Windfall and advice

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Windfall and advice

Post by rad doc » Sun Oct 08, 2017 6:47 pm

Hello all, I would love some advice from anyone who has time. Portfolio is below. However, it will grow significantly do to a 7 figure windfall. I am strongly considering going with a low fixed fee passive advisor such as EAM or Cardiff. Reasons being, job requires significant time and I am afraid I will not be diligent enough with rebalancing. I also have trouble sticking to a desired allocation! See my bond allocation which is now quite low! Also, I would like relationship in the event something happens to me. Am I crazy? I guess I could just use Vanguard PAS? I am 39 and plan to work for another 10-15 years with a mid 6 figure salary. Should also add that I will also receive an additional 7 figure inheritance but hopefully not for some time!

Emergency funds: Yes
Debt: 400k mortgage at 3.5%, 100k student loans at 2%
Tax Filing Status: Married Joint
Tax Rate: 39% Federal, 0% State
State of Residence:TX
Age:39
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 25% of stocks

Current AA is 55% Total US, 25% International, 4% Total Bond, 10% Small Cap, 6%REIT

Portfolio is currently mid to high 6 figures.

25% in taxable account, the international fund. 75% in mix between Roth IRA, Roth 401k and Trad 401k. HSA not included in allocation mix.

Contributions

New annual Contributions
$28000 his 401k including match
$6000 his Roth IRA
$6000 her Roth IRA
$None taxable (for retirement, not short term goals)

Thanks to anyone who takes the time.
Last edited by rad doc on Sun Oct 08, 2017 6:56 pm, edited 1 time in total.

Gill
Posts: 3500
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: Windfall and advice

Post by Gill » Sun Oct 08, 2017 6:50 pm

Are you saying your are receiving a seven-figure windfall in addition to the potential for a similar sized inheritance?
Gill

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Sun Oct 08, 2017 6:51 pm

Gill wrote:
Sun Oct 08, 2017 6:50 pm
Are you saying your are receiving a seven-figure windfall in addition to the potential for a similar sized inheritance?
Gill
Correct, low digit 7 figures like 2-3 each.

ThePrince
Posts: 43
Joined: Sun Aug 20, 2017 9:15 pm

Re: Windfall and advice

Post by ThePrince » Sun Oct 08, 2017 7:31 pm

I would use Betterment. Set your stock/bond allocations and let them handle the rebalancing, TLH, and if you use their coordinated portfolios, asset location.

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Sun Oct 08, 2017 7:35 pm

ThePrince wrote:
Sun Oct 08, 2017 7:31 pm
I would use Betterment. Set your stock/bond allocations and let them handle the rebalancing, TLH, and if you use their coordinated portfolios, asset location.
Will consider them but the fees would be almost the same or perhaps even a bit more since they are a flat 0.25% regardless of account size. For example 0.25% of 4 mil is 10k. EAM charges bw 2500-8000.

John Laurens
Posts: 210
Joined: Mon Nov 14, 2016 7:31 pm

Re: Windfall and advice

Post by John Laurens » Sun Oct 08, 2017 8:07 pm

If you don’t want to do any rebalancing, I would do 100% tax managed balanced in taxable and 100% life strategy growth in tax advantaged.

Regards,
John

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Sun Oct 08, 2017 8:19 pm

John Laurens wrote:
Sun Oct 08, 2017 8:07 pm
If you don’t want to do any rebalancing, I would do 100% tax managed balanced in taxable and 100% life strategy growth in tax advantaged.

Regards,
John
Thanks, that seems a bit conservative with near 50% in bonds.

User avatar
arcticpineapplecorp.
Posts: 2183
Joined: Tue Mar 06, 2012 9:22 pm

Re: Windfall and advice

Post by arcticpineapplecorp. » Sun Oct 08, 2017 8:20 pm

don't forget to read the wiki "managing a windfall":

https://www.bogleheads.org/wiki/Managing_a_windfall
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

sambb
Posts: 1699
Joined: Sun Mar 10, 2013 3:31 pm

Re: Windfall and advice

Post by sambb » Sun Oct 08, 2017 8:30 pm

I would definintely do 100% in tax managed balanced for taxable.
Yes, it is conservative.
So what, the market has had a huge run, and with your salary you dont have to take risk with this money. 50/50 - calculate it out - it will be plenty by the time you hit retirement if it returns historical numbers.
Set it and forget it.

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Sun Oct 08, 2017 8:51 pm

sambb wrote:
Sun Oct 08, 2017 8:30 pm
I would definintely do 100% in tax managed balanced for taxable.
Yes, it is conservative.
So what, the market has had a huge run, and with your salary you dont have to take risk with this money. 50/50 - calculate it out - it will be plenty by the time you hit retirement if it returns historical numbers.
Set it and forget it.
I suppose I could tilt a bit buy purchasing some of the tax managed growth fund. Just feel like if eam or cardiff are only 3-4k per year it is worthwhile for my sanity.

