On our own [Leaving financial advisor, looking for advice]

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UpstateNY
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On our own [Leaving financial advisor, looking for advice]

Post by UpstateNY »

Hello my wife and I are divorcing our financial advisor after 7 years. We had -3- separate IRA's and a mutual fund account, total value around 1 million. My wife's IRA was switched in July to Vanguard's VTSAX fund, I am in the process of switching my -2- IRA's to the VTSAX fund as well. The non IRA mutual fund will be liquidated at the end of December giving us a little over 400k to invest. I was thinking of putting it in Vanguard's non IRA VTSAX fund. We've used the 400k as a go to when we had a big ticket item to purchase.

I'm 67 and retired with a defined pension plan, my wife is 55 (yes I know I'm a cradle robber) she is a also retired with a defined pension plan.

I began collecting my SS at 62 and haven't looked back (no regrets).

Our mortgage is paid off, our kids are grown adults on their own, and we haven't paid an interest charge on our credit cards in 32 years. Life is good.

We can live comfortable off our pensions and my SS while our investments grow with the idea then when we expire our saving will be passed on to our children.

With that said aren't stocks a better long term gain than bonds ?

I believe given our age difference I can start my IRA rmd at a later age and increase the earning potential, does this seem wise ?

Any input would be appreciated

Thank you
J
Silk McCue
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Re: On our own

Post by Silk McCue »

Welcome to Bogleheads!

Please clarify what type of account you are referring to in this statement - “ The non IRA mutual fund will be liquidated at the end of December giving us a little over 400k to invest.”

It sounds like a taxable brokerage account. If so, liquidating it (selling the holdings) is going to create a potentially large tax bill depending upon the basis of the holdings which should not be done without a thorough analysis and understanding of the consequences.

In regards to RMDs you can’t wait past 72 to take RMDs but you can use the Joint Life and Last Survivor Expectancy Table (IRS Publication 590-B, Table II) to reduce the RMDs compared to using the regular Uniform Lifetime Table (Table III) for just yourself.

Historically stocks outperform bonds and will better serve your legacy goals so long as you can ignore the market machinations.

Cheers
Topic Author
UpstateNY
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Re: On our own [Leaving financial advisor, looking for advice]

Post by UpstateNY »

Thanks Silk for your input, yes our non IRA mutual fund is a taxable brokerage account. What other choice do I have other than selling off our investments and starting fresh with Vanguard ?

Thank you for your comments
J
Misenplace
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Re: On our own [Leaving financial advisor, looking for advice]

Post by Misenplace »

Welcome to the forum UpstateNY! [That's anything north of Bronxville, right? :wink: ]

It's kind of hard to give advice with limited information. I think that might be why you haven't gotten many replies. My first question was whether there was a COLA to either or both pensions. Next, I was also worried about what was the tax hit to liquidating your taxable account (which is what I think you mean by your non-IRA mutual funds), and wondering whether if it might be good to split the liquidation into two or more tax years or not. It might be good to post the taxable account holdings, the expense ratios for each fund, and the unrealized capital gains before you liquidate them to ask for advice.

Consider using the Subject: Asking Portfolio Questions format. It is pretty comprehensive, but pulling the information together for it will give you a really good idea of your portfolio, and help us help you. You can just use the "pencil" icon to update your post, and then reply with to your thread with a new post bumping your thread letting us know you have added information.
tomd37
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Re: On our own [Leaving financial advisor, looking for advice]

Post by tomd37 »

Misenplace
I often wonder why posters on this forum do not indicate their location, in general at least. Sometimes we see posts where knowing the location of the poster would make a difference in a response. IMO upstate NY can mean anywhere from the Catskills to mid-state around Syracuse, western NY would be Buffalo/Rochester, and northern NY would be Watertown and north. I guess you could say Eastchester is north of Bronxville, but Bronxville is really part of Eastchester :wink:
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AnnetteLouisan
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Re: On our own [Leaving financial advisor, looking for advice]

