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Need to sleep at night...Must rebalance!

Posted: Sun Apr 21, 2019 7:11 pm
by Sweetbriar
I have been meaning to do this for a long time, but family+++ has pre-occupied my time.
Hold Stock funds & tax exempt Muni. No bond funds. Need to re-balance to more risk adverse portfolios. Would like simplify holdings and reduce expense ratios, especially to my IRA. Any info, guidance for all holdings, would be greatly appreciated.

Me: 72 retired pension 2400k mo SS 2000k mo
Husband: 68 working, 550,000-600,000k yr. No pension. 401K, stock proceeds, IRA.
He now wants to retire Jan 2020 after a diagnosis of a controllable heart condition. 45 years in the field he loves, but is much too stressful! Will continue to travel....Life, more important!

Tax filing: Married/jointly IRS 37% CA 13.3%

No debt, own a home.
Have LTC policy & Trust

Emergency fund +
Credit Union: 700,000k money market 0.65%

Current retirement assets:

Taxable:
Vanguard Brokerage Account
Vanguard Municipal MM- VMSXX 1.96 M (0.15%) received 1.5m Dec2018 from husband's company stock.
Remainder of stock buy back at retirement.

His Vanguard IRA - 117,300k
Vanguard Total Stock Adm - VTSAX 76% (0.04%)
Vanguard Global Equity - VHGEX 18% (0.48%)
Vanguard Prime MM - VMMXX 6% (0.16%)

His T Rowe Price 401K 2,077,000m (will roll this over to Vanguard upon retirement)
Fidelity 500 Index FXAIX 49% (0.01%)
TRPrice Blue Chip TRBCX 20% (0.70%)
MFS Value R4 MEIJX 12% (0.58%)
Fidelity Mid Cap FSMDX 6% (0.02%)
Fidelity Intl Index FSPSX 5% (0.04%)
TRPrice StableVFund 8% (0.45%)

Her Fidelity IRA 1,132,700
Fidelity TSM FSKAX 63% (0.15%) May move to Vanguard
Rydex Nasdaq 100 RYOCX 10% (1.28%)
Vanguard Dividend Ap VDADX 8 % (0.08%)
Akre Focus AKREX 8% (1.32%)
Vanguard Global Eq VHGEX 4% (0.48%)
Fid. Prime MM SPRXX 4% (0.42%)
Doubleline Low Dur DLSNX 2% (0.68%)
Fidelity Floating Rate FFRHX 1% (0.69%)

His 401K additional Available Funds
Stocks
American Beacon Intl ABEYX (0.81%)
American New World RNWFX (0.68%)
Fidelity Small Cap Indx FSSNX (0.02%)
Janus JAENX (0.91%)
WFSpec Mid Cap Value (0.83%)

Bonds
Alliancebernst Global Bond ANAIX (0.55%)
Federated High Yield FHTIX (0.73%)
Fidelity US Bond Indx (0.02%)

TRP Retirement Funds 2010-2060 (0.45-0.73%)

Re: Need to sleep at night...Must rebalance!

Posted: Sun Apr 21, 2019 7:17 pm
by HEDGEFUNDIE
What are your goals for the money? Do you have heirs you want to pass the money onto?

Re: Need to sleep at night...Must rebalance!

Posted: Sun Apr 21, 2019 7:17 pm
by MotoTrojan
With almost $2M in a money market you aren’t taking that much risk but I’d say some simplification is in order. That low ER fidelity bond fund looks to be a fine choice. I’d hold low risk income there in the 401K and/or IRA and use taxable for Total US and Total International. Research tax-loss harvesting. Just setup a simple 3-fund for now.

Re: Need to sleep at night...Must rebalance!

Posted: Sun Apr 21, 2019 7:40 pm
by z3r0c00l
Well I know it isn't as significant when you are so successful, but you are leaving $10,000 a year on the table by not keeping your emergency fund in an account that pays real interest. Most online savings accounts offer 2% or more now.

Re: Need to sleep at night...Must rebalance!

