Investment Help! Working on Getting Educated

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
BuckeyeAaron
Posts: 24
Joined: Tue Jan 24, 2023 6:51 am
Location: Ohio

Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

Good morning. First, this Forum is amazing. I feel fortunate to have found it during my Google searches and research for advice and "how-tos." I have been browsing and reading for the past two days and am getting a crash course in personal finance. It's eye-opening. There are several books and deeper dives I plan to complete but I do feel a bit of pressure to reach out now and seek advice on where my wife and I are (financially speaking) and where we should go. I will do my best to provide detail and follow forum rules. I can appreciate proper protocol when it comes to these things but understand I am here with good intentions and looking for a helping hand.

I'm 37, my wife is 38, we were married 10 years ago and we have two children (8 and 5) and we live in SW Ohio. Prior to marriage, and during our first several years of marriage, we did basic personal finance (I had a ROTH, we both contributed to employer sponsored plans). I am not a finance minded individual. I have always found stocks, bonds, ETFs, index funds, etc. to be intimidating and complex. As her income started to increase we felt it may be wise to work with a professional to make sure money was going in the right places. We utilized a service touted by Ramsey (Kingdom Advisors) to find an advisor near us that professes a Christian belief. Being Christians ourselves, we felt this was a decent place to start. We liked this gentleman: he seemed knowledgeable, energetic, and did open our eyes to some blinds spots (life insurance for example - we sourced our own for a better deal and did not buy any he offered, FYI). He was associated with Ameriprise Financial. This all started in 2019. As Covid got rolling, we kept working the plan and eventually got most of our "stuff" rolled over to Ameriprise and we felt good that we were being intentional/responsible with our finances. Two years later our advisor tragically passed and we were paired with his father. Again, a nice gentleman, years of experience, and accessible - but we started to encounter some frustrations on the pace of executing steps, redundant conversations, and poorly administered digital meetings/conferences. We kept the course as losing a child cannot be easy and we were empathetic to the situation. Fast forward to today we still have these frustrations, paired with what I believe to be very poor performance from last year (22% portfolio loss), we started asking more questions. I started reading more, researching other advisor options, and then found this forum (praise be!).

I have had three conversations with advisory groups over the past few days as we considered making a change. Admittedly, I did have a great interaction with one outfit locally but the costs were always a factor. Rates ranged from 0.95% to 1.25% AUM or a flat rate of $5,000/year (yikes). I then started wondering if we really need someone like this... our financial situations seems complex; but maybe it isn't? Which brought me here. And reading about offerings from Vanguard either for free or utilizing their advisory service (0.3%) - I have a call scheduled with them later today at 5PM. But perhaps that isn't even necessary? If I can figure out how to navigate our various "pots" of money from Ameriprise to Vanguard or Fidelity, and set up a three fund portfolio and rebalance when necessary, maybe I can "do this alone" (with help from his forum and it's resources). So here is a snapshot of our family situation:

Emergency Fund: we have $50,000 of liquid cash in a savings account (we are in the process of moving to SoFi to take advantage of interest rates and we may incorporate a CD/I-Bond ladder with a portion of these funds to help avoid depreciation).

Debt: The only debt we carry is our mortgage. Currently 4.875% on 30-yr fixed (we moved last September and this was the best we could find). We have 20% equity so no PMI. The "Dave Ramsey" in us has led to a debt aversion - no car payments, do not carry credit card debt, no medical debt, etc.

Desired Asset allocation: I believe we want to employ the three fund portfolio approach with whatever funds may be available to do so (some may be locked in certain funds that can't be altered). I am considering a 70/30 split on stocks/bonds.

Currently we have the following with Ameriprise:
ROTH IRA Rollover from my wife: $3,929.77
ROTH IRA Rollover from myself: $37,169.74
Traditional IRA Rollover from myself: $5,578.32
Traditional IRA Rollover from my wife: $38,581.81
SPS Advantage Non-qualified Account: $50,710.86 (currently receiving $1,000 monthly contributions)

ACT GRW BLDR AGG
IRA Rollover from myself
Total Asset Value: $5,579.23
Traded Funds: $2,919.21
-SPLG, QTY 20, Mkt Price $47.03; SPDR Portfolio S&P 500 ETF, ER 0.03%
-SPSM, QTY 7, Mkt Price $39.45; SPDR Portfolio S&P 600 Small Cap ETF, ER 0.05%
-VEA, QTY 5, Mkt Price $45.545; Vanguard Developed Markets Index Fund, ER 0.05%
-VGLT, QTY 3, Mkt Price $65.73; Vanguard Long-Term Treasury Index Fund, ER 0.04%
-VIG, QTY 4, Mkt Price $154.76; Vanguard Dividend Appreciation Index Fund, ER 0.06%
-VWO, QTY 5, $42.80; Vanguard Emerging Markets Stock Index, ER 0.08%
Mutual Funds & UITs: $2,500.88
-IHOIX, QTY 42.158, Mkt Price $16.66; The Hartford International Opportunities Fund, ER 0.76%
-JVLIX, QTY 26.844, Mkt Price $21.540; John Hancock Funds Disciplined Value Fund, ER 0.78%
-MFEIX, QTY 3.685, Mkt Price $141.780; MFS Growth Fund, ER 0.58%
-PCBIX, QTY 20.907, Mkt Price $33.380; Principal MidCap Fund, ER 0.67%

Ameriprise Brokerage
ROTH IRA Rollover from my wife
Total Asset Value: $3,929.77
Cash: $3,929.77


Strategic Portfolio Service Advantage
ROTH IRA Rollover from myself
Total Asset Value: $37,152.90
Equities: $12,133.15
-AAPL, QTY 14, Mkt Price $142.07; Apple Inc., ER N/A
-AMZN, QTY 42.0, Mkt Price $97.010; Amazon.com, Inc., ER N/A
-COST, QTY 2, $490.36; Costco Wholesale Corporation, ER N/A
-MSFT, QTY 21, Mkt Price $242.33; Microsoft Corporation, ER N/A
Traded Funds: $10,850.15
-BIV, QTY 14, Mkt Price $76.865; Vanguard Intermediate-Term Bond Index Fund, ER 0.04%
-IWS, QTY 46, Mkt Price $111.49; iShares Russell Mid-Cap Value ETF, ER 0.23%
-LRGF, QTY 114, Mkt Price $40.750; iShares U.S. Equity Factor ETF, ER 0.08%
Mutual Funds & UITs: $12,285.72
-BPRIX, QTY 116.22, Mkt Price $9.96; BlackRock Inflation Protected Bond Fund Institutional Shares, ER 0.08%
-EILDX, QTY 315.561, $7.49; Eaton Vance Short Duration Government Income Fund, ER 0.53%
-GSFTX, QTY 71.318, Mkt Price $29.21; Columbia Dividend Income Fund Institutional Class, ER 1.16%
-JVLIX, QTY 255.39, Mkt Price $21.540; John Hancock Funds Disciplined Value Fund, ER 1.00%
-WATFX, QTY 107.597, Mkt Price $10.97; Western Asset Core Bond Fund, ER 0.46%


Strategic Portfolio Service Advantage
IRA Rollover from my wife
Total Asset Value: $38,570.18
Cash: $2,136.48
Equities: $12,717.90
-AAPL, QTY 15, Mkt Price $142.07; Apple Inc., ER N/A
-AMZN, QTY 44.0, Mkt Price $97.010; Amazon.com, Inc., ER N/A
-COST, QTY 2, $490.36; Costco Wholesale Corporation, ER N/A
-MSFT, QTY 22, Mkt Price $242.33; Microsoft Corporation, ER N/A
Traded Funds: $11,352.80
-BIV, QTY 15, Mkt Price $76.865; Vanguard Intermediate-Term Bond Index Fund, ER 0.04%
-IWS, QTY 48, Mkt Price $111.49; iShares Russell Mid-Cap Value ETF, ER 0.23%
-LRGF, QTY 119, Mkt Price $40.750; iShares U.S. Equity Factor ETF, ER 0.08%
Mutual Funds & UITs: $12,363.00
-BPRIX, QTY 119.049, Mkt Price $9.96; BlackRock Inflation Protected Bond Fund Institutional Shares, ER 0.08%
-EILDX, QTY 327.962, $7.49; Eaton Vance Short Duration Government Income Fund, 0.53%
-GSFTX, QTY 74.119, Mkt Price $29.21; Columbia Dividend Income Fund Institutional Class, ER 1.16%
-JVLIX, QTY 247.407, Mkt Price $21.540; John Hancock Funds Disciplined Value Fund, ER 1.00%
-WATFX, QTY 111.824, Mkt Price $10.97; Western Asset Core Bond Fund, ER 0.46%


SPS Advantage Account (non-qualified account):
Total Asset Value: $50,730.74
Equities: $18,455.10
-AAPL, QTY 48, Mkt Price $142.07; Apple Inc., ER N/A
-AMZN, QTY 50.0, Mkt Price $97.010; Amazon.com, Inc., ER N/A
-MSFT, QTY 28, Mkt Price $242.33; Microsoft Corporation, ER N/A
Traded Funds: $7,802.90
-IWS, QTY 70, Mkt Price $111.47; iShares Russell Mid-Cap Value ETF, ER 0.23%
Mutual Funds & UITs: $9,522.60
-FAARX, QTY 198.954, Mkt Price $198.954; Nuveen All-American Municipal Bond Fund Class I, ER 0.70%
-MCVIX, QTY 55.805, Mkt Price $29.670; MFS Mid Cap Value Fund, ER 1.02%
-NCIAX, QTY 104.621, Mkt Price $19.730; Columbia Convertible Securities Fund, ER 0.00%
-NPSRX, QTY 130.689, Mkt Price $15.630; Nuveen Preferred Securities & Income Fund, ER 0.74%
-OTCIX, QTY 67.094, Mkt Price $25.410; MFS Mid Cap Growth Fund, ER 1.00%

With Fidelity:
My wife has a 401(k) from a previous employer still setting with Fidelity that is worth approx $106,000. Details below:

Rollover IRA in Fidelity for my Wife
-FDRXX, $2,652.78; FIDELITY GOVERNMENT CASH RESERVES, ER 0.08%

Previous Employer Retirement for my Wife
-WFIGVX, $107,105.75; CIT: flexPATH Index Aggressive 2055 Fund Cl I1, ER 0.17%
Note, this is not listed as a clear 401k so I'm entirely clear what kind of account this.

Health Savings Account for my Wife
$406.90, CORE** - FDIC-INSURED DEPOSIT SWEEP
Not sure what these funds are. It looks like it is a Core account which I think means they just hold cash here until it is invested or withdrawn. But if so, I don't understand why it lists it under a HSA...