User avatar
Sandtrap
Posts: 1626
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳

Re: Windfall and advice

Post by Sandtrap » Sun Oct 08, 2017 9:03 pm

Vanguard PAS ?

Also read the Wiki: "Managing a Windfall".
Also: Tell nobody.
Not a financial expert - just a retired businessman hacking out of a sand trap -- again.

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Sun Oct 08, 2017 9:08 pm

Sandtrap wrote:
Sun Oct 08, 2017 9:03 pm
Vanguard PAS ?

Also read the Wiki: "Managing a Windfall".
Also: Tell nobody.
Thanks, have read the wiki several times!

Have thought about PAS but it is 0.3% which given size of portofolio is about as much or more than eam and cardiff just like betterment. For that amount, would one of the low fee passive advisors be a better value?

User avatar
BolderBoy
Posts: 3278
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Windfall and advice

Post by BolderBoy » Sun Oct 08, 2017 9:09 pm

rad doc wrote:
Sun Oct 08, 2017 6:47 pm
Debt: 400k mortgage at 3.5%, 100k student loans at 2%
Why not pay off all your debts first?

Then put 70% of what is left in Vanguard Total Stock Index Fund and 30% in the Intermediate Term Tax Exempt Bond fund (is that aggressive enough)? Simple to rebalance (takes 5 minutes tops including the time to login, do the math, click the boxes (enter some numbers), click "submit" and logout), cheap.

No one is going to take care of your money as fastidiously as you will.
“Where you stand, depends on where you sit” - Rufus Miles | "Never underestimate one's capacity to overestimate one's abilities"

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Sun Oct 08, 2017 9:21 pm

BolderBoy wrote:
Sun Oct 08, 2017 9:09 pm
rad doc wrote:
Sun Oct 08, 2017 6:47 pm
Debt: 400k mortgage at 3.5%, 100k student loans at 2%
Why not pay off all your debts first?

Then put 70% of what is left in Vanguard Total Stock Index Fund and 30% in the Intermediate Term Tax Exempt Bond fund (is that aggressive enough)? Simple to rebalance (takes 5 minutes tops including the time to login, do the math, click the boxes (enter some numbers), click "submit" and logout), cheap.

No one is going to take care of your money as fastidiously as you will.
I could live with 70/30 for sure. Not a bad idea. I guess it is no suprise that everyone here avoids advisors even low fee passive type.

Chadnudj
Posts: 649
Joined: Tue Oct 29, 2013 11:22 am

Re: Windfall and advice

Post by Chadnudj » Sun Oct 08, 2017 9:22 pm

If the only thing you're worried about is rebalancing, why not just go with Vanguard LifeStrategy? LifeStrategy Growth is basically an 80-20 stock-bond fund with international included, auto-rebalances, and has an expense of 0.15% (which is FAR less than you'd pay for a comparable adviser to do the same thing for you). LifeStrategy Moderate Growth is 60-40, LifeStrategy Conservative Growth is 40-60, and LifeStrategy Income is 20-80.....

Honestly, that would be easy, and would give you the rebalancing you desire automatically. Keep in mind those other advisers you mention charge you their 0.25% or whatever ON TOP of the expense fees of the funds the put you in....whereas with Vanguard LifeStrategy, it's all in one.

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Sun Oct 08, 2017 9:30 pm

Chadnudj wrote:
Sun Oct 08, 2017 9:22 pm
If the only thing you're worried about is rebalancing, why not just go with Vanguard LifeStrategy? LifeStrategy Growth is basically an 80-20 stock-bond fund with international included, auto-rebalances, and has an expense of 0.15% (which is FAR less than you'd pay for a comparable adviser to do the same thing for you). LifeStrategy Moderate Growth is 60-40, LifeStrategy Conservative Growth is 40-60, and LifeStrategy Income is 20-80.....

Honestly, that would be easy, and would give you the rebalancing you desire automatically. Keep in mind those other advisers you mention charge you their 0.25% or whatever ON TOP of the expense fees of the funds the put you in....whereas with Vanguard LifeStrategy, it's all in one.
LifeStrategy are not very tax efficient. Also advisors I mentioned are not 0.25%, they are flat fee

User avatar
Sandtrap
Posts: 1626
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳

Re: Windfall and advice

Post by Sandtrap » Sun Oct 08, 2017 9:34 pm

rad doc wrote:
Sun Oct 08, 2017 9:08 pm
Sandtrap wrote:
Sun Oct 08, 2017 9:03 pm
Vanguard PAS ?

Also read the Wiki: "Managing a Windfall".
Also: Tell nobody.
Thanks, have read the wiki several times!

