65 Years Old, Left Advisor, Appreciate Feedback on Situation!

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Topic Author
mnveloguy
Posts: 4
Joined: Mon Apr 15, 2019 12:49 pm

65 Years Old, Left Advisor, Appreciate Feedback on Situation!

Post by mnveloguy » Mon Apr 15, 2019 1:11 pm

Hi everyone, I’ve recently left my financial advisor and am attempting to manage my investments on my own going forward. Really appreciate any input and advice on my situation.

Emergency funds: Yes, part of overall cash on hand balance.
Debt: No debt, home is owned outright.
Tax Filing Status: Married Filing Jointly
Tax Rate: 24% Federal, 7.85% State
State of Residence: MN
Age: 65
Desired Asset allocation: 60% Stocks / 40% Bonds
Desired International allocation: 20%

Investment Detail:
Cash: $530k – This is in a low yield savings account, earning 2.2%
Employer 401k: $462k (maxing contributions and catch up contributions) – This is all in PARBX, T Rowe Price 2020 fund, ER is 0.94 and allocation is roughly 60/40 with 20% international.
Fidelity IRA: $347k (no new contributions) – This is all in a cash settlement position since I left my advisor and is ready to be invested in something.
HSA: $30k (maxing contributions and catch up contributions). – This is not invested.

Situation Summary:
1 – I recently left my financial advisor and moved everything to Fidelity. I liquidated about $150k of mutual funds from my taxable account and will pay taxes on those gains in 2019. That $150k is now part of my overall cash position of $530k listed above.
2 – My wife and I own our home outright, value is about $500k.
3 – I recently turned 65 and am now getting healthcare coverage through a combination of Medicare and my employer. Overall health of both my wife and I is good, no major issues.
4 – I have no near term plans to retire. My job is fulfilling and I have a lot of independence in my role, which is heavily sales focused and putting together unique deals for my employer. I get a lot of free time to spend with grandchildren, but at this point in time still want to keep working for the next 2-3 years at least. I’ll continue to re-evaluate each year and if my heart is still in it. I make enough to max out 401k contributions and HSA contributions, both with catch up.
5 – Current Social Security projections give me a monthly payout of $5,100 if I start distributions when I turn 71. That includes my wife and I distributions together. I can also start taking at 66 and get $4200 for my wife and I together.
6 – Our annual expenses are pretty low, I’ll need to go through that in detail in the coming 1-2 years as we start retirement planning, but they’re low enough and we’re frugal enough that I haven’t seen a need to look at them in detail as of yet. We also end up with left over cash that grows our cash savings.

Questions:
1 – My first goal is to get my investments in order. I think I should target an overall allocation of 60% stock and 40% bond, but would like other opinions on this. 401k options are listed below.
2 – My second goal is to figure out what to do with my cash position… taxable account, CD, high yield savings? I struggle with how large my cash position should be for someone in my situation. I FEEL like I should protect it as I don’t need it to grow prior to retirement, but maybe some amount should go to a taxable investment account and the rest in savings?
3 – What is a good retirement planning book/resource to start with? I have a couple of years to start this process, but open to ideas on where to start for someone new to retirement planning. Go with the Bogleheads Guide to Retirement Planning to start?
4 – I need to lay out my social security plan in more detail, but I think I should take it at age 66 even though I don’t need it. Put the distributions in savings?

401k Options with Expense Ratios:
MFS Conservative Allocation R4 Asset Allocation MACJX 0.66
MFS Moderate Allocation R4 Asset Allocation MAMJX 0.71
MFS Growth Allocation R4 Asset Allocation MAGJX 0.77
MFS Aggressive Growth Allocation R4 Asset Allocation MAALX 0.83
T. Rowe Price 2020 Adv Asset Allocation PARBX 0.86
T. Rowe Price 2030 Adv Asset Allocation PARCX 0.92
T. Rowe Price 2040 Adv Asset Allocation PARDX 0.97
T. Rowe Price 2050 Adv Asset Allocation PARFX 0.97
T. Rowe Price 2060 Advisor Asset Allocation TRRYX 0.97
American Funds EuroPacific Gr R4 International Funds REREX 0.83
Oppenheimer Developing Markets Y International Funds ODVYX 1.05
T. Rowe Price International Eq Index International Funds PIEQX 0.46
Columbia Small Cap Index A Small Cap Funds NMSAX 0.45
Victory Sycamore Small Co Opportunity A Small Cap Funds SSGSX 1.22
Baron Asset Fund Mid Cap Funds BARAX 1.31
Federated Mid-Cap Index Svc Mid Cap Funds FMDCX 0.56
Victory Sycamore Established Value R Mid Cap Funds GETGX 1.1
T. Rowe Price Blue Chip Growth Adv Large Cap Funds PABGX 0.97
T. Rowe Price Total Equity Market Index Large Cap Funds POMIX 0.3
Vanguard 500 Index Fund Large Cap Funds VFINX 0.14
Federated Total Return Bond Svc Bond FTRFX 0.69
Key Guaranteed Portfolio Fund 1.2% Fixed N/A

