks. Most ETFs will be free. Check with Vanguard for the cost of liquidating non-etf mutual funds.

I would prefer moving everything "in kind" to Vanguard and sell the non-transferable asset at your present firm. This will simplify any interaction with the present. Once the non-transerable asset is sold, Vanguard can do all of the grunt work to move the assets.

You will be much happier with the lower fees.

Dale
Volatility is my friend

delamer
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by delamer » Tue Oct 16, 2018 4:54 pm

Dale_G wrote:
Tue Oct 16, 2018 4:44 pm
You didn't say how many positions you have in the taxable account, but you will have "Flagship" status at Vanguard and therefore 25 free trades a yearfor stocks. After 25 trades, about $2 per trade for stocks. Most ETFs will be free. Check with Vanguard for the cost of liquidating non-etf mutual funds.

I would prefer moving everything "in kind" to Vanguard and sell the non-transferable asset at your present firm. This will simplify any interaction with the present. Once the non-transerable asset is sold, Vanguard can do all of the grunt work to move the assets.

You will be much happier with the lower fees.

Dale
Flagship qualification is based on dollars in Vanguard products, not on the account total. So, for instance, if the OP has $400,000 in individual stocks, it will not be a Flagship account (even if the rest is in Vanguard mutual funds/ETFs).

OregonDucksFan
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by OregonDucksFan » Tue Oct 16, 2018 6:20 pm

If you're thinking of withdrawing in 7 years (age 55 now, withdraw age 62), then it may be worthwhile to think about asset allocation at the same time.

I would transfer in kind if they're Vanguard funds or eligible for in-kind transfer. You could sell other assets in taxable account. I believe there is a checkbox on Vanguard's transfer form that says transfer in-kind, liquidate, etc.

I assume you're already a Flagship client because your IRA at Vanguard has $1 million in index funds (presumably Vanguard's index funds). Then, I am sure your Flagship representative can help you if you ask for help to transfer an additional $1.2 million to Vanguard.

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Watty
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by Watty » Tue Oct 16, 2018 7:05 pm

Many mutual funds pay dividends and capital gains distributions in December. Whatever you decide you may want to set your accounts up so that these are not automatically reinvested if you have not sold them all by then.

delamer wrote:
Tue Oct 16, 2018 4:32 pm
Make sure you have cost basis information for all your investments before you do any transferring (or selling). Once you leave your current advisor, he has no incentive to cooperate with you in providing that information. Hopefully, it is available on your account statements.
+1

I am not 100% sure but I think I recall someone posting that shortly after they moved their account that they could not longer sign on the old brokers system to see their history. When they called the 800 number to get the information they got very little help since they were not longer a client.

PQ12$
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by PQ12$ » Tue Oct 16, 2018 8:24 pm

This is very helpful re: the need to get all of my account info, cost basis etc. before moving the account. Thank you

drzzzzz
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by drzzzzz » Tue Oct 16, 2018 8:26 pm

Transfer everything in kind to Vanguard and then discuss with Vanguard or their PSA group about what to sell and what to keep to minimize taxes

PQ12$
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by PQ12$ » Tue Oct 16, 2018 8:28 pm

OregonDucksFan wrote:
Tue Oct 16, 2018 6:20 pm
If you're thinking of withdrawing in 7 years (age 55 now, withdraw age 62), then it may be worthwhile to think about asset allocation at the same time.

I would transfer in kind if they're Vanguard funds or eligible for in-kind transfer. You could sell other assets in taxable account. I believe there is a checkbox on Vanguard's transfer form that says transfer in-kind, liquidate, etc.

I assume you're already a Flagship client because your IRA at Vanguard has $1 million in index funds (presumably Vanguard's index funds). Then, I am sure your Flagship representative can help you if you ask for help to transfer an additional $1.2 million to Vanguard.
I have not (ever) spoken to a rep at Vanguard to see what assistance they may offer. I will call tomorrow and see how that goes. I was under the impression with Vanguard you are more or less on your own. Ideally they will help me make this transition and I welcome the assist!

PQ12$
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by PQ12$ » Tue Oct 16, 2018 8:33 pm

OregonDucksFan wrote:
Tue Oct 16, 2018 6:20 pm
If you're thinking of withdrawing in 7 years (age 55 now, withdraw age 62), then it may be worthwhile to think about asset allocation at the same time.

