Asking Portfolio Questions [Portfolio help request]

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Gennaro Dillinger
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Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

[Moved into a new thread from: Learn how to manage my portfolio? --admin LadyGeek]

Emergency funds: No specific fund set aside for this any longer.

Debt: No debt whatsoever. I do have two credit cards, but they are paid in full every month.

Tax Filing Status: Married Filing Jointly

Tax Rate: 12% Federal, 3.07 % State

State of Residence: PA

Age: Gennaro 58, Mary 62

Desired Asset allocation: 60% stocks / 40% bonds. I am a mix now though at 55% equity, 45% buffers and 1% debt

Desired International allocation: xx% of stocks. Not particularly concerned on this point.

$5.5M.

Gennaro and Mary are both retired.

Took a bit of work but I have it almost exactly at 100%.

Current retirement assets

All pasted at the bottom!


Contributions

New annual Contributions
No new annual contributions, we are both retired.

Current retirement assets (let me know if the formatting is not adequate)

% Joint Account - Non-Qualified Symbol Expense Ratio
1.01 FDIC Insured Deposit Account MMDA12
1.85 Wells Fargo Bank, Monthly, 12/14/2022 3.400% CD
2.93 First Trust Ultra Short Muni (ETF, n/a, .35) FUMB 0.25
3.72 JPMorgan Ultra-Short Muni (ETF, n/a, .18) JMST 0.18
2.82 First Trust Intermediate Munis (ETF) FMB 0.5
0.75 FT 10% Buffered ETF, EFA, Resets 06/20/22, Est. Cap. 9.83% Net YJUN 0.9
2.48 FT 10% Buffered ETF, QQQ, Resets 06/20/22, Est. Cap. 10.4% Net QJUN 0.9
1.45 FT 8.5% Buffered ETF, EFA, 3/21/22, Resets 03/17/23, Est. Cap. 19.5% Net YMAR 0.9
1.42 Innovator 15% Buffered ETF, MSCI EAFE, 4/1/22 - 3/31/23, Est. Cap. 13.51% Net IAPR 0.85
1.51 Innovator 15% Buffered ETF, S&P 500, Resets 02/28/23, Est. Cap. 10.92% Net PMAR 0.79
2 Putnam Eq.Inc. (Instl, 5*, ,66) PEIYX 0.63
0.92 Schwab US Dividend Equity (ETF) SCHD 0.06
0.8 American Funds Cap.IncBldr.(Instl F2) CAIFX 0.37
2.42 Vanguard Mega Cap (ETF) MGC 0.07
0.69 Vanguard Total Stock (ETF) VTI 0.03
1.46 First Eagle Global (Instl) SGIIX 0.86
0.22 iShares MSCI EAFE Growth (ETF) EFG 0.35
1.58 Vanguard Mid-Cap Value Idx. Adm. (Instl) VMVAX 0.07
2.8 Baron Partners Fd (Instl) BPTIX 1.11
0.2 Invesco Oppenheimer Intl Small/Mid Co R6 OSCIX 0.95
0.18 T Rowe Price Intl Discovery I (Instl) TIDDX 1.05
1.15 Vanguard Small-Cap Idx. Adm. (Instl) VSMAX 0.005
0.96 Baron Growth (Instl) BGRIX 1.03
0.3 Innovative Ind. Properties IIPR
0.1 Scotts Miracle-Gro SMG
0.48 First Trust DJ Internet (ETF) FDN 0.51
0.4 T Rowe Price Global Tech (NTF, 4*,.88) PRGTX 0.86
1.26 First Trust Cybersecurity (ETF) CIBR 0.6
1.02 First Tr. Artificial Intel. & Robotics (ETF) ROBT 0.65
0.91 Robo Global® Robotics&Autom. Idx (ETF) ROBO 0.95
0.92 Fidelity Communication Serv. (ETF) FCOM 0.08
0.85 First Trust Cloud (ETF, 3*.69) SKYY 0.6
1.11 iShares Medical Devices (ETF) IHI 0.41
1.84 Schwab Health Care (NTF) SWHFX 0.25
0.94 SPDR® Health Care Equipment (ETF) XHE 0.35
0.03 Carrier Global Corp CARR
0.2 General Dynamics Corp GD
0.03 Huntington Ingalls Inds HII
1.93 Invesco Aerospace & Defense (ETF) PPA 0.61
0.39 Lockheed Martin Corp LMT
0.44 Northrop Grumman Corp NOC
0.03 Otis Woldwide Corp OTIS
0.09 Raytheon Tech Corp RTX
0.04 Vanguard Energy (Instl) VGENX 0.41
0.78 Vanguard Materials Index Adm. (Instl) VMIAX 0.1
0.75 Vanguard Materials Vipers (ETF) VAW 0.1
1.06 SPDR® Consumer Stpls Idx (ETF 4*.10) XLP 0.1
8.04 Tesla Motors TSLA

Joint Account - Non-Qualified Symbol Expense Ratio
0.18 FDIC Insured Deposit Account MMDA12
0.54 Fortinet FTNT
0.62 Palo Alto Networks PANW
0.43 Amazon AMZN
0.37 Shopify Inc SHOP
0.25 Snowflake Cl A Ord SNOW
0.6 Lucid Group ORD LCID
0.38 Tesla Motors TSLA
0.7 Argenx Se Sponsored Adr ARGX
0.33 Idexx Labs IDXX
0.3 Illumina ILMN
0.53 Thermo Fisher Scientific Inc TMO
0.68 Unitedhealth Group Inc UNH
0.39 Veeva Systems VEEV
0.43 Brookfield Asset Management Inc Class A BAM
0.4 Jones Lang LaSalle Inc JLL
0.39 Intuitive Surgical ISRG
0.34 Target Corporation TGT
0.34 Guidewire Software GWRE
0.57 Iridium Communications IRDM
0.47 Charles Schwab & Co. SCHW

Rollover IRA - Gennaro Symbol Expense Ratio
0.16 FDIC Insured Deposit Account MMDA12
1.63 Synchrony Bank, Semi-annual, 10/13/2022 2.350% CD
0.31 Synchrony Bank, Semi-annual, 10/13/2023 2.450% CD
0.9 iShares Sh. Maturity Bond (ETF-0) NEAR 0.25
0.54 Janus Henderson Short Duration (ETF) VNLA 0.23
0.18 PIMCO Short-Term (Instl) PTSHX 0.47
1.27 SPDR® Bloomberg/Barclays Inv.Gr. (ETF) FLRN 0.15
0.61 Vanguard Sh.Term Inv. Grade Adml. (Instl) VFSUX 0.1
0.96 PIMCO 15+ yr. US TIPS (ETF) LTPZ 0.2
0.37 FT 10% Buffered ETF, SPY, Resets 2/17/23, Est. Cap. 13.4% Net FFEB 0.85
1.14 FT 15% Buffered ETF, 2x S&P 500, Resets 06/17/2022, Est. Cap 6% Net XJUN 0.85
5.17 FT10% Buffered ETF, S&P 500, Resets 01/23/23, Est. Cap. 13.35% Net FJAN 0.85
0.53 First Trust Rising Div. (ETF, 5*,.50) RDVY 0.5
0.15 SPDR® S&P 500 High Div. (ETF) SPYD 0.07
0.48 First Trust DJ Global Div, Idx (ETF, 3*, .57) FGD 0.57
0.5 iShares USA Momentum (ETF) MTUM 0.15
0.48 First Trust DJ Internet (ETF) FDN 0.51

Rollover IRA - Mary Symbol Expense Ratio
0.06 FDIC Insured Deposit Account MMDA12
0.57 Discover Bank, Semi-annual, 08/01/2023 3.350% CD
0.57 Synchrony Bank, Semi-annual, 10/13/2022 2.350% CD
1.36 First Trust Enh. Sh. Maturity (ETF) FTSM 0.25
1.58 Legg M Partners Income WA Adj (Instl) SBAYX 0.39
3 Palmer Square Income Plus (Instl) PSYPX 0.94
0.89 PIMCO Short-Term (Instl) PTSHX 0.47
0.89 T. Rowe Price Ultra Short-Term Bd (Instl) TRSTX 0.18
1.57 FT 10% Buffered ETF, EFA, Resets 06/20/22, Est. Cap. 9.83% Net YJUN 0.9
FT 10% Buffered ETF, QQQ, Resets 06/20/22, Est. Cap. 10.4% Net QJUN 0.9
1.79 FT 10% Buffered ETF, S&P 500, Resets 5/19/23, Est. Cap. 19.30% Net FMAY 0.85
1.41 FT 10% Buffered ETF, SPY, 4/18/22 - 04/21/23, Est. Cap. 15.48% Net FAPR 0.85

Roth IRA - Gennaro Symbol Expense Ratio
0.03 FDIC Insured Deposit Account MMDA12
0.03 Vanguard Total World Stock (ETF, 3*.08)) VT 0.07
0.3 American Funds Cap.IncBldr.(Instl F3) CFIHX 0.26

Roth IRA - Mary Symbol Expense Ratio
0.03 FDIC Insured Deposit Account MMDA12
0.95 Innovator 9% Buffered ETF, S&P, Resets 2/28/23, Est. Cap. 15.18% Net BMAR 0.79
0.56 American Funds Cap.IncBldr.(Instl F3) CFIHX 0.26
0.06 First Trust US Equity Opp (ETF, 4*.59) FPX 0.57
0.54 Baron Real Estate (Instl, 5*,1.08) BREIX 1.05

100.07




Questions

1. I am looking for any advice on how to best manage the portfolio myself. Any useful advice is welcome. (It’s clear this website is a wealth of advice.)
2. I am very interested in anything worthwhile to manage taxes. (I am currently doing Roth conversions, trying to take advantage of tax situation.
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retiredjg
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Re: Asking Portfolio Questions

Post by retiredjg »

Oh my goodness. That was a lot of work!