Have thought about PAS but it is 0.3% which given size of portofolio is about as much or more than eam and cardiff just like betterment. For that amount, would one of the low fee passive advisors be a better value?
You could setup and manage and excellent portfolio with the help of the Boglehead experts.
It's not difficult and would need very little maintenance.
You can add to the funds while keeping the set allocation as you come into more assets.
If you want a more hands off approach you could go with the various Life Strategy, Target Retirement, or Balanced funds but the individual funds will give you the most flexibility.
Nobody will be a better caretaker of your assets as yourself.
Or. . . a compromise. . . go with Vanguard PAS for the initial setup then take them off the table and maintain it yourself.
Not a financial expert - just a retired businessman hacking out of a sand trap -- again.

Chadnudj
Posts: 649
Joined: Tue Oct 29, 2013 11:22 am

Re: Windfall and advice

Post by Chadnudj » Mon Oct 09, 2017 8:10 am

rad doc wrote:
Sun Oct 08, 2017 9:30 pm
Chadnudj wrote:
Sun Oct 08, 2017 9:22 pm
If the only thing you're worried about is rebalancing, why not just go with Vanguard LifeStrategy? LifeStrategy Growth is basically an 80-20 stock-bond fund with international included, auto-rebalances, and has an expense of 0.15% (which is FAR less than you'd pay for a comparable adviser to do the same thing for you). LifeStrategy Moderate Growth is 60-40, LifeStrategy Conservative Growth is 40-60, and LifeStrategy Income is 20-80.....

Honestly, that would be easy, and would give you the rebalancing you desire automatically. Keep in mind those other advisers you mention charge you their 0.25% or whatever ON TOP of the expense fees of the funds the put you in....whereas with Vanguard LifeStrategy, it's all in one.
LifeStrategy are not very tax efficient. Also advisors I mentioned are not 0.25%, they are flat fee
And what is that flat fee? The expense ratio for LifeStrategy Growth is 0.15%, which means you pay $1,500 for every $1 million you have invested.

Are you telling me your adviser is going to charge less than that?

And, again, keep in mind -- whatever your adviser's fee is, that fee will be on TOP of the expense ratio of any funds the adviser has you invest in. So that means even if your adviser puts you in Vanguard Total Stock VTSAX (0.04% expense fee) and Vanguard Tax-Exempt Bonds VTEAX (0.09% expense ratio plus a 0.25% purchase fee), at 60/40, you'll be paying the adviser fee PLUS $600 every year on every million you have invested (representing $240 per $600k on VTSAX, $360 per $400k on VTEAX), plus you'll have paid $1,000 per every $400k you put into VTEAX as the purchase fee. So to get you into this tax efficient 60-40 your adviser will need to charge less than $900 compared to LifeStrategy Growth per million to break even (and that's ignoring the purchase fee on VTEAX).

As for tax efficiency, don't let the tax tail wag the total returns dog. Obviously you should consider taxes, but paying an adviser to build a lazy/rebalancing portfolio for you seems a poor way of doing so.

Jack FFR1846
Posts: 5592
Joined: Tue Dec 31, 2013 7:05 am

Re: Windfall and advice

Post by Jack FFR1846 » Mon Oct 09, 2017 8:15 am

Rebalancing takes 15 minutes a year. Do you really not have 15 minutes a year?
Bogle: Smart Beta is stupid

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Mon Oct 09, 2017 8:37 am

Jack FFR1846 wrote:
Mon Oct 09, 2017 8:15 am
Rebalancing takes 15 minutes a year. Do you really not have 15 minutes a year?
You rebalance only once a year?

I agree with a lot of the points here. I am just wondering if for my sanity low fee advisors may be worth it. It’s painful to see your portfolio drop 50k in a day. 500k in a day or a few would be very stressful.

The other consideration is dfa vs vanguard but that is a whole other discussion!

User avatar
BolderBoy
Posts: 3278
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Windfall and advice

Post by BolderBoy » Mon Oct 09, 2017 9:49 am

rad doc wrote:
Mon Oct 09, 2017 8:37 am
I agree with a lot of the points here. I am just wondering if for my sanity low fee advisors may be worth it. It’s painful to see your portfolio drop 50k in a day. 500k in a day or a few would be very stressful.
You think an advisor is going to protect your portfolio from volatility?
“Where you stand, depends on where you sit” - Rufus Miles | "Never underestimate one's capacity to overestimate one's abilities"

User avatar
BolderBoy
Posts: 3278
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Windfall and advice

Post by BolderBoy » Mon Oct 09, 2017 9:49 am

rad doc wrote:
Mon Oct 09, 2017 8:37 am
I agree with a lot of the points here. I am just wondering if for my sanity low fee advisors may be worth it. It’s painful to see your portfolio drop 50k in a day. 500k in a day or a few would be very stressful.
You think an advisor is going to protect your portfolio from volatility?
“Where you stand, depends on where you sit” - Rufus Miles | "Never underestimate one's capacity to overestimate one's abilities"

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Mon Oct 09, 2017 10:01 am

BolderBoy wrote:
Mon Oct 09, 2017 9:49 am
rad doc wrote:
Mon Oct 09, 2017 8:37 am
I agree with a lot of the points here. I am just wondering if for my sanity low fee advisors may be worth it. It’s painful to see your portfolio drop 50k in a day. 500k in a day or a few would be very stressful.
You think an advisor is going to protect your portfolio from volatility?
No, obviously not. However, not second guessing yourself and having a low cost professional seems reasonable. I have managed it this far using this forum but the growing size just has me a bit uncomfortable. Is it worth 3-5k to have professional help? We are talking about a very small percent of portfolio size. I would never entertain the 1% guys.

