Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Former Vanguard PAS customer, consolidated everything to Fidelity in the past 30 days with no advice fee and planning to DIY. Plan to stick to Vanguard funds in taxable.
Emergency funds: 6 months (note this is invested in premium money market per below)
Debt: Mortgage, $250k, 3.375%. 1 Car loan, $15k remaining ($30k market value). No other debts.
Tax Filing Status: Married Filing Jointly
Tax Rate: 37% Federal, 0% State
State of Residence: TX
Age: 42
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 30% of stocks
Please provide an approximate size of your total portfolio: $7M
Current retirement assets
Taxable - $5.3M
2% cash (FZDXX, used to be in the equivalent on the Vanguard side)
4% Vanguard Small-Cap Index (VB) (.05%)
.13% Vanguard Tax Managed Fund FTSE ETF (VEA) (.06%)
14.92% Vanguard FTSE All world Ex US (VEU) (.07%)
1.4% Vanguard FTSE Europe (VGK) (.09%)
4.36% Vanguard Limited Term Tax Exempt (VMLUX) (.09%) (note: debating if I need to move these admiral shares back to Vanguard as they're not transactable at Fidelity)
.56% Vanguard Russell 1000 Index Fund ETF (VONE) (.08%)
.81% Vanguard FTSE Pacific ETF (VPL) (.08%)
25.8% Vanguard Total Stock Market (VTI) (.03%)
5.36% Vanguard Value Index Fund ETF (VTV) (.04%)
6.36% Vanguard Growth Index Fund (VUG) (.04%)
3.52% Vanguard International Growth Fund (VWILX) (0.31%)
5.82% Vanguard Intermediate Term Tax Exempt Fund Admiral (VWIUX) (.09%)
4.36% Vanguard Long Term Tax Exempt Fund Admiral (VWLUX) (.09%)
0.4% Vanguard Emerging Markets Stock Index ETF (VWO) (.08%)
.87% Vanguard Extended Market ETF (VXF) (.06%)
4.85% Vanguard Total International Stock Index (VXUS) (.08%)
16% Broadcom (AVGO) (note: RSU's that I've held onto for the past ~4 years)
His 401k's - $763k
20.57% Fidelity Large Cap Value Index Fund (FLCOX) (.035%)
8.87% Fidelity Mid Cap Index Fund (FSMDX) (.025%)
27.5% Fidelity Large Cap Growth Index Fund (FSPGX) (.035%)
8.32% Fidelity Small Cap Index Fund (FSSNX) (.025%)
34.68% Fidelity Total International Index Fund (FTIHX) (.06%)
His Roth IRA - $242k
26.15% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (.12%)
47.43% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (.04%)
26.63% Vanguard International Growth Fund (VWILX) (0.31%)
His Traditional IRA - $140k
70% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (.05%)
30% Vanguard Total International Bond Index Fund Admiral Shares (VTABX) (.11%)
Her Traditional IRA - $106k
70% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (.05%)
30% Vanguard Total International Bond Index Fund Admiral Shares (VTABX) (.11%)
Her Roth IRA - $137k
39.75% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (.12%)
21.78% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (.04%)
38.44% Vanguard International Growth Fund (VWILX) (0.31%)
529's
Max'd out 529's don't plan to contribute further - $100k each. Currently in Vanguard 529 target enrollment funds. Considering consolidating to Fidelity and choosing their aggressive growth NH index given 10+ year time horizon.
_______________________________________________________________
Contributions
New annual Contributions
Maxing out my 401k's and doing after tax contributions to max with roth conversion
~$100k taxable (for retirement, not short term goals)
Questions:
1. Any general reactions?
2. Given I just moved the portfolio to Fidelity, do I need to consider moving the 3 funds back to Vanguard where I can no longer transact these?
Emergency funds: 6 months (note this is invested in premium money market per below)
Debt: Mortgage, $250k, 3.375%. 1 Car loan, $15k remaining ($30k market value). No other debts.
