Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
BullHouse_BearMarket
Posts: 47
Joined: Sun Jul 10, 2016 4:19 pm

Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by BullHouse_BearMarket »

Just before Thanksgiving, my wife and I very unexpectedly suffered the loss of her mother. Before I get started, we are going to continue using the Financial Advisor my MIL had because our lives have been turned upside down and our time is being consumed in executing the estate, caring for our 1 year old, and preparing for our 2nd child to be born in 6 weeks. For now, it is easier to let the FA do the work while we get through everything else.

So all that being said, we told the FA that we want an 80/20 split and asked them to compare what they come up with against the LifeStrategy Growth Fund (VASGX). What they recommend is of course way more involved than a simple 3 or 4 fund portfolio but the performance testing puts their allocation ~2% hire (i assume the return is after all fees, but I need to confirm). Here is what they came up with compared to VASGX

Theirs:

Image


VASGX:

Image

Should I go with the FA selection? I don't have the ERs but again, i'm assuming the return is after all fees paid.

Thank you all for the help
User avatar
JoeRetire
Posts: 5960
Joined: Tue Jan 16, 2018 2:44 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by JoeRetire »

BullHouse_BearMarket wrote: Fri Dec 06, 2019 2:43 pm Just before Thanksgiving, my wife and I very unexpectedly suffered the loss of her mother.
Sorry for your loss.
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
aristotelian
Posts: 8214
Joined: Wed Jan 11, 2017 8:05 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by aristotelian »

Tell them to go back to the drawing board. They are not listening to your instructions and their recommendations are both overly complex and higher fee than the portfolio you requested. Ignore their projected return numbers since those cannot be guaranteed. Be prepared to contact Vanguard and initiate transfer as soon as the dust settles and you are comfortable.
User avatar
Quirkz
Posts: 423
Joined: Mon Jan 14, 2019 5:32 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by Quirkz »

Sorry for your loss.
BullHouse_BearMarket wrote: Fri Dec 06, 2019 2:43 pm What they recommend is of course way more involved than a simple 3 or 4 fund portfolio but the performance testing puts their allocation ~2% hire (i assume the return is after all fees, but I need to confirm). Here is what they came up with compared to VASGX
What performance testing can they do that shows the future? Because if they're back-testing against the past, anybody can locate *something* that did better than a benchmark, but there's no guarantee that something will do any better in the future. I'm not a fan of complicated, either, and that's why I hang out here.

But that's just general skepticism, I don't know enough about the particular funds to say anything further. I assume others will chime in shortly.
jeroly
Posts: 101
Joined: Wed Jan 24, 2018 2:07 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by jeroly »

BullHouse_BearMarket wrote: Fri Dec 06, 2019 2:43 pm Just before Thanksgiving, my wife and I very unexpectedly suffered the loss of her mother. Before I get started, we are going to continue using the Financial Advisor my MIL had because our lives have been turned upside down and our time is being consumed in executing the estate, caring for our 1 year old, and preparing for our 2nd child to be born in 6 weeks. For now, it is easier to let the FA do the work while we get through everything else.

So all that being said, we told the FA that we want an 80/20 split and asked them to compare what they come up with against the LifeStrategy Growth Fund (VASGX). What they recommend is of course way more involved than a simple 3 or 4 fund portfolio but the performance testing puts their allocation ~2% hire (i assume the return is after all fees, but I need to confirm). Here is what they came up with compared to VASGX

Theirs:

Image


VASGX:

Image

Should I go with the FA selection? I don't have the ERs but again, i'm assuming the return is after all fees paid.

Thank you all for the help
I don’t understand your question... if you are going with the FA then you are doing what they recommend. If you do something else you are not going with the FA.