delamer
Posts: 7500
Joined: Tue Feb 08, 2011 6:13 pm

Re: 65 Years Old, Left Advisor, Appreciate Feedback on Situation!

Post by delamer » Mon Apr 15, 2019 2:36 pm

Is your Social Security at age 66 or age 70 (there is no benefit to delaying to age 71) sufficient to cover your expenses?

Is leaving a legacy/inheritance important?

These things feed into the appropriate allocation.

Generally, you want to delay Social Security as long as feasible after age 66 because of the guaranteed 8% increase in benefits each year. That is a much better return than you can get by taking it at age 66 and reinvesting (without substantial risk).

mhalley
Posts: 6717
Joined: Tue Nov 20, 2007 6:02 am

Re: 65 Years Old, Left Advisor, Appreciate Feedback on Situation!

Post by mhalley » Mon Apr 15, 2019 2:43 pm

You can save some on expenses by switching from the tr fund to the s and p 500, total bond and TRP intl fund. TO fully represent the total stock market, you could also add the columbia small cap index with a ratio of about 82% s and p to 18% small cap. This would give you a 3 or 4 fund portfolio with much lower expenses.
You want to have the money invested in something besides cash, otherwise you lose money every year to inflation. I liked having some bonds in taxable, you need to figure the tax equivalent yield to see if you need muni bonds at your tax bracket. Many don't like having bonds in taxable. WCI says they are fine:
https://www.whitecoatinvestor.com/asset ... n-taxable/
Check out the wiki on investing at fidelity: https://www.bogleheads.org/wiki/Fidelity
I would say that your cash position should be that of anyone that is in the accumulation stage: six to 12 months of expenses.
Run your ss through the open social security calculator here: https://opensocialsecurity.com/ A general rule of thumb is the high earner waits till 70, the low earner takes earlier.
The hsa should also be invested unless you pan on paying current medical expenses from it. The bogleheads guide is great. I also liked Jane Bryant Quinns book:
https://www.amazon.com/dp/B00P434BTE/re ... TF8&btkr=1

Topic Author
mnveloguy
Posts: 4
Joined: Mon Apr 15, 2019 12:49 pm

Re: 65 Years Old, Left Advisor, Appreciate Feedback on Situation!

Post by mnveloguy » Mon Apr 15, 2019 3:05 pm

delamer wrote:
Mon Apr 15, 2019 2:36 pm
Is your Social Security at age 66 or age 70 (there is no benefit to delaying to age 71) sufficient to cover your expenses?

Is leaving a legacy/inheritance important?

These things feed into the appropriate allocation.

Generally, you want to delay Social Security as long as feasible after age 66 because of the guaranteed 8% increase in benefits each year. That is a much better return than you can get by taking it at age 66 and reinvesting (without substantial risk).
I definitely need to look at my annual expenses and break them down, but I'm pretty sure if I delay to age 70, SS will definitely cover my expenses. I'd estimate I break even with just SS, so any other distributions from investments/savings would be for retirement indulgences or other purposes, e.g., trips, a new car, charitable contributions, etc.

Leaving an inheritance isn't a goal or hard requirement. I don't necessarily derive happiness from things I can buy with money, so while I can forecast dipping into some of it, I suppose there would a be chunk that would naturally be there to pass down to my children and grandchildren.