Is this money still with the advisor? Or already moved?

Not sure you need to do Roth conversions, but am not sure about that yet. Have you been doing small conversions...perhaps to stay in the 12% tax bracket?
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Re: Learn how to manage my portfolio?

Post by LadyGeek »

In order to provide appropriate advice, it's best to keep all the information in one spot. I merged the OP's update back into the original thread. If you have any questions, ask them here.

Also, please check your Private Messages for information regarding your username. The link is in the top-right corner of the page and will look like this: Private messages 1 (generic link which goes to your inbox)

(Thanks to the member who reported the post and explained what's wrong.)

Update: The username has been resolved. In case anyone is concerned, this is not the OP's real name.
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Tamalak
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Re: Learn how to manage my portfolio?

Post by Tamalak »

Good lord what a mess. Your advisor was clearly the type to keep things looking as complicated as possible so you'd be dissuaded from doing things on your own.
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Gennaro Dillinger
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Re: Asking Portfolio Questions

Post by Gennaro Dillinger »

retiredjg wrote: Wed Jul 13, 2022 12:22 pm Oh my goodness. That was a lot of work!

Is this money still with the advisor? Or already moved?

Not sure you need to do Roth conversions, but am not sure about that yet. Have you been doing small conversions...perhaps to stay in the 12% tax bracket?
Hi,

Not moved just yet. I have been doing conversions up to the top of the bracket. Thanks
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Re: Learn how to manage my portfolio?

Post by retiredjg »

Lady Geek, can you unmerge this so that the information we need is at the top please?

In this case, merging makes it harder, not easier.
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Re: Learn how to manage my portfolio?

Post by retiredjg »

Before you move your money, be sure you have the basis (aka cost basis) of every holding you have in taxable.

At what brokerage is all this held?

Do you know what a buffered ETF is? Does anybody know what a buffered ETF is?
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Gennaro Dillinger
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Re: Learn how to manage my portfolio?

Post by Gennaro Dillinger »

retiredjg wrote: Wed Jul 13, 2022 3:25 pm Before you move your money, be sure you have the basis (aka cost basis) of every holding you have in taxable.

At what brokerage is all this held?

Do you know what a buffered ETF is? Does anybody know what a buffered ETF is?
Hi,

I do have cost basis for 99% but I will double check that. Thanks for reminding me

The bar for DTF seems like a reasonable solution Bing bonds were so bad but there you have it
https://www.barrons.com/amp/articles/bu ... 1624046451

Thanks
Zeno
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Re: Asking Portfolio Questions

Post by Zeno »

Following
Last edited by Zeno on Thu Jul 21, 2022 8:39 pm, edited 1 time in total.
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Re: Learn how to manage my portfolio?

Post by retiredjg »

Genarro, before anyone spends a lot of time on this, you need to tell us what kind of portfolio you want. Obviously, this is what you are accustomed to but it is in no way similar to what is usually suggested here at Bogleheads.

A typical BH portfolio would have 2 to 4 holdings in taxable and 1 to 3 in the other accounts. Maybe a few more, but certainly nothing like what you have. To do that would require a systematic liquidation of essentially everything. If you want to minimize taxes, it would take several years to "clean up".

You might be satisfied to just leave this as it is instead of making that large a change.

Or there might be some middle ground. Like getting rid of some but not everything.

You said you want to manage your own portfolio. What do you have in mind to manage? Something like what you have? Or something different?


I am a mix now though at 55% equity, 45% buffers and 1% debt
Also, did you mean 45% bonds? Was that a typo? Or do you and your advisor talk about "buffers"? If yes, what does it mean?
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Re: Learn how to manage my portfolio?

Post by LadyGeek »

retiredjg wrote: Wed Jul 13, 2022 3:22 pm Lady Geek, can you unmerge this so that the information we need is at the top please?

In this case, merging makes it harder, not easier.
Sure. The discussion is now "unmerged" (split) back into separate threads.

Both threads are in the Personal Investments forum (portfolio help).

I also locked the original thread Learn how to manage my portfolio? so we can continue the discussion here.
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Gennaro Dillinger
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Re: Asking Portfolio Questions

Post by Gennaro Dillinger »

Zeno wrote: Wed Jul 13, 2022 3:52 pm
Gennaro Dillinger wrote: Wed Jul 13, 2022 12:11 pm Desired Asset allocation: 60% stocks / 40% bonds. I am a mix now though at 55% equity, 45% buffers and 1% debt

...

$5.5M.

Questions

1. I am looking for any advice on how to best manage the portfolio myself. Any useful advice is welcome. (It’s clear this website is a wealth of advice.)
2. I am very interested in anything worthwhile to manage taxes. (I am currently doing Roth conversions, trying to take advantage of tax situation.
Welcome to the forum, and congratulations on: (1) that $5.5M; and (2) wanting to take control of your financial future.

You have received a lot of good advice above, and merely spending time reviewing the fundamental resources provided here, on the wiki and in the book should be invaluable. Following are my initial reactions and some questions.

1. You should evaluate your portfolio as part of your entire financial picture -- i.e., your annual financial needs, social security, health care coverage prior to age 65, and so on and so forth. Indeed, your portfolio -- supplemented by SS and perhaps a pension -- is designed to meet your financial needs in retirement. So just make sure you have done all of that other homework, too, instead of merely examining your portfolio in isolation. That homework, for example, may help inform your AA and how you are going to tap your portfolio in retirement. You also need to think about "where" your portfolio will reside going forward -- are you going to shift it to Vanguard, for example? Do you know how much you will need to withdraw annually or monthly in retirement? (By "buffers" above, I assume you mean "fixed income/bonds/cash.")

2. Everybody is going to weigh in and say that your portfolio is outrageously complex. And it is. Informed by your homework in #1 above, your next fundamental task is simplifying your portfolio in the most tax-efficient way possible. To that end, please see: https://www.bogleheads.org/wiki/Tax-eff ... _placement.

3. Related to #2 is that your portfolio is actually arguably quite risky in that, if my math is right, you have about 20% of your holdings in individual stocks, which includes about 9% in one stock alone (TSLA). I would spend some time thinking about exiting some of those positions in a tax-efficient way, if possible. Tax-loss harvesting may be possible. Before you leave your financial advisor, I'm curious if they can help you with some of these tax-efficient consolidations. The general advice here is to have the new home for your money (say, Vanguard) initiate the process of having the monies transferred away from a FA. Here, however, the portfolio is such a scattershot, I'm curious if you could sit down with the FA and say something like: "Look, I've decided to greatly simply my portfolio. Can you help me consolidate it in a tax-efficient way?" Or you might consider explaining the situation to Vanguard (or somebody else), describe what you have, say you want to shift it over and inquire if they can help you do so in a tax-efficient way. Paying somebody to help with all of this could be worthwhile.

4. Finally, and this will be anathema to many here (including myself) but if your FA is willing to work with you to simply matters, it may not be a crazy idea to stay with them for a transition period, at least. Taking full control of one's portfolio at this time of life (at the start of retirement, "sequence of return risks," etc.) and in current market conditions itself entails risks. You effectively want to hand yourself a check for $5.5M at the start of retirement and hope that you can come up to speed fast enough to not make mission-critical mistakes. You say you want to "manage" your portfolio, but generally the "BH way" is that you hold a handful of simple broad market funds that don't really need to be "managed." If one is doing this right, the BH portfolio works for you and you don't need to stress about it. Sure, maybe you check in once a year to see if the AA is out of whack. But generally the portfolio is "lazy" and works for you. Don't let the high volume of traffic here persuade you otherwise.