Posted: Sun Apr 21, 2019 7:44 pm
by Thegame14
first things first, glad the condition is controllable, and with $700K at 0.65, just moving that to FMMXX at 2.45%, you gain 1.8% return for doing nothing which is $12,600 in interest every year for doing nothing, that is an additional $1K in income per month for about 15 minutes worth of work, I think that should be priority #1.

Re: Need to sleep at night...Must rebalance!

Posted: Sun Apr 21, 2019 8:16 pm
by Wiggums
Thegame14 wrote:
Sun Apr 21, 2019 7:44 pm
first things first, glad the condition is controllable, and with $700K at 0.65, just moving that to FMMXX at 2.45%, you gain 1.8% return for doing nothing which is $12,600 in interest every year for doing nothing, that is an additional $1K in income per month for about 15 minutes worth of work, I think that should be priority #1.
I agree. Emergency fund is an easy fix

Re: Need to sleep at night...Must rebalance!

Posted: Sun Apr 21, 2019 8:29 pm
by pasadena
Wiggums wrote:
Sun Apr 21, 2019 8:16 pm
Thegame14 wrote:
Sun Apr 21, 2019 7:44 pm
first things first, glad the condition is controllable, and with $700K at 0.65, just moving that to FMMXX at 2.45%, you gain 1.8% return for doing nothing which is $12,600 in interest every year for doing nothing, that is an additional $1K in income per month for about 15 minutes worth of work, I think that should be priority #1.
I agree. Emergency fund is an easy fix
+1.

OP: You have about 45% of your total assets in Money Market and Stable Value funds. When you say you would like a more risk-adverse portfolio, what did you have in mind?

I don't see your Munis in the list?

Also, what are your current expenses? Is there anything beyond those that you want this portfolio to provide (long term care, medical expenses, inheritance...)?

Re: Need to sleep at night...Must rebalance!

Posted: Mon Apr 22, 2019 8:22 am
by Sweetbriar
HEDGEFUNDIE wrote:
Sun Apr 21, 2019 7:17 pm
What are your goals for the money? Do you have heirs you want to pass the money onto?
Just to continue to travel, health providing, gifting to charities, live comfortably...and Yes, we have grown children and grandchildren and a trust in place.

Re: Need to sleep at night...Must rebalance!

Posted: Mon Apr 22, 2019 8:38 am
by Sweetbriar
MotoTrojan wrote:
Sun Apr 21, 2019 7:17 pm
With almost $2M in a money market you aren’t taking that much risk but I’d say some simplification is in order. That low ER fidelity bond fund looks to be a fine choice. I’d hold low risk income there in the 401K and/or IRA and use taxable for Total US and Total International. Research tax-loss harvesting. Just setup a simple 3-fund for now.
so, move Fidelity US Bond Indx (FXNAX) into his 401K? Should we also add Fid Small Cap for a more TSM holding? Is the Blue Chip too high a risk? 3 fund in Taxable Brokerage?

Re: Need to sleep at night...Must rebalance!

Posted: Mon Apr 22, 2019 9:04 am
by goodenyou
Is the problem sleeping well at night because your are taking too little risk? That is, your portfolio is so cash heavy and in poorly chosen investment choices for that cash.

You need to decide if your allocation that fits your risk tolerance. For example, a 50/50 stock/bond portfolio. You could dollar cost average into it over a 1-3 year period if it would relieve your nerves. I would immediately put my cash into a money market fund @2.45% while I was figuring out what to do. You could move around your tax deferred money without tax implications although you are at RMD age already.

Your need to take risk is low. However, you are poorly managing your low risk.

Re: Need to sleep at night...Must rebalance!

Posted: Mon Apr 22, 2019 9:04 am
by goodenyou
Deleted.

Re: Need to sleep at night...Must rebalance!