With Empower:
My wife's current employer offers retirement through Empower. She was just recently eligible to start contributing so the funds are fairly low. Details below:

401(k) - Company match (100% of deferrals up to 3% of compensation and then 50% of deferrals on 3% to 5% of compensation)
-VTIVX, $1,696.17; Vanguard Target Retirement 2045 Inv, ER 0%
Deeper dive into VTIVX:
Asset Allocation Model
The Early Years AGGRESSIVE, ER .43
The Retirement Years MOD CONS, ER .49
The Acquisition Years MOD AGGR, ER .43
The Accumulation Years MODERATE, ER .48

Asset Allocation
Vanguard Target Retirement Income Inv, ER .08
Vanguard Target Retirement 2020 Inv, ER .08
Vanguard Target Retirement 2025 Inv, ER .08
Vanguard Target Retirement 2030 Inv, ER .08
Vanguard Target Retirement 2035 Inv, ER .08
Vanguard Target Retirement 2040 Inv, ER. 08
Vanguard Target Retirement 2045 Inv, ER .08
Vanguard Target Retirement 2050 Inv, ER .08
Vanguard Target Retirement 2055 Inv, ER .08
Vanguard Target Retirement 2060 Inv, ER .08
Vanguard Target Retirement 2065 Inv, ER .08

International Funds
American Funds Capital World G/I R6 7252 13.27 -17.01 -17.01 3.43 4.61 7.94 May 2009 .42
First Eagle Global R6, ER .78
Invesco Developing Markets R6, ER .81
PIMCO All Asset All Authority Inst, ER 1.60
Vanguard FTSE All-Wld ex-US Inx Admiral, ER .11

Specialty
Calamos Market Neutral Income I, ER .90
Cohen & Steers Instl Realty Shares, ER .76
Allspring Precious Metals Institutional, ER .85

Mid Cap Funds
Columbia Acorn Instl 3, ER .76
Vanguard Mid-Cap Growth Index Admiral, ER 1 .07
Vanguard Selected Value Inv, ER .32

Large Cap Funds
American Funds Growth Fund of Amer R6, ER .30
Parnassus Core Equity - Inst, ER .61
T. Rowe Price Growth Stock I, ER .51
Vanguard 500 Index Admiral, ER .04
Vanguard High Dividend Yield Index Adm, ER .08

Balanced Funds
MFS Total Return R6, ER .39
Bond Funds
Loomis Sayles Investment Grade Bond N, ER .47
Invesco International Bond R6, ER .66
T. Rowe Price Spectrum Income, ER .62
Vanguard Total Bond Market Index Admiral, ER .05


I dug around a bit more in the Empower website and she does have the flexibility to switch to many different funds which include all of the Vanguard Target Retirement Funds plus the following options:
American Funds Capital World G/I R6
First Eagle Global R6
Invesco Developing Markets R6
PIMCO All Asset All Authority Inst
Vanguard FTSE All-Wld ex-US Inx Admiral
Calamos Market Neutral Income I
Cohen & Steers Instl Realty Shares
Allspring Precious Metals Institutional
Columbia Acorn Instl 3
Vanguard Mid-Cap Growth Index Admiral
Vanguard Selected Value Inv
American Funds Growth Fund of Amer R6
Parnassus Core Equity - Inst
T. Rowe Price Growth Stock I
Vanguard 500 Index Admiral
Vanguard High Dividend Yield Index Adm
MFS Total Return R6
Loomis Sayles Investment Grade Bond N
Invesco International Bond R6
T. Rowe Price Spectrum Income
Vanguard Total Bond Market Index Admiral
EI Fixed Account - Series Class I

My instincts say it would be safe to switch from Vanguard 2045 to Vanguard 2050 or 2055 to get a slightly more aggressive allocation (88% equities/12% bonds versus 84% Equities/16% Bonds she has currently with 2045). Any thoughts on this?


Cash in Savings:
$50,000

Contributions: Current contributions include the 5% of wife's salary for company match with employer plan and $1,000/mo to non-qualified account with Ameriprise. We do not qualify for ROTH contributions due to join income limits. I am self-employed so I do not have access to any company retirement benefits. We also contribute $500 per month towards Ohio 529 plan. EDIT: I am now reading about back-door ROTH. This is not something that our advisor has ever covered or offered - but it seems like something we should pursue if we re-adjust things.

Other Info: My wife was recently awarded stock in her company (Class B shares I believe) which may result in a significant payout in 3 to 5 years depending upon company growth/performance.

I apologize for some of lacking details above. I am happy to try to pull some more info from the Ameriprise web interface if given some guidance on what to look for and how to find it. My wife is also traveling for work this week so I can't pull more details until she is back home. But our main goals (beyond getting educated and being more intentional) is to have a secure retirement (not necessarily retire early - I think we'll always stay busy with something) and make surplus cash flow work for us positively until retirement. Secondary goal would be to provide some assistance with higher education costs for kids when time arrives - but not at the expense of higher ranking goals, however.

Again, thank you for this resource and for all of the active members that provide so much value. I am still learning and fact finding so please forgive me if I used incorrect format, protocol, or wasn't as detailed as needed. I am happy to provide more info if I can receive a bit of guidance on where to find it. Thank you!
Last edited by BuckeyeAaron on Thu Jan 26, 2023 8:16 am, edited 5 times in total.
novelbogle
Posts: 58
Joined: Sat Jul 30, 2022 7:28 pm

Re: Investment Help! Working on Getting Educated

Post by novelbogle »

Welcome!

1. The best thing you can do to receive helpful advice is to post in the suggested portfolio review format: viewtopic.php?t=6212

That will require determining what your adviser has all of your accounts invested in, the expense ratios for those funds, and the funds available in your wife's 401k.

2. Have you considered a Solo 401(k) to increase your own tax-advantaged investments?

3. Your investment situation does not look like it would be too complicated for you to manage, though the Vanguard adviser may be a smooth transition.

Please review and report back!
Last edited by novelbogle on Tue Jan 24, 2023 9:03 am, edited 1 time in total.
"Exemplary persons cherish their excellence; petty persons cherish their land." - Analects 4.11.
tashnewbie
Posts: 3412
Joined: Thu Apr 23, 2020 12:44 pm

Re: Investment Help! Working on Getting Educated

Post by tashnewbie »

Welcome to the forum!

It sounds like you're already doing some things very well. No debt other than the mortgage, regular contributions to 401k and other accounts, and the desire to move away from a high-fee advisor. I think your instincts are serving you well.

I think with a bit of knowledge, you'll build confidence in your ability to manage your own portfolio. I think the fact that you found this forum, made an account and your first post speaks to your ability to manage your own portfolio. Managing a portfolio such that you're basically getting market returns is not rocket science.

You provided some relevant information in your post but not everything we typically need to see to offer more-informed advice. I recommend editing your post (use pencil icon in top right corner) to add the information in the suggested format found here: viewtopic.php?t=6212. Having all of the information in one place at the top of the thread will make it easier for other forum members to review and offer advice.

This may be a good place to get started (no pun intended) learning about the Boglehead investing philosophy and general principles of portfolio management: https://www.bogleheads.org/wiki/Getting_started

BuckeyeAaron wrote: Tue Jan 24, 2023 8:07 am Desired Asset allocation: I believe we want to employ the three fund portfolio approach with whatever funds may be available to do so (some may be locked in certain funds that can't be altered). I am considering a 70/30 split on stocks/bonds.
70/30 seems reasonable for your ages.
Currently we have the following with Ameriprise:
SPS Advantage Non-qualified Account: $50,710.86 (currently receiving $1,000 monthly contributions)
Is this a taxable brokerage account? What funds are in this account? What are the unrealized losses or gains for each holding? If you'll provide this information, forum members can offer advice about how to unwind these positions and get this account transferred somewhere else.
With Fidelity:
My wife has a 401(k) from a previous employer still setting with Fidelity that is worth approx $106,000. I don't have those details available to me at the moment.

Current 401(k) with Wife's Employer:
Unknown total amount but we contribute 5% of salary to take full advantage of company match which results in a total of approximately 9%.
The great news is that most of your money is in tax-advantaged accounts (e.g., 401k, Roth IRA, IRA), where you can make changes without tax implications.

I would transfer the IRAs that are at Ameriprise to a low-cost brokerage of your choice such as Fidelity, Schwab, or Vanguard. More than likely that money will be out of the market during transit which could be a week or so, but I wouldn't worry about that. Work with the destination brokerage to handle the logistics of getting the accounts transferred.

I probably wouldn't even bother telling Ameriprise about your intent to leave. It might be best to transfer the taxable account first. But it may take more work to transfer the taxable account, depending on what holdings are in it, because you may not be able to keep those holdings at the destination brokerage. You'd have to ask the destination brokerage whether you can.
Cash in Savings:
$50,000
Is this the same as your emergency fund listed above?
Contributions: Current contributions include the 5% of wife's salary for company match with employer plan and $1,000/mo to non-qualified account with Ameriprise. We do not qualify for ROTH contributions due to join income limits. I am self-employed so I do not have access to any company retirement benefits. We also contribute $500 per month towards Ohio 529 plan. EDIT: I am now reading about back-door ROTH. This is not something that our advisor has ever covered or offered - but it seems like something we should pursue if we re-adjust things.
If you move the Traditional IRAs into 401ks (assuming they'll accept them), you would be able to do what's known as the "backdoor Roth" without any encumbrances. You don't have to or need to do the backdoor, but it is a way to get money into a Roth IRA when your MAGI exceeds the limits.

Check out the forum wiki page about the backdoor for more information. I advise not attempting to do it before you really understand it and can complete the associated tax paperwork yourself. Ask questions here before you do it to confirm your understanding.

If you're self-employed, you may be eligible for a retirement plan such as a solo 401k. I've never been self-employed so I'm not qualified to speak to details about self-employed retirement plans, but you can check out the wiki about it for more general information. Search prior forum threads about them and ask questions on the forum. If you can set up a solo 401k, you could transfer your Traditional IRA into it to open the way for the backdoor for him.
Topic Author
BuckeyeAaron
Posts: 24
Joined: Tue Jan 24, 2023 6:51 am
Location: Ohio

Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

Thanks for the initial responses. I really appreciate the help. I will work on getting more details but unfortunately I'm too ignorant to even find the "basics" being requested such as: "determining what your adviser has all of your accounts invested in, the expense ratios for those funds." When I login to our Ameriprise account I can see these 5 main accounts (4 listed under "IRAs" and one listed under "Brokerage/Trade Accounts"). I can then click on them individually to get more information but that is where I start to get lost...

