How to Begin with 1M

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TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

How to Begin with 1M

Post by TylerLearning » Sun Aug 19, 2018 3:00 pm

Hello, I tried to post a group thank you this morning when I was on the run and saw everyone's replies: "It is very moving to be alone with a problem and see these thoughtful, knowledgeable, and kind responses. Let me take a day or two to really digest these suggestions--I know I'll have more questions." I don't see that this message appears anywhere, so sorry.

Honestly, I don't see instructions for how to reply. What am I missing? Should I reply to each person here in one message? Or... how to respond to each person? Always with the quote?

Wish I could say these are the dumbest questions I've ever asked, but nay...

_______________________________________________

Hello, I’ve been reading here extensively for several months. Of course touched and impressed by everyone.

I recently inherited 1M (final distribution about an hour ago). 62 (longevity in my family). Nearly retired (means working freelance less). No family except son, 23 (lives abroad). No debt, car, cellphone, or TV. Paid off my house. Savings: high. Live in California.

I need to move forward from an essentially cash-and-savings life. In a chaotic period of grief for my parent, a family friend set me up with a “financial advisor.” Since last year, my $700,000 has earned just under $9000 and, AUM-ing me at .75%, I’ve paid him nearly the same. I so much want to extricate myself from him, but… how? It sounds tricky. And what to do next? I can barely make heads or tails of my statement (Schwab).

I’ve gotten increasingly concerned about making my own decisions, reading here about loads, exit and hidden fees, bonuses, tax implications, ERs, ladders, AAs, target dates and endless considerations that I won’t know to consider.

In my life I've handled complex financial situations (two low- and no-overhead businesses; changing countries) but know nothing about caring for this new sum or what's next: investing—but also trust, will, taxes, life and death insurance, and so on. Other information:

What I have

1. In the high 200,000s/low 300,000s: Chase account, earning pennies (hiding from advisor)
2. $1800: Bank of America checking for bills, with credit card, earning pennies.
3. The Schwab-advisor account (see above).
4. I qualify for Medi-Cal health insurance, and free tax preparation.
Now I’m living from freelance earnings + savings—about $25,00/year

*

What I expect

No retirement accounts or pensions.
Freelance income as long as I’m able: $6-10,000
Will qualify for Medicare.
About $1060 at 66-1/2 from Social Security.

*

Hopes, wild and other

1. To live off interest and dividends from investment.
2. To be a little freer with money than I’ve been for a long time.
3. To have an occasional housecleaner and a monthly gardener.
4. To repair and upgrade the house: $20-30,000?
5. To be able to do something(s) a bit big: take a trip where I’m not squirreling leftovers in the hotel mini-fridge? Buy a good painting? Buy a little room (pied à terre) in another country?
6. To leave my principal (most?) and house to my son.

*

Note 1. If I lose the money, there’s no more where that came from.

Note 2. I saw how the “home care” people sucked six figures from my parent (98 years old) in the last year or less—> don’t-want-to-be-a-burden-to-my-son.

*

Thank you in advance to anyone with advice about how to maximize what I have. A three-fund portfolio? Vanguard advisor? Schwab advisor?No advisor? CDs? FIDC everything? Hourly financial planner? All new and daunting to me.

Best,
Last edited by TylerLearning on Mon Aug 20, 2018 8:06 pm, edited 1 time in total.

RickBoglehead
Posts: 635
Joined: Wed Feb 14, 2018 9:10 am

Re: How to Begin with 1M

Post by RickBoglehead » Sun Aug 19, 2018 3:27 pm

It's sad that you're hiding money from your advisor in a low interest account. I've read many posts like yours where people say "how do I fire my advisor"?

Send an email:

Dear Fred:

Your services are no longer needed. Please get Schwab to remove your trading authority from my account today.

Thanks,

Wiser than I was a year ago

HEDGEFUNDIE
Posts: 607
Joined: Sun Oct 22, 2017 2:06 pm

Re: How to Begin with 1M

Post by HEDGEFUNDIE » Sun Aug 19, 2018 3:34 pm

Welcome to the board. As I see it, there are two options you could take:

1. Invest your $1M in the markets with a low-fee advisor (perhaps Vanguard Personal Advisory Service), at a conservative asset allocation (maybe 50/50 stocks/bonds) and get an average annual return of 4-5% (pre-tax). Others here can help you calculate what your risk is of running out of money in this scenario.

2. Buy a Single Premium Immediate Annuity with your $1M and collect $60k/yr for life, completely forget about the markets, and go enjoy life. You said longevity runs in your family so this option should be appealing.

One big asset you left out: how much is your house worth?

MrJones
Posts: 203
Joined: Sat Mar 18, 2017 2:23 am

Re: How to Begin with 1M

Post by MrJones » Sun Aug 19, 2018 5:00 pm

SPIA doesn't work with:
6. To leave my principal (most?) and house to my son.

MotoTrojan
Posts: 2093
Joined: Wed Feb 01, 2017 8:39 pm

Re: How to Begin with 1M

Post by MotoTrojan » Sun Aug 19, 2018 5:05 pm

Curious what the advisor had you invested in yielding less than most savings accounts over the last year.

MrJones
Posts: 203
Joined: Sat Mar 18, 2017 2:23 am

Re: How to Begin with 1M

Post by MrJones » Sun Aug 19, 2018 5:15 pm

Welcome to the forum. You're in great shape overall, once you fire that advisor and simplify. Here's my recommendation for starting out:

Of course, the very first step is to fire your advisor immediately. Send a polite but firm thank you note saying their services are no longer needed. Then,

1. Keep $100,000 in the bank for emergencies

2. Take *all* the remaining money you have, and put it into this one single fund at Vanguard:
LifeStrategy Conservative Growth Fund
https://investor.vanguard.com/mutual-fu ... estrategy/#/

All you have to do is call Vanguard, open an account and let them know that you have all your funds at Schwab and Chase, and ask them to help you sell and transfer them. They'll guide you.

3. Withdraw up to 4% of your original principal invested in step 2, from this fund every year, and spend it to your liking.

This is very easily doable and will get you 90% of the way there. You can do this, and nothing else, and live the rest of your life and achieve your financial goals. However, if you get really comfortable and want to optimize that last 10%, these initial steps will still let you do that, say a year or two or five from now.

Good luck!
Last edited by MrJones on Wed Aug 29, 2018 12:40 am, edited 4 times in total.

myfrogger
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Joined: Sat Feb 28, 2015 1:37 pm

Re: How to Begin with 1M

Post by myfrogger » Sun Aug 19, 2018 5:31 pm

I understand that during a difficult time it would be easy to get into a situation like this. Luckily it hasn't been too long. I know people that didn't discover this forum for years or decades! You're in good shape and that's a nice inheritance that your parents were thoughtful enough to save up and leave to you! You seem to have a very disciplined spending pattern for a generally high cost state! And you're working freelance and sounds like you enjoy it. All great :)

One question I had: Do you want to find a new financial advisor or take on the task investing yourself?

You don't need an adviser especially if you invest in a single Vanguard fund or a 3 fund portfolio. https://www.bogleheads.org/wiki/Three-fund_portfolio. You don't need a complex strategy but I also know millions of people have financial advisors. I'm sure any new person you hire would be more than happy to help you "fire" you old one.

AlphaLess
Posts: 551
Joined: Fri Sep 29, 2017 11:38 pm

Re: How to Begin with 1M

Post by AlphaLess » Sun Aug 19, 2018 5:37 pm

RickBoglehead wrote:
Sun Aug 19, 2018 3:27 pm
Send an email:

Dear Shmuck:

Your services are no longer needed.
Golden!

AlphaLess
Posts: 551
Joined: Fri Sep 29, 2017 11:38 pm

Re: How to Begin with 1M

Post by AlphaLess » Sun Aug 19, 2018 5:38 pm

MrJones wrote:
Sun Aug 19, 2018 5:15 pm
1. Keep $100,000 in the bank for emergencies
There are a lot of banks that earn 1.75% or more.
And excellent advice all around, Mr Jones.

deikel
Posts: 551
Joined: Sat Jan 25, 2014 7:13 pm

Re: How to Begin with 1M

Post by deikel » Sun Aug 19, 2018 6:09 pm

Given that you state your own insecurity about your finances, I think you should probably consider a fee only advisor rather than a fee based advisor - who has all the wrong incentives regarding your money.

For your question of care in the final days, you should probably get Long Term Care Insurance, especially if you are currently still reasonably healthy.

Good book to read is from Jane Bryant Quinn: How to make your money last; it will touch many aspects you need to understand to become 'advisor free' and do your own advising.

Technically, getting rid of your advisor is as simple as writing a letter telling them so and revoking their access to your account. Pumping 1M dollar into your account at this point in time would give me heartburn, at minimum you should consider dollar cost averaging over a longer time period of 12 months say.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immidiatly and destroy any copy or remembrance of it.