Post by AnnetteLouisan »

tomd37 wrote: Fri Nov 26, 2021 10:01 pm Misenplace
I often wonder why posters on this forum do not indicate their location, in general at least. Sometimes we see posts where knowing the location of the poster would make a difference in a response. IMO upstate NY can mean anywhere from the Catskills to mid-state around Syracuse, western NY would be Buffalo/Rochester, and northern NY would be Watertown and north. I guess you could say Eastchester is north of Bronxville, but Bronxville is really part of Eastchester :wink:
I think it’s for the same reason we all use pseudonyms. Freedom to speak without loss of privacy, danger of identity theft, or the social barriers that our usual sorting and social engagement methods put up. It’s very liberating not to be pigeonholed by region/neighborhood, job status, party, age, beauty/handsomeness, clique, ethnic origin or level of affluence. Sorting still occurs but I would never be able to speak to Picasso, UpperNWGuy, smitcat or Sandtrap in any other circumstance. To me this benefit is a minor miracle.
Silk McCue
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Re: On our own [Leaving financial advisor, looking for advice]

Post by Silk McCue »

UpstateNY wrote: Fri Nov 26, 2021 9:14 pm Thanks Silk for your input, yes our non IRA mutual fund is a taxable brokerage account. What other choice do I have other than selling off our investments and starting fresh with Vanguard ?

Thank you for your comments
Paying an unnecessarily high tax bill in order to leave your current financial advisor would be like cutting off your nose to spite your face. That would be an unforced error.

As Misenplace said “It might be good to post the taxable account holdings, the expense ratios for each fund, and the unrealized capital gains before you liquidate them to ask for advice.” Do that and folks here will be happy to help you make this transition in manner that is in your best interest.

Cheers
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Sandtrap
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Re: On our own [Leaving financial advisor, looking for advice]

Post by Sandtrap »

OP: You will get more comprehensive suggestions by including missing data and reformatting your original post (use the pencil icon) . . . like this:
Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212

With missing data, some assumptions and generalizations will have to be made in the suggestions.
Thanks@@
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dbr
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Re: On our own [Leaving financial advisor, looking for advice]

Post by dbr »

UpstateNY wrote: Fri Nov 26, 2021 4:20 pm

With that said aren't stocks a better long term gain than bonds ?

Yes. If you want to quantify all this go run www.firecalc.com Don't worry about the success or failure but look at the range of end-point wealth. You can change around the portfolio asset allocation and compare the range of outcomes. High stock allocation will result in greater overall expected wealth with a very wide range of possible outcome. Asset allocation outcomes also overlap a lot, so there is no magic choice here.

If you are invested heavily in stocks be sure you will not do something stupid such as panic and bail out if there is a market crash.
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Re: On our own [Leaving financial advisor, looking for advice]

Post by ImUrHuckleberry »

UpstateNY wrote: Fri Nov 26, 2021 9:14 pm Thanks Silk for your input, yes our non IRA mutual fund is a taxable brokerage account. What other choice do I have other than selling off our investments and starting fresh with Vanguard ?

Thank you for your comments
J
You may be able to transfer in kind, depending on what instruments the funds are currently invested in.
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Re: On our own [Leaving financial advisor, looking for advice]

Post by Jack FFR1846 »

What is the taxable (non-IRA) account currently invested in? I can see coming from a FA that many of those clowns put people into illiquid investments that can't be transferred between brokers. But say it's in VTSAX, you could simply transfer it in kind, creating no tax liability.

(this answer from Jack....from a bit east of you on Spring Street in Hopkinton, MA. Come on over if you're willing to haul firewood from the pile into my basement for the wood furnace)
Bogle: Smart Beta is stupid
Topic Author
UpstateNY
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Re: On our own [Leaving financial advisor, looking for advice]

Post by UpstateNY »

Thank you all, I've got a lot of work to do before my next post. I'll have more data to share asap.