I would transfer in kind if they're Vanguard funds or eligible for in-kind transfer. You could sell other assets in taxable account. I believe there is a checkbox on Vanguard's transfer form that says transfer in-kind, liquidate, etc.

I assume you're already a Flagship client because your IRA at Vanguard has $1 million in index funds (presumably Vanguard's index funds). Then, I am sure your Flagship representative can help you if you ask for help to transfer an additional $1.2 million to Vanguard.

So are you saying that when I initiate this transfer -- all of my funds managed by this advisor are held by National Financial Services fyi, that Vanguard can help me liquidate the one sole non-transferable fund in my portfolio (without any interaction with my soon to be ex-advisor)?

inbox788
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by inbox788 » Sat Oct 20, 2018 4:33 pm

PQ12$ wrote:
Tue Oct 16, 2018 8:33 pm
OregonDucksFan wrote:
Tue Oct 16, 2018 6:20 pm
If you're thinking of withdrawing in 7 years (age 55 now, withdraw age 62), then it may be worthwhile to think about asset allocation at the same time.

I would transfer in kind if they're Vanguard funds or eligible for in-kind transfer. You could sell other assets in taxable account. I believe there is a checkbox on Vanguard's transfer form that says transfer in-kind, liquidate, etc.

I assume you're already a Flagship client because your IRA at Vanguard has $1 million in index funds (presumably Vanguard's index funds). Then, I am sure your Flagship representative can help you if you ask for help to transfer an additional $1.2 million to Vanguard.

So are you saying that when I initiate this transfer -- all of my funds managed by this advisor are held by National Financial Services fyi, that Vanguard can help me liquidate the one sole non-transferable fund in my portfolio (without any interaction with my soon to be ex-advisor)?
I would assume that you'd be giving Vanguard permission to ask National Financial Services to liquidate the fund (they'd likely charge all possible fees and commissions) and then just transfer the cash value over to Vanguard. It's probably one of the forms or check boxes if you're paying attention to those details.

PQ12$
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Joined: Tue Oct 16, 2018 9:24 am

Re: Transferring $1.2 Mil taxable to Vanguard

Post by PQ12$ » Mon Oct 22, 2018 2:13 pm

retiredjg wrote:
Tue Oct 16, 2018 4:23 pm
-
Given most of my funds can transfer in kind to Vanguard, should i just do that before year-end 2018 and then figure out when to sell based on cost basis so that I can begin to move this money into an all-index portfolio? I want to get out of the 1% advisor fee for 2019.
Since you have the large carryover loss, I would liquidate where you are. This will avoid any transaction fees for selling the things you don't want at Vanguard. Of course, there is no reason to liquidate things you actually want to keep.

- I have some concerns about how my advisor will respond to this news, and worry -- not much but a little, that I will be quickly on my own once I break it to him. Anybody have any experience how these guys react to this? He's a good guy but this will mean $12-15K less in his firm's pocket every year, plus the other money they make we don't know about.
Your advisor may try to talk you out of this. He may have all kinds of reasons why your move is dumb. He might even offer to drop his fee a little. Just say "thank you but I've decided to move" and say nothing else. Do not let him draw you into a conversation. Have Vanguard do the work of moving the money. Your advisor is unlikely to be involved but someone there will be.

- Given my advisor has been tax/loss harvesting for years, and the big loss I am carrying forward, I'm tempted to just have the advisor liquidate to cash and start anew with Vanguard. Is this crazy? I have trouble imagining there is a big cap gains issue here for me, or significant costs for buying/selling, but how do I conduct a more careful analysis before pulling the trigger? As you can probably tell I'm anxious to get this money into a low fee world and just let it sit and not touch it for 6-7 years, pulling it out slowly and over time.
IN your case, I think liquidating is fine since you have the losses to cover it all. The issue will be if you are unwilling to put that money right back into stocks and bonds on the day it arrives at Vanguard. You are already in the market and you should just slide in a sideways move into other funds. If you are not comfortable with that, move the assets in kind and sell as you get comfortable.

- Based on my needs starting at age 65 to begin drawing $100K per year from this taxable account, how would you allocate it with Vanguard based on my situation?
There is not enough information to address this. See the format shown in the link at the bottom of this message for how to ask that kind of question.

Hi; It's taken me awhile to get back to this. I really appreciate all of the advice to date and have been crystallizing my thinking. I'm going to transfer my taxable account in kind to Vanguard with the exception of the one fund they won't take. I'll have my current advisor liquidate and then move that over to Vanguard as well.