User avatar
ruralavalon
Posts: 11282
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Windfall and advice

Post by ruralavalon » Mon Oct 09, 2017 10:03 am

rad doc wrote:
Sun Oct 08, 2017 9:21 pm
BolderBoy wrote:
Sun Oct 08, 2017 9:09 pm
rad doc wrote:
Sun Oct 08, 2017 6:47 pm
Debt: 400k mortgage at 3.5%, 100k student loans at 2%
Why not pay off all your debts first?

Then put 70% of what is left in Vanguard Total Stock Index Fund and 30% in the Intermediate Term Tax Exempt Bond fund (is that aggressive enough)? Simple to rebalance (takes 5 minutes tops including the time to login, do the math, click the boxes (enter some numbers), click "submit" and logout), cheap.

No one is going to take care of your money as fastidiously as you will.
I could live with 70/30 for sure. Not a bad idea. I guess it is no suprise that everyone here avoids advisors even low fee passive type.
Good advice.

Or 20% Vanguard Intermediate-term Tax-exempt, 20%, Vanguard Total International Stock Index Fund, and 60% Vanguard Total Stock Market Index Fund.

Rebalancing would take just a couple of minutes.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Mon Oct 09, 2017 10:14 am

If i did continue diy, why not keep current allocation? 40% Total, 25% international, 10% small caps, 10% reit, 15% bond

joeblow
Posts: 52
Joined: Sat Nov 28, 2015 12:17 pm

Re: Windfall and advice

Post by joeblow » Mon Oct 09, 2017 10:21 am

rad doc wrote:
Mon Oct 09, 2017 8:37 am

I agree with a lot of the points here. I am just wondering if for my sanity low fee advisors may be worth it. It’s painful to see your portfolio drop 50k in a day. 500k in a day or a few would be very stressful.
You do not have time to rebalance once or twice a year, but have time to watch daily fluctuations of your portfolio?

Sounds like you've already made up your mind and are looking for confirmation.

Congrats on the windfall and good luck finding someone to share it with and that will manage it for you.

Jack FFR1846
Posts: 5592
Joined: Tue Dec 31, 2013 7:05 am

Re: Windfall and advice

Post by Jack FFR1846 » Mon Oct 09, 2017 10:30 am

rad doc wrote:
Mon Oct 09, 2017 8:37 am
Jack FFR1846 wrote:
Mon Oct 09, 2017 8:15 am
Rebalancing takes 15 minutes a year. Do you really not have 15 minutes a year?
You rebalance only once a year?
On my birthday. This is a very common method. I'll add that if you forget to do it for a year or 5, it's no big deal. I went well over 30 years without doing it.
Bogle: Smart Beta is stupid

deltaneutral83
Posts: 385
Joined: Tue Mar 07, 2017 4:25 pm

Re: Windfall and advice

Post by deltaneutral83 » Mon Oct 09, 2017 10:33 am

Even with what appears to be a 5 fund portfolio (US Total, Intl Tot, REIT, Small Cap, Bonds) I don't really think you need to re balance more than once a year. Could even consider going with the 3F to ease re-balancing concerns. Whatever you are contemplating paying an adviser (30 bps with VG, or whatever flat fee discussed earlier) would negate the REIT and Small cap tilt over the next 30 years and that's assuming you are getting better risk adjusted returns out of REITS and small caps over US Total which no one knows. I just assumed anyone that tilts also wants to and has the capacity to be hands on (and by tilting, I'm using anything more than 3F for these purposes).

ThriftyPhD
Posts: 116
Joined: Mon Jul 31, 2017 10:43 am

Re: Windfall and advice

Post by ThriftyPhD » Mon Oct 09, 2017 10:38 am

rad doc wrote:
Mon Oct 09, 2017 10:14 am
If i did continue diy, why not keep current allocation? 40% Total, 25% international, 10% small caps, 10% reit, 15% bond
The allocation is completely up to you, based on your comfort level. No need to change, but you've suggested that you feel your bond allocation is low, and then expressed worry about how you would react if the market dropped. Perhaps you're more risk adverse now that you have a larger portfolio, within ~10 years of desired retirement, and coupled with a decreased NEED to take risk, a more conservative asset allocation might be called for. Only you can say.

Also, consider that you'll need to manage your complete portfolio. Now that you have all of this money coming into taxable, the best option may be to put it 100% equities, and move your 401k to mostly/completely bonds to meet your desired stock:bond ratio. At your marginal tax rate, bonds will do a lot better in tax deferred space. A fee only adviser could help you with this, but the rebalancing would probably take less time per year than the drive to the adviser.