Good luck, and I'm certain that others here will weigh in with more specific advice.
1. Yes, I have already looked at the whole picture and we are OK with going ahead on addressing the investments. As mentioned, I have been trying to do Roth conversions so I am trying to exploit any advantage I have in a given tax bracket before Social Security kicks in. I anticipated trying to simplify this at the same time may present an issue.
2. Thanks!
3. Yes, my guy has always been a huge Tesla fan and to his credit we bought it very cheap. I have been with him a long time, I'm guessing having a heart to heart about simplifying things won't go down well. Also, if things proceed as I guess they might I'll be several years gone before I can look to really simplify things.
4. I've actually been retired 5 years now. Your point is well taken, though. I am not doing anything, certainly nothing rash. I am a long-term investor.

I really appreciate the input.
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Gennaro Dillinger
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Re: Learn how to manage my portfolio?

Post by Gennaro Dillinger »

retiredjg wrote: Wed Jul 13, 2022 3:52 pm Genarro, before anyone spends a lot of time on this, you need to tell us what kind of portfolio you want. Obviously, this is what you are accustomed to but it is in no way similar to what is usually suggested here at Bogleheads.

A typical BH portfolio would have 2 to 4 holdings in taxable and 1 to 3 in the other accounts. Maybe a few more, but certainly nothing like what you have. To do that would require a systematic liquidation of essentially everything. If you want to minimize taxes, it would take several years to "clean up".

You might be satisfied to just leave this as it is instead of making that large a change.

Or there might be some middle ground. Like getting rid of some but not everything.

You said you want to manage your own portfolio. What do you have in mind to manage? Something like what you have? Or something different?


I am a mix now though at 55% equity, 45% buffers and 1% debt
Also, did you mean 45% bonds? Was that a typo? Or do you and your advisor talk about "buffers"? If yes, what does it mean?
I think you're right - I would love to wave a wand and have it all tight and simple but that is going to take some effort. As mentioned, I have been trying to do Roth conversions so I am trying to exploit any advantage I have in a given tax bracket before Social Security kicks in. I anticipated trying to simplify this at the same time may present an issue.
The 'buffers' are ETFs that cap the upside and downside.Buffer ETFs are funds that seek to provide investors with the upside of an asset’s returns (generally up to a capped percentage) while also providing downside protection on the first predetermined percentage of losses (for example, on the first 10% or 15%)

I want to manage something different - something more BH for sure. Getting there looks like it'll be an adventure.

I really appreciate the input.
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Gennaro Dillinger
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Re: Learn how to manage my portfolio?

Post by Gennaro Dillinger »

Gennaro Dillinger wrote: Wed Jul 13, 2022 3:28 pm
retiredjg wrote: Wed Jul 13, 2022 3:25 pm Before you move your money, be sure you have the basis (aka cost basis) of every holding you have in taxable.

At what brokerage is all this held?

Do you know what a buffered ETF is? Does anybody know what a buffered ETF is?
Hi,

I do have cost basis for 99% but I will double check that. Thanks for reminding me

The bar for DTF seems like a reasonable solution Bing bonds were so bad but there you have it
https://www.barrons.com/amp/articles/bu ... 1624046451

Thanks
In case I wasn't clear, The 'buffers' are ETFs that cap the upside and downside.Buffer ETFs are funds that seek to provide investors with the upside of an asset’s returns (generally up to a capped percentage) while also providing downside protection on the first predetermined percentage of losses (for example, on the first 10% or 15%)
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retiredjg
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Re: Asking Portfolio Questions [Portfolio help request]

Post by retiredjg »

A quick look at your list, if I captured all the bits and pieces right....

I found 19.06% in Buffered ETFs. I'm still not sure what these are, but I am pretty sure they should NOT be counted on the bond/fixed income side of the portfolio.

28.05% in Bonds, CDs, and other fixed income assets. This is a pretty low number for your age and being in retirement. However, you apparently have more money than you will ever need and perhaps you are investing for heirs. If you continue to be in the 12% bracket, you should probably not be using muni bonds in your taxable account.

The rest is stocks and stock funds/ETFs with a few mutual funds thrown in there for fun.


I've been around awhile and never heard of "buffered ETFs" that I recall. That pretty much means they are some kind of complex investment that most Bogleheads would simply not use. They also have high expense ratios - much higher than most here would consider using.

I see you have posted some things. I'll stop here for now to read what you have said.
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retiredjg
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Re: Asking Portfolio Questions [Portfolio help request]

Post by retiredjg »

I'm glad you think of this as an adventure! Yes, it could be.

I think you have already found out that you are not going to get anywhere doing conversions in the 12% bracket. It appears you have about $1.6 million in tax deferred accounts. If the account does not grow at all, your first RMD is going to be about $58k. That's actually not too bad, but I the dividends and capital gains distributions from your taxable accounts (again, if nothing grows) is going to put you in a higher tax bracket than 12%. So larger conversions, at least for a few years, might be in order. Staying under 12% now may be false economy.

There is no reason you have to get your tax-deferred accounts to $0. But getting them under $1 million and keeping mostly bonds in there might make your RMDs more pleasant.

On the other hand, if you stop doing conversions, depending on your income and where it is from, you might be able to sell stuff in the taxable accounts and pay 0% tax on it. Are you familiar with the 0% tax bracket for long term cap gains and qualified dividends?

Give us an idea of whether you have any losses you can sell from the taxable accounts. If yes, how much?

Just to get this in the thread so I don't forget later, I think you have some funds that will not be transferrable to another brokerage. Also, where is this money located right now?
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retiredjg
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Re: Asking Portfolio Questions [Portfolio help request]

Post by retiredjg »

If you and your wife are charitable givers, you can unload some of these appreciated shares to your charities, either directly or through a donor advised fund.

You get rid of the capital gains but do not pay any taxes.
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Re: Asking Portfolio Questions

Post by Zeno »

Gennaro Dillinger wrote: Wed Jul 13, 2022 4:55 pm
1. Yes, I have already looked at the whole picture and we are OK with going ahead on addressing the investments. As mentioned, I have been trying to do Roth conversions so I am trying to exploit any advantage I have in a given tax bracket before Social Security kicks in. I anticipated trying to simplify this at the same time may present an issue.
2. Thanks!
3. Yes, my guy has always been a huge Tesla fan and to his credit we bought it very cheap. I have been with him a long time, I'm guessing having a heart to heart about simplifying things won't go down well. Also, if things proceed as I guess they might I'll be several years gone before I can look to really simplify things.
4. I've actually been retired 5 years now. Your point is well taken, though. I am not doing anything, certainly nothing rash. I am a long-term investor.

I really appreciate the input.
I think you are in great shape, OP.
Last edited by Zeno on Thu Jul 21, 2022 8:35 pm, edited 1 time in total.
HomeStretch
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Re: Asking Portfolio Questions [Portfolio help request]

Post by HomeStretch »

Welcome to the forum! Great job on assembling your portfolio information given its numerous holdings!

Your FA has created a complicated high-expense portfolio. You can greatly simplify your portfolio and significantly reduce your investment costs if you so desire.

You don’t mention your advisor fees but it wouldn’t surprise me if you were paying 2% annually in advisor fees and ERs. If your FA is managing your entire $5.5 million portfolio, 2% is $110k/year. That’s a big incentive to DIY as quickly as possible.

It looks like [edit ~30% 60%] of your portfolio is in your/spouse’s traditional/Roth IRAs. There are no tax consequences for changing holdings in IRAs. Have you considered selling everything but the cash/CDs now and moving everything in these 4 IRAs to a low-cost brokerage such as Fidelity or Schwab? You could then reinvest the cash in low-cost diversified equity and bond funds.

Simplifying the Taxable accounts will take some work and time but it can be done. You can start by instructing your FA not to reinvest any dividends and let it go to cash. You can also sell any holdings or tax lots with a loss or minimal gain and let the proceeds go to cash. Then transfer out this cash + CDs/individual munis to a new Taxable account at Fidelity or Schwab and invest in low-cost diversified mutual funds/ETFs. Edit - check with the new brokerage to see if everything else can be transferred in-kind.

What is the total unrealized gain or loss on your/spouse’s Taxable accounts? How much of the gain or loss is short-term v. long-term?

P.S. if you do move to Fidelity or Schwab, be sure to negotiate for a bonus, reimbursement of any transfer/account closure fees and waive any selling fees for old holdings transfer in-kind charged by your FA.
Last edited by HomeStretch on Thu Jul 14, 2022 7:55 am, edited 2 times in total.
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celia
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Re: Asking Portfolio Questions [Portfolio help request]

Post by celia »

OP, what fee (commission) does your advisor charge you to buy or sell an asset? I’m wondering if it would be more cost-effective to sell with the advisor or elsewhere, although those “buffered ETFs” might be proprietary and can’t be moved to another custodian. Is there a commission if you buy or sell a holding on your own? Is there a fee when a buffered asset meets it’s expiration date and rolls over to new terms? (There could be a “sell” going out of one buffer and a “buy” going into a new buffer.)