So my question is around asset allocation -- both in my taxable and IRA. As noted above my hope is to not touch any of this money until age 65 (10 years from now) at which point I will need to draw down $100K per year from my taxable to meet my expenses. I hope not to touch my IRA until 70 and then begin the mandatory withdrawals.

So based on the above scenario (in my initial post), here is my current asset allocation (pre transfer, etc.) What would you suggest?

Current Holdings

1. Taxable Account: $1,395,000
Equities (76%)

FDSAX AIG Focused Dividend Strategy CL A $86,000
AMPFX American AMCP Fund CL F1 $272,000
CVSIX Calamos Market Neutral Income CL A $51,000
LBSAX Columbia Dividend Income CL A $161,000
FNIAX Fidelity Advisor New Insights CL A $26,000
SGENX First Eagle Global Fund Class A $80,000
GATEX Gateway Fund Class A $51,000
GQPSX GMO Quality Series Fund Class PS $87,000
JDMAX Janus Henderson Enterprise A $107,000
JVMAX John Hancock Discil Ined Value Mid Cap $$28,000
MERFX Merger Fund $49,000
UBVAX Undiscovered Managers Behavioral Value CL A $29,000
IWN Ishares Russel 2000 Value ETF $37,000

Fixed Income (24%)

NEFRX Loomis Sayles Core Plus Bond CL A $65,000
LALDX Lord Abbott Short Duration Income CL A $79,000
TPINX Templeton Global Bond Fund Class A $37,000
PONAX PIMCO Income Fund, Class A $96,000

Other

United States Treasury Note 2.25000% $54,000
03/31/2020


2. Vanguard IRA: $891,352

Equities (84%) Fixed Income (16%)

Vanguard 500 Index Admiral Shares $427,267
Vanguard Mid Cap Index Admiral Shares $158,628
Vanguard Small Cap Index Admiral Shares $159,414

Vanguard Intermediate Term Bond Index $146,043

inbox788
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Joined: Thu Mar 15, 2012 5:24 pm

Re: Transferring $1.2 Mil taxable to Vanguard

Post by inbox788 » Mon Oct 22, 2018 2:54 pm

I would transfer everything over in kind to Vanguard. Then look at cost basis and expense fees to take further action.

I don't see 30% bonds. What's your desired AA?

blevine
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Location: New York

Re: Transferring $1.2 Mil taxable to Vanguard

Post by blevine » Mon Oct 22, 2018 3:04 pm

You may want to pay for the Vanguard advisor service for a period, then once you are feeling educated
(here and elsewhere) you can take the steering wheel and stop paying them.

https://investor.vanguard.com/advice/personal-advisor

What helps is to know the unrealized gains/losses you may have on your taxable account.
Given the bull market you may not have any with losses, but if so, you can sell those first and realize the losses for a tax benefit.
Then maybe sell those with the highest fees yet modest gains.
If you have any with large gains it may be worth it to hold these unless the fees are exceptionally high,
until a time when you are in a lower tax bracket (a bad year or retirement).

If you have much left after the above selling, consider use of Total Stock and Total International funds to replace those equity holdings.
Maybe swap the equities in IRA for bonds, and swap most of the bonds in taxable for these Total Stock index funds.
https://www.bogleheads.org/wiki/Tax-eff ... _placement

PQ12$
Posts: 11
Joined: Tue Oct 16, 2018 9:24 am

Re: Transferring $1.2 Mil taxable to Vanguard

Post by PQ12$ » Mon Oct 22, 2018 4:55 pm

<r><QUOTE author="blevine" post_id="4178022" time="1540238644" user_id="17710"><s>
blevine wrote:
Mon Oct 22, 2018 3:04 pm
</s>
You may want to pay for the Vanguard advisor service for a period, then once you are feeling educated<br/>
(here and elsewhere) you can take the steering wheel and stop paying them.<br/>
<br/>
<URL url="https://investor.vanguard.com/advice/pe ... </URL><br/>
<br/>
What helps is to know the unrealized gains/losses you may have on your taxable account.<br/>
Given the bull market you may not have any with losses, but if so, you can sell those first and realize the losses for a tax benefit.<br/>
Then maybe sell those with the highest fees yet modest gains.<br/>
If you have any with large gains it may be worth it to hold these unless the fees are exceptionally high,<br/>
until a time when you are in a lower tax bracket (a bad year or retirement).<br/>
<br/>
If you have much left after the above selling, consider use of Total Stock and Total International funds to replace those equity holdings.<br/>
Maybe swap the equities in IRA for bonds, and swap most of the bonds in taxable for these Total Stock index funds.<br/>
<URL url="https://www.bogleheads.org/wiki/Tax-eff ... <LINK_TEXT text="https://www.bogleheads.org/wiki/Tax-eff ... _placement">https://www.bogleheads.org/wiki/Tax-eff ... TEXT></URL>
<e>
</e></QUOTE>

