Portfolio Overhaul Help Needed Due to Changing Circumstance

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Topic Author
Royalty
Posts: 23
Joined: Wed Mar 06, 2024 2:01 am

Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

When I began investing with a small sum 30 years ago, my goal was to grow as much money for retirement as possible. Now that I’ve reached my 60’s, my investment goals have drastically changed.

I have a disabled daughter that will need to be taken care of once her father & I am gone. So I have no intention of touching any of the money that has accrued in my brokerage acct. Instead I need to overhaul my portfolio to focus on my daughter’s future needs. But I am at a loss as to the best way to proceed at this point. I could use help. No idea what asset allocation would be best for this situation.

Here is our financial picture:

Emergency Fund: 6 months of expenses
.
Debt:
Mortgage – Balance $170,594.06 with 27 yrs remaining.
Monthly payment $1,762.18 at 3.75% interest;

Daughter’s student loan balance $4,862.91 at 4.45% - $70 per month payment;

New ac unit = $280 per month for 4 years at 0% interest.

Explanation: We had to refinance our mortgage when my husband lost his job to take out enough money to purchase several years of his out of state service toward his pension. This effectively set us back to the beginning with another 30 year mortgage.

Tax Filing Status: Married Filing Jointly -Tax Rate: 22%

State of Residence: Texas

Age: 62

Taxable Brokerage account is 100% invested in stocks = 33 individual stocks for a total of $237k plus $21,600 cash available to invest.
Roth IRA: has 14 individual stocks & a Mid-Cap ETF = $24k

I didn’t think I should list all of the individual stocks because they would take up so much space here. I find that I am much more nervous about risk now that I’m thinking about my daughter’s future & my current accounts are very risky.

Other Financial Information:

I have been on a disability pension for the past 21 years that currently pays $1,703.43 per month & a long-term disability policy payment of $621.12 per month.

My husband is 66 & lost his job 5 years ago due to a health disability. He currently gets a monthly pension of $3,554.80 & also gets social security of $3,006.00.

His pension will pass to my daughter which will help, but will be at a lowered payment of $2,554.80.

My daughter is 33 years old. She has been working her first part-time job for the past few months at a daycare. We worked with a state agency whose focus is getting employment for people with disabilities. She is unable to drive due to her disability, so will need to pay someone to drive her once we are gone, along with other household help.

I realize at this point that there is no portfolio overhaul that will provide all the money she will realistically need, but it’s all I’ve got. So I feel a sense of urgency to set up a portfolio that can work effectively to provide for her needs for as long as possible.

I welcome input & apologize if this post didn’t conform to the typical portfolio review model.
BitTooAggressive
Posts: 1126
Joined: Tue Jul 13, 2021 3:15 pm

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by BitTooAggressive »

All these individual stocks is a bad philosophy. Consider a Vanguard Life Strategy fund. You can pick a fixed allocation such as 60/40 or 80/20.

The fund will hold the US total market and International total market for equities and bonds and automatically rebalance.

It will serve as a great all in one fund and will require no maintenance. Hope that helps.

https://investor.vanguard.com/investmen ... tegy-funds
andy08
Posts: 11
Joined: Fri Apr 08, 2022 7:46 am

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by andy08 »

Hi:
Sorry to hear about your daughter's situation and that your husband lost his job.

Others who know more will comment on trust/will as I am not that familiar with it especially with regards to disabled child.

Total income: $8885.35. Some questions that others will also want answers to help you.

1. What are your expenses adding all that you mentioned and others that you didnt mention? Can you save every month and how much?
2. All individuals stocks is not a good situation as passive index funds will beat those returns over time. Can you sell them matching out loss and gain to avoid taxes?
3. What are the projected expenses for your disabled daughter after you and your husband are not around? Does her part time job and Social Security cover expenses?
lakpr
Posts: 11784
Joined: Fri Mar 18, 2011 9:59 am

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by lakpr »

The individual stocks within the Roth IRA can be sold without any tax consequences. I recommend selling everything there, and buying a total stock market fund or ETF such as FSKAX (if at Fidelity), SWTSX (if at Schwab), VTSAX (if at Vanguard), or VTI or ITOT if at any other brokerage.

The individual stocks within the taxable account are a bit more problematic and need to be approached carefully. You said you have been investing for the past 30 years, are these stocks also that many years old? They could be non covered shares, meaning the brokerage firm may not have the acquisition cost basis information for those shares (by law, brokerage firms are required to keep track of cost basis of stocks or funds only those bought after January 1st, 2012; cost basis for securities bought earlier than that will be the responsibility of the taxpayer). Did you keep good records? What is the loss or gain on each individual stock?
tashnewbie
Posts: 4370
Joined: Thu Apr 23, 2020 12:44 pm

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by tashnewbie »

I agree that individual stocks is not the way to go for your family, at least not when it comprises 100% of your invested assets.

I think you should consult with a professional who specializes in setting up special needs trusts or other arrangements for disabled adult children.

Is your daughter eligible for SSI? Would she ever qualify for SSDI? I presume she'd need to accrue 40 quarterly credits to be eligible for SSDI, but I don't know how quarters are accumulated with part-time work.

I think you'll need to consider whether there is any shortfall between your daughter's part-time job earnings and the future pension and her expenses. That shortfall is what would need to be covered by the inheritance she receives from your portfolio. But I would confirm that there are no governmental sources of income such as SSI or SSDI. She also might qualify for Medicare and/or Medicaid.

What is the plan with your house? Do you plan to downsize or do you want your daughter to inherit it? I assume there could be issues with her ability to inherit it, due to her disability and possible lack of legal capacity. You also probably wouldn't want her to inherit it with a mortgage.

But I don't know enough to advise you, other than to tell you I think you should talk with an expert who handles these sorts of arrangements. That might be a trusts and estates attorney, but I'm not sure. I would see if there is a disability advocacy group in your local area (or state) and talk with someone there. They should be able to point you in the right direction.
Topic Author
Royalty
Posts: 23
Joined: Wed Mar 06, 2024 2:01 am

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

BitTooAggressive wrote: Tue Mar 19, 2024 1:50 am All these individual stocks is a bad philosophy. Consider a Vanguard Life Strategy fund. You can pick a fixed allocation such as 60/40 or 80/20.

The fund will hold the US total market and International total market for equities and bonds and automatically rebalance.

It will serve as a great all in one fund and will require no maintenance. Hope that helps.

https://investor.vanguard.com/investmen ... tegy-funds
That would definitely work for the Roth IRA where I can sell all stock without consequences, but I have a total gain in my taxable account of $171,280.93 vs a loss of $9,632.19. I have no idea how to manage that.
Topic Author
Royalty
Posts: 23
Joined: Wed Mar 06, 2024 2:01 am

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

andy08 wrote: Tue Mar 19, 2024 1:55 am Hi:
Sorry to hear about your daughter's situation and that your husband lost his job.
Thanks.
andy08 wrote: Total income: $8885.35. Some questions that others will also want answers to help you.

1. What are your expenses adding all that you mentioned and others that you didnt mention? Can you save every month and how much?
2. All individuals stocks is not a good situation as passive index funds will beat those returns over time. Can you sell them matching out loss and gain to avoid taxes?
3. What are the projected expenses for your disabled daughter after you and your husband are not around? Does her part time job and Social Security cover expenses?
You ask some hard questions. Necessary questions, but hard to answer. I went & took a look at our current bank statement to try & answer your question as to expenses. I put together a spreadsheet with the caveat that it can vary widely depending on the month. For instance our current combined energy bill (natural gas + electric) is $408 but in the summer months electric is over $1,000 per month. It's like a second mortgage. Also we have 5 pets, 4 that are now seniors & vet care can be expensive at times. Our dog had to have surgery recently that cost $4,000. Then we had to have our house foundation raised because the ground is shifting & the front corner had sank 5 inches. They raised it & put 14 piers underneath to support it & that was $7,000. Now that I've given that caveat to account for variations, here are this month's expenses:
Groceries & Food Deliveries 1,700
Mortgage 1,762.18
Medical 223.75
Student Loan 70
Cable/Internet 318.22
Disney Plus 20.52
Sewer/Water/Trash Pickup 109
Veterinarian 597
Boost Mobile 90
Atmos Energy 154
TXU Energy 254
Misc. 500
Lawn Maintenance 100
Nationwide Insurance 147
Syncrony (new bed) 40
AC Unit 280
Total 6,366

As to your second question, I have a gain of $171,280.93 vs a loss of $9,632.19 in my taxable account. I don't know how to manage that without taking a huge tax hit.