Personally, I’d just hold the fort only as long as it takes to get the death certificate (if you are listed as the beneficiary or it’s part of a trust), or the will probated (if necessary) so you can transfer the iIRA to your broker, e.g. Vanguard. Additionally, make sure that the RMD is taken if necessary before December 31.
Texanbybirth
Posts: 1398
Joined: Tue Apr 14, 2015 12:07 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by Texanbybirth »

Very sorry for your loss - such an event would be absolutely devastating in my family as well. I can understand wanting to stay with the FA for a while, but why not just have them re-allocate to VASGX itself, instead of replicating it? The ERs in most of those funds are much higher than what you'd pay at VG as I'm sure you know, but they're not anywhere near as egregious as others have posted on this board. I think the bigger issue is the portfolio suggested doesn't really fit your request.
“The strong cannot be brave. Only the weak can be brave; and yet again, in practice, only those who can be brave can be trusted, in time of doubt, to be strong.“ - GK Chesterton
User avatar
Wiggums
Posts: 2955
Joined: Thu Jan 31, 2019 8:02 am

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by Wiggums »

Sorry for your loss
delamer
Posts: 10590
Joined: Tue Feb 08, 2011 6:13 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by delamer »

I am sorry about your MIL.

Ask the advisor to provide a breakdown of the current investments by asset type — large caps, small caps, international,bonds, cash. Maybe by year.

Comparing the raw return of 2 portfolios is just a start. It is important to understand the risk level of each portfolio when you are comparing the results. You already have that for VASGX.

And as others have noted, this is a backtest and it isn’t predictive.

And you definitely need to find out how fees (and taxes) are accounted for.
Topic Author
BullHouse_BearMarket
Posts: 47
Joined: Sun Jul 10, 2016 4:19 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by BullHouse_BearMarket »

Thank you all for your replies. I should clarify, I didn't ask them to replicate VASGX. I just wanted them to compare whatever they came up with against it since that fund holds what I typically hold in my 3 fund.
delamer wrote: Fri Dec 06, 2019 3:17 pm Ask the advisor to provide a breakdown of the current investments by asset type — large caps, small caps, international,bonds, cash. Maybe by year.
That is a good idea. I think they sort of broke that down but in charts that were confusing to understand at first glance and while I'm occupied at work.

They told me previously that they make their decisions based on each ETF/Fund's ALPHA and the Vanguard funds typically have a negative or even ALPHA, i.e. VASGX alpha was -.69 and their allocation alpha was 1.29.

I guess my question is, should I have them stick with what they recommend given their backtesting results and not give it another thought for now, or is this a bad portfolio and i should direct them to create a simpler portfolio more in line with the bogelhead way?

I apologize if my question is still confusing. Emotions are taking over my usual logical perspective. I just don't have the time or energy to come up with my own allocation and manage it right now, and frankly, looking at this money is a curse that reminds me of who we lost.

Thank you again for all the help and bearing with me while I sort my thoughts.
Grt2bOutdoors
Posts: 23122
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by Grt2bOutdoors »

Sorry for your loss. I know you don’t have the time, but Swedroes book The Incredible Shrinking Alpha is a book to be read. The advisor is using a marketing ploy into believing you can earn the same alpha prospectively. You will not. Of course they are going to present better numbers, you gave them license to cherry pick funds and allocation percentages. That alpha they presented to you is “net of fees”? If not, there goes your alpha. But the best part is there is no guarantee if they fail to produce alpha that you get your money back. At least in a hedge fund you don’t pay for performance you aren’t getting.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
ballons
Posts: 444
Joined: Sun Aug 18, 2019 3:05 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by ballons »

jeroly wrote: Fri Dec 06, 2019 3:07 pm I don’t understand your question... if you are going with the FA then you are doing what they recommend. If you do something else you are not going with the FA.

Personally, I’d just hold the fort only as long as it takes to get the death certificate (if you are listed as the beneficiary or it’s part of a trust), or the will probated (if necessary) so you can transfer the iIRA to your broker, e.g. Vanguard. Additionally, make sure that the RMD is taken if necessary before December 31.
Agreed. Sticking with the FA is supposed to prevent "our time is being consumed" and yet your time is being consumed questioning the FA's recommendations.
delamer
Posts: 10590
Joined: Tue Feb 08, 2011 6:13 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by delamer »

BullHouse_BearMarket wrote: Fri Dec 06, 2019 3:44 pm Thank you all for your replies. I should clarify, I didn't ask them to replicate VASGX. I just wanted them to compare whatever they came up with against it since that fund holds what I typically hold in my 3 fund.
delamer wrote: Fri Dec 06, 2019 3:17 pm Ask the advisor to provide a breakdown of the current investments by asset type — large caps, small caps, international,bonds, cash. Maybe by year.
That is a good idea. I think they sort of broke that down but in charts that were confusing to understand at first glance and while I'm occupied at work.