SelfEmployed123
Posts: 163
Joined: Sun Apr 15, 2018 8:57 pm

Re: How to Begin with 1M

Post by SelfEmployed123 » Mon Aug 20, 2018 6:05 am

MrJones wrote:
Sun Aug 19, 2018 5:15 pm
Welcome to the forum. You're in great shape overall, once you fire that advisor and simplify. Here's my recommendation for starting out:

Of course, the very first step is to fire your advisor immediately. Send a polite but firm thank you note saying their services are no longer needed. Then,

1. Keep $100,000 in the bank for emergencies

2. Take *all* the remaining money you have, and put it into this one single fund at Vanguard:
LifeStrategy Conservative Growth Fund
https://investor.vanguard.com/mutual-fu ... estrategy/#/

All you have to do is call Vanguard, open an account and let them know that you have all your funds at Schwab and Chase, and ask them to help you sell and transfer them. They'll guide you.

3. Withdraw up to 4% of your original principal invested in step 2, from this fund once a year, and spend it to your liking.

This is very easily doable and will get you 90% of the way there. You can do this, and nothing else, and live the rest of your life and achieve your financial goals. However, if you get really comfortable and want to optimize that last 10%, these initial steps will still let you do that, say a year or two or five from now.

Good luck!
OP: This is very good advice. You should definitely fire that advisor. You will want to put yourself somewhere between 40% stocks/60% bonds or 60% stocks/40% bonds. I would also recommend you move your funds to Vanguard and invest in the funds listed above. However if you decide to fire your advisor and stay at Charles Schwab this is the group of funds you should invest in: https://www.schwab.com/public/schwab/in ... rget_funds. You probably should either be in SWYBX, SWYLX, or SWYDX depending on your tolerance for risk. Take this free survey at Vanguard to help decide what your asset allocation should be: https://personal.vanguard.com/us/FundsInvQuestionnaire

The key here is when you purchase one of the above funds, you can withdraw 4% every year and historically the market will replace the principal balance. If there is a huge drop in the market you may have to reduce your withdrawals. You can expect the value of your investment to vary as the market go up and down. However, you must keep your funds in the market and only sell to fund your expenses, never to get out of the market. Ideally you should hold one of these funds forever. If you can't foresee yourself doing this, then purchase an annuity.

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

Re: How to Begin with 1M

Post by Jack FFR1846 » Mon Aug 20, 2018 6:23 am

First: There is NO reason to even interact with your financial advisor. None. Zero. No letter, no phone call, no text, no email. You interact only with the institution where your money is going.

Good places to go? Vanguard, Fidelity, Schwab. What? Schwab? Yes, they have absolutely great ETFs and mutual funds, brick and mortar locations and some of the lowest fees out there. Simply call Schwab today and have them remove the financial advisor from your account. If you just want your investments elsewhere, call Vanguard or Fidelity.

What to do once you have control? Look at the Wiki https://www.bogleheads.org/wiki/Three-fund_portfolio

What if that's even too complicated? Well, the absolute simplest way to go is with a life strategy fund at Vanguard. Call Vanguard. They'll ask you a few questions and recommend one of them. They take care of asset allocation and change it as you age. It's the ideal "hands off" portfolio in a single fund way to go.

For your free cash, Ally is a very good high service provider. I believe they're paying 1.8% now. I use Redneck Bank where they pay 2% up to $50k. It's more cumbersome than Ally and transfers are more limited, but with planning, it works well for me.

And obviously, on $1MM invested, $9k return last year is horrible. $90k would have been quite reasonable.
Bogle: Smart Beta is stupid

Kaktus
Posts: 33
Joined: Sun Apr 10, 2016 1:57 pm

Re: How to Begin with 1M

Post by Kaktus » Mon Aug 20, 2018 6:51 am

Sorry about your loss.I like generally Mr Jones suggestions with a few amendments. Your finances seem not very complicated. No need forrunning advisorfees to my mind. Keep it simple.
Personally I would not enter everything into stocks at one time. I would spread out as already mentioned. Especially Since we have now had approx 8 years of bullrun in the stockmarket. Also I myself do not want to keep all assets in only one fund company. Perhaps Im just paranoid.
I would also consider giving some to my child. It can make a huge difference for him regarding negotiating power towards the bank for example. But you are the one who have the whole picture.

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HomerJ
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Re: How to Begin with 1M

Post by HomerJ » Mon Aug 20, 2018 10:38 am

MrJones wrote:
Sun Aug 19, 2018 5:15 pm
Of course, the very first step is to fire your advisor immediately. Send a polite but firm thank you note saying their services are no longer needed.
He shouldn't even have to do this.

Just open an account with Vanguard, and work with them to get the money transferred.
The J stands for Jay

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Raymond
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Location: Texas

Re: How to Begin with 1M

Post by Raymond » Mon Aug 20, 2018 11:06 am

HomerJ wrote:
Mon Aug 20, 2018 10:38 am
MrJones wrote:
Sun Aug 19, 2018 5:15 pm
Of course, the very first step is to fire your advisor immediately. Send a polite but firm thank you note saying their services are no longer needed.
He shouldn't even have to do this.

Just open an account with Vanguard, and work with them to get the money transferred.
Agreed.

OP, if you want to avoid the awkwardness of directly firing him, start the paperwork with Vanguard (or Fidelity, or wherever) and have them transfer the assets "in kind" from Schwab to them.

If you feel comfortable, please post the details of your Schwab account in this thread, using the format in the following stickied thread (just cut and paste from there, and fill in your info):

"Asking Portfolio Questions"

Your advisor might have put your money into things that can't be transferred, and those will have to be sold at Schwab before the proceeds can be transferred.

One thing you might consider with the money in the Chase accounts is setting up a "ladder" of Certificates of Deposit (CDs):

"Laddering bonds or CDs"

When your advisor calls to ask why you're leaving, just tell him "It's not you, it's me" :)
"Ritter, Tod und Teufel"

MrJones
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Joined: Sat Mar 18, 2017 2:23 am

Re: How to Begin with 1M

Post by MrJones » Tue Aug 21, 2018 3:28 am

Jack FFR1846 wrote:
Mon Aug 20, 2018 6:23 am
First: There is NO reason to even interact with your financial advisor. None. Zero. No letter, no phone call, no text, no email. You interact only with the institution where your money is going.
Some advisors have a fixed fee portion to their total fees. It's best to make the termination explicit, IMHO.

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Tue Aug 21, 2018 8:46 pm

HEDGEFUNDIE wrote:
Sun Aug 19, 2018 3:34 pm
Welcome to the board. As I see it, there are two options you could take:

1. Invest your $1M in the markets with a low-fee advisor (perhaps Vanguard Personal Advisory Service), at a conservative asset allocation (maybe 50/50 stocks/bonds) and get an average annual return of 4-5% (pre-tax). Others here can help you calculate what your risk is of running out of money in this scenario.

2. Buy a Single Premium Immediate Annuity with your $1M and collect $60k/yr for life, completely forget about the markets, and go enjoy life. You said longevity runs in your family so this option should be appealing.

One big asset you left out: how much is your house worth?
Hello, I hope this is the right way to reply to you.

1. "pre-tax" The tax component of all this is making me very nervous. Taxable, tax-advantaged, tax-qualified. Terms I see when reading online. It seems as if a huge part of choosing the right thing to invest in would be how much you're going to be taxed on it. Yes? No? And I know nothing about these things--I think I could get myself in big trouble doing this wrong...

2. From my reading, it seems as if an annuity isn't very flexible, is this correct? I think I'd have to stick with an amount even if my situation changes--for example if I'm walking down the street and suddenly want to buy a large something.

3. The house is worth something like $795,000 (the average of several numbers I got preparing to answer you).

Thank you very much for your advice.

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Tue Aug 21, 2018 8:51 pm

MrJones wrote:
Sun Aug 19, 2018 5:00 pm
SPIA doesn't work with:
6. To leave my principal (most?) and house to my son.
Yes, thanks, I will think about this. Does a question about leaving principal to progeny as a point of pride (as it was in my family) or just spending the heck out of the sum would... go on a different page (forum)?

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Tue Aug 21, 2018 8:54 pm

MotoTrojan wrote:
Sun Aug 19, 2018 5:05 pm
Curious what the advisor had you invested in yielding less than most savings accounts over the last year.
Indeed. I didn't understand. (Sigh.)

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Tue Aug 21, 2018 9:06 pm

MrJones wrote:
Sun Aug 19, 2018 5:15 pm
Welcome to the forum. You're in great shape overall, once you fire that advisor and simplify. Here's my recommendation for starting out:

Of course, the very first step is to fire your advisor immediately. Send a polite but firm thank you note saying their services are no longer needed. Then,

1. Keep $100,000 in the bank for emergencies

2. Take *all* the remaining money you have, and put it into this one single fund at Vanguard:
LifeStrategy Conservative Growth Fund
https://investor.vanguard.com/mutual-fu ... estrategy/#/

All you have to do is call Vanguard, open an account and let them know that you have all your funds at Schwab and Chase, and ask them to help you sell and transfer them. They'll guide you.