Tax Filing Status: Married Filing Jointly
Tax Rate: 37% Federal, 0% State
State of Residence: TX
Age: 42
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 30% of stocks
Please provide an approximate size of your total portfolio: $7M
Current retirement assets
Taxable - $5.3M
2% cash (FZDXX, used to be in the equivalent on the Vanguard side)
4% Vanguard Small-Cap Index (VB) (.05%)
.13% Vanguard Tax Managed Fund FTSE ETF (VEA) (.06%)
14.92% Vanguard FTSE All world Ex US (VEU) (.07%)
1.4% Vanguard FTSE Europe (VGK) (.09%)
4.36% Vanguard Limited Term Tax Exempt (VMLUX) (.09%) (note: debating if I need to move these admiral shares back to Vanguard as they're not transactable at Fidelity)
.56% Vanguard Russell 1000 Index Fund ETF (VONE) (.08%)
.81% Vanguard FTSE Pacific ETF (VPL) (.08%)
25.8% Vanguard Total Stock Market (VTI) (.03%)
5.36% Vanguard Value Index Fund ETF (VTV) (.04%)
6.36% Vanguard Growth Index Fund (VUG) (.04%)
3.52% Vanguard International Growth Fund (VWILX) (0.31%)
5.82% Vanguard Intermediate Term Tax Exempt Fund Admiral (VWIUX) (.09%)
4.36% Vanguard Long Term Tax Exempt Fund Admiral (VWLUX) (.09%)
0.4% Vanguard Emerging Markets Stock Index ETF (VWO) (.08%)
.87% Vanguard Extended Market ETF (VXF) (.06%)
4.85% Vanguard Total International Stock Index (VXUS) (.08%)
16% Broadcom (AVGO) (note: RSU's that I've held onto for the past ~4 years)
His 401k's - $763k
20.57% Fidelity Large Cap Value Index Fund (FLCOX) (.035%)
8.87% Fidelity Mid Cap Index Fund (FSMDX) (.025%)
27.5% Fidelity Large Cap Growth Index Fund (FSPGX) (.035%)
8.32% Fidelity Small Cap Index Fund (FSSNX) (.025%)
34.68% Fidelity Total International Index Fund (FTIHX) (.06%)
His Roth IRA - $242k
26.15% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (.12%)
47.43% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (.04%)
26.63% Vanguard International Growth Fund (VWILX) (0.31%)
His Traditional IRA - $140k
70% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (.05%)
30% Vanguard Total International Bond Index Fund Admiral Shares (VTABX) (.11%)
Her Traditional IRA - $106k
70% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (.05%)
30% Vanguard Total International Bond Index Fund Admiral Shares (VTABX) (.11%)
Her Roth IRA - $137k
39.75% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (.12%)
21.78% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (.04%)
38.44% Vanguard International Growth Fund (VWILX) (0.31%)
529's
Max'd out 529's don't plan to contribute further - $100k each. Currently in Vanguard 529 target enrollment funds. Considering consolidating to Fidelity and choosing their aggressive growth NH index given 10+ year time horizon.
_______________________________________________________________
Contributions
New annual Contributions
Maxing out my 401k's and doing after tax contributions to max with roth conversion
~$100k taxable (for retirement, not short term goals)
Questions:
1. Any general reactions?
2. Given I just moved the portfolio to Fidelity, do I need to consider moving the 3 funds back to Vanguard where I can no longer transact these?
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
General reaction is way,way too many holdings.
When you discover that you are riding a dead horse, the best strategy is to dismount.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Agree. The work of PAS.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Yikes. But good to know. Have no need for them but this is disappointing especially in taxable where it can be harder to clean up.
If any of them have losses or very low unrealized gain I’d shed them sooner rather than later
When you discover that you are riding a dead horse, the best strategy is to dismount.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Wow, yeah. In my "if I die" instructions for my wife, I've suggested using PAS, but this doesn't inspire a lot of confidence. At least they're all still low cost funds.
- retired@50
- Posts: 14996
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Yes, consider moving these back.jmac312 wrote: ↑Mon Aug 19, 2024 5:25 pm
4.36% Vanguard Limited Term Tax Exempt (VMLUX) (.09%) (note: debating if I need to move these admiral shares back to Vanguard as they're not transactable at Fidelity)
2. Given I just moved the portfolio to Fidelity, do I need to consider moving the 3 funds back to Vanguard where I can no longer transact these?
If you intend to be a long term holder of municipal bond funds, then using Vanguard is the best way to make your life easier. Why fight it? Nobody runs a muni bond fund better than Vanguard. You don't have to use PAS, just have a DIY account and buy your tax exempt bonds there.
Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
FWIW, I've been a PAS user for 9 years or so, and they put me in a standard 4-fund portfolio (3 fund plus international). Not sure if my experience is more typical, or the OP's is.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
I haven't seen anyone yet say: Turn off dividend reinvestment.
-
- Posts: 1093
- Joined: Sun Jan 16, 2022 1:48 pm
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
$200k annual expenses fairly consistent at that number the last 3 years.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Retired@50 another thought. These 3 munis have small losses. TLH into VTEI / VTEB?
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
$1M of Broadcom really jumps out as it represents a big risk - Consider trimming this holding to the extent possible.
Taxes will hurt, but not as much as if the stock drops.
Small potatoes at this point, but a bit surprised that you don't mention an HSA.
Taxes will hurt, but not as much as if the stock drops.
Small potatoes at this point, but a bit surprised that you don't mention an HSA.
-
- Posts: 1093
- Joined: Sun Jan 16, 2022 1:48 pm
-
- Posts: 353
- Joined: Mon Jan 15, 2024 1:34 pm
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Good seed at 10 years out, though I'd think you could go higher here given expected costs and real returns. Assumes cost increases that continue to outpace general inflation, as well as a presumed plan to glide AA more conservative as college approaches.
- retired@50
- Posts: 14996
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
You could. But if the losses are "small" it may not be worth the trouble.
You can also include VTES if you're interested in a shorter duration fund.
Another difference with the mutual funds (VWLUX, VWIUX, VMLUX) is that they are actually actively managed which would be something to consider. I think people forget about this because the expense ratios are so low.
The ETFs listed above are index funds, so, depending on your beliefs about whether or not active management can add value in the bond market, that may guide your decision.
Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
-
- Posts: 4844
- Joined: Fri Dec 20, 2019 2:49 am
- Location: Upstate NY
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
I worked at a fee only advisor for a year. One founder said people should only take the market risk they have to in order to acheive their financial goals. Another founder said one should only take what they think is prudent risk. My mba teacher said one should always consider minimizing their maximum regret.
