72 years old and need to simplify our portfolio!

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Franmom
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Joined: Mon Jan 10, 2022 11:14 pm

72 years old and need to simplify our portfolio!

Post by Franmom »

I really need help choosing a more simple portfolio for my husband and myself, and would like to move everything into Vanguard if that's reasonable. Here's what we have:
Emergency Fund: Fully funded for approx. 9 months expenses

Debt: no debt (home paid off, worth approx. $425k)

Tax Filing Status: Married filing jointly

Tax Rate: Federal effective rate = 15% (income low but doing Roth conversions); State tax = 3%

State of Residence: PA

Age: I am 72, husband is 78 (longevity on his side)

Desired Asset Allocation: 45% stocks; 55% bonds (?)
Desired International exposure: 15%

Approximate Size of Portfolio: 950k

Current Portfolio:

Taxable Assets
American Fds Joint Brokerage
Amer Mutual Fund (AMRMX) , (exp ratio 0.60%) - 2.05%
The Bond Fd of America (ABNDX), (exp ratio 0.57%) - 3.05%
Intermediate Bond Fund (AIBAX), (exp ratio 0.61%) - 1.64%

Vanguard Joint Brokerage
Joint Money Market - 0.66%
Fidelity Bluechip Growth – (FBGRX), (exp ratio 0.79%) - 0.52%
Vanguard Short term Corp Bond ETF (VCSH) - 1.13%
Vang Dividend Appreciation Index Admir – (VDADX) - 0.40%
Vang Inflat Protect Sec Invst – (VIPSX) - 0.79%
Vanguard Target Retirement 2020 Fd – (VTWNX) - 5.59%
Vanguard International Growth fd – (VWIGX) - 0.73%

Other
I Bonds (Treasury Direct) - 4.28%
EE bond (matures 02012023) - 2.09%

Husband's Roth IRA at American Funds
Amer Mutual Fund (AMRMX) - 3.14%
Intermediate Bond Fund (AIBAX) - 2.12%
New Perspective Fund (ANWPX), (exp ratio 0.72%) - 1.23%
New World Fund (NEWFX), (exp ratio 0.96%) - 2.06%

Husband's Roth IRA at Vanguard
His Money Market - 0.16%
Vang Short term inv Grade Investor Cl (VFSTX) - 0.35%
Vang. Wellington FD Investor shares (VWELX) - 1.22%
Vang. Russell 1000 Investor ETF (VONV) - 0.26%
Vanguard Total Stock Market ETF – (VTI) - 0.23%

My TIRA at American Funds
Amer Balanced Fund (ABALX), (exp ratio 0.58%) - 0.20%
Amer Funds Inflat Linked Bond fd (BFIAX), (exp ratio 0.70%) - 5.87%
Amer Funds Mortgage Fund (MFAAX), (exp ratio 0.65%) - 2.30%
The Bond Fd of America (ABNDX), (exp ratio 0.57%) - 3.63%
Intermediate Bond Fund (AIBAX), (exp ratio 0.61%) - 5.38%

My Roth IRA at American Funds
Amer Balanced Fund (ABALX),(exp ratio 0.58%) - 5.83%
Amer Mutual Fund (AMRMX) - 26.15%
The Bond Fd of America (ABNDX) - 3.07%
New Perspective Fund (ANWPX) - 6.51%
New World Fund (NEWFX) - 5.02%

My Roth IRA at Vanguard
My Money Market - 0.01%
Vang Balanced Index Fd (VBIAX) - 0.38%
Vang 500 Index Admiral (VFIAX) - 0.43%
Vang Midcap Value Index (VMVAX) - 0.45%
Vang. Wellington FD Investor shares (VWELX) - 1.08%
100.00%

Annual Contributions: (from small part time job paying approx. $13k/yr
5K into my Vanguard Roth
5K into husbands Vanguard Roth

Funds Available to Trade:
$1400 in his Vanguard Roth IRA Money Market
$6000 in Joint Vanguard Brokerage Money Market

Questions:
1. Should my allocation be the same for the brokerage accounts as for the IRA's
2. If I use 3-4 fund portfolio, should the brokerage accounts have the same 3 funds as the IRA's
3. Should I have the same 3-4 funds as my husband
4. What funds do you recommend so I can "set it and forget it" for at least 6 months before rebalancing
5. Does it look like I need an advisor?
Thank you for any advice you can give!
Last edited by Franmom on Thu Jan 13, 2022 10:21 am, edited 1 time in total.
LeeMKE
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Joined: Mon Oct 14, 2013 9:40 pm

Re: 72 years old and need to simplify our portfolio!

Post by LeeMKE »

Agree, this is way too complicated, and it is costing you some serious change in fees.

1) Rollover your accounts to Vanguard so you can halve the number of accounts you manage.

2) Read the Wiki for the Three Fund Portfolio
https://www.bogleheads.org/wiki/Three-fund_portfolio

3) In your Roth and tax deferred accounts, you can change to a 3 fund portfolio in a single day.

I did this re-organizing a few years ago once we retired. It is sweet to open the portfolio and have only a few funds in each account. I think of it as doing a Marie Kondo on the portfolio. Nice and tidy. Very low cost. Gives me joy.
The mightiest Oak is just a nut who stayed the course.
Exchme
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Re: 72 years old and need to simplify our portfolio!

Post by Exchme »

As you age, things need to be easier and easier and you will have an increasing need for help. So easiest steps first - I would move the Roth IRAs to Vanguard, that can probably be done through the Vanguard website, but it depends on who the funds are moving from, sometimes you have to call them. You can set up a Boglehead type 3 fund portfolio there or use an all in one retirement date fund or if you feel like you need help right now, you can hire their Personal Advisory Service for 0.3%/year.

The only taxable things you have at American seem to be a small stock mutual fund holding and some bonds. While you do need to look at the cost basis to see if there are tax implications of making the move, I'm guessing it would be worth it to move those as well, capital gains taxes probably won't be much and it will help to have the money under one roof.

I don't think you are getting a lot of extra value for holding all those funds, your holdings in many of them are too small to make a difference. Others are odd choices - for instance growth funds add risk above the market - going up more in good times and down more in bad, but you could do the same thing with equal or better results with a small adjustment in your overall stock/bond holding of a 3 fund portfolio.

Overall, you can make your finances a lot simpler and possibly reduce some fees and expenses.
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goingup
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Re: 72 years old and need to simplify our portfolio!

Post by goingup »

It's an unusual portfolio in that there are little bits of this and that. It looks like a sampler platter. :D

American Funds are well-regarded, but more expensive than Vanguard Funds. You'll have to decide if you want to hang onto those. Are they held directly at Capitol Group or at a broker?

An easy simplification would be to put all Roth accounts into one or two funds. A Lifestrategy Fund, Target Fund, Wellington Fund or Vanguard Balanced Fund. You could also put together a 3-Fund portfolio. If you or spouse have a problem with tinkering, a single blended fund might help keep you on track.
tomd37
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Re: 72 years old and need to simplify our portfolio!

Post by tomd37 »

In my opinion that portfolio is overwhelming and needs major changes and simplification. In all those funds you listed I believe I only saw one, by virtue of its percentage of your total investments, that is worthwhile and that is AMRMX at 26% of your investments. We are a couple ten years older than you and I would recommend you simplify your portfolio to a 2, 3, or 4 fund portfolio based on your desires. How is the survivor, when one of you passes, going to handle that volume of funds?
Depending on your desires you could easily reduce it all to two US funds, total stock market index and total bond market index at your desired asset allocation. Or if you want international you could add a third fund, total international stock market index at your desired asset allocation. Two or three funds would be very easy to handle both now and in the future. I would estimate your cost would be around 4 or 5 basis points for such an allocation, much cheaper than what you have now.

We personally have a three-fund portfolio with a 40/60 stock/bond asset allocation using the total stock market index (VTSAX), intermediate term bond index (VBILX) and real estate index fund (VGSLX) funds.