If I click on my rolled over Roth, for example, I can see things like "positions by security type," which includes equities, traded funds, and mutual funds & UITs. There is also a "cash and equivalents" section. If I look for greater detail for the security types, I see that under Equities we have AAPL, AMZN, COST, MSFT; under Traded Fund we have BIV, IWS, LRGF; and under Mutual Funds and UITS we have BPRIX, EILDX, GSFTX, JVLIX, WATFX. Each of these has an associated quantity, market price, market value, day range, 52 week range, and today's change. I can do this for each of our accounts. Is this the type of information that is needed?

In regards to the SPS Advantage account, I don't know the answer if it is a taxable brokerage account. It was funded with cash from our savings originally and we contribute post-tax dollars each month. Under the "unrealized loss/gain" I see a value of −$4,401.31. But I believe any earnings would be taxable.

I think I am close. I am happy to update the original post with these additional details if I am on the right track.
HomeStretch
Posts: 9158
Joined: Thu Dec 27, 2018 3:06 pm

Re: Investment Help! Working on Getting Educated

Post by HomeStretch »

Welcome to the forum!

You have received excellent feedback. As suggested above, post your financial picture in the ‘Asking Portfolio Questions’ (APQ) for best feedback to help you develop the best specific plan for you.

Investment costs reduce your investment returns. So moving from Ameriprise to DIY or a low-cost advisor, such as Vanguard PAS at 0.3%, makes sense.

Your spouse has an old 401k at Fidelity. Which brokerage holds her current 401k? Fidelity is a very good low-cost brokerage for your DIY accounts and it’s helpful if there is a local office with getting the medallion guarantees on the Fidelity account transfer forms that Ameriprise will require.

Print or download all your Ameriprise statements, tax forms and cost basis by holding/tax lot for any Taxable account now as Ameriprise may lock your online account once the account transfers are initiated. Usually a ‘non-qualified account’ is a Taxable account. The fact that you see an unrealized loss for the account supports that. The good news is that when you sell the (likely) high-cost account holdings, you will not owe taxes due to the unrealized loss and losses can offset up to $3k per year in ordinary taxable income and be carried forward

Do you and your spouse have adequate life and disability insurance?

Do you and your spouse have your estate planning up-to-date including Wills (naming Executor, Guardian and successors), Trusts (for minor beneficiaries), durable power-of-attorneys and healthcare rep/advance directives? Are account and insurance beneficiaries up-to-date?

Are you saving towards college for your children? If yes, where are you saving - 529 account,UTNA/UGMA account. etc.? Does your state offer a state tax deduction for 529 contributions? Fidelity offers a good low-cost 529 plan.

For retirement savings, prioritize Roth over Taxable accounts. Roth accounts grow tax-free whereas Taxable accounts do not.
1) Getting $ into a Roth IRA via a Backdoor Roth for each of you makes sense. However, before doing so, you and spouse should rollover your traditional IRA pre-tax balances into 401k plans, if allowed, to avoid pro-rated taxes.
2) Also check if your spouse’s current 401k plan allows a mega-backdoor Roth (MBR). BH wiki MBR page:
https://www.bogleheads.org/wiki/Mega-backdoor_Roth

There are several self-employed retirement plan options that are available to you. Does your business have any W-2 non-spouse employees?
Topic Author
BuckeyeAaron
Posts: 24
Joined: Tue Jan 24, 2023 6:51 am
Location: Ohio

Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

HomeStretch wrote: Tue Jan 24, 2023 9:30 am Welcome to the forum!

You have received excellent feedback. As suggested above, post your financial picture in the ‘Asking Portfolio Questions’ (APQ) for best feedback to help you develop the best specific plan for you.

...

Your spouse has an old 401k at Fidelity. Which brokerage holds her current 401k? Fidelity is a very good low-cost brokerage for your DIY accounts and it’s helpful if there is a local office with getting the medallion guarantees on the Fidelity account transfer forms that Ameriprise will require.

Print or download all your Ameriprise statements, tax forms and cost basis by holding/tax lot for any Taxable account now as Ameriprise may lock your online account once the account transfers are initiated. Usually a ‘non-qualified account’ is a Taxable account. The fact that you see an unrealized loss for the account supports that. The good news is that when you sell the (likely) high-cost account holdings, you will not owe taxes due to the unrealized loss and losses can offset up to $3k per year in ordinary taxable income and be carried forward

Do you and your spouse have adequate life and disability insurance?

Do you and your spouse have your estate planning up-to-date including Wills (naming Executor, Guardian and successors), Trusts (for minor beneficiaries), durable power-of-attorneys and healthcare rep/advance directives? Are account and insurance beneficiaries up-to-date?

Are you saving towards college for your children? If yes, where are you saving - 529 account,UTNA/UGMA account. etc.? Does your state offer a state tax deduction for 529 contributions? Fidelity offers a good low-cost 529 plan.

For retirement savings, prioritize Roth over Taxable accounts. Roth accounts grow tax-free whereas Taxable accounts do not.
1) Getting $ into a Roth IRA via a Backdoor Roth for each of you makes sense. However, before doing so, you and spouse should rollover your traditional IRA pre-tax balances into 401k plans, if allowed, to avoid pro-rated taxes.
2) Also check if your spouse’s current 401k plan allows a mega-backdoor Roth (MBR). BH wiki MBR page:
https://www.bogleheads.org/wiki/Mega-backdoor_Roth

There are several self-employed retirement plan options that are available to you. Does your business have any W-2 non-spouse employees?
Thank you. I am trying to follow the APQ template but need a bit more guidance on how to find the necessary information. Please see my second post above - I believe I am on the right track but just need some clarification.
I do not know who holds the current 401(k) for my wife. She is traveling for work so some of this information will need to be updated once she returns.
"... medallion guarantees on the Fidelity account transfer forms that Ameriprise will require." This is Greek to me. I will need to research this so I can follow along.
Estate planning has been thoroughly completed. Life insurance has been addressed as well.
Yes - we contribute to Ohio 529 for education.
I believe we exceed the adjusted gross income limit for Roth contributions. I will research back door options.
I will research the mega backdoor Roth option for my wife's 401(k).
My company is just me - LLC. I don't earn much and it can vary significantly from year to the next. I could look look into solo 401(k) but if I went the backdoor Roth route I doubt I would have much left after maxing that out.
HomeStretch
Posts: 9158
Joined: Thu Dec 27, 2018 3:06 pm

Re: Investment Help! Working on Getting Educated

Post by HomeStretch »

BuckeyeAaron wrote: Tue Jan 24, 2023 9:17 am … I will work on getting more details but unfortunately I'm too ignorant to even find the "basics" being requested such as: "determining what your adviser has all of your accounts invested in, the expense ratios for those funds." …
Advisor AUM portfolios often have numerous holdings which can complicate making sense of it on your own. So if each of your accounts has 15+ holdings, it can be a bit overwhelming to sort out. The complicated portfolio is by design and helps keep clients at the AUM advisor.

You have a few options including:

1) sort out your accounts’ details in the ‘Asking Portfolio Questions’ format. It may help to start in a spreadsheet. Leave off ERs for now. Focus first on listing for each account - each holding (name and symbol) and market value $. Using a spreadsheet can help you add up $ and calculate % when all accounts/holdings are entered. This might be easier if you use your Dec. 31 or Jan. 31 account statements as your data entry source.

2) hire Vanguard PAS to guide you through the transfer and new portfolio set-up. You can choose later to DIY at Vanguard or another brokerage.

3) instruct your Ameriprise advisor to sell everything in the four IRA accounts and transfer cash to your new brokerage to be re-invested in same type of accounts. There are no tax consequences to selling in these accounts. If you want to later rollover the traditional (pre-tax) IRAs into 401k plans in order to do Backdoor Roths not subject to pro-rated taxes, you can do this as step 2 at the new brokerage.

4) Sales in the Taxable account have tax consequences. You have a couple options:
(A) as you have a total unrealized loss, you can sell everything at Ameriprise and transfer cash to reinvest at the new brokerage in a Taxable account (and possibly later redeploy to a Backdoor Roth and mega-backdoor Roth).
(B) you can transfer in-kind whichever holdings can be transferred to the new brokerage and sort it out there. If any of the holdings are proprietary to Ameriprise, they won’t transfer and you will have to sell them before transferring.

A new brokerage such as Fidelity or Schwab may give you a bonus for the account transfer and/or reimburse you for the Ameriprise account closure fees so ask before you transfer. Also check whether there are any fees for selling your account holdings at Ameriprise or the new brokerage.
Target2019
Posts: 633
Joined: Sat Mar 03, 2007 5:30 pm

Re: Investment Help! Working on Getting Educated

Post by Target2019 »

Good luck with the recommendations. Since you're both so young, there is plenty of time to recover from lost ground.

I've read thousands of posts at this site and others. I also have experience with in-laws managed accounts and S-I-L. I've even attended sales dinners put on by firms like Ameriprise, etc.

I have a rule-of-thumb as many others do on the issue of expenses.

1) When you're in a managed account there are fees for the funds (called expense ratio) that usually hover around 1%.

2) In addition, there are fees for the advisor, and these can be difficult to find. But expect, again, for another fee between .75 and 1.5%.

3) The performance of the managed accounts declines over time when compared to passive index fund(s).

As you find out more about the accounts and funds you hold, and discuss these, your path to the future will become very clear.
Topic Author
BuckeyeAaron
Posts: 24
Joined: Tue Jan 24, 2023 6:51 am
Location: Ohio

Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

EDIT - Content moved to initial post to clean up thread clutter.
Last edited by BuckeyeAaron on Wed Jan 25, 2023 9:45 am, edited 3 times in total.
HomeStretch
Posts: 9158
Joined: Thu Dec 27, 2018 3:06 pm

Re: Investment Help! Working on Getting Educated

Post by HomeStretch »

BuckeyeAaron wrote: Tue Jan 24, 2023 11:29 am Is there a way to get permissions to upload attachments/images? I thought it may be easiest to simply paste snips of our most recent statement, with sensitive information removed, for full transparency and to make sure all info is provided. I tried linking with "image" button but struggled to get it to work.
No, that would make it harder for reviewers and possibly limit your responses.

Try considering the task of completing the APQ template as part of your financial education. You can learn a lot just pulling together your information. :happy
User avatar
22twain
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Re: Investment Help! Working on Getting Educated

Post by 22twain »

This forum does not host images, in order to minimize resource usage on the hosting servers, and the associated costs to maintain the forum. You need to upload the file to an image-hosting site, or your own Google Drive account if you have one, and link to it. That's what the image tags are for. See this article from the forum's Wiki:

https://www.bogleheads.org/wiki/Posting ... eads_forum

Posting large blocks of text as images makes things difficult for people who want to comment on individual sections of it. The forum's quoting mechanism can't quote portions of images.
It's "IRMAA" (Income Related Monthly Adjustment Amount), not "IIRMA" or "IRRMA" or "IRMMA".
MattB
Posts: 989
Joined: Fri May 28, 2021 12:27 am

Re: Investment Help! Working on Getting Educated

Post by MattB »

Welcome to the forum.