When I try to find a common thread in all these concepts, I struggle with your overall asset allocation being so heavily weighted in equities. Of course this is an individual decision - would encountering a stock market correction of 30% and losing say close to 2 million dollars of your hard earned portfolio detract from your peace of mind to retire soon? If so then I’d bump my fixed income allocation up higher to Minimize that scenario.
Bedsides that i’d simplify my portfolio. And you don’t need that Broadcom risk as was already stated.
Congrats on your saving and investing success.
When I try to find a common thread in all these concepts, I struggle with your overall asset allocation being so heavily weighted in equities. Of course this is an individual decision - would encountering a stock market correction of 30% and losing say close to 2 million dollars of your hard earned portfolio detract from your peace of mind to retire soon? If so then I’d bump my fixed income allocation up higher to Minimize that scenario.
Bedsides that i’d simplify my portfolio. And you don’t need that Broadcom risk as was already stated.
Congrats on your saving and investing success.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
I agree with your MBA teach but not at all with the 'won the game' and take little market risk approach.Parkinglotracer wrote: ↑Tue Aug 20, 2024 2:43 am I worked at a fee only advisor for a year. One founder said people should only take the market risk they have to in order to acheive their financial goals. Another founder said one should only take what they think is prudent risk. My mba teacher said one should always consider minimizing their maximum regret.
When I try to find a common thread in all these concepts, I struggle with your overall asset allocation being so heavily weighted in equities. Of course this is an individual decision - would encountering a stock market correction of 30% and losing say close to 2 million dollars of your hard earned portfolio detract from your peace of mind to retire soon? If so then I’d bump my fixed income allocation up higher to Minimize that scenario.
Bedsides that i’d simplify my portfolio. And you don’t need that Broadcom risk as was already stated.
Congrats on your saving and investing success.
The biggest risks are actually not market related: divorce, fraud, broker/bank failures, govt, tax changes, lawsuits and so on.
Market risk isn't the 30% drawdown but rather prolonged inflation and the portfolio not keeping up with inflation.
OP has a 50Y plus runway for his portfolio so it has to be considered like an endowment.
There's plenty of research out there showing one needs at least 70% equity to support perpetual withdrawals for such a long time period.
This "won the game thus I can put everything in MMF and bonds" does not work out too well over 50Y.
@OP what's your overall asset allocation in terms of Equity, Bonds, Cash in %s?
-
- Posts: 4844
- Joined: Fri Dec 20, 2019 2:49 am
- Location: Upstate NY
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Great points on the risks including inflation, although I probably think a 30% market correction is a higher risk than you do. I would not recommend he go to a conservative portfolio but it would have more than 20% fixed income. If a market correction would make him want to delay retirement in the next few years then I’d say to reduce that risk. I’d like 70/30 more than 80/20 he has now.
We are retired age 63 with a 65/35 AA.
We are retired age 63 with a 65/35 AA.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
alternate point of view:retired@50 wrote: ↑Mon Aug 19, 2024 6:00 pmYes, consider moving these back.jmac312 wrote: ↑Mon Aug 19, 2024 5:25 pm
4.36% Vanguard Limited Term Tax Exempt (VMLUX) (.09%) (note: debating if I need to move these admiral shares back to Vanguard as they're not transactable at Fidelity)
2. Given I just moved the portfolio to Fidelity, do I need to consider moving the 3 funds back to Vanguard where I can no longer transact these?
If you intend to be a long term holder of municipal bond funds, then using Vanguard is the best way to make your life easier. Why fight it? Nobody runs a muni bond fund better than Vanguard. You don't have to use PAS, just have a DIY account and buy your tax exempt bonds there.
Regards,
I agree that Vanguard has the best run muni funds, and this was the biggest issue for me when I moved from Vanguard to Fidelity.
You can move the muni funds to VTEB, and keep them at Fidelity. There should be minimal gains, probably losses in doing this.
There are many advantages to doing this:
VTEB is portable
Easier for estate planning. For example, I went to two trust structure for estate tax purposes (live in MA), and doing this across brokerages is cumbersome, and one of the reasons I left Vanguard is because Fidelity has (or had) better support for trusts.
If you want to live on your income stream, having everything at Fidelity is much easier. I direct my Muni (and equity) dividends/interest to a high yield money market which I also use for all my banking needs (at Fidelity). Money management has been much easier (fully automated and more profitable) since I did this.
If you are retired, and want to buy a house, having everything at Fidelity gives you options for funding the purchase until you sell your old one as you can use your asset base to borrow without being forced to sell assets. Vanguard does not provide for this. Bonds are the best collateral for this, in case you are forced to sell during a market downturn.
Additional bonus: no need to deal (or the inability to deal) with anyone at Vanguard.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Responding to some of the comments / questions:
- @hand Broadcom stock. Agree. I don't have a plan here and need to get one in place. It's a risk.
- Curious on the comment around turning off dividend reinvestment - why @BirdFood?
- @DIYtrixie I figured at 1.9% on the car loan, worth it to keep and invest in my ~5% money market. What are your thoughts?
- @DoctorE - AA is probably around 83% equity given the Broadcom exposure. Targeting 80/20. 2% cash.
- @skeptical - thanks for the feedback on VTEB and leaning that way going forward. Just debating whether to TLH the 3 admiral funds or just keep them running and invest new bond money into VTEB.