I counted 106 holdings across all your accounts. 106! That’s a ton of commissions you probably already paid and you propbably paid again each time you purchased more shares of an existing holding.

It is obvious to me that the advisor is probably making lots of money off of you just by putting relatively small amounts in different funds. The commission is probably the same if you invest $5,000 or $1,000,000 in a new fund. But to invest a million in two hundred $5,000 chunks would use up a lot of your money just on the commissions.
:oops:

To simplify this in our heads, can you list the account names again (below) with only their current value? (Put the value first on each line so we can add some of them up in our head.)
You can start with this:


(Value) Joint Account - Taxable

(Value) Joint Account - Taxable

(Value) Rollover IRA - Gennaro

(Value) Rollover IRA - Mary

(Value) Roth IRA - Gennaro

(Value) Roth IRA - Mary
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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Re: Asking Portfolio Questions [Portfolio help request]

Post by LadyGeek »

An observation for the experienced investors - My guess is that the advisor is attempting to use direct indexing and is probably why the OP has all those funds. There's nothing wrong with the approach - except for the higher fees. FYI - Fidelity and Schwab also use direct indexing.
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Re: Asking Portfolio Questions [Portfolio help request]

Post by retiredjg »

Here are the numbers I got yesterday. There is one position in Mary's Rollover IRA that does not have a percentage.

Joint taxable 59.26%

Joint taxable 9.24%

Gen Rollover 15.22%

Mary Rollover 13.59%

Gen Roth IRA .36%

Mary Roth IRA 2.14%

Total = 99.81% (so the position without a percentage is probably .26%). I only added these once so there might be some small errors, but I think it is pretty close to right.

Things I don't understand yet...why are my numbers so very different from what Homestretch got for the IRAs? And where are the rest of the "buffereds" that Gennaro mentioned? I think bonds and buffereds may be lumped together in Gennaro's ratios.

I get 52.44% stocks, 19.06 Buffered ETFs (based on stock indexes), and 28.5% bonds/fixed.


Agree that this portfolio may be direct indexing, but that would be a particularly difficult strategy for one to start learning at age 58 and carry on into later years.
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Re: Asking Portfolio Questions

Post by Gennaro Dillinger »

Zeno wrote: Wed Jul 13, 2022 6:31 pm
Gennaro Dillinger wrote: Wed Jul 13, 2022 4:55 pm
1. Yes, I have already looked at the whole picture and we are OK with going ahead on addressing the investments. As mentioned, I have been trying to do Roth conversions so I am trying to exploit any advantage I have in a given tax bracket before Social Security kicks in. I anticipated trying to simplify this at the same time may present an issue.
2. Thanks!
3. Yes, my guy has always been a huge Tesla fan and to his credit we bought it very cheap. I have been with him a long time, I'm guessing having a heart to heart about simplifying things won't go down well. Also, if things proceed as I guess they might I'll be several years gone before I can look to really simplify things.
4. I've actually been retired 5 years now. Your point is well taken, though. I am not doing anything, certainly nothing rash. I am a long-term investor.

I really appreciate the input.
I think you are in great shape, OP. For all the criticizing we all do here of FA's -- and while I am unable to make sense of the portfolio he has constructed for you -- he arguably has played some role in getting you to $5.5M. You and I are the same age but you have me beat in that department. Plus, I'm still working. So, on reflection, I'm in no position to be giving you suggestions. I should be taking advice from you.

It sounds as if you have a great relationship with your FA. Hopefully he can work with you going forward on any kind of transition you want to make.

In the meantime, a lot of folks here -- all smarter than I -- can provide some guidance along the way.

It is wonderful to have you here.
Thanks! I have gotten some great advice here already, I wish I found this years ago.
My FA is a good guy and I genuinely believe he was working for us in a manner we wanted.
Best regards
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Re: Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

LadyGeek wrote: Thu Jul 14, 2022 6:00 am An observation for the experienced investors - My guess is that the advisor is attempting to use direct indexing and is probably why the OP has all those funds. There's nothing wrong with the approach - except for the higher fees. FYI - Fidelity and Schwab also use direct indexing.
Thanks
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Re: Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

retiredjg wrote: Wed Jul 13, 2022 5:10 pm A quick look at your list, if I captured all the bits and pieces right....

I found 19.06% in Buffered ETFs. I'm still not sure what these are, but I am pretty sure they should NOT be counted on the bond/fixed income side of the portfolio.

28.05% in Bonds, CDs, and other fixed income assets. This is a pretty low number for your age and being in retirement. However, you apparently have more money than you will ever need and perhaps you are investing for heirs. If you continue to be in the 12% bracket, you should probably not be using muni bonds in your taxable account.

The rest is stocks and stock funds/ETFs with a few mutual funds thrown in there for fun.


I've been around awhile and never heard of "buffered ETFs" that I recall. That pretty much means they are some kind of complex investment that most Bogleheads would simply not use. They also have high expense ratios - much higher than most here would consider using.

I see you have posted some things. I'll stop here for now to read what you have said.
Why no muni bonds in taxable account due to tax bracket? Thanks!
(I think I answered the buffered ETF question otherwise.I'm still plowing through all my mail.)
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Re: Asking Portfolio Questions [Portfolio help request]

Post by retiredjg »

Gennaro Dillinger wrote: Thu Jul 14, 2022 7:35 am Why no muni bonds in taxable account due to tax bracket? Thanks!
(I think I answered the buffered ETF question otherwise.I'm still plowing through all my mail.)
Munis are (almost always) tax-exempt bonds. Tax-exempt bonds are designed for people in higher tax brackets, not the lowest tax bracket.

In general, a person in a high tax bracket gets more return using a tax-exempt bond. A person in a low tax bracket will get less return by using the tax-exempt bonds. Having said that, they are not actually doing you any "harm", just not working as hard as they could be.
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Re: Asking Portfolio Questions [Portfolio help request]

Post by retiredjg »

While you are answering questions, here are a few more.

1. What do you intend to do with your money in the long run? Your strategy will be different if the money is going to charity vs heirs. If the money is going to heirs, do you have a strong preference for leaving them Roth IRA instead of traditional IRA?

2. What are you using for health insurance currently?

3. Where is your current income coming from?

4. About what are your annual expenses? (or another way to ask what I want to know - about how much have you been converting to Roth each year?)
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Re: Asking Portfolio Questions [Portfolio help request]

Post by HomeStretch »

retiredjg wrote: Thu Jul 14, 2022 7:19 am Here are the numbers I got yesterday. There is one position in Mary's Rollover IRA that does not have a percentage.

Joint taxable 59.26%

Joint taxable 9.24%

Gen Rollover 15.22%

Mary Rollover 13.59%

Gen Roth IRA .36%

Mary Roth IRA 2.14%

Total = 99.81% (so the position without a percentage is probably .26%). I only added these once so there might be some small errors, but I think it is pretty close to right.

Things I don't understand yet...why are my numbers so very different from what Homestretch got for the IRAs? …
I see now that I incorrectly added in two “est cap %” when calculating the % of OP’s portfolio in IRAs. I agree with you that the split is more like 70% Taxable and 30% IRAs.

OP, as suggested by Celia, please add the % held in each account to your original post. You can add it to the account name perhaps like this:

Joint Account 1 - 59.26%
% Joint Account - Non-Qualified Symbol Expense Ratio
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Re: Asking Portfolio Questions [Portfolio help request]

Post by LadyGeek »

HomeStretch wrote: Thu Jul 14, 2022 7:49 am OP, as suggested by Celia, please add the % held in each account to your original post.
And when you (OP) are done, please bump the thread (add a post) to let everyone know that the first post was updated.
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Re: Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

retiredjg wrote: Wed Jul 13, 2022 5:24 pm I'm glad you think of this as an adventure! Yes, it could be.

I think you have already found out that you are not going to get anywhere doing conversions in the 12% bracket. It appears you have about $1.6 million in tax deferred accounts. If the account does not grow at all, your first RMD is going to be about $58k. That's actually not too bad, but I the dividends and capital gains distributions from your taxable accounts (again, if nothing grows) is going to put you in a higher tax bracket than 12%. So larger conversions, at least for a few years, might be in order. Staying under 12% now may be false economy.

There is no reason you have to get your tax-deferred accounts to $0. But getting them under $1 million and keeping mostly bonds in there might make your RMDs more pleasant.

