Vanguard Financial Plan Under the New [ 0.3% ] Fee

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mucho dinero
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Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by mucho dinero » Thu Apr 30, 2015 7:22 am

Folks,

I have recently contacted Vanguard concerning their pilot program on Financial Planning. In my initial discussion with their team, they recommended a portfolio consisting of four index funds: Total Stock Market Index Fund(35%), Total Bond Index Fund(40%), Total international Stock Market Index Fund(15%), and Total International Bond Index Fund (10%). The overall split is 50% stock and 50% bond. They have sent me how it will be allocated through out my various accounts. I originally posted an introduction to this topic on the Investment Theory cpmponent of the Boglehead Board Index.
My current portfolio is as follows:
Roth IRA Account %of portfolio
VAIPX Vanguard Inflation-Protected Securities Fund Admiral Shares 0.10% 13%
VFICX Vanguard Intermediate-Term Investment-Grade Fund Investor Shares 0.20% 6%
VMMXX Vanguard Prime Money Market Fund 0.16% — — o%
VTAPX Vanguard Short-Term Inflation-Protected Securities Index Fund Admiral Shares 0.10% 4%
VBTLX Vanguard Total Bond Market Index Fund Admiral Shares 0.08% 17%


ETFs-Roth
VNQ VANGUARD REIT INDEX ETF 0.10% 6%
Brokerage acc
VWITX Vanguard Intermediate-Term Tax-Exempt Fund Investor Shares 0.20% 3%
VBISX Vanguard Short-Term Bond Index Fund Investor Shares 0.20% — —
VFIRX Vanguard Short-Term Treasury Fund Admiral Shares 0.10% 8%
VMSXX Vanguard Tax-Exempt Money Market FundETFs 1%
Brokerage ETFs
VEU VANGUARD FTSE ALL WORLD EX US ETF 0.14% 7%
VTI VANGUARD TOTAL STOCK MARKET ETF 0.05% 28%

Wifes Roth

VBTLX Vanguard Total Bond Market Index Fund Admiral Shares 0.08%% 4%
VTSAX Vanguard Total Stock Market Index Fund Admiral Shares 0.05% 3%
Total 100%
My wife and I have a split of about 44% stocks and the rest in bonds. We are retired, and we both have government pensions with above average health insurance. Our house is paid for. No kids. We are in 25% tax bracket. Low debt. To participate in Vanguards new pilot program were they handle the financial planning functions they will put the client in the 4 funds I listed in the first paragraph above.
It is their theory that by increasing our exposure to equities they will compensate for not having an allocation of TIPs funds.
I would like to do a risk/reward profile on both my current portfolio and their proposed portfolio.
When comparing individual mutual funds I usually use the standard deviation metric to compare risk. Do any of you have any suggestions on how to best develop a risk/reward portfolio for an entire portfolio?
I want to use their service because I am getting to the point were I have to be constantly going to Doctors and it really is burning up a lot of my time. So at least with Vanguard I will have a planner who I can somewhat trust to do a good job.

Below is the portfolio proposed byVanguard:

Roth IRA
VBTLX Vg Total Bond index Fund ADM 0.08% 0.32
VTIAX Vg Total Int stock Index Fund Adm 0.14% 0.04
VTIAX VG Total int Bond Index Fund Adm 0.19% 0.10

Brokerage acc
VTIAX VG Total International Stock Index Fund Adm Shares 0.14% 0.04
VTSAX VG Total Stock Market Index Fund Adm Shares 0.05% 0.07

Brokerage for ETFs
VEU VG FTSE all World EX US ETF 0.14% 0.07
VTI VG Total Stock Mkt ETF 0.05% 0.28

Wife's Roth IRA
VBTLX Vg Total Bond index Fund Admiral Shares 0.08% 0.08

What do you all think about Vanguards proposed portfolio for us.



Thanks in advance. :happy
mucho dinero

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livesoft
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Re: Vanguard Financial Plan Under the New .03% Fee

Post by livesoft » Thu Apr 30, 2015 7:25 am

Did Vanguard lower their fee from 0.3% to 0.03%? Or is this a special deal to attract new customers?
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Re: Vanguard Financial Plan Under the New .03% Fee

Post by Logan T » Thu Apr 30, 2015 7:52 am

livesoft wrote:Did Vanguard lower their fee from 0.3% to 0.03%? Or is this a special deal to attract new customers?
I assume that's a typo...they still show 0.30% online.
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Re: Vanguard Financial Plan Under the New .03% Fee

Post by jimkinny » Thu Apr 30, 2015 7:52 am

I like the simplicity of Vanguard's proposal.