- HSA - I do have one though I was using these funds up until last year to pay for healthcare. I know that's not the best path, so I made the change to pocket this and invest for retirement. Currently sitting at around $9K.
I appreciate everyone's inputs here. Thank you so much!
- @hand Broadcom stock. Agree. I don't have a plan here and need to get one in place. It's a risk.
- Curious on the comment around turning off dividend reinvestment - why @BirdFood?
- @DIYtrixie I figured at 1.9% on the car loan, worth it to keep and invest in my ~5% money market. What are your thoughts?
- @DoctorE - AA is probably around 83% equity given the Broadcom exposure. Targeting 80/20. 2% cash.
- @skeptical - thanks for the feedback on VTEB and leaning that way going forward. Just debating whether to TLH the 3 admiral funds or just keep them running and invest new bond money into VTEB.
- HSA - I do have one though I was using these funds up until last year to pay for healthcare. I know that's not the best path, so I made the change to pocket this and invest for retirement. Currently sitting at around $9K.
I appreciate everyone's inputs here. Thank you so much!
-
- Posts: 177
- Joined: Wed Feb 07, 2018 8:55 pm
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
I agree with lots of the comments:
1) I'd consider dropping back to 70/30, or even 60/40 but this is personal.
2) I would ditch the Broadcom and put into equity index (eg VTI & VEU). I think this is the highest priority of any fund sales or moves.
3) If you do want to reduce risk I would swap 401K assets for fixed income for tax efficiency. This is second highest priority
4) For simplicity, I might look at the cost basis of your taxable account and see what sort of a tax hit you take to consolidate a little bit. I'd specifically look at the cost of consolidating the following funds I will list below by selling and purchasing into a 4 fund type portfolio choice (It looks like you have VTI and VEU already so those might be good choices to consolidate into but there are many other reasonable ones as well). I'm not saying I would necessarily trim all the way down to 4 fund depending on basis and I could see having some muni because depending on point 1 above you might still need it even with swapping all of your equity to fixed income in the 401K and keeping all of your fixed income in your traditional IRA.
a) Vanguard FTSE Europe (VGK)
b) Vanguard Russell 1000 Index Fund ETF (VONE)
c) Vanguard FTSE Pacific ETF (VPL)
d) Vanguard Value Index Fund ETF (VTV)
e) Vanguard Growth Index Fund (VUG)
d) Vanguard International Growth Fund (VWILX)
e) Vanguard Emerging Markets Stock Index ETF (VWO)
f) Vanguard Extended Market ETF (VXF)
Congrats on your hard work, good savings habits, and good luck.
1) I'd consider dropping back to 70/30, or even 60/40 but this is personal.
2) I would ditch the Broadcom and put into equity index (eg VTI & VEU). I think this is the highest priority of any fund sales or moves.
3) If you do want to reduce risk I would swap 401K assets for fixed income for tax efficiency. This is second highest priority
4) For simplicity, I might look at the cost basis of your taxable account and see what sort of a tax hit you take to consolidate a little bit. I'd specifically look at the cost of consolidating the following funds I will list below by selling and purchasing into a 4 fund type portfolio choice (It looks like you have VTI and VEU already so those might be good choices to consolidate into but there are many other reasonable ones as well). I'm not saying I would necessarily trim all the way down to 4 fund depending on basis and I could see having some muni because depending on point 1 above you might still need it even with swapping all of your equity to fixed income in the 401K and keeping all of your fixed income in your traditional IRA.
a) Vanguard FTSE Europe (VGK)
b) Vanguard Russell 1000 Index Fund ETF (VONE)
c) Vanguard FTSE Pacific ETF (VPL)
d) Vanguard Value Index Fund ETF (VTV)
e) Vanguard Growth Index Fund (VUG)
d) Vanguard International Growth Fund (VWILX)
e) Vanguard Emerging Markets Stock Index ETF (VWO)
f) Vanguard Extended Market ETF (VXF)
Congrats on your hard work, good savings habits, and good luck.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Dividend reinvestment - by turning it off, especially for the funds/ETFs you are planning to sell off, you prevent the purchase of additional lots that you have to deal with, especially if they turn into short-term gains (taxed as ordinary income).jmac312 wrote: ↑Tue Aug 20, 2024 8:38 am Responding to some of the comments / questions:
...
- Curious on the comment around turning off dividend reinvestment - why @BirdFood?
- @DIYtrixie I figured at 1.9% on the car loan, worth it to keep and invest in my ~5% money market. What are your thoughts?
...
Redirect the dividends into your settlement fund, where you can deploy the funds at your discretion.
-----
Car loan - you stated the remaining balance is $15,000.
The interest earned in the MMF on $15,000 @ 5% = $750.00 per year.
The car loan interest @ 1.9% (I'm just going to use a simple interest rate, not APR) = $285.00 per year.
Net annual difference $750-285 = $465.00
Your call as to whether $465 per year (0.007% of your $7 million net worth) is worth keeping the loan.
"Ritter, Tod und Teufel"
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
I believe you can transfer admiral funds to Fidelity, it just costs $75 to buy additional shares. Fidelity also allows investor class shares (I don't believe that VWLUX has this option). I used to have VWLUX, but got tired of their cap gains distributions - they were not huge, but annoying and I feel more comfortable with an intermediate fund than a longer term, at least for what I am looking for my bonds to do.