3. Withdraw up to 4% of your original principal invested in step 2, from this fund once a year, and spend it to your liking.

This is very easily doable and will get you 90% of the way there. You can do this, and nothing else, and live the rest of your life and achieve your financial goals. However, if you get really comfortable and want to optimize that last 10%, these initial steps will still let you do that, say a year or two or five from now.

Good luck!
1. About firing him:
But there are so many thing I don't know!
-- When he sells things from my portfolio, will I lose a lot of money?
-- Are there other expenses related to moving the money that I should expect?
-- Can I do this in two steps? Get everything into Schwab with a short-term advisor and then move to Vanguard when I know more?
-- Will moving complicate my tax preparation somehow?

2. About 100,000 in the bank:
Someone recommended a CD ladder in my bank. But I think you mean in cash? Liquid?

3. "...help you transfer and sell..."
> Gulp < Does anyone put their money, say, part in Schwab and part in Vanguard, just so everything in not in the same place? Sounds as if you're saying that doesn't make sense? Or, just to start with?

Omigoodness, thank you. Don't know whether I have the confidence to do it exactly the way you say... Is there a way you can suggest whereby I could... kind of ease into it? Thanks again.

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Tue Aug 21, 2018 9:17 pm

RickBoglehead wrote:
Sun Aug 19, 2018 3:27 pm
Wiser than I was a year ago
Thanks for giving me the language: "to remove your trading authority from my account today."

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Tue Aug 21, 2018 9:29 pm

myfrogger wrote:
Sun Aug 19, 2018 5:31 pm
I understand that during a difficult time it would be easy to get into a situation like this. Luckily it hasn't been too long. I know people that didn't discover this forum for years or decades! You're in good shape and that's a nice inheritance that your parents were thoughtful enough to save up and leave to you! You seem to have a very disciplined spending pattern for a generally high cost state! And you're working freelance and sounds like you enjoy it. All great :)

One question I had: Do you want to find a new financial advisor or take on the task investing yourself?

You don't need an adviser especially if you invest in a single Vanguard fund or a 3 fund portfolio. https://www.bogleheads.org/wiki/Three-fund_portfolio. You don't need a complex strategy but I also know millions of people have financial advisors. I'm sure any new person you hire would be more than happy to help you "fire" you old one.
Thanks for the nice words: yes, it's been a rough time; yes, thoughtful parents.
About advisor or investing myself, I'm really trying to read everyone's suggestions... I do think the Three-fund-portfolio makes sense. But I'm skittish about just cutting loose from my "advisor" and setting up this portfolio myself. Is it ethical to pay a low-cost advisor (Schwab, Vanguard) and then let them go after the portfolio is in place? Never having done any of this, I can't really even picture what's involved...

HEDGEFUNDIE
Posts: 607
Joined: Sun Oct 22, 2017 2:06 pm

Re: How to Begin with 1M

Post by HEDGEFUNDIE » Tue Aug 21, 2018 9:55 pm

TylerLearning wrote:
Tue Aug 21, 2018 8:46 pm
HEDGEFUNDIE wrote:
Sun Aug 19, 2018 3:34 pm
Welcome to the board. As I see it, there are two options you could take:

1. Invest your $1M in the markets with a low-fee advisor (perhaps Vanguard Personal Advisory Service), at a conservative asset allocation (maybe 50/50 stocks/bonds) and get an average annual return of 4-5% (pre-tax). Others here can help you calculate what your risk is of running out of money in this scenario.

2. Buy a Single Premium Immediate Annuity with your $1M and collect $60k/yr for life, completely forget about the markets, and go enjoy life. You said longevity runs in your family so this option should be appealing.

One big asset you left out: how much is your house worth?
Hello, I hope this is the right way to reply to you.

1. "pre-tax" The tax component of all this is making me very nervous. Taxable, tax-advantaged, tax-qualified. Terms I see when reading online. It seems as if a huge part of choosing the right thing to invest in would be how much you're going to be taxed on it. Yes? No? And I know nothing about these things--I think I could get myself in big trouble doing this wrong...

2. From my reading, it seems as if an annuity isn't very flexible, is this correct? I think I'd have to stick with an amount even if my situation changes--for example if I'm walking down the street and suddenly want to buy a large something.

3. The house is worth something like $795,000 (the average of several numbers I got preparing to answer you).

Thank you very much for your advice.
1. The good news is you don't have to worry about any of these tax issues. All those account types with differing tax implications are meant to be mulled over by people who are still in the asset accumulation phase of their lives. You are no longer in that phase, and all of your money is in a taxable account. That means the only tax issue you need to worry about is paying income tax on any gains from your investments. Get an accountant.

2. Well, if you wanted the flexibility to make a big purchase, just keep that amount in the bank.

3. Sounds like a great inheritance for your son.

MrJones
Posts: 203
Joined: Sat Mar 18, 2017 2:23 am

Re: How to Begin with 1M

Post by MrJones » Tue Aug 21, 2018 11:09 pm

TylerLearning wrote:
Tue Aug 21, 2018 9:06 pm
1. About firing him:
But there are so many thing I don't know!
-- When he sells things from my portfolio, will I lose a lot of money?
-- Are there other expenses related to moving the money that I should expect?
-- Can I do this in two steps? Get everything into Schwab with a short-term advisor and then move to Vanguard when I know more?
-- Will moving complicate my tax preparation somehow?
Login to Schwab and check your total account current value. That is pretty much exactly what you will get if you sell everything. It's hard to say more without knowing your details but I strongly suspect if you just sell everything and invest in the current stock market at Vanguard you will come out ahead in the long run. This is because you haven't been invested for very long.

If you made a small profit, you'll pay a bit of taxes. But that doesn't sound like the case here. Either way it's too small to make a difference. no it will not complicate your tax preparation. you would have to declare the capital gains or losses and that is simple because Schwab will send you the forms: nothing that your garden-variety tax preparer cannot handle in under 10 minutes. If you do your taxes yourself, budget another 20 minutes.

No other expenses. It's possible Schwab will charge you 50 or $100 to transfer but that is not a percentage of your assets and it's usually a small reasonable fee. My guess is it would be completely free. Vanguard does not charge at their end. Let them know you don't need the money to be wired, and a regular electronic transfer is just fine.

If you want to move everything to Vanguard eventually, I suggest you just get it over with. Doing it in multiple steps only complicates things even more. Definitely don't get a short-term advisor if you're going this route. Again, that adds complexity without benefits. Don't worry, my outline above was thought out to be as simple as possible. You will find that once you go through the experience you will come out of it much more stronger and confident a few days or weeks from now!
TylerLearning wrote:
Tue Aug 21, 2018 9:06 pm
2. About 100,000 in the bank:
Someone recommended a CD ladder in my bank. But I think you mean in cash? Liquid?
Start by simply putting it in cash in a savings account. Ally gives you 1.8% as a point of reference. You can think about that last 10% of optimization including CD ladders a few months from now when you were much more comfortable. Don't worry, you're not missing out much at all.

Again, my plan above was to get you 90% of the way with very few and very simple steps.
TylerLearning wrote:
Tue Aug 21, 2018 9:06 pm
3. "...help you transfer and sell..."
> Gulp < Does anyone put their money, say, part in Schwab and part in Vanguard, just so everything in not in the same place? Sounds as if you're saying that doesn't make sense? Or, just to start with?

Omigoodness, thank you. Don't know whether I have the confidence to do it exactly the way you say... Is there a way you can suggest whereby I could... kind of ease into it? Thanks again.
Don't worry about this. you're not actually putting your money into Vanguard, you're putting your money into the underlying thousands of stocks. If Vanguard goes up in smoke tomorrow, you will still be safe.

And this is indeed the "ease into it" plan. Contrary to what trepidation you might be feeling, breaking this down further will only complicate things more. With just a little bit of trust in yourself, try these steps in hole, and as I mentioned above, you will come out stronger and much more confident at the end of it.

If you really have cold feet, try this:
Step 1 should be very easy. Ally Bank is a great option. Total time: 1 - 3 hours.

Step 2:
- open an account at Vanguard (2 hours)
- Transfer $3000 from your bank above do Vanguard and put it in the fund that I recommended above (1 hour)
- give it a few days to settle down in your mind
- Sell $5000 worth of your assets from Schwab and transfer it to your Vanguard fund (2 hours)
- give it a few more days to get comfortable
- sell and transfer a hundred percent of your assets

How does that sound?

Remember you can always post here for guidance along the way. Also remember, the mind only complicates. Your sole job is to keep everything really, really simple. Everything else will be fine :).