I think I'm tracking with you re: establishing clear answers to these questions and my overall goals for the coming years. E.g., I assume if I plan to never touch my investments, a more aggressive allocation may be appropriate, but if I intended to rely on distributions in the coming 3-5 years, then I may be better off to be more conservative...

delamer
Posts: 7500
Joined: Tue Feb 08, 2011 6:13 pm

Re: 65 Years Old, Left Advisor, Appreciate Feedback on Situation!

Post by delamer » Mon Apr 15, 2019 3:10 pm

mnveloguy wrote:
Mon Apr 15, 2019 3:05 pm
delamer wrote:
Mon Apr 15, 2019 2:36 pm
Is your Social Security at age 66 or age 70 (there is no benefit to delaying to age 71) sufficient to cover your expenses?

Is leaving a legacy/inheritance important?

These things feed into the appropriate allocation.

Generally, you want to delay Social Security as long as feasible after age 66 because of the guaranteed 8% increase in benefits each year. That is a much better return than you can get by taking it at age 66 and reinvesting (without substantial risk).
I think I'm tracking with you re: establishing clear answers to these questions and my overall goals for the coming years. E.g., I assume if I plan to never touch my investments, a more aggressive allocation may be appropriate, but if I intended to rely on distributions in the coming 3-5 years, then I may be better off to be more conservative...
That’s the way I’d look at it.

If you’d need to take distributions in a 3 to 5 year period, then you’d want to have that money in cash equivalents or short term bonds.

JoeRetire
Posts: 2137
Joined: Tue Jan 16, 2018 2:44 pm

Re: 65 Years Old, Left Advisor, Appreciate Feedback on Situation!

Post by JoeRetire » Mon Apr 15, 2019 3:21 pm

mnveloguy wrote:
Mon Apr 15, 2019 1:11 pm
I’ve recently left my financial advisor
Why?
Cash: $530k
Why so much in cash?
HSA: $30k – This is not invested.
Why is this not invested?
I have no near term plans to retire. My job is fulfilling and I have a lot of independence in my role, which is heavily sales focused and putting together unique deals for my employer. I get a lot of free time to spend with grandchildren, but at this point in time still want to keep working for the next 2-3 years at least. I’ll continue to re-evaluate each year and if my heart is still in it. I make enough to max out 401k contributions and HSA contributions, both with catch up.
Terrific! "Fulfilling" is one of the best reasons to keep working.
Our annual expenses are pretty low, I’ll need to go through that in detail in the coming 1-2 years as we start retirement planning, but they’re low enough and we’re frugal enough that I haven’t seen a need to look at them in detail as of yet. We also end up with left over cash that grows our cash savings.
What is your estimate?
I struggle with how large my cash position should be for someone in my situation.
If your job situation is stable, you shouldn't need to keep more than 2 years worth of expenses in cash. If you are worried about market volatility, perhaps CDs would be helpful.
I need to lay out my social security plan in more detail, but I think I should take it at age 66 even though I don’t need it. Put the distributions in savings?
It's not clear why you would want to start at 66. Consider what would happen if you predecease your wife and if she would be better served by your waiting until you are 70 (assuming you are the higher earner).

You might benefit from exploring different scenarios using https://opensocialsecurity.com/

cas
Posts: 559
Joined: Wed Apr 26, 2017 8:41 am

Re: 65 Years Old, Left Advisor, Appreciate Feedback on Situation!

Post by cas » Mon Apr 15, 2019 3:34 pm

mnveloguy wrote:
Mon Apr 15, 2019 1:11 pm

HSA: $30k (maxing contributions and catch up contributions). – This is not invested.

3 – I recently turned 65 and am now getting healthcare coverage through a combination of Medicare and my employer. Overall health of both my wife and I is good, no major issues.

4 . . . I make enough to max out 401k contributions and HSA contributions, both with catch up.
Sorry, this isn't addressing your questions, but... since you say "catch up contributions" (plural) ...

Sorry to say, but once you are on Medicare, you aren't eligible to make contributions to an HSA. If your wife is still younger than 65 and not yet on Medicare, she may be eligible to make contributions. (And I would get confused and would have to read more in IRS Publication 969 and IRS Form 8889 Instructions "Health Savings Accounts" to figure out what the contribution limit is for her if she is covered under your employer's family HSA-eligible health insurance, but she is the only person in the family-coverage eligible to make HSA contributions.)

Source: IRS Publication 969 "Health Savings Accounts and Other Tax-Favored Health Plans"
Enrolled in Medicare.