Fidelity can also make exceptions for admiral class on a case by case basis. You should get to know your Fidelity advisor and find out from them what you can/cannot do, and ask for an exception, you are moving enough to them, but this would only be if you plan on keeping an admiral class for the long term.
Don't know if anyone else mentioned this, but you should be able to get a transfer bonus, maybe $5K, maybe more. It takes some work on your part to do this though, they no longer do this easily. If this is important enough to you, you may need to get a quote from Schwab for Fidelity to match (this is what I needed to do).
-
- Posts: 353
- Joined: Mon Jan 15, 2024 1:34 pm
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
skeptical wrote: ↑Tue Aug 20, 2024 10:16 am Fidelity can also make exceptions for admiral class on a case by case basis. You should get to know your Fidelity advisor and find out from them what you can/cannot do, and ask for an exception, you are moving enough to them, but this would only be if you plan on keeping an admiral class for the long term.
Appreciate this tip on asking for an exception, which I never thought of and will now do.
I'm a believer in Vanguard management for muni funds, but my inability to buy admiral class at Fidelity and the $75 fee have been sources of minor irritation.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Yes, also appreciate this tip. I'll share that Fidelity offered $10k to move the portfolio over. They do up to $5k, but the branch manager doubled this when they learned the portfolio size I was considering. This offset 12-18 months of PAS fees.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
That taxable portfolio is a mess, whoever at PAS came up with that should be ashamed. It's the kind of thing expensive advisors do to make it look like portfolio construction is hard/complicated.
Personally, I would sell anything that's less than a 1% allocation as well as anything that doesn't have much capital gains and reinvest the proceeds in VTI just to clean it up a little.
Personally, I would sell anything that's less than a 1% allocation as well as anything that doesn't have much capital gains and reinvest the proceeds in VTI just to clean it up a little.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Also interested in the logic here. In my taxable portfolio of (too many) ETFs, I have the dividends automatically reinvested. What would the preferable alternative be, and why?BirdFood wrote: ↑Mon Aug 19, 2024 6:33 pmI haven't seen anyone yet say: Turn off dividend reinvestment.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
I had two reasons in mind:Ace300 wrote: ↑Tue Aug 20, 2024 2:09 pmAlso interested in the logic here. In my taxable portfolio of (too many) ETFs, I have the dividends automatically reinvested. What would the preferable alternative be, and why?BirdFood wrote: ↑Mon Aug 19, 2024 6:33 pmI haven't seen anyone yet say: Turn off dividend reinvestment.
1) If you want to stop having all those ETFs and narrow to a smaller set, it makes more sense to take the dividends (which in a taxable account you're already paying taxes on) and use them to invest in the funds that you want to end up with. Otherwise, you're unnecessarily allowing the problem to slowly grow.
2) If you want to get out of the unwanted ETFs with minimal tax cost, one possible strategy is to sell, matching losses with gains. But if you've recently "bought" some of a sold-for-a-loss fund by reinvesting dividends, you run into the wash sale rule, which will hamper your ability to use the loss.
If anyone disagrees with me on facts here, believe them.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Just curious why mortgage interest rate is 3.375% assuming you've been in same home from before 2020 in which case did you not refinance?
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
• I have a similar issue as OP, being heavy on taxable brokerage accounts. My solution to asset location is to keep all of our fixed income (G fund & Total Bond Market ETF) in pre-tax accounts (e.g. 401k, TSP, 457b) to minimize tax drag. Thus, I don't keep the same asset allocation in each account.
• Simplify. Even if you want to get fancy, you only need 4-5 funds. Even less, if simplicity is your goal.
• See: Always Turn Off Taxable Dividend Reinvestment In Retirement?
viewtopic.php?p=7659283&hilit=dividend#p7659283
• Simplify. Even if you want to get fancy, you only need 4-5 funds. Even less, if simplicity is your goal.
• See: Always Turn Off Taxable Dividend Reinvestment In Retirement?
viewtopic.php?p=7659283&hilit=dividend#p7659283
Ace300 wrote: ↑Tue Aug 20, 2024 2:09 pmAlso interested in the logic here. In my taxable portfolio of (too many) ETFs, I have the dividends automatically reinvested. What would the preferable alternative be, and why?BirdFood wrote: ↑Mon Aug 19, 2024 6:33 pmI haven't seen anyone yet say: Turn off dividend reinvestment.
At that point in my life: |
“At some point you are trading time you will never get back for money you will never spend” |
(quote lifted from Wannaretireearly)
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
These answers, plus if you ever tax loss harvest, buying the fund via a dividend repurchase in the 30 day window can create a wash sale.BirdFood wrote: ↑Tue Aug 20, 2024 2:29 pmI had two reasons in mind:Ace300 wrote: ↑Tue Aug 20, 2024 2:09 pmAlso interested in the logic here. In my taxable portfolio of (too many) ETFs, I have the dividends automatically reinvested. What would the preferable alternative be, and why?BirdFood wrote: ↑Mon Aug 19, 2024 6:33 pmI haven't seen anyone yet say: Turn off dividend reinvestment.