Regarding your third question, I don't know at this point what her expenses will be, but I do know that they will exceed what she will be able to earn combined with the amount she will get from my husband's pension. Our mortgage is the biggest expense & would take every penny she currently earns to pay. That leaves the pension to pay everything else. We are looking at her current job as a stepping stone to something that pays better & that offers a full time position so her income increases some. It's giving her the experience she needs working with kids which is the thing that kept her from better jobs. But again she will need someone to drive her to work & everywhere else she needs to go & will possibly need some household help. I have no idea how much that will cost.

I was hoping I could grow my portfolio enough to at least help her through most of her years, but I'm realizing what a big mistake I've made with all of those stocks in my taxable account. I'm truly stuck.
ScubaHogg
Posts: 3661
Joined: Sun Nov 06, 2011 2:02 pm

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by ScubaHogg »

One question, is your husband’s pension indexed for inflation? Or have any kind of cost of living adjustment built in?

Since you mentioned that part of his pension will pass to your daughter, it’s conceivable that she will be collecting the pension for decades (I assume? Or is there a time limit?).

Over that kind of time span even mild inflation can really chew away at the purchasing power of a nominal income stream (ie one that doesn’t adjust for inflation)

Some budget thoughts: Now keep in mind, I have two little boys. My below suggestions are based on what I would do if I were in your shoes. There isn’t a ton you can do investment wise (though there is some) to make a huge difference. It seems no one can go back to work either. So the budget is the only place you can make a difference.

- A quick glance at your budget suggests you can probably cut down on groceries. I have a family of four, no one would ever accuse me of being frugal, and that’s in line with our total monthly food spend. A couple hundred dollars a month saved for the next 20 years adds up

- Pet love is real. I get it. I’ve been there. But the simply fact is your daughter is looking at possible 50 plus years of needing assistance. You just can’t be dropping $4k on an old dog. You just can’t. Do you realize that investing $4000 into a total stock market portfolio 40 years ago would be worth $86,000 today?!

Think about that. When you daughter is in her 70s she could have had an additional $86,000. Or your dog could have a little more time today? It’s a crappy choice to have to make, but it seems to be the one you have to make. It’s your dog or your daughter. You’ve got to choose. Combined with the almost $600/mo in vet bills and you are talking about some real money. For my boys at least I know what I would do.

- Housing: Your mortgage payment isn’t bad. But the house sounds like it’s crazy expensive to maintain. Probably more than you can afford. Why in the world is your electric bill over $1000/mo in the summer? Board members in Phoenix and Houston regularly post electric bills well less than that? Is it a super leaky house?

Never mind foundation repairs and other upkeep. You’ve got maintenance, lawn up keep, trash pick up, crazy utility bills that are still $400 in the winter despite crazy high summer bills. You’re paying extortionary amounts for cable and internet. Are you subscribed to every channel on the planet?

I’d look into selling it and finding a nice, modern apartment to rent that includes trash, maybe utilities, maybe internet. Once you eliminate all the cost drag of your house, you could probably rent a place for $2000/mo and still come out way ahead

All in all it seems like it would be trivially easy to cut $1000/mo out of your budget without really suffering that much. That’s $12,000/year! A quick Monte Carlo sim on a 60/40 portfolio shows that in 15 years with even a little luck that could be several hundred thousand dollars

https://www.portfoliovisualizer.com/mon ... iiPlWYTN1C

Combined with what you already have, there is a very good chance of getting your daughter hundreds of thousands of dollars for her support. She won’t be rich, but that’s a huge difference maker.

(Hopefully other board members smarter than me will be able to comment on trusts, etc. I can’t help but wonder if you can gift your taxable brokerage to her, count it against your lifetime estate exemption. Would that reset the cost basis? I don’t know. But if it did it would be a way out of the individual stocks)
“Conventional Treasury rates are risk free only in the sense that they guarantee nominal principal. But their real rate of return is uncertain until after the fact.” -Risk Less and Prosper
Topic Author
Royalty
Posts: 23
Joined: Wed Mar 06, 2024 2:01 am

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

tashnewbie wrote: Tue Mar 19, 2024 7:46 am I agree that individual stocks is not the way to go for your family, at least not when it comprises 100% of your invested assets.

I think you should consult with a professional who specializes in setting up special needs trusts or other arrangements for disabled adult children.


I agree. I have no idea if a trust would be the best way to go & if so what kind? I think we need to talk to a trust/estate attorney & a financial planner of some kind. The hard part is finding professionals we can trust & that won't eat up a lot in expenses. I know that we need to look for a fiduciary for the financial part. I know that the Bogleheads have a chapter in this area, so I thought I might reach out & see if someone could offer a trustworthy recommendation.
tashnewbie wrote: Is your daughter eligible for SSI? Would she ever qualify for SSDI? I presume she'd need to accrue 40 quarterly credits to be eligible for SSDI, but I don't know how quarters are accumulated with part-time work.
She was turned down for SSI. I assume she would qualify for SSDI once she has paid in the required credits, but that is a long way off.
tashnewbie wrote: I think you'll need to consider whether there is any shortfall between your daughter's part-time job earnings and the future pension and her expenses. That shortfall is what would need to be covered by the inheritance she receives from your portfolio. But I would confirm that there are no governmental sources of income such as SSI or SSDI. She also might qualify for Medicare and/or Medicaid.
After reading everyone's replies, I realize that the 3 of us need to sit down & do our best to figure out what her expenses will be once we are gone, although that's going to be hard to do because some things can't be anticipated. As for Medicare, currently she is on my health insurance policy that I was able to keep when I had to leave my job due to disability. As for governmental sources of income, I've found the government tends to hold the disabled in low regard. They create unnecessary obstacles & make life even more difficult for people already dealing with difficulties.
tashnewbie wrote:What is the plan with your house? Do you plan to downsize or do you want your daughter to inherit it? I assume there could be issues with her ability to inherit it, due to her disability and possible lack of legal capacity. You also probably wouldn't want her to inherit it with a mortgage.
This is up in the air. Ideally we would like to sell this house & move somewhere where we know people. We have decided to ask our nephew (who is an attorney) this weekend if he would consider acting as Executor of any trust or estate & also be willing to help our daughter with any needs she may have. If he agrees, we could possibly move to Ohio where he lives to make it easier. I do want to leave my daughter a house & ideally I would like to leave her without a mortgage. I don't yet know if that will be possible.
tashnewbie wrote:But I don't know enough to advise you, other than to tell you I think you should talk with an expert who handles these sorts of arrangements. That might be a trusts and estates attorney, but I'm not sure. I would see if there is a disability advocacy group in your local area (or state) and talk with someone there. They should be able to point you in the right direction.
A disability advocacy group is an excellent idea! I can't believe it hadn't occurred to me to look for one. Thanks!
ScubaHogg
Posts: 3661
Joined: Sun Nov 06, 2011 2:02 pm

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by ScubaHogg »

Royalty wrote: Thu Mar 21, 2024 1:36 am
I do want to leave my daughter a house & ideally I would like to leave her without a mortgage. I don't yet know if that will be possible.
Is this the wisest path? If she is disabled, will she be good to manage property taxes, lawn upkeep, preventative maintenance, insurance, emergency maintenance? What if a life situation requires a move? Will she have the capability to engage a real estate agent and negotiate a sell?