Posted: Mon Apr 22, 2019 9:13 am
by Sweetbriar
pasadena wrote:
Sun Apr 21, 2019 8:29 pm
Wiggums wrote:
Sun Apr 21, 2019 8:16 pm
Thegame14 wrote:
Sun Apr 21, 2019 7:44 pm
first things first, glad the condition is controllable, and with $700K at 0.65, just moving that to FMMXX at 2.45%, you gain 1.8% return for doing nothing which is $12,600 in interest every year for doing nothing, that is an additional $1K in income per month for about 15 minutes worth of work, I think that should be priority #1.
I agree. Emergency fund is an easy fix
Are you suggesting opening and placing 700,000k into a Fidelity brokerage account? Unfortunately my IRA's not an option :(

+1.

OP: You have about 45% of your total assets in Money Market and Stable Value funds. When you say you would like a more risk-adverse portfolio, what did you have in mind?

I don't see your Munis in the list?

Also, what are your current expenses? Is there anything beyond those that you want this portfolio to provide (long term care, medical expenses, inheritance...)?
Re: my IRA...Just was considering a simpler/lower ER 3 or 4 fund portfolio for the long term...50/50 or 40/60. Our Tax Exempt Municipal MM (VMSXX) is held in our listed Taxable: Vanguard Brokerage. Current expenses 7000-8000mo. Will probably increase after retirement. LTC covered.

Re: Need to sleep at night...Must rebalance!

Posted: Mon Apr 22, 2019 10:27 am
by Thegame14
7-8K expenses in retirement, Wow, you are living the life.....

if any of those living expenses are paying off debt like a mortgage or car loan, I would pay those off in cash.

Re: Need to sleep at night...Must rebalance!

Posted: Mon Apr 22, 2019 11:18 am
by goodenyou
Thegame14 wrote:
Mon Apr 22, 2019 10:27 am
7-8K expenses in retirement, Wow, you are living the life.....

if any of those living expenses are paying off debt like a mortgage or car loan, I would pay those off in cash.
Probably not unreasonable for someone making $600,000+ per year pre-retirement.

Re: Need to sleep at night...Must rebalance!

Posted: Mon Apr 22, 2019 11:31 am
by Kenkat
You have enough in pension and social security to cover half of your retirement expenses which is pretty good I think. Will your husband also receive social security?

Move most of the credit union emergency fund to your existing Municipal MM fund.

Figure out your target allocation. You have plenty of money which means you can either be more aggressive OR more conservative depending on your risk tolerance. Given that you are asking about sleeping at night, I’d go more conservative - 50/50 maybe? Or 40/60?

You can always simplify later, but for now I don’t see major issues with:

His Vanguard IRA
His 401(k) - you can move it to Vanguard but T. Rowe Price is reasonable as well

In your IRA, I would get rid of the high cost Rydex, Akre, Doubleline and Fidelity Floating Rate funds. You seem a little low on International stocks to me, so maybe allocate more to an International Index fund.

Really, figure out where you want to be in terms of asset allocation and then plot a course to get there over time. I think it is too much too do all at once and not necessary because overall you seem in pretty good shape to me.

Re: Need to sleep at night...Must rebalance!

Posted: Mon Apr 22, 2019 12:14 pm
by rich126
There are better people here than me on understanding portfolios and giving more specific advice. One thing that I am considering more and more as I get close to retirement and am more interested in avoiding huge drops in the market is a portfolio that is more heavy in treasuries. Something like 40% in the market (whether your preference is total stock market, S&P500, etc.) and 60% in treasuries (either all in an intermediate fund or 30/30 in short and long term treasuries).

I personally don't see inflation as a huge threat any time soon and the short term rates are poor but in the long run it seems like a portfolio like this is likely to minimize any big drop in the market while giving you a real rate of return (maybe 2-4%). And you could divide the 40% in the market into either international or maybe 25/15 between SP500 and small caps.

This may not be practical depending on the tax situations and your desired returns.

Anyhow, I'll be curious seeing what people suggest.

Re: Need to sleep at night...Must rebalance!

Posted: Mon Apr 22, 2019 12:17 pm
by Sweetbriar
goodenyou wrote:
Mon Apr 22, 2019 9:04 am
Is the problem sleeping well at night because your are taking too little risk? That is, your portfolio is so cash heavy and in poorly chosen investment choices for that cash.