1) If you want to stop having all those ETFs and narrow to a smaller set, it makes more sense to take the dividends (which in a taxable account you're already paying taxes on) and use them to invest in the funds that you want to end up with. Otherwise, you're unnecessarily allowing the problem to slowly grow.
2) If you want to get out of the unwanted ETFs with minimal tax cost, one possible strategy is to sell, matching losses with gains. But if you've recently "bought" some of a sold-for-a-loss fund by reinvesting dividends, you run into the wash sale rule, which will hamper your ability to use the loss.
If anyone disagrees with me on facts here, believe them.
For this portfolio, #1 is probably the big item. Why buy separate growth and value funds when you also have a total market fund??? If you think value will outperform growth, then why buy any growth at all? Or vice versa.
Also I'll make the plug for setting your cost basis method to specific ID (or whatever Fidelity calls that) within the taxable account. That is another aid to tax loss harvesting and controlling taxes when you need to withdraw.
Mark |
Somewhere in WA State
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Njdealguy - we planned to move in 2019/20 and changed course. In hindsight, I should’ve refinanced but the costs to do so seemed prohibitive at the time when we had the intent to move.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Exactly. If someone at PAS really did set up this portfolio, they were completely incompetent-- unless they were following orders from the higher-ups, in which case it is borderline criminal. If it were me, I'd lodge a complaint. You have certainly just convinced me NEVER to use or recommend PAS. I'm sorry this happened to you.
OK, maybe I am being a little dramatic. There are far worse things that can befall a portfolio, I'm just dumbfounded that something like this could pass as professional advice.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Do your $200k/y expenses include taxes but not healthcare insurance? In that case as you retire early, taxes will go down and healthcare will go up possibly canceling out each other.jmac312 wrote: ↑Tue Aug 20, 2024 8:38 am Responding to some of the comments / questions:
- @hand Broadcom stock. Agree. I don't have a plan here and need to get one in place. It's a risk.
- Curious on the comment around turning off dividend reinvestment - why @BirdFood?
- @DIYtrixie I figured at 1.9% on the car loan, worth it to keep and invest in my ~5% money market. What are your thoughts?
- @DoctorE - AA is probably around 83% equity given the Broadcom exposure. Targeting 80/20. 2% cash.
- @skeptical - thanks for the feedback on VTEB and leaning that way going forward. Just debating whether to TLH the 3 admiral funds or just keep them running and invest new bond money into VTEB.
- HSA - I do have one though I was using these funds up until last year to pay for healthcare. I know that's not the best path, so I made the change to pocket this and invest for retirement. Currently sitting at around $9K.
I appreciate everyone's inputs here. Thank you so much!
Currently that would be a 2.86% withdrawal. You could retire today.
If you turn off dividend reinvestment, your 80% will put out something like $100k in dividends and the 20% in bonds/mmf will yield $60k. That's another missing $40k adjusted for inflation annually which you can chip away from the bond part in case equities are down. Your bond allocation should last you something like 10 years without having to touch equities based on the worst inflationary period (70s). In terms of volatility dampening, this allocation would historically take you from -50% drawdown to -40% drawdown. Worst year from -37% to -25% comparing to 100% equity.
-
- Posts: 12440
- Joined: Thu Dec 27, 2018 2:06 pm
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Please update the % for each holding to show them as a % of your total portfolio balance of $7 million. Right now they are shown as a % of each account balance. For example, your corrected IRA % are:
His Traditional IRA - $140k (2% of $7 million)
70% 1.4% Vanguard Total Bond Market Index Fund VBTLX
30% 0.6% Vanguard Total International Bond Index Fund VTABX
In the Taxable account:
1. Did you verify that cost basis transferred over from Vanguard to Fidelity correctly? +1 to setting your cost basis method to specific ID.
2. Consider reducing the # of holdings (especially the 12% concentrated in a single stock, Broadcom).
3. There are tax consequences to selling in the Taxable account. What are the unrealized gains/losses for each holding? Any positions or tax lots with a loss/small gain that you can sell?
4. +1 to turning off dividend reinvestment for any holdings you plan on selling. Use the dividends to buy more Total Stock Market Fund/ETF such as VTI and VXUS or Fidelity’s comparable funds (but not the zero funds in Taxable as they are proprietary).
In the 401k/IRAs:
1. There are no tax consequences to selling so you can reduce the # of holdings in each account to simplify.
2. Continue to hold 100% fixed income in your 401k/IRAs. Consider holding only US bonds and selling VTABX (international bonds) which have currency risk.
3. Continue to hold 100% equity in your Roth IRAs. Sell the international growth fund VWILX with a 0.31% ER as you already hold VTIAX (Total International Stock Market).
Either get a waiver to buy Vanguard funds or use ETFs or Fidelity funds as you clean up your account.
His Traditional IRA - $140k (2% of $7 million)
70% 1.4% Vanguard Total Bond Market Index Fund VBTLX
30% 0.6% Vanguard Total International Bond Index Fund VTABX
In the Taxable account:
1. Did you verify that cost basis transferred over from Vanguard to Fidelity correctly? +1 to setting your cost basis method to specific ID.
2. Consider reducing the # of holdings (especially the 12% concentrated in a single stock, Broadcom).
3. There are tax consequences to selling in the Taxable account. What are the unrealized gains/losses for each holding? Any positions or tax lots with a loss/small gain that you can sell?