Thanks for your responses. In terms of allocation I am comfortable with 75% equities and 25% equities which is aggressive, but given I won't touch the taxable for 10 years and the IRA for 15 (and zero debt, etc.) I think I will sleep okay and revisit in 5 years or so.<br/>
<br/>
I spoke with one of the Vanguard advisor services reps 3-4 months ago and they did an analysis for me. Given their simple solution (which I probably could have gotten here just as easily) I've decided not to pay for that service. I can get help on the side re: tax loss harvesting, cap gains strategies etc. Plus I have a big $400K loss from the sale of some company stock a few years I am carrying over that will make this liquidation and any cap gains bearable. Anyway here was the suggested AA they gave me - note it might be off a bit but will give you the gist:<br/>
<br/>
Taxable: 75% Vanguard Total Stock Market Index Admiral<br/>
25% Vanguard Total International Stock Market Index Admiral<br/>
<br/>
IRA: 30% Vanguard Total International Stock Market Index Admiral<br/>
23% Vanguard Total International Bond Market Index Admiral<br/>
10% Vanguard Short Term Investment Grade Fund Admiral Shares<br/>
15% Vanguard Intermediate Term Investment Grade Admiral Shares<br/>
22% Vanguard Total Bond Market Index Fund Admiral Shares</r>

His basic advice was you need to be 30% international which I'm just not comfortable with. I get the logic but will maybe max 15% there. Also I'm not sure I want to load up my IRA with all those bonds, tho I certainly get the notion of reducing dividends/interest in my taxable. Given my horizon (start tapping taxable in 10 years, and don't touch IRA until 15 years) I'd have trouble watching that bucket meander up so slowly.

lgs88
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by lgs88 » Mon Oct 22, 2018 5:21 pm

A note of caution: you’re right to get out from under your advisor’s thumb, but I’d be wary of Vanguard. I had the experience of trying to transfer a sum like yours to them — every ball that they could drop, they did. It was a several-week odyssey.

Then I called up Fidelity, and they got it handled within days. Been happy with them ever since.
merely an interested amateur

blevine
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Location: New York

Re: Transferring $1.2 Mil taxable to Vanguard

Post by blevine » Mon Oct 22, 2018 9:33 pm

You can reallocate the IRA to hold equities if necessary, as you spend down taxable. Tax location is only relevant if you have assets in more than one location, and enough assets in each. Always allocate across what remains.

increment
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by increment » Mon Oct 22, 2018 9:46 pm

lgs88 wrote:
Mon Oct 22, 2018 5:21 pm
Then I called up Fidelity, and they got it handled within days.
Fidelity owns something called "National Financial Services". Is that the same outfit that is holding PQ12$'s funds?

retiredjg
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by retiredjg » Tue Oct 23, 2018 7:35 am

PQ12$ wrote:
Mon Oct 22, 2018 2:13 pm
Hi; It's taken me awhile to get back to this. I really appreciate all of the advice to date and have been crystallizing my thinking. I'm going to transfer my taxable account in kind to Vanguard with the exception of the one fund they won't take. I'll have my current advisor liquidate and then move that over to Vanguard as well.
Before you do the transfer, you need to document the cost basis (already taxed money) in each of these funds. You will need that information when you sell and I would not depend on all the right information getting moved in your transfer.

I would probably liquidate and then move if you are pretty sure the capital gains will not be significantly over your $400k in losses.


So my question is around asset allocation -- both in my taxable and IRA. As noted above my hope is to not touch any of this money until age 65 (10 years from now) at which point I will need to draw down $100K per year from my taxable to meet my expenses. I hope not to touch my IRA until 70 and then begin the mandatory withdrawals.
This may not be the best approach. Consider drawing down the IRA first so that when you reach RMD time, your RMDs will not be too large. They may not be too large anyway depending on when you take SS and what other income you have.