Edited to add: I would use the same funds in all the accounts for simplification purposes. If any rebalancing is required it could be done in your TIRA accounts when RMDs are taken. I don't see you needing or paying an advisor. The site could provide any assistance you might need. Save yourselves many $$$$.
Tom D.
Topic Author
Franmom
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Joined: Mon Jan 10, 2022 11:14 pm

Re: 72 years old and need to simplify our portfolio!

Post by Franmom »

I'm new to this forum and not sure how to respond to individual questions. I did get the American Funds through a broker, but I get statements from the Capital Group, and I am able to move the $ around myself. The broker just sends me an email twice a year to tell me that we are too aggressively invested (he thinks we should have almost 80% in bonds and AF bond funds have pretty poor morningstar ratings.)
Thanks
Topic Author
Franmom
Posts: 20
Joined: Mon Jan 10, 2022 11:14 pm

Re: 72 years old and need to simplify our portfolio!

Post by Franmom »

LeeMKE wrote: Thu Jan 13, 2022 9:50 am Agree, this is way too complicated, and it is costing you some serious change in fees.

1) Rollover your accounts to Vanguard so you can halve the number of accounts you manage.

2) Read the Wiki for the Three Fund Portfolio
https://www.bogleheads.org/wiki/Three-fund_portfolio

3) In your Roth and tax deferred accounts, you can change to a 3 fund portfolio in a single day.

I did this re-organizing a few years ago once we retired. It is sweet to open the portfolio and have only a few funds in each account. I think of it as doing a Marie Kondo on the portfolio. Nice and tidy. Very low cost. Gives me joy.
I need some joy! Thanks!
pkcrafter
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Re: 72 years old and need to simplify our portfolio!

Post by pkcrafter »

Welcome Franmom,

I read your first post and now see that you have presented a better post that shows all your holdings and account types. This is very helpful to us and to you. You certainly have a lot more funds than you need or are useful. The first fund I looked up was AMRMX, a fund with an expense ratio of 0.58% and a front-end load (commission) of 5.75%. You have far too many funds with very small amounts, which isn't useful.

Here's the simple 3-fund portfolio. You can use this as a reference to create a workable portfolio that is much easier to manage.

viewtopic.php?f=10&t=88005

tax-efficient fund placement

https://www.bogleheads.org/wiki/Tax-eff ... _placement

All accounts for retirement are parts of one unified portfolio.

Asset Allocation in multiple accounts

https://www.bogleheads.org/wiki/Asset_a ... e_accounts


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
Topic Author
Franmom
Posts: 20
Joined: Mon Jan 10, 2022 11:14 pm

Re: 72 years old and need to simplify our portfolio!

Post by Franmom »

goingup wrote: Thu Jan 13, 2022 10:01 am It's an unusual portfolio in that there are little bits of this and that. It looks like a sampler platter. :D

American Funds are well-regarded, but more expensive than Vanguard Funds. You'll have to decide if you want to hang onto those. Are they held directly at Capitol Group or at a broker?

An easy simplification would be to put all Roth accounts into one or two funds. A Lifestrategy Fund, Target Fund, Wellington Fund or Vanguard Balanced Fund. You could also put together a 3-Fund portfolio. If you or spouse have a problem with tinkering, a single blended fund might help keep you on track.
Yes, I felt like a kid in a candy shop when I opened the Vanguard account in 2020, but now I have a tummy ache! I had read on Reddit that the recommendation was to put all stocks into Roth accounts. Is this no longer true when you are my age?
Topic Author
Franmom
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Re: 72 years old and need to simplify our portfolio!

Post by Franmom »

pkcrafter wrote: Thu Jan 13, 2022 11:01 am Welcome Franmom,

I read your first post and now see that you have presented a better post that shows all your holdings and account types. This is very helpful to us and to you. You certainly have a lot more funds than you need or are useful. The first fund I looked up was AMRMX, a fund with an expense ratio of 0.58% and a front-end load (commission) of 5.75%. You have far too many funds with very small amounts, which isn't useful.

Here's the simple 3-fund portfolio. You can use this as a reference to create a workable portfolio that is much easier to manage.

viewtopic.php?f=10&t=88005

tax-efficient fund placement

https://www.bogleheads.org/wiki/Tax-eff ... _placement

All accounts for retirement are parts of one unified portfolio.

Asset Allocation in multiple accounts

https://www.bogleheads.org/wiki/Asset_a ... e_accounts


Paul
Thanks, Paul. I'm slowly learning how to navigate this forum, but the information I'm receiving is already priceless! I kissed the front end loads goodbye about 10 years ago when my portfolio was much smaller, so I'm ready to move on. I'm not sure I understand the implications of Tax efficiency in my accounts. I've been doing Roth conversions for over 10 years (my goal is to convert the full TIRA over the next 3-4 years) and paying estimated taxes for that, otherwise my tax bracket is very low. Dividends and cap gains have been only a few thousand $ every year.
HomeStretch
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Re: 72 years old and need to simplify our portfolio!

Post by HomeStretch »

Welcome to the forum!
Franmom wrote: Thu Jan 13, 2022 9:22 am 1. Should my allocation be the same for the brokerage accounts as for the IRA's
2. If I use 3-4 fund portfolio, should the brokerage accounts have the same 3 funds as the IRA's
3. Should I have the same 3-4 funds as my husband
There is no need to use the same asset allocation in each of your/spouse's accounts. Apply your desired portfolio allocation to your entire portfolio and place your holdings tax efficiently. See pkcrafter's link to the BH wiki page about tax efficient fund placement.
4. What funds do you recommend so I can "set it and forget it" for at least 6 months before rebalancing
A 3-fund portfolio is simple, easy to manage and likely will not need rebalancing more than once a year, if that.
5. Does it look like I need an advisor?
No, a 3-fund portfolio is easy to DIY. You seem to have a good handle on your portfolio based on how quickly you pulled together your post in the requested format.

To simplify your portfolio and reduce costs, the first step would be to transfer the 4 accounts at American Funds (AF) to Vanguard. The only new Vanguard account you need to set up is a Traditional IRA (TIRA) for you. Start the transfer at Vanguard, not AF. Consider converting the 3 AF IRAs to cash (there are no tax consequences) to make the transfer easier. AF may require a medallion guarantee (MG) on the Vanguard account transfer forms which Vanguard does not provide (your local bank might). If you are "voice verified" at Vanguard, the MG requirement may be waived.

AF may cut off your online access after receiving the account transfer form. Be sure to print out your most recent statements and your Taxable account's cost basis by holding/tax lot. You will want to make sure the cost basis transfers properly from AF to Vanguard.

Once the funds are all at Vanguard:
1. you can reinvest the IRAs without tax consequence.
2. in your Vanguard Vanguard Taxable - set the cost basis method to "specific ID", turn off dividend reinvestment so you don't buy more of funds you do not want to hold, and make sure the AF Taxable cost basis transfers properly.
3. changing the holdings in your Taxable account will have tax consequences. However, as your taxable income is low, you should have room to sell some holdings while in the 0% capital gains bracket. Sell any tax lots with a loss or minimal gain. Then focus on selling the high ER holdings.

A couple other items to consider:
1. If you haven't already purchased 2022 I-Bonds, consider doing so with your emergency funds. I-Bonds are liquid after one year. Edit - or eliminate the separate emergency fund altogether.

2. Your TIRA balance is $165k. I don't see the need for you to completely convert the funds to Roth IRA.
3. We can help you reinvest your accounts in the 3-fund portfolio.

Edit - consider granting agent access to each other’s individual accounts at Vanguard, if you haven’t already.
Last edited by HomeStretch on Thu Jan 13, 2022 2:40 pm, edited 2 times in total.
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vineviz
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Re: 72 years old and need to simplify our portfolio!