Beginning with the first month you are enrolled in Medicare, your contribution limit is zero. This rule applies to periods of retroactive Medicare coverage. So, if you delayed applying for Medicare and later your enrollment is back dated, any contributions to your HSA made during the period of retroactive coverage are considered excess. See Excess contributions , later.

Example.

You turned age 65 in July 2018 and enrolled in Medicare. You had an HDHP with self-only coverage and are eligible for an additional contribution of $1,000. Your contribution limit is $2,225 ($4,450 × 6 ÷ 12).

Topic Author
mnveloguy
Posts: 4
Joined: Mon Apr 15, 2019 12:49 pm

Re: 65 Years Old, Left Advisor, Appreciate Feedback on Situation!

Post by mnveloguy » Mon Apr 15, 2019 3:47 pm

cas wrote:
Mon Apr 15, 2019 3:34 pm
mnveloguy wrote:
Mon Apr 15, 2019 1:11 pm

HSA: $30k (maxing contributions and catch up contributions). – This is not invested.

3 – I recently turned 65 and am now getting healthcare coverage through a combination of Medicare and my employer. Overall health of both my wife and I is good, no major issues.

4 . . . I make enough to max out 401k contributions and HSA contributions, both with catch up.
Sorry, this isn't addressing your questions, but... since you say "catch up contributions" (plural) ...

Sorry to say, but once you are on Medicare, you aren't eligible to make contributions to an HSA. If your wife is still younger than 65 and not yet on Medicare, she may be eligible to make contributions. (And I would get confused and would have to read more in IRS Publication 969 and IRS Form 8889 Instructions "Health Savings Accounts" to figure out what the contribution limit is for her if she is covered under your employer's family HSA-eligible health insurance, but she is the only person in the family-coverage eligible to make HSA contributions.)

Source: IRS Publication 969 "Health Savings Accounts and Other Tax-Favored Health Plans"
Enrolled in Medicare.

Beginning with the first month you are enrolled in Medicare, your contribution limit is zero. This rule applies to periods of retroactive Medicare coverage. So, if you delayed applying for Medicare and later your enrollment is back dated, any contributions to your HSA made during the period of retroactive coverage are considered excess. See Excess contributions , later.

Example.

You turned age 65 in July 2018 and enrolled in Medicare. You had an HDHP with self-only coverage and are eligible for an additional contribution of $1,000. Your contribution limit is $2,225 ($4,450 × 6 ÷ 12).
Great catch on this, I wasn't aware of the rule. I will do my homework on this one. Thanks.

Topic Author
mnveloguy
Posts: 4
Joined: Mon Apr 15, 2019 12:49 pm

Re: 65 Years Old, Left Advisor, Appreciate Feedback on Situation!

Post by mnveloguy » Mon Apr 15, 2019 3:52 pm

JoeRetire wrote:
Mon Apr 15, 2019 3:21 pm
mnveloguy wrote:
Mon Apr 15, 2019 1:11 pm
I’ve recently left my financial advisor
Why?
Cash: $530k
Why so much in cash?
HSA: $30k – This is not invested.
Why is this not invested?
I have no near term plans to retire. My job is fulfilling and I have a lot of independence in my role, which is heavily sales focused and putting together unique deals for my employer. I get a lot of free time to spend with grandchildren, but at this point in time still want to keep working for the next 2-3 years at least. I’ll continue to re-evaluate each year and if my heart is still in it. I make enough to max out 401k contributions and HSA contributions, both with catch up.
Terrific! "Fulfilling" is one of the best reasons to keep working.
Our annual expenses are pretty low, I’ll need to go through that in detail in the coming 1-2 years as we start retirement planning, but they’re low enough and we’re frugal enough that I haven’t seen a need to look at them in detail as of yet. We also end up with left over cash that grows our cash savings.
What is your estimate?
I struggle with how large my cash position should be for someone in my situation.
If your job situation is stable, you shouldn't need to keep more than 2 years worth of expenses in cash. If you are worried about market volatility, perhaps CDs would be helpful.
I need to lay out my social security plan in more detail, but I think I should take it at age 66 even though I don’t need it. Put the distributions in savings?
It's not clear why you would want to start at 66. Consider what would happen if you predecease your wife and if she would be better served by your waiting until you are 70 (assuming you are the higher earner).