On the other hand, if you stop doing conversions, depending on your income and where it is from, you might be able to sell stuff in the taxable accounts and pay 0% tax on it. Are you familiar with the 0% tax bracket for long term cap gains and qualified dividends?

Give us an idea of whether you have any losses you can sell from the taxable accounts. If yes, how much?

Just to get this in the thread so I don't forget later, I think you have some funds that will not be transferrable to another brokerage. Also, where is this money located right now?
Good point, I was 22% the previous year for taxes. (Had to rebalance and had large capital gains) I do believe taxes will be higher in the future so I may fill up the 22% (24%?) this year.

Correct about the first RMD for Mary - I guess I had it in my head that Roth conversions would be a priority for me due to the tax implication and all the other benefits I see there (I won't get off on Roth's right now! I'm going to check everyone else's opinions on this website first.)

Why bonds in the tax deferred? Why 'under a million' ok for tax-deferred? Back to Roth's - I see them as a huge benefit. I guess I felt even emptying them was a benefit.

I am not 0% familiar...I am guessing I can look that up in here?

In the two taxable accounts about a total of $91k long-term losses I could take today, some short I didn't count.

I'm not sure what ones might not transfer to another brokerage yet, sorry, I'll have to figure it out. All of this is TDA.

THANKS!!
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Re: Asking Portfolio Questions [Portfolio help request]

Post by retiredjg »

Gennaro Dillinger wrote: Thu Jul 14, 2022 8:26 am
retiredjg wrote: Wed Jul 13, 2022 5:24 pm I'm glad you think of this as an adventure! Yes, it could be.

I think you have already found out that you are not going to get anywhere doing conversions in the 12% bracket. It appears you have about $1.6 million in tax deferred accounts. If the account does not grow at all, your first RMD is going to be about $58k. That's actually not too bad, but I the dividends and capital gains distributions from your taxable accounts (again, if nothing grows) is going to put you in a higher tax bracket than 12%. So larger conversions, at least for a few years, might be in order. Staying under 12% now may be false economy.

There is no reason you have to get your tax-deferred accounts to $0. But getting them under $1 million and keeping mostly bonds in there might make your RMDs more pleasant.

On the other hand, if you stop doing conversions, depending on your income and where it is from, you might be able to sell stuff in the taxable accounts and pay 0% tax on it. Are you familiar with the 0% tax bracket for long term cap gains and qualified dividends?

Give us an idea of whether you have any losses you can sell from the taxable accounts. If yes, how much?

Just to get this in the thread so I don't forget later, I think you have some funds that will not be transferrable to another brokerage. Also, where is this money located right now?
Good point, I was 22% the previous year for taxes. (Had to rebalance and had large capital gains) I do believe taxes will be higher in the future so I may fill up the 22% (24%?) this year.
This is the last year you can go into the 24% tax bracket without triggering IRMAA (which determines what Mary will pay for Medicare). Or the last year may have already occurred. It depends on when Mary turns 63. The income in the year in which she turns 63 will determine what she pays for Medicare when she turns 65. There is always a 2 year look-back.

If you are not familiar with IRMAA, put that on your list to learn about. Basic info - the less you earn, the less you pay for Medicare coverage (although none of us pay the full cost of Medicare).

Correct about the first RMD for Mary - I guess I had it in my head that Roth conversions would be a priority for me due to the tax implication and all the other benefits I see there (I won't get off on Roth's right now! I'm going to check everyone else's opinions on this website first.)
I'm not saying that reducing RMDs should fall off your radar. I'm saying you may have to choose between capital gains and Roth conversions. I don't think any of us, including you, know enough yet to suggest that one is better for you than the other.

Why bonds in the tax deferred?
In general, because of how income is taxed, bonds are more "tax-efficient" in a tax-deferred account than in a taxable account. There is more to this story but that's enough for right now. A second reason is to slow the growth of the tax-deferred accounts so that RMDs will will be lower.


Why 'under a million' ok for tax-deferred?
Just my best guess. A million in tax-deferred will start with an RMD of about $37k which will not be too burdensome for many retirees.


I am not 0% familiar...I am guessing I can look that up in here?
If your taxable income, married filing jointly, is less than $$83,350 (or $109,250 before standard deduction), then all your long term gains and qualified dividends are taxed at the 0% tax rate. I'm thinking you can unload some things from the taxable accounts without paying taxes. But this is the same space that you are considering using for Roth conversions. That's where your choices will come in.

In the two taxable accounts about a total of $91k long-term losses I could take today, some short I didn't count.
Well this is good. Are you familiar with how capital gains are taxed? Are you aware that you can use your $91k in losses to offset $91k in taxable gains and pay no tax on those gains?

I'm not sure what ones might not transfer to another brokerage yet, sorry, I'll have to figure it out. All of this is TDA.
Yes, there is a lot to learn and do, both before and after you decide what your goal is. The way to eat an elephant is one bite at a time. :happy


One last thing.
Good point, I was 22% the previous year for taxes. (Had to rebalance and had large capital gains)
Capital gains (except short) have their own tax brackets of 0%, 15%, and 20%. Gains (except short term) do not increase the tax bracket for your ordinary income (salary, interest, pension, bond dividends, etc.). Ordinary income is taxed at 0%, 10%, 12%, 22%, 24% 32%, 35%, and 37%.
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Re: Asking Portfolio Questions [Portfolio help request]

Post by HomeStretch »

Gennaro Dillinger wrote: Thu Jul 14, 2022 8:26 am In the two taxable accounts about a total of $91k long-term losses I could take today, some short I didn't count.
Consider using these losses to offset gains as you sell holdings to simplify your portfolio.

If in the future (if/when you manage your own accounts) you have capital losses in a Taxable account, it may be to your financial advantage to tax loss harvest (TLH). See BH wiki page on TLH:
https://www.bogleheads.org/wiki/Tax_loss_harvesting
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Re: Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

retiredjg wrote: Thu Jul 14, 2022 9:25 am
Gennaro Dillinger wrote: Thu Jul 14, 2022 8:26 am
retiredjg wrote: Wed Jul 13, 2022 5:24 pm I'm glad you think of this as an adventure! Yes, it could be.

I think you have already found out that you are not going to get anywhere doing conversions in the 12% bracket. It appears you have about $1.6 million in tax deferred accounts. If the account does not grow at all, your first RMD is going to be about $58k. That's actually not too bad, but I the dividends and capital gains distributions from your taxable accounts (again, if nothing grows) is going to put you in a higher tax bracket than 12%. So larger conversions, at least for a few years, might be in order. Staying under 12% now may be false economy.

There is no reason you have to get your tax-deferred accounts to $0. But getting them under $1 million and keeping mostly bonds in there might make your RMDs more pleasant.

On the other hand, if you stop doing conversions, depending on your income and where it is from, you might be able to sell stuff in the taxable accounts and pay 0% tax on it. Are you familiar with the 0% tax bracket for long term cap gains and qualified dividends?

Give us an idea of whether you have any losses you can sell from the taxable accounts. If yes, how much?

Just to get this in the thread so I don't forget later, I think you have some funds that will not be transferrable to another brokerage. Also, where is this money located right now?
Good point, I was 22% the previous year for taxes. (Had to rebalance and had large capital gains) I do believe taxes will be higher in the future so I may fill up the 22% (24%?) this year.
This is the last year you can go into the 24% tax bracket without triggering IRMAA (which determines what Mary will pay for Medicare). Or the last year may have already occurred. It depends on when Mary turns 63. The income in the year in which she turns 63 will determine what she pays for Medicare when she turns 65. There is always a 2 year look-back.

If you are not familiar with IRMAA, put that on your list to learn about. Basic info - the less you earn, the less you pay for Medicare coverage (although none of us pay the full cost of Medicare).

Correct about the first RMD for Mary - I guess I had it in my head that Roth conversions would be a priority for me due to the tax implication and all the other benefits I see there (I won't get off on Roth's right now! I'm going to check everyone else's opinions on this website first.)
I'm not saying that reducing RMDs should fall off your radar. I'm saying you may have to choose between capital gains and Roth conversions. I don't think any of us, including you, know enough yet to suggest that one is better for you than the other.

Why bonds in the tax deferred?
In general, because of how income is taxed, bonds are more "tax-efficient" in a tax-deferred account than in a taxable account. There is more to this story but that's enough for right now. A second reason is to slow the growth of the tax-deferred accounts so that RMDs will will be lower.


Why 'under a million' ok for tax-deferred?
Just my best guess. A million in tax-deferred will start with an RMD of about $37k which will not be too burdensome for many retirees.