FYI I spent 6 years in Tuckahoe right next to Bronxville while working in NYC. Currently living outside of Troy NY the home of Uncle Sam !
delamer
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Re: On our own [Leaving financial advisor, looking for advice]

Post by delamer »

If you use the taxable account money for occasional large expenses, then it isn’t purely a legacy account. Therefore, don’t put the whole thing in stocks. Buy some TIPS or short-term bonds for 25% or so of that account.

Also consider starting to gift funds now to your kids instead of making them wait until you are both dead to get it all. And if doing that worries you because you’re afraid that you might need the money yourselves some day (like for long-term care), then your IRAs are invested too aggressively.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Topic Author
UpstateNY
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Re: On our own [Leaving financial advisor, looking for advice]

Post by UpstateNY »

Thanks Delamer for the advise regarding our taxable account will research TIPS and short term bonds.

I just looked up what our capital gains would be if we sold today approximately 155K, that would definitely move us from the 22% bracket to the 24% bracket.

Will move the money over two years and stay at 22%. Still going to contact Vanguard and see if they can move the account directly to them with out cashing it out.

Looks like our final divorce will be delayed

Thanks again to everyone, the more I learn it becomes apparent the little I know !

J
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JoeRetire
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Re: On our own [Leaving financial advisor, looking for advice]

Post by JoeRetire »

UpstateNY wrote: Fri Nov 26, 2021 4:20 pm I began collecting my SS at 62 and haven't looked back (no regrets).
Is that something your advisor suggested?
With that said aren't stocks a better long term gain than bonds ?
Yes, they are.
I believe given our age difference I can start my IRA rmd at a later age and increase the earning potential, does this seem wise ?
RMDs must be started at 72.
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Topic Author
UpstateNY
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Re: On our own [Leaving financial advisor, looking for advice]

Post by UpstateNY »

Joe regarding me taking my SS at 62 I did a lot of research recommending waiting.

I did the math and felt that I'd rather have the money now as opposed to waiting longer and getting a bigger monthly check. Having the money for a golden wheelchair when I would be less active didn't seem like a good choice for me.

I make no pretense about being an expert, but 62 worked for me and my wife

Thanks for your input.
J
delamer
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Re: On our own [Leaving financial advisor, looking for advice]

Post by delamer »

UpstateNY wrote: Sat Nov 27, 2021 3:05 pm Thanks Delamer for the advise regarding our taxable account will research TIPS and short term bonds.

I just looked up what our capital gains would be if we sold today approximately 155K, that would definitely move us from the 22% bracket to the 24% bracket.

Will move the money over two years and stay at 22%. Still going to contact Vanguard and see if they can move the account directly to them with out cashing it out.

Looks like our final divorce will be delayed

Thanks again to everyone, the more I learn it becomes apparent the little I know !

J
Long-term capital gains are taxed differently than your pension or Social Security (to the extent it’s taxed).

Your pension is taxed as ordinary income (like your income from your job was).

Make sure you understand how it all interacts. This isn’t an easy read, but it’s helpful: https://www.kitces.com/blog/long-term-c ... in-0-rate/

If you have income tax software or download the TaxCaster app, you can input various scenarios and see how your taxes vary.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
single2019
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Re: On our own [Leaving financial advisor, looking for advice]

Post by single2019 »

delamer wrote: Sat Nov 27, 2021 4:54 pm
UpstateNY wrote: Sat Nov 27, 2021 3:05 pm Thanks Delamer for the advise regarding our taxable account will research TIPS and short term bonds.

I just looked up what our capital gains would be if we sold today approximately 155K, that would definitely move us from the 22% bracket to the 24% bracket.

Will move the money over two years and stay at 22%. Still going to contact Vanguard and see if they can move the account directly to them with out cashing it out.