As an example, lets say you have $500k total currently, with $50k each roth and $400k in 401k. You get $1.5m windfall, and want 60% US, 20% international, 20% bond.

Taxable:
20% $400k VXUS Vanguard Total International Stock ETF
55% $1.1m VTI Vanguard Total Stock Market ETF

Roth Him:
2.5% $50k VTI Vanguard Total Stock Market ETF

Roth Her:
2.5% $50k VTI Vanguard Total Stock Market ETF

401k:
20% $400k BND Vanguard Total Bond Market ETF

New money will mostly be going into the 401k. By default, you could have it go 100% into bond, have roth contributions go 100% VTI, and at the end of the year sell BND to buy VTI in the 401k if necessary to maintain your asset allocation. It is a quick calculation and shouldn't take you long.

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Mon Oct 09, 2017 10:57 am

joeblow wrote:
Mon Oct 09, 2017 10:21 am
rad doc wrote:
Mon Oct 09, 2017 8:37 am

I agree with a lot of the points here. I am just wondering if for my sanity low fee advisors may be worth it. It’s painful to see your portfolio drop 50k in a day. 500k in a day or a few would be very stressful.
You do not have time to rebalance once or twice a year, but have time to watch daily fluctuations of your portfolio?

Sounds like you've already made up your mind and are looking for confirmation.

Congrats on the windfall and good luck finding someone to share it with and that will manage it for you.
Why would I waste my time just looking for confirmation? Thanks though.

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Mon Oct 09, 2017 11:01 am

ThriftyPhD wrote:
Mon Oct 09, 2017 10:38 am
rad doc wrote:
Mon Oct 09, 2017 10:14 am
If i did continue diy, why not keep current allocation? 40% Total, 25% international, 10% small caps, 10% reit, 15% bond
The allocation is completely up to you, based on your comfort level. No need to change, but you've suggested that you feel your bond allocation is low, and then expressed worry about how you would react if the market dropped. Perhaps you're more risk adverse now that you have a larger portfolio, within ~10 years of desired retirement, and coupled with a decreased NEED to take risk, a more conservative asset allocation might be called for. Only you can say.

Also, consider that you'll need to manage your complete portfolio. Now that you have all of this money coming into taxable, the best option may be to put it 100% equities, and move your 401k to mostly/completely bonds to meet your desired stock:bond ratio. At your marginal tax rate, bonds will do a lot better in tax deferred space. A fee only adviser could help you with this, but the rebalancing would probably take less time per year than the drive to the adviser.

As an example, lets say you have $500k total currently, with $50k each roth and $400k in 401k. You get $1.5m windfall, and want 60% US, 20% international, 20% bond.

Taxable:
20% $400k VXUS Vanguard Total International Stock ETF
55% $1.1m VTI Vanguard Total Stock Market ETF

Roth Him:
2.5% $50k VTI Vanguard Total Stock Market ETF

Roth Her:
2.5% $50k VTI Vanguard Total Stock Market ETF

401k:
20% $400k BND Vanguard Total Bond Market ETF

New money will mostly be going into the 401k. By default, you could have it go 100% into bond, have roth contributions go 100% VTI, and at the end of the year sell BND to buy VTI in the 401k if necessary to maintain your asset allocation. It is a quick calculation and shouldn't take you long.
Thank you. Good info. I confess to not being fully educated on tax efficiency especially when it comes to bonds. Probably need to brush up on bonds all together and yes will increase bond allocation from current 4%! Things like this make me wonder how much more I dont know or how many mistakes I would make that could cost me. Do I have potential to make mistakes that would cost me more than advisor fee?

letsgobobby
Posts: 10478
Joined: Fri Sep 18, 2009 1:10 am

Re: Windfall and advice

Post by letsgobobby » Mon Oct 09, 2017 11:05 am

rad doc wrote:
Mon Oct 09, 2017 10:57 am
joeblow wrote:
Mon Oct 09, 2017 10:21 am
rad doc wrote:
Mon Oct 09, 2017 8:37 am

I agree with a lot of the points here. I am just wondering if for my sanity low fee advisors may be worth it. It’s painful to see your portfolio drop 50k in a day. 500k in a day or a few would be very stressful.
You do not have time to rebalance once or twice a year, but have time to watch daily fluctuations of your portfolio?

Sounds like you've already made up your mind and are looking for confirmation.

Congrats on the windfall and good luck finding someone to share it with and that will manage it for you.
Why would I waste my time just looking for confirmation? Thanks though.
There is absolutely nothing wrong with paying a Boglehead type advisor a reasonable fee (well under 1% if you can) to provide full service financial advice. That should be very achievable. This is much more than just investment management. Presuming you are a radiologist and value your time at a few hundred bucks an hour, and don't have the interest in learning to manage your own finances, go for it. Interview a few advisors and give it a shot. It sounds like you know enough already to know the good advisors from the bad ones.