Owning a home is a lot of work. It seems that maybe have a bunch of savings and renting would be more suitable?
“Conventional Treasury rates are risk free only in the sense that they guarantee nominal principal. But their real rate of return is uncertain until after the fact.” -Risk Less and Prosper
Topic Author
Royalty
Posts: 23
Joined: Wed Mar 06, 2024 2:01 am

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

ScubaHogg wrote: Wed Mar 20, 2024 4:35 am One question, is your husband’s pension indexed for inflation? Or have any kind of cost of living adjustment built in?
It does.
ScubaHogg wrote:Since you mentioned that part of his pension will pass to your daughter, it’s conceivable that she will be collecting the pension for decades (I assume? Or is there a time limit?).
She will receive the pension for the rest of her life.
ScubaHogg wrote: Some budget thoughts: Now keep in mind, I have two little boys. My below suggestions are based on what I would do if I were in your shoes. There isn’t a ton you can do investment wise (though there is some) to make a huge difference. It seems no one can go back to work either. So the budget is the only place you can make a difference.

- A quick glance at your budget suggests you can probably cut down on groceries. I have a family of four, no one would ever accuse me of being frugal, and that’s in line with our total monthly food spend. A couple hundred dollars a month saved for the next 20 years adds up

- Pet love is real. I get it. I’ve been there. But the simply fact is your daughter is looking at possible 50 plus years of needing assistance. You just can’t be dropping $4k on an old dog. You just can’t. Do you realize that investing $4000 into a total stock market portfolio 40 years ago would be worth $86,000 today?!

Think about that. When you daughter is in her 70s she could have had an additional $86,000. Or your dog could have a little more time today? It’s a crappy choice to have to make, but it seems to be the one you have to make. It’s your dog or your daughter. You’ve got to choose. Combined with the almost $600/mo in vet bills and you are talking about some real money. For my boys at least I know what I would do.
It's my belief that when adopting pets you are accepting responsibility for that animal's well-being for the duration of their lives. Just like children, they are completely dependent on you for their welfare. You don't adopt them & keep them while they are young & healthy, just to discard them when they need medical care. Our dog is 11 years old & has already had his surgery to remove a soft-tissue sarcoma.. Thanks to this life saving surgery he should live for another 5 or 6 years. My daughter was unable to sleep alone in her own bed until she was in her 20s & this dog was the reason she was able to accomplish that. He gave her the security that she needed to make this huge step & he has slept with her every night since.

As for the $600 vet bill, that was this month, which is why I added the caveat that some expenses can vary widely. There are a greater number of months where we don't incur any vet bills.
ScubaHogg wrote: - Housing: Your mortgage payment isn’t bad. But the house sounds like it’s crazy expensive to maintain. Probably more than you can afford. Why in the world is your electric bill over $1000/mo in the summer? Board members in Phoenix and Houston regularly post electric bills well less than that? Is it a super leaky house?
We bought the house new but it is now 21 years old & things are starting to need replacement or repair. The past 12 months have been particularly expensive with the foundation, a new ac unit & new flooring downstairs. There are quite a few repairs currently needed. As for the summer electric bills, there are several reasons for such high costs. For each of the past 3 years we have broken heat records with 60 days or more of temps at 115 degrees with the heat index. Combined with such high temps we have a number of windows which need to be replaced because they have lost their seal and that is a huge expense that we currently can't afford.
ScubaHogg wrote: Never mind foundation repairs and other upkeep. You’ve got maintenance, lawn up keep, trash pick up, crazy utility bills that are still $400 in the winter despite crazy high summer bills. You’re paying extortionary amounts for cable and internet. Are you subscribed to every channel on the planet?
I agree with you about the high cost of our cable/internet with Spectrum. I have tried several times to find alternative television providers but end up getting frustrated & resigning myself to what we already have. I can revisit that again & see if anything has changed in this area. The problem is that Spectrum pretty much has a monopoly. We do have several pay channels that adds to the expense but I have to tell you that with my husband's disability along with my own, we don't get to take vacations or have other hobbies outside of the house that we are able to do, so movies are the one thing that we are able to enjoy in our retirement.
ScubaHogg wrote: I’d look into selling it and finding a nice, modern apartment to rent that includes trash, maybe utilities, maybe internet. Once you eliminate all the cost drag of your house, you could probably rent a place for $2000/mo and still come out way ahead
We would like to sell this house but feel that certain repairs have to be made first in order to get anywhere close to what the house is worth. We are currently working on clearing out the upstairs floors so that we can get the sub-floors repaired & then new flooring is needed. This is a slow process because of our health situation. It's going to take a few years to get the house ready.
ScubaHogg wrote: All in all it seems like it would be trivially easy to cut $1000/mo out of your budget without really suffering that much. That’s $12,000/year! A quick Monte Carlo sim on a 60/40 portfolio shows that in 15 years with even a little luck that could be several hundred thousand dollars

https://www.portfoliovisualizer.com/mon ... iiPlWYTN1C

Combined with what you already have, there is a very good chance of getting your daughter hundreds of thousands of dollars for her support. She won’t be rich, but that’s a huge difference maker.
I'm not sure about being able to cut $1,000 a month out of our budget, but we are looking at our expenses with an eye toward cutting. Getting my daughter the assistance she will need occupies all of my waking hours.
ScubaHogg wrote: (Hopefully other board members smarter than me will be able to comment on trusts, etc. I can’t help but wonder if you can gift your taxable brokerage to her, count it against your lifetime estate exemption. Would that reset the cost basis? I don’t know. But if it did it would be a way out of the individual stocks)
I looked into gifting my taxable brokerage account to my daughter & what I found online was that while it would get me out of paying any capital gains, my daughter would still have to pay the tax. You would think that there would be some kind of exemption of capital gains for a disabled child. I would love to talk to someone on here about a trust.
ScubaHogg
Posts: 3661
Joined: Sun Nov 06, 2011 2:02 pm

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by ScubaHogg »

Royalty wrote: Fri Mar 22, 2024 1:10 am
ScubaHogg wrote: Wed Mar 20, 2024 4:35 am One question, is your husband’s pension indexed for inflation? Or have any kind of cost of living adjustment built in?
It does.
ScubaHogg wrote:Since you mentioned that part of his pension will pass to your daughter, it’s conceivable that she will be collecting the pension for decades (I assume? Or is there a time limit?).
She will receive the pension for the rest of her life.
That’s a great start!

It's my belief that when adopting pets you are accepting responsibility for that animal's well-being for the duration of their lives. Just like children, they are completely dependent on you for their welfare. You don't adopt them & keep them while they are young & healthy, just to discard them when they need medical care. Our dog is 11 years old & has already had his surgery to remove a soft-tissue sarcoma.. Thanks to this life saving surgery he should live for another 5 or 6 years. My daughter was unable to sleep alone in her own bed until she was in her 20s & this dog was the reason she was able to accomplish that. He gave her the security that she needed to make this huge step & he has slept with her every night since.
I mean, it’s your choice obviously. But if it were my kid, their lifelong security would be my all consuming goal. It’s a choice between an old pet and your child.

We bought the house new but it is now 21 years old & things are starting to need replacement or repair. The past 12 months have been particularly expensive with the foundation, a new ac unit & new flooring downstairs. There are quite a few repairs currently needed. As for the summer electric bills, there are several reasons for such high costs. For each of the past 3 years we have broken heat records with 60 days or more of temps at 115 degrees with the heat index. Combined with such high temps we have a number of windows which need to be replaced because they have lost their seal and that is a huge expense that we currently can't afford.
Yeah, that’s happened other places. Like I said. Board members in phoenix and Houston post much lower utility bills all the time. Your house has major leaks.
I agree with you about the high cost of our cable/internet with Spectrum. I have tried several times to find alternative television providers but end up getting frustrated & resigning myself to what we already have. I can revisit that again & see if anything has changed in this area. The problem is that Spectrum pretty much has a monopoly. We do have several pay channels that adds to the expense but I have to tell you that with my husband's disability along with my own, we don't get to take vacations or have other hobbies outside of the house that we are able to do, so movies are the one thing that we are able to enjoy in our retirement.
Starlink is $120/mo. You could then get Hulu and a series of movie channels for easily less than $80/mo.

https://www.starlink.com/residential

Speaking of, with these disabilities how are you expecting to do the major repairs you say your house needs? Hire it out 100%?


We would like to sell this house but feel that certain repairs have to be made first in order to get anywhere close to what the house is worth. We are currently working on clearing out the upstairs floors so that we can get the sub-floors repaired & then new flooring is needed. This is a slow process because of our health situation. It's going to take a few years to get the house ready.
A few years?! You can’t afford the house today. A few more years of repairs and budget busting utilities and apparently endless maintenance.

