How do I switch from Ameriprise to an index fund approach

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RayBolger
Posts: 6
Joined: Tue Dec 19, 2017 5:26 pm

How do I switch from Ameriprise to an index fund approach

Post by RayBolger » Mon Jan 08, 2018 8:25 pm

Hi Everyone, I'm new here and looking for advice. My wife and I have invested via Ameriprise for 12 years. Trusted too much and have a couple of disappointments via a REIT and an annuity. Looking to move forward by simplifying what we can. We are 52 and are hoping to retire at 59. That isn't very long but we will not need to touch some moneys for a long time I hope. Here is what we have and what we would like to do.

New Member Working to leave Ameriprise and become a Bogle Head!

Emergency funds: Full
Debt: None
Tax Filing Status: Married Filing Jointly No Dependents
Tax Rate: 28% Federal, 7% State
State of Residence: MN
Age:52
Desired Asset allocation: 60% stocks / 40% bonds?
Desired International allocation: 10% of stocks?

28.5% large caps, 7.7% mid caps, 3% sm caps, bonds 17?, 18% cash, Fixed Income 12.7%
Non Core Fixed 6.7% real estate 6%.). Had a hard time breaking this out because I know there are bond funds in the fixed income and Non Core Fixed. Not a financial planner that is why I’m interested in Index funds.

Size of current total portfolio: High 6 figure portfolio at Ameriprise (listed above)
Mid 6 figures 401K for myself break out below (not at Ameriprise)
My wife also has a mid 5 figure 401K (not at Ameriprise, info listed below)

Current retirement assets: The numbers below are calculated by taking the grand total of all assets and dividing each individual asset catagory below by the grand total.

Ameriprise taxable account 37.85 %
Ameriprise non taxable 23.23 %
His 401k 33.39 %
Her 401K 5.49
His Roth IRA .018 %
Her Roth IRA .018 %


His 401k
Alger Capital Apprec Instl 30.48 of total Net Expense 1.12%
JP Morgan High Yield R6 19.43% of total Net Expense .6%
IVY International Core Equity 15.21% of total Net Expense .82%
Invesco Diversified Dividend R 9.89% of total Net Expense .42%
Pioneer Bond K 9.62% of total Net Expense .47%
Victory Trivalent IntL SM-CP 5.14% of total Net Expense .96%
Vangaurd 500 Index Adml 5.12% of total Net Expense .04%
Oppenheimer Developing Mkts I 5.11% of total Net Expense .88%

Other funds available in his 401(k)
Vangaurd Growth Index ADM 0% Net Expense .06%
J Henderson Triton N 0% Net Expense .68%
Vangaurd Smal-Cap Val Idx Inv 0% Net Expense .19%
Morley Stable Value 25-1 183 0% Net Expense -55%
Company match? None

His Roth IRA
SHSAX BLACKROCK HEALTH SCIENCES OPPTYS INVESTOR CL A
Her Roth IRA
SHSAX BLACKROCK HEALTH SCIENCES OPPTYS INVESTOR CL A

New annual Contributions
$3000 his 401k No Match
$24,000 her 401K 3% Employer Match
$6,500 his Roth IRA
$6,500 her Roth IRA

Her 401K Middle 5 figure total

7.2 of 401k /Federated Equity Income R / Expense Ratio 1.55%
7.86 of 401k/ Federated Global Allocation R/ Expense Ratio 1.77%
8.33 of 401k /Federated International Leaders R /Expense Ratio 1.84%
5.93 of 401k / Federated Kaufmann Small Cap R/ Expense Ratio1.73
30.05 of 401kFederated Max-Cap Index R /Expense Ratio 1.18
15.01 of 401kFederated Total Return Bond R /Expense Ratio 1.16
6.73 of 401k Federated U.S. Government Securities 2-5 Yr R/ Expense Ratio 1.31
5.39 of 401k/Franklin Small Cap Value R /Expense Ratio 1.38
8.32 of 401K/ Mfs Lifetime Income R2 /Expense Ratio 1.3
5.15% of 01K/ Mfs Mid Cap Value R2 /Expense Ratio 1.41
Other funds available in her 401K...
Mfs Lifetime 2020 R2 /Expense Ratio 1.33
Mfs Lifetime 2030 R2/ Expense Ratio 1.36
Mfs Lifetime 2040 R2 /Expense Ratio 1.41
Mfs Lifetime 2050 R2 /Expense Ratio 1.56
Federated MDT Large Cap Value R /Expense Ratio 1.60
Federated Kaufmann Large Cap R/ Expense Ratio 1.62
Federated Kaufmann R /Expense Ratio 2.28
Federated Government Obligations Inst Svc / Expense Ratio .45%

Questions:
1. I want to move as much as I can without taxes or surrender fees to an Index Fund. What is the best way to get started?

2. Do I simply pick an index fund and transfer what is movable into it?
Note: Between my suggested investments at Ameriprise I’m confused on how to handle, our REIT, our annuity that is only 3.5 years into a 10 year lock. I’m pretty sure our stocks will be easy to transfer to a like investment but I guess I’m not totally sure of that either.

Key Points

* Please make sure that percentages add up to 100% across all of your accounts.
Did my best on this one.

* If you have an account in a retirement plan with your employer, be sure to enter the expense ratios for the funds as they are in your company's specific plan; often the fund expense ratios in 401k
I will have to check on this. I’m sure they are higher than vanguard has to offer.