Looks like our final divorce will be delayed

Thanks again to everyone, the more I learn it becomes apparent the little I know !

J
Long-term capital gains are taxed differently than your pension or Social Security (to the extent it’s taxed).

Your pension is taxed as ordinary income (like your income from your job was).

Make sure you understand how it all interacts. This isn’t an easy read, but it’s helpful: https://www.kitces.com/blog/long-term-c ... in-0-rate/

If you have income tax software or download the TaxCaster app, you can input various scenarios and see how your taxes vary.
+1
Tax awareness is more critical than investment acumen
Misenplace
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Re: On our own [Leaving financial advisor, looking for advice]

Post by Misenplace »

UpstateNY wrote: Sat Nov 27, 2021 3:05 pm I just looked up what our capital gains would be if we sold today approximately 155K, that would definitely move us from the 22% bracket to the 24% bracket.

Will move the money over two years and stay at 22%. Still going to contact Vanguard and see if they can move the account directly to them with out cashing it out.

Looks like our final divorce will be delayed
Hi UpstateNY, that's not exactly how the brackets work. Your ordinary income is taxed first, and then the capital gains and dividends are added on top of that and taxed at their lower rates. What you need to worry about is pushing your capital gains into where they get subject to the Net Investment Income Tax, which occurs when your MFJ modified adjusted gross income goes over $250K. At that point, any capital gains that push you over $250K get an extra 3.8% tax put on them. Making it 18.8%. Might as well split it up if you can into two years to avoid the extra tax. But get rid of the worst funds first.

Here's an article that explains it: https://www.forbes.com/advisor/taxes/capital-gains-tax/

I think moving it over in kind to Vanguard as soon as you can is a good idea to get it out of Ameriprise and their wrap fee. No reason to delay the divorce.
Collectingnuts
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Re: On our own [Leaving financial advisor, looking for advice]

Post by Collectingnuts »

UpstateNY wrote: Sat Nov 27, 2021 3:05 pm Thanks Delamer for the advise regarding our taxable account will research TIPS and short term bonds.

I just looked up what our capital gains would be if we sold today approximately 155K, that would definitely move us from the 22% bracket to the 24% bracket.

Will move the money over two years and stay at 22%. Still going to contact Vanguard and see if they can move the account directly to them with out cashing it out.

Looks like our final divorce will be delayed

Thanks again to everyone, the more I learn it becomes apparent the little I know !

J
I'm doing the very same thing, an "In Kind" transfer to Merrill Edge. Did Vanguard offer you any transfer bonus? I provided Merrill with a statement to identify if there were assets that could not be transferred in kind. I was told all looked good. If not I will likely wait to liquidate those assets until I have losses to offset any gains.
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JoeRetire
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Re: On our own [Leaving financial advisor, looking for advice]

Post by JoeRetire »

UpstateNY wrote: Sat Nov 27, 2021 3:49 pm Joe regarding me taking my SS at 62 I did a lot of research recommending waiting.

I did the math and felt that I'd rather have the money now as opposed to waiting longer and getting a bigger monthly check. Having the money for a golden wheelchair when I would be less active didn't seem like a good choice for me.

I make no pretense about being an expert, but 62 worked for me and my wife
Thanks for the response! I was mostly curious if this was an advisor suggestion. Apparently not.

IMHO, it's a decision between good and better, and almost nobody ever has any regrets, without regard to when they actually start their benefits.

Some would argue that having a much larger, tax advantaged, spousal and survivor beneficial, inflation protected, guaranteed income stream coming your way later in life means that you can more safely spend more of your portfolio earlier in life.

Glad 62 has worked out for you and your wife. When does she plan to start her benefits?
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nedsaid
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Re: On our own [Leaving financial advisor, looking for advice]

Post by nedsaid »

Just a question to the original poster, did you learn how to manage your own portfolio before leaving your advisor? Did you have a plan in place for moving your accounts? Why did you ditch your advisor?

