Starting out

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crossroad101
Posts: 15
Joined: Sun May 27, 2018 3:55 pm

Starting out

Post by crossroad101 » Sun May 27, 2018 5:23 pm

Hello Bogleheads,
I discovered Bogleheads after listening to a Freakonomics podcast episode and I am reaching out to ask for help with some basic investing questions. Completely open to any input on this post if I made a mistake or any other general suggestion. Due to personal situation (job changes, relocation, new baby) I have not had the ability to start reading on topics as much as I would have liked. I would like to think myself as a passive investor and I have managed to gain some return (approx 100%) on post-tax investment over past 6-7 years since I started working (Post-tax through Fidelity brokerage as well as simply holding the stocks from current and previous employer stock compensation, namely ESPP/RSU, all of it quite tech heavy but not quite FAANG). With presumably upcoming bear market or simply non-diversified holding, I am strongly considering doing some change to the post-tax stock/RSU/ESPP portion alleviate the risk in my portfolio. Now some details,

Married 34yo, wife stay-at-home and 1 child 9mo.
Years worked 7, I would like to state roughly my avg. gross around 90K for this period.
My current portfolio:
Cash in Checking/Savings: 13k
Fidelity 401k current: 28k (not maxing out due to the fact that I am not US citizen, and things are uncertain in my head to say the least)
Fidelity 401k prev: 51k
Fidelity post-tax: 135k
ESPP/RSU current: 75k
ESPP/RSU prev: 75k
Car payment remaining 10K @ 0% apr

Currently renting as I have done when I was a new grad student in this country as well as ever since I have started working. Not quite sure where or when I should buy a house. Used to live in the Pacific Northwest, now in AZ and wondering why.

Due to aforementioned personal situation, I would like to take somewhat hands-off approach as I want to spend more time with baby or on my potentially new job. I admit I was rather careless about investing as I used to be single and things have quite changed. In a sense, if I have to ask a few questions to solicit your input:

1. Where do I stand? How am I doing? With due respect and gratitude to the opportunity this country and the people have afforded.

2. What should be my long-term goal benchmark for retirement / child/children's education? Also given that I am not sure where I will be 20 years from now. But near term, I am hoping to continue work for as long as they find me useful and not kick me out of job or this country.

3. I have been offered portfolio review as well as a general comment on my non-diversification by this company whose app I am using to track my portfolio, but their rates are around 1% or so which I understand is too high. Their overall observation was my returns are sub-optimal with tremendous risk/volatility and hence I should sign up.

4. Since one of the ESPP/RSU stock plan is with UBS they are offering a service for a flat rate where they say they will waive all the fees for holding the portfolio and for nominal fees they will suggest/advice which index fund or vanguard funds or other funds I can invest and diversify from my current tech heavy portfolio of the post-tax + RSU stated above. They say the only expense will be with the associated funds, but I am not sure how much it will be. I am keen to simply buy a Vanguard fund but it comes with some $80 charge to purchase through UBS. Is someone familiar with such a service? So I would like to know if I need low-cost investing but not have the time to look at it myself should I consider this type of advisory service? What basic question should I ask of this service provided by UBS?

5. At what point does someone consider hiring such advisory services? Is there a comparable service from Vanguard, Fidelity or others I should consider?

Since this is a rather long post, I would appreciate any input or feedback to any of the above.

Sincerely,
crossroad101

mhalley
Posts: 6076
Joined: Tue Nov 20, 2007 6:02 am

Re: Starting out

Post by mhalley » Sun May 27, 2018 7:25 pm

Welcome to the forum. Looks like you are doing ok. I can’t figure exactly how much you are saving, but if above 15% you will do fine.
Are you talking about personal capital? Their aggregator is fine, but fees are way too high to use as an fa. Financial advisors will tell you what a horrible job you are doing with your investments in order to get your business. Bogleheads like to be diy investors, but if you do need some help there are a couple of ways to go.
Vanguard offers a personal advisory service for .3%. Fidelity and schwab offer a robo advisory service, fidelity go and schwab intelligent portfolios.
Another option is a fee only planner, such as garret planning network.
White coat investor has a post in what to look for in a fa.
https://www.whitecoatinvestor.com/the-p ... l-advisor/
Perhaps ubs will allow you to buy ETFs at a much lower fee than funds. You need to get a clear picture on how much the fund fees will be. If they put you in vanguard funds, fine, but if they start talking about loaded funds, or fees in the 1% range run away.