They told me previously that they make their decisions based on each ETF/Fund's ALPHA and the Vanguard funds typically have a negative or even ALPHA, i.e. VASGX alpha was -.69 and their allocation alpha was 1.29.

I guess my question is, should I have them stick with what they recommend given their backtesting results and not give it another thought for now, or is this a bad portfolio and i should direct them to create a simpler portfolio more in line with the bogelhead way?

I apologize if my question is still confusing. Emotions are taking over my usual logical perspective. I just don't have the time or energy to come up with my own allocation and manage it right now, and frankly, looking at this money is a curse that reminds me of who we lost.

Thank you again for all the help and bearing with me while I sort my thoughts.
There is absolutely nothing wrong with deferring a decision for now. It would make sense to wait until your wife is in a better position to weigh in, since is this is presumably her inheritance. Give yourself permission to leave things as they are until March 1, say. And then reconsider.
Last edited by delamer on Fri Dec 06, 2019 5:34 pm, edited 1 time in total.
User avatar
goingup
Posts: 3921
Joined: Tue Jan 26, 2010 1:02 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by goingup »

OP-
If the plan is to use the FA for the time being, let them do what they do. You told them 80/20 and that should suffice. You should be aware that advisors just back-fit their fund selection--in other words they pick the past top-performers to create a portfolio to present to you. Nothing magical there.

In 6 months to one year revisit this situation. At that point you can sell everything and set up an account at Vanguard, Schwab or Fidelity.

So sorry for your loss. Such a painful experience to lose a parent.
Dottie57
Posts: 9308
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by Dottie57 »

OP, Why don’t you let the whole portfolio just remain as is. Are they suggesting funds with a front end load, just leave it alone. Just wait until you are ready to move to Vanguard.

What is in the portfolio that there is a burning need to change the AA.
aristotelian
Posts: 8214
Joined: Wed Jan 11, 2017 8:05 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by aristotelian »

BullHouse_BearMarket wrote: Fri Dec 06, 2019 3:44 pm Thank you all for your replies. I should clarify, I didn't ask them to replicate VASGX. I just wanted them to compare whatever they came up with against it since that fund holds what I typically hold in my 3 fund.
delamer wrote: Fri Dec 06, 2019 3:17 pm Ask the advisor to provide a breakdown of the current investments by asset type — large caps, small caps, international,bonds, cash. Maybe by year.
That is a good idea. I think they sort of broke that down but in charts that were confusing to understand at first glance and while I'm occupied at work.

They told me previously that they make their decisions based on each ETF/Fund's ALPHA and the Vanguard funds typically have a negative or even ALPHA, i.e. VASGX alpha was -.69 and their allocation alpha was 1.29.

I guess my question is, should I have them stick with what they recommend given their backtesting results and not give it another thought for now, or is this a bad portfolio and i should direct them to create a simpler portfolio more in line with the bogelhead way?

I apologize if my question is still confusing. Emotions are taking over my usual logical perspective. I just don't have the time or energy to come up with my own allocation and manage it right now, and frankly, looking at this money is a curse that reminds me of who we lost.

Thank you again for all the help and bearing with me while I sort my thoughts.
"Alpha" is a fancy word for beating the market. Alpha can only be achieved by taking additional risk, but then you are just as likely to underperform. As others have said, they are basing their claims to alpha on previous results. There is no guarantee that their recommendations will continue to beat the market. Up to you, but based on your post it seemed you were convinced of boglehead approach, which is based on owning/matching the market rather than trying to beating the market. If you buy into the idea of alpha, you are going down the path of speculation and nobody here can advise you how to do it.
User avatar
Stinky
Posts: 5807
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by Stinky »

Stop. Take a deep breath. Allow you and your wife some time to grieve. Enjoy the birth of your new child in 6 weeks or so.