Post by vineviz »

Franmom wrote: Thu Jan 13, 2022 9:22 am Questions:
1. Should my allocation be the same for the brokerage accounts as for the IRA's
2. If I use 3-4 fund portfolio, should the brokerage accounts have the same 3 funds as the IRA's
3. Should I have the same 3-4 funds as my husband
4. What funds do you recommend so I can "set it and forget it" for at least 6 months before rebalancing
5. Does it look like I need an advisor?
Thank you for any advice you can give!
If I had a client with a portfolio that looked like yours, my proposal wold probably resemble something like this (assuming you moved complete to Vanguard):

Taxable: Vanguard Total Stock Market Index Fund (VTSAX)

Traditional IRAs: Vanguard Target Retirement Income Fund (VTINX)

Roth IRAs: 50/50 Split between Vanguard Target Retirement Income Fund (VTINX) and Vanguard LifeStrategy Moderate Growth Fund (VSMGX)

With the savings bonds this gets you very close to your stated target allocations using just three funds; reasonable tax-efficiency; no need to rebalance; and no need to pay an advisor for ongoing advice.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
HeelaMonster
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Re: 72 years old and need to simplify our portfolio!

Post by HeelaMonster »

LeeMKE wrote: Thu Jan 13, 2022 9:50 am Agree, this is way too complicated, and it is costing you some serious change in fees.

1) Rollover your accounts to Vanguard so you can halve the number of accounts you manage.

2) Read the Wiki for the Three Fund Portfolio
https://www.bogleheads.org/wiki/Three-fund_portfolio

3) In your Roth and tax deferred accounts, you can change to a 3 fund portfolio in a single day.

I did this re-organizing a few years ago once we retired. It is sweet to open the portfolio and have only a few funds in each account. I think of it as doing a Marie Kondo on the portfolio. Nice and tidy. Very low cost. Gives me joy.
DITTO on all points. We had a very similar picture as the OP... a little here, a little there, high expense ratios on funds that threw off lots of cap gains, etc, etc. We reorganized when we were heading into retirement (not coincidentally, about the same time I stumbled into BH). Now much easier to track, manage, and draw from, in our decumulation years. My wife is all about Marie Kondo in our closet, and that is an apt analogy for decluttering the portfolio!

One immediate no-brainer is to consolidate and exchange funds within the IRAs, since that does not trigger a taxable event (as long as you stay in the IRAs). For us, that meant moving existing funds into a single, low-cost, balanced fund like VBIAX, which maintains a 60:40 split between stock and bond indexes.

It took a bit more work (e.g., digging through records, strategic timing of sales) to declutter our taxable accounts, which included some old mutual funds we had held for 30-40 years. I was initially scared by the projected tax hit on large gains over that length of time, but was pleasantly surprised that it was minimal, once I accounted for full cost basis (i.e., we had already paid most of the tax hit, on annual distributions of dividends and cap gains, plus original investments). Taxable account is now in VTSAX, low-cost and tax-efficient.

In any event, well worth the effort.
inbox788
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Re: 72 years old and need to simplify our portfolio!

Post by inbox788 »

HomeStretch wrote: Thu Jan 13, 2022 12:11 pm2. Your TIRA balance is $165k. I don't see the need for you to completely convert the funds to Roth IRA.
Agree with approach! No need to take out more than RMD for now. Use the low tax brackets for taxable account rebalancing first. If RMD (peak 20k?) + SS + pension > 52k (= 40 + 12), then it might be worth converting some at 12% to lower the peak.

https://taxfoundation.org/2021-tax-brackets/
billfromct
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Re: 72 years old and need to simplify our portfolio!

Post by billfromct »

Since you have a part time job earning $13k, you can put up to $7k into your Roth IRA when over 50 years old, up to your earned income. So if you earn $13k, you could put $7k in your Roth IRA & $6k in your husband’s Roth IRA.

You may want to wait until you have actually earned the income before contributing to the Roth IRAs because nobody knows what may happen in the future. You have until April 15, 2023 (tax filing day) to fund your 2022 Roth IRA.

bill
howard71
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Re: 72 years old and need to simplify our portfolio!

Post by howard71 »

OMG, makes my head hurt just to think about how you manage this, not to mention how much work it's going to be to simplify it....

Questions:
1. Should my allocation be the same for the brokerage accounts as for the IRA's

No. You have to consider tax implications in your brokerage accounts.

2. If I use 3-4 fund portfolio, should the brokerage accounts have the same 3 funds as the IRA's

See above.

3. Should I have the same 3-4 funds as my husband

My wife and I mostly use the same funds. I don't see any problem with it.

4. What funds do you recommend so I can "set it and forget it" for at least 6 months before rebalancing

Opinions will vary here. I never make such recommendations because I don't want to be responsible if things don't work out as expected. As for rebalancing, I rarely do it at all with our portfolio, let alone every six months.

5. Does it look like I need an advisor?

No. Once you decide on the funds it's just a matter of doing the work to consolidate which doesn't sound like a lot of fun to me. I'm sure
some financial advisor would be willing to do the work for you but it won't be that hard. Time consuming maybe, but not really that hard. I would
just take it slow and do it one fund at a time. Just set up the funds you want to use then sell, buy, take inventory, rinse, repeat until you have it all consolidated.

I would do the IRA's first because you don't have to worry about tax implications, then move on to the taxable where you will obviously have to give it more thought unless you like paying taxes.

BTW, I'm also 72, my wife 56. We use the Golden Butterfly portfolio strategy. I don't recommend it only because of my answer to question number 4.
Last edited by howard71 on Thu Jan 13, 2022 4:31 pm, edited 1 time in total.
Nyc10036
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Re: 72 years old and need to simplify our portfolio!

Post by Nyc10036 »

If you want to consolidate at Vanguard

1. I would move your Roth IRA at American Funds to Vanguard and merge it with your Roth IRA at Vanguard.
Vanguard can help you with that. Buy VTSAX (Vanguard Total Stock Market Index Fund) or VTI.
This will represent approximately 49% of your portfolio.

2. I would move your husband's Roth IRA at American Funds to Vanguard and merge it with his Roth IRA at Vanguard.
Vanguard can help with that. Buy VBTLX (Vanguard Total Bond Index Fund).
This will represent approximately 11% of your portfolio.

3. I would move your Traditional IRA at American Funds to Vanguard.
Buy VBTLX
This will represent 17% of your portfolio.

If you do these 3, you will have 49% in stocks and 28% in bonds.

The Other adds another 6% to your bonds raising to 34%.

The international stocks can come from your brokerage accounts.
Jack FFR1846
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Re: 72 years old and need to simplify our portfolio!

Post by Jack FFR1846 »

If you want ultimate simplicity, there is a way to do it.

First, sell the funds that are outside of Vanguard to turn the asset into cash.

Next, move it into a "like" account at Vanguard. So for example, your Roth at American Funds goes into your Roth at Vanguard.

In addition, you can make a single broker/taxable at Vanguard and dump all the others.

So now you both have a Roth, a tIRA and between you, a combined taxable/broker.

What do you put in each? I'll make that really, really easy. Choose a target date fund. Buy it in every single account. It is not as cost effective as managing your own 3 fund portfolio, but it's way cheaper than what you have now. I also see you have a target date amongst your current investments which in my opinion is way out of place.

Good luck. A bit of juggling around up front, but once it's done, you have an extremely simple portfolio and don't have to do anything but add money to it or take withdrawals.
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dual
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Re: 72 years old and need to simplify our portfolio!

Post by dual »

you need to be aware of unrealized capital gains in your taxable accounts. That means gains in the value for which you have not paid taxes. The taxes are due when you sell the shares. if the gains are large, you may need to space out the sales over several years to keep in a lower tax bracket.
GaryA505
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Re: 72 years old and need to simplify our portfolio!

Post by GaryA505 »

This is overwhelming. If this was mine, I would do this:

1. I would Move all the IRAs to Vanguard and simplify using 1 to 4 funds. For roughly 45/55 stock/bond with 15% intl, I might consider using 50/50 Vanguard LifeStrategy Conservative Growth (VSCGX) and Vanguard Balanced Index (VBIAX) which should result in about 16% intl and a 50/50 stock bond allocation. I would hardly ever need to balance this combo, and I would just set RMDs to withdraw proportionally.