crossroad101
Posts: 15
Joined: Sun May 27, 2018 3:55 pm

Re: Starting out

Post by crossroad101 » Sun May 27, 2018 7:45 pm

Thank you for your reply. I was referring to Personal Capital indeed.

As a general question, I wanted to know when would someone sign up for any of these advisory services? I will definitely check Fidelity Go as I already have my brokerage account with them. Is the 0.3% an industry average for such service? The Fidelity Go appears to be 0.35% as well. So in that sense, is the Vanguard Personal Advisor (0.3%) better than a robo advisory service at about the similar cost?
Perhaps ubs will allow you to buy ETFs at a much lower fee than funds. You need to get a clear picture on how much the fund fees will be. If they put you in vanguard funds, fine, but if they start talking about loaded funds, or fees in the 1% range run away.
I will certainly inquire on this. I do not know what loaded funds are, I will try to find out. This is what info I have received:
1. To initiate a transfer, I simply need a copy of your recent statement and instructions on what you will be transferring.

2. The only fee will be an annual $150.00 advisory fee, which I will waive for 2018. Upon further discussion we can explore additional fee exceptions. There are no additional costs for holding stocks. There may be other costs associated with other investments we discuss which I will disclose to you. Through this relationship you have unlimited access to UBS analyst and stock research, unlimited access to myself and my team of Financial Advisors, and I offer portfolio management, retirement/estate planning, and professional advice and guidance.

3. I will waive all commissions and charges associated with you exiting your current positions into investments that I recommend. There are no additional costs for purchasing investments at UBS versus other institutions. In some rare circumstances UBS charges a $5.25 processing fee to purchase some funds.

a. Vanguard is the only exception to this rule. They charge investors $75.00 to purchase their funds outside of their own brokerage house.

4. Termination costs vary with investments. Any investment that recommend to you will not include any termination costs. If you are transferring to another institution there is normally a transfer fee of $95.00. If for whatever reason to decide that this relationship is no longer a good fit for you, I will help you transfer your funds to your desired institution and waive the transfer fee for you.
I wanted to know if the above sounds reasonable.

Sincerely,
crossroad101

manedark
Posts: 242
Joined: Sun Apr 22, 2018 2:05 pm

Re: Starting out

Post by manedark » Sun May 27, 2018 11:48 pm

crossroad101 wrote:
Sun May 27, 2018 5:23 pm
Hello Bogleheads,
I discovered Bogleheads after listening to a Freakonomics podcast episode and I am reaching out to ask for help with some basic investing questions. Completely open to any input on this post if I made a mistake or any other general suggestion. Due to personal situation (job changes, relocation, new baby) I have not had the ability to start reading on topics as much as I would have liked. I would like to think myself as a passive investor and I have managed to gain some return (approx 100%) on post-tax investment over past 6-7 years since I started working (Post-tax through Fidelity brokerage as well as simply holding the stocks from current and previous employer stock compensation, namely ESPP/RSU, all of it quite tech heavy but not quite FAANG). With presumably upcoming bear market or simply non-diversified holding, I am strongly considering doing some change to the post-tax stock/RSU/ESPP portion alleviate the risk in my portfolio. Now some details,

Married 34yo, wife stay-at-home and 1 child 9mo.
Years worked 7, I would like to state roughly my avg. gross around 90K for this period.
My current portfolio:
Cash in Checking/Savings: 13k
Fidelity 401k current: 28k (not maxing out due to the fact that I am not US citizen, and things are uncertain in my head to say the least)
Fidelity 401k prev: 51k
Fidelity post-tax: 135k
ESPP/RSU current: 75k
ESPP/RSU prev: 75k
Car payment remaining 10K @ 0% apr

Currently renting as I have done when I was a new grad student in this country as well as ever since I have started working. Not quite sure where or when I should buy a house. Used to live in the Pacific Northwest, now in AZ and wondering why.