So based on the above scenario (in my initial post), here is my current asset allocation (pre transfer, etc.) What would you suggest?

Current Holdings

1. Taxable Account: $1,395,000
Equities (76%)

FDSAX AIG Focused Dividend Strategy CL A $86,000
AMPFX American AMCP Fund CL F1 $272,000
CVSIX Calamos Market Neutral Income CL A $51,000
LBSAX Columbia Dividend Income CL A $161,000
FNIAX Fidelity Advisor New Insights CL A $26,000
SGENX First Eagle Global Fund Class A $80,000
GATEX Gateway Fund Class A $51,000
GQPSX GMO Quality Series Fund Class PS $87,000
JDMAX Janus Henderson Enterprise A $107,000
JVMAX John Hancock Discil Ined Value Mid Cap $$28,000
MERFX Merger Fund $49,000
UBVAX Undiscovered Managers Behavioral Value CL A $29,000
IWN Ishares Russel 2000 Value ETF $37,000

Fixed Income (24%)

NEFRX Loomis Sayles Core Plus Bond CL A $65,000
LALDX Lord Abbott Short Duration Income CL A $79,000
TPINX Templeton Global Bond Fund Class A $37,000
PONAX PIMCO Income Fund, Class A $96,000

Other

United States Treasury Note 2.25000% $54,000
03/31/2020
I would sell it all except for the Treasury notes. There is not one fund in this basket worth keeping (well, maybe the iShares Russel 2000...but you don't need the clutter). Invest IMMEDIATELY in Total Stock Index and Total International Index.


2. Vanguard IRA: $891,352

Equities (84%) Fixed Income (16%)

Vanguard 500 Index Admiral Shares $427,267
Vanguard Mid Cap Index Admiral Shares $158,628
Vanguard Small Cap Index Admiral Shares $159,414

Vanguard Intermediate Term Bond Index $146,043
Exchange enough stocks to bonds to achieve your desired stock to bond ratio (for the portfolio, not for just this account).

I think 75% stock and 25% bonds is too aggressive for your age of 55. Consider more bonds.

PQ12$
Posts: 11
Joined: Tue Oct 16, 2018 9:24 am

Re: Transferring $1.2 Mil taxable to Vanguard

Post by PQ12$ » Tue Oct 23, 2018 2:59 pm

retiredjg wrote:
Tue Oct 23, 2018 7:35 am
PQ12$ wrote:
Mon Oct 22, 2018 2:13 pm
Hi; It's taken me awhile to get back to this. I really appreciate all of the advice to date and have been crystallizing my thinking. I'm going to transfer my taxable account in kind to Vanguard with the exception of the one fund they won't take. I'll have my current advisor liquidate and then move that over to Vanguard as well.
Before you do the transfer, you need to document the cost basis (already taxed money) in each of these funds. You will need that information when you sell and I would not depend on all the right information getting moved in your transfer.

I would probably liquidate and then move if you are pretty sure the capital gains will not be significantly over your $400k in losses.

I agree an that's what I think I'll do
So my question is around asset allocation -- both in my taxable and IRA. As noted above my hope is to not touch any of this money until age 65 (10 years from now) at which point I will need to draw down $100K per year from my taxable to meet my expenses. I hope not to touch my IRA until 70 and then begin the mandatory withdrawals.
This may not be the best approach. Consider drawing down the IRA first so that when you reach RMD time, your RMDs will not be too large. They may not be too large anyway depending on when you take SS and what other income you have.

So based on the above scenario (in my initial post), here is my current asset allocation (pre transfer, etc.) What would you suggest?

Current Holdings

1. Taxable Account: $1,395,000
Equities (76%)

FDSAX AIG Focused Dividend Strategy CL A $86,000
AMPFX American AMCP Fund CL F1 $272,000
CVSIX Calamos Market Neutral Income CL A $51,000
LBSAX Columbia Dividend Income CL A $161,000
FNIAX Fidelity Advisor New Insights CL A $26,000
SGENX First Eagle Global Fund Class A $80,000
GATEX Gateway Fund Class A $51,000
GQPSX GMO Quality Series Fund Class PS $87,000
JDMAX Janus Henderson Enterprise A $107,000
JVMAX John Hancock Discil Ined Value Mid Cap $$28,000
MERFX Merger Fund $49,000
UBVAX Undiscovered Managers Behavioral Value CL A $29,000
IWN Ishares Russel 2000 Value ETF $37,000