2. I would leave most of the American Funds in taxable (at least the stock funds for sure), because selling would likely result in sizable realized gains. However, I would check to see if I can sell a small amount of these each year while staying in the 0% CG rate.

3. I would not try to use tax efficient asset location in this case, mostly due to the equity American Funds in taxable. The savings obtained would likely be small and could cause difficulty due to RMDs (maybe you don't need to take from taxable but you still have to take the RMD).

If I didn't feel confident I could do this well, I would hire a financial advisor to help, keeping taxable gains in mind.
"Get most of it right and don't make any big mistakes."
Nyc10036
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Re: 72 years old and need to simplify our portfolio!

Post by Nyc10036 »

GaryA505 wrote: Thu Jan 13, 2022 5:45 pm If I didn't feel confident I could do this well, I would hire a financial advisor to help, keeping taxable gains in mind.
All the financial advisor will do is make it a even bigger stew than it is now.
catdoctor
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Re: 72 years old and need to simplify our portfolio!

Post by catdoctor »

Good questions.
Topic Author
Franmom
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Re: 72 years old and need to simplify our portfolio!

Post by Franmom »

inbox788 wrote: Thu Jan 13, 2022 1:44 pm
HomeStretch wrote: Thu Jan 13, 2022 12:11 pm2. Your TIRA balance is $165k. I don't see the need for you to completely convert the funds to Roth IRA.
Agree with approach! No need to take out more than RMD for now. Use the low tax brackets for taxable account rebalancing first. If RMD (peak 20k?) + SS + pension > 52k (= 40 + 12), then it might be worth converting some at 12% to lower the peak.

https://taxfoundation.org/2021-tax-brackets/
Thanks. Combined SS + pensions = 73k. RMD was about 7K last year and I assume that will go up so that's why I want to pay the taxes sooner than later. Additionally, I'm hoping that when the time comes, my kids' inheritance will be higher if the taxes are paid. They are in much higher tax brackets than me right now.
Topic Author
Franmom
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Re: 72 years old and need to simplify our portfolio!

Post by Franmom »

billfromct wrote: Thu Jan 13, 2022 2:30 pm Since you have a part time job earning $13k, you can put up to $7k into your Roth IRA when over 50 years old, up to your earned income. So if you earn $13k, you could put $7k in your Roth IRA & $6k in your husband’s Roth IRA.

You may want to wait until you have actually earned the income before contributing to the Roth IRAs because nobody knows what may happen in the future. You have until April 15, 2023 (tax filing day) to fund your 2022 Roth IRA.

bill
Yes. The work hours are inconsistent so I wasn't sure how much I would make until the year ended. I can supplement the Roth contributions at tax filing time depending on how much cash I have on hand.
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Franmom
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Re: 72 years old and need to simplify our portfolio!

Post by Franmom »

Jack FFR1846 wrote: Thu Jan 13, 2022 4:18 pm If you want ultimate simplicity, there is a way to do it.

First, sell the funds that are outside of Vanguard to turn the asset into cash.

Next, move it into a "like" account at Vanguard. So for example, your Roth at American Funds goes into your Roth at Vanguard.

In addition, you can make a single broker/taxable at Vanguard and dump all the others.

So now you both have a Roth, a tIRA and between you, a combined taxable/broker.

What do you put in each? I'll make that really, really easy. Choose a target date fund. Buy it in every single account. It is not as cost effective as managing your own 3 fund portfolio, but it's way cheaper than what you have now. I also see you have a target date amongst your current investments which in my opinion is way out of place.

Good luck. A bit of juggling around up front, but once it's done, you have an extremely simple portfolio and don't have to do anything but add money to it or take withdrawals.
Thanks. This sounds almost too easy, but frankly it is what I considered after working on my unwieldy spreadsheet! When I first opened a Vanguard account, I was overwhelmed by all the choices. I had about 100k to invest but was afraid to put it all in at once, so every so many months I would deposit more $. About 6 months in, I discovered the Target Retirement Funds so added them at that time. Why do you say that the target date fund is way out of place? Is it because it overlaps with some of the other Funds?
GaryA505
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Location: New Mexico

Re: 72 years old and need to simplify our portfolio!

Post by GaryA505 »

Nyc10036 wrote: Thu Jan 13, 2022 5:52 pm
GaryA505 wrote: Thu Jan 13, 2022 5:45 pm If I didn't feel confident I could do this well, I would hire a financial advisor to help, keeping taxable gains in mind.
All the financial advisor will do is make it a even bigger stew than it is now.
No, not an investment advisor. If I hired one it would be very clear what I'm paying for, and it would not be investment advice.
"Get most of it right and don't make any big mistakes."
Topic Author
Franmom
Posts: 20
Joined: Mon Jan 10, 2022 11:14 pm

Re: 72 years old and need to simplify our portfolio!

Post by Franmom »

Nyc10036 wrote: Thu Jan 13, 2022 3:48 pm If you want to consolidate at Vanguard

1. I would move your Roth IRA at American Funds to Vanguard and merge it with your Roth IRA at Vanguard.
Vanguard can help you with that. Buy VTSAX (Vanguard Total Stock Market Index Fund) or VTI.
This will represent approximately 49% of your portfolio.

2. I would move your husband's Roth IRA at American Funds to Vanguard and merge it with his Roth IRA at Vanguard.
Vanguard can help with that. Buy VBTLX (Vanguard Total Bond Index Fund).
This will represent approximately 11% of your portfolio.

3. I would move your Traditional IRA at American Funds to Vanguard.
Buy VBTLX
This will represent 17% of your portfolio.

If you do these 3, you will have 49% in stocks and 28% in bonds.

The Other adds another 6% to your bonds raising to 34%.

The international stocks can come from your brokerage accounts.
Thanks. Do you recommend also holding bonds in the brokerage account to bring up the allocation in bonds?
Topic Author
Franmom
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Joined: Mon Jan 10, 2022 11:14 pm

Re: 72 years old and need to simplify our portfolio!

Post by Franmom »

howard71 wrote: Thu Jan 13, 2022 2:48 pm OMG, makes my head hurt just to think about how you manage this, not to mention how much work it's going to be to simplify it....

Questions:
1. Should my allocation be the same for the brokerage accounts as for the IRA's

No. You have to consider tax implications in your brokerage accounts.

2. If I use 3-4 fund portfolio, should the brokerage accounts have the same 3 funds as the IRA's

See above.

3. Should I have the same 3-4 funds as my husband

My wife and I mostly use the same funds. I don't see any problem with it.

4. What funds do you recommend so I can "set it and forget it" for at least 6 months before rebalancing

Opinions will vary here. I never make such recommendations because I don't want to be responsible if things don't work out as expected. As for rebalancing, I rarely do it at all with our portfolio, let alone every six months.

5. Does it look like I need an advisor?

No. Once you decide on the funds it's just a matter of doing the work to consolidate which doesn't sound like a lot of fun to me. I'm sure
some financial advisor would be willing to do the work for you but it won't be that hard. Time consuming maybe, but not really that hard. I would
just take it slow and do it one fund at a time. Just set up the funds you want to use then sell, buy, take inventory, rinse, repeat until you have it all consolidated.

I would do the IRA's first because you don't have to worry about tax implications, then move on to the taxable where you will obviously have to give it more thought unless you like paying taxes.

BTW, I'm also 72, my wife 56. We use the Golden Butterfly portfolio strategy. I don't recommend it only because of my answer to question number 4.
Yup! My head hurts.
DangerDad
Posts: 36
Joined: Tue Apr 27, 2021 7:37 pm

Re: 72 years old and need to simplify our portfolio!