You need to decide if your allocation that fits your risk tolerance. For example, a 50/50 stock/bond portfolio. You could dollar cost average into it over a 1-3 year period if it would relieve your nerves. I would immediately put my cash into a money market fund @2.45% while I was figuring out what to do. You could move around your tax deferred money without tax implications although you are at RMD age already.

Your need to take risk is low. However, you are poorly managing your low risk.
Our cash heavy allocation was a big surprise; re-capitalization of husband's company with substancial increase in stock pps. Cashed out..Because of our income and tax year changes, we placed our money in a tax exempt muni. Would you still advise a taxable MM?

Re: Need to sleep at night...Must rebalance!

Posted: Mon Apr 22, 2019 2:17 pm
by Sweetbriar
Wiggums wrote:
Sun Apr 21, 2019 8:16 pm
Thegame14 wrote:
Sun Apr 21, 2019 7:44 pm
first things first, glad the condition is controllable, and with $700K at 0.65, just moving that to FMMXX at 2.45%, you gain 1.8% return for doing nothing which is $12,600 in interest every year for doing nothing, that is an additional $1K in income per month for about 15 minutes worth of work, I think that should be priority #1.
I agree. Emergency fund is an easy fix
Re: FMMXX I believe this fund was liquidated.

Re: Need to sleep at night...Must rebalance!

Posted: Mon Apr 22, 2019 2:51 pm
by goodenyou
Sweetbriar wrote:
Mon Apr 22, 2019 12:17 pm
goodenyou wrote:
Mon Apr 22, 2019 9:04 am
Is the problem sleeping well at night because your are taking too little risk? That is, your portfolio is so cash heavy and in poorly chosen investment choices for that cash.

You need to decide if your allocation that fits your risk tolerance. For example, a 50/50 stock/bond portfolio. You could dollar cost average into it over a 1-3 year period if it would relieve your nerves. I would immediately put my cash into a money market fund @2.45% while I was figuring out what to do. You could move around your tax deferred money without tax implications although you are at RMD age already.

Your need to take risk is low. However, you are poorly managing your low risk.
Our cash heavy allocation was a big surprise; re-capitalization of husband's company with substancial increase in stock pps. Cashed out..Because of our income and tax year changes, we placed our money in a tax exempt muni. Would you still advise a taxable MM?
You are highly taxed in a high taxed state. So, munis may be better. I would look at where your other cash is lagging (ie .65%). Again, I would re-configure your tax privileged spaces with a few index funds that are low cost. You could move all of that around to a low cost index fund or two and a bond index fund. Not sure why you would have any cash in your tax-privileged space if you have ample cash elsewhere, unless there are poor bond choices in retirement accounts. Add up all your money, decide your asset allocation and fill your spaces. I did the same just recently after I sold commercial real estate and had a big cash infusion. Moved it around to meet my desired asset allocation. Pick few low cost funds. You could run a Portfolio Watch tool like they have in Vanguard and put in all your values that get you to your desired AA and then pull the trigger.

Have you run a portfolio analysis? What is your current AA? You have too many funds in my opinion.

Re: Need to sleep at night...Must rebalance!

Posted: Mon Apr 22, 2019 4:12 pm
by jainn
Here is what I would do based on the information provided...

1. Transfer $700,000 from credit union to Vanguard Brokerage. Deposit into existing Vanguard Muni MM (VMSXX)
2. Move 1.33m VMSXX to VWSUX (Short Term Muni Fund Avoids AMT) has 1.0 year duration
3. Move 1.33m VMSXX to VCLAX (Cali Muni Fund - Avoids Federal + State tax) has 6.8 year duration
4. Consolidate to 100% in Vanguard Global Equity in His Vanguard IRA
5. Consolidate to 100% in Fidelity 500 Index in His 401k
6. Consolidate to 100% Fidelity TSM in Her Fidelity IRA

Resulting allocation:

$1.33m Short-term Tax Exempt Bond Fund
$1.33m California Long-Term Municipal Bond Fund
$117k Global Equity
$2.07m SP500 Index
$1.13m Total Stock Market
5.98m total (3.32m stocks, 2.66m bonds) Weighted average bond duration is 4 years.
Asset allocation 55% stocks / 45% bonds

Re: Need to sleep at night...Must rebalance!