Good luck and do let us know how it goes!
Last edited by MrJones on Tue Aug 21, 2018 11:27 pm, edited 2 times in total.

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Tue Aug 21, 2018 11:11 pm

AlphaLess wrote:
Sun Aug 19, 2018 5:38 pm
MrJones wrote:
Sun Aug 19, 2018 5:15 pm
1. Keep $100,000 in the bank for emergencies
There are a lot of banks that earn 1.75% or more.
And excellent advice all around, Mr Jones.
Thank you for the perspective that there are such banks. Very hopeful.

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Tue Aug 21, 2018 11:39 pm

Raymond wrote:
Mon Aug 20, 2018 11:06 am
HomerJ wrote:
Mon Aug 20, 2018 10:38 am
MrJones wrote:
Sun Aug 19, 2018 5:15 pm
Of course, the very first step is to fire your advisor immediately. Send a polite but firm thank you note saying their services are no longer needed.
He shouldn't even have to do this.

Just open an account with Vanguard, and work with them to get the money transferred.
Agreed.

OP, if you want to avoid the awkwardness of directly firing him, start the paperwork with Vanguard (or Fidelity, or wherever) and have them transfer the assets "in kind" from Schwab to them.

If you feel comfortable, please post the details of your Schwab account in this thread, using the format in the following stickied thread (just cut and paste from there, and fill in your info):

"Asking Portfolio Questions"

Your advisor might have put your money into things that can't be transferred, and those will have to be sold at Schwab before the proceeds can be transferred.

One thing you might consider with the money in the Chase accounts is setting up a "ladder" of Certificates of Deposit (CDs):

"Laddering bonds or CDs"

When your advisor calls to ask why you're leaving, just tell him "It's not you, it's me" :)
Thank you very much.
Is it generally agreed everywhere that Vanguard is much better than Schwab? I've read very six-of-one-half-dozen-of-the-other type articles online. Not sure why I'm feeling so hesitant to leave Schwab right now--I can only say I've... had a lot of change in the last year+... and Vanguard seems a little impersonal? People seem to have trouble with their customer service? Probably just the jitters...

I always get paper statements, and today I spent hours setting up my online statement for the express purpose of replying to you here. I am so willing to post my account details and yes, the link you sent me to was what I used for organizing my original post. But beyond that? Sad to say I can't make heads nor tails of all that. I simply relied on said advisor to do it all while I closed up the estate [insert sad face]. It's only now I'm getting back in the proverbial saddle.

From my statement: do I send a lot of these, like below? That is, the first three columns? (Ticker??) All of them on the statement? Do I specify the headings (kind--as in mutual fund, equity...)? More? Everything but my name? You say, and I'll do.

GOOG
ALPHABET INC. CLASS C 5 $1,201.62

I am out of my element, excuse me.

Yes, at your suggestion I went to get CD ladder info from Chase yesterday.

Grateful for your thoughts.

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Wed Aug 22, 2018 12:00 am

Kaktus wrote:
Mon Aug 20, 2018 6:51 am
Sorry about your loss.I like generally Mr Jones suggestions with a few amendments. Your finances seem not very complicated. No need forrunning advisorfees to my mind. Keep it simple.
Personally I would not enter everything into stocks at one time. I would spread out as already mentioned. Especially Since we have now had approx 8 years of bullrun in the stockmarket. Also I myself do not want to keep all assets in only one fund company. Perhaps Im just paranoid.
I would also consider giving some to my child. It can make a huge difference for him regarding negotiating power towards the bank for example. But you are the one who have the whole picture.
Thanks, Kaktus.
One question I have is about how hard it is to move things. I mean, suppose I put everything in one fund company, and then change my mind? Or vice-versa: put it in different places, change my mind and want to consolidate? Or put all my money somewhere, and then see a (very, very small) Picasso I want to buy (haha), which I'd never imagined doing so I hadn't planned for it at all. How locked in am I to the choices I make now? Because I have what Obama called "decision fatigue." Too much of everything at one time. I mean, I'm not in my old life, but my new life hasn't really started either. What will it be?

What I'm reading online about stocks: free or low-cost index funds... index-based ETFs... international stock index fund... Are you a Three-Fund-Portfolio recommender? Or...?

About my son, yes, actually, thanks for thinking of him--he has his $50,000 with this same advisor, too. I thought I have to start a new thread for that? But yes, good for him to have that. It will slow down our extricating ourselves from this advisor, but... worth it, surely.

Thank you for your time, of course.

MrJones
Posts: 203
Joined: Sat Mar 18, 2017 2:23 am

Re: How to Begin with 1M

Post by MrJones » Wed Aug 22, 2018 2:11 am

OP, just reading your back and forth here, I'm wondering if this sounds familiar to you:

Paralysis by analysis
Investors have thousands of funds to choose from plus an abundance of market “noise” telling them what they should do. The more choices they have the harder it is for them to choose one, making it more likely they won’t make a choice and will fail to invest. For example, employees pass up billions every year in free money offered by their employer’s matching retirement plans. They do this simply because they can’t decide which investment course to take.

See: https://www.bogleheads.org/wiki/Behavioral_pitfalls

gilgamesh
Posts: 1087
Joined: Sun Jan 10, 2016 9:29 am

Re: How to Begin with 1M

Post by gilgamesh » Wed Aug 22, 2018 5:08 am

Where was your $700,000 prior to moving to Schwab? Just want to be sure it’s all basis like all are assuming.

Also are you 100% certain you only earned $9,000 since you’ve started at Schwab ...easy to know, call/chat them and ask, it’s free.

Also, you don’t have any IRA, 401k, Roth etc right?

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Wed Aug 22, 2018 2:39 pm

SelfEmployed123 wrote:
Mon Aug 20, 2018 6:05 am
MrJones wrote:
Sun Aug 19, 2018 5:15 pm
Welcome to the forum. You're in great shape overall, once you fire that advisor and simplify. Here's my recommendation for starting out:

Of course, the very first step is to fire your advisor immediately. Send a polite but firm thank you note saying their services are no longer needed. Then,

1. Keep $100,000 in the bank for emergencies

2. Take *all* the remaining money you have, and put it into this one single fund at Vanguard:
LifeStrategy Conservative Growth Fund
https://investor.vanguard.com/mutual-fu ... estrategy/#/

All you have to do is call Vanguard, open an account and let them know that you have all your funds at Schwab and Chase, and ask them to help you sell and transfer them. They'll guide you.

3. Withdraw up to 4% of your original principal invested in step 2, from this fund once a year, and spend it to your liking.

This is very easily doable and will get you 90% of the way there. You can do this, and nothing else, and live the rest of your life and achieve your financial goals. However, if you get really comfortable and want to optimize that last 10%, these initial steps will still let you do that, say a year or two or five from now.

Good luck!
OP: This is very good advice. You should definitely fire that advisor. You will want to put yourself somewhere between 40% stocks/60% bonds or 60% stocks/40% bonds. I would also recommend you move your funds to Vanguard and invest in the funds listed above. However if you decide to fire your advisor and stay at Charles Schwab this is the group of funds you should invest in: https://www.schwab.com/public/schwab/in ... rget_funds. You probably should either be in SWYBX, SWYLX, or SWYDX depending on your tolerance for risk. Take this free survey at Vanguard to help decide what your asset allocation should be: https://personal.vanguard.com/us/FundsInvQuestionnaire

The key here is when you purchase one of the above funds, you can withdraw 4% every year and historically the market will replace the principal balance. If there is a huge drop in the market you may have to reduce your withdrawals. You can expect the value of your investment to vary as the market go up and down. However, you must keep your funds in the market and only sell to fund your expenses, never to get out of the market. Ideally you should hold one of these funds forever. If you can't foresee yourself doing this, then purchase an annuity.
Thank you. It looks as if "target funds" might make more sense for people with a more predictable life than mine is now. And the questionnaire looks like it's for people who already invest or know something about it.
Every comment or perspective helps and yours has, too. Best,

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Wed Aug 22, 2018 3:41 pm

gilgamesh wrote:
Wed Aug 22, 2018 5:08 am
Where was your $700,000 prior to moving to Schwab? Just want to be sure it’s all basis like all are assuming.

Also are you 100% certain you only earned $9,000 since you’ve started at Schwab ...easy to know, call/chat them and ask, it’s free.

Also, you don’t have any IRA, 401k, Roth etc right?
The money was spread around in my parents' trust and bank accounts, death benefits, house value, and so on. There was even an investment account at Edward Jones. Everything has been liquidated.

Well... my "account value" on newest statement is around $9000 more than the amount I gave the fellow to invest a year ago. My fee so far this year has been $3854, and it was similar last year. My son also gave him $50,000 and he now has $1500 more.

Right: no IRA, 401k, Roth, etc.

Thank you for your thoughts and questions. Everything helps me understand my situation better.