Post by DangerDad »

vineviz wrote: Thu Jan 13, 2022 12:20 pm
Franmom wrote: Thu Jan 13, 2022 9:22 am Questions:
1. Should my allocation be the same for the brokerage accounts as for the IRA's
2. If I use 3-4 fund portfolio, should the brokerage accounts have the same 3 funds as the IRA's
3. Should I have the same 3-4 funds as my husband
4. What funds do you recommend so I can "set it and forget it" for at least 6 months before rebalancing
5. Does it look like I need an advisor?
Thank you for any advice you can give!
If I had a client with a portfolio that looked like yours, my proposal wold probably resemble something like this (assuming you moved complete to Vanguard):

Taxable: Vanguard Total Stock Market Index Fund (VTSAX)

Traditional IRAs: Vanguard Target Retirement Income Fund (VTINX)

Roth IRAs: 50/50 Split between Vanguard Target Retirement Income Fund (VTINX) and Vanguard LifeStrategy Moderate Growth Fund (VSMGX)

With the savings bonds this gets you very close to your stated target allocations using just three funds; reasonable tax-efficiency; no need to rebalance; and no need to pay an advisor for ongoing advice.
+1
Nyc10036
Posts: 987
Joined: Wed Oct 05, 2016 6:29 pm

Re: 72 years old and need to simplify our portfolio!

Post by Nyc10036 »

Franmom wrote: Thu Jan 13, 2022 8:05 pm
Nyc10036 wrote: Thu Jan 13, 2022 3:48 pm If you want to consolidate at Vanguard

1. I would move your Roth IRA at American Funds to Vanguard and merge it with your Roth IRA at Vanguard.
Vanguard can help you with that. Buy VTSAX (Vanguard Total Stock Market Index Fund) or VTI.
This will represent approximately 49% of your portfolio.

2. I would move your husband's Roth IRA at American Funds to Vanguard and merge it with his Roth IRA at Vanguard.
Vanguard can help with that. Buy VBTLX (Vanguard Total Bond Index Fund).
This will represent approximately 11% of your portfolio.

3. I would move your Traditional IRA at American Funds to Vanguard.
Buy VBTLX
This will represent 17% of your portfolio.

If you do these 3, you will have 49% in stocks and 28% in bonds.

The Other adds another 6% to your bonds raising to 34%.

The international stocks can come from your brokerage accounts.
Thanks. Do you recommend also holding bonds in the brokerage account to bring up the allocation in bonds?
If you hold the bonds in your brokerage account, they will continually throw dividends on which you will have pay taxes.
According to those more in the know, bonds should be held in IRAs.
https://www.bogleheads.org/wiki/Tax-eff ... y_of_bonds
However, in your case, only 16% of your portfolio will be in bonds in your brokerage accounts.
Or maybe have the bonds in your Vanguard brokerage and have stocks in your American brokerage.
It's a tough call.
You should analyze what the tax implications with you selling those funds in your brokerage accounts.
I would keep your holdings in Vang Inflat Protect Sec Invst – (VIPSX) and Vanguard Target Retirement 2020 Fd – (VTWNX) intact.

.
.
Topic Author
Franmom
Posts: 20
Joined: Mon Jan 10, 2022 11:14 pm

Re: 72 years old and need to simplify our portfolio!

Post by Franmom »

Nyc10036 wrote: Thu Jan 13, 2022 8:55 pm
Franmom wrote: Thu Jan 13, 2022 8:05 pm
Nyc10036 wrote: Thu Jan 13, 2022 3:48 pm If you want to consolidate at Vanguard

1. I would move your Roth IRA at American Funds to Vanguard and merge it with your Roth IRA at Vanguard.
Vanguard can help you with that. Buy VTSAX (Vanguard Total Stock Market Index Fund) or VTI.
This will represent approximately 49% of your portfolio.

2. I would move your husband's Roth IRA at American Funds to Vanguard and merge it with his Roth IRA at Vanguard.
Vanguard can help with that. Buy VBTLX (Vanguard Total Bond Index Fund).
This will represent approximately 11% of your portfolio.

3. I would move your Traditional IRA at American Funds to Vanguard.
Buy VBTLX
This will represent 17% of your portfolio.

If you do these 3, you will have 49% in stocks and 28% in bonds.

The Other adds another 6% to your bonds raising to 34%.

The international stocks can come from your brokerage accounts.
Thanks. Do you recommend also holding bonds in the brokerage account to bring up the allocation in bonds?
If you hold the bonds in your brokerage account, they will continually throw dividends on which you will have pay taxes.
According to those more in the know, bonds should be held in IRAs.
https://www.bogleheads.org/wiki/Tax-eff ... y_of_bonds
However, in your case, only 16% of your portfolio will be in bonds in your brokerage accounts.
Or maybe have the bonds in your Vanguard brokerage and have stocks in your American brokerage.
It's a tough call.
You should analyze what the tax implications with you selling those funds in your brokerage accounts.
I would keep your holdings in Vang Inflat Protect Sec Invst – (VIPSX) and Vanguard Target Retirement 2020 Fd – (VTWNX) intact.
.Oh! OK! The fog is starting to lift and I'm seeing what people are saying about taxes and bonds! I always assumed that making a few bucks off dividends was a good thing, (and it's never been more than a few thousand bucks in the past) but I am reading that if I make them in my Roth that's a better thing, because I won't get taxed on it at all! I wish I had the time to learn this when I was 42, but I am enjoying the journey now..
Topic Author
Franmom
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Joined: Mon Jan 10, 2022 11:14 pm

Re: 72 years old and need to simplify our portfolio!

Post by Franmom »

vineviz wrote: Thu Jan 13, 2022 12:20 pm
Franmom wrote: Thu Jan 13, 2022 9:22 am Questions:
1. Should my allocation be the same for the brokerage accounts as for the IRA's
2. If I use 3-4 fund portfolio, should the brokerage accounts have the same 3 funds as the IRA's
3. Should I have the same 3-4 funds as my husband
4. What funds do you recommend so I can "set it and forget it" for at least 6 months before rebalancing
5. Does it look like I need an advisor?
Thank you for any advice you can give!
If I had a client with a portfolio that looked like yours, my proposal wold probably resemble something like this (assuming you moved complete to Vanguard):

Taxable: Vanguard Total Stock Market Index Fund (VTSAX)

Traditional IRAs: Vanguard Target Retirement Income Fund (VTINX)

Roth IRAs: 50/50 Split between Vanguard Target Retirement Income Fund (VTINX) and Vanguard LifeStrategy Moderate Growth Fund (VSMGX)

With the savings bonds this gets you very close to your stated target allocations using just three funds; reasonable tax-efficiency; no need to rebalance; and no need to pay an advisor for ongoing advice.
Why do you recommend VTINX over VTWNX? When started contributing to my Vanguard account 2 years ago, I was moving money in and out of funds because I had no idea what I was doing, and I put $ in VTINX. But then it looked like the returns were better in VTWNX so I moved it. Now the end of year statement shows a capital loss of 8k on an account value of 52k! So I'm licking my wounds about that.
User avatar
vineviz
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Re: 72 years old and need to simplify our portfolio!

Post by vineviz »

Franmom wrote: Fri Jan 14, 2022 12:14 pm
vineviz wrote: Thu Jan 13, 2022 12:20 pm
Franmom wrote: Thu Jan 13, 2022 9:22 am Questions:
1. Should my allocation be the same for the brokerage accounts as for the IRA's
2. If I use 3-4 fund portfolio, should the brokerage accounts have the same 3 funds as the IRA's
3. Should I have the same 3-4 funds as my husband
4. What funds do you recommend so I can "set it and forget it" for at least 6 months before rebalancing
5. Does it look like I need an advisor?
Thank you for any advice you can give!
If I had a client with a portfolio that looked like yours, my proposal wold probably resemble something like this (assuming you moved complete to Vanguard):

Taxable: Vanguard Total Stock Market Index Fund (VTSAX)

Traditional IRAs: Vanguard Target Retirement Income Fund (VTINX)

Roth IRAs: 50/50 Split between Vanguard Target Retirement Income Fund (VTINX) and Vanguard LifeStrategy Moderate Growth Fund (VSMGX)

With the savings bonds this gets you very close to your stated target allocations using just three funds; reasonable tax-efficiency; no need to rebalance; and no need to pay an advisor for ongoing advice.
Why do you recommend VTINX over VTWNX? When started contributing to my Vanguard account 2 years ago, I was moving money in and out of funds because I had no idea what I was doing, and I put $ in VTINX. But then it looked like the returns were better in VTWNX so I moved it. Now the end of year statement shows a capital loss of 8k on an account value of 52k! So I'm licking my wounds about that.
I chose VTINX as my example fund primarily because it has a stable asset allocation, but at this point I'd treat VTWNX and VTINX as essentially interchangeable since VTWNX will merge into VTINX in 2027. Don't sweat any period-to-period differences in performance between the two funds.