You have been a member of this forum since 2007 and presumably a reader/member of Morningstar's Diehard forum.

I am curious about what you think?

Jim

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Re: Vanguard Financial Plan Under the New .03% Fee

Post by retiredjg » Thu Apr 30, 2015 8:30 am

mucho dinero wrote:What do you all think about Vanguards proposed portfolio for us.
I think their portfolio idea is fine. But the important thing is how you feel about it. What would you like to change?

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Re: Vanguard Financial Plan Under the New .03% Fee

Post by dbr » Thu Apr 30, 2015 9:20 am

mucho dinero wrote: It is their theory that by increasing our exposure to equities they will compensate for not having an allocation of TIPs funds.
I would like to do a risk/reward profile on both my current portfolio and their proposed portfolio.
When comparing individual mutual funds I usually use the standard deviation metric to compare risk. Do any of you have any suggestions on how to best develop a risk/reward portfolio for an entire portfolio?
I want to use their service because I am getting to the point were I have to be constantly going to Doctors and it really is burning up a lot of my time. So at least with Vanguard I will have a planner who I can somewhat trust to do a good job.
If you have mean and SD data for the individual investments, then you have to also obtain the correlation data and then there are standard formulas for calculating the mean and standard deviation of the portfolio, all based on assuming normal distribution in most cases.

But if they are supplying a recommendation are they not running some data to justify what they are recommending? Surely they don't propose to charge 0.3% to give you a cookie cutter portfolio that anyone could maintain in a few minutes effort now and then. Having someone oversee your investments would be valuable if you fear losing the ability to do, of course.

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Re: Vanguard Financial Plan Under the New .03% Fee

Post by Lafder » Thu Apr 30, 2015 9:26 am

If you want the extra handholding that the 0.3% management fee will give you, go for it.

I find that the level of support I get for no extra fee at Vanguard is more than sufficient. That plus Bogleheads is all I need, without paying an extra fee.

Other than setting up the plan, which you already have now, what else do you want from Vanguard to justify the 0.3% extra fee year after year ?

You can also achieve automatic rebalancing if you chose all in one or Target Date retirement funds.

What $ amount is 0.3% of your total portfolio ? Only you can decide if the extra help is worth that cost for you.

I have told my husband that if anything happens to me, he should post on Bogleheads for all the financial advice he needs, and follow what the consensus says :)

lafder

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Re: Vanguard Financial Plan Under the New .03% Fee

Post by nisiprius » Thu Apr 30, 2015 10:12 am

dbr wrote:If you have mean and SD data for the individual investments, then you have to also obtain the correlation data and then there are standard formulas for calculating the mean and standard deviation of the portfolio, all based on assuming normal distribution in most cases.

But if they are supplying a recommendation are they not running some data to justify what they are recommending? Surely they don't propose to charge 0.3% to give you a cookie cutter portfolio that anyone could maintain in a few minutes effort now and then....
I imagine this is precisely what Vanguard does, and that the Wealthmints of the world do the same. But the others put on a great show of obfuscation and complexity with a lot of use of the word "optimized." They start with their advisor's "views" of what the future holds, then they run it through the Black-Litterman machine so it comes out "scientific."

You are perfectly correct that one can obtain mean, standard deviation, and correlation data from the past, but unfortunately even with Statistics 101 assumptions there isn't enough past data to avoid sampling error in the values. What you want to plug into the MPT formulas is not the sampled values, but the true underlying distribution parameters--which are basically un-knowable.

One of these days I'm going to finish working out a presentation showing the crazy way the efficient frontier curves squirm around with small changes in the year range, and how the tangent point can be near one end one year and near the other end a few years later.

So the question is whether plain cookie-cutter or obfuscated cookie-cutter is better value for the money. (Along the same lines, why buy a Target Retirement fund with only four holdings when you can get one from Fidelity that has about 22?)
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Re: Vanguard Financial Plan Under the New .03% Fee

Post by trasmuss » Fri May 01, 2015 6:58 am

I find it interesting that the allocation to international stocks and bonds matches Vanguard's old recommendations (e.g. 30% of stocks for international) and not the new (40% of stocks for international). The Target Retirement funds still seem to match the old also (at least the 2015 fund). I can see the Target funds slowly switching over but why would current recommendations still reflect the old?