I am not 0% familiar...I am guessing I can look that up in here?
If your taxable income, married filing jointly, is less than $$83,350 (or $109,250 before standard deduction), then all your long term gains and qualified dividends are taxed at the 0% tax rate. I'm thinking you can unload some things from the taxable accounts without paying taxes. But this is the same space that you are considering using for Roth conversions. That's where your choices will come in.

In the two taxable accounts about a total of $91k long-term losses I could take today, some short I didn't count.
Well this is good. Are you familiar with how capital gains are taxed? Are you aware that you can use your $91k in losses to offset $91k in taxable gains and pay no tax on those gains?

I'm not sure what ones might not transfer to another brokerage yet, sorry, I'll have to figure it out. All of this is TDA.
Yes, there is a lot to learn and do, both before and after you decide what your goal is. The way to eat an elephant is one bite at a time. :happy


One last thing.
Good point, I was 22% the previous year for taxes. (Had to rebalance and had large capital gains)
Capital gains (except short) have their own tax brackets of 0%, 15%, and 20%. Gains (except short term) do not increase the tax bracket for your ordinary income (salary, interest, pension, bond dividends, etc.). Ordinary income is taxed at 0%, 10%, 12%, 22%, 24% 32%, 35%, and 37%.
Thanks so much, again!

I was aware of IRMAA but honestly at this point with all the balls in the air I was only going to worry about it if I could manage not exceeding the next income level, whatever that might be, when I get towards the end of a year and see where things are tracking.

The window on the lower tax situation in early retirement is going to run out. I am debating RMD vs. capital gains to simplify the portfolio. I guess I still feel like RMDs give me more bang for the buck. (I guess inside the IRAs themselves I can ‘simplify’ things there with some index funds with no tax implication in the meantime.)

Ah, on 0% capital gains I see your point. Thanks. Yes, I’m aware of losses to offset gains.

Yes on capital gains vs. ordinary income.
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Re: Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

HomeStretch wrote: Thu Jul 14, 2022 1:08 pm
Gennaro Dillinger wrote: Thu Jul 14, 2022 8:26 am In the two taxable accounts about a total of $91k long-term losses I could take today, some short I didn't count.
Consider using these losses to offset gains as you sell holdings to simplify your portfolio.

If in the future (if/when you manage your own accounts) you have capital losses in a Taxable account, it may be to your financial advantage to tax loss harvest (TLH). See BH wiki page on TLH:
https://www.bogleheads.org/wiki/Tax_loss_harvesting
Thanks!
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Re: Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

retiredjg wrote: Thu Jul 14, 2022 7:47 am While you are answering questions, here are a few more.

1. What do you intend to do with your money in the long run? Your strategy will be different if the money is going to charity vs heirs. If the money is going to heirs, do you have a strong preference for leaving them Roth IRA instead of traditional IRA?

2. What are you using for health insurance currently?

3. Where is your current income coming from?

4. About what are your annual expenses? (or another way to ask what I want to know - about how much have you been converting to Roth each year?)
1. I plan on spending it all or leaving my wife with it. ;) I do have heirs but no kids, I'm more concerned with my own efficiency with the whole portfolio while I'm breathing - leaving anything in good shape for them is nice but secondary at the moment.

2. I have lifetime insurance from a company I worked for which changes when we become Medicare eligible. Right now I have insurance through the company which I have a monthly payment of $550 that covers both of us. When we become Medical eligible my payment stops and they fund an HRA account for life.

3. The first and largest non-qualified joint account.

4. Last year I converted $40K into Mary's Roth.

Thanks
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Re: Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

retiredjg wrote: Wed Jul 13, 2022 5:27 pm If you and your wife are charitable givers, you can unload some of these appreciated shares to your charities, either directly or through a donor advised fund.

You get rid of the capital gains but do not pay any taxes.
good tip!
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Re: Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

HomeStretch wrote: Wed Jul 13, 2022 7:02 pm Welcome to the forum! Great job on assembling your portfolio information given its numerous holdings!

Your FA has created a complicated high-expense portfolio. You can greatly simplify your portfolio and significantly reduce your investment costs if you so desire.

You don’t mention your advisor fees but it wouldn’t surprise me if you were paying 2% annually in advisor fees and ERs. If your FA is managing your entire $5.5 million portfolio, 2% is $110k/year. That’s a big incentive to DIY as quickly as possible.

It looks like [edit ~30% 60%] of your portfolio is in your/spouse’s traditional/Roth IRAs. There are no tax consequences for changing holdings in IRAs. Have you considered selling everything but the cash/CDs now and moving everything in these 4 IRAs to a low-cost brokerage such as Fidelity or Schwab? You could then reinvest the cash in low-cost diversified equity and bond funds.

Simplifying the Taxable accounts will take some work and time but it can be done. You can start by instructing your FA not to reinvest any dividends and let it go to cash. You can also sell any holdings or tax lots with a loss or minimal gain and let the proceeds go to cash. Then transfer out this cash + CDs/individual munis to a new Taxable account at Fidelity or Schwab and invest in low-cost diversified mutual funds/ETFs. Edit - check with the new brokerage to see if everything else can be transferred in-kind.

What is the total unrealized gain or loss on your/spouse’s Taxable accounts? How much of the gain or loss is short-term v. long-term?

P.S. if you do move to Fidelity or Schwab, be sure to negotiate for a bonus, reimbursement of any transfer/account closure fees and waive any selling fees for old holdings transfer in-kind charged by your FA.
Advisors fees work out to about 0.75% overall. It’s a bit involved but if you think it helps knowing, let me know, I can send it to you. Wouldn’t want to post it publicly…longish story.

Yes, I am going to do the DIY switch soonish but not until I’m sure I have all my ducks in a row.

The IRAs, I am absolutely going to do that. I am in TDA right now – I thought that was about par for others like Schwab and Fidelity?
-I’m looking at funds right now if you have any you think worth considering…I was reading up on VOO and VTI recently.

Thanks, if I need to switch brokerages I’ll make sure it’s all good before taking action.

At the moment it looks like about $74K short-term and $94k long-term.

Thanks – hoping TDA is ok but I appreciate the tip should I move.

Thanks for everything!
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Re: Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

celia wrote: Thu Jul 14, 2022 2:17 am OP, what fee (commission) does your advisor charge you to buy or sell an asset? I’m wondering if it would be more cost-effective to sell with the advisor or elsewhere, although those “buffered ETFs” might be proprietary and can’t be moved to another custodian. Is there a commission if you buy or sell a holding on your own? Is there a fee when a buffered asset meets it’s expiration date and rolls over to new terms? (There could be a “sell” going out of one buffer and a “buy” going into a new buffer.)

I counted 106 holdings across all your accounts. 106! That’s a ton of commissions you probably already paid and you propbably paid again each time you purchased more shares of an existing holding.

It is obvious to me that the advisor is probably making lots of money off of you just by putting relatively small amounts in different funds. The commission is probably the same if you invest $5,000 or $1,000,000 in a new fund. But to invest a million in two hundred $5,000 chunks would use up a lot of your money just on the commissions.
:oops:

To simplify this in our heads, can you list the account names again (below) with only their current value? (Put the value first on each line so we can add some of them up in our head.)
You can start with this:


(Value) Joint Account - Taxable

(Value) Joint Account - Taxable

(Value) Rollover IRA - Gennaro

(Value) Rollover IRA - Mary

(Value) Roth IRA - Gennaro

(Value) Roth IRA - Mary
Advisors’ fees work out to about 0.75% overall. It’s a bit involved but if you think it helps knowing, let me know, I can send it to you. Wouldn’t want to post it publicly…longish story. The only charge he give me is the fee, there are no other charges. (Although I’m still digging)
I don’t know about the buffered ETFs moving yet but will find out.
\
$3,162,981 Joint Account - Taxable

$507,693 Joint Account - Taxable

$839,730 Rollover IRA - Gennaro

$822,549 Rollover IRA - Mary

$19,491 Roth IRA - Gennaro

$116,728 Roth IRA - Mary

Thanks!
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Gennaro Dillinger
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Re: Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

retiredjg wrote: Thu Jul 14, 2022 7:19 am Here are the numbers I got yesterday. There is one position in Mary's Rollover IRA that does not have a percentage.

Joint taxable 59.26%

Joint taxable 9.24%

Gen Rollover 15.22%

Mary Rollover 13.59%

Gen Roth IRA .36%

Mary Roth IRA 2.14%

Total = 99.81% (so the position without a percentage is probably .26%). I only added these once so there might be some small errors, but I think it is pretty close to right.

Things I don't understand yet...why are my numbers so very different from what Homestretch got for the IRAs? And where are the rest of the "buffereds" that Gennaro mentioned? I think bonds and buffereds may be lumped together in Gennaro's ratios.

I get 52.44% stocks, 19.06 Buffered ETFs (based on stock indexes), and 28.5% bonds/fixed.


