We pay our manager .375% AUM. They oversee our total savings of $1.3 million across one taxable and two IRA accounts at Schwab. They maintain a 60/40 AA using eleven low-cost index funds...Vanguard, DFA, and I-Shares.
At 64, I'm retired from my one-person recruiting practice so my saving days are behind me. With no pension, just social security, it’s critical that we steward our savings carefully. I enjoy my "retirement job" as school-bus driver which pays $29,000 per year and I hope to do it into my seventies. When my wife stops working in two years we’ll both begin collecting SS with the goal of covering our living expenses and leave our savings untouched until RMD's kick in.
I’ve read up on Bogleheads’ 3 and 4-fund strategy and Rick Ferri’s Core-4 recommendations. We need to decide:
- First, are we better off to keep the manager and pay the .375% fee? If not:
- Which funds to use based on ER and future transaction costs.
- Tax considerations of liquidating our existing funds?
- Is is advantageous to keep one or more of the funds we already own.
- What are potential pitfalls when terminating our manager?
- Timing considerations?
- RISK: Should I be concerned about concentrated hacking risk, institutional risk, of having our total worth diversified in only four funds at one custodian?
- Should we change our 60/40 allocation now that we are mid-60’s and our retirement funding days are over?
Here's our situation:
- Emergency funds: Three to six months of expenses in our checking accounts.
- Debt: No credit card debt. We drive two used paid-for cars.
- Mortgage: $155K balance on our 2012-refinanced 30-year mortgage at 3.625% rate. Monthly P&I $810. Insurance & property tax $5,000 /year. Home value $325K.
- Healthcare: No health issues. Wife’s employer health plan for now, then Medicare - Advantage or similar.
- Filing Status: Married Filing Jointly
- Tax Rate: Federal 22%, State: 5.1% State
- Residence: Massachusetts
- Age: Husband 65, Wife 63
- Savings: Taxable account $190,000 Wife's IRA $210,000, Husband's Rollover IRA $900,000. All at Schwab.
Thank you for reading this and for your comments.
Perhaps too much info, but I made this table below detailing our current allocation of eleven index funds across our three Schwab accounts:
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Total portfolio, across three accounts: $1,300,000 100% US Stock funds 33% Real Estate Funds 5% International Stocks 20% Bond Funds 41% Cash & Equivalents 1% Individual Account details: Joint Taxable Account - Schwab $190,000 100% Cash 1% DFA Emerging Markets Core Stock Fund - DFCEX 4% DFA International Small Cap Value Fund - DISVX 4% I-Shares S&P Small-Cap 600 Value Index ETF - IJS 8% Vanguard FTSE Europe Index ETF - VGK 6% Vanguard FTSE Pacific Index ETF - VPL 6% Vanguard Total Stock Market Index ETF - VTI 25% Vanguard Real Estate Index ETF - VNQ 6% Vanguard High Yield Corporate Fund - VWEAX 8% Vanguard Inflation-Protected Securitas Fund - VAIPX 7% Vanguard Total Bond Market Index Fund - VBTLX 16% Vanguard Total International Bond Index Fund - VTABX 9% Wife's Traditional IRA - Schwab $210,300 100% Cash 1% DFA Emerging Markets Core Stock Fund - DFCEX 2% DFA International Small Cap Value Fund - DISVX 1% Vanguard Ftse Europe Index ETF - VGX 1% Vanguard Ftse Pacific Index ETF - VPL 5% Vanguard High Yield Corporate Fund 1% Vanguard Inflation-Protected Securities Fund - VAIPX 3% Vanguard Real Estate Index ETF - VNQ 4% Vanguard Total Bond Market Index Fund - VBTLX 4% Vanguard Total Stock Market Index ETF - VTI 78% Husband's SEP Rollover IRA - Schwab $910,000 100% Schwab Money Market 1% DFA EMERGING MARKETS CORE STOCK FUND 5% DFA International Small Cap Value Fund - DISVX 4% I shares S&P Small-Cap 600 Value Index ETF - IJS 10% Vanguard FTSE Europe Index ETF - VGK 7% Vanguard FTSE Pacific Index ETF - VPL 6% Vanguard High Yield Corporate Fund - VWEAX 10% Vanguard Inflation-Protected Securities Fund - VAIPX 9% Vanguard Real Estate Index ETF - VNQ 5% Vanguard Total Bond Market Index Fund - VBTLX 19% Vanguard Total International Bond Index Fund- VTABX 11% Vanguard Total Stock Market Index ETF- VTI 13%