I doubt the repairs add anymore value to the property than they cost (otherwise the buyer could just do them). If you are trying to save money, you need to sell it and downsize.

I'm not sure about being able to cut $1,000 a month out of our budget, but we are looking at our expenses with an eye toward cutting. Getting my daughter the assistance she will need occupies all of my waking hours.
$1000 easy. But it’s pretty obvious you aren’t interested in making any changes to your life. You could probably pretty easily get your daughter several hundred thousand more dollars. Or you can just let it leak out in month to month expenses. It seems a blindingly easy choice to this dad, but others disagree

Money will be the best way to get your daughter the assistance she needs once you two are gone. I’d focusing on maximizing that

Good luck
“Conventional Treasury rates are risk free only in the sense that they guarantee nominal principal. But their real rate of return is uncertain until after the fact.” -Risk Less and Prosper
Sagefemme
Posts: 355
Joined: Mon Mar 12, 2018 9:31 pm

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Sagefemme »

We would like to sell this house but feel that certain repairs have to be made first in order to get anywhere close to what the house is worth. We are currently working on clearing out the upstairs floors so that we can get the sub-floors repaired & then new flooring is needed. This is a slow process because of our health situation. It's going to take a few years to get the house ready.

The house is "worth" what it's worth, today. Why spend several years and your capital and your sweat equity (which you can't do very well because of health issues) to then sell the house for what it's worth today PLUS your capital (if you're lucky; most improvements don't net what the old owner spent)? Keep your capital, sell it now for its current worth, and let new owners do the improvements that THEY want. Every house will sell for the right price. You just need to find a good realtor who knows the market and say, sell this property now! Ok, maybe find your new forever house first, but you get my drift.

Sadly, it doesn't sound like a great house. My house is 80 years old and we are walking around on the floors that were installed when it was built. We don't have dogs, though, and I guess they are hard on floors.

Good luck with all this. Making huge life changes is daunting when you and your family members don't have great health. Take care of yourselves!
Topic Author
Royalty
Posts: 23
Joined: Wed Mar 06, 2024 2:01 am

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

It's my belief that when adopting pets you are accepting responsibility for that animal's well-being for the duration of their lives. Just like children, they are completely dependent on you for their welfare. You don't adopt them & keep them while they are young & healthy, just to discard them when they need medical care. Our dog is 11 years old & has already had his surgery to remove a soft-tissue sarcoma.. Thanks to this life saving surgery he should live for another 5 or 6 years. My daughter was unable to sleep alone in her own bed until she was in her 20s & this dog was the reason she was able to accomplish that. He gave her the security that she needed to make this huge step & he has slept with her every night since.
ScubaHogg wrote: I mean, it’s your choice obviously. But if it were my kid, their lifelong security would be my all consuming goal. It’s a choice between an old pet and your child.
Her lifelong security is my all consuming goal & your commentary is coming across as judgmental & a bit insulting which I do not need. Saving a beloved pet's life was never about a choice between him & my daughter. End of story.
ScubaHogg wrote: Speaking of, with these disabilities how are you expecting to do the major repairs you say your house needs? Hire it out 100%?
Yes. It's not possible to do it ourselves.

I'm not sure about being able to cut $1,000 a month out of our budget, but we are looking at our expenses with an eye toward cutting. Getting my daughter the assistance she will need occupies all of my waking hours.
ScubaHogg wrote: $1000 easy. But it’s pretty obvious you aren’t interested in making any changes to your life. You could probably pretty easily get your daughter several hundred thousand more dollars. Or you can just let it leak out in month to month expenses. It seems a blindingly easy choice to this dad, but others disagree
You don't know me, have never walked in my shoes, have no idea what my thoughts are, what I'm dealing with or what I'm planning, so please don't tell me what I am or am not doing or willing to do. I've already indicated that we are taking a hard look at our monthly expenses with an eye toward cutting. We are dealing with a helluva lot of difficult issues all at once & it certainly doesn't help to come on this forum & be insulted.
ScubaHogg wrote: Money will be the best way to get your daughter the assistance she needs once you two are gone. I’d focusing on maximizing that

Good luck
I am aware, that is my intent & the reason I posted in the first place.
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Beensabu
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Beensabu »

Royalty wrote: Tue Mar 19, 2024 1:07 am Mortgage – Balance $170,594.06 with 27 yrs remaining.
Monthly payment $1,762.18 at 3.75% interest;
Really? I took out a 30-year mortgage for more than that at 4.5% and my monthly payment is less. Does that include ins/tax?
His pension will pass to my daughter which will help, but will be at a lowered payment of $2,554.80.
That's plenty. It's more than full-time minimum wage in most states, currently. She'll be fine.
She is unable to drive due to her disability, so will need to pay someone to drive her once we are gone, along with other household help.
Does she know how to use Uber/Lyft? The bus? Plenty of people without cars making do just fine with a combo of that.
I realize at this point that there is no portfolio overhaul that will provide all the money she will realistically need, but it’s all I’ve got. So I feel a sense of urgency to set up a portfolio that can work effectively to provide for her needs for as long as possible.
She'll be fine. The pension plus part-time work plus small annual withdrawals from the inheritance will be enough. Don't worry. You just might want to set up a special needs trust maybe.

The individual stocks are an issue. But you can stop auto-reinvesting dividends, and then redirect that money from the settlement fund to a total stock market index fund.

As far as risk, you can look at the pension as the bond / fixed income portion of "her portfolio". The $282k at ~3% withdrawal per year is $8.5k on top of the $30.5k annual pension. That's practically $19/hr full-time. People make do on that just fine. Especially as a single individual.

If she takes over your mortgage/ins/tax on the home, she'll still have ~$1500/mo for non-housing spending. If you fix it up and sell it, and get her set up with housing assistance through a government agency (probably a more feasible long-term solution as she won't have to deal with home ownership and everything that comes with it), then that's more money for her to draw on over time later.

Bottom line: she'll be okay. She really will. You did good.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
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Royalty
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

We would like to sell this house but feel that certain repairs have to be made first in order to get anywhere close to what the house is worth. We are currently working on clearing out the upstairs floors so that we can get the sub-floors repaired & then new flooring is needed. This is a slow process because of our health situation. It's going to take a few years to get the house ready.
Sagefemme wrote: The house is "worth" what it's worth, today. Why spend several years and your capital and your sweat equity (which you can't do very well because of health issues) to then sell the house for what it's worth today PLUS your capital (if you're lucky; most improvements don't net what the old owner spent)? Keep your capital, sell it now for its current worth, and let new owners do the improvements that THEY want. Every house will sell for the right price. You just need to find a good realtor who knows the market and say, sell this property now! Ok, maybe find your new forever house first, but you get my drift.
My statement about needing certain repairs in order to be able to get the amount the house was worth was not expressed well. What I meant is that there are some problems that will likely make most buyers walk away, like windows with condensation between the panes to the point that you can't see out well or upstairs floors that are angled down toward one side which could lead a potential buyer to think there are structural problems (which there could be, there's just no way of knowing until we get someone to find out what the cause is) but if the cause is not structural and there is a fairly simple fix, it would be well worth it to fix it & NOT scare off buyers with structural concerns.
Sagefemme wrote: Sadly, it doesn't sound like a great house. My house is 80 years old and we are walking around on the floors that were installed when it was built. We don't have dogs, though, and I guess they are hard on floors.
For 20 years it was a great house, even in the ever-changeable Texas weather. We've had to re-roof the house twice due to hail damage, but so did everyone in our neighborhood. Our foundation problem also affected many others in our neighborhood because the shifting ground was throughout the neighborhood, not just underneath our house. The problems with the upstairs floors being slanted had nothing to do with our dogs. The 3 we had when we moved here never went up stairs & the small dog we have now only goes up at night & never goes in those rooms.
Sagefemme wrote: Good luck with all this. Making huge life changes is daunting when you and your family members don't have great health. Take care of yourselves!
Thanks! I appreciate it.
madbrain
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by madbrain »

If you already have to take on long-term consumer debt for maintenance, such as what you did for the AC unit, it is a clear sign that you can't afford the maintenance going forward. A house, especially an older one, will have ongoing lumpy expenses. The longer you stay, the more you will incur. If you must borrow for each one, even at 0%, you will at some point be unable to obtain any more credit, or default on your debts because the sum of monthly payments is too high.