4. +1 to turning off dividend reinvestment for any holdings you plan on selling. Use the dividends to buy more Total Stock Market Fund/ETF such as VTI and VXUS or Fidelity’s comparable funds (but not the zero funds in Taxable as they are proprietary).
In the 401k/IRAs:
1. There are no tax consequences to selling so you can reduce the # of holdings in each account to simplify.
2. Continue to hold 100% fixed income in your 401k/IRAs. Consider holding only US bonds and selling VTABX (international bonds) which have currency risk.
3. Continue to hold 100% equity in your Roth IRAs. Sell the international growth fund VWILX with a 0.31% ER as you already hold VTIAX (Total International Stock Market).
Either get a waiver to buy Vanguard funds or use ETFs or Fidelity funds as you clean up your account.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
@DoctorE - the $200k/year expenses is all expenses minus estimated tax payments I made last year as those were large due to some sizable capital gains and I didn't believe it was fair to include those.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Ok so now that I've been with Fidelity for a bit, they're positioning SMA / sleeves for the $5M+ I have in my taxable portfolio. I'm reading mixed reviews on this approach, but several seem to be aligning with the advisor that this could be beneficial for the TLH alone to offset a large portion of the fee - it's 40 bps for the sleeve piece or 62bps for management of the entire portfolio. Does anyone have perspectives on this?
The advisor said if I didn't go down this path I'd continue to work with him to self-manage as I have been since I've consolidated with them.
The advisor said if I didn't go down this path I'd continue to work with him to self-manage as I have been since I've consolidated with them.
- retired@50
- Posts: 14996
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Yes, skip the SMA. The ongoing 40 basis point charge will eat the tax savings.jmac312 wrote: ↑Wed Sep 11, 2024 1:16 pm Ok so now that I've been with Fidelity for a bit, they're positioning SMA / sleeves for the $5M+ I have in my taxable portfolio. I'm reading mixed reviews on this approach, but several seem to be aligning with the advisor that this could be beneficial for the TLH alone to offset a large portion of the fee - it's 40 bps for the sleeve piece or 62bps for management of the entire portfolio. Does anyone have perspectives on this?
The advisor said if I didn't go down this path I'd continue to work with him to self-manage as I have been since I've consolidated with them.
Learn to TLH yourself. It's really not that hard.
See link: https://www.bogleheads.org/wiki/Tax_loss_harvesting
Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Are you able to share how you built such a sizeable net worth in your early 40s? What is your line of work and income to reach such high figures? I only ask because I am in the wealth building phase in my mid 30s. Getting close to $1 million but I will not be remotely close to the $5-$7 million in my 40s.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Yep. High income in tech and save most of it. Live a frugal life. Same house since 2012 and driving the same car since then as well. We live well with the $200k in expenses so I don’t feel we’ve short changed ourselves.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Thanks retired@50 gut telling me the same.
- retired@50
- Posts: 14996
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
In addition to the wiki, Fairmark will often have some useful information available.
Knowing how to avoid a wash sale can come in handy.
See archive link: https://web.archive.org/web/20170420045 ... /ws101.htm
Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
- White Coat Investor
- Posts: 18320
- Joined: Fri Mar 02, 2007 8:11 pm
- Location: Greatest Snow On Earth
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
1. Wow. Congratulations. Do whatever you want.jmac312 wrote: ↑Mon Aug 19, 2024 5:25 pm Former Vanguard PAS customer, consolidated everything to Fidelity in the past 30 days with no advice fee and planning to DIY. Plan to stick to Vanguard funds in taxable.
Emergency funds: 6 months (note this is invested in premium money market per below)
Debt: Mortgage, $250k, 3.375%. 1 Car loan, $15k remaining ($30k market value). No other debts.
Tax Filing Status: Married Filing Jointly
Tax Rate: 37% Federal, 0% State
State of Residence: TX
Age: 42
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 30% of stocks
Please provide an approximate size of your total portfolio: $7M
Current retirement assets
Taxable - $5.3M
2% cash (FZDXX, used to be in the equivalent on the Vanguard side)
4% Vanguard Small-Cap Index (VB) (.05%)
.13% Vanguard Tax Managed Fund FTSE ETF (VEA) (.06%)
14.92% Vanguard FTSE All world Ex US (VEU) (.07%)
1.4% Vanguard FTSE Europe (VGK) (.09%)
4.36% Vanguard Limited Term Tax Exempt (VMLUX) (.09%) (note: debating if I need to move these admiral shares back to Vanguard as they're not transactable at Fidelity)
.56% Vanguard Russell 1000 Index Fund ETF (VONE) (.08%)
.81% Vanguard FTSE Pacific ETF (VPL) (.08%)
25.8% Vanguard Total Stock Market (VTI) (.03%)
5.36% Vanguard Value Index Fund ETF (VTV) (.04%)
6.36% Vanguard Growth Index Fund (VUG) (.04%)
3.52% Vanguard International Growth Fund (VWILX) (0.31%)
5.82% Vanguard Intermediate Term Tax Exempt Fund Admiral (VWIUX) (.09%)
4.36% Vanguard Long Term Tax Exempt Fund Admiral (VWLUX) (.09%)
0.4% Vanguard Emerging Markets Stock Index ETF (VWO) (.08%)
.87% Vanguard Extended Market ETF (VXF) (.06%)
4.85% Vanguard Total International Stock Index (VXUS) (.08%)
16% Broadcom (AVGO) (note: RSU's that I've held onto for the past ~4 years)
His 401k's - $763k
20.57% Fidelity Large Cap Value Index Fund (FLCOX) (.035%)
8.87% Fidelity Mid Cap Index Fund (FSMDX) (.025%)
27.5% Fidelity Large Cap Growth Index Fund (FSPGX) (.035%)
8.32% Fidelity Small Cap Index Fund (FSSNX) (.025%)
34.68% Fidelity Total International Index Fund (FTIHX) (.06%)
His Roth IRA - $242k
26.15% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (.12%)
47.43% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (.04%)
26.63% Vanguard International Growth Fund (VWILX) (0.31%)
His Traditional IRA - $140k
70% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (.05%)
30% Vanguard Total International Bond Index Fund Admiral Shares (VTABX) (.11%)
Her Traditional IRA - $106k
70% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (.05%)
30% Vanguard Total International Bond Index Fund Admiral Shares (VTABX) (.11%)
Her Roth IRA - $137k
39.75% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (.12%)
21.78% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (.04%)
38.44% Vanguard International Growth Fund (VWILX) (0.31%)
529's
Max'd out 529's don't plan to contribute further - $100k each. Currently in Vanguard 529 target enrollment funds. Considering consolidating to Fidelity and choosing their aggressive growth NH index given 10+ year time horizon.