Your initial post gave a good idea of where you guys are, and where you want to head.

I wouldn't spend too much time listing all of the holdings in your current accounts. Instead, I think you would be well-served by using this forum to figure out how you want to be invested going forward; figuring out how to consolidate your various accounts at one of the big three low cost investment firms, vanguard, schwab, or fidelity; and then doing that (consolidating your accounts and getting them out of Ameriprise). This will save you money and logistical headaches in the future.

Suggestion: You might either reach out to Fidelity or stop at one of their offices for help in setting up appropriate accounts there (IRAs and a taxable brokerage account) and then having them pull your investments at Ameriprise over. They should be able to pull most things over "in-kind," for you to sort out later. This will avoid, to the extent possible, any extra fees Ameriprise might charge you for those transactions. You are currently showing a loss in your taxable ("non-qualified") account. So, there shouldn't be any tax consequences from selling everything in that account.

Finally: Yes, you and your wife would do better, over the long term, by going through a backdoor Roth process each year (to get more money into your Roth space). This, however, is a lower priority than consolidating your investments at one of the low cost brokerage houses and then invested into low-cost index funds.
wetgear
Posts: 779
Joined: Thu Apr 06, 2017 10:14 am

Re: Investment Help! Working on Getting Educated

Post by wetgear »

MattB wrote: Tue Jan 24, 2023 12:44 pm Welcome to the forum.

Your initial post gave a good idea of where you guys are, and where you want to head.

I wouldn't spend too much time listing all of the holdings in your current accounts. Instead, I think you would be well-served by using this forum to figure out how you want to be invested going forward; figuring out how to consolidate your various accounts at one of the big three low cost investment firms, vanguard, schwab, or fidelity; and then doing that (consolidating your accounts and getting them out of Ameriprise). This will save you money and logistical headaches in the future.

Suggestion: You might either reach out to Fidelity or stop at one of their offices for help in setting up appropriate accounts there (IRAs and a taxable brokerage account) and then having them pull your investments at Ameriprise over. They should be able to pull most things over "in-kind," for you to sort out later. This will avoid, to the extent possible, any extra fees Ameriprise might charge you for those transactions. You are currently showing a loss in your taxable ("non-qualified") account. So, there shouldn't be any tax consequences from selling everything in that account.

Finally: Yes, you and your wife would do better, over the long term, by going through a backdoor Roth process each year (to get more money into your Roth space). This, however, is a lower priority than consolidating your investments at one of the low cost brokerage houses and then invested into low-cost index funds.
I have to disagree here. The reason so many people on this thread requested OP do the APQ work is not only that it makes reviewing easier but it’s also, maybe most importantly, a good learning experience. It takes work but a dedicated novice can complete it with very little help. The account, ticker, and value require no special knowledge just access to the online accounts and poking around. Digging up the ER can be a bit more difficult but once you have a ticker folks can help teach how to look them up. If OP wants to learn then this exercise is the first step to that and will let OP ask better questions which will facilitate further learning. We’ve all been in the I don’t know what I don’t know stage before and the APQ exercise helps break through that.
Topic Author
BuckeyeAaron
Posts: 24
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Location: Ohio

Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

wetgear wrote: Tue Jan 24, 2023 12:57 pm
MattB wrote: Tue Jan 24, 2023 12:44 pm Welcome to the forum.

Your initial post gave a good idea of where you guys are, and where you want to head.

I wouldn't spend too much time listing all of the holdings in your current accounts. Instead, I think you would be well-served by using this forum to figure out how you want to be invested going forward; figuring out how to consolidate your various accounts at one of the big three low cost investment firms, vanguard, schwab, or fidelity; and then doing that (consolidating your accounts and getting them out of Ameriprise). This will save you money and logistical headaches in the future.

Suggestion: You might either reach out to Fidelity or stop at one of their offices for help in setting up appropriate accounts there (IRAs and a taxable brokerage account) and then having them pull your investments at Ameriprise over. They should be able to pull most things over "in-kind," for you to sort out later. This will avoid, to the extent possible, any extra fees Ameriprise might charge you for those transactions. You are currently showing a loss in your taxable ("non-qualified") account. So, there shouldn't be any tax consequences from selling everything in that account.

Finally: Yes, you and your wife would do better, over the long term, by going through a backdoor Roth process each year (to get more money into your Roth space). This, however, is a lower priority than consolidating your investments at one of the low cost brokerage houses and then invested into low-cost index funds.
I have to disagree here. The reason so many people on this thread requested OP do the APQ work is not only that it makes reviewing easier but it’s also, maybe most importantly, a good learning experience. It takes work but a dedicated novice can complete it with very little help. The account, ticker, and value require no special knowledge just access to the online accounts and poking around. Digging up the ER can be a bit more difficult but once you have a ticker folks can help teach how to look them up. If OP wants to learn then this exercise is the first step to that and will let OP ask better questions which will facilitate further learning. We’ve all been in the I don’t know what I don’t know stage before and the APQ exercise helps break through that.
I have been working on a post today that provides full details on what we have at Ameriprise. I won't have details on on my wife's Fidelity account or her current employers 401(k) until she returns home from traveling. I hope the information provided above can help answer some of the lingering questions.
wetgear
Posts: 779
Joined: Thu Apr 06, 2017 10:14 am

Re: Investment Help! Working on Getting Educated

Post by wetgear »

BuckeyeAaron wrote: Tue Jan 24, 2023 1:51 pm
wetgear wrote: Tue Jan 24, 2023 12:57 pm
MattB wrote: Tue Jan 24, 2023 12:44 pm Welcome to the forum.

Your initial post gave a good idea of where you guys are, and where you want to head.

I wouldn't spend too much time listing all of the holdings in your current accounts. Instead, I think you would be well-served by using this forum to figure out how you want to be invested going forward; figuring out how to consolidate your various accounts at one of the big three low cost investment firms, vanguard, schwab, or fidelity; and then doing that (consolidating your accounts and getting them out of Ameriprise). This will save you money and logistical headaches in the future.

Suggestion: You might either reach out to Fidelity or stop at one of their offices for help in setting up appropriate accounts there (IRAs and a taxable brokerage account) and then having them pull your investments at Ameriprise over. They should be able to pull most things over "in-kind," for you to sort out later. This will avoid, to the extent possible, any extra fees Ameriprise might charge you for those transactions. You are currently showing a loss in your taxable ("non-qualified") account. So, there shouldn't be any tax consequences from selling everything in that account.

Finally: Yes, you and your wife would do better, over the long term, by going through a backdoor Roth process each year (to get more money into your Roth space). This, however, is a lower priority than consolidating your investments at one of the low cost brokerage houses and then invested into low-cost index funds.
I have to disagree here. The reason so many people on this thread requested OP do the APQ work is not only that it makes reviewing easier but it’s also, maybe most importantly, a good learning experience. It takes work but a dedicated novice can complete it with very little help. The account, ticker, and value require no special knowledge just access to the online accounts and poking around. Digging up the ER can be a bit more difficult but once you have a ticker folks can help teach how to look them up. If OP wants to learn then this exercise is the first step to that and will let OP ask better questions which will facilitate further learning. We’ve all been in the I don’t know what I don’t know stage before and the APQ exercise helps break through that.
I have been working on a post today that provides full details on what we have at Ameriprise. I won't have details on on my wife's Fidelity account or her current employers 401(k) until she returns home from traveling. I hope the information provided above can help answer some of the lingering questions.
Great! Your wife could probably login in from anywhere and call you with the information.
Topic Author
BuckeyeAaron
Posts: 24
Joined: Tue Jan 24, 2023 6:51 am
Location: Ohio

Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

If she were available, yes - that's correct. Her piece of the puzzle will have to be omitted for now. But I was able to get everything else posted above from Ameriprise.
HomeStretch
Posts: 9158
Joined: Thu Dec 27, 2018 3:06 pm

Re: Investment Help! Working on Getting Educated

Post by HomeStretch »

Congrats, sounds like great progress already! The fact that you are putting so much energy into this makes it very likely you will be a successful DIY investor.
annebert
Posts: 89
Joined: Fri Jul 20, 2018 5:39 pm

Re: Investment Help! Working on Getting Educated

Post by annebert »

Hey Aaron, you are doing great. An easy way for you to learn more about your portfolio is to look up all those 3- and 4- letter acronyms on the Internet, and just write out the name of the stock or mutual fund.
Topic Author
BuckeyeAaron
Posts: 24
Joined: Tue Jan 24, 2023 6:51 am
Location: Ohio

Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

Thanks for the continued support and help.

I just finished my call with Vanguard about 30 mins ago. Other than being 15 late to the meeting, it was a good visit. The advisor seemed knowledgeable and seemed to echo a lot of what I have read on here. I got the sense he had other folks to get to as he seemed rushed at the end to gather details. I wish he had allocated more time for that piece of the conversation rather than the chit chat. I don't mind the latter but when pressed for time I'd prefer to focus on the important factors. I am going to send him some statements to provide a clear picture and we are meeting again on Feb. 6 at 6PM. At that meeting we will receive his proposed plan. I gave a snapshot of our current situation and that we would like to abandon Ameriprise altogether - all IRA funds and non-qualified account funds. I also expressed interest in cash flow allocation and index funds coupled with the appeal of the three fund portfolio. Overall it was satisfactory.
MattB
Posts: 989
Joined: Fri May 28, 2021 12:27 am

Re: Investment Help! Working on Getting Educated

Post by MattB »

BuckeyeAaron wrote: Tue Jan 24, 2023 1:51 pm
wetgear wrote: Tue Jan 24, 2023 12:57 pm
MattB wrote: Tue Jan 24, 2023 12:44 pm Welcome to the forum.

Your initial post gave a good idea of where you guys are, and where you want to head.

I wouldn't spend too much time listing all of the holdings in your current accounts. Instead, I think you would be well-served by using this forum to figure out how you want to be invested going forward; figuring out how to consolidate your various accounts at one of the big three low cost investment firms, vanguard, schwab, or fidelity; and then doing that (consolidating your accounts and getting them out of Ameriprise). This will save you money and logistical headaches in the future.

Suggestion: You might either reach out to Fidelity or stop at one of their offices for help in setting up appropriate accounts there (IRAs and a taxable brokerage account) and then having them pull your investments at Ameriprise over. They should be able to pull most things over "in-kind," for you to sort out later. This will avoid, to the extent possible, any extra fees Ameriprise might charge you for those transactions. You are currently showing a loss in your taxable ("non-qualified") account. So, there shouldn't be any tax consequences from selling everything in that account.