Thanks,
Ray
Last edited by RayBolger on Fri Jan 12, 2018 1:36 pm, edited 6 times in total.

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Duckie
Posts: 5880
Joined: Thu Mar 08, 2007 2:55 pm

Re: How do I switch from Ameriprise to an index fund approach

Post by Duckie » Mon Jan 08, 2018 9:26 pm

RayBolger wrote:Age:52
Desired Asset allocation: 60% stocks / 40% bonds?
Reasonable for your age.
Desired International allocation: 10% of stocks?
Vanguard has found between 20% and 40% of stocks in international to be the "sweet spot". See the Vanguard paper link and the discussion. I usually split the difference and recommend 30% of stocks. Your 10% is low.
Funds available in his 401(k)
Not sure what this is. I thought 401K’s were untouchable until 59.5
This is asking for the 401k options. Not just what you have but what you could have. List the fund names, ticker symbols, and plan expense ratios. Do this for your wife's 401k, too.
I want to move as much as I can without taxes or surrender fees to an Index Fund. What is the best way to get started?
Open two Roth IRAs at Vanguard. Sell SHSAX in your current Roth IRAs and have Vanguard pull the money into the new Roth IRAs. This is a trustee-to-trustee transfer and there will be no taxes. Your current custodians may charge an account closing fee of around $100. It's worth it to move.

Open a taxable brokerage account at Vanguard. Move the 15% cash to the brokerage settlement account. The best options in a taxable account are a total US stock fund and a total international stock fund. But we need to work around your 401k accounts and the Ameriprise account first.

As for the six figure portfolio at Ameriprise, I assume that is a taxable account. Exactly what stocks, bonds, mutual funds, and/or ETFs are in that account? When you list them also list the unrealized gain/loss for each asset, so we'll have an idea of the tax-hit if sold.
Please make sure that percentages add up to 100% across all of your accounts.
Did my best on this one.
You have:
  • Ameriprise taxable account -- %
    Other taxable (15%?) -- %
    His 401k (95.41%?) -- %
    His Roth IRA -- %
    Her Roth IRA -- %
The total of these five accounts should be 100%. But then you mention a REIT and an annuity so I'm confused.
If you have an account in a retirement plan with your employer, be sure to enter the expense ratios for the funds as they are in your company's specific plan; often the fund expense ratios in 401k
I will have to check on this. I’m sure they are higher than vanguard has to offer.
They probably are, but we still need the numbers because you both still need to contribute. And although we could look up many of the fund options, plan rates are often not the same as retail rates, so we need your costs.

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dwickenh
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Location: Illinois

Re: How do I switch from Ameriprise to an index fund approach

Post by dwickenh » Mon Jan 08, 2018 10:37 pm

RayBolger,

Duckie has asked all the right questions and you will get some great guidance once you fill in the blanks. You are on the right track to get to a low cost provider like Vanguard. Take your time, get all the information, and then move purposely slow to make sure there are no mistakes.

Congrats on your great savings to this point.

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

RayBolger
Posts: 6
Joined: Tue Dec 19, 2017 5:26 pm

Re: How do I switch from Ameriprise to an index fund approach

Post by RayBolger » Tue Jan 09, 2018 9:15 am

Thank you Duckie, I will do more homework and post an update. Thank you for your time!

Thanks to you as well Dan.

More to come,

Ray

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Duckie
Posts: 5880
Joined: Thu Mar 08, 2007 2:55 pm

Re: How do I switch from Ameriprise to an index fund approach

Post by Duckie » Fri Jan 12, 2018 5:19 pm

RayBolger wrote:I filled in some blanks.
<snip>
As far as your question about the REIT and the Annuity here is what I can tell you. My wife changed jobs and the money from her 401K went into two accounts a REIT and an IRA account. The annuity was purchased in the amount of 100,000 when we sold our cabin. At the time I was worried about the market and my Financial Planner offered the annuity as a guaranteed annual amount of 6% until they take their cut. The annuity started in Sept. 2014.
<snip>
Ameriprise taxable account 37.85%
Ameriprise non taxable 23.20%
His 401k 33.39%
Her 401K 5.49%
His Roth IRA .018%
Her Roth IRA .018%
What is the non-taxable account? Is that her REIT and IRA? Can they be moved from Ameriprise? Can they be liquidated? Which is the annuity? (I know practically nothing about annuities.)
As far as figuring out the tax implications of pulling out stocks. I looked and looked and cannot find the price I bought at so I will not be able to figure out tax exposure. I will have to rely on my Financial Planner for that.
How long have you owned this taxable account at Ameriprise? Do you have the annual statements? Can you access any of that information online? Somewhere it should show the unrealized gains for each asset.
His 401k
The best options are:
  • Vanguard 500 Index 0.04% -- Large caps
  • Vanguard Small-Cap Value Index 0.19% -- Small cap value
  • IVY International Core Equity 0.82% -- International developed markets
  • Pioneer Bond 0.47% -- US bonds
Her 401K
Yikes, those are bad! The lease worst options are:
  • Federated Max-Cap Index 1.18% -- Large caps
  • Federated Total Return Bond 1.16% -- US bonds
  • Federated Government Obligations 0.45% -- Money market
I would use just Max-Cap Index here.
New annual Contributions
$3000 his 401k No Match
$24,000 her 401K 3% Employer Match
$6,500 his Roth IRA
$6,500 her Roth IRA
Given the expense ratios in his 401k versus her 401k, I would max his before maxing hers.

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