MotoTrojan
Posts: 2093
Joined: Wed Feb 01, 2017 8:39 pm

Re: How to Begin with 1M

Post by MotoTrojan » Wed Aug 22, 2018 4:59 pm

TylerLearning wrote:
Wed Aug 22, 2018 3:41 pm
gilgamesh wrote:
Wed Aug 22, 2018 5:08 am
Where was your $700,000 prior to moving to Schwab? Just want to be sure it’s all basis like all are assuming.

Also are you 100% certain you only earned $9,000 since you’ve started at Schwab ...easy to know, call/chat them and ask, it’s free.

Also, you don’t have any IRA, 401k, Roth etc right?
The money was spread around in my parents' trust and bank accounts, death benefits, house value, and so on. There was even an investment account at Edward Jones. Everything has been liquidated.

Well... my "account value" on newest statement is around $9000 more than the amount I gave the fellow to invest a year ago. My fee so far this year has been $3854, and it was similar last year. My son also gave him $50,000 and he now has $1500 more.

Right: no IRA, 401k, Roth, etc.

Thank you for your thoughts and questions. Everything helps me understand my situation better.
Please tell me what you’re invested in.

Vanguard PAS can set you up in a 3 fund portfolio and then you can opt out after you’re comfortable. 0.3%. Ask them specifically to setup a 3-fund allocation as you desire.

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Wed Aug 22, 2018 7:52 pm

MrJones wrote:
Tue Aug 21, 2018 11:09 pm
TylerLearning wrote:
Tue Aug 21, 2018 9:06 pm
1. About firing him:
But there are so many thing I don't know!
-- When he sells things from my portfolio, will I lose a lot of money?
-- Are there other expenses related to moving the money that I should expect?
-- Can I do this in two steps? Get everything into Schwab with a short-term advisor and then move to Vanguard when I know more?
-- Will moving complicate my tax preparation somehow?
Login to Schwab and check your total account current value. That is pretty much exactly what you will get if you sell everything. It's hard to say more without knowing your details but I strongly suspect if you just sell everything and invest in the current stock market at Vanguard you will come out ahead in the long run. This is because you haven't been invested for very long.

If you made a small profit, you'll pay a bit of taxes. But that doesn't sound like the case here. Either way it's too small to make a difference. no it will not complicate your tax preparation. you would have to declare the capital gains or losses and that is simple because Schwab will send you the forms: nothing that your garden-variety tax preparer cannot handle in under 10 minutes. If you do your taxes yourself, budget another 20 minutes.

No other expenses. It's possible Schwab will charge you 50 or $100 to transfer but that is not a percentage of your assets and it's usually a small reasonable fee. My guess is it would be completely free. Vanguard does not charge at their end. Let them know you don't need the money to be wired, and a regular electronic transfer is just fine.

If you want to move everything to Vanguard eventually, I suggest you just get it over with. Doing it in multiple steps only complicates things even more. Definitely don't get a short-term advisor if you're going this route. Again, that adds complexity without benefits. Don't worry, my outline above was thought out to be as simple as possible. You will find that once you go through the experience you will come out of it much more stronger and confident a few days or weeks from now!
TylerLearning wrote:
Tue Aug 21, 2018 9:06 pm
2. About 100,000 in the bank:
Someone recommended a CD ladder in my bank. But I think you mean in cash? Liquid?
Start by simply putting it in cash in a savings account. Ally gives you 1.8% as a point of reference. You can think about that last 10% of optimization including CD ladders a few months from now when you were much more comfortable. Don't worry, you're not missing out much at all.

Again, my plan above was to get you 90% of the way with very few and very simple steps.
TylerLearning wrote:
Tue Aug 21, 2018 9:06 pm
3. "...help you transfer and sell..."
> Gulp < Does anyone put their money, say, part in Schwab and part in Vanguard, just so everything in not in the same place? Sounds as if you're saying that doesn't make sense? Or, just to start with?

Omigoodness, thank you. Don't know whether I have the confidence to do it exactly the way you say... Is there a way you can suggest whereby I could... kind of ease into it? Thanks again.
Don't worry about this. you're not actually putting your money into Vanguard, you're putting your money into the underlying thousands of stocks. If Vanguard goes up in smoke tomorrow, you will still be safe.

And this is indeed the "ease into it" plan. Contrary to what trepidation you might be feeling, breaking this down further will only complicate things more. With just a little bit of trust in yourself, try these steps in hole, and as I mentioned above, you will come out stronger and much more confident at the end of it.

If you really have cold feet, try this:
Step 1 should be very easy. Ally Bank is a great option. Total time: 1 - 3 hours.

Step 2:
- open an account at Vanguard (2 hours)
- Transfer $3000 from your bank above do Vanguard and put it in the fund that I recommended above (1 hour)
- give it a few days to settle down in your mind
- Sell $5000 worth of your assets from Schwab and transfer it to your Vanguard fund (2 hours)
- give it a few more days to get comfortable
- sell and transfer a hundred percent of your assets

How does that sound?

Remember you can always post here for guidance along the way. Also remember, the mind only complicates. Your sole job is to keep everything really, really simple. Everything else will be fine :).

Good luck and do let us know how it goes!
Oh MrJones, thank you so much for suggesting these different plans. I understand you put some thought into simplifying as much as possible.
You've anticipated some of my questions, but here's another round--then I think I'll be good to go. If I've already used up your good will, maybe someone else will chime in with answers for me:

1. Why are the 4% withdrawals taken yearly? It seems as if withdrawing monthly would leave more invested and be more flexible. Yes? No?

2. If I need less than 4%, should I just leave it there, or take it anyway and keep it in the bank? (I've had this situation with my current FA--I stopped withdrawing altogether.)

3. Once the money is invested, do I have any access to it? Or I have to guess before investing how much I might ever need in my future life and hang onto that?

4. Risk. When I call Vanguard, they're going to ask about my risk. This utterly baffles me. Why ask someone who doesn't know about investing how to handle their money? With my FA, he just uses this "risk" idea to cover himself: if the account doesn't earn enough, he can say I didn't take enough risk; if it loses money, he can say I took on too much risk. Absurd. I am not an investor and know nothing about risk.

Imagine you're going to take an international flight and at the last minute the pilot says: you have a couple of choices of engine. We have the XQ4539M engine or the BJJF6138C. Different pluses and minuses. Which do you want us to put into the plane?

There. Your life depends on it but you have no tools for deciding. And the plane won't take off till you decide... Everyone's waiting...

My FA asked me the first day about risk. I said, well, let's do something really wild with a lot of it and see what happens!--we can pull back later. He said: hmmmm. Let's say you have low-to-moderate risk tolerance. --> In other words, my own sense of the risk I'd take was terrible. Or... either he saved me from myself or he saved himself from something (liability?).

What is the right answer to the risk question Vanguard will ask me? I hope no one is going to ask me my AAs (see airplane engine analogy above.)

MrJones, you've been a pal when I need one.

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Wed Aug 22, 2018 7:57 pm

deikel wrote:
Sun Aug 19, 2018 6:09 pm
Given that you state your own insecurity about your finances, I think you should probably consider a fee only advisor rather than a fee based advisor - who has all the wrong incentives regarding your money.

For your question of care in the final days, you should probably get Long Term Care Insurance, especially if you are currently still reasonably healthy.

Good book to read is from Jane Bryant Quinn: How to make your money last; it will touch many aspects you need to understand to become 'advisor free' and do your own advising.

Technically, getting rid of your advisor is as simple as writing a letter telling them so and revoking their access to your account. Pumping 1M dollar into your account at this point in time would give me heartburn, at minimum you should consider dollar cost averaging over a longer time period of 12 months say.
Hello to you. Much harder to find a fee-only advisor in my are than one would think reading about them online; think I'll do without. I'm definitely going to look into this insurance you suggest, thank you. And the book: great. And writing the letter: yes. "Dollar cost averaging"--I'm unfamiliar; will think.

So much appreciate your sharing your thoughts, truly.

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Wed Aug 22, 2018 8:16 pm

MrJones wrote:
Wed Aug 22, 2018 2:11 am
OP, just reading your back and forth here, I'm wondering if this sounds familiar to you:

Paralysis by analysis
Investors have thousands of funds to choose from plus an abundance of market “noise” telling them what they should do. The more choices they have the harder it is for them to choose one, making it more likely they won’t make a choice and will fail to invest. For example, employees pass up billions every year in free money offered by their employer’s matching retirement plans. They do this simply because they can’t decide which investment course to take.

See: https://www.bogleheads.org/wiki/Behavioral_pitfalls
Haha, thanks for the interesting read. No, this Paralysis isn't me. On that page, I'm more recognizable in: 1. The opening quotation about money as an expression of complex life matters, and 2. wanting to do what I do because it makes sense to me, not "the herd."