Finally: Yes, you and your wife would do better, over the long term, by going through a backdoor Roth process each year (to get more money into your Roth space). This, however, is a lower priority than consolidating your investments at one of the low cost brokerage houses and then invested into low-cost index funds.
I have to disagree here. The reason so many people on this thread requested OP do the APQ work is not only that it makes reviewing easier but it’s also, maybe most importantly, a good learning experience. It takes work but a dedicated novice can complete it with very little help. The account, ticker, and value require no special knowledge just access to the online accounts and poking around. Digging up the ER can be a bit more difficult but once you have a ticker folks can help teach how to look them up. If OP wants to learn then this exercise is the first step to that and will let OP ask better questions which will facilitate further learning. We’ve all been in the I don’t know what I don’t know stage before and the APQ exercise helps break through that.
I have been working on a post today that provides full details on what we have at Ameriprise. I won't have details on on my wife's Fidelity account or her current employers 401(k) until she returns home from traveling. I hope the information provided above can help answer some of the lingering questions.
I don't disagree with wetgear. There is some value in fighting your way through everything so you become aware of expense ratios, etc.
MattB
Posts: 989
Joined: Fri May 28, 2021 12:27 am

Re: Investment Help! Working on Getting Educated

Post by MattB »

BuckeyeAaron wrote: Tue Jan 24, 2023 6:46 pm Thanks for the continued support and help.

I just finished my call with Vanguard about 30 mins ago. Other than being 15 late to the meeting, it was a good visit. The advisor seemed knowledgeable and seemed to echo a lot of what I have read on here. I got the sense he had other folks to get to as he seemed rushed at the end to gather details. I wish he had allocated more time for that piece of the conversation rather than the chit chat. I don't mind the latter but when pressed for time I'd prefer to focus on the important factors. I am going to send him some statements to provide a clear picture and we are meeting again on Feb. 6 at 6PM. At that meeting we will receive his proposed plan. I gave a snapshot of our current situation and that we would like to abandon Ameriprise altogether - all IRA funds and non-qualified account funds. I also expressed interest in cash flow allocation and index funds coupled with the appeal of the three fund portfolio. Overall it was satisfactory.
You probably don't need active management at your point in life, if that's what you're talking to vanguard about. Managing a two or three fund portfolio is very straightforward. Though vanguard's PAS is probably much cheaper, and will put you in better (for you) investments, than Ameriprise.
sunsetting101
Posts: 63
Joined: Tue Apr 13, 2021 2:34 am

Re: Investment Help! Working on Getting Educated

Post by sunsetting101 »

Quick note. You stated your advisor was doing bad based on a 22% loss. In my opinion, you should gauge his results compared to the general market like the Dow Jones Industrial (^DJI) or some index fund like Vanguard Total Stock Market Index Fund (VTI). I think VTI has been down around 15-23% depending on where you place the dates. So he actually can be doing ok using this metric against VTI. If you continue to gauge him on an absolute scale of losing 22%, heck.. about 99.9% of stock pickers are down.
Topic Author
BuckeyeAaron
Posts: 24
Joined: Tue Jan 24, 2023 6:51 am
Location: Ohio

Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

sunsetting101 wrote: Wed Jan 25, 2023 1:39 am Quick note. You stated your advisor was doing bad based on a 22% loss. In my opinion, you should gauge his results compared to the general market like the Dow Jones Industrial (^DJI) or some index fund like Vanguard Total Stock Market Index Fund (VTI). I think VTI has been down around 15-23% depending on where you place the dates. So he actually can be doing ok using this metric against VTI. If you continue to gauge him on an absolute scale of losing 22%, heck.. about 99.9% of stock pickers are down.
That’s a fair point. I’m not going to place too much blame on performance, it’s just what got us asking more questions. There’s still the issues and frustrations we encounter when trying to communicate and make efficient progress. Plus the fact that I’m realizing this is something I can, and probably should, be more active in and do alone.

Several of the funds we have do have high ER so that’s a concern. Plus some of these funds may receive kickbacks to Ameriprise for using (that information isn’t readily clear to me). Plus, we were advised to contribute $1k/mo to this non-qualified account and I now realize that we actually could have been sending that money to a Roth (for myself and my wife) as we are below the adjusted income limit. Unless that has recently been significantly increased, I don’t know why he would have advised us to do otherwise. So that’s lost year of contributions we could have made.
backpacker61
Posts: 1148
Joined: Wed May 20, 2020 6:36 am

Re: Investment Help! Working on Getting Educated

Post by backpacker61 »

I had a large loss last year, too; investing in low cost index funds does not mean that you won't experience losses when the overall market goes down.

Also, you can (and should) look up each of the ticker symbols and fill out the actual name of the securities you own. You should understand what you own. Boglehead don't go around with most ticker symbols memorized.

Any search engine can accomplish this for you; for example:

https://duckduckgo.com/?q=NPSRX&t=ffab&ia=web

Consider doing that and filling in the security name for each of the holdings in your accounts.
“Now shall I walk or shall I ride? | 'Ride,' Pleasure said; | 'Walk,' Joy replied.” | | ― W.H. Davies
Topic Author
BuckeyeAaron
Posts: 24
Joined: Tue Jan 24, 2023 6:51 am
Location: Ohio

Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

I had time this morning to research each fund using Yahoo Finance or Marketwatch. I updated each fund name along with it's current expense ratio in a post above. I hope this provides more detail for the helpful folks on here. Thanks.
tashnewbie
Posts: 3412
Joined: Thu Apr 23, 2020 12:44 pm

Re: Investment Help! Working on Getting Educated

Post by tashnewbie »

BuckeyeAaron wrote: Wed Jan 25, 2023 8:43 am I had time this morning to research each fund using Yahoo Finance or Marketwatch. I updated each fund name along with it's current expense ratio in a post above. I hope this provides more detail for the helpful folks on here. Thanks.
I recommend adding that edit to the original post in this thread so that users don't have to scroll the thread to find the updated information.

I'll reiterate that the good news in all of this is that most of your money is in IRAs, so you can buy and sell without any tax implications. And it sounds like you have a net loss in the taxable account, so you can sell those funds and not incur any tax liability - better yet, it sounds like you'll have a loss that can be applied towards your tax liability (2023's if you sell this year), and if you have losses >$3k, they will carryforward to future tax years.

I think most of your work will be in deciding whether you want to self-direct your own accounts or sign up for a roboadvisor like Vanguard PAS and then doing the actual account transfers. As someone else mentioned, before you leave Ameriprise, download account information in case they lock you out of your online account. I would work with the destination brokerage about transfer logistics. If you have a net loss in taxable, it's probably better to sell everything at Ameriprise and then download all of your cost basis and realized loss information before you transfer the account.

I don't think PAS is magical, but they will put you in something that resembles a 3-fund portfolio and will use low-cost Vanguard mutual funds/ETFs, for 0.3% AUM. That's a lot better than Ameriprise. I don't think you've mentioned it in this thread, but it's unclear what total advisory fees you're paying Ameriprise. I suspect it's >1%. The slight silver lining is that the ER of most of the funds you have aren't really high. But you may have paid a high load fee for some of the mutual funds, but that's a sunk cost at this point. The best course forward is to get out of Ameriprise.

I personally would move my accounts to Fidelity, Schwab, or Vanguard (I've used all 3 and don't really have a preference, but I'm low maintenance and don't need to speak with representatives often) and would self-manage. You'll have to decide what you're comfortable with. That may mean using something like PAS for a "training wheels" period before you build the confidence to self-manage. Honestly, self-managing a 2- or 3-fund-style portfolio doesn't take much work. It's mostly about adding new money and maybe rebalancing once a year.

I would probably transfer the Rollover IRAs to current 401ks/403bs, if they'll take them, because that opens the way for easy backdoor Roth (if you need to use it; sounds like you don't currently but may in the future as your incomes grow). I'd probably use 1 fund in the Roth IRAs and taxable, 2 tops. That's all you need.
Topic Author
BuckeyeAaron
Posts: 24
Joined: Tue Jan 24, 2023 6:51 am
Location: Ohio

Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

tashnewbie wrote: Wed Jan 25, 2023 9:11 am
BuckeyeAaron wrote: Wed Jan 25, 2023 8:43 am I had time this morning to research each fund using Yahoo Finance or Marketwatch. I updated each fund name along with it's current expense ratio in a post above. I hope this provides more detail for the helpful folks on here. Thanks.
I recommend adding that edit to the original post in this thread so that users don't have to scroll the thread to find the updated information.

I'll reiterate that the good news in all of this is that most of your money is in IRAs, so you can buy and sell without any tax implications. And it sounds like you have a net loss in the taxable account, so you can sell those funds and not incur any tax liability - better yet, it sounds like you'll have a loss that can be applied towards your tax liability (2023's if you sell this year), and if you have losses >$3k, they will carryforward to future tax years.

I think most of your work will be in deciding whether you want to self-direct your own accounts or sign up for a roboadvisor like Vanguard PAS and then doing the actual account transfers. As someone else mentioned, before you leave Ameriprise, download account information in case they lock you out of your online account. I would work with the destination brokerage about transfer logistics. If you have a net loss in taxable, it's probably better to sell everything at Ameriprise and then download all of your cost basis and realized loss information before you transfer the account.

I don't think PAS is magical, but they will put you in something that resembles a 3-fund portfolio and will use low-cost Vanguard mutual funds/ETFs, for 0.3% AUM. That's a lot better than Ameriprise. I don't think you've mentioned it in this thread, but it's unclear what total advisory fees you're paying Ameriprise. I suspect it's >1%. The slight silver lining is that the ER of most of the funds you have aren't really high. But you may have paid a high load fee for some of the mutual funds, but that's a sunk cost at this point. The best course forward is to get out of Ameriprise.

I personally would move my accounts to Fidelity, Schwab, or Vanguard (I've used all 3 and don't really have a preference, but I'm low maintenance and don't need to speak with representatives often) and would self-manage. You'll have to decide what you're comfortable with. That may mean using something like PAS for a "training wheels" period before you build the confidence to self-manage. Honestly, self-managing a 2- or 3-fund-style portfolio doesn't take much work. It's mostly about adding new money and maybe rebalancing once a year.

I would probably transfer the Rollover IRAs to current 401ks/403bs, if they'll take them, because that opens the way for easy backdoor Roth (if you need to use it; sounds like you don't currently but may in the future as your incomes grow). I'd probably use 1 fund in the Roth IRAs and taxable, 2 tops. That's all you need.
This is very helpful advice. Thank you for taking the time to weigh in. I will update my first post shortly to clean up this thread.

I'm in agreement with everything you are saying. I will need to do a little research on the capital gains/loss issue with the non-qualified account and how it will pertain to taxes. I'm fuzzy there but I'll dig into it. I need to give some thought on what to do with the funds in the non-qualified account if we sell everything off and liquidate. That would leave us around $50k seed money for something else... but I suppose the first task would be to simply get it out of Ameriprise.