Fixed Income (24%)

NEFRX Loomis Sayles Core Plus Bond CL A $65,000
LALDX Lord Abbott Short Duration Income CL A $79,000
TPINX Templeton Global Bond Fund Class A $37,000
PONAX PIMCO Income Fund, Class A $96,000

Other

United States Treasury Note 2.25000% $54,000
03/31/2020
I would sell it all except for the Treasury notes. There is not one fund in this basket worth keeping (well, maybe the iShares Russel 2000...but you don't need the clutter). Invest IMMEDIATELY in Total Stock Index and Total International Index.

What is you thinking about investing immediately? I do plan to re-invest, but wondering if there is a reason I don't know to do so ASAP vs. waiting a few weeks or a month.
2. Vanguard IRA: $891,352

Equities (84%) Fixed Income (16%)

Vanguard 500 Index Admiral Shares $427,267
Vanguard Mid Cap Index Admiral Shares $158,628
Vanguard Small Cap Index Admiral Shares $159,414

Vanguard Intermediate Term Bond Index $146,043
Exchange enough stocks to bonds to achieve your desired stock to bond ratio (for the portfolio, not for just this account).

I think 75% stock and 25% bonds is too aggressive for your age of 55. Consider more bonds.

I am thinking about this and weighing the pros/cons. A lot of people are not convinced bonds will be as safe a harbor as they have been, and I am weighing if my other assets ( a second home I could sell in a pinch, no mortgage) and their ability to generate cash in a 3-5 year downturn warrant increased equity exposure. Also just trying to get to that optimal "sleep at night" allocation, which this board is very helpful with.

PQ12$
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by PQ12$ » Tue Oct 23, 2018 3:28 pm

lgs88 wrote:
Mon Oct 22, 2018 5:21 pm
A note of caution: you’re right to get out from under your advisor’s thumb, but I’d be wary of Vanguard. I had the experience of trying to transfer a sum like yours to them — every ball that they could drop, they did. It was a several-week odyssey.

Then I called up Fidelity, and they got it handled within days. Been happy with them ever since.
I've heard some occasional horror stories for all of these companies - Vanguard, Fidelity, Schwab etc. I just feel comfortable with Vanguard and am gonna hope for the best. As long as they don't lose my damn money I'll endure what I have to, and hopefully it'll go thru without a problem.

PQ12$
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by PQ12$ » Tue Oct 23, 2018 3:29 pm

blevine wrote:
Mon Oct 22, 2018 9:33 pm
You can reallocate the IRA to hold equities if necessary, as you spend down taxable. Tax location is only relevant if you have assets in more than one location, and enough assets in each. Always allocate across what remains.
Not exactly sure what you mean by this - re: tax location is only relevant.. Can you clarify?

retiredjg
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by retiredjg » Tue Oct 23, 2018 3:39 pm

PQ12$ wrote:
Tue Oct 23, 2018 2:59 pm
What is you thinking about investing immediately? I do plan to re-invest, but wondering if there is a reason I don't know to do so ASAP vs. waiting a few weeks or a month.
It's a lot of money and some people would worry about putting it all into the market at one time. That is just wrong. The money is already in the market. You are just making a sideways move. If you let the money sit out, the market might go up. And people just have a problem - they want to wait for a good time to "get back in". It leads to all manner of bad decisions.

On second thought....if you liquidate and then move, the money may be out of the market for a week or two or even three. If you transfer in kind, the value of the funds will be exactly what it was when you left the other custodian. So maybe I would not liquidate and sell if I could find good documentation of the basis.

Or maybe I'd liquidate 1/3 and move it, then do that two more times so all is not out of the market at one time.

I am thinking about this and weighing the pros/cons. A lot of people are not convinced bonds will be as safe a harbor as they have been, and I am weighing if my other assets ( a second home I could sell in a pinch, no mortgage) and their ability to generate cash in a 3-5 year downturn warrant increased equity exposure. Also just trying to get to that optimal "sleep at night" allocation, which this board is very helpful with.
Bonds are way safer than stocks. I suppose if you are not fond of bonds, you could use CDs. Having all stocks would not be wise in my opinion. Having a second home does not change that.

kmurp
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by kmurp » Tue Oct 23, 2018 4:10 pm

I second the advice given in a previous post to print out the cost basis of all these transferred funds BEFORE you initiate a transfer. You will need this info and possibly have difficulty getting it from your old advisor after you cut ties.