Don’t touch the current portfolio (for now, that is). I expect that there’s nothing so broken in the current portfolio that it can’t continue on its current course for a few more months.

When baby is home safe and sound, and things have returned to a more-normal routine, move the assets to Vanguard, Fidelity, or your choice of low cost firms. And fire the advisor.

Invest the transferred money in the same way as you invest your own money.

I wish you the best in this time of upheaval, with both death and new life on your minds.
It's a GREAT day to be alive - Travis Tritt
User avatar
LilyFleur
Posts: 1572
Joined: Fri Mar 02, 2018 10:36 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by LilyFleur »

Would it be OK just to leave the investments "as is" without making any changes at this time?
Revisit it in a year when your lives have calmed down and it isn't quite as painful to deal with?
(When I lost my mother, doing ANYTHING about her estate was extremely painful for at least a year.) I moved a table from her house, put it below my wall-mounted TV, and then the first movie I watched I kept looking at her table and crying.
Almost two years later, I am able to enjoy her furniture in my house, and I am grateful rather than sad about what I inherited financially.
The advice I received here about an inheritance skewed strongly toward not doing anything with it for a while.
I am so sorry for your loss.
Keep us posted, and I wish you much joy with the birth of your new baby.
MotoTrojan
Posts: 10708
Joined: Wed Feb 01, 2017 8:39 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by MotoTrojan »

Move this money to Vanguard or elsewhere and invest it in the LifeStrategy fund. Done. Sorry for your loss.
Target2019
Posts: 483
Joined: Sat Mar 03, 2007 5:30 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by Target2019 »

Sorry for your loss. I entered your percentages to Portfolio Visualizer:

https://www.portfoliovisualizer.com/bac ... tion10_1=2

The available data for some of those symbols is limited. If you could find proxy symbols and go back further (like 10 years), you'd find that VASGX annual return to be 9.06% for 10 years. Not too shabby.

The returns you are seeing do not include the AUM fee. So ask about that also.

Finally, their percentages do not add up to 100%. I added CASHX, a proxy for cash/money market.
User avatar
celia
Posts: 11504
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by celia »

BullHouse_BearMarket wrote: Fri Dec 06, 2019 2:43 pm Just before Thanksgiving, my wife and I very unexpectedly suffered the loss of her mother. Before I get started, we are going to continue using the Financial Advisor my MIL had because our lives have been turned upside down and our time is being consumed in executing the estate, caring for our 1 year old, and preparing for our 2nd child to be born in 6 weeks. For now, it is easier to let the FA do the work while we get through everything else.
This is reasonable considering your situation.

UNTIL....you realize you are probably spending more time directing them than doing it yourself. And even if they set it up properly, when you sell it or move the assets to someplace to do it yourself, will there be capital gains to pay taxes on? Will the taxes and commissions cover the growth meanwhile?

How about just letting everything just sit until you have time to do it yourselves? Have all assets get a step-up in value and sell anything you don't want. Then take your time. Even waiting a year or more is recommended when someone gets a "windfall".
User avatar
BL
Posts: 9531
Joined: Sun Mar 01, 2009 2:28 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by BL »

I agree with suggestions to leave the investments alone (and direct the "advisor" to not change anything so you don't end up paying for shuffling them around or front loads, etc.) No need to discuss the possibility of leaving with the "advisor", just that you have decided not to make decisions yet.

All you want done now is to get the title changed to the proper wording for an inherited IRA.
The rest can wait while your wife gets some time before dealing with extra stress on things that can wait for 6-12 months or whatever is needed.

Also, is she the one who inherited? Decisions may need to be made by her on how to handle "her" inheritance.

Read about "windfalls" in the Wiki.
mortfree
Posts: 2425
Joined: Mon Sep 12, 2016 7:06 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by mortfree »

Random thoughts

Target date fund.

Instruct the FA that they are not allowed to buy/sell.

Do not try to get into detailed conversations with FA about which is “better”. They are trained in how to talk to you about this.

Stick to low costs.

It is an IRA so there should be no tax consequences. I am not an tax person, accountant or lawyer etc.

Do not buy any of their other products - universal life, annuities etc.