I like the idea of Vanguard training wheels but if I go the three fund round it may not be necessary. I think with continued effort on my part I should be able to tackle the learning curve fairly quickly. But it does make the transition fairly easy. I am debating on moving funds to Vanguard versus Fidelity. The reason being that my wife's previous employers 401(k) with Fidelity so it may make sense to move things there, consolidate where possible, and keep everything in one place. I did talk to some Fidelity folks yesterday and they mentioned their Robo service for 0.35% AUM or utilizing an actual advisor from a brick-and-mortar branch. But I understand these advisors are commission based so I don't care for that option.

Also, upon second review, we actually did exceed the income limits for 2021 so it is probably safe to say we did for 2022 as well (we haven't done taxes yet). So backdoor roth is something I will likely need to get acquainted with.
tashnewbie
Posts: 3412
Joined: Thu Apr 23, 2020 12:44 pm

Re: Investment Help! Working on Getting Educated

Post by tashnewbie »

BuckeyeAaron wrote: Wed Jan 25, 2023 9:42 am I'm in agreement with everything you are saying. I will need to do a little research on the capital gains/loss issue with the non-qualified account and how it will pertain to taxes. I'm fuzzy there but I'll dig into it. I need to give some thought on what to do with the funds in the non-qualified account if we sell everything off and liquidate. That would leave us around $50k seed money for something else... but I suppose the first task would be to simply get it out of Ameriprise.
Once your wife returns home and can access her online 401k account, then you can review the fund options and decide whether you want to move her Rollover IRA there (I would examine fund fees and overall plan admin fees to make that decision). If the plan is subpar, perhaps she keeps the Rollover IRA and foregoes the backdoor, but you can still do the backdoor if you move your Rollover IRA into a solo 401k (or pay the taxes to convert the Traditional Rollover IRA into Roth IRA; it's only ~$6k so not a huge balance but the tax cost would be $6k x your combined marginal tax rates which are 24% fed + whatever state you pay). I wouldn't want to pay to convert her Rollover IRA because it's almost $40k so the tax bill would be quite a bit higher, and Roth conversions in >24% bracket is not a good idea for most people.

I assume the "Roth IRA Rollover" for each of you is a Roth IRA or perhaps rollover of previous Roth 401ks? If so, then that money should just be in a Roth IRA.
I like the idea of Vanguard training wheels but if I go the three fund round it may not be necessary. I think with continued effort on my part I should be able to tackle the learning curve fairly quickly. But it does make the transition fairly easy. I am debating on moving funds to Vanguard versus Fidelity. The reason being that my wife's previous employers 401(k) with Fidelity so it may make sense to move things there, consolidate where possible, and keep everything in one place. I did talk to some Fidelity folks yesterday and they mentioned their Robo service for 0.35% AUM or utilizing an actual advisor from a brick-and-mortar branch. But I understand these advisors are commission based so I don't care for that option.
I wouldn't care for the commission-based advisor either.

Once you get more 401k details, post your fund options here in the suggested format, and forum members can offer advice about how to construct a 3-fund-style portfolio with your available options.
backpacker61
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Re: Investment Help! Working on Getting Educated

Post by backpacker61 »

BuckeyeAaron wrote: Wed Jan 25, 2023 9:42 am I like the idea of Vanguard training wheels but if I go the three fund round it may not be necessary. I think with continued effort on my part I should be able to tackle the learning curve fairly quickly. But it does make the transition fairly easy. I am debating on moving funds to Vanguard versus Fidelity. The reason being that my wife's previous employers 401(k) with Fidelity so it may make sense to move things there, consolidate where possible, and keep everything in one place. I did talk to some Fidelity folks yesterday and they mentioned their Robo service for 0.35% AUM or utilizing an actual advisor from a brick-and-mortar branch. But I understand these advisors are commission based so I don't care for that option.
There are tips on investing the "Boglehead Way" at Fidelity at

https://www.bogleheads.org/wiki/Fidelity

You can also purchase Vanguard ETF's through Fidelity's brokerage commission-free
VTI - Vanguard Total Stock Market Index Fund ETF
VXUS - Vanguard Total International Stock Index Fund ETF
BND - Vanguard Total Bond Market Index Fund ETF

I have accounts at both Fidelity and Vanguard. Fidelity has 'Cash Management Accounts' and 'Health Savings Accounts' that Vanguard doesn't offer, but I like Vanguard's selection of municipal bond funds better. I also use the 'Fidelity Rewards Visa Signature' credit card (2% cash back on anything). I direct the credit card cash rewards back into a mutual fund; FSKAX (Fidelity Total Market Index Fund). So I keep positions at both brokerages.

There are slight differences in how the firms profit from or distribute revenue from securities lending. My impression is that Vanguard's is more advantageous for shareholders, but this only makes a difference at the margins (and can negate perceived expense ratio advantages between the two).

They're both good companies (and Schwab is fine, too, and some report they have the best service).
Last edited by backpacker61 on Wed Jan 25, 2023 10:11 am, edited 1 time in total.
“Now shall I walk or shall I ride? | 'Ride,' Pleasure said; | 'Walk,' Joy replied.” | | ― W.H. Davies
HomeStretch
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Re: Investment Help! Working on Getting Educated

Post by HomeStretch »

After reviewing your updated portfolio post (thank you), the easiest and fastest path may be to have your advisor sell everything in the Taxable account (which has a total unrealized loss) and the four IRAs. Initiate the transfers of the cash in the 5 accounts from your new brokerage. Then start a new thread for help with investing the cash and cleaning up your spouse’s 401k accounts, if necessary, including perhaps rolling over the traditional IRA (for a backdoor Roth not subject to pro-rated taxes) and perhaps the old 401k into the new 401k.

This assumes Ameriprise doesn’t charge high fees on top of the advisor fee to sell. Also read my prior post about asking the new brokerage for a new account bonus and to reimburse you for the Ameriprise account closure/transfer fees, if any.

In your new thread, include a link to this thread and please include all information requested in the ‘Asking Portfolio Questions’ template such as Federal filing status, marginal tax rates, state, 2023 contributions, available 401k fund choices. And limit the amount of extra background you include in order to keep the post concise and easy for reviewers to follow.
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Taylor Larimore
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Re: Investment Help! Working on Getting Educated

Post by Taylor Larimore »

To those involved:

Reading this Conversation makes me proud to be a Boglehead.

Thank you and best wishes
Taylor
Jack Bogle's Words of Wisdom: "The Bogleheads forum is a treasure trove of information, as its contributors and visitors alike help one another, with no axe to grind, on all manner of topics that essentially cover the entire field of investing."
"Simplicity is the master key to financial success." -- Jack Bogle
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BuckeyeAaron
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Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

My wife returned home today so we were able to dig in a bit on her Fidelity stuff and what she has with her current employer with Empower. I updated my original post to showcase this info. I think much of the advice given here will still apply - and I thank you all for your gracious advice - but this should provide the entire picture for current assets (not including Ohio 529 which sits around $9k in value and is receiving $500/mo for now). This may open some considerations such as: do we move to Fidelity and consolidate where possible, do we move everything to Vanguard and consolidate where possible, do we move anything to Empower (if possible/where feasible) to consolidate, do we do something entirely.

One interesting note - her Empower account is a Vanguard target date 2045. While retiring in 20 years would be wonderful, its not likely - so should this be adjusted to showcase that?
Silverado
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Re: Investment Help! Working on Getting Educated

Post by Silverado »

Target Date Funds are useful for matching a desired allocation. Ignore the “date” and look at what it holds.

And welcome OP, you have made great early progress collecting your current state.
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BuckeyeAaron
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Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

Silverado wrote: Wed Jan 25, 2023 7:15 pm Target Date Funds are useful for matching a desired allocation. Ignore the “date” and look at what it holds.

And welcome OP, you have made great early progress collecting your current state.
Thank you - I went back to the most recent statement and investigated the makeup of the target date fund. I updated my initial post again to display all of that information.

One more thing that confuses me, however, is that the Target Date Fund has it own's ticker and ER (VTIVX, ER 0%) but yet the makeup of the Target Date fund has all of their own unique tickers and ERs. So is the ER for the Target Date Fund (VTIVX) shown as zero to indicate that it doesn't really have it's "own" ER. but rather the collection of many?
HomeStretch
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Re: Investment Help! Working on Getting Educated

Post by HomeStretch »

Per Vanguard (link below), VTIVX has an ER of 0.08%. You can ignore the ERs for the underlying funds held in the target date fund.
https://investor.vanguard.com/investmen ... file/vtivx
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BuckeyeAaron
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Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

HomeStretch wrote: Wed Jan 25, 2023 10:39 pm Per Vanguard (link below), VTIVX has an ER of 0.08%. You can ignore the ERs for the underlying funds held in the target date fund.
https://investor.vanguard.com/investmen ... file/vtivx
Interesting. My source for the 0.0% was Marketwatch - I believe. I did notice that were times (pretty rare) where Yahoo and Maketwatch didn’t report the same ER for the same Fund.
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BuckeyeAaron
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Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

Just to update everyone:

On Monday, Feb. 6, in the morning we have a meeting with a fee-only advisor that offers 0.95% AUM services. We want to sit down and hear him out and I feel like I have become much better educated (still lots to learn) for that discussion. Later in the day, at 6PM, we have our follow up phone call with Vanguard Personal Advisory Services. This is where they will pitch their plan to us.