With all the issues you describe, the house sounds like a fixer upper. There are investors who will buy those as-is, for the right price.

Try to find out what the house is worth. Talk to a local realtor. Have them visit and inspect the home, and do a competitive market analysis.

If you are lucky, it will cover the mortgage and the AC loan, and you will hopefully have some amount left over. Sell it while you still can. Don't wait until you are upside down. Don't burn through your savings to fix the house. Let the next owner choose their brand of windows floors etc. Do not fix anything anymore unless it jeopardizes your safety. For example, I had a gas leak that cost $6k to fix, and not fixing it could have cost me the entire house. Once sold, rent a home. Rent should cost less than your current home carrying costs. If something breaks in your rental, it's on the landlord to fix it. Not your job. Fixing a home can be expensive and stressful at your age. And if the landlord doesn't fix it or raises your rent too much, you have the ability to move. Moving is very stressful, but it could still be the best financial choice for you.

I say this as someone dealing with disability myself, owning a huge home that is an incredible expense generator. I don't do any of the maintenance myself either as I'm not skilled in that area. Fortunately, I'm not taking on any debt yet for the carrying costs, and I don't have a disabled child either. I am staying put at the moment, but giving consideration to moving as well in the future, as disability income is much more limited than wage earnings. In my case selling the home, investing the proceeds, and renting a home half the size would save over $5k/month. That is a ton of money not spent on maintenance. But I like my home and haven't been able to make that call yet. I may have to eventually if I can't work again.
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by madbrain »

Royalty wrote: Sat Mar 23, 2024 1:28 am We would like to sell this house but feel that certain repairs have to be made first in order to get anywhere close to what the house is worth.
You need to get a professional opinion to find out what your home is actually worth, currently, without making any further repairs, much less improvements. A professional home inspector might help also with evaluating the severity of problems, or anything you may have missed. A buyer will do their own inspection anyway, so you might as well find out first. Unless the buyer wants to tear down the home, which they might. Sometimes it is less expensive to rebuild than to repair. It certainly is on a per sq ft basis. But you obviously cannot afford to do a rebuild if one is needed.
It's going to take a few years to get the house ready.
What makes you think you'll be in a better financial position in a few years? A lot of things can happen. You had two reroofings due to hail. What are the odds that there will be hail again within the next few years, and you will have to reproof once more ?
Do you have the funds for it ? Or is the home insurance company on the hook for it ? And how much will your homeowner's insurance premiums go up as a result after the 3rd roof claim ?
Any number of things could happen during those years that could cost you a lot of money. Rebuilding the sewer line, gas line, water heater replacement, furnace, water pipes corroding and leaking, etc. They might not, but in an old home, it's more likely that some of them will. Most of these issues have to be dealt without delay if you still live in the house. If you can't afford to, you have to shut off all your utilities and move out.
In the end, if you wait a couple years and are on the hook for some of these problems, you could easily be in a much deeper financial hole. What is the upside of waiting ? Your home is not likely to appreciate in value during that time given its condition.
My statement about needing certain repairs in order to be able to get the amount the house was worth was not expressed well. What I meant is that there are some problems that will likely make most buyers walk away, like windows with condensation between the panes to the point that you can't see out well
An serious buyer or investor will budget for new windows and bid accordingly, discounting for this cost. That alone shouldn't prevent the home from being sold.
or upstairs floors that are angled down toward one side which could lead a potential buyer to think there are structural problems (which there could be, there's just no way of knowing until we get someone to find out what the cause is) but if the cause is not structural and there is a fairly simple fix, it would be well worth it to fix it & NOT scare off buyers with structural concerns.
You mentioned foundation issues, that the neighbors also had. It really could be structural problems. You should find out. Have the home inspector or structural engineer take a look. I had both take a look before I bought my current home. You should assume the buyer will inspect and find out about the issue before purchase. Don't try to hide it from the buyer.

If the house is structurally unsound, that will deter most buyers if it can't be fixed. You should find out if that is the case before spending one more dollar maintaining the house. Don't waste good money after bad !

An investor might still buy it in this case, but it will only be worth the land value minus demolition costs. That is probably a lot less than your mortgage.
If you turn out to have negative equity, a short sale or foreclosure may be in order.
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Kendall »

Perhaps you have already considered this, but does your daughter's disability meet the criteria that allow her student loan to be cancelled and forgiven? I don't know what qualifies, but it's worth checking.
cs412a
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by cs412a »

Kendall wrote: Sat Mar 23, 2024 11:31 am Perhaps you have already considered this, but does your daughter's disability meet the criteria that allow her student loan to be cancelled and forgiven? I don't know what qualifies, but it's worth checking.
Definitely check this out, OP.

I understand that this is a stressful situation for you. I'm not going to suggest anything re your home, but please set aside your emotions and consider the advice you have been given.

I would, however, like to address the issue of reducing expenses. This is critical, but it often is impractical to sit down, itemize all the expenses, and make drastic changes. That process is extremely stressful in itself, so I'd like to suggest a different approach. An analogy: I lost 65-75 lbs (it varies 8-)) by changing my diet. However, I didn't change to a low-fat, lean protein, veggies, fruits and seeds regimen overnight. It was a gradual process that started simply by daily monitoring and logging what I ate. Just seeing what I was eating was helpful, and it was easy to gradually tweak my food in a healthier direction (e.g., cutting back from two bagels & cream cheese to one bagel with light cream cheese, then switching to oatmeal for breakfast). Those changes add up over time. Now I have a completely different lifestyle with respect to diet.

So what I would suggest for you is to carefully and thoroughly monitor your expenses over the next few weeks. Making changes/cuts gradually but consistently over time may be easier to do than simply trying to go cold turkey. If it takes a few months to a year, you are still in a better place eventually.

For instance, I understand your desire to stream entertainment, but have you checked out what your local library has to offer? My local library offers two online streaming services, not to mention tons of e-books. Your tax dollars at work! No, you won't be able to see "the latest thing" but eventually the latest thing becomes not so shiny and it will probably show up at the library eventually.

Good luck.
ladycat
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by ladycat »

Someone mentioned getting your house appraised. A lower current value may help you reduce your property tax bill. Our home value is based on recent sales, and those homes are often renovated and sell for top dollar. Even without a formal appraisal, we've had our tax assessment lowered due to the lack of modern upgrades/renovations.
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Royalty
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

Kendall wrote: Sat Mar 23, 2024 11:31 am Perhaps you have already considered this, but does your daughter's disability meet the criteria that allow her student loan to be cancelled and forgiven? I don't know what qualifies, but it's worth checking.
This is something we are currently trying to find out. You would think that this would be the case.
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Royalty
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

madbrain wrote: Sat Mar 23, 2024 2:24 am If you already have to take on long-term consumer debt for maintenance, such as what you did for the AC unit, it is a clear sign that you can't afford the maintenance going forward. A house, especially an older one, will have ongoing lumpy expenses. The longer you stay, the more you will incur. If you must borrow for each one, even at 0%, you will at some point be unable to obtain any more credit, or default on your debts because the sum of monthly payments is too high.

Your point is valid & we are evaluating the situation going forward. We have been researching states & cities that are affordable that also have the best resources available for our daughter's disability, so a move is likely once we find the best location. She's going to need more than just financial assistance. She's going to need actual human assistance.
madbrain wrote: With all the issues you describe, the house sounds like a fixer upper. There are investors who will buy those as-is, for the right price.

Try to find out what the house is worth. Talk to a local realtor. Have them visit and inspect the home, and do a competitive market analysis.