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celia
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by celia » Tue Oct 23, 2018 4:19 pm

PQ12$ wrote:
Tue Oct 16, 2018 1:56 pm
- Given most of my funds can transfer in kind to Vanguard, should i just do that before year-end 2018 and then figure out when to sell based on cost basis so that I can begin to move this money into an all-index portfolio? I want to get out of the 1% advisor fee for 2019.
Whatever you do, you need to first obtain the cost basis for each holding, as has been suggested (and you acknowledged). Depending on the holdings, the sales commission will probably be less at Vanguard. They should be shown on your current broker's website. For Vanguard, they are here.
- I have some concerns about how my advisor will respond to this news, and worry -- not much but a little, that I will be quickly on my own once I break it to him. Anybody have any experience how these guys react to this? He's a good guy but this will mean $12-15K less in his firm's pocket every year, plus the other money they make we don't know about.
You can initiate the transfer by having Vanguard "pull" the assets and then you never have to talk to the advisor again. (Should he call, just say "Yes, I decided to change directions and transferred everything to another brokerage firm. Thank you for your help all these years." No need to say much more.) The transfer usually happens faster with a "pull" than with a "push" by the old company, since the old company doesn't have any incentive to act quickly. If there are questions or problems, let Vanguard take care of them. They do this every day.

As far as what your new holdings should be, we can help with that too. It would be best to list your entire portfolio (with gains/losses for each holding), your carry-over losses from your 2017 tax return, your current year gains and losses so far, and your tax bracket. We might see some things that are worth keeping or recommend not to sell everything in one year.
- Given my advisor has been tax/loss harvesting for years, and the big loss I am carrying forward, I'm tempted to just have the advisor liquidate to cash and start anew with Vanguard. Is this crazy? I have trouble imagining there is a big cap gains issue here for me, or significant costs for buying/selling, but how do I conduct a more careful analysis before pulling the trigger? As you can probably tell I'm anxious to get this money into a low fee world and just let it sit and not touch it for 6-7 years, pulling it out slowly and over time.
No-one can answer this until you know the gains and losses that have been realized for this year so far and what unrealized (not yet sold) gains and losses that you might have.
- Based on my needs starting at age 62 to begin drawing $100K per year from this taxable account, how would you allocate it with Vanguard based on my situation?
That's just a couple of years from now and we don't know what the markets will do during this time. How many times can you withdraw $100K from $1.2M? Unless the account can earn near $100K a year, I don't see you getting more than 12-15 years from this account. Or are you planning to sell the real estate and add the proceeds to the taxable account? You might be able to also get that many years out of the tIRA too, but withdrawing before age 59.5 will give you penalties. After you turn 70.5, you MUST start Required Minimum Distributions.

After you turn 59.5, you might want to withdraw from both accounts each year, to keep your taxes steady. If you pull from the IRA only in some years, your will owe taxes on every dollar withdrawn. If you pull from taxable only in some years, you will owe taxes on only the gains minus losses. We can even our your taxable income for each year, and thus the taxes. We should also be able to get some Roth conversions done so that you end up with tax-diversity in your holdings.

blevine
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Re: Transferring $1.2 Mil taxable to Vanguard

Post by blevine » Wed Oct 24, 2018 12:36 pm

PQ12$ wrote:
Tue Oct 23, 2018 3:29 pm
blevine wrote:
Mon Oct 22, 2018 9:33 pm
You can reallocate the IRA to hold equities if necessary, as you spend down taxable. Tax location is only relevant if you have assets in more than one location, and enough assets in each. Always allocate across what remains.
Not exactly sure what you mean by this - re: tax location is only relevant.. Can you clarify?
If one had only an ira or only a taxable acct, tax driven asset location is not relevant. If you only had one acct no strategy needed to pick where to place your funds. But you do have both. The fact that your % in ira does not match your desired % bonds, does not invalidate asset location. Asset allocation comes first, to manage risk/reward. But once you pick the asset allocation, asset location can help minimize taxes. So if one believes in this asset location strategy, you buy bonds up to your bond AA in the IRA. If that is too much, buy the desired bonds in ira and rest of ira can be in stocks. If one needed more bonds than can fit in ira, but tax exempt bonds in taxable acct to get up to your bond AA.

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