I'm making serious life decisions by myself without any tools and taking time to ask pretty common sensical questions. I imagine you've made your financial decisions on the basis of an enormous body of real information and experience. I'm making this financial decision on the basis of a few emails from strangers on the internet. If you lose your money, you won't go to zero or be alone with the problem, I suspect. So thanks for your patience while I gather myself to make this imminent move.

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Wed Aug 22, 2018 8:30 pm

MotoTrojan wrote:
Wed Aug 22, 2018 4:59 pm
TylerLearning wrote:
Wed Aug 22, 2018 3:41 pm
gilgamesh wrote:
Wed Aug 22, 2018 5:08 am
Where was your $700,000 prior to moving to Schwab? Just want to be sure it’s all basis like all are assuming.

Also are you 100% certain you only earned $9,000 since you’ve started at Schwab ...easy to know, call/chat them and ask, it’s free.

Also, you don’t have any IRA, 401k, Roth etc right?
The money was spread around in my parents' trust and bank accounts, death benefits, house value, and so on. There was even an investment account at Edward Jones. Everything has been liquidated.

Well... my "account value" on newest statement is around $9000 more than the amount I gave the fellow to invest a year ago. My fee so far this year has been $3854, and it was similar last year. My son also gave him $50,000 and he now has $1500 more.

Right: no IRA, 401k, Roth, etc.

Thank you for your thoughts and questions. Everything helps me understand my situation better.
Please tell me what you’re invested in.

Vanguard PAS can set you up in a 3 fund portfolio and then you can opt out after you’re comfortable. 0.3%. Ask them specifically to setup a 3-fund allocation as you desire.
Thank you. I asked yesterday what exactly to include in what I post here. I sent:

"The link you sent me to was what I used for organizing my original post. But beyond that? Sad to say I can't make heads nor tails of all that... From my statement, do I send a lot of these entries or items, like below? That is, the first three columns? All of them on the statement? Do I specify the headings (kind--as in mutual fund, equity...)? More? Everything but my name? You say, and I'll do.

GOOG
ALPHABET INC. CLASS C 5 $1,201.62

I am out of my element, excuse me."

One correction: my newest paper statement says $9000-ish, but online I see $12,000-ish.

Thanks for your interest. I asked Schwab today to go over my account with me, as people here recommended--but they're not allowed to because my FA is "outside their network." So it'd be interesting to see what it looks like to someone else. Best,

MotoTrojan
Posts: 2093
Joined: Wed Feb 01, 2017 8:39 pm

Re: How to Begin with 1M

Post by MotoTrojan » Wed Aug 22, 2018 11:36 pm

TylerLearning wrote:
Wed Aug 22, 2018 8:30 pm
MotoTrojan wrote:
Wed Aug 22, 2018 4:59 pm
TylerLearning wrote:
Wed Aug 22, 2018 3:41 pm
gilgamesh wrote:
Wed Aug 22, 2018 5:08 am
Where was your $700,000 prior to moving to Schwab? Just want to be sure it’s all basis like all are assuming.

Also are you 100% certain you only earned $9,000 since you’ve started at Schwab ...easy to know, call/chat them and ask, it’s free.

Also, you don’t have any IRA, 401k, Roth etc right?
The money was spread around in my parents' trust and bank accounts, death benefits, house value, and so on. There was even an investment account at Edward Jones. Everything has been liquidated.

Well... my "account value" on newest statement is around $9000 more than the amount I gave the fellow to invest a year ago. My fee so far this year has been $3854, and it was similar last year. My son also gave him $50,000 and he now has $1500 more.

Right: no IRA, 401k, Roth, etc.

Thank you for your thoughts and questions. Everything helps me understand my situation better.
Please tell me what you’re invested in.

Vanguard PAS can set you up in a 3 fund portfolio and then you can opt out after you’re comfortable. 0.3%. Ask them specifically to setup a 3-fund allocation as you desire.
Thank you. I asked yesterday what exactly to include in what I post here. I sent:

"The link you sent me to was what I used for organizing my original post. But beyond that? Sad to say I can't make heads nor tails of all that... From my statement, do I send a lot of these entries or items, like below? That is, the first three columns? All of them on the statement? Do I specify the headings (kind--as in mutual fund, equity...)? More? Everything but my name? You say, and I'll do.

GOOG
ALPHABET INC. CLASS C 5 $1,201.62

I am out of my element, excuse me."

One correction: my newest paper statement says $9000-ish, but online I see $12,000-ish.

Thanks for your interest. I asked Schwab today to go over my account with me, as people here recommended--but they're not allowed to because my FA is "outside their network." So it'd be interesting to see what it looks like to someone else. Best,
Company, ETF, Mutual Fund Ticker, Name, Expense Ratio, and $ value would be a good start. Frankly I would probably just sell anything that is at a loss, and maybe everything at all, and start fresh. These are dismal returns unless you asked for maximum safety and are mostly in bonds.

MrJones
Posts: 203
Joined: Sat Mar 18, 2017 2:23 am

Re: How to Begin with 1M

Post by MrJones » Thu Aug 23, 2018 2:03 am

TylerLearning wrote:
Wed Aug 22, 2018 7:52 pm
Oh MrJones, thank you so much for suggesting these different plans. I understand you put some thought into simplifying as much as possible.
You've anticipated some of my questions, but here's another round--then I think I'll be good to go. If I've already used up your good will, maybe someone else will chime in with answers for me:

1. Why are the 4% withdrawals taken yearly? It seems as if withdrawing monthly would leave more invested and be more flexible. Yes? No?
Correct, monthly works very well, as does weekly or quarterly. The number (4% per year) is far more important than the withdrawal frequency, which has only a very small impact on the ultimate outcomes. It is also a standard number ("Safe Withdrawal Rate") quoted widely as an annual figure, much more than say, "0.34% monthly."
TylerLearning wrote:
Wed Aug 22, 2018 7:52 pm
2. If I need less than 4%, should I just leave it there, or take it anyway and keep it in the bank? (I've had this situation with my current FA--I stopped withdrawing altogether.)
Good question to ask: leave it invested. As your previous question states, it's best to leave as much as possible invested.

TylerLearning wrote:
Wed Aug 22, 2018 7:52 pm
3. Once the money is invested, do I have any access to it? Or I have to guess before investing how much I might ever need in my future life and hang onto that?
You can always sell and withdraw on any working day. The point is to *not* guess what you might need, and invest as fully as possible. Your generous emergency fund of $100k exists in case your fund is very badly down (unlikely), and you need a huge emergency withdrawal.

TylerLearning wrote:
Wed Aug 22, 2018 7:52 pm
4. Risk. When I call Vanguard, they're going to ask about my risk. This utterly baffles me. Why ask someone who doesn't know about investing how to handle their money? With my FA, he just uses this "risk" idea to cover himself: if the account doesn't earn enough, he can say I didn't take enough risk; if it loses money, he can say I took on too much risk. Absurd. I am not an investor and know nothing about risk.

Imagine you're going to take an international flight and at the last minute the pilot says: you have a couple of choices of engine. We have the XQ4539M engine or the BJJF6138C. Different pluses and minuses. Which do you want us to put into the plane?

There. Your life depends on it but you have no tools for deciding. And the plane won't take off till you decide... Everyone's waiting...

My FA asked me the first day about risk. I said, well, let's do something really wild with a lot of it and see what happens!--we can pull back later. He said: hmmmm. Let's say you have low-to-moderate risk tolerance. --> In other words, my own sense of the risk I'd take was terrible. Or... either he saved me from myself or he saved himself from something (liability?).

What is the right answer to the risk question Vanguard will ask me? I hope no one is going to ask me my AAs (see airplane engine analogy above.)
You're absolutely right. Risk, its assessment, and strategy can be a complex topic. But like with any other topic, it can be simplified to a large extent. It would be like the pilot saying: you have a couple choices. For a $50 ticket, we could use an engine that causes 1 out of 10 planes to crash. For $200 a ticket, we could use an engine that causes 1 out of one million plans to crash.

Here are some ways Vanguard attempts to simplify risk assessment:
https://investor.vanguard.com/mutual-fu ... estrategy/#/ (uses descriptions to simplify risk)
https://personal.vanguard.com/us/FundsInvQuestionnaire (asks you simple questions to simplify risk)
https://investor.vanguard.com/investing ... tment-risk (gives you numbers to give you a sense of risk)

One traditional rule of thumb is "age in bonds". Meaning, 62% in bonds, 38% in stock for you. I recommended the "LifeStrategy Conservative Growth Fund" for you in my earlier post, which is 60% bonds, 40% stock. This would be a good place to start IMHO, given your age, longevity, goals, and the amount. Practically, if you chose any of 60/40, 50/50, or 40/60, I'd imagine most folks here wouldn't squirm too badly. It won't make a *huge* difference in the outcome either. Once you pick, simply tell Vanguard you'd like the fund you picked (eg: "I'd like the LifeStrategy Conservative Growth Fund, which has a 60% bonds / 40% stock") when you answer the risk question.