We have a good idea of the value. When we refinanced 4 years ago the mortgage co had an appraisal done. Actually 2 appraisals were done for 2 different banks by different appraisers. The same problems we currently have were also present when those were done. Once we figure out the best place to relocate, we will have a realtor come in & possibly a home inspector.
madbrain wrote: If you are lucky, it will cover the mortgage and the AC loan, and you will hopefully have some amount left over. Sell it while you still can. Don't wait until you are upside down. Don't burn through your savings to fix the house. Let the next owner choose their brand of windows floors etc. Do not fix anything anymore unless it jeopardizes your safety. For example, I had a gas leak that cost $6k to fix, and not fixing it could have cost me the entire house. Once sold, rent a home. Rent should cost less than your current home carrying costs. If something breaks in your rental, it's on the landlord to fix it. Not your job. Fixing a home can be expensive and stressful at your age. And if the landlord doesn't fix it or raises your rent too much, you have the ability to move. Moving is very stressful, but it could still be the best financial choice for you.

I say this as someone dealing with disability myself, owning a huge home that is an incredible expense generator. I don't do any of the maintenance myself either as I'm not skilled in that area. Fortunately, I'm not taking on any debt yet for the carrying costs, and I don't have a disabled child either. I am staying put at the moment, but giving consideration to moving as well in the future, as disability income is much more limited than wage earnings. In my case selling the home, investing the proceeds, and renting a home half the size would save over $5k/month. That is a ton of money not spent on maintenance. But I like my home and haven't been able to make that call yet. I may have to eventually if I can't work again.
I'm sorry you are also dealing with a disability. I do feel strongly that there should be more support for the disabled from the govt, like a tax credit to help offset the cost of a mortgage or for simple household help, but I feel like the disabled tend to be forgotten when legislative priorities are being decided. Biden is proposing a $400 per month payment toward first time homebuyers' mortgages for 2 years. Where is a similar payment to help the disabled with a mortgage or rent? But I digress over something that's of no help now.

You seem to be in an enviable position if you can sale your current home, invest the proceeds & be able to save $5k a month renting. That's a dream on this end. Being able to free up that kind of money would make a substantial difference going forward.

I appreciate your reply.
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Royalty
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

cs412a wrote: Sat Mar 23, 2024 12:11 pm
I understand that this is a stressful situation for you. I'm not going to suggest anything re your home, but please set aside your emotions and consider the advice you have been given.

I would, however, like to address the issue of reducing expenses. This is critical, but it often is impractical to sit down, itemize all the expenses, and make drastic changes. That process is extremely stressful in itself, so I'd like to suggest a different approach. An analogy: I lost 65-75 lbs (it varies 8-)) by changing my diet. However, I didn't change to a low-fat, lean protein, veggies, fruits and seeds regimen overnight. It was a gradual process that started simply by daily monitoring and logging what I ate. Just seeing what I was eating was helpful, and it was easy to gradually tweak my food in a healthier direction (e.g., cutting back from two bagels & cream cheese to one bagel with light cream cheese, then switching to oatmeal for breakfast). Those changes add up over time. Now I have a completely different lifestyle with respect to diet.

So what I would suggest for you is to carefully and thoroughly monitor your expenses over the next few weeks. Making changes/cuts gradually but consistently over time may be easier to do than simply trying to go cold turkey. If it takes a few months to a year, you are still in a better place eventually.
This is actually excellent advice & makes a great deal of sense.
cs412a wrote: For instance, I understand your desire to stream entertainment, but have you checked out what your local library has to offer? My local library offers two online streaming services, not to mention tons of e-books. Your tax dollars at work! No, you won't be able to see "the latest thing" but eventually the latest thing becomes not so shiny and it will probably show up at the library eventually.

Good luck.
I'm all for libraries. My former job was director of a regional public library system, 2 libraries in 2 counties plus a bookmobile. The library here is not that great. No streaming services. It was a great thought though.
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Royalty
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

ladycat wrote: Sat Mar 23, 2024 12:39 pm Someone mentioned getting your house appraised. A lower current value may help you reduce your property tax bill. Our home value is based on recent sales, and those homes are often renovated and sell for top dollar. Even without a formal appraisal, we've had our tax assessment lowered due to the lack of modern upgrades/renovations.
We did that. We had our tax assessment lowered. Thanks for the advice though!
madbrain
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by madbrain »

Royalty wrote: Tue Apr 02, 2024 1:41 am You seem to be in an enviable position if you can sale your current home, invest the proceeds & be able to save $5k a month renting. That's a dream on this end. Being able to free up that kind of money would make a substantial difference going forward.
I am not seeing it the same way - I really like my home and want to stay in it. Moving is quite disruptive. It would definitely be much less expensive to rent, though. I'm looking into the possibility of reverse mortgages. Typical HECM requires being 62. There seems to be some options at age 55.
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Royalty
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

Royalty wrote: You seem to be in an enviable position if you can sale your current home, invest the proceeds & be able to save $5k a month renting. That's a dream on this end. Being able to free up that kind of money would make a substantial difference going forward.
madbrain wrote: I am not seeing it the same way - I really like my home and want to stay in it. Moving is quite disruptive. It would definitely be much less expensive to rent, though. I'm looking into the possibility of reverse mortgages. Typical HECM requires being 62. There seems to be some options at age 55.
Then I hope you are able to stay in your home where you are happy. I agree that moving is disruptive & stressful. By enviable position I was referring to the value of your home that would allow you to rent smaller & save $5k a month. I certainly don't envy your current situation. I don't know anything about reverse mortgages, but I hope you can find a financial option that works for you.
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by madbrain »

Royalty wrote: Tue Apr 02, 2024 8:44 pm Then I hope you are able to stay in your home where you are happy. I agree that moving is disruptive & stressful. By enviable position I was referring to the value of your home that would allow you to rent smaller & save $5k a month. I certainly don't envy your current situation. I don't know anything about reverse mortgages, but I hope you can find a financial option that works for you.
Thank you ! And you as well.
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BL
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by BL »

In taxable, you could sell all stocks that are at a loss, and also sell enough stocks at a capital gain to equal the capital loss. That would let you lower your investment in individual stocks and give you some cash to buy index funds as recommended above, without increasing your taxes.

If you want to sell more, you should probably check to see how it affects your taxes (social security and other things affected by extra income).

Agree: don't reinvest into anything you don't want to own more of.

You have received some good suggestions which may help you find a way to live within your means, if you choose to do so. Little things like alternating extra tv subscriptions could be a start. I have seen that suggested on this website. Keeping very good records of everything you spend for a few months can help you figure this out. Hiding your credit card by dropping into a milk carton full of water and then freezing it could break you of the habit of spending more than you can pay for.

Good luck on getting this right.
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Wiggums »

To reach your stated goal of providing for your daughter after you are gone, I would slowly sell off your individual stock with the goal of simplifying your portfolio. This will make your portfolio more manageable when you are gone.

We track every penny spent to have an accurate accounting of our expenses over several years. We asked our Internet provider for a better price, and I was pleasantly surprised to see the folks in the store were able to reduce the cost by $35/month.

You will make progress on your goal a little at a time. Good luck to you.
"I started with nothing and I still have most of it left."
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Royalty
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

BL wrote: Tue Apr 02, 2024 8:55 pm In taxable, you could sell all stocks that are at a loss, and also sell enough stocks at a capital gain to equal the capital loss. That would let you lower your investment in individual stocks and give you some cash to buy index funds as recommended above, without increasing your taxes.
I was just thinking that I should start selling off the stocks I have losses in (a little over $9,000 in losses at last check) & then try to match that amount by selling off the stocks that closely equal that amount. I do have some cash available in the taxable account generated from several mergers this past year, but I keep being indecisive about which index funds to invest in. Every time I decide on a fund, I come across another one that I think might be better. Any suggestions?
BL wrote: If you want to sell more, you should probably check to see how it affects your taxes (social security and other things affected by extra income).
I had 3 of my stocks bought out by other companies this past year & I'm sitting on a $12,000+ gain without even initiating any sales. I'm still working on our taxes, but I'm a little concerned as to what this will mean in the end, so I need to be careful going forward. The problem is that the bulk of the stocks I own have substantial gains. Part of me thinks that either way I'm going to have to pay the gains, I don't see a way around it, so part of me has considered just ripping off the bandaid quickly & just paying the tax. Either way it's a painful thought.

