PORTFOLIO REVIEW Please (already retired)

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Joined: Fri Mar 26, 2010 5:11 pm

PORTFOLIO REVIEW Please (already retired)

Post by GMT-8 »

Hello folks,

My wife and I just received our first Social Security direct deposits on Friday. Thanks to John Bogle's advice, Vanguard's low fees, and our good friend "compound interest", I hope we are pretty well set for the future.

However, I foresee some potential future tax issues, so wanted to see if folks here have any ideas on how we could work now to alleviate them?

To date my tax minimization strategy has been:
  • withdraw as much as reasonable from my IRA now
  • donate 25% of AGI or 1.5% portfolio from appreciated taxable to Donor Advised Fund
  • delay SS until 70
I started contributing to my tIRA back in 1974; I have had a SEP IRA and a 401(k) and one small pension which all got rolled over into the tIRA when leaving each employer. I never did any Roth conversions because when Roth came in 1997 I was in my highest earning years and the IRA balance was already large. It's now around $2M.

My wife worked just enough years in 1970-80's to qualify for SS, then she got into a TIAA-CREF plan, then into the public school pension system which reduces her small SS payment. The TIAA-CREF was rolled into her tIRA to simplify our lives.

We each retired around age 60, and our portfolio has continued to grow; now in mid 7-figures.

Emergency Funds: 6-9 months expenses

Debt: None 1.2M House paid for in HCLA

Tax: Married filing jointly

Tax Rate:
2018 = 12% Fed 6% CA
2019 = 22% Fed 9.3% CA (due to substantial withdrawal from IRA)

State: CA

Age: Him 69, Her 65

Desired Allocation: 40% Bond - 60% Stock but I am overweight on stocks right now

4.0% Vanguard CA Interm Tax-Exempt (.09 VCADX)
4.2% Vanguard CA Long-Term Tax-Exempt (.09 VCLAX)
0.5% Vanguard 500 Index Fund (.04 VFIAX)
1.3% Vanguard Windsor II Fund (.25 VWNAX)
1.4% Settlement fund MM

His tIRA
9.7% Vanguard Interm-Term Bond Index Fund (.07 VBILX)
15.7% Vanguard Long-Term Bond Index Fund (.07 VBLAX)
9.6% Vanguard Extended Market Index Fund (.06 VEXAX)
22% Vanguard 500 Index Fund (.04 VFIAX)
1.0% Settlement fund MM

Her tIRA
9.7% Vanguard Total Stock Market Index Fund (.04 VTSAX)
0.8% Settlement MM

Her windfall/inheritance:
18% coming in next 30-60 days

Contributions to tax advantaged

40k Her STRS
7k Her SS (WEP)
3k His SS (spousal)
40k His SS (earned starting 2021)
Last edited by GMT-8 on Wed Aug 05, 2020 3:22 pm, edited 5 times in total.
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David Jay
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Location: Michigan

Re: PORTFOLIO REVIEW (already retired)

Post by David Jay »

Are you familiar with the Qualified Charitable Distribution (QCD)? That is one significant way to control your taxable withdrawals. A QCD can, in essence, replace the DAF from your working years.

Wiki link here: https://www.bogleheads.org/wiki/Qualifi ... tributions
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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Re: PORTFOLIO REVIEW (already retired)

Post by delamer »

Will your wife be getting a step-up in the basis for her inheritance, assuming it consists of some non-cash assets?
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Re: PORTFOLIO REVIEW (already retired)

Post by retired@50 »

Curious about the bond holdings...

They don't seem to add up to 40% and they seem to skew toward long term bonds. Is this on purpose?

I would have guessed more of an intermediate-term range for a retired couple.

This is one person's opinion. Nothing more.
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Posts: 190
Joined: Fri Mar 26, 2010 5:11 pm

Re: PORTFOLIO REVIEW (already retired)

Post by GMT-8 »

Thanks for the comments and questions.

David Jay - yes I know about the QCD but I am not yet 69 so I haven't researched it in detail. Assuming it still exists, I would use it in lieu of the Vanguard Charitable DAF.

Delamer - the estimated amount is a fraction of the property being sold by the estate, which was actually valued higher when appraised a year ago at the owner's death. We just put in a placeholder on the advice of the executor as the property is closing this week or next. Investing it is the next thing we need to consider.

Retired@50 - you're right, the desired allocation is 60/40 but I gave a bunch of appreciated stock to my DAF last month and haven't rebalanced, plus she received VG index fund shares from the estate so we are out of bounds right now.

As for the long and intermediate mix ... I have no feel for bonds and just bought roughly 50-50 when liquidating other assets.

Thanks for making me think about this more carefully.

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