And though your statement might show a capital loss for VTWNX, the total return of the fund in 2021 was significantly positive which means that distributed gains and dividend outcome more than outweighed the loss.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
inbox788
Posts: 8566
Joined: Thu Mar 15, 2012 5:24 pm

Re: 72 years old and need to simplify our portfolio!

Post by inbox788 »

Franmom wrote: Thu Jan 13, 2022 7:43 pmThanks. This sounds almost too easy, but frankly it is what I considered after working on my unwieldy spreadsheet! When I first opened a Vanguard account, I was overwhelmed by all the choices. I had about 100k to invest but was afraid to put it all in at once, so every so many months I would deposit more $. About 6 months in, I discovered the Target Retirement Funds so added them at that time. Why do you say that the target date fund is way out of place? Is it because it overlaps with some of the other Funds?
It is that easy, but avoid Target Retirement funds, especially in taxable account. It should be an all or none decision, or otherwise, it's like having 2 drivers in a car. Anyway, late in the glidepath, it converges with retirement income fund VTINX (30/70).

First off, what is your current AA? I count about 35% bonds vs 55 desired, but that's just a first pass guess. Also, I only see about 8% international vs. 15%, but those aren't that significant now anyway since it's all going to undergo change.

Your unwieldy spreadsheet probably has 50+ fund entries (see below), but what I see is:
16.56% (6.74% + 9.82%) Taxable
6.37% Other (bonds)
77.08% Tax Advantaged

You can immediately adjust Tax Advantaged any which way to achieve your desired AA. Consider moving all accounts to Vanguard so you're left with:
Husband's Roth IRA 10.77% VTI
My TIRA 17.38% BND
My Roth IRA 48.93% 50/50 VTI/BND
Your AA will be close to 50/50 and you can adjust the location of funds and specific numbers, but you'll be pretty close to desired, and have transparency so you don't need the spreadsheet.

Assuming you don't want to change Other (I & EE bonds), the only issues are the taxable assets. Any fund with little actual gain in dollars is easy to pay a small tax and liquidate. ABNDX, AIBAX, VCSH, VIPSX? If AMRMX doesn't have much tax consequence, you could just close out that brokerage account.
Taxable Assets
American Fds Joint Brokerage 6.74%
Amer Mutual Fund (AMRMX) , (exp ratio 0.60%) 2.05%
The Bond Fd of America (ABNDX), (exp ratio 0.57%) 3.05%
Intermediate Bond Fund (AIBAX), (exp ratio 0.61%) 1.64%

Vanguard Joint Brokerage 9.82%
Joint Money Market 0.66%
Fidelity Bluechip Growth – (FBGRX), (exp ratio 0.79%) 0.52%
Vanguard Short term Corp Bond ETF (VCSH) 1.13%
Vang Dividend Appreciation Index Admir – (VDADX) 0.40%
Vang Inflat Protect Sec Invst – (VIPSX) 0.79%
Vanguard Target Retirement 2020 Fd – (VTWNX) 5.59%
Vanguard International Growth fd – (VWIGX) 0.73%

Other 6.37%
Husband's Roth IRA at American Funds 8.55%
Husband's Roth IRA at Vanguard 2.22%
My TIRA at American Funds 17.38%
My Roth IRA at American Funds 46.58%
My Roth IRA at Vanguard 2.35%

Code: Select all

Desired Asset Allocation: 45% stocks; 55% bonds (?)		
Desired International exposure: 15%		
		
Approximate Size of Portfolio: 950k		
		
Current Portfolio:		
		
Taxable Assets		
American Fds Joint Brokerage		6.74%
Amer Mutual Fund (AMRMX) , (exp ratio 0.60%) 	2.05%	
The Bond Fd of America (ABNDX), (exp ratio 0.57%) 	3.05%	
Intermediate Bond Fund (AIBAX), (exp ratio 0.61%) 	1.64%	
		
Vanguard Joint Brokerage		9.82%
Joint Money Market 	0.66%	
Fidelity Bluechip Growth – (FBGRX), (exp ratio 0.79%) 	0.52%	
Vanguard Short term Corp Bond ETF (VCSH) 	1.13%	
Vang Dividend Appreciation Index Admir – (VDADX) 	0.40%	
Vang Inflat Protect Sec Invst – (VIPSX) 	0.79%	
Vanguard Target Retirement 2020 Fd – (VTWNX) 	5.59%	
Vanguard International Growth fd – (VWIGX) 	0.73%	
		
Other		6.37%
I Bonds (Treasury Direct) 	4.28%	
EE bond (matures 02012023) 	2.09%	
		
Husband's Roth IRA at American Funds		8.55%
Amer Mutual Fund (AMRMX) 	3.14%	
Intermediate Bond Fund (AIBAX) 	2.12%	
New Perspective Fund (ANWPX), (exp ratio 0.72%) 	1.23%	
New World Fund (NEWFX), (exp ratio 0.96%) 	2.06%	
		
Husband's Roth IRA at Vanguard		2.22%
His Money Market 	0.16%	
Vang Short term inv Grade Investor Cl (VFSTX) 	0.35%	
Vang. Wellington FD Investor shares (VWELX) 	1.22%	
Vang. Russell 1000 Investor ETF (VONV) 	0.26%	
Vanguard Total Stock Market ETF – (VTI) 	0.23%	
		
My TIRA at American Funds		17.38%
Amer Balanced Fund (ABALX), (exp ratio 0.58%) 	0.20%	
Amer Funds Inflat Linked Bond fd (BFIAX), (exp ratio 0.70%) 	5.87%	
Amer Funds Mortgage Fund (MFAAX), (exp ratio 0.65%) 	2.30%	
The Bond Fd of America (ABNDX), (exp ratio 0.57%) 	3.63%	
Intermediate Bond Fund (AIBAX), (exp ratio 0.61%) 	5.38%	
		
My Roth IRA at American Funds		46.58%
Amer Balanced Fund (ABALX),(exp ratio 0.58%) 	5.83%	
Amer Mutual Fund (AMRMX) 	26.15%	
The Bond Fd of America (ABNDX) 	3.07%	
New Perspective Fund (ANWPX) 	6.51%	
New World Fund (NEWFX) 	5.02%	
		
My Roth IRA at Vanguard		2.35%
My Money Market 	0.01%	
Vang Balanced Index Fd (VBIAX) 	0.38%	
Vang 500 Index Admiral (VFIAX) 	0.43%	
Vang Midcap Value Index (VMVAX) 	0.45%	
Vang. Wellington FD Investor shares (VWELX) 	1.08%	
	100.01%	
Nyc10036
Posts: 987
Joined: Wed Oct 05, 2016 6:29 pm

Re: 72 years old and need to simplify our portfolio!

Post by Nyc10036 »

inbox788 wrote: Fri Jan 14, 2022 2:46 pm You can immediately adjust Tax Advantaged any which way to achieve your desired AA. Consider moving all accounts to Vanguard so you're left with:
Husband's Roth IRA 10.77% VTI
My TIRA 17.38% BND
My Roth IRA 48.93% 50/50 VTI/BND
Your AA will be close to 50/50 and you can adjust the location of funds and specific numbers, but you'll be pretty close to desired, and have transparency so you don't need the spreadsheet.
Sure it is easy to use their IRAs to achieve desired asset allocaton, but the taxable portion is 16.5%
It is consequential enough that If all of it is in stocks then the asset allocation is thrown out of whack.
inbox788
Posts: 8566
Joined: Thu Mar 15, 2012 5:24 pm

Re: 72 years old and need to simplify our portfolio!