I am a bit concerned here that perhaps you need to do some more study. You didn't know whether stocks or bonds had better long term returns and you didn't seem too aware of the effects of capital gains taxes. I am also concerned that you want your accounts to be 100% stocks. Hopefully, if your advisor was good (he or she may not have been) you should have been taught these things.

You seem to be in good shape financially and have done most things right but I wonder if you are acting in haste here and making unforced errors. Perhaps you should try the Vanguard Personal Advisor Service, who are likely a lot cheaper than the Advisor you just parted with.
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nedsaid
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Re: On our own [Leaving financial advisor, looking for advice]

Post by nedsaid »

The concern that I have is over a possible misuse of the Bogleheads forum. The optimal approach for someone in an Advisory relationship who wants to self manage is to post questions and to study up before making the change. Get some transition plan in place before making the move. Get feedback on the plan before proceeding. Learn from others who have been in a similar situation. The Bogleheads are a great place for learning how to do this yourself. This is the second thread where the original poster seems to want to fire the advisor and then, in effect, hire the Bogleheads to do the same for free. An anonymous forum is not the place to run your financial life.

I think folks should always feel free to ask questions, no matter how basic they might seem. I think folks should always feel free to ask basic advice. I am seeing a troubling trend here that people think that Bogleheads is a free Advisory service. I have seen pretty detailed and good advice provided here but the advice is only as good as the information given and as good as the expertise of the person giving it.

For one thing, the people here have varying degrees of knowledge and expertise. A second point is that one missing piece of information could completely change the advice given. A third issue is that most here won't spend huge amounts of time with an individual's situation. I have seen a couple examples of where the person seeking help had a thread that ran pages and pages. In both cases, people got interested and were willing to walk them through the whole process of solving their problem. That is the exception and not the rule from what I have seen here.

I also want to stress the importance of doing your homework. The Wiki is a great place to start, many great articles on various topics there. There are also recommended authors and books, there is a Bogleheads book on investing and another one on retirement planning. Taylor Larimore recently authored a book on the Three Fund Portfolio. The more you know, the better questions you can ask, and the more you can learn.

It is sort of a we report, you decide type of thing. Despite whatever advice and information is given here, the decisions are still yours to make.

Best wishes,

Ned
A fool and his money are good for business.
ImUrHuckleberry
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Re: On our own [Leaving financial advisor, looking for advice]

Post by ImUrHuckleberry »

UpstateNY wrote: Sat Nov 27, 2021 3:05 pm Still going to contact Vanguard and see if they can move the account directly to them with out cashing it out.
This should be your first step imo before wasting time researching gains or worrying about anything else. You may not even need to contact Vanguard (or another house), just post your current investments (no need to provide dollar amounts or percentages of total, just tickers) and we can probably tell you if they can be transferred in kind.
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nedsaid
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Re: On our own [Leaving financial advisor, looking for advice]

Post by nedsaid »

I want to comment UpstateNY for having the courage to move his accounts and seeking to save money by doing this. It isn't an easy thing to do.

What you will find is that there is more to this than one might think. Some issues here to explore: appropriate asset allocation, capital gains tax from selling investments in a taxable account, taxability of social security. More advanced concepts would include such things as ROTH conversions.

Not sure who your Advisory firm was, Misenplace seemed to think it was Ameriprise. As has been covered in many other threads, the fees which may or not be transparent really add up over time. A big issue for me is getting your money's worth for fees paid. Ameriprise and Edward Jones are two of the most expensive options for Advisory firms.

There are lower cost options available if you want advice and Vanguard Personal Advisor Service is often mentioned here. You will get advice and Vanguard will handle the transfers and do so in a tax efficient manner. The cost is 0.30% a year plus the internal costs of the funds, which should be less than 0.40% a year of your assets invested there. That will be big savings over what you are paying now.