Due to aforementioned personal situation, I would like to take somewhat hands-off approach as I want to spend more time with baby or on my potentially new job. I admit I was rather careless about investing as I used to be single and things have quite changed. In a sense, if I have to ask a few questions to solicit your input:

1. Where do I stand? How am I doing? With due respect and gratitude to the opportunity this country and the people have afforded.

2. What should be my long-term goal benchmark for retirement / child/children's education? Also given that I am not sure where I will be 20 years from now. But near term, I am hoping to continue work for as long as they find me useful and not kick me out of job or this country.

3. I have been offered portfolio review as well as a general comment on my non-diversification by this company whose app I am using to track my portfolio, but their rates are around 1% or so which I understand is too high. Their overall observation was my returns are sub-optimal with tremendous risk/volatility and hence I should sign up.

4. Since one of the ESPP/RSU stock plan is with UBS they are offering a service for a flat rate where they say they will waive all the fees for holding the portfolio and for nominal fees they will suggest/advice which index fund or vanguard funds or other funds I can invest and diversify from my current tech heavy portfolio of the post-tax + RSU stated above. They say the only expense will be with the associated funds, but I am not sure how much it will be. I am keen to simply buy a Vanguard fund but it comes with some $80 charge to purchase through UBS. Is someone familiar with such a service? So I would like to know if I need low-cost investing but not have the time to look at it myself should I consider this type of advisory service? What basic question should I ask of this service provided by UBS?

5. At what point does someone consider hiring such advisory services? Is there a comparable service from Vanguard, Fidelity or others I should consider?

Since this is a rather long post, I would appreciate any input or feedback to any of the above.

Sincerely,
crossroad101
#1. You have done well mate, at 90K gross to be saving 350K in 7 yrs is commendable.

#2. I would not start to worry immediately about college, but I am not an expert, maybe others can help you more with College Savings Plans etc. One thing, do explore I-bonds, its 20K (10K each in your and wife name) you can invest in them annually and can use them tax free for college education.

#3 Dont pay them 1%. But they are right, you are taking too much risk with the espp, rsu stocks. I was doing the same, got a good gain in last 10 years but I was plain lucky, my 50% saving was in a single stock. And you are in kind of similar situation. I would say consider selling that 150K and put in Vanguard Total Market and International Market - VTSAX and VTIAX. You can even sell them in one go and still be under 250K MFJ limit for NIIT tax., then its just about paying 15% or so LTCG tax and be done with it (assuming your state doesn't tax LTCG).

In any case if you do still need a advisory service I would consider Vanguard PAS, I am not sure if they charge one time fee or continued. But I would rather you do spend some time - maybe a week or so researching and do it yourself. Ask a lot of questions here, no matter how stupid.

Once your Asset Allocation and fund choice is clear, just execute it and dont touch it tok often.

All the best.

PS-About the 401K, you would always have option to roll over that into an IRA and let it keep growing.or continue in same plan. Clarify this with the 401K broker. If you invest 5K or 18K its still your money. You need to be clear what happens if you leave job, or country and mosr important how you will be taxed on it.

student
Posts: 2539
Joined: Fri Apr 03, 2015 6:58 am

Re: Starting out

Post by student » Mon May 28, 2018 6:20 am

You are doing very well. $350,000 at this age. Take a look at this general guideline. It has it flaws but it provides something to start with. https://www.fidelity.com/viewpoints/ret ... -to-retire

Personally, I would not give 1% per year to someone to manage my money. I would not even give 0.3%. To me, there are already somewhat equivalent investment advisors that one can get for free. I usually suggest target-date funds or asset allocation funds such as https://investor.vanguard.com/mutual-fu ... -one-funds
Fidelity also has them but they have both index version and active version. Bogleheads would prefer the index version.