Agree that this portfolio may be direct indexing, but that would be a particularly difficult strategy for one to start learning at age 58 and carry on into later years.
Re indexing, I think you're right and I probably don't care to do it. I'm all for simplification. Thanks
HomeStretch
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Re: Asking Portfolio Questions [Portfolio help request]

Post by HomeStretch »

Gennaro Dillinger wrote: Thu Jul 14, 2022 2:49 pm … Advisors fees work out to about 0.75% overall. …
+ the fund ERs (some of your funds have high-ERs). Both reduce your investment returns so reducing both is financially attractive.
The IRAs, I am absolutely going to do that. I am in TDA right now – I thought that was about par for others like Schwab and Fidelity?
Are all 6 of your/spouse’s accounts at TDA? Are all 6 managed by the FA?

TDA is fine. If you can just move your accounts over to the TDA DIY side of the house, your changeover to DIY should be much easier. Schwab acquired TDA so at some point I believe your TDA accounts will migrate to Schwab.
… I’m looking at funds right now if you have any you think worth considering…I was reading up on VOO and VTI recently. …
Those are good diversified equity Vanguard ETFs. Make sure you can buy them transaction-fee free at TDA or Schwab.

If your accounts will migrate to the Schwab platform this year, another option is to use Schwab’s funds/ETFs. For example, a BH three-fund portfolio using Schwab funds would be:
SWTSX - Total US Stock Market Fund
SWISX - Total International Stock Market Fund
SWAGX - US Bond Fund
… At the moment it looks like about $74K short-term and $94k long-term. …
$168k in capital losses + any space you have remaining in the 0% capital gains tax bracket will offset a lot of gains from a portfolio recalibration. Excluding the $168k in losses, what is the remaining total gain on your portfolio?
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Gennaro Dillinger
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Re: Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

HomeStretch wrote: Thu Jul 14, 2022 4:18 pm
Gennaro Dillinger wrote: Thu Jul 14, 2022 2:49 pm … Advisors fees work out to about 0.75% overall. …
+ the fund ERs (some of your funds have high-ERs). Both reduce your investment returns so reducing both is financially attractive.
The IRAs, I am absolutely going to do that. I am in TDA right now – I thought that was about par for others like Schwab and Fidelity?
Are all 6 of your/spouse’s accounts at TDA? Are all 6 managed by the FA?

TDA is fine. If you can just move your accounts over to the TDA DIY side of the house, your changeover to DIY should be much easier. Schwab acquired TDA so at some point I believe your TDA accounts will migrate to Schwab.
… I’m looking at funds right now if you have any you think worth considering…I was reading up on VOO and VTI recently. …
Those are good diversified equity Vanguard ETFs. Make sure you can buy them transaction-fee free at TDA or Schwab.

If your accounts will migrate to the Schwab platform this year, another option is to use Schwab’s funds/ETFs. For example, a BH three-fund portfolio using Schwab funds would be:
SWTSX - Total US Stock Market Fund
SWISX - Total International Stock Market Fund
SWAGX - US Bond Fund
… At the moment it looks like about $74K short-term and $94k long-term. …
$168k in capital losses + any space you have remaining in the 0% capital gains tax bracket will offset a lot of gains from a portfolio recalibration. Excluding the $168k in losses, what is the remaining total gain on your portfolio?
All six accounts are TDA.

I assume with the 3 Schwab you mention that they are used in proportion to whatever mix you want e.g. 60/40 equity debt would be 30 SWTSX, 30SWISX and 40 SWAGX?

Looking right now across the two taxable non-qualified accounts there is a possible $1,229,000 in gains I could take.

Thanks
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retiredjg
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Re: Asking Portfolio Questions [Portfolio help request]

Post by retiredjg »

Here is an idea to help you start thinking.

joint taxable 57.8%
Total stock index
Total international stock index
legacy bucket of diversified stocks because you won't be able to get rid of them all
bonds and fixed income assets as needed to achieve your 40% allocation (type to be determined)

Joint taxable 9.3%
Total stock index
Total international stock index
legacy bucket of diversified stocks because you won't be able to get rid of them all
bonds and fixed income assets as needed to achieve your 40% allocation (type to be determined)

Gennaro Rollover IRA 15.4%
all bonds

Mary Rollover IRA 15%
all bonds

Gennaro Roth IRA .36%
Extended Market Index ("completes" the 500 index)

Mary Roth IRA 2.1%
500 index


The tIRAs and Roth IRAs can be changed immediately with no tax consequences. The taxable accounts would take some time unless you want to pull off the band-aid and pay a lot. Even then, I don't think I'd go over $250k income each year - because that would trigger the NITT, an additional 3.8% tax on your gains.

What to do with the taxable account?

1. Take your $168k in losses and about $168k in gains - this will start the "clean up" without triggering taxes. Buy Total Stock and Total international with this money.

2. Continue to monitor the accounts for losses and sell them as they arise. Then sell an equal amount in gains. Buy Total stock and Total international.

What to get rid of? I suggest getting rid of the higher ER funds first. For me this would include the buffered ETFs. These are high cost and (In my opinion but I am not trained financial advisor) are not a good substitute for bonds or other fixed income assets (which is what I think your advisor has in mind).

3. Donate some older appreciated shares to a donor advised fund. Or donate them directly to your charity of choice.

4. Turn off all reinvestment of dividends in the taxable accounts (this should be one of your first things to do). Send the dividends to money market and then use that periodically to buy more Total Stock and Total International Index or bonds. This will give you a little money to rebalance the portfolio without selling something in taxable.

5. If you don't do more Roth conversions, you can use the space under total income of $109,250 (which is where the 0% cap gains tax ends this year) to sell stocks without tax.



About Roth conversions....You have about $1.6 million there now. It will not grow very fast if you fill those accounts with bonds and holding your bonds in tax-deferred is tax-efficient (because bond income will be taxed as ordinary income no matter where the bonds are held - this is not true for stock income).

If Mary does not turn 63 in 2022, you could do one last larger Roth conversion without triggering IRMAA when she turns 65. Doing conversions in the 12% bracket is better than nothing, but will not accomplish very much. And triggering IRMAA is not fatal, but nice to avoid when you can.

In 2023 and forward, start some spending from the tIRAs and maybe continue small conversions if you want (perhaps up to just below IRMAA which is currently a bit below the top of the 22% bracket.

Keep in mind that the more Roth conversions you do, the less of your portfolio will be in tax-deferred accounts. This will push more and more bonds into taxable. If I were in your shoes, I think I'd skip the Roth conversions myself.

Obviously, it will take a number of years to entirely "clean up" the taxable account. However, what you have seems to be well diversified so I'm not sure it is important to ever get entirely to just holding 3 funds in your taxable accounts.


One thing I'd like to know if you run across this information or already know it. For assets held in a taxable account, long term cap gains and qualified dividends are taxed at a lower rate than ordinary income. I don't know yet what kind of income you get from the buffered ETFs. Is it taxed as ordinary income or as qualified dividends?

If it is taxed as ordinary income, that would be an additional impetus to get rid of those when the opportunity arises. I understand they are on yearly cycles so you may have to wait to sell them.


I don't know if any of my ideas above are the "best" way to handle your situation. It's just a collection of things I would do if faced with your portfolio. Others may have additional ideas.

If you like TDA and can buy the things you want there, I don't know of any reason to move the money. However, I don't know much about TDA.
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Gennaro Dillinger
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Re: Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

WOW. I really can't thank you enough for all the advice. I also need to take a while and digest it all. I'm sure to follow up with questions but I really appreciate so much effort, awfully kind.
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Gennaro Dillinger
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Re: Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

retiredjg wrote: Fri Jul 15, 2022 10:30 am Here is an idea to help you start thinking.

joint taxable 57.8%
Total stock index
Total international stock index
legacy bucket of diversified stocks because you won't be able to get rid of them all
bonds and fixed income assets as needed to achieve your 40% allocation (type to be determined)

Joint taxable 9.3%
Total stock index
Total international stock index
legacy bucket of diversified stocks because you won't be able to get rid of them all
bonds and fixed income assets as needed to achieve your 40% allocation (type to be determined)

Gennaro Rollover IRA 15.4%
all bonds

Mary Rollover IRA 15%
all bonds

Gennaro Roth IRA .36%
Extended Market Index ("completes" the 500 index)

Mary Roth IRA 2.1%
500 index


The tIRAs and Roth IRAs can be changed immediately with no tax consequences. The taxable accounts would take some time unless you want to pull off the band-aid and pay a lot. Even then, I don't think I'd go over $250k income each year - because that would trigger the NITT, an additional 3.8% tax on your gains.

What to do with the taxable account?