Post by inbox788 »

Nyc10036 wrote: Fri Jan 14, 2022 3:51 pm
inbox788 wrote: Fri Jan 14, 2022 2:46 pm You can immediately adjust Tax Advantaged any which way to achieve your desired AA. Consider moving all accounts to Vanguard so you're left with:
Husband's Roth IRA 10.77% VTI
My TIRA 17.38% BND
My Roth IRA 48.93% 50/50 VTI/BND
Your AA will be close to 50/50 and you can adjust the location of funds and specific numbers, but you'll be pretty close to desired, and have transparency so you don't need the spreadsheet.
Sure it is easy to use their IRAs to achieve desired asset allocaton, but the taxable portion is 16.5%
It is consequential enough that If all of it is in stocks then the asset allocation is thrown out of whack.
I took that into account. If My Roth is 50/50, that's about half the portfolio. My TIRA is 17% BND vs Husband Roth 11%, so 6% more bonds. Add that to the 6% bonds in Other, and the net difference is about 4% (and there is about 5% bond in taxable from what I can tell; all not that significant in the scheme of things). OP can decide to tweak My Roth 45/55 or 55/45 or rebalance with new additions, but there are bigger decisions (and not so big IMO) regarding which funds are placed where and whether OP is comfortable with all stock in say Husband Roth vs. something closer to desired AA in each account separately. To me approaching big picture total and simplification (3 fund?) is the first order of business.

Anyway, that 16.5% taxable is the biggest problem, and it's only 1/6 the portfolio, a small fraction.
Topic Author
Franmom
Posts: 20
Joined: Mon Jan 10, 2022 11:14 pm

Re: 72 years old and need to simplify our portfolio!

Post by Franmom »

vineviz wrote: Fri Jan 14, 2022 12:39 pm
Franmom wrote: Fri Jan 14, 2022 12:14 pm
vineviz wrote: Thu Jan 13, 2022 12:20 pm
Franmom wrote: Thu Jan 13, 2022 9:22 am Questions:
1. Should my allocation be the same for the brokerage accounts as for the IRA's
2. If I use 3-4 fund portfolio, should the brokerage accounts have the same 3 funds as the IRA's
3. Should I have the same 3-4 funds as my husband
4. What funds do you recommend so I can "set it and forget it" for at least 6 months before rebalancing
5. Does it look like I need an advisor?
Thank you for any advice you can give!
If I had a client with a portfolio that looked like yours, my proposal wold probably resemble something like this (assuming you moved complete to Vanguard):

Taxable: Vanguard Total Stock Market Index Fund (VTSAX)

Traditional IRAs: Vanguard Target Retirement Income Fund (VTINX)

Roth IRAs: 50/50 Split between Vanguard Target Retirement Income Fund (VTINX) and Vanguard LifeStrategy Moderate Growth Fund (VSMGX)

With the savings bonds this gets you very close to your stated target allocations using just three funds; reasonable tax-efficiency; no need to rebalance; and no need to pay an advisor for ongoing advice.
Why do you recommend VTINX over VTWNX? When started contributing to my Vanguard account 2 years ago, I was moving money in and out of funds because I had no idea what I was doing, and I put $ in VTINX. But then it looked like the returns were better in VTWNX so I moved it. Now the end of year statement shows a capital loss of 8k on an account value of 52k! So I'm licking my wounds about that.
I chose VTINX as my example fund primarily because it has a stable asset allocation, but at this point I'd treat VTWNX and VTINX as essentially interchangeable since VTWNX will merge into VTINX in 2027. Don't sweat any period-to-period differences in performance between the two funds.

And though your statement might show a capital loss for VTWNX, the total return of the fund in 2021 was significantly positive which means that distributed gains and dividend outcome more than outweighed the loss.
Oh, Thank you! I thought the loss had something to do with dividends, but wasn't sure.
Topic Author
Franmom
Posts: 20
Joined: Mon Jan 10, 2022 11:14 pm

Re: 72 years old and need to simplify our portfolio!

Post by Franmom »

inbox788 wrote: Fri Jan 14, 2022 2:46 pm
Franmom wrote: Thu Jan 13, 2022 7:43 pmThanks. This sounds almost too easy, but frankly it is what I considered after working on my unwieldy spreadsheet! When I first opened a Vanguard account, I was overwhelmed by all the choices. I had about 100k to invest but was afraid to put it all in at once, so every so many months I would deposit more $. About 6 months in, I discovered the Target Retirement Funds so added them at that time. Why do you say that the target date fund is way out of place? Is it because it overlaps with some of the other Funds?
It is that easy, but avoid Target Retirement funds, especially in taxable account. It should be an all or none decision, or otherwise, it's like having 2 drivers in a car. Anyway, late in the glidepath, it converges with retirement income fund VTINX (30/70).

First off, what is your current AA? I count about 35% bonds vs 55 desired, but that's just a first pass guess. Also, I only see about 8% international vs. 15%, but those aren't that significant now anyway since it's all going to undergo change.

Your unwieldy spreadsheet probably has 50+ fund entries (see below), but what I see is:
16.56% (6.74% + 9.82%) Taxable
6.37% Other (bonds)
77.08% Tax Advantaged

You can immediately adjust Tax Advantaged any which way to achieve your desired AA. Consider moving all accounts to Vanguard so you're left with:
Husband's Roth IRA 10.77% VTI
My TIRA 17.38% BND
My Roth IRA 48.93% 50/50 VTI/BND
Your AA will be close to 50/50 and you can adjust the location of funds and specific numbers, but you'll be pretty close to desired, and have transparency so you don't need the spreadsheet.

Assuming you don't want to change Other (I & EE bonds), the only issues are the taxable assets. Any fund with little actual gain in dollars is easy to pay a small tax and liquidate. ABNDX, AIBAX, VCSH, VIPSX? If AMRMX doesn't have much tax consequence, you could just close out that brokerage account.
Taxable Assets
American Fds Joint Brokerage 6.74%
Amer Mutual Fund (AMRMX) , (exp ratio 0.60%) 2.05%
The Bond Fd of America (ABNDX), (exp ratio 0.57%) 3.05%
Intermediate Bond Fund (AIBAX), (exp ratio 0.61%) 1.64%

Vanguard Joint Brokerage 9.82%
Joint Money Market 0.66%
Fidelity Bluechip Growth – (FBGRX), (exp ratio 0.79%) 0.52%
Vanguard Short term Corp Bond ETF (VCSH) 1.13%
Vang Dividend Appreciation Index Admir – (VDADX) 0.40%
Vang Inflat Protect Sec Invst – (VIPSX) 0.79%
Vanguard Target Retirement 2020 Fd – (VTWNX) 5.59%
Vanguard International Growth fd – (VWIGX) 0.73%

Other 6.37%
Husband's Roth IRA at American Funds 8.55%
Husband's Roth IRA at Vanguard 2.22%
My TIRA at American Funds 17.38%
My Roth IRA at American Funds 46.58%
My Roth IRA at Vanguard 2.35%

Code: Select all

Desired Asset Allocation: 45% stocks; 55% bonds (?)		
Desired International exposure: 15%		
		
Approximate Size of Portfolio: 950k		
		
Current Portfolio:		
		
Taxable Assets		
American Fds Joint Brokerage		6.74%
Amer Mutual Fund (AMRMX) , (exp ratio 0.60%) 	2.05%	
The Bond Fd of America (ABNDX), (exp ratio 0.57%) 	3.05%	
Intermediate Bond Fund (AIBAX), (exp ratio 0.61%) 	1.64%	
		
Vanguard Joint Brokerage		9.82%
Joint Money Market 	0.66%	
Fidelity Bluechip Growth – (FBGRX), (exp ratio 0.79%) 	0.52%	
Vanguard Short term Corp Bond ETF (VCSH) 	1.13%	
Vang Dividend Appreciation Index Admir – (VDADX) 	0.40%	
Vang Inflat Protect Sec Invst – (VIPSX) 	0.79%	
Vanguard Target Retirement 2020 Fd – (VTWNX) 	5.59%	
Vanguard International Growth fd – (VWIGX) 	0.73%	
		