As for housing, I would say do not buy until you are fairly certain that you will stay in the city.

Overall, I think you are doing very well.

Ron Scott
Posts: 983
Joined: Tue Apr 05, 2016 5:38 am

Re: Starting out

Post by Ron Scott » Mon May 28, 2018 7:23 am

You're doing well and, yes, you should reduce risk.

The general guidelines in this forum will serve you well and there is no need to pay a financial advisor, robo-advisor or whatever, for advice on investing you can get here for free. Investing is one of those oddities in life in which its not rocket science but its just as easy to screw it up as it is to get it right. You are in the right place.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. Preparing for financial challenges is more fruitful than trying to predict them.

cherijoh
Posts: 4946
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Starting out

Post by cherijoh » Mon May 28, 2018 8:25 am

crossroad101 wrote:
Sun May 27, 2018 5:23 pm
Married 34yo, wife stay-at-home and 1 child 9mo.
Years worked 7, I would like to state roughly my avg. gross around 90K for this period.
My current portfolio:
Cash in Checking/Savings: 13k
Fidelity 401k current: 28k (not maxing out due to the fact that I am not US citizen, and things are uncertain in my head to say the least)
Fidelity 401k prev: 51k
Fidelity post-tax: 135k
ESPP/RSU current: 75k
ESPP/RSU prev: 75k
Car payment remaining 10K @ 0% apr

Currently renting as I have done when I was a new grad student in this country as well as ever since I have started working. Not quite sure where or when I should buy a house. Used to live in the Pacific Northwest, now in AZ and wondering why.

Due to aforementioned personal situation, I would like to take somewhat hands-off approach as I want to spend more time with baby or on my potentially new job. I admit I was rather careless about investing as I used to be single and things have quite changed. In a sense, if I have to ask a few questions to solicit your input:

1. Where do I stand? How am I doing? With due respect and gratitude to the opportunity this country and the people have afforded.

2. What should be my long-term goal benchmark for retirement / child/children's education? Also given that I am not sure where I will be 20 years from now. But near term, I am hoping to continue work for as long as they find me useful and not kick me out of job or this country.

3. I have been offered portfolio review as well as a general comment on my non-diversification by this company whose app I am using to track my portfolio, but their rates are around 1% or so which I understand is too high. Their overall observation was my returns are sub-optimal with tremendous risk/volatility and hence I should sign up.

4. Since one of the ESPP/RSU stock plan is with UBS they are offering a service for a flat rate where they say they will waive all the fees for holding the portfolio and for nominal fees they will suggest/advice which index fund or vanguard funds or other funds I can invest and diversify from my current tech heavy portfolio of the post-tax + RSU stated above. They say the only expense will be with the associated funds, but I am not sure how much it will be. I am keen to simply buy a Vanguard fund but it comes with some $80 charge to purchase through UBS. Is someone familiar with such a service? So I would like to know if I need low-cost investing but not have the time to look at it myself should I consider this type of advisory service? What basic question should I ask of this service provided by UBS?

5. At what point does someone consider hiring such advisory services? Is there a comparable service from Vanguard, Fidelity or others I should consider?
The first thing you need to realize is that you can get good short- and medium-term results (impressive nest egg) from a bad longer-term strategy (risky and concentrated portfolio).

The advisor you spoke with is absolutely correct that you are far too concentrated in the stocks of your former and current employer and in tech in general. But I don't think you need to pay anyone 1% to manage your portfolio. I'm not sure how long Personal Capital has been around, but I suspect that it wasn't around (or at least not very big) during the last bear market. So IMO it is unproven though an entire market cycle. Vg index funds and the 3-fund lazy portfolio were.

Your post doesn't mention your asset allocation in your two 401k accounts. Are you 100% stock in these accounts as well or do you have an allocation to bonds? What is your overall asset allocation across all your accounts?

Rus In Urbe
Posts: 35
Joined: Sat Dec 09, 2017 2:12 pm

Re: Starting out

Post by Rus In Urbe » Mon May 28, 2018 8:46 am

You are doing just fine with your savings---and your questions. Congratulations!

But---I warn you that you are the perfect mark (ie. targeted victim) for a whole host of hungry Financial Advisors because:
1. You've got some assets to invest
2. You feel insecure about your knowledge of investing
3. You are getting interested in managing your money for the long haul

I would recommend that you never pay a Financial Advisor any ongoing percentage for advice. Not worth it ever. Not in the days of low cost Index Funds. It will pay off better for you just continue on your general path and gradually learn what do to and execute it gradually, than to sign up with an advisor who will scrape off a lot of your profits off for years to come.

The old adage holds true: No one cares for your money the way you do.

The fastest and cheapest way to learn is by reading books (See Bill Gates, Warren Buffett, etc.) One of my favorite reads is: Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School, by Andrew Hallam. It's well written and an excellent introduction to thinking about your investments for the long haul. Because he's a teacher, he had a low salary and likes to share information. The most hilarious chapter is one in which he tells you exactly what arguments a Financial Advisor will put forward to talk you into signing up for advice, and what answers you should give them (citing all the data). This chapter should be read by everyone---it is just marvelous.

You'll be fine if you stay out of the hands of rapacious Financial Advisors. I should know----my uncle, rest his soul, managed other people's money---he was an honest broker and I know he did his best for his clients. He taught me a lot about money back in the day (70s, 80s), but times have changed and investing is so much different now. He lived in Greenwich, CT. From his example, I also learned that I don't want to be paying for someone else's multi-million dollar estate.

Good luck to you!
Last edited by Rus In Urbe on Wed Jun 06, 2018 8:29 am, edited 1 time in total.

crossroad101
Posts: 15
Joined: Sun May 27, 2018 3:55 pm

Re: Starting out

Post by crossroad101 » Mon May 28, 2018 12:56 pm

Dear All Bogleheads,
I am very much encouraged by your insightful comments and generous feedback. I am grateful for your advice and sparing the time for sharing your knowledge. I will certainly try and go through all the resources mentioned in the comments. I appreciate all the input I am receiving from everyone.
  1. Regarding the savings benchmark, the part that I am not sure is if it takes into account that it is post-tax, I am not single and having 2 dependents to support. I always thought the benchmark apply to 401k only..I just wonder if it changes the savings benchmark since it is neither 401k or IRA even. However I will take it positively based on all the comments received.[\n]
  2. It is clear to me that any kind of % based service is not good in the long run, however I am leaning towards the lower-cost ones such as Vanguard PAS 0.3% or similar ones simply due to my personal situation at least in the short term. I will talk to my UBS advisor this week and with the below info I have been given so far. I would appreciate knowing if this sounds reasonable :
    1. To initiate a transfer, I simply need a copy of your recent statement and instructions on what you will be transferring.

    2. The only fee will be an annual $150.00 advisory fee, which I will waive for 2018. Upon further discussion we can explore additional fee exceptions. There are no additional costs for holding stocks. There may be other costs associated with other investments we discuss which I will disclose to you. Through this relationship you have unlimited access to UBS analyst and stock research, unlimited access to myself and my team of Financial Advisors, and I offer portfolio management, retirement/estate planning, and professional advice and guidance.

    3. I will waive all commissions and charges associated with you exiting your current positions into investments that I recommend. There are no additional costs for purchasing investments at UBS versus other institutions. In some rare circumstances UBS charges a $5.25 processing fee to purchase some funds.

    a. Vanguard is the only exception to this rule. They charge investors $75.00 to purchase their funds outside of their own brokerage house.

    4. Termination costs vary with investments. Any investment that recommend to you will not include any termination costs. If you are transferring to another institution there is normally a transfer fee of $95.00. If for whatever reason to decide that this relationship is no longer a good fit for you, I will help you transfer your funds to your desired institution and waive the transfer fee for you.
  3. As far as my current portfolio I post the allocation below with the 401k break up. I welcome any insight or comment regarding the same, It will help me also when talking to the potential advisory service I hope.
    Your post doesn't mention your asset allocation in your two 401k accounts. Are you 100% stock in these accounts as well or do you have an allocation to bonds? What is your overall asset allocation across all your accounts?
    My current portfolio:
    Cash in Checking/Savings: 13k
    Fidelity 401k current: 28k
    Fidelity 401k prev: 51k
    Fidelity post-tax: 135k (96% US Stock. 4% Intl.)
    ESPP/RSU current: 75k (US Stock)
    ESPP/RSU prev: 75k (US Stock)

    401k Previous Employer (I realized only just now that although I left about 2 years back, it appears I am having only 43k vested. I did not see this until now :( )
    Balance $51,284.17
    Vested balance $43,585.74
    --------------------------------------------
    Asset Classes
    Domestic Stock 43.40%
    Foreign Stock 25.56%
    Other 21.39%
    Short Term 5.78%
    Bonds 3.87%

    Holdings
    TARGET DATE 2045 100.00%

    Sources
    PRE TAX DEFERRED 62.47%
    RETIREMENT CONTRIBUTION 37.53%

    401k Current Employer
    Balance $28,961.02
    Vested balance $25,265.21
    --------------------------------------------
    Asset Classes
    Domestic Stock 60.98%
    Foreign Stock 26.40%
    Bonds 10.13%
    Short Term 1.78%
    Other 0.72%

    Holdings
    FID FDM IDX 2050 IPR 100.00%

    Sources
    EMPLOYEE DEFERRAL 78.73%
    POST 1/1/94 ER MATCH 21.27%
I apologize for the really long post, I would appreciate any input regarding the UBS service as well as my allocation above.

Thanking you in advance,

Sincerely,
crossroad101

manedark
Posts: 242
Joined: Sun Apr 22, 2018 2:05 pm

Re: Starting out

Post by manedark » Mon May 28, 2018 6:39 pm

Just make sure you are aware of all the ERs i.e. Expense Ratio of each fund that UBS recommends to you.

Do remember that benchmark for a total stock market index fund like VTSAX is 0.04. And also in the long run small differences in ER can play a big role.

crossroad101
Posts: 15
Joined: Sun May 27, 2018 3:55 pm

Re: Starting out

Post by crossroad101 » Wed Jun 06, 2018 12:14 am

Dear All
Thank you for your replies and inputs again. After talking to UBS, I realized their service costs 0.8% (quite high) and hence I am trying to talk to Schwab or Vanguard regarding their advisory services based on your earlier suggestion.

My immediate goal is to liquidate/consolidate my taxable portfolio ($135k+75k+75k), LTCG close to 50% of the portfolio value. I am trying to read other forum posts on the LTCG tax impact for a MFJ status with W4 income around 100k. Regardless of the actual tax(~30K), is this usually the recommended approach(ie. completely liquidate and re-start) before I can start to diversify? Any thoughts on what I should potentially be talking to the advisor from Schwab or Vanguard in this regard?

I welcome your input on this or any other general comment.

Sincerely,
crossroad101

Rus In Urbe
Posts: 35
Joined: Sat Dec 09, 2017 2:12 pm

Re: Starting out

Post by Rus In Urbe » Wed Jun 06, 2018 7:33 am

You are asking the right questions---and from people who have been there and who are helpful.

While you are educating yourself about investing though, at your level (just starting out), you should spend the bulk of your time maximizing income and chunking as much as you can into your investments. That should be your top priority. Worrying overmuch about investments, over time, can lead to moving things around and leaking money through fees and such.

Set it and forget it is good advice.

crossroad101
Posts: 15
Joined: Sun May 27, 2018 3:55 pm

Re: Starting out

Post by crossroad101 » Wed Jun 06, 2018 8:31 am

Thank you for the reply. I am intending to follow the advise you mentioned and also suggested earlier -- I hope to find the right index fund allocation for my taxable portfolio by talking to one of the advisors and hopefully not have to mess around too much with the same. However, my immediate question is that I have to sell my taxable portfolio with a fair amount of long term capital gain to re-allocate the same. I was wondering if this is usually the simplest or recommended approach.

I appreciate your input if any to the above also.

Sincerely,
crossroad101

megabad
Posts: 613
Joined: Fri Jun 01, 2018 4:00 pm

Re: Starting out

Post by megabad » Wed Jun 06, 2018 1:47 pm

crossroad101 wrote:
Wed Jun 06, 2018 8:31 am
Thank you for the reply. I am intending to follow the advise you mentioned and also suggested earlier -- I hope to find the right index fund allocation for my taxable portfolio by talking to one of the advisors and hopefully not have to mess around too much with the same. However, my immediate question is that I have to sell my taxable portfolio with a fair amount of long term capital gain to re-allocate the same. I was wondering if this is usually the simplest or recommended approach.

I appreciate your input if any to the above also.

Sincerely,
crossroad101
Well I am unclear as to what your holdings or plans are from reading the above, but I would urge simplicity. It sounds like you are on the right track: Assuming they are vested, I would sell the ESPP and RSU holdings and move this money to your Fidelity taxable account. I would start investing these newly transferred funds in something like Fidelity Total Stock Market Index - Premium. One fund means you shouldn't need to pay any advisor. You may have capital gains on these amounts, but you are close to the 0% capital gains tax bracket. If possible, I would attempt to reduce your AGI as much as possible (using 401k, IRAs, etc) and then sell the RSUs/ESPP investments up to the top of the 0% bracket, potentially spreading the sale out over a few years. If not possible, 15% capital gains tax is a relative small hit in my opinion for the risk reduction and your gains typically do not go down with time. I don't know what your other holdings are at Fidelity but the same logic applies if you are not happy with them. If they are already in low cost Fidelity funds or ETFs, I don't see any reason why you have to sell them off.

ExitStageLeft
Posts: 923
Joined: Sat Jan 20, 2018 4:02 pm

Re: Starting out

Post by ExitStageLeft » Wed Jun 06, 2018 4:39 pm

If you haven't made any IRA contributions for you or spouse this year, you should consider moving $11K from taxable into either tradional or Roth IRAs. Contributing to a tradional IRA would lower your adjusted gross income by up to $11K. If you are unsure about long-term residency in the US then you could put $11K from your taxable into Roth IRAs. In either case you should maximize your tax-advantaged space by moving funds from taxable into some form of IRA.

crossroad101
Posts: 15
Joined: Sun May 27, 2018 3:55 pm

Re: Starting out

Post by crossroad101 » Thu Jun 07, 2018 1:08 am

thank you again for your replies. I will consider the options for Roth IRA or increasing my 401k also.

As it stands, over 75% of my total portfolio is after tax holding, that include the RSU/ESPP portion @ 150K and Individual stocks @ 135K. Roughly 50% of this is capital gain, mostly long term. It is this portion I would like to diversify asap. (my apologies if I have repeated myself on this point).

And based on the generous response received here and other threads I am reading, I am convinced that the LTCG tax portion (15%) is likely negligible considering the risk involved.
You may have capital gains on these amounts, but you are close to the 0% capital gains tax bracket. If possible, I would attempt to reduce your AGI as much as possible (using 401k, IRAs, etc) and then sell the RSUs/ESPP investments up to the top of the 0% bracket, potentially spreading the sale out over a few years. If not possible, 15% capital gains tax is a relative small hit in my opinion for the risk reduction and your gains typically do not go down with time.
I would appreciate if you could explain what is meant by the above reference to:
You may have capital gains on these amounts, but you are close to the 0% capital gains tax bracket.

Additionally, in the interest of simplicity if I am 100% invested in a fund like " Fidelity Total Stock Market Index - Premium." @ 250k, is this considered diversified enough, knowing I am limited to having an after-tax only allocation?

I hope this is a valid question. Feel free to correct me if not.

Best regards,
crossroad101

ExitStageLeft
Posts: 923
Joined: Sat Jan 20, 2018 4:02 pm

Re: Starting out

Post by ExitStageLeft » Thu Jun 07, 2018 12:00 pm

Of course it's a valid question. You can probably find overly detailed information on the IRS web site, but in a nutshell long term capital gains are taxed seperately from your taxable income. The tax rate applied to your LTCG is determined by your total annual income (taxable income such as wages or self-employment plus LTCG).

https://en.wikipedia.org/wiki/Capital_g ... urrent_law

Your taxable income from wages is likely under the $77,200 threshold for a MFJ couple. You can sell assets and take LTCG up to that threshold and pay no taxes on the gains. Once you get above that threshold, all your capital gains will be taxed at 15%. That's my take on it, but I don't have a taxable account so no firsthand experience dealing with CG. There are some online calculators that may be helpful in deciding how much of your taxable assets you want to cash in for a given year.

Edit to add: The taxable income above refers to the level of income used to determine your tax. It is calculated by taking your gross income and subtracting out deductible retirement contributions and other tax-deferred benefits to get your reported income. From there you would subtract your standard or itemized deduction, yielding your taxable income. If you make $100k and have no contributions or deductions at work then your reported income is $100k. Subtracting a standard deduction for married filing jointly (MFJ) and your taxable income is $76k.

Assuming your situation is close to this, then you have some options on how to sell your appreciated stocks. You can reduce your reported income by contributing to your 401k. You can then sell an equivalent amount of stock, or whatever amount keeps your total income under $77,200. In that case you would pay no taxes on the stocks sold, because you would be in the 0% bracket for long term capital gains. And you would be lowering your earned income by the same amount, thus reducing your taxes owed.

crossroad101
Posts: 15
Joined: Sun May 27, 2018 3:55 pm

Re: Starting out

Post by crossroad101 » Mon Jun 11, 2018 10:56 am

Hello again,
Thank you for the valuable feedback. I have a correction to make as I was looking at my last few year tax returns, my taxable income after std. deduction and exemptions appear to be around $93k MFJ. Based on all the feedback in this thread I will just take the 15% LTCG tax hit and move on. Additionally, I am inclined to open the Roth IRA at Vanguard with 11k contribution for the year.

To start with I am also most likely to start moving some or most of my taxable to Vanguard PAS after doing a bit on reading on BH as well as talking to them last week. I have also spoken to Schwab local office and they recommended their robo advisor. Here is my summary discussion (although this may be repeated in multiple threads). I am happy to share details of my discussion if anyone likes to know.

1. Schwab robo advisory (Schwab intelligent portfolios) -- 0.2% cost. Tax-loss harvesting included. Automated
2. Vanguard PAS -- 0.3% + "Fund cost/expense" -- Overall not greater than 0.4% or so. It was not totally clear to me how this total cost works out. No tax-loss harvesting. I do not think it matters at my level.

Regarding #2 above I have seen here on various threads regarding the 0.3% for Vanguard PAS. However is it implicit or assumed there will be additional cost for the funds on top of the 0.3%? Anyhow to me it seems to be the best bet for having someone to talk / discuss with as well as set it and forget it given some of my constraints.

I have have also seen good reviews of Schwab on the threads so I am wondering if it is reasonable to split the investment between the 1 and 2 ? If any thoughts on this I would be happy to hear.

Thank you all for your inputs.

Sincerely,
crossroad101

ExitStageLeft
Posts: 923
Joined: Sat Jan 20, 2018 4:02 pm

Re: Starting out

Post by ExitStageLeft » Mon Jun 11, 2018 12:31 pm

You have it correct, the 0.3% for for PAS services is on top of whatever the expenses are for the funds you invest in. If you were to put in all in VTSAX, which as an expense ratio of 0.04%, then your overall expenses would be 0.34%.

crossroad101
Posts: 15
Joined: Sun May 27, 2018 3:55 pm

Re: Starting out

Post by crossroad101 » Wed Jun 13, 2018 10:44 am

Thank you again for the clarification. I hope to share what I hear back from Vanguard PAS if someone finds it useful.

Sincerely.
crossroad101

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