Posted: Tue Apr 23, 2019 10:20 am
by Sweetbriar
goodenyou wrote:
Mon Apr 22, 2019 2:51 pm
Sweetbriar wrote:
Mon Apr 22, 2019 12:17 pm
goodenyou wrote:
Mon Apr 22, 2019 9:04 am
Is the problem sleeping well at night because your are taking too little risk? That is, your portfolio is so cash heavy and in poorly chosen investment choices for that cash.

You need to decide if your allocation that fits your risk tolerance. For example, a 50/50 stock/bond portfolio. You could dollar cost average into it over a 1-3 year period if it would relieve your nerves. I would immediately put my cash into a money market fund @2.45% while I was figuring out what to do. You could move around your tax deferred money without tax implications although you are at RMD age already.

Your need to take risk is low. However, you are poorly managing your low risk.
Our cash heavy allocation was a big surprise; re-capitalization of husband's company with substancial increase in stock pps. Cashed out..Because of our income and tax year changes, we placed our money in a tax exempt muni. Would you still advise a taxable MM?
You are highly taxed in a high taxed state. So, munis may be better. I would look at where your other cash is lagging (ie .65%). Again, I would re-configure your tax privileged spaces with a few index funds that are low cost. You could move all of that around to a low cost index fund or two and a bond index fund. Not sure why you would have any cash in your tax-privileged space if you have ample cash elsewhere, unless there are poor bond choices in retirement accounts. Add up all your money, decide your asset allocation and fill your spaces. I did the same just recently after I sold commercial real estate and had a big cash infusion. Moved it around to meet my desired asset allocation. Pick few low cost funds. You could run a Portfolio Watch tool like they have in Vanguard and put in all your values that get you to your desired AA and then pull the trigger.

Have you run a portfolio analysis? What is your current AA? You have too many funds in my opinion.

Re: Cash in my IRA...I read a recommendation for placing cash for RMD withdrawal...not tapping into stock funds. What say you?

Re: Need to sleep at night...Must rebalance!

Posted: Tue Apr 23, 2019 10:24 am
by Sweetbriar
jainn wrote:
Mon Apr 22, 2019 4:12 pm
Here is what I would do based on the information provided...

1. Transfer $700,000 from credit union to Vanguard Brokerage. Deposit into existing Vanguard Muni MM (VMSXX)
2. Move 1.33m VMSXX to VWSUX (Short Term Muni Fund Avoids AMT) has 1.0 year duration
3. Move 1.33m VMSXX to VCLAX (Cali Muni Fund - Avoids Federal + State tax) has 6.8 year duration
4. Consolidate to 100% in Vanguard Global Equity in His Vanguard IRA
5. Consolidate to 100% in Fidelity 500 Index in His 401k
6. Consolidate to 100% Fidelity TSM in Her Fidelity IRA

Resulting allocation:

$1.33m Short-term Tax Exempt Bond Fund
$1.33m California Long-Term Municipal Bond Fund
$117k Global Equity
$2.07m SP500 Index
$1.13m Total Stock Market
5.98m total (3.32m stocks, 2.66m bonds) Weighted average bond duration is 4 years.
Asset allocation 55% stocks / 45% bonds
Wish I could be this gutsy!!

Re: Need to sleep at night...Must rebalance!

Posted: Tue Apr 23, 2019 11:11 am
by blackholescion
Sweetbriar wrote:
Tue Apr 23, 2019 10:24 am
jainn wrote:
Mon Apr 22, 2019 4:12 pm
Here is what I would do based on the information provided...