User avatar
TomatoTomahto
Posts: 6578
Joined: Mon Apr 11, 2011 1:48 pm

Re: Windfall and advice

Post by TomatoTomahto » Mon Oct 09, 2017 11:14 am

Here’s something different. If your windfalls bring you into “won the game” territory, why not put:

Some large amount into Fixed Income. In our case, it’s $3 - $3.5M, which should be sufficient, on top of SS and pensions, to weather almost any storm.

The remainder goes into equities, a mix of international and US-based indexed funds.

I don’t TLH, TGH, or rebalance, except that I consider which lots to sell if I’m selling, in order to do so as a side effect.

Easy Peasy. I don’t pay any AUM fees. Best of all, I no longer calculate my AA, which is, as the saying goes, Priceless. I don’t need handholding to stay the course. If I did, I probably would overrule the advisor anyway.

ETA: new money goes mostly into equities, but it’s not a religious obligation

User avatar
ruralavalon
Posts: 11282
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Windfall and advice

Post by ruralavalon » Mon Oct 09, 2017 11:20 am

rad doc wrote:
Mon Oct 09, 2017 10:14 am
If i did continue diy, why not keep current allocation? 40% Total, 25% international, 10% small caps, 10% reit, 15% bond
Because you expressed a desire for a larger bond allocation, and something easier to manage needing less attention.
Last edited by ruralavalon on Mon Oct 09, 2017 11:23 am, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

ThriftyPhD
Posts: 116
Joined: Mon Jul 31, 2017 10:43 am

Re: Windfall and advice

Post by ThriftyPhD » Mon Oct 09, 2017 11:23 am

rad doc wrote:
Mon Oct 09, 2017 11:01 am
ThriftyPhD wrote:
Mon Oct 09, 2017 10:38 am
rad doc wrote:
Mon Oct 09, 2017 10:14 am
If i did continue diy, why not keep current allocation? 40% Total, 25% international, 10% small caps, 10% reit, 15% bond
The allocation is completely up to you, based on your comfort level. No need to change, but you've suggested that you feel your bond allocation is low, and then expressed worry about how you would react if the market dropped. Perhaps you're more risk adverse now that you have a larger portfolio, within ~10 years of desired retirement, and coupled with a decreased NEED to take risk, a more conservative asset allocation might be called for. Only you can say.

Also, consider that you'll need to manage your complete portfolio. Now that you have all of this money coming into taxable, the best option may be to put it 100% equities, and move your 401k to mostly/completely bonds to meet your desired stock:bond ratio. At your marginal tax rate, bonds will do a lot better in tax deferred space. A fee only adviser could help you with this, but the rebalancing would probably take less time per year than the drive to the adviser.

As an example, lets say you have $500k total currently, with $50k each roth and $400k in 401k. You get $1.5m windfall, and want 60% US, 20% international, 20% bond.

Taxable:
20% $400k VXUS Vanguard Total International Stock ETF
55% $1.1m VTI Vanguard Total Stock Market ETF

Roth Him:
2.5% $50k VTI Vanguard Total Stock Market ETF

Roth Her:
2.5% $50k VTI Vanguard Total Stock Market ETF

401k:
20% $400k BND Vanguard Total Bond Market ETF

New money will mostly be going into the 401k. By default, you could have it go 100% into bond, have roth contributions go 100% VTI, and at the end of the year sell BND to buy VTI in the 401k if necessary to maintain your asset allocation. It is a quick calculation and shouldn't take you long.
Thank you. Good info. I confess to not being fully educated on tax efficiency especially when it comes to bonds. Probably need to brush up on bonds all together and yes will increase bond allocation from current 4%! Things like this make me wonder how much more I dont know or how many mistakes I would make that could cost me. Do I have potential to make mistakes that would cost me more than advisor fee?
A fee only adviser wouldn't hurt if you're not comfortable doing this. You need to make sure you pick a good adviser, and not someone trying to sell you whole life insurance. As has been said many a time, by the time you know enough to pick a good adviser, you don't really need one. But if it makes you feel better to have someone to speak to, it might be worth it for peace of mind.

At your new investing level, brokerage houses might have services available to do this. For example, at Vanguard with over $1m in assets, you would qualify for Flagship Services which includes access to certified financial planners. I'm not sure if this would be an extra fee, but you would get a more boglehead type of advice than choosing a random adviser or planner out of the phone book. Perhaps someone who has reached this level at Vanguard can comment.

Can you make mistakes? Of course. The adviser can too. Especially if you make a mistake in which adviser you hire ;). The best way to avoid mistakes is to come up with a plan that you can stick to, implement the plan, and stick to it. The big mistakes people make are buying high and selling low, following hot stock tips their coworkers mentioned, etc. If you pick an asset allocation that you're comfortable with, and choose a 'set it and forget it' investment plan with a small number of funds, such as the Three Fund Portfolio, you'll minimize your chance to make mistakes. Come up with a plan that you're comfortable with, post it here, and get some feedback. You could then run it by a fee only adviser and see what they think.