1. Take your $168k in losses and about $168k in gains - this will start the "clean up" without triggering taxes. Buy Total Stock and Total international with this money.

2. Continue to monitor the accounts for losses and sell them as they arise. Then sell an equal amount in gains. Buy Total stock and Total international.

What to get rid of? I suggest getting rid of the higher ER funds first. For me this would include the buffered ETFs. These are high cost and (In my opinion but I am not trained financial advisor) are not a good substitute for bonds or other fixed income assets (which is what I think your advisor has in mind).

3. Donate some older appreciated shares to a donor advised fund. Or donate them directly to your charity of choice.

4. Turn off all reinvestment of dividends in the taxable accounts (this should be one of your first things to do). Send the dividends to money market and then use that periodically to buy more Total Stock and Total International Index or bonds. This will give you a little money to rebalance the portfolio without selling something in taxable.

5. If you don't do more Roth conversions, you can use the space under total income of $109,250 (which is where the 0% cap gains tax ends this year) to sell stocks without tax.



About Roth conversions....You have about $1.6 million there now. It will not grow very fast if you fill those accounts with bonds and holding your bonds in tax-deferred is tax-efficient (because bond income will be taxed as ordinary income no matter where the bonds are held - this is not true for stock income).

If Mary does not turn 63 in 2022, you could do one last larger Roth conversion without triggering IRMAA when she turns 65. Doing conversions in the 12% bracket is better than nothing, but will not accomplish very much. And triggering IRMAA is not fatal, but nice to avoid when you can.

In 2023 and forward, start some spending from the tIRAs and maybe continue small conversions if you want (perhaps up to just below IRMAA which is currently a bit below the top of the 22% bracket.

Keep in mind that the more Roth conversions you do, the less of your portfolio will be in tax-deferred accounts. This will push more and more bonds into taxable. If I were in your shoes, I think I'd skip the Roth conversions myself.

Obviously, it will take a number of years to entirely "clean up" the taxable account. However, what you have seems to be well diversified so I'm not sure it is important to ever get entirely to just holding 3 funds in your taxable accounts.


One thing I'd like to know if you run across this information or already know it. For assets held in a taxable account, long term cap gains and qualified dividends are taxed at a lower rate than ordinary income. I don't know yet what kind of income you get from the buffered ETFs. Is it taxed as ordinary income or as qualified dividends?

If it is taxed as ordinary income, that would be an additional impetus to get rid of those when the opportunity arises. I understand they are on yearly cycles so you may have to wait to sell them.


I don't know if any of my ideas above are the "best" way to handle your situation. It's just a collection of things I would do if faced with your portfolio. Others may have additional ideas.

If you like TDA and can buy the things you want there, I don't know of any reason to move the money. However, I don't know much about TDA.
WOW. I really can't thank you enough for all the advice. I also need to take a while and digest it all. I'm sure to follow up with questions but I really appreciate so much effort, awfully kind.
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retiredjg
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Re: Asking Portfolio Questions [Portfolio help request]

Post by retiredjg »

Happy to do it Gennaro. :happy

Nothing particularly brilliant there, just things I've read and learned here over the years.

Just take your time, continue learning, and let it unfold.
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celia
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Re: Asking Portfolio Questions [Portfolio help request]

Post by celia »

We should probably also ask what your wife will likely do with the portfolio after you die. If you (we) simplify it and use Tax-efficient Fund Placement principles, will she be interested in maintaining it similarly or will she likely go back to your advisor or do something else? It occurred to me that it might not make sense to simplify if she would go back to the same advisor who would just put things back like they are now. You would be paying commissions to clean it up now, then she would pay commissions to put it back. But if you were to sign up for Vanguard’s PAS (Personal Advisor Service) instead, they would only charge 0.3% a year. They would also be reasonable on how many holdings you should use. But they only give you advice. It is up to the account owner to make the recommeded change(s) if they agree. The changes would not have to all be done in the same year since there will be tax consequences for anything sold in Taxable, but not in Tax-deferred or Roth.

To put it simply, the goal of Tax Efficiency is to put only stock funds in Roths and only bonds in tax-deferred. You want to put the assets that grow the most in Roth to maximize future Tax-free growth. Bonds in Tax-deferred will slow down the growth of the accounts (and future RMDs) while also putting interest there since it is not taxed favorably like LTCGs or Qualified Dividends are. The Taxable Accounts should hold Foreign stocks so you can capture the Foreign Tax credits, although there may be a limit where this is beneficial. The rest of Taxable should be stocks.

The challenge here is that your desired Asset Allocation (stocks/ bonds/ international percentages) are usually different than the spaces you have in each account. You could put all your bonds in Tax-deferred, but still need more room. And as you do Roth conversions, that space will get smaller. That is where you do the best you can, then not worry about it.

Gennaro Dillinger wrote: Thu Jul 14, 2022 3:02 pm $3,162,981 Joint Account - Taxable

$507,693 Joint Account - Taxable

$839,730 Rollover IRA - Gennaro

$822,549 Rollover IRA - Mary

$19,491 Roth IRA - Gennaro

$116,728 Roth IRA - Mary
Thank you for this. I want to address the $1.6 million you jointly hold in tax-deferred. This is the “elephant in the room”. If you are withdrawing / converting less than the yearly growth each year, the value will continue to grow. It is also possible for these accounts to at least double in the next 10 or 14 years, when RMDs start. When each of you turns 72, the joint RMDs would then start at $118k (3.7% of 3.2 million—I simplified it as if you both turned 72 in the same year). The percentage to withdraw increases each year as you get older. So this suggests you should do serious Roth conversions before then and decrease the space in Tax-deferred while increasing the space in Roth. I would convert to near the top of the 24% bracket for a few years and get that growth to happen in Roth instead. Only convert stock funds.


When you turn 70.5, you can make Qualified Charitable Contributions (QCDs) directly to a charity of up to $100K a person each year. QCDs won’t be taxed and can count as your RMDs too if they are made before the RMD is satisfied.

I didn’t notice who would inherit the portfolio, but if part of it will go to charity, it is best to give them the tax-deferred assets since they won’t need to pay the taxes. You also wouldn’t have to convert as much (or at all) if you wanted to give your RMDs away to charity as well as the remainder of the tax-deferred accounts. But without doing some Roth conversions, it is hard to increase the space in Roths.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
HomeStretch
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Re: Asking Portfolio Questions [Portfolio help request]

Post by HomeStretch »

retiredjg wrote: Fri Jul 15, 2022 10:30 am … Here is an idea to help you start thinking. …
^^^ OP, this is a solid plan.
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Gennaro Dillinger
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Re: Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

HomeStretch wrote: Fri Jul 15, 2022 3:51 pm
retiredjg wrote: Fri Jul 15, 2022 10:30 am … Here is an idea to help you start thinking. …
^^^ OP, this is a solid plan.
Thanks! I appreciate your opinion.
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celia
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Re: Asking Portfolio Questions [Portfolio help request]

Post by celia »

Another thing to consider since you have more in Taxable than you will likely ever spend is to let some assets that have huge gains just sit there until you die. If you live in a community property state, all Taxable assets will get a step-up of cost basis when one of you dies. Then they can be sold soon after without paying taxes on the gains.

If you are in a non-community state, you could put each Taxable account in one person’s name with the other as the primary beneficiary. Then that person’s solo assets would get a step-up.

And while you are cleaning up Taxable, you might need to leave some cash for Roth conversion taxes.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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Gennaro Dillinger
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Re: Asking Portfolio Questions [Portfolio help request]

Post by Gennaro Dillinger »

celia wrote: Fri Jul 15, 2022 4:35 pm Another thing to consider since you have more in Taxable than you will likely ever spend is to let some assets that have huge gains just sit there until you die. If you live in a community property state, all Taxable assets will get a step-up of cost basis when one of you dies. Then they can be sold soon after without paying taxes on the gains.

If you are in a non-community state, you could put each Taxable account in one person’s name with the other as the primary beneficiary. Then that person’s solo assets would get a step-up.

And while you are cleaning up Taxable, you might need to leave some cash for Roth conversion taxes.
Thanks, Celia. I am not in a community property state. That's a great tip about step-up but I'm wondering...if we split the two taxable accounts and more or less make them equal value and then one of us dies, then half of them get a full step-up in cost basis, the other half nothing. Isn't that about the same as keeping them all in our joint names and taking the half-step-up when one of us dies? (I think if you know you are dying and can do this so the other gifts them back that'd be 100% step-up on everything but the one person has to have them for a year.)

I am very focused on Roth conversions...I'm still trying to rationalize should I use losses to offset gains and then use those funds from capital gains for conversion or to instead just invest BH-style. I guess I see the Roth's as an enormous benefit so I'm pondering that whole issue now...

Many, many thanks!!!
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