Read the windfall section of the wiki

In 6 months or when things settle down leave the FA.
Topic Author
BullHouse_BearMarket
Posts: 47
Joined: Sun Jul 10, 2016 4:19 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by BullHouse_BearMarket »

Thank you all for the condolences and advice. My wife and I had a short call with the FA just to formalize the IRA transfer in name make sure the ETFs and funds are all low-ish cost and have no front loaded fees. The annualized return was net of all fees including the AUM fee. Like many have said, we are going to take time to focus on getting our feet back on the ground and settled. We are happy to pay the 1% fee in exchange for not having to worry about it for awhile. The FA is a fiduciary and did great work helping my MIL get her financials in order and be able to retire when she didn't think she could.

Thank you all for helping us organize our thoughts and providing great advice and reassurance.
User avatar
Stinky
Posts: 5807
Joined: Mon Jun 12, 2017 11:38 am
Location: Sweet Home Alabama

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by Stinky »

BullHouse_BearMarket wrote: Wed Dec 11, 2019 8:21 am Thank you all for the condolences and advice. My wife and I had a short call with the FA just to formalize the IRA transfer in name make sure the ETFs and funds are all low-ish cost and have no front loaded fees. The annualized return was net of all fees including the AUM fee. Like many have said, we are going to take time to focus on getting our feet back on the ground and settled. We are happy to pay the 1% fee in exchange for not having to worry about it for awhile. The FA is a fiduciary and did great work helping my MIL get her financials in order and be able to retire when she didn't think she could.

Thank you all for helping us organize our thoughts and providing great advice and reassurance.
Best of luck as you move forward.

Hope that all goes well for both DW and new baby with the impending birth.

Please post back on the Forum when you have more questions.
It's a GREAT day to be alive - Travis Tritt
Jack FFR1846
Posts: 12790
Joined: Tue Dec 31, 2013 7:05 am
Location: 26 miles, 385 yards west of Copley Square

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by Jack FFR1846 »

At this point, I would think that your main objective with the FA is to prevent him from totally messing you up in the future. Limited access funds, illiquid funds, funds with exit fees. Honestly, I'd tell him to go to cash and wait further instructions. Think ROA as RETURN OF ASSETS. You don't want to end up being in stuff that's going to drag out for a year, or 3 years, or 5 years. Once the account is in your wife's name, transfer it immediately. Then you can replicate what you currently have, if you wish.
Bogle: Smart Beta is stupid
TN_Boy
Posts: 1899
Joined: Sat Jan 17, 2009 12:51 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by TN_Boy »

Dottie57 wrote: Fri Dec 06, 2019 4:21 pm OP, Why don’t you let the whole portfolio just remain as is. Are they suggesting funds with a front end load, just leave it alone. Just wait until you are ready to move to Vanguard.

What is in the portfolio that there is a burning need to change the AA.
One reason to change AA would be taxes.

OP, are these investments in a taxable account or tax-deferred (401k, etc)? If that was in the post I somehow missed it.

If investments are in a taxable account, one strategy would be to immediately move everything to cash (taking advantage of the step-up in cost basis to avoid capital gains taxes) and then redeploy at your leisure. You might miss out on gains, but you would be in a clean situation tax-wise.

If they are in a tax-deferred account, I might do nothing until you had time to actually drive the process. You either have time to mess with this or you don't. Or, if you want 80/20, tell them 80% in a total market index fund and 20% in a bond index fund and stop comparing.
Dottie57
Posts: 9308
Joined: Thu May 19, 2016 5:43 pm
Location: Earth Northern Hemisphere

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by Dottie57 »

TN_Boy wrote: Wed Dec 11, 2019 10:49 am
Dottie57 wrote: Fri Dec 06, 2019 4:21 pm OP, Why don’t you let the whole portfolio just remain as is. Are they suggesting funds with a front end load, just leave it alone. Just wait until you are ready to move to Vanguard.

What is in the portfolio that there is a burning need to change the AA.
One reason to change AA would be taxes.

OP, are these investments in a taxable account or tax-deferred (401k, etc)? If that was in the post I somehow missed it.