One other option I've considered, although it won't help with current gains, is to move the bulk of the money in the taxable account into the roth. I didn't make a contribution last year or this year, so I could move most of it over & it could then grow without causing another tax problem going forward. But again I can't decide if that's the best move.
BL wrote: Agree: don't reinvest into anything you don't want to own more of.
Absolutely.
BL wrote: You have received some good suggestions which may help you find a way to live within your means, if you choose to do so. Little things like alternating extra tv subscriptions could be a start. I have seen that suggested on this website. Keeping very good records of everything you spend for a few months can help you figure this out. Hiding your credit card by dropping into a milk carton full of water and then freezing it could break you of the habit of spending more than you can pay for.

Good luck on getting this right.
I appreciate the advice! I wish I had thought about the credit card trick when I was younger, but thankfully we don't have any credit card debt now.
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Royalty
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

Wiggums wrote: Tue Apr 02, 2024 10:33 pm To reach your stated goal of providing for your daughter after you are gone, I would slowly sell off your individual stock with the goal of simplifying your portfolio. This will make your portfolio more manageable when you are gone.
I think that is the best option, too.
Wiggums wrote: We track every penny spent to have an accurate accounting of our expenses over several years. We asked our Internet provider for a better price, and I was pleasantly surprised to see the folks in the store were able to reduce the cost by $35/month.

You will make progress on your goal a little at a time. Good luck to you.
Congrats on getting your internet cost reduced. That's amazing! I guess it definitely pays to ask. We have already found some places to cut expenses & that's before going through our bank statement. My goal is to be able to invest monthly in a fund or funds so that my account can continue to grow for my daughter.

Thanks for taking the time to reply.
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Royalty
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

Getting back to my portfolio, I could really use some fund recommendations. I'm not sure whether to go with a fund of funds to simplify things or if I could achieve a better return by putting together a portfolio of individual low cost index funds (or ETFs) on my own. If you have had great success with a particular fund, please share.
HeadSpinning
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by HeadSpinning »

Royalty wrote: Fri Apr 05, 2024 2:12 am Getting back to my portfolio, I could really use some fund recommendations. I'm not sure whether to go with a fund of funds to simplify things or if I could achieve a better return by putting together a portfolio of individual low cost index funds (or ETFs) on my own. If you have had great success with a particular fund, please share.
At which brokerage are your taxable and Roth IRA accounts?

Have you already sold everything in your Roth? What did you put them in?

Have you already harvested your losses in the individual stocks?

What is your desired AA?
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Royalty
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Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

HeadSpinning wrote: Tue Apr 09, 2024 4:23 pm
Royalty wrote: Fri Apr 05, 2024 2:12 am Getting back to my portfolio, I could really use some fund recommendations. I'm not sure whether to go with a fund of funds to simplify things or if I could achieve a better return by putting together a portfolio of individual low cost index funds (or ETFs) on my own. If you have had great success with a particular fund, please share.
At which brokerage are your taxable and Roth IRA accounts?
Schwab
HeadSpinning wrote: Have you already sold everything in your Roth? What did you put them in?
Not yet. I'm doing a few each night.
HeadSpinning wrote: Have you already harvested your losses in the individual stocks?
I have already sold off all the stocks with losses in my taxable account. Now I'm starting to sell off stocks with equal gains. I did have $21,000 sitting in my taxable acct thanks to 3 stocks being bought out & I put part of that in a Schwab target date fund plus the Vanguard S&P 500 Index & Total Stock market index. I plan to funnel more money into those as I sell off stocks.
HeadSpinning wrote: What is your desired AA?
I have no idea which is why I picked the Target date fund. I'm open to any advice. Most of the money in stocks has not been freed up yet.
FIRWYW
Posts: 358
Joined: Thu Dec 23, 2021 8:11 am

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by FIRWYW »

tashnewbie wrote: Tue Mar 19, 2024 7:46 am I agree that individual stocks is not the way to go for your family, at least not when it comprises 100% of your invested assets.

I think you should consult with a professional who specializes in setting up special needs trusts or other arrangements for disabled adult children.

What is the plan with your house? Do you plan to downsize or do you want your daughter to inherit it? I assume there could be issues with her ability to inherit it, due to her disability and possible lack of legal capacity. You also probably wouldn't want her to inherit it with a mortgage.
+10 to this.

In addition, Whitecoatinvestor.com recently (months ago) had a guest on talking about estate planning for kids with disabilities. Link below. Good info l. Can get a free basic guide as well from person who was on. I now keep it in my office to give disabled patients families

https://www.whitecoatinvestor.com/finan ... ility-317/
DIYtrixie
Posts: 390
Joined: Sun Sep 13, 2020 12:11 pm

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by DIYtrixie »

Royalty wrote: Fri Apr 12, 2024 1:13 am
HeadSpinning wrote: Have you already harvested your losses in the individual stocks?
I have already sold off all the stocks with losses in my taxable account. Now I'm starting to sell off stocks with equal gains. I did have $21,000 sitting in my taxable acct thanks to 3 stocks being bought out & I put part of that in a Schwab target date fund plus the Vanguard S&P 500 Index & Total Stock market index. I plan to funnel more money into those as I sell off stocks.
HeadSpinning wrote: What is your desired AA?
I have no idea which is why I picked the Target date fund. I'm open to any advice. Most of the money in stocks has not been freed up yet.
While target date funds can be a helpful starting point for determining an AA, they can throw off a lot of capital gains unexpectedly in any given year. For this reason, in a taxable account it’s usually better to hold the underlying 3-4 funds. Save the TDF for your tax-advantaged account(s).
HeadSpinning
Posts: 129
Joined: Sun Mar 29, 2015 8:27 pm

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by HeadSpinning »

Royalty wrote: Wed Apr 03, 2024 12:48 am One other option I've considered, although it won't help with current gains, is to move the bulk of the money in the taxable account into the roth. I didn't make a contribution last year or this year, so I could move most of it over & it could then grow without causing another tax problem going forward. But again I can't decide if that's the best move.
Was there any earned income last year or this year that would allow you to contribute to your Roth IRA? In that case, it would be a good idea to use the cash in your taxable to make a contribution to your Roth account.

Is there just one Roth account or do each of you have one? No other Traditional IRA accounts or any other tax-advantaged retirement accounts, just the Roth and taxable?
Royalty wrote: Fri Apr 12, 2024 1:13 am
HeadSpinning wrote: Have you already sold everything in your Roth? What did you put them in?
Not yet. I'm doing a few each night.
No point in dragging it on, just get them all sold at once and if you prefer ETFs put everything in your Roth in VTI (Vanguard Total Stock Market Index Fund). If you'd rather use mutual funds then invest it all in SWTSX (Schwab Total Stock Market Index Fund) so there are no trading fees.
Royalty wrote: Fri Apr 12, 2024 1:13 am
HeadSpinning wrote: Have you already harvested your losses in the individual stocks?
I have already sold off all the stocks with losses in my taxable account. Now I'm starting to sell off stocks with equal gains. I did have $21,000 sitting in my taxable acct thanks to 3 stocks being bought out & I put part of that in a Schwab target date fund plus the Vanguard S&P 500 Index & Total Stock market index. I plan to funnel more money into those as I sell off stocks.
Good job on selling all the stocks with losses, but you really don't need to buy both the Total Stock and the S&P500 Index. Total Stock already contains the S&P 500. And if you want to go with a target date fund stick just with that don't keep adding TS to it. A target date fund already contains TS beside international stock and bonds + international bonds.

You really should figure out first what your desired AA is.
I could tell you what I would do but you are the only one who can decide what you would be comfortable with. Normally I would go for a 60/40 AA but if I was in your situation, I would count the pensions as my bonds which would allow me to invest both the Roth and the taxable account 100% in stocks, with them being invested for the long run.
Could you stomach that? Would you be able to not panic and sell if they would drop 50%? Only you could decide that.

Your monthly expenses are covered by your income and you don't need to withdraw from your Roth and taxable accounts, instead you could actually add some more with the extra income each month. Or consider paying off some of your higher interest debt.

Another decision to make is if you want to invest a portion of your stock allocation into international stock market. I know lots of people decide not to and some people go as far as splitting half half between the US and international allocation. Again, this is a personal choice and you need to figure it out for yourself.
Target funds include the international market along with the US.