If you don't use an advisor at Vanguard, you will not even be asked that question.
TylerLearning wrote:
Wed Aug 22, 2018 7:52 pm
MrJones, you've been a pal when I need one.
Glad to help! Cheers! :sharebeer
Last edited by MrJones on Thu Aug 23, 2018 2:15 am, edited 1 time in total.

MrJones
Posts: 203
Joined: Sat Mar 18, 2017 2:23 am

Re: How to Begin with 1M

Post by MrJones » Thu Aug 23, 2018 2:13 am

TylerLearning wrote:
Wed Aug 22, 2018 8:16 pm
I'm making serious life decisions by myself without any tools and taking time to ask pretty common sensical questions. I imagine you've made your financial decisions on the basis of an enormous body of real information and experience. I'm making this financial decision on the basis of a few emails from strangers on the internet. If you lose your money, you won't go to zero or be alone with the problem, I suspect. So thanks for your patience while I gather myself to make this imminent move.
Again, you're absolutely right. In my own case, I started investing with very small amounts (< $1000), and my financial experience grew at a rate somewhat commensurate with the amount of money invested, which has put me in a reasonably comfortable zone for the most part. In your case, you are investing a lifetime's worth of savings in one shot when you are still an financial investment novice. Which is hard. It would certainly put me out of my comfort zone and make me ask a ton of questions.

So please do ask away, that's what we are here for. I'm sure you're also trying to gauge the rough consensus opinion, and the diversity and range of viewpoints, which are also important before your make your decisions.

The reason I sent you that link about behaviors is to plant some seeds to possibly accelerate your learning and decision making through awareness of financial and decision making psychology. That is the value I got out of them.
Last edited by MrJones on Fri Aug 24, 2018 12:05 am, edited 1 time in total.

gilgamesh
Posts: 1087
Joined: Sun Jan 10, 2016 9:29 am

Re: How to Begin with 1M

Post by gilgamesh » Thu Aug 23, 2018 7:25 am

The only reason to switch from Schwab to Vanguard is if you are interested in “LifeStrategy Conservative Growth Fund” as Schwab doesn’t have quite the same product and certainly not at that low fee. This is an excellent option for those wanting a 60:40 stock exposure and wanting to just invest and forget about it.

If you are comfortable with something like the simple 3 fund portfolio popular on this site, Schwab is fine.

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Thu Aug 23, 2018 1:34 pm

Thanks for your interest. I asked Schwab today to go over my account with me, as people here recommended--but they're not allowed to because my FA is "outside their network." So it'd be interesting to see what it looks like to someone else. Best,
[/quote]

Company, ETF, Mutual Fund Ticker, Name, Expense Ratio, and $ value would be a good start. Frankly I would probably just sell anything that is at a loss, and maybe everything at all, and start fresh. These are dismal returns unless you asked for maximum safety and are mostly in bonds.
[/quote]

Well, I can't connect these to the names of the columns I see: "Company, ETF, Mutual Fund Ticker, Name, Expense Ratio, and $ value."

This is the first line. Is this the kind of thing I should send?

Equities
XOM
EXXON MOBIL CORP 50 $79.1501 -$0.8099 -$0.8099 $3,957.51 -$40.50 -1.01% $3,995.77 -$38.26 -0.96% -- No 0.56%

Otherwise, would it make any sense for me to send you the whole (blasted) thing privately, and you tell me what to post here publicly? It'd be so helpful to know how it all looks to someone else (read: someone who isn't trying to sell me something).

Very best,

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Thu Aug 23, 2018 8:59 pm

MotoTrojan sent:

[/quote]

Please tell me what you’re invested in.

Company, ETF, Mutual Fund Ticker, Name, Expense Ratio, and $ value would be a good start. Frankly I would probably just sell anything that is at a loss, and maybe everything at all, and start fresh. These are dismal returns unless you asked for maximum safety and are mostly in bonds.
[/quote]

Well, I can't connect these to the names of the columns I see on the online statement: "Company, ETF, Mutual Fund Ticker, Name, Expense Ratio, and $ value."

This is the first line. Is this the kind of thing I should send?

Equities
XOM
EXXON MOBIL CORP 50 $79.1501 -$0.8099 -$0.8099 $3,957.51 -$40.50 -1.01% $3,995.77 -$38.26 -0.96% -- No 0.56%

Otherwise, would it make any sense for me to send you the whole (blasted) thing privately, and you tell me what to post here publicly? It'd be so helpful to know how it all looks to someone else (read: someone who isn't trying to sell me something).

Very best,

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Thu Aug 23, 2018 9:09 pm

gilgamesh wrote:
Thu Aug 23, 2018 7:25 am
The only reason to switch from Schwab to Vanguard is if you are interested in “LifeStrategy Conservative Growth Fund” as Schwab doesn’t have quite the same product and certainly not at that low fee. This is an excellent option for those wanting a 60:40 stock exposure and wanting to just invest and forget about it.

If you are comfortable with something like the simple 3 fund portfolio popular on this site, Schwab is fine.
Hi, thanks for this. Yes, I've been reading on another thread about the pros and cons of switching. Been curious about staying at Schwab, partly because people complain about Vanguard's customer service. But I have to say Schwab's customer service on the last six calls I've made has been just appalling. And their 24/7 cust. serv. seems to end at about 4:30 p.m.

Your point is well taken.

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Thu Aug 23, 2018 9:30 pm

MotoTrojan wrote:
Wed Aug 22, 2018 11:36 pm
TylerLearning wrote:
Wed Aug 22, 2018 8:30 pm
MotoTrojan wrote:
Wed Aug 22, 2018 4:59 pm
TylerLearning wrote:
Wed Aug 22, 2018 3:41 pm
These are dismal returns unless you asked for maximum safety and are mostly in bonds.
I'm having trouble with replying to the right person. MotoTrojan? Gilgamesh?

No, never asked for "maximum safety." Quite the reverse, actually.

Found Investment Policy Statement, September 2017:

35% stocks 65% bonds
His fee .75 %
Notes say: the $700,000 is expected to generate interest and dividends of $18,000.
Receiving $2500/month would be a 4.3% withdrawal, so that principal would be decreasing.
His June 2018 email: As the portfolio is currently positioned the yield is 2.8%, which means the dividends and interest produce income of $20,123. That number divided by 12 months is $1,676.91. That number is not net of fees.

So, that's 2.8% minus .75%. Which, if I understand, is less than a couple of banks offer on savings?

Thanks, anybody.

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Thu Aug 23, 2018 10:04 pm

MrJones wrote:
Thu Aug 23, 2018 2:13 am
TylerLearning wrote:
Wed Aug 22, 2018 8:16 pm
I'm making serious life decisions by myself without any tools and taking time to ask pretty common sensical questions. I imagine you've made your financial decisions on the basis of an enormous body of real information and experience. I'm making this financial decision on the basis of a few emails from strangers on the internet. If you lose your money, you won't go to zero or be alone with the problem, I suspect. So thanks for your patience while I gather myself to make this imminent move.
Again, you're absolutely right. In my own case, I started investing with very small amounts (< $1000), and my financial experience grew at a rate somewhat commensurate with the amount of money invested, which has put me in a reasonably comfortable zone for the most part. In your case, you are investing a lifetime's worth of savings in one shot when you are still a financial novice. Which is hard. It would certainly put me out of my comfort zone and make me ask a ton of questions.

So please do ask away, that's what we are here for. I'm sure you're also trying to gauge the rough consensus opinion, and the diversity and range of viewpoints, which are also important before your make your decisions.

The reason I sent you that link about behaviors is to plant some seeds to possibly accelerate your learning and decision making through awareness of financial and decision making psychology. That is the value I got out of them.
Thanks for sharing what you've learned. Um, I'm not a financial novice--as in I've run three free-lance businesses including across Europe and Asia for 40 years--but an investment novice: gawd, that's the truth. What a pickle.

About range of opinions--you don't seem to be recommending the 3-Fund Portfolio others are liking. Excuse me if I'm wrong--I'll surely be re-reading what you've sent. But if this is so, why?

MrJones
Posts: 203
Joined: Sat Mar 18, 2017 2:23 am

Re: How to Begin with 1M

Post by MrJones » Fri Aug 24, 2018 12:12 am

TylerLearning wrote:
Thu Aug 23, 2018 10:04 pm
Thanks for sharing what you've learned. Um, I'm not a financial novice--as in I've run three free-lance businesses including across Europe and Asia for 40 years--but an investment novice: gawd, that's the truth. What a pickle.

About range of opinions--you don't seem to be recommending the 3-Fund Portfolio others are liking. Excuse me if I'm wrong--I'll surely be re-reading what you've sent. But if this is so, why?
Apologies, investment novice is what I meant. Corrected.

I am indeed recommending a fund portfolio as well. The question is, do you DIY that portfolio or use a "readymade" fund? I'm recommending the latter.