Current thoughts and possible action items:
  • 1. Shift wife's current employer 401k fund provided by Empower from Vanguard Target 2045 to Target 2050
  • 2. Rollover wife's previous employer 401k (current value around $107k) held with Fidelity in a CIT: flexPATH Index Aggressive 2055 Fund Cl I1 (WFIGVX, ER 0.17%) to her current employer's 401k Empower Vanguard Target Fund which results in consolidated 401k and lower ER (.08%)
  • 3. Open traditional IRA and roth IRA for both myself and my wife at Vanguard (specific funds to be determined but I like the idea of the three fund portfolio and stay heavy on index funds - but I still don't quite understand how that jives with IRA accounts...)
  • 4a. Rollover, where applicable, all IRAs from Ameriprise and Fidelity (previous employer account for my wife) to new Vanguard accounts
  • 4b. Backdoor transfer rolled over traditional IRA funds to roth accounts acknowledging we will owe tax on these pre-existing funds, apply these deposits towards 2022 deposit limits
  • 5. Cash out non-qualified account (approx $50k) with Ameriprise and move cash to savings account temporarily (given unrealized loss I believe this will have no impact on taxes). This would be final closure with Ameriprise and moving on completely from them.
  • 5a. Use cash funds from closed non-qualified account to deposit into new traditional IRA accounts at Vanguard, for my wife and myself, then transfer to ROTH accounts to max out 2022 contributions. From residual balance of the $50k, fully fund traditional IRA accounts for my wife and I ($13,000) for 2023 contributions, then backdoor transfer to roth accounts
  • 6. Remaining questions:
  • 6a. What to do with Fidelity HSA account from wife's previous employer for ~$480? Open new HSA at Vanguard and rollover? Cash out and pay tax penalty?
  • 6b. Not sure I fully understand backdoor roth - need to dig deeper on this
  • 6c. I'm considering a SEP-IRA for myself due to self-employment. I don't make much so the 25% salary limit wouldn't amount to a whole lot but it can't hurt. Or possible solo 401k. I need to further research differences between the two. I also wonder how careful we have to be from where the money comes from. My company is very small and very simple. I have a single checking account that I deposit payments into and then transfer money out to our personal accounts when I pay myself. I always leave a little money in this account. But I wouldn't have enough in there right now to cover 25% of earnings - so is it permissible to pull that money from somewhere else as long as that amount doesn't exceed 25% of my earnings (in the SEP-IRA example)?
  • 6d. Surplus cash flow - where to put it? Currently we had been contributing $1k/month to non-qualified account. I think a better use of these funds would be to start sending that money to iras to be backdoor transferred to roths. But if we front-load 2023 using cash, that leaves the rest of this year... maybe these funds go into wife's 401k with employer? Increase contributions to Ohio 529? Send cash to HSA which we have historically always kind of ignored and never used? My thought for 2024 would be to send this to IRAs with the goal of backdoor transfer max contributions.
So what do you guys think? Are we getting closer? I fear I am wearing out my welcome and I don't want to be a pest. But this website has been incredibly valuable.
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dogagility
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Re: Investment Help! Working on Getting Educated

Post by dogagility »

Welcome to the forum. You're obviously willing to put in the time to learn. Because of this, you won't need to pay any advisor. Let this forum be your advisor sounding board... for free!
BuckeyeAaron wrote: Thu Jan 26, 2023 6:28 pm On Monday, Feb. 6, in the morning we have a meeting with a fee-only advisor that offers 0.95% AUM services.
A "fee-only" advisor charges a single fee (typically per hour) regardless of your portfolio size.

An AUM advisor charges a percentage of your portfolio... day after day, year after year. That's the kind of advisor you are referring to above. Plus, this advisor will likely put you in high expense funds. Don't do it! It will cost you upwards of 50% of your portfolio over a lifetime.
So what do you guys think? Are we getting closer? I fear I am wearing out my welcome and I don't want to be a pest. But this website has been incredibly valuable.
Yes, you're getting closer... just keep participating and reading the wiki. https://www.bogleheads.org/wiki/Getting_started
The more flexibility you have the less you need to know what happens next. -- Morgan Housel. A penny saved in a storage headache. -- Conor Friedersdorf
HomeStretch
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Re: Investment Help! Working on Getting Educated

Post by HomeStretch »

BuckeyeAaron wrote: Thu Jan 26, 2023 6:28 pm … Surplus cash flow - where to put it? Currently we had been contributing $1k/month to non-qualified account. I think a better use of these funds would be to start sending that money to iras to be backdoor transferred to roths. But if we front-load 2023 using cash, that leaves the rest of this year... maybe these funds go into wife's 401k with employer? Increase contributions to Ohio 529? Send cash to HSA which we have historically always kind of ignored and never used? My thought for 2024 would be to send this to IRAs with the goal of backdoor transfer max contributions. …
Stopping contributions to the high-cost Ameriprise Taxable account makes sense.

You could instead use the $1k/month to contribute to a Taxable account or to your HSA if eligible or to 529 accounts. Also, as per my earlier post, you/spouse may be able to do backdoor Roths* or perhaps your spouse’s 401k plan offers a mega-backdoor Roth? Prioritize making retirement contributions to the Roth accounts over a Taxable account as the Roth accounts grow tax-free.

*Backdoor Roths don’t make sense for you and spouse right now as they would be subject to pro-rated taxes due to your/spouse’s Traditional IRAs (TIRA) and your SEP-IRA (if you open one). If your spouse can roll her pre-tax TIRA balance into her 401k before 12/31/23, then she could do a backdoor Roth without pro-rated taxes. You may be able to use a Solo 401k (rather than a SEP-IRA) and roll your pretax TIRA balance into the Solo 401k which would allow you to do a backdoor Roth without pro-rated taxes.
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BuckeyeAaron
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Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

HomeStretch wrote: Thu Jan 26, 2023 8:52 pm
BuckeyeAaron wrote: Thu Jan 26, 2023 6:28 pm … Surplus cash flow - where to put it? Currently we had been contributing $1k/month to non-qualified account. I think a better use of these funds would be to start sending that money to iras to be backdoor transferred to roths. But if we front-load 2023 using cash, that leaves the rest of this year... maybe these funds go into wife's 401k with employer? Increase contributions to Ohio 529? Send cash to HSA which we have historically always kind of ignored and never used? My thought for 2024 would be to send this to IRAs with the goal of backdoor transfer max contributions. …
Stopping contributions to the high-cost Ameriprise Taxable account makes sense.

You could instead use the $1k/month to contribute to a Taxable account or to your HSA if eligible or to 529 accounts. Also, as per my earlier post, you/spouse may be able to do backdoor Roths* or perhaps your spouse’s 401k plan offers a mega-backdoor Roth? Prioritize making retirement contributions to the Roth accounts over a Taxable account as the Roth accounts grow tax-free.

*Backdoor Roths don’t make sense for you and spouse right now as they would be subject to pro-rated taxes due to your/spouse’s Traditional IRAs (TIRA) and your SEP-IRA (if you open one). If your spouse can roll her pre-tax TIRA balance into her 401k before 12/31/23, then she could do a backdoor Roth without pro-rated taxes. You may be able to use a Solo 401k (rather than a SEP-IRA) and roll your pretax TIRA balance into the Solo 401k which would allow you to do a backdoor Roth without pro-rated taxes.
Thanks for weighing in again. I understand the priority of Roth contributions but we aren’t eligible due to income limits (MAGI too high for 2021 and likely for 2022 - we’ll know for sure once we do taxes). Because of that, TIRA would be the only option for IRAs - which is why I was hoping to do backdoor but it sounds like that isn’t possible. I’m trying to understand that… since we have pre-existing TIRA with funds in it, we can’t add new funds and transfer those specific funds to Roth right away to avoid taxes? In other words, one would need a TIRA of $0 balance to be able to execute this maneuver? When I was reading about backdoor Roths online the articles I said all that was needed is a TIRA and a Roth account - they never specified what the protocol or consequences if these accounts already existed with funds in them. Perhaps they assume one is starting from scratch?

Rolling her TIRA into her 401k could be appealing - but I’m not sure if that option is on the table. I suppose we’ll have to talk to the Empower folks to find out.

EDIT - Reading about Pro-rata tax rule right now which should educate me on the backdoor issue. Sorry!

EDIT 2 - IF my wife can roll over her TIRA into her 401(k), then that would provide a vehicle to backdoor Roth contributions for 2024z. However, I have no such option for myself due to self employment. So that brings me to yet more questions… if I open a solo-401k, I could then maybe roll over TIRA funds into that and then have a method for backdoor Roth in 2024. If not, another option (albeit expensive), would be early withdraw and pay the penalty and tax. That would clear the TIRA allowing easy backdoor contributions. Would that pencil out long term? Not sure on that one.

This stuff is fascinating.
HomeStretch
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Re: Investment Help! Working on Getting Educated

Post by HomeStretch »

Take a look at Form 8606 and Instructions, linked below. You each need to file this form with your Form 1040 if you each do a backdoor Roth. Working through the Form should help you understand how pro-rated taxes are calculated for a backdoor Roth’s step 2 (the Roth conversion) if you have any pretax IRA balances as of 12/31.
https://www.irs.gov/pub/irs-pdf/f8606.pdf
https://www.irs.gov/pub/irs-pdf/i8606.pdf
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BuckeyeAaron
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Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

Quick question: Is it generally advised to max traditional 401(k) contributions and standard backdoor roth before considering mega backdoor roth maneuvers (assuming employer allows after-tax contributions and in-service withdraws)? Or, is it preferred to utilize full company match and then use extra cash straight to mega backdoor roth (assuming we have maxed backdoor roth at $6500 per spouse)? This assumes that we do not have enough cash flow to max out 401k and throw money into mega backdoor roth.
MattB
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Re: Investment Help! Working on Getting Educated

Post by MattB »

BuckeyeAaron wrote: Fri Jan 27, 2023 9:46 am Quick question: Is it generally advised to max traditional 401(k) contributions and standard backdoor roth before considering mega backdoor roth maneuvers (assuming employer allows after-tax contributions and in-service withdraws)? Or, is it preferred to utilize full company match and then use extra cash straight to mega backdoor roth (assuming we have maxed backdoor roth at $6500 per spouse)? This assumes that we do not have enough cash flow to max out 401k and throw money into mega backdoor roth.
The individual answer depends on your individual situation.

That said, pre-tax 401k contributions are more beneficial than Roth contributions for most people, and have a lower tail risk because you're deferring taxes. Roth IRA and MBR contributions are more or less equally valuable for most people.

In your case, since you have assets in IRAs, and thus cannot do backdoor Roth conversions without encountering the pro-rata rule, I would suggest in order:

1. Max pre-tax 401k contributions.
2. Max mega backdoor Roth 401k contributions.
3. Roll your IRAs into your 401ks so you can make backdoor Roth contributions without encountering pro-rata consequences in the future.
4. Contribute excess investment money to a taxable account**/***

**I'll note that many people, even many people on this board, never invest in a taxable account because their pre-tax space exceeds their investible cash flow, or only invest in a taxable account later in life as they reach their peak earning years. Point being, there are few if any compelling reasons to pay taxes now when you could defer taxes until later.

***All of this ignores HSAs, which you may or may not have access to.
backpacker61
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Re: Investment Help! Working on Getting Educated

Post by backpacker61 »

BuckeyeAaron wrote: Fri Jan 27, 2023 9:46 am Quick question: Is it generally advised to max traditional 401(k) contributions and standard backdoor roth before considering mega backdoor roth maneuvers (assuming employer allows after-tax contributions and in-service withdraws)? Or, is it preferred to utilize full company match and then use extra cash straight to mega backdoor roth (assuming we have maxed backdoor roth at $6500 per spouse)? This assumes that we do not have enough cash flow to max out 401k and throw money into mega backdoor roth.
For protection from legal judgements, funds in employer sponsored plans have a slight advantage over funds in IRA's, which would give a small advantage to funding the mega-backdoor Roth. This depends on the state you live in.