Other		6.37%
I Bonds (Treasury Direct) 	4.28%	
EE bond (matures 02012023) 	2.09%	
		
Husband's Roth IRA at American Funds		8.55%
Amer Mutual Fund (AMRMX) 	3.14%	
Intermediate Bond Fund (AIBAX) 	2.12%	
New Perspective Fund (ANWPX), (exp ratio 0.72%) 	1.23%	
New World Fund (NEWFX), (exp ratio 0.96%) 	2.06%	
		
Husband's Roth IRA at Vanguard		2.22%
His Money Market 	0.16%	
Vang Short term inv Grade Investor Cl (VFSTX) 	0.35%	
Vang. Wellington FD Investor shares (VWELX) 	1.22%	
Vang. Russell 1000 Investor ETF (VONV) 	0.26%	
Vanguard Total Stock Market ETF – (VTI) 	0.23%	
		
My TIRA at American Funds		17.38%
Amer Balanced Fund (ABALX), (exp ratio 0.58%) 	0.20%	
Amer Funds Inflat Linked Bond fd (BFIAX), (exp ratio 0.70%) 	5.87%	
Amer Funds Mortgage Fund (MFAAX), (exp ratio 0.65%) 	2.30%	
The Bond Fd of America (ABNDX), (exp ratio 0.57%) 	3.63%	
Intermediate Bond Fund (AIBAX), (exp ratio 0.61%) 	5.38%	
		
My Roth IRA at American Funds		46.58%
Amer Balanced Fund (ABALX),(exp ratio 0.58%) 	5.83%	
Amer Mutual Fund (AMRMX) 	26.15%	
The Bond Fd of America (ABNDX) 	3.07%	
New Perspective Fund (ANWPX) 	6.51%	
New World Fund (NEWFX) 	5.02%	
		
My Roth IRA at Vanguard		2.35%
My Money Market 	0.01%	
Vang Balanced Index Fd (VBIAX) 	0.38%	
Vang 500 Index Admiral (VFIAX) 	0.43%	
Vang Midcap Value Index (VMVAX) 	0.45%	
Vang. Wellington FD Investor shares (VWELX) 	1.08%	
	100.01%	
Thanks! This is so helpful! I think that my current AA is closer to 41% bonds. Considering that VWELX ABALX and VBIAX are stock/bond funds, when I added the raw numbers on my spreadsheet and divided by the total, this is how I arrived at this %. Otherwise, miraculously, all my other %s matched with yours. (I'm not a math person!) My desired AA when I started this journey was 50/50. The more I've been reading since I joined this forum, however, the more I'm thinking I should be closer to 70/30. My FA at American Fds. had me at 70/30 for years, and I missed out on a lot of market gains until I moved things myself into more stocks a couple of years ago. He got so angry at me that he's had his assistant deal with me and hasn't spoken to me directly in years. So I'm paying him for no direct service, really.
Topic Author
Franmom
Posts: 20
Joined: Mon Jan 10, 2022 11:14 pm

Re: 72 years old and need to simplify our portfolio!

Post by Franmom »

HomeStretch wrote: Thu Jan 13, 2022 12:11 pm Welcome to the forum!
Franmom wrote: Thu Jan 13, 2022 9:22 am 1. Should my allocation be the same for the brokerage accounts as for the IRA's
2. If I use 3-4 fund portfolio, should the brokerage accounts have the same 3 funds as the IRA's
3. Should I have the same 3-4 funds as my husband
There is no need to use the same asset allocation in each of your/spouse's accounts. Apply your desired portfolio allocation to your entire portfolio and place your holdings tax efficiently. See pkcrafter's link to the BH wiki page about tax efficient fund placement.
4. What funds do you recommend so I can "set it and forget it" for at least 6 months before rebalancing
A 3-fund portfolio is simple, easy to manage and likely will not need rebalancing more than once a year, if that.
5. Does it look like I need an advisor?
No, a 3-fund portfolio is easy to DIY. You seem to have a good handle on your portfolio based on how quickly you pulled together your post in the requested format.

To simplify your portfolio and reduce costs, the first step would be to transfer the 4 accounts at American Funds (AF) to Vanguard. The only new Vanguard account you need to set up is a Traditional IRA (TIRA) for you. Start the transfer at Vanguard, not AF. Consider converting the 3 AF IRAs to cash (there are no tax consequences) to make the transfer easier. AF may require a medallion guarantee (MG) on the Vanguard account transfer forms which Vanguard does not provide (your local bank might). If you are "voice verified" at Vanguard, the MG requirement may be waived.

AF may cut off your online access after receiving the account transfer form. Be sure to print out your most recent statements and your Taxable account's cost basis by holding/tax lot. You will want to make sure the cost basis transfers properly from AF to Vanguard.

Once the funds are all at Vanguard:
1. you can reinvest the IRAs without tax consequence.
2. in your Vanguard Vanguard Taxable - set the cost basis method to "specific ID", turn off dividend reinvestment so you don't buy more of funds you do not want to hold, and make sure the AF Taxable cost basis transfers properly.
3. changing the holdings in your Taxable account will have tax consequences. However, as your taxable income is low, you should have room to sell some holdings while in the 0% capital gains bracket. Sell any tax lots with a loss or minimal gain. Then focus on selling the high ER holdings.

A couple other items to consider:
1. If you haven't already purchased 2022 I-Bonds, consider doing so with your emergency funds. I-Bonds are liquid after one year. Edit - or eliminate the separate emergency fund altogether.

2. Your TIRA balance is $165k. I don't see the need for you to completely convert the funds to Roth IRA.
3. We can help you reinvest your accounts in the 3-fund portfolio.

Edit - consider granting agent access to each other’s individual accounts at Vanguard, if you haven’t already.
Thank you so much! I'm re-reading this since all of the information didn't sink in the first time. It's almost overwhelming, but I have to step back and take my time, and I don't want to do anything I regret. I should mention that I also have some small 529s for 3 of my grandchildren in American Funds, and the youngest won't be college age for another 6 years. So I was going to just leave them in there. And to complicate matters we have a Universal Life Ins Policy with the same FA listed as the agent and my daughter listed as the trustee because my one child has special needs so I don't see cutting ties with the guy immediately.
User avatar
Wiggums
Posts: 4712
Joined: Thu Jan 31, 2019 8:02 am

Re: 72 years old and need to simplify our portfolio!

Post by Wiggums »

Welcome to the forum. Reducing the number of funds is a great idea. You have done a good job so far and I see no big mistakes. We have only four funds. The three fund portfolio plus a municipal bond fund for our state. In your tax deferred accounts, I would start by eliminating funds with the highest ERs. For example: New World Fund (NEWFX), (exp ratio 0.96%). There’s no tax implication for selling this fund. As you illuminate funds, it will be so much easier to work with in the future.

In Roth, it’s best to have all stock (biggest growth potential) since you will never be taxed on this account again.

Good luck to you.
Investors need to be better informed about the costs they pay. “High fund fees can be hazardous to your wealth in the same way that high calories can be hazardous for your health.”
Topic Author
Franmom
Posts: 20
Joined: Mon Jan 10, 2022 11:14 pm

Re: 72 years old and need to simplify our portfolio!

Post by Franmom »

Wiggums wrote: Sat Jan 15, 2022 12:10 pm Welcome to the forum. Reducing the number of funds is a great idea. You have done a good job so far and I see no big mistakes. We have only four funds. The three fund portfolio plus a municipal bond fund for our state. In your tax deferred accounts, I would start by eliminating funds with the highest ERs. For example: New World Fund (NEWFX), (exp ratio 0.96%). There’s no tax implication for selling this fund. As you illuminate funds, it will be so much easier to work with in the future.

In Roth, it’s best to have all stock (biggest growth potential) since you will never be taxed on this account again.

Good luck to you.
Thanks. I love this forum already! Everyone is so supportive and helpful!
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