_______________________________________________________________
Contributions
New annual Contributions
Maxing out my 401k's and doing after tax contributions to max with roth conversion
~$100k taxable (for retirement, not short term goals)
Questions:
1. Any general reactions?
2. Given I just moved the portfolio to Fidelity, do I need to consider moving the 3 funds back to Vanguard where I can no longer transact these?
2. Doesn't matter. Do you realize how far from normal your situation is? Whether due to high income, inheritance, windfall or whatever, your level of wealth at that age is so far ahead of most that you don't have to do much right with your investments to be very successful.
But if I had one tip, I'd tell you to quit collecting investments and get a written investing plan. If all you care about asset allocation wise is 80/20 and 30% international, why in the world do you have 17 mutual funds and an individual stock in your taxable account? Unnecessary complexity. If you don't have at least 5% of your portfolio in something, it seems kind of silly to bother with it at all.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy |
4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
-
- Posts: 248
- Joined: Wed Dec 22, 2021 9:15 am
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
They explained earlier that these were selected by Vanguard PAS.White Coat Investor wrote: ↑Thu Sep 12, 2024 12:30 pm But if I had one tip, I'd tell you to quit collecting investments and get a written investing plan. If all you care about asset allocation wise is 80/20 and 30% international, why in the world do you have 17 mutual funds
-
- Posts: 6661
- Joined: Mon Apr 11, 2011 12:28 am
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Are you understating savings?
Maxing 401k + 100k to taxable with current income doesn’t add up to 7M by 40
Did you have a blow up in RSUs temporarily that’s not persistent?
Last edited by Nathan Drake on Fri Sep 13, 2024 1:43 pm, edited 1 time in total.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Congrats on your success. I would keep the Vanguard ETFs but move the Vanguard mutual funds back. If they can be convert to ETF then convert them, if not, maybe sell them in Vanguard once you're in the low income years in retirement.
- White Coat Investor
- Posts: 18320
- Joined: Fri Mar 02, 2007 8:11 pm
- Location: Greatest Snow On Earth
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Then I'd tell that to the Vanguard PAS advisor and their client, but only the client was available to me.Scorpion Stare wrote: ↑Thu Sep 12, 2024 1:39 pmThey explained earlier that these were selected by Vanguard PAS.White Coat Investor wrote: ↑Thu Sep 12, 2024 12:30 pm But if I had one tip, I'd tell you to quit collecting investments and get a written investing plan. If all you care about asset allocation wise is 80/20 and 30% international, why in the world do you have 17 mutual funds
1) Invest you must 2) Time is your friend 3) Impulse is your enemy |
4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
Following back up here, my current plan is to start to consolidate. My thought right now:
VWO ($3500 gain) VPL ($9k gain) VEA ($297 gain) into VEU
VXF($10k gain) VONE($11k gain) into VTI
I have carry-forward losses to more than offset the gains.
White Coat Investor - you suggested I get a plan. Would that be by way of a fee-only advisor to take a look and provide guidance?
The other path is what Fidelity is currently suggesting - go to their Wealth Services and pay a 67 bps fee which they claim will be mostly offset by the 53bps tax drag they say I currently have.
VWO ($3500 gain) VPL ($9k gain) VEA ($297 gain) into VEU
VXF($10k gain) VONE($11k gain) into VTI
I have carry-forward losses to more than offset the gains.
White Coat Investor - you suggested I get a plan. Would that be by way of a fee-only advisor to take a look and provide guidance?
The other path is what Fidelity is currently suggesting - go to their Wealth Services and pay a 67 bps fee which they claim will be mostly offset by the 53bps tax drag they say I currently have.
- retired@50
- Posts: 14996
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: Portfolio Review: $7M NW, Early 40s with 2 kids, targeting < 50 retirement
I wouldn't do this ^^^
Since you're aware of what needs to be done you can eliminate your tax drag all by yourself.
Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman