84 - Need to adjust portfolio

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cautious
Posts: 19
Joined: Fri Feb 10, 2017 1:56 pm

84 - Need to adjust portfolio

Post by cautious » Tue May 15, 2018 12:58 pm

I’m 84 with a totally taxable portfolio. Due to catastrophic loss of health and income, I did not have an IRS liability until a few years ago. Sale of my home allowed me to buy into a retirement community and begin investing the small surplus.

My goal was to increase my assets. Although I cannot be evicted from my CCRC community for lack of funds (IRS Ruling 72-124), I would like to pay for private care in-house if necessary. Currently I am in the independent living part of the facility, but with a life expectancy of eight years (IRS) and increased costs for supported living @ $10,000 mo, I could end up being a charity case. (The care would still be good - it’s a matter of pride and control over quality.)

I consolidated all funds into Vanguard which have done well with a 64B/36Eq mix. I have also been investing about $1500 a month in my AA. But I'm doing so well I’m edging out of the 15% bracket. The main culprit is Wellington Fund. Although I like the combination of Wellesley and Wellington for the mix of bonds and equity, it’s time to find a way to reduce taxes from my investments.

All assets are now with Vanguard except for an annuity with TIAA.

39.% Total Bond Market Index Fund Admiral (VBTLX)
24.3 Wellesley Income Fund Admiral (VWIAX)
22.0 Wellington Fund Admiral (VWENX)
10.5 Total International Stock Index Fund (VTIAX)
2.5 High Dividend Yield ETF (VYM)

IRA
1.7% Wellesley Income Fund (VWIAX)

I would like advice on where I can get good returns with less tax consequences. I have started investing in an ETF (VYM) that I believe to be more tax efficient. But I’m not sure how to proceed or what the tax consequences would be of moving Wellington into ETFs - or whether there's another approach. I’m also aware that ETF’s cannot be transferred back to mutual funds.

Thank you.

bloom2708
Posts: 4768
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: 84 - Need to adjust portfolio

Post by bloom2708 » Tue May 15, 2018 1:05 pm

50/50 seems reasonable or you seem to be ok with 60/40.

Total US
Total International (you have that already)
Int-Term Tax-Exempt bond index

Taxable bond interest is 100% ordinary income, taxed at your highest marginal rate. That is pushing your tax bracket up.

You could also do a mix of Limited-Term and Intermediate-Term Tax-Exempt indexes.

What are your gains/losses (short and long term?). You may be better off just sliding into the higher tax bracket as compared to creating a big taxable event on re-structuring.
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ralph124cf
Posts: 1999
Joined: Tue Apr 01, 2014 11:41 am

Re: 84 - Need to adjust portfolio

Post by ralph124cf » Tue May 15, 2018 5:22 pm

I haven't checked the 2018 tax law, but up to last year the nursing home counted as a deductible medical expense if it exceeded 7.5% of your income. This would probably wipe out any tax liability.

Ralph

Gill
Posts: 4620
Joined: Sun Mar 04, 2007 8:38 pm
Location: Florida

Re: 84 - Need to adjust portfolio

Post by Gill » Tue May 15, 2018 5:26 pm

ralph124cf wrote:
Tue May 15, 2018 5:22 pm
I haven't checked the 2018 tax law, but up to last year the nursing home counted as a deductible medical expense if it exceeded 7.5% of your income. This would probably wipe out any tax liability.

Ralph
OP says he is in independent living which does not qualify as a medical expense.
Gill

cautious
Posts: 19
Joined: Fri Feb 10, 2017 1:56 pm

Re: 84 - Need to adjust portfolio

Post by cautious » Wed May 16, 2018 11:49 am

Thank you Ralph, Gill and Bloom 2708.

Bloom, I think I may opt to slip in to the higher bracket or increase my donations.

Gill, We do have a sizable medical deduction ($3000+) because of the health clinic and access to nurses 24/7 even for those of us in Independent Living. I'll have to check on what those in Supported Living or Memory Care get to deduct. It's probably a higher amount.

Thanks again.

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