If investments are in a taxable account, one strategy would be to immediately move everything to cash (taking advantage of the step-up in cost basis to avoid capital gains taxes) and then redeploy at your leisure. You might miss out on gains, but you would be in a clean situation tax-wise.

If they are in a tax-deferred account, I might do nothing until you had time to actually drive the process. You either have time to mess with this or you don't. Or, if you want 80/20, tell them 80% in a total market index fund and 20% in a bond index fund and stop comparing.
My point is why it needs to be done NOW. It might be best to think about it a bit longer. The standard advice when losing a loved one is to do nothing. Let grief subside and then make changes if warranted.
HomeStretch
Posts: 5125
Joined: Thu Dec 27, 2018 3:06 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by HomeStretch »

BullHouse_BearMarket wrote: Wed Dec 11, 2019 8:21 am My wife and I had a short call with the FA just to formalize the IRA transfer in name make sure the ETFs and funds are all low-ish cost and have no front loaded fees. The annualized return was net of all fees including the AUM fee.
There should be a written agreement documenting the AUM arrangement that the advisor has asked you to sign. Be sure to also put in writing your investment instructions to invest only in funds with ERs < x% and no other fees including loads.

As you plan to change providers in the future, consider also instructing FA in writing not to reinvest dividends and capital gain distributions (let them go to a money market fund) so you don’t buy more of the funds/ETFs you will sell soon.
KyleAAA
Posts: 8630
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by KyleAAA »

Obviously you should ignore their return predictions, because they are just wild guesses. But overall, the suggested portfolio ain’t bad. Looks like a factor shop and of the options I recognize, they all have reasonable ERs. I’m not sure what AUM the advisor charges, but the portfolio itself is within the realm of reasonable.

Edit: As mentioned above, I think you're also fine just leaving it as is for now unless it's invested in something truly ridiculous. If your intention is to transfer to Vanguard in 6 months once you've had time to process things anyway, I don't see the advantage of making a short-term move.
Last edited by KyleAAA on Wed Dec 11, 2019 12:28 pm, edited 1 time in total.
TheDDC
Posts: 1145
Joined: Mon Jan 08, 2018 11:11 am

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by TheDDC »

Sorry for your loss... right before Christmas too. If it were me, I would hire Vanguard PAS and have them handle this end to end 100% according to desired AA. Keep in mind even without PAS you would have very little time invested in this to invest in what you REALLY want. You are going to be taking time now or taking time later to unwind all this, all the while losing money due to high fees. I say you are wasting valuable time now working with this joker.

-TheDDC
Rules to wealth building: 90-100% VTSAX piled high and deep, 0-10% VIGAX tilt, 0% given away to banks, minimize amount given to medical-industrial complex
radiowave
Posts: 2442
Joined: Thu Apr 30, 2015 5:01 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by radiowave »

mortfree wrote: Sat Dec 07, 2019 1:55 am Random thoughts

Target date fund.

Instruct the FA that they are not allowed to buy/sell.

Do not try to get into detailed conversations with FA about which is “better”. They are trained in how to talk to you about this.

Stick to low costs.

It is an IRA so there should be no tax consequences. I am not an tax person, accountant or lawyer etc.

Do not buy any of their other products - universal life, annuities etc.

Read the windfall section of the wiki

In 6 months or when things settle down leave the FA.
+1

and as above, check whether a RMD is due and be sure to take care of that by Dec 31

Another key point, asset allocation is for the entire portfolio. Your wife has now inherited her mom's assets and that should be considered in total for your portfolio. Typically bonds are preferred in tax deferred space so the advisor should be engaged when your wife has time next year. Agree to put something in writing especially directing the FA not to buy/sell without your wife's written permission.

My condolences as well, this is a difficult time for both of you.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page
prairieman
Posts: 356
Joined: Thu Mar 01, 2018 3:17 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by prairieman »

Love the advice being given here. We went through a similar event three years ago. We paused and, despite meeting with my MIL’s FAs (she had two), eventually transferred everything out (as is), and then sold the very complicated portfolio and reinvested almost all. We kept some specific assets (half a dozen municipal bonds, several high performing and low cost mutual funds).