Also, don't feel the need to quickly make a decision. Read through Managing a Windfall and take your time. You don't need to drop $2m into the market in one click. One thing that has already been mentioned is to use $500k to pay off your debts. Even that you don't need to do all at once.

User avatar
ruralavalon
Posts: 11282
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Windfall and advice

Post by ruralavalon » Mon Oct 09, 2017 11:26 am

Your IRAs are with what fund company?

What funds are offered in your 401k? Please give fund names, tickers and expense ratios.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Mon Oct 09, 2017 11:36 am

ruralavalon wrote:
Mon Oct 09, 2017 11:26 am
Your IRAs are with what fund company?

What funds are offered in your 401k? Please give fund names, tickers and expense ratios.
Roth IRA are both Vanguard Total Market. 401k is with Fidelity and taxable is Vanguard.

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Mon Oct 09, 2017 11:43 am

ThriftyPhD wrote:
Mon Oct 09, 2017 11:23 am
rad doc wrote:
Mon Oct 09, 2017 11:01 am
ThriftyPhD wrote:
Mon Oct 09, 2017 10:38 am
rad doc wrote:
Mon Oct 09, 2017 10:14 am
If i did continue diy, why not keep current allocation? 40% Total, 25% international, 10% small caps, 10% reit, 15% bond
The allocation is completely up to you, based on your comfort level. No need to change, but you've suggested that you feel your bond allocation is low, and then expressed worry about how you would react if the market dropped. Perhaps you're more risk adverse now that you have a larger portfolio, within ~10 years of desired retirement, and coupled with a decreased NEED to take risk, a more conservative asset allocation might be called for. Only you can say.

Also, consider that you'll need to manage your complete portfolio. Now that you have all of this money coming into taxable, the best option may be to put it 100% equities, and move your 401k to mostly/completely bonds to meet your desired stock:bond ratio. At your marginal tax rate, bonds will do a lot better in tax deferred space. A fee only adviser could help you with this, but the rebalancing would probably take less time per year than the drive to the adviser.

As an example, lets say you have $500k total currently, with $50k each roth and $400k in 401k. You get $1.5m windfall, and want 60% US, 20% international, 20% bond.

Taxable:
20% $400k VXUS Vanguard Total International Stock ETF
55% $1.1m VTI Vanguard Total Stock Market ETF

Roth Him:
2.5% $50k VTI Vanguard Total Stock Market ETF

Roth Her:
2.5% $50k VTI Vanguard Total Stock Market ETF

401k:
20% $400k BND Vanguard Total Bond Market ETF

New money will mostly be going into the 401k. By default, you could have it go 100% into bond, have roth contributions go 100% VTI, and at the end of the year sell BND to buy VTI in the 401k if necessary to maintain your asset allocation. It is a quick calculation and shouldn't take you long.
Thank you. Good info. I confess to not being fully educated on tax efficiency especially when it comes to bonds. Probably need to brush up on bonds all together and yes will increase bond allocation from current 4%! Things like this make me wonder how much more I dont know or how many mistakes I would make that could cost me. Do I have potential to make mistakes that would cost me more than advisor fee?
A fee only adviser wouldn't hurt if you're not comfortable doing this. You need to make sure you pick a good adviser, and not someone trying to sell you whole life insurance. As has been said many a time, by the time you know enough to pick a good adviser, you don't really need one. But if it makes you feel better to have someone to speak to, it might be worth it for peace of mind.

At your new investing level, brokerage houses might have services available to do this. For example, at Vanguard with over $1m in assets, you would qualify for Flagship Services which includes access to certified financial planners. I'm not sure if this would be an extra fee, but you would get a more boglehead type of advice than choosing a random adviser or planner out of the phone book. Perhaps someone who has reached this level at Vanguard can comment.

Can you make mistakes? Of course. The adviser can too. Especially if you make a mistake in which adviser you hire ;). The best way to avoid mistakes is to come up with a plan that you can stick to, implement the plan, and stick to it. The big mistakes people make are buying high and selling low, following hot stock tips their coworkers mentioned, etc. If you pick an asset allocation that you're comfortable with, and choose a 'set it and forget it' investment plan with a small number of funds, such as the Three Fund Portfolio, you'll minimize your chance to make mistakes. Come up with a plan that you're comfortable with, post it here, and get some feedback. You could then run it by a fee only adviser and see what they think.

Also, don't feel the need to quickly make a decision. Read through Managing a Windfall and take your time. You don't need to drop $2m into the market in one click. One thing that has already been mentioned is to use $500k to pay off your debts. Even that you don't need to do all at once.
Thank you. Yes, no insurance salesmen or hot stock tips here. There are many low cost fixed boglehead advisors that are less than say betterment or vanguard pas. I do need to call vanguard as i couldnt tell if pas is discounted over a million and what the fees are for their cfps.