Simplicity is the sole reason. Are you ready to get into the complexities of asset and fund allocation, balanced withdrawals, and most importantly, do your own rebalancing based on either bands, or absolute value, or periodically? If so, by all means, go for the DIY 3 fund.

The lifestrategy find I recommended is indeed a three fund portfolio. It's got international, domestic, and bonds. In fact, it's got both international and domestic bonds, making it technically a four fund portfolio. It does all of the above that I mentioned, automatically within a single fund so you don't have to.

MotoTrojan
Posts: 2093
Joined: Wed Feb 01, 2017 8:39 pm

Re: How to Begin with 1M

Post by MotoTrojan » Fri Aug 24, 2018 10:50 am

TylerLearning wrote:
Thu Aug 23, 2018 9:30 pm
MotoTrojan wrote:
Wed Aug 22, 2018 11:36 pm
TylerLearning wrote:
Wed Aug 22, 2018 8:30 pm
MotoTrojan wrote:
Wed Aug 22, 2018 4:59 pm
TylerLearning wrote:
Wed Aug 22, 2018 3:41 pm
These are dismal returns unless you asked for maximum safety and are mostly in bonds.
I'm having trouble with replying to the right person. MotoTrojan? Gilgamesh?

No, never asked for "maximum safety." Quite the reverse, actually.

Found Investment Policy Statement, September 2017:

35% stocks 65% bonds
His fee .75 %
Notes say: the $700,000 is expected to generate interest and dividends of $18,000.
Receiving $2500/month would be a 4.3% withdrawal, so that principal would be decreasing.
His June 2018 email: As the portfolio is currently positioned the yield is 2.8%, which means the dividends and interest produce income of $20,123. That number divided by 12 months is $1,676.91. That number is not net of fees.

So, that's 2.8% minus .75%. Which, if I understand, is less than a couple of banks offer on savings?

Thanks, anybody.
It is not that simple. Stocks and bonds pay dividends but their price also goes up and down (stocks get most of their growth from price appreciation, not dividends). You can't just do the math and figure out what interest rate you are going to get.

Bond/stock funds will essentially always have a positive yield, but the annual return can be negative if the funds price goes down. This is especially shocking to many that think bonds can't lose value.

35/65 stocks/bonds is pretty low risk. I'd read up on the 3-fund portfolio and just manage it yourself at your desired AA, or use a Target/Balanced fund.

Good luck!

TylerLearning
Posts: 65
Joined: Wed Jul 11, 2018 11:41 pm

Re: How to Begin with 1M

Post by TylerLearning » Fri Aug 24, 2018 11:12 am

MotoTrojan wrote:
Fri Aug 24, 2018 10:50 am
TylerLearning wrote:
Thu Aug 23, 2018 9:30 pm
MotoTrojan wrote:
Wed Aug 22, 2018 11:36 pm
TylerLearning wrote:
Wed Aug 22, 2018 8:30 pm
MotoTrojan wrote:
Wed Aug 22, 2018 4:59 pm


I'm having trouble with replying to the right person. MotoTrojan? Gilgamesh?

No, never asked for "maximum safety." Quite the reverse, actually.

Found Investment Policy Statement, September 2017:

35% stocks 65% bonds
His fee .75 %
Notes say: the $700,000 is expected to generate interest and dividends of $18,000.
Receiving $2500/month would be a 4.3% withdrawal, so that principal would be decreasing.
His June 2018 email: As the portfolio is currently positioned the yield is 2.8%, which means the dividends and interest produce income of $20,123. That number divided by 12 months is $1,676.91. That number is not net of fees.

So, that's 2.8% minus .75%. Which, if I understand, is less than a couple of banks offer on savings?

Thanks, anybody.
It is not that simple. Stocks and bonds pay dividends but their price also goes up and down (stocks get most of their growth from price appreciation, not dividends). You can't just do the math and figure out what interest rate you are going to get.

Bond/stock funds will essentially always have a positive yield, but the annual return can be negative if the funds price goes down. This is especially shocking to many that think bonds can't lose value.

35/65 stocks/bonds is pretty low risk. I'd read up on the 3-fund portfolio and just manage it yourself at your desired AA, or use a Target/Balanced fund.

Good luck!
Well, thanks. Not sure about this: "You can't just do the math and figure out what interest rate you are going to get." This "the yield is 2.8" is a quote for the FA, not me. Are you saying he oversimplified?

My own comment was trying to get at his "That number is not net of fees" sentence. Let me ask a different way: If his fees are close to $500/month, and he's suggesting that he can provide me with $1,676.91 "net of fees", it means he is suggesting I will have around $1100/month from investing my $700,000 with him. And he will have around $500/month from that same $700,000.

I do understand your point that the arrangement with him is a poor one one several different grounds.

Thanks very much.

MotoTrojan
Posts: 2093
Joined: Wed Feb 01, 2017 8:39 pm

Re: How to Begin with 1M

Post by MotoTrojan » Fri Aug 24, 2018 11:39 am

TylerLearning wrote:
Fri Aug 24, 2018 11:12 am
MotoTrojan wrote:
Fri Aug 24, 2018 10:50 am
TylerLearning wrote:
Thu Aug 23, 2018 9:30 pm
MotoTrojan wrote:
Wed Aug 22, 2018 11:36 pm
TylerLearning wrote:
Wed Aug 22, 2018 8:30 pm


It is not that simple. Stocks and bonds pay dividends but their price also goes up and down (stocks get most of their growth from price appreciation, not dividends). You can't just do the math and figure out what interest rate you are going to get.

Bond/stock funds will essentially always have a positive yield, but the annual return can be negative if the funds price goes down. This is especially shocking to many that think bonds can't lose value.

35/65 stocks/bonds is pretty low risk. I'd read up on the 3-fund portfolio and just manage it yourself at your desired AA, or use a Target/Balanced fund.

Good luck!
Well, thanks. Not sure about this: "You can't just do the math and figure out what interest rate you are going to get." This "the yield is 2.8" is a quote for the FA, not me. Are you saying he oversimplified?

My own comment was trying to get at his "That number is not net of fees" sentence. Let me ask a different way: If his fees are close to $500/month, and he's suggesting that he can provide me with $1,676.91 "net of fees", it means he is suggesting I will have around $1100/month from investing my $700,000 with him. And he will have around $500/month from that same $700,000.

I do understand your point that the arrangement with him is a poor one one several different grounds.

Thanks very much.
He’s telling you how much income the portfolio will generate which is easier to predict/assume, but the price of funds can also change. Individual bonds won’t but you don’t need those. Stocks obviously do.

Example: Would you want to put $100 into a bond fund paying 5% if you knew the value of the fund was going down 10% a year? Of course not.

You need to do some more reading. Intro to Bogleheads would be a great book to start. In the meantime get out of this advisors grasp.

gilgamesh
Posts: 1087
Joined: Sun Jan 10, 2016 9:29 am

Re: How to Begin with 1M

Post by gilgamesh » Fri Aug 24, 2018 2:44 pm

TylerLearning wrote:
Fri Aug 24, 2018 11:12 am
MotoTrojan wrote:
Fri Aug 24, 2018 10:50 am


It is not that simple. Stocks and bonds pay dividends but their price also goes up and down (stocks get most of their growth from price appreciation, not dividends). You can't just do the math and figure out what interest rate you are going to get.

Bond/stock funds will essentially always have a positive yield, but the annual return can be negative if the funds price goes down. This is especially shocking to many that think bonds can't lose value.

35/65 stocks/bonds is pretty low risk. I'd read up on the 3-fund portfolio and just manage it yourself at your desired AA, or use a Target/Balanced fund.

Good luck!
Well, thanks. Not sure about this: "You can't just do the math and figure out what interest rate you are going to get." This "the yield is 2.8" is a quote for the FA, not me. Are you saying he oversimplified?

My own comment was trying to get at his "That number is not net of fees" sentence. Let me ask a different way: If his fees are close to $500/month, and he's suggesting that he can provide me with $1,676.91 "net of fees", it means he is suggesting I will have around $1100/month from investing my $700,000 with him. And he will have around $500/month from that same $700,000.

I do understand your point that the arrangement with him is a poor one one several different grounds.

Thanks very much.

Your principal (based on each situation) shoots out interests, dividends and capital gains. You are ignoring capital gains.

My portfolio has minimal dividends and interests, my returns are mostly capital gains. I’d be very Disappointed with returns if I ignore capital gains. Even worse, if I ignore capital gains, I will give unfair weight to only 2/3rd of returns and draw erroneous conclusions - like you are doing.

Also, your paragraph on you getting $1100 and him getting $500 is all wrong...investing is not that neat. There is no such thing as you getting a certain amount leaving the principal untouched, when it comes to stocks. They are unpredictable. All we have are guidelines based on past performance, such as the 4% rule you’ve been already informed.

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