As far as the portfolio goes it pretty much matches mine (except I don't have the international bonds at this time).

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Re: Vanguard Financial Plan Under the New .03% Fee

Post by BL » Fri May 01, 2015 9:33 am

I would be interested in learning what other value-added help they will give you besides rebalancing?

This should put you miles ahead of almost any "adviser" you might find elsewhere who may not have your best interests in mind. If I feel I need help someday, this would be my first choice as I believe I could trust them as a fiduciary to do things in my best interest.

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Re: Vanguard Financial Plan Under the New .03% Fee

Post by Iorek » Fri May 01, 2015 9:44 am

When I talked to one of their CFPs under the old program they also told me they preferred equities as an inflation hedge (vs. inflation-adjusted bonds), but I thought that was perhaps because I am about 15 years from retirement. I think the target retirement funds for at/close to retirement have TIPS in them. To the extent your individual recommendations differ from the comparable life cycle fund allocation, I think it's a fair question to ask why-- maybe your pension allows you to take more risk, but that's a bit different from saying equities are better inflation hedges than TIPS. And of course, if you want to add a TIPS fund that seems unlikely to tip your portfolio into a morass of complexity...

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Re: Vanguard Financial Plan Under the New .03% Fee

Post by Taylor Larimore » Fri May 01, 2015 9:48 am

What do you all think about Vanguards proposed portfolio for us.
MuchoDinero:

I think Vanguard's recommendation (using my three favorite funds) is excellent! -- The Three Fund Portfolio

"The enemy of a good plan is the dream of a perfect plan." -- Jack Bogle

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Vanguard Financial Plan Under the New .03% Fee

Post by toto238 » Fri May 01, 2015 12:05 pm

It looks to me like a portfolio that will beat 90% of all other 50-50 stock/bond portfolios over the next 30 years. Perhaps more.

Can we clarify that the fee is 0.30%, not 0.03%? And if so could we change the thread title to reflect the correct number? It may confuse some.

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Re: Vanguard Financial Plan Under the New .03% Fee

Post by bloom2708 » Fri May 01, 2015 12:19 pm

That sounds like a "4 Fund Portfolio". :shock:

I like the suggestion of putting the .3% (I am pretty sure it is .3% or .003) into a dollar figure. If you have $1,000,000 that is $3,000/year. After 10 years that is a pretty nice new car.

Skip the extra fee, buy the 4 funds themselves. Re-balance every 6 months or so. Save $3k/year. Let that money grow over time.

Each spring I think about buying a boat. I envision taking it out on the water on the 6 nice days we have in the short summer. Then I envision storing it for 9 months. Then I don't buy it. I save $Xk per year just not buying a boat.

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by LadyGeek » Fri May 01, 2015 12:57 pm

mucho dinero - By popular request, I fixed the thread title. If this is incorrect, you can change the thread title by editing the Subject: line in Post #1.

If you want to change your portfolio content in Post #1, use the Edit button in the top-right corner and then bump the thread to say it's been updated.
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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by nedsaid » Fri May 01, 2015 1:01 pm

LadyGeek wrote:mucho dinero - By popular request, I fixed the thread title. If this is incorrect, you can change the thread title by editing the Subject: line in Post #1.

If you want to change your portfolio content in Post #1, use the Edit button in the top-right corner and then bump the thread to say it's been updated.
Darn it!! I was looking forward to that 0.03% management fee. Someone had to burst the bubble! :D :D :D
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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by mucho dinero » Sat May 02, 2015 8:38 pm

Folks,

I would like to thank all of you for the input that you provided to me in helping me finalize my decision for this plan. First I would like to apologize to all of you for not quoting Vanguards fee correctly. The fee was 0.3% rather than 0.03% that I had put forth.
First I must say that many you made appropiate comments relative to why would I pay Vanguard a fee for things that I could easily do myself. However I am going to use this service because I am spending more time than ever running to Doctors and as a senior trying to go high tech I am constantly having to spend a great deal of time boning up on issues in computer applications. Even if my health was not an issue, my wife has no interest in dabbling in matters of a financial nature. Lafder you make a good point that your spouse can go on the Bogleheads forum to get excellent advice, but I know my wife would not be inclined to do so. BL in terms of value added services, Vanguard will position your investments to take advantage of tax efficinies, while keeping your accounts and individual tax situation in mind, manage your investments and monitor your plan, review your progress with you through scheduled appointments, and update your plan wen life events impact your goals. I would like to thank both Taylor and toto238 for the positive comments. And I would like to thank the rest of you for the input that you all provided me.
Have a great day

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by Lafder » Sat May 02, 2015 9:11 pm

mucho dinero,

What you said makes perfect sense and is understandable! Knowing what you are paying for and knowing that it is optional are what mattered to me, for you to know.