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Mon Oct 09, 2017 11:47 am

letsgobobby wrote:
Mon Oct 09, 2017 11:05 am
rad doc wrote:
Mon Oct 09, 2017 10:57 am
joeblow wrote:
Mon Oct 09, 2017 10:21 am
rad doc wrote:
Mon Oct 09, 2017 8:37 am

I agree with a lot of the points here. I am just wondering if for my sanity low fee advisors may be worth it. It’s painful to see your portfolio drop 50k in a day. 500k in a day or a few would be very stressful.
You do not have time to rebalance once or twice a year, but have time to watch daily fluctuations of your portfolio?

Sounds like you've already made up your mind and are looking for confirmation.

Congrats on the windfall and good luck finding someone to share it with and that will manage it for you.
Why would I waste my time just looking for confirmation? Thanks though.
There is absolutely nothing wrong with paying a Boglehead type advisor a reasonable fee (well under 1% if you can) to provide full service financial advice. That should be very achievable. This is much more than just investment management. Presuming you are a radiologist and value your time at a few hundred bucks an hour, and don't have the interest in learning to manage your own finances, go for it. Interview a few advisors and give it a shot. It sounds like you know enough already to know the good advisors from the bad ones.
Thank you. Yes well under 1%, more like .1% on the fixed fee guys.

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Mon Oct 09, 2017 2:30 pm

If I do interview a few advisors, what questions would you guys suggest. Obviously have to be low cost, flat fee passive manager. No commission. ?AA, TLH and other tax management. Frequency of consultation? Other fees? Recommend funds? Frequency of rebalancing?

letsgobobby
Posts: 10478
Joined: Fri Sep 18, 2009 1:10 am

Re: Windfall and advice

Post by letsgobobby » Mon Oct 09, 2017 3:47 pm

several radio personalities have a checklist of questions to ask advisors. ric edelman, Clark howard, Dave Ramsey, etc. you can find the checklist on their websites or in their books.

who is proposing fees of 0.1%? I do not think that will be financial advice, only investment management.

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Mon Oct 09, 2017 4:34 pm

letsgobobby wrote:
Mon Oct 09, 2017 3:47 pm
several radio personalities have a checklist of questions to ask advisors. ric edelman, Clark howard, Dave Ramsey, etc. you can find the checklist on their websites or in their books.

who is proposing fees of 0.1%? I do not think that will be financial advice, only investment management.
Thanks. There are several low cost flat fee passive advisors such as evanson asset management and cardiff park. Nobody proposing fee percentages that low but just think of 4-6k annual as percent of portfolio. Yes they are more investment management but really thats what i need. Have a good cpa and asset protection plan and trust, etc.

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Thu Oct 12, 2017 11:16 am

To update, I spoke with Steve Evanson of Evanson Asset. Very nice, smart guy. $625 per quarter. I still will talk to a few other low fee advisors and decide to go alone or pick an advisor. I am sure I could manage it but the low cost provides some peace of mind that in the event something happens to me, there is an established relationship.

User avatar
ruralavalon
Posts: 11282
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Windfall and advice

Post by ruralavalon » Thu Oct 12, 2017 11:35 am

rad doc wrote:
Sun Oct 08, 2017 6:47 pm
Hello all, I would love some advice from anyone who has time. Portfolio is below. However, it will grow significantly do to a 7 figure windfall. I am strongly considering going with a low fixed fee passive advisor such as EAM or Cardiff. Reasons being, job requires significant time and I am afraid I will not be diligent enough with rebalancing. I also have trouble sticking to a desired allocation! See my bond allocation which is now quite low! Also, I would like relationship in the event something happens to me. Am I crazy? I guess I could just use Vanguard PAS? I am 39 and plan to work for another 10-15 years with a mid 6 figure salary. Should also add that I will also receive an additional 7 figure inheritance but hopefully not for some time!
. . . . .
rad doc wrote:
Thu Oct 12, 2017 11:16 am
To update, I spoke with Steve Evanson of Evanson Asset. Very nice, smart guy. $625 per quarter. I still will talk to a few other low fee advisors and decide to go alone or pick an advisor. I am sure I could manage it but the low cost provides some peace of mind that in the event something happens to me, there is an established relationship.
There's nothing wrong with having an advisor with a low expense indexing philosophy to get you started and help you set up a plan, and then beginning to manage the portfolio yourself.

Either way, it's good for you to learn the basics. I suggest that you read one or two books on general investing. Please see the wiki article "books: recommendations and reviews".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

rad doc
Posts: 47
Joined: Mon Dec 19, 2011 11:26 am

Re: Windfall and advice

Post by rad doc » Tue Oct 17, 2017 9:13 am

Thank you.

Would anyone care to weigh in on putting the whole thing in the market now versus spreading it out/DCA? Lots of talk about "full valuation" etc. However, target retirement is quite a bit away for me.

Post Reply