If you decide not to go 100% stock and would rather have some bond allocation for stability, then I recommend you choose a Target date fund that has the percentage of bonds you want and use that in both your Roth and in your taxable. That's all you need, you're done.

If you go 100% stock, decide if you want international or not but the Roth account is small enough that you should only have one fund in it and for now that can be either VTI or SWTSX like I was saying earlier.

Meanwhile, in the taxable, you can get more of the same or VXUS for the international if you decide you want the exposure. Set the dividends from the individual stock to get invested in SWTSX (or VTI) or VXUS and as you sell the individual stock reinvest the proceeds into one of these two funds.

GL
Topic Author
Royalty
Posts: 23
Joined: Wed Mar 06, 2024 2:01 am

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

FIRWYW wrote: Fri Apr 12, 2024 1:28 am
tashnewbie wrote: Tue Mar 19, 2024 7:46 am I agree that individual stocks is not the way to go for your family, at least not when it comprises 100% of your invested assets.

I think you should consult with a professional who specializes in setting up special needs trusts or other arrangements for disabled adult children.

What is the plan with your house? Do you plan to downsize or do you want your daughter to inherit it? I assume there could be issues with her ability to inherit it, due to her disability and possible lack of legal capacity. You also probably wouldn't want her to inherit it with a mortgage.
+10 to this.

In addition, Whitecoatinvestor.com recently (months ago) had a guest on talking about estate planning for kids with disabilities. Link below. Good info l. Can get a free basic guide as well from person who was on. I now keep it in my office to give disabled patients families

https://www.whitecoatinvestor.com/finan ... ility-317/
Thank you! The link you provided was most helpful!
Topic Author
Royalty
Posts: 23
Joined: Wed Mar 06, 2024 2:01 am

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

DIYtrixie wrote: Fri Apr 12, 2024 3:05 am
Royalty wrote: Fri Apr 12, 2024 1:13 am
HeadSpinning wrote: Have you already harvested your losses in the individual stocks?
I have already sold off all the stocks with losses in my taxable account. Now I'm starting to sell off stocks with equal gains. I did have $21,000 sitting in my taxable acct thanks to 3 stocks being bought out & I put part of that in a Schwab target date fund plus the Vanguard S&P 500 Index & Total Stock market index. I plan to funnel more money into those as I sell off stocks.
HeadSpinning wrote: What is your desired AA?
I have no idea which is why I picked the Target date fund. I'm open to any advice. Most of the money in stocks has not been freed up yet.
While target date funds can be a helpful starting point for determining an AA, they can throw off a lot of capital gains unexpectedly in any given year. For this reason, in a taxable account it’s usually better to hold the underlying 3-4 funds. Save the TDF for your tax-advantaged account(s).
Good to know. Thanks!
Topic Author
Royalty
Posts: 23
Joined: Wed Mar 06, 2024 2:01 am

Re: Portfolio Overhaul Help Needed Due to Changing Circumstance

Post by Royalty »

Royalty wrote: Wed Apr 03, 2024 12:48 am One other option I've considered, although it won't help with current gains, is to move the bulk of the money in the taxable account into the roth. I didn't make a contribution last year or this year, so I could move most of it over & it could then grow without causing another tax problem going forward. But again I can't decide if that's the best move.
HeadSpinning wrote: Was there any earned income last year or this year that would allow you to contribute to your Roth IRA? In that case, it would be a good idea to use the cash in your taxable to make a contribution to your Roth account.
If you mean income other than from pensions & social security then that would be a no.
HeadSpinning wrote: Is there just one Roth account or do each of you have one? No other Traditional IRA accounts or any other tax-advantaged retirement accounts, just the Roth and taxable?
We only have the one Roth IRA & the taxable account.
Royalty wrote: Fri Apr 12, 2024 1:13 am
HeadSpinning wrote: Have you already sold everything in your Roth? What did you put them in?
Not yet. I'm doing a few each night.
HeadSpinning wrote: No point in dragging it on, just get them all sold at once and if you prefer ETFs put everything in your Roth in VTI (Vanguard Total Stock Market Index Fund). If you'd rather use mutual funds then invest it all in SWTSX (Schwab Total Stock Market Index Fund) so there are no trading fees.
I only sell using limit orders so I still have stock sells waiting to be triggered. I think that investing the proceeds in a Total Stock Market ETF is a good idea going forward. I don't have that much in the Roth IRA.
Royalty wrote: Fri Apr 12, 2024 1:13 am
HeadSpinning wrote: Have you already harvested your losses in the individual stocks?
I have already sold off all the stocks with losses in my taxable account. Now I'm starting to sell off stocks with equal gains. I did have $21,000 sitting in my taxable acct thanks to 3 stocks being bought out & I put part of that in a Schwab target date fund plus the Vanguard S&P 500 Index & Total Stock market index. I plan to funnel more money into those as I sell off stocks.
HeadSpinning wrote: Good job on selling all the stocks with losses, but you really don't need to buy both the Total Stock and the S&P500 Index. Total Stock already contains the S&P 500. And if you want to go with a target date fund stick just with that don't keep adding TS to it. A target date fund already contains TS beside international stock and bonds + international bonds.

You really should figure out first what your desired AA is.
I could tell you what I would do but you are the only one who can decide what you would be comfortable with. Normally I would go for a 60/40 AA but if I was in your situation, I would count the pensions as my bonds which would allow me to invest both the Roth and the taxable account 100% in stocks, with them being invested for the long run.
Could you stomach that? Would you be able to not panic and sell if they would drop 50%? Only you could decide that.
I was already 100% in stocks, so with the added diversification of the TS index, I feel good about 100% stocks. I survived the financial crash of 2008 without selling. In fact I bought more & made back everything I lost & more. Although with the Target Date Fund I do have a small exposure to bonds. I only have $10,000 invested because I couldn't figure out the best allocation & felt that the money just sitting there should be doing something, so that seemed like a good idea at the time just to get me moving.
HeadSpinning wrote: Your monthly expenses are covered by your income and you don't need to withdraw from your Roth and taxable accounts, instead you could actually add some more with the extra income each month. Or consider paying off some of your higher interest debt.
We've decided to apply for my spousal benefit social security (I'm 4 credits short to collect on my own) and have that check deposited directly into the brokerage account which should help tremendously. We don't have any high interest debt, thank goodnesss.
HeadSpinning wrote: Another decision to make is if you want to invest a portion of your stock allocation into international stock market. I know lots of people decide not to and some people go as far as splitting half half between the US and international allocation. Again, this is a personal choice and you need to figure it out for yourself.
Target funds include the international market along with the US.
I'm not a fan of international stock, but I do have a small exposure through the TD fund & I'm okay with that for the time being. Do you think that consolidating everything into a TS fund is sufficient? It's hard to wrap my head around a single fund being all I need.
HeadSpinning wrote: If you decide not to go 100% stock and would rather have some bond allocation for stability, then I recommend you choose a Target date fundfund that has the percentage of bonds you want and use that in both your Roth and in your taxable. That's all you need, you're done.
I'm fine with 100% stock. I have no idea about bonds. I've never owned a bond or bond fund & I have no idea what a good allocation would be. That's why I chose the TD fund figuring it couldn't hurt to have a small amount of bonds & international stock. The good thing is that the international stock will go down, but then at the same time bond exposure will go up. But again the amount I have invested is not great, so I figure the impact on my overall holdings will be minimal. I'm still trying to figure all of this out. You've given me a lot to think about.
HeadSpinning wrote: If you go 100% stock, decide if you want international or not but the Roth account is small enough that you should only have one fund in it and for now that can be either VTI or SWTSX like I was saying earlier.
I agree. The Roth is not big enough to hold more than one fund & a TS fund would be ideal.
HeadSpinning wrote: Meanwhile, in the taxable, you can get more of the same or VXUS for the international if you decide you want the exposure. Set the dividends from the individual stock to get invested in SWTSX (or VTI) or VXUS and as you sell the individual stock reinvest the proceeds into one of these two funds.

GL
I think you just answered my earlier question about whether or not a TS fund alone would be sufficient. Again, you've given me a lot to think about. I appreciate your taking the time to go through this with me.
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