You have found a service that I do trust for one of the lowest management fees around. You are in good hands!!

It also makes sense that if you do go first, your wife will have all of the support she needs with investments already in place.

I wish you the best with your health and a longer comfortable life :)
lafder

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by youbetcha » Sat May 02, 2015 9:35 pm

I too have chosen Vanguard Personal Advisor. Although I have been reading about how many of you are able to set up your portfolios and asset allocations, I found it to be a difficult task. The main reason for the difficulty was actually "pulling the trigger" and divesting myself of all of my old investments. In my mind I knew it was the right thing to do but I couldn't bring myself to do it. The Vanguard Personal Advisor sold off all of my old assets and purchased all of the funds which Vanguard recommended. Maybe after a couple of years of hand holding I'll be able to venture off on my own, but right now I'm happy to have Vanguard make my investment decisions for me. It is well worth the 0.3% fee to let me sleep well and not have to worry about the investment philosophy I have chosen.

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by James P. Bipps » Sun May 10, 2015 11:54 am

What does the Vanguard Personal Advisor service do or suggest if someone has non-Vanguard accounts?

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by SpringMan » Sun May 10, 2015 12:56 pm

I thought my wife could use Vanguard Personal Advisor Service if I should pass on first but I am having second thoughts about whether it is worth 30 basis points. The three fund portfolio is easy enough for her to manage, I think. Stuff in our joint taxable accounts should probably be left for our children, receiving stepped up cost basis. She could sell her inherited half getting her stepped up basis soon as possible and reinvest accordingly, TSM, TISM. The Target Retirement Income fund is always an option for further simplicity but I am really not that big a fan of short term TIPs and currency hedged International Bonds.
Best Wishes, SpringMan

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by dbr » Sun May 10, 2015 1:07 pm

SpringMan wrote:I thought my wife could use Vanguard Personal Advisor Service if I should pass on first but I am having second thoughts about whether it is worth 30 basis points. The three fund portfolio is easy enough for her to manage, I think. Stuff in our joint taxable accounts should probably be left for our children, receiving stepped up cost basis. She could sell her inherited half getting her stepped up basis soon as possible and reinvest accordingly, TSM, TISM. The Target Retirement Income fund is always an option for further simplicity but I am really not that big a fan of short term TIPs and currency hedged International Bonds.
A question I asked in another discussion of this kind of advisory service is how it can be that a person who can't keep track of a simple portfolio is going to be able to manage all the other financial affairs a person faces as time goes on. I don't think Vanguard PAS is a general personal custodian and should not be counted on as such. As an example, are they going to do the tax management that you mention above?

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by Iorek » Sun May 10, 2015 9:22 pm

James P. Bipps wrote:What does the Vanguard Personal Advisor service do or suggest if someone has non-Vanguard accounts?
I haven't used this exact version of the service, but I did use the CFP consultation in its prior incarnation and I can say that they collected information on all of your accounts and offered advice w/r/t all of them (I think they actually suggested some exchanges they thought I should do between the TSP F and G funds, although IMO that was based on a misunderstanding of what the G fund represents).
Last edited by Iorek on Mon May 11, 2015 6:25 am, edited 1 time in total.

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by Gnirk » Sun May 10, 2015 9:33 pm

I plan on enrolling in this service in 4 years when I turn 75, if I am fortunate enough to do so.

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by dbr » Mon May 11, 2015 8:01 am

Iorek wrote:
James P. Bipps wrote:What does the Vanguard Personal Advisor service do or suggest if someone has non-Vanguard accounts?
I haven't used this exact version of the service, but I did use the CFP consultation in its prior incarnation and I can say that they collected information on all of your accounts and offered advice w/r/t all of them (I think they actually suggested some exchanges they thought I should do between the TSP F and G funds, although IMO that was based on a misunderstanding of what the G fund represents).
An issue in seeking advice from a fund company is either not having other accounts addressed or, on the other hand, trying to address things the adviser is not expert enough to understand. It may be the jury is still out.