1. Transfer $700,000 from credit union to Vanguard Brokerage. Deposit into existing Vanguard Muni MM (VMSXX)
2. Move 1.33m VMSXX to VWSUX (Short Term Muni Fund Avoids AMT) has 1.0 year duration
3. Move 1.33m VMSXX to VCLAX (Cali Muni Fund - Avoids Federal + State tax) has 6.8 year duration
4. Consolidate to 100% in Vanguard Global Equity in His Vanguard IRA
5. Consolidate to 100% in Fidelity 500 Index in His 401k
6. Consolidate to 100% Fidelity TSM in Her Fidelity IRA

Resulting allocation:

$1.33m Short-term Tax Exempt Bond Fund
$1.33m California Long-Term Municipal Bond Fund
$117k Global Equity
$2.07m SP500 Index
$1.13m Total Stock Market
5.98m total (3.32m stocks, 2.66m bonds) Weighted average bond duration is 4 years.
Asset allocation 55% stocks / 45% bonds
Wish I could be this gutsy!!
What’s so gutsy about it? You have 700k in cash. If you spent 150k a year (12k a month), that’s 4.5 years of expenses in cash. If the market 2008’d, you’d be down 1.6 million. However, you have 4.5 years of a cash bucket you spend from and then another 2.6million in bonds to spend from which is another 17 years. You’d be at net even 3 years after a 2008 happened. You wouldn’t even have to touch more than your cash allocation. Even if you did, you have 21.5 years of fixed income to pull from until your stocks recovered back to existing levels.

Our expenses bucket is 3 years + current year expenses that way we always have 3 years in there and aren’t doing something like spending down to 2 years and then replenishing back. It’s really 4 years of expenses depending on how you look a time it. In the worst case we feel that after 3 years the market would have generally recovered as has historically been the case. If it doesn’t, we have the bonds to fall back on.

It sounds like you want more conservative than 50/50 (cash is equivalent to bonds, 2.6m+700k = 3.3 which is your stock total). If you want to go 40/60, then just adjust accordingly.

Re: Need to sleep at night...Must rebalance!

Posted: Tue Apr 23, 2019 12:52 pm
by goodenyou
Sweetbriar wrote:
Tue Apr 23, 2019 10:20 am
goodenyou wrote:
Mon Apr 22, 2019 2:51 pm
Sweetbriar wrote:
Mon Apr 22, 2019 12:17 pm
goodenyou wrote:
Mon Apr 22, 2019 9:04 am
Is the problem sleeping well at night because your are taking too little risk? That is, your portfolio is so cash heavy and in poorly chosen investment choices for that cash.

You need to decide if your allocation that fits your risk tolerance. For example, a 50/50 stock/bond portfolio. You could dollar cost average into it over a 1-3 year period if it would relieve your nerves. I would immediately put my cash into a money market fund @2.45% while I was figuring out what to do. You could move around your tax deferred money without tax implications although you are at RMD age already.

Your need to take risk is low. However, you are poorly managing your low risk.
Our cash heavy allocation was a big surprise; re-capitalization of husband's company with substancial increase in stock pps. Cashed out..Because of our income and tax year changes, we placed our money in a tax exempt muni. Would you still advise a taxable MM?
You are highly taxed in a high taxed state. So, munis may be better. I would look at where your other cash is lagging (ie .65%). Again, I would re-configure your tax privileged spaces with a few index funds that are low cost. You could move all of that around to a low cost index fund or two and a bond index fund. Not sure why you would have any cash in your tax-privileged space if you have ample cash elsewhere, unless there are poor bond choices in retirement accounts. Add up all your money, decide your asset allocation and fill your spaces. I did the same just recently after I sold commercial real estate and had a big cash infusion. Moved it around to meet my desired asset allocation. Pick few low cost funds. You could run a Portfolio Watch tool like they have in Vanguard and put in all your values that get you to your desired AA and then pull the trigger.

Have you run a portfolio analysis? What is your current AA? You have too many funds in my opinion.

Re: Cash in my IRA...I read a recommendation for placing cash for RMD withdrawal...not tapping into stock funds. What say you?
Have you run your portfolio analyzer? What is your current breakdown of AA across all accounts? You are paying way too much in fees in your retirement accounts for the privilege of under performance.