The only “mistake” we made was holding a very complicated Edward Jones portfolio past Jan 1, meaning we had to deal with it for two tax seasons rather than just one. What a nightmare!
“As long as the roots are not severed, all is well.” Chauncey Gardner
NancyABQ
Posts: 301
Joined: Thu Aug 18, 2016 3:37 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by NancyABQ »

What I would recommend for action items this year:

1) Make sure 2019 RMD has been taken.
2) Get Inherited IRA properly re-titled in Wife's name as a beneficiary IRA.
3) Tell FA not to do any trading (other than selling to finance RMD if necessary) until further notice. They can feel free to propose to you a particular investment scheme, but they are not allowed to change anything and you shouldn't bother yourself by actually looking at their proposal until sometime next year.

After that, take your time, deal with your life and your new baby.

Think about this sometime next year (probably to transfer to Vanguard or wherever and take over the investing yourself).

4) Make sure to take 2020 RMD.
User avatar
goingup
Posts: 3921
Joined: Tue Jan 26, 2010 1:02 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by goingup »

BullHouse_BearMarket wrote: Wed Dec 11, 2019 8:21 am Thank you all for the condolences and advice. My wife and I had a short call with the FA just to formalize the IRA transfer in name make sure the ETFs and funds are all low-ish cost and have no front loaded fees. The annualized return was net of all fees including the AUM fee. Like many have said, we are going to take time to focus on getting our feet back on the ground and settled. We are happy to pay the 1% fee in exchange for not having to worry about it for awhile. The FA is a fiduciary and did great work helping my MIL get her financials in order and be able to retire when she didn't think she could.

Thank you all for helping us organize our thoughts and providing great advice and reassurance.
Good measures taken so far and good plan going forward. That's one less thing to worry about in your busy lives!
TN_Boy
Posts: 1899
Joined: Sat Jan 17, 2009 12:51 pm

Re: Unexpected loss of MIL, Inherited IRA, and How to Restructure Investments

Post by TN_Boy »

Dottie57 wrote: Wed Dec 11, 2019 10:54 am
TN_Boy wrote: Wed Dec 11, 2019 10:49 am
Dottie57 wrote: Fri Dec 06, 2019 4:21 pm OP, Why don’t you let the whole portfolio just remain as is. Are they suggesting funds with a front end load, just leave it alone. Just wait until you are ready to move to Vanguard.

What is in the portfolio that there is a burning need to change the AA.
One reason to change AA would be taxes.

OP, are these investments in a taxable account or tax-deferred (401k, etc)? If that was in the post I somehow missed it.

If investments are in a taxable account, one strategy would be to immediately move everything to cash (taking advantage of the step-up in cost basis to avoid capital gains taxes) and then redeploy at your leisure. You might miss out on gains, but you would be in a clean situation tax-wise.

If they are in a tax-deferred account, I might do nothing until you had time to actually drive the process. You either have time to mess with this or you don't. Or, if you want 80/20, tell them 80% in a total market index fund and 20% in a bond index fund and stop comparing.
My point is why it needs to be done NOW. It might be best to think about it a bit longer. The standard advice when losing a loved one is to do nothing. Let grief subside and then make changes if warranted.
Well, the first part of my post is null and void, since I managed to miss that the money seems to be 100% IRA so no capital gains tax considerations apply.

But I stand by my suggestion had the money been in a brokerage account. If (that is an if) the inherited funds were invested in a complicated mess of high expense, tax inefficient funds, get out of them now when there are minimal capital gains tax implications. You wait 6 months or a year, and if the funds are substantial, it might be expensive to get out of them. And moving everything to cash (the simple, "no decision" move), while potentially missing out on market gains, does protect you from possibly getting "stuck" in a fund you didn't like.

I realize some may disagree, but given the preconditions I list for taxable accounts (which again are not in play here it seems) there are reasons why doing something safe now might make sense.

In IRA, I would be more tempted to do nothing and wait until a better time. Though the OP does seem set on doing something ... in which case I'd fall back to my suggestion to tell the FA what to do (put X $$ in fund A and Y $$ in fund B) and then quit worrying about it.
Post Reply