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by 1210sda » Mon May 11, 2015 10:59 am

Don't the Life Strategy funds do pretty much the same thing that VPAS will be doing? Fund selection, Asset allocation. etc.....
1210

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by Dandy » Mon May 11, 2015 11:28 am

I agree that the funds selected and the allocation is pretty simple - but that is what I expected - I would be concerned if there was 2% in gold ETF etc.
I guess the benefit for the fee is you get to decide what funds/allocation there will be - don't like International bond don't include them. And if your spouse is not investment savvy then you can set something up that will be maintained and a "trusted" source for ongoing advice. That would remove one worry from the list of incase I die first.

It might be an option for me as I approach losing my mental sharpness (Nurse I'm still ok aren't I ? :oops: )

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by beyou » Mon May 11, 2015 8:22 pm

If I felt the end was near...would consider moving assets to Target Retirement Fund to ease the burden for my wife.
Would pay 6-7bps more than the 3 fund ETF/Admiral shares, instead of the 30bps.
Not sure the tax planning asset location would be worth paying more to have someone optimize for her,
depending on the tax bracket we would pay by then. Thoughts ?

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by tfb » Mon May 11, 2015 8:53 pm

1210sda wrote:Don't the Life Strategy funds do pretty much the same thing that VPAS will be doing? Fund selection, Asset allocation. etc.....
1210
LifeStrategy funds don't come with an advisor you can talk to outside fund selection and asset allocation unless you have $500k.
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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by 1210sda » Tue May 12, 2015 7:47 am

tfb wrote:
1210sda wrote:Don't the Life Strategy funds do pretty much the same thing that VPAS will be doing? Fund selection, Asset allocation. etc.....
1210
LifeStrategy funds don't come with an advisor you can talk to outside fund selection and asset allocation unless you have $500k.
OK, I'll restate.....For those with $500k or more at Vanguard, Don't the Life Strategy funds do pretty much the same thing that VPAS will be doing? Fund selection, Asset allocation. etc.....

1210

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by Dandy » Tue May 12, 2015 8:20 am

Not sure the tax planning asset location would be worth paying more to have someone optimize for her,
depending on the tax bracket we would pay by then. Thoughts
?

Not sure but who will my wife turn to get some investment/tax guidance? Family members are not very qualified. There are plenty of commissioned brokers/agents that would be glad to help but that has its own problems - that might end up being more expensive. VG regular customer service isn't equipped to answer - how about flagship rep?? not sure what service they provide and how that might differ from this new service.

I have my own issues with Target Date funds - i.e. too much tinkering with allocations/content. But once you get out of a one fund solution the "complexity" of it for a non savvy investor can be an issue. Balanced index is attractive but may be a bit more equity than I desire - especially with taxable mostly in equities.

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.....

Post by essbeer » Tue May 12, 2015 11:33 am

.....
Last edited by essbeer on Sun May 06, 2018 1:18 pm, edited 2 times in total.

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by Dandy » Tue May 12, 2015 4:27 pm

Do the Vanguard advisors really give tax advice? Seems like other advisor services are pretty explicit that they will not give tax advice.

Not sophisticated advice but guidance --things like RMDs are taxable, you will only pay taxes on a taxable sale if there is a gain and then usually at a lower rate, do muni funds make sense, it is better to put bonds in your IRA, etc.

Things that people like my wife would need to know to avoid making silly but costly mistakes.

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Re: Vanguard Financial Plan Under the New [ 0.3% ] Fee

Post by toto238 » Wed May 13, 2015 11:51 am

Dandy wrote:Do the Vanguard advisors really give tax advice? Seems like other advisor services are pretty explicit that they will not give tax advice.

Not sophisticated advice but guidance --things like RMDs are taxable, you will only pay taxes on a taxable sale if there is a gain and then usually at a lower rate, do muni funds make sense, it is better to put bonds in your IRA, etc.

Things that people like my wife would need to know to avoid making silly but costly mistakes.
Indeed, I don't think they're going to do your tax return for you. But they're definitely knowledgeable as to the different tax consequences of different investment choices and can help with a bit of that tax advice.

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