401(K)
https://www.bogleheads.org/wiki/Asset_p ... _in_a_401K
IRA
https://www.bogleheads.org/wiki/Asset_p ... _in_an_IRA

Your wife's Empower employer-sponsored plan has some excellent choices.
“Now shall I walk or shall I ride? | 'Ride,' Pleasure said; | 'Walk,' Joy replied.” | | ― W.H. Davies
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BuckeyeAaron
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Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

MattB wrote: Fri Jan 27, 2023 10:21 am
BuckeyeAaron wrote: Fri Jan 27, 2023 9:46 am Quick question: Is it generally advised to max traditional 401(k) contributions and standard backdoor roth before considering mega backdoor roth maneuvers (assuming employer allows after-tax contributions and in-service withdraws)? Or, is it preferred to utilize full company match and then use extra cash straight to mega backdoor roth (assuming we have maxed backdoor roth at $6500 per spouse)? This assumes that we do not have enough cash flow to max out 401k and throw money into mega backdoor roth.
The individual answer depends on your individual situation.

That said, pre-tax 401k contributions are more beneficial than Roth contributions for most people, and have a lower tail risk because you're deferring taxes. Roth IRA and MBR contributions are more or less equally valuable for most people.

In your case, since you have assets in IRAs, and thus cannot do backdoor Roth conversions without encountering the pro-rata rule, I would suggest in order:

1. Max pre-tax 401k contributions.
2. Max mega backdoor Roth 401k contributions.
3. Roll your IRAs into your 401ks so you can make backdoor Roth contributions without encountering pro-rata consequences in the future.
4. Contribute excess investment money to a taxable account**/***

**I'll note that many people, even many people on this board, never invest in a taxable account because their pre-tax space exceeds their investible cash flow, or only invest in a taxable account later in life as they reach their peak earning years. Point being, there are few if any compelling reasons to pay taxes now when you could defer taxes until later.

***All of this ignores HSAs, which you may or may not have access to.
I did confirm today that I could roll over my TIRA funds into an I-401k account at vanguard to which would free up the TIRA account for the purpose of backdoor roth in 2024 and avoid pro-rata rule. So that's an option.

I'm not sure yet if my wife's employer 401k allows TIRA fund rollover. But if so, the thought was to execute the same and free up her TIRA account for the same purpose - backdoor roth in 2024 and avoid pro-rata.

But given your order of priority, this would only be advisable if we were to max out my wife's 401k and max out mega backdoor roth (assuming its possible and assuming we had the funds to max that out - which we wouldn't). My wife is currently contributing 5% to simply take advantage of full employer match. That results in $11,250 based on her gross salary. It looks like limit for 401k contributions in 2023 is $22,500 which means we'd have another $11,250. This is within our means but wouldn't leave much for mega backdoor or regula backdoor (maybe a $2 to $3k per year).

This is interesting to think about as I've always been led to believe to push roth first, above all else - which means to take that additional $11,250 and figure out a way to get it into roth (via backdoor contribution) but your guidance is prioritizing 401k. Am I tracking correctly?
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BuckeyeAaron
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Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

backpacker61 wrote: Fri Jan 27, 2023 10:33 am Your wife's Empower employer-sponsored plan has some excellent choices.
Which specific ones do you prize? I was thinking of simply switching from 2045 to 2050 Vanguard Target Fund to boost the equity percentage a tad. Any other changes we should consider?
tashnewbie
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Re: Investment Help! Working on Getting Educated

Post by tashnewbie »

BuckeyeAaron wrote: Thu Jan 26, 2023 6:28 pm
  • 4b. Backdoor transfer rolled over traditional IRA funds to roth accounts acknowledging we will owe tax on these pre-existing funds, apply these deposits towards 2022 deposit limits
  • 5a. Use cash funds from closed non-qualified account to deposit into new traditional IRA accounts at Vanguard, for my wife and myself, then transfer to ROTH accounts to max out 2022 contributions. From residual balance of the $50k, fully fund traditional IRA accounts for my wife and I ($13,000) for 2023 contributions, then backdoor transfer to roth accounts
Based on later posts, I think you understand this now, but I want to reiterate this point.

Do not do the backdoor Roth maneuver if you still have pretax money in a TIRA (this is individual, so your having pretax money in a TIRA wouldn't affect your wife's ability to do a backdoor unencumbered by the pro rata rule and vice versa).

If he does not open a solo 401k and instead chooses a SEP IRA, then he should completely forego the backdoor, unless and until he can transfer the TIRA money into a 401k/403b. However, I think I recall that his TIRA balance is relatively low (<$8k). You can decide between yourselves whether you want to pay the taxes to convert that balance to Roth (tax cost would be the balance in the TIRA multiplied by your marginal tax rate). Then the way for easy backdoors would be open for him.

She can investigate whether her current 401k will accept an incoming rollover of her TIRA/Rollover IRA. Most plans seem to allow them but some don't. If she can get her TIRA into her 401k, then she can do easy backdoor Roth.

I would prioritize backdoor Roth for her over taxable investing. But if you don't want to do the backdoor, you don't have to. It's easy to do, but some people don't want to be bothered by the little extra paperwork or risk making a mistake in the execution, and that's fine.

Check out this wiki page about prioritizing investments to get a sense for what might be reasonable for you: https://www.bogleheads.org/wiki/Priorit ... nvestments

I would max her 401k, max HSA if you still have a qualifying health plan, max backdoor for her and him if you can clear the TIRAs (by moving into her 401k, moving into his solo 401k OR paying tax), then put any remaining money in 529s and/or taxable.
  • 6. Remaining questions:
  • 6a. What to do with Fidelity HSA account from wife's previous employer for ~$480? Open new HSA at Vanguard and rollover? Cash out and pay tax penalty?
Fidelity is a favorite on the forum for HSA custodians. I would keep her HSA account at Fidelity, assuming her previous employer isn't charging her any fees. If it is, then I would transfer the account from her employer's plan to an individual HSA at Fidelity (should be very easy for Fidelity to handle).
  • 6b. Not sure I fully understand backdoor roth - need to dig deeper on this
Keep reading. Don't attempt it until you can do the tax paperwork yourself (Form 8606).

You're doing great!
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BuckeyeAaron
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Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

tashnewbie wrote: Fri Jan 27, 2023 11:09 am ...
TIRA balance is relatively low (<$8k). You can decide between yourselves whether you want to pay the taxes to convert that balance to Roth (tax cost would be the balance in the TIRA multiplied by your marginal tax rate).
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I would prioritize backdoor Roth for her over taxable investing.
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I would max her 401k, max HSA if you still have a qualifying health plan, max backdoor for her and him if you can clear the TIRAs (by moving into her 401k, moving into his solo 401k OR paying tax), then put any remaining money in 529s and/or taxable.
That's an interesting thought... you are correct - my ITA balance is pretty small ($5,600). Converting this to roth by paying tax rate may make the most sense and remove the need to open an I-401(k) that we may not have the cash flow to really utilize (for all practical purposes, it would likely just sit there and hold rolled over TIRA funds indefinitely with no active contributions anytime soon - if ever). That would keep things cleaner.

When you say you "I would prioritize backdoor Roth for her over taxable investing" - do you not consider 401(k) taxable investing? I just want to be clear because later you said you would "max her 401k, max HSA if you still have a qualifying health plan, max backdoor for her and him if you can clear the TIRAs (by moving into her 401k, moving into his solo 401k OR paying tax), then put any remaining money in 529s and/or taxable" but shouldn't backdoor roth take top spot since 401k is taxable investing? Just want to make sure I'm following correctly.
backpacker61
Posts: 1148
Joined: Wed May 20, 2020 6:36 am

Re: Investment Help! Working on Getting Educated

Post by backpacker61 »

BuckeyeAaron wrote: Fri Jan 27, 2023 10:55 am
backpacker61 wrote: Fri Jan 27, 2023 10:33 am Your wife's Empower employer-sponsored plan has some excellent choices.
Which specific ones do you prize? I was thinking of simply switching from 2045 to 2050 Vanguard Target Fund to boost the equity percentage a tad. Any other changes we should consider?
Your thinking is fine; the Vanguard Target Funds are excellent.

These are also very good:
Vanguard FTSE All-Wld ex-US Inx Admiral, ER .11 (for international stock)
Vanguard 500 Index Admiral, ER .04 (for US stock)
Vanguard Total Bond Market Index Admiral, ER .05 (for fixed income)

Also, you asked about transferring your wife's HSA to Vanguard. Unfortunately, Vanguard doesn't have HSA's. Fidelity's HSA is probably one of the best around.

You could also do your taxable account investing investing at Fidelity to keep as much as possible at one place. They have many fund choices that are comparable to Vanguard's, and you can even buy Vanguard ETF's commission-free through Fidelity's brokerage.
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Topic Author
BuckeyeAaron
Posts: 24
Joined: Tue Jan 24, 2023 6:51 am
Location: Ohio

Re: Investment Help! Working on Getting Educated

Post by BuckeyeAaron »

backpacker61 wrote: Fri Jan 27, 2023 12:59 pm
BuckeyeAaron wrote: Fri Jan 27, 2023 10:55 am
backpacker61 wrote: Fri Jan 27, 2023 10:33 am Your wife's Empower employer-sponsored plan has some excellent choices.
Which specific ones do you prize? I was thinking of simply switching from 2045 to 2050 Vanguard Target Fund to boost the equity percentage a tad. Any other changes we should consider?
Your thinking is fine; the Vanguard Target Funds are excellent.

These are also very good:
Vanguard FTSE All-Wld ex-US Inx Admiral, ER .11 (for international stock)
Vanguard 500 Index Admiral, ER .04 (for US stock)
Vanguard Total Bond Market Index Admiral, ER .05 (for fixed income)

Also, you asked about transferring your wife's HSA to Vanguard. Unfortunately, Vanguard doesn't have HSA's. Fidelity's HSA is probably one of the best around.

You could also do your taxable account investing investing at Fidelity to keep as much as possible at one place. They have many fund choices that are comparable to Vanguard's, and you can even buy Vanguard ETF's commission-free through Fidelity's brokerage.
Thanks for the feedback. The HSA amount is marginal. I need to check with my wife's employer to see if they offer HSA - I think that they do and if so, we could look into rolling that amount into a new account with her employer/Empower just to keep things simple.

My goal would be to consolidate as much as possible - I enjoy simplicity (as long as it doesn't come at an unreasonable cost). And moving her Fidelity 401k to Empower seems appealing as the ER is lower and fund selection seems to be better. If we are able to pull that off, then that just leaves a small IRA and an even smaller HSA at Fidelity - so rolling those accounts over would be nice as well.
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