My sense from reading this thread is that you still need Advisory help and perhaps Vanguard Personal Advisor Service would be a good option for you. You can cancel the service at whatever point you think you can do this on your own.
A fool and his money are good for business.
Topic Author
UpstateNY
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Re: On our own [Leaving financial advisor, looking for advice]

Post by UpstateNY »

Thanks for the links to increase my knowledge.

Wife will wait till she can collect full SS benefits.

When we began with the FA was taking a leap of faith based on friends recommendation. When he couldn't or won't answer my questions I went directly to the -3- annuity funds we were in and got answers. I didn't like the answers but at least now I knew. I also began paying more attention to the fees, we were making money but at quite a cost. I knew transferring the -3- IRA's didn't present an immediate problem with my lack of knowledge. The transfer of the other account which the FA maintained directly is where I'm at now. My son wanted me to question the FA years ago but I had more pressing matter at the time.

Will look into Vanguard Personal Advisor service, I will be calling Vanguard Monday with a list of the stocks to see if in kind transfer is possible.

I find this website fascinating, I am not looking for this forum to be my own personal advisor, I know I have a lot of work to do.
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Re: On our own [Leaving financial advisor, looking for advice]

Post by Misenplace »

nedsaid wrote: Sun Nov 28, 2021 10:20 am My sense from reading this thread is that you still need Advisory help and perhaps Vanguard Personal Advisor Service would be a good option for you. You can cancel the service at whatever point you think you can do this on your own.
This is good advice. I also want to reiterate that going through the exercise of the Asking Portfolio questions post is key in order to wrest control of your portfolio (and also to get the best out of this forum).

nedsaid - I may have confused this poster with another newbie leaving their FA.
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nedsaid
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Re: On our own [Leaving financial advisor, looking for advice]

Post by nedsaid »

Misenplace wrote: Mon Nov 29, 2021 5:53 pm
nedsaid wrote: Sun Nov 28, 2021 10:20 am My sense from reading this thread is that you still need Advisory help and perhaps Vanguard Personal Advisor Service would be a good option for you. You can cancel the service at whatever point you think you can do this on your own.
This is good advice. I also want to reiterate that going through the exercise of the Asking Portfolio questions post is key in order to wrest control of your portfolio (and also to get the best out of this forum).

nedsaid - I may have confused this poster with another newbie leaving their FA.
If one uses a simple 3 fund portfolio, managing the portfolio should be relatively easy. Vanguard, I suspect will use 4-6 funds, that is if the original poster decides to use their Advisory service. For the tax deferred accounts, a LifeStrategy Fund could be used.

The harder stuff is managing the transfer of assets from the taxable account so that he doesn't get killed on capital gains taxes, doing some tax scenario planning, and deciding on a sustainable withdrawal strategy. Seeing that the Original Poster doesn't need any withdrawals from his retirement accounts, perhaps he could do ROTH conversions in order to pass money tax free to his heirs and also to minimize the Required Minimum Distributions at age 72. People also don't think about the taxability of Social Security. It sounds like he is investing for his heirs, hence the aggressive asset allocation, I think a couple of the accounts were 100% Total Stock Market. I also think he needs help with asset allocation, the Original Poster might be too aggressive here.

It sounds like his previous Advisor didn't teach him very well about these concepts or that the Original Poster didn't show interest until he saw the fees he was paying. I would say he is quite motivated to learn now. I am suggesting Vanguard Personal Advisor Service as training wheels on a bike until he knows enough to manage on his own. My suggestion is sticking with the service for at least a year and view each call or meeting with the Advisor as a learning experience. As they say, class is in session. Take notes from each meeting and read the financial and investment plan carefully and ask the Advisor questions. If he is going to pay the fees, he might as well get the full benefit. If free webinars are offered as part of the service, watch them and take notes.

Why do I recommend VPAS for at least a year? It is ethical to stick with the service long enough to pay for services rendered and also gives time to learn some of this stuff.
A fool and his money are good for business.
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