AA – Help rebalance/streamline FIL’s portfolio

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AA – Help rebalance/streamline FIL’s portfolio

Post by Alearning » Wed Nov 13, 2019 5:11 pm

FIL asked me to take a look at his finances. He is a widower, in so-so health. He has no debt as the house is paid for, and sufficient cash on hand, excluding the cash below. He is 80-something and in the 32% federal bracket, 0% (NH).

5% Cash, excluding emergency funds
1% DCPAX  - BNY Mellon Core Plus (0.70%) *
1% MUB - iShres national Muni (0.07%)
1% SCHZ - Schwab US Aggregate Bond (0.04%)
1% SCMTX - DWS Intermed Term Tax Free (0.52%) *
3% VBTLX - Vanguard Total Bond Market (0.05%)
2% VFIRX - Vanguard Short Term Treasury (0.10%)
6% VWALX - Vanguard High Yield Tax Exempt (0.09%)
5% VWIUX - Vanguard Inter. Term Tax Exempt (0.09%)
4% VWSUX - Vanguard Short Term Tax Exempt (0.09%)

48% Stock portfolio
2% FASMX - Fidelity Asset Manager 50% (0.65%) *
1% GPAFX - Victory RS Large Cap Alpha (0.89%, <gasp>)*
4% VBIAX - Vanguard Balanced (0.07%)
6% VFIAX - Vanguard 500 Index (0.04%)
5% VHYAX - Vanguard High Dividend (0.08%)
2% VSMAX - Vanguard Small Cap Index (0.05%)
2% VTIAX - Vanguard Total International Stock (0.11%)

Rollover IRA
1% VBTLX - Vanguard Total Bond Market (0.05%)
1% VFIAX - Vanguard 500 Index (0.04%)

* These mutual funds were acquired decades ago; selling now despite the high expense ratios implies a large capital gain.

The stock portfolio was also acquired over many years and many of the basis costs are very low. Many of the stocks throw off dividends that throw off 79% of his annual income.

His accounts are with several brokerage firms.

Given the rates climate I am curious as to your thoughts. I think originally his AA was 60-63/37-40% but has crept up in favor of stocks. As tax loss harvesting seasons nears, I am wondering how his portfolio can be streamlined. I realize munis have tax advantages but am a bit perturbed about the low yields on some of the muni funds or whether the funds can not be invested elsewhere.. I’m also concerned about the impact of dropping interest rates on the high yield muni fund.

In application,


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Re: AA – Help rebalance/streamline FIL’s portfolio

Post by dbr » Wed Nov 13, 2019 5:42 pm

The ability of his portfolio to support his income needs has nothing to do with the interest or dividends that are being paid out. What it does have to do with is how large is his portfolio and what is his income need. The idea is that if dividends and interest don't provide enough to meet spending needs he can sell various assets. How that works out depends on the numbers, but for a man of 80+ age not very many years will have to be provided for. If 79% of the income is coming from this high stock portfolio it doesn't seem important that bond yields are low right now.

It is entirely possible this portfolio should just be left alone. A factor is that basis is stepped up on death meaning there may never be any tax paid by anyone on most of the existing unrealized gains.

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Re: AA – Help rebalance/streamline FIL’s portfolio

Post by Alearning » Thu Nov 14, 2019 7:48 pm

Thank you, dbr.

His income exceeds his needs.

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