You might benefit from exploring different scenarios using https://opensocialsecurity.com/
Appreciate the above feedback. The short answer to your first 3 questions is simply that I never took this seriously enough and while I am late to taking full control I realized that I could be making better decisions (or at least more purposeful) with who is guiding me (I want this to be myself) and what I am doing with so much cash. Core reason is I've always been afraid to put too much into the market for fear or losing it. I fortunately rode through the .com bust and 2008 without pulling anything from my retirement accounts, but that volatility made me wary of putting more into a taxable account.

Good feedback on expenses, cash and social security. I can do my homework on annual expenses and get my social security planning squared away. I'll do that this week and will check out the SS scenario link above. Based on current situation I assume it will make sense to wait to take SS distributions.

JoeRetire
Posts: 2137
Joined: Tue Jan 16, 2018 2:44 pm

Re: 65 Years Old, Left Advisor, Appreciate Feedback on Situation!

Post by JoeRetire » Mon Apr 15, 2019 4:03 pm

mnveloguy wrote:
Mon Apr 15, 2019 3:52 pm
Appreciate the above feedback. The short answer to your first 3 questions is simply that I never took this seriously enough and while I am late to taking full control I realized that I could be making better decisions (or at least more purposeful) with who is guiding me (I want this to be myself) and what I am doing with so much cash.
Did your advisor discuss any of this with you? And you just weren't ready to take the advice?
Core reason is I've always been afraid to put too much into the market for fear or losing it. I fortunately rode through the .com bust and 2008 without pulling anything from my retirement accounts, but that volatility made me wary of putting more into a taxable account.
You may have missed the past 10 years of market run up. A good advisor can talk you through this and help think it through.

Remember that your decision to dump your advisor isn't binary. If you find that you are capable of doing everything on your own and are comfortable with the results, that terrific. But if not, you can always seek a fee-only fiduciary financial advisor. You can find one that would work hourly to get help on ideas, or just to check your work.
Good feedback on expenses, cash and social security. I can do my homework on annual expenses and get my social security planning squared away. I'll do that this week and will check out the SS scenario link above. Based on current situation I assume it will make sense to wait to take SS distributions.
Good luck!

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dogagility
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Re: 65 Years Old, Left Advisor, Appreciate Feedback on Situation!

Post by dogagility » Mon Apr 15, 2019 4:37 pm

mnveloguy wrote:
Mon Apr 15, 2019 3:52 pm
...I never took this seriously enough and while I am late to taking full control I realized that I could be making better decisions (or at least more purposeful) with who is guiding me (I want this to be myself) and what I am doing with so much cash. Core reason is I've always been afraid to put too much into the market for fear or losing it. I fortunately rode through the .com bust and 2008 without pulling anything from my retirement accounts, but that volatility made me wary of putting more into a taxable account.
Welcome to the forum.
It's good that your lived through those two events. Hopefully, the lessen learned is that market volatility should not be equated with loss of principal. You just need to not sell during a downturn and plan for these events and the longevity typically associated with them (about 4 years).

BTW, I think a 60:40 asset allocation across your entire retirement portfolio is reasonable for your situation.
Taking "risk" since 1995.

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CAsage
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Joined: Sun Mar 27, 2016 6:25 pm

Re: 65 Years Old, Left Advisor, Appreciate Feedback on Situation!

Post by CAsage » Mon Apr 15, 2019 5:22 pm

Fun! Put the 401k completely into the Vanguard 500 stock fund, because that has the lowest expense ratio. Put the IRA completely into a low cost bond fund, such as Fidelity FXNAX (minimize future growth since you have to pay taxes on that). Split the cash between low cost International Index Fund, U.S. Total Stock fund, and Muni Bonds. Put the HSA in something that pays interest and spend it soon, it's hardly worth keeping. The Math part is easy, lots more to think about from other (smarter) posters! If your tax bracket is appropriate, get muni bonds.

Vanguard 500 401K $462,000 33.7%
Cash: Total Stock $90,000 6.6%
Cash: Intern'l $270,000 19.7%
IRA Fidelity FXNAX $347,000 25.3%
HSA Bond Fund $30,000 2.2%
Cash: Muni Bonds $170,000 12.4%
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.

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