A Schwab Story... but some Vanguard too

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Sillyivan
Posts: 6
Joined: Thu Sep 06, 2018 2:20 pm

A Schwab Story... but some Vanguard too

Post by Sillyivan » Wed Mar 13, 2019 3:07 pm

After visiting this site frequently over the last two years, finally found the gumption to post the current state of our retirement investments and request guidance. My wife and I are both 61 and will probably begin taking our Writers’ Guild pensions in 18 months. Fortunately this should cover most all of our expenses at present. We have a low six figure mortgage @ 4.25% - our home being our largest asset. We have two grown children and anticipate paying for a wedding and helping with a first home in the next year or so.

We’re not “retiring” until the script requests stop, so any additional writing gigs after our pensions commence will accumulate in new accounts that I believe can be accessed around age 70 in either a monthly payment or a lump sum.

We have an S corporation. Our portfolio (mid 6 figures) at Schwab consists of 2 SEP accounts (maxed-out per our income), 2 IRA rollovers & 2 Roths. About one third is managed gratis by Schwab’s Intelligent Portfolio – 1 Roth & 1 IRA rollover. It’s a blizzard of ETFs, probably too many - but so far it’s keeping pace with the market, a good thing.

Based on Boglehead posts and other robo-advisor input (Personal Capital and Future Advisor) I’ve invested the other two thirds in low expense ratio ETFs. Almost evenly divided between Vanguard and Schwab products. My results are very similar to the Intelligent Portfolio using half as many funds. Go figure.

Overall allocations: 7% International Bonds; 36% US Bonds; 21% International stocks; 18% US stocks; 7% in US Real Estate REITs, and 11% cash (which means we have mid five figures to invest, mostly held in our SEP accounts ).

A recent snapshot using the Personal Capital app indicates our approach is too conservative and we’re “overweight” in US Bonds, “underweight” in US stocks. Similarly overweight in Large Cap Core and most underweight in Large Cap Growth & Small Cap Growth. Re: sector allocation we’re overweight in Industrials and underweight in Basic Materials, Communication Services, Energy and Utilities.

So it seems a rebalancing is probably in order. To that beginning, how best to invest the cash? Do I attempt to bolster the funds we already have to address the underweight issues? If so, using dollar cost averaging, like say 7-8% a month till the next SEP contributions are due?

Or is it time to pay a pro for an hour’s wisdom for next steps? Thanks for any enlightenment.

megabad
Posts: 2460
Joined: Fri Jun 01, 2018 4:00 pm

Re: A Schwab Story... but some Vanguard too

Post by megabad » Wed Mar 13, 2019 3:48 pm

Sillyivan wrote:
Wed Mar 13, 2019 3:07 pm
After visiting this site frequently over the last two years, finally found the gumption to post the current state of our retirement investments and request guidance. My wife and I are both 61 and will probably begin taking our Writers’ Guild pensions in 18 months. Fortunately this should cover most all of our expenses at present. We have a low six figure mortgage @ 4.25% - our home being our largest asset. We have two grown children and anticipate paying for a wedding and helping with a first home in the next year or so.

We’re not “retiring” until the script requests stop, so any additional writing gigs after our pensions commence will accumulate in new accounts that I believe can be accessed around age 70 in either a monthly payment or a lump sum.

We have an S corporation. Our portfolio (mid 6 figures) at Schwab consists of 2 SEP accounts (maxed-out per our income), 2 IRA rollovers & 2 Roths. About one third is managed gratis by Schwab’s Intelligent Portfolio – 1 Roth & 1 IRA rollover. It’s a blizzard of ETFs, probably too many - but so far it’s keeping pace with the market, a good thing.

Based on Boglehead posts and other robo-advisor input (Personal Capital and Future Advisor) I’ve invested the other two thirds in low expense ratio ETFs. Almost evenly divided between Vanguard and Schwab products. My results are very similar to the Intelligent Portfolio using half as many funds. Go figure.

Overall allocations: 7% International Bonds; 36% US Bonds; 21% International stocks; 18% US stocks; 7% in US Real Estate REITs, and 11% cash (which means we have mid five figures to invest, mostly held in our SEP accounts ).

A recent snapshot using the Personal Capital app indicates our approach is too conservative and we’re “overweight” in US Bonds, “underweight” in US stocks. Similarly overweight in Large Cap Core and most underweight in Large Cap Growth & Small Cap Growth. Re: sector allocation we’re overweight in Industrials and underweight in Basic Materials, Communication Services, Energy and Utilities.

So it seems a rebalancing is probably in order. To that beginning, how best to invest the cash? Do I attempt to bolster the funds we already have to address the underweight issues? If so, using dollar cost averaging, like say 7-8% a month till the next SEP contributions are due?

Or is it time to pay a pro for an hour’s wisdom for next steps? Thanks for any enlightenment.
I would first ask yourself if you agree with Personal Capital's claim that your are "over/underweight" in some areas. Everyone has different risk tolerances and goals so I would take any exact allocation recommendations with a grain of salt and use your own judgement.

Personally, in retirement accounts where there are not tax consequences, I prefer to instantly rebalance if I fall outside of my rebalance bands. Dollar cost averaging works as well, but is slower but takes less of an emotional toll on some folks so some prefer.

You sound as if you feel very confident handling your own investments given that you have a sizable ETF portfolio that your are self managing. I would not think you necessarily are in need of investment advice, but an hourly fee based advisor visit can be fine for a one time review if you and spouse think it would be fruitful.

Whether you use an advisor or not, my primary planning goals at your stage in life would be tax planning, not asset allocation. Based on your comments, you are likely to have very high taxable income once your turn 70.5 and receive SS and RMDs on top of the pensions. There may be steps you can take prior to that time to reduce your tax burden but it is hard to tell given the limited info here.

Topic Author
Sillyivan
Posts: 6
Joined: Thu Sep 06, 2018 2:20 pm

Re: A Schwab Story... but some Vanguard too

Post by Sillyivan » Wed Mar 13, 2019 4:32 pm

Thanks for your thoughtful comments. Point well taken about tax planning. More reading in store...

S

User avatar
Tyler Aspect
Posts: 1562
Joined: Mon Mar 20, 2017 10:27 pm
Location: California
Contact:

Re: A Schwab Story... but some Vanguard too

Post by Tyler Aspect » Wed Mar 13, 2019 4:49 pm

You might have a double allocation to US REITs, as S&P 500 index already contains REITs.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

Topic Author
Sillyivan
Posts: 6
Joined: Thu Sep 06, 2018 2:20 pm

Re: A Schwab Story... but some Vanguard too

Post by Sillyivan » Thu Mar 14, 2019 10:07 am

Will check that out. Thanks.

PSM
Posts: 15
Joined: Thu Aug 16, 2018 9:52 am

Re: A Schwab Story... but some Vanguard too

Post by PSM » Thu Mar 14, 2019 10:28 am

I am a Schwab customer too. Last year, I was using several Intelligent Portfolios; however, their required "cash" allocation began to drag on returns since they paid only about .40% on cash. So, we switched back to managing everything ourselves in regular accounts (main taxable brokerage, 2 rollover IRA's, inherited IRA, checking). Since I saw their assumptions regarding diversified investments, I thought it was better to just do it all myself and earn 2.3% on un-invested cash/emergency fund in their Value Advantage Money Market Fund. Plus, it was better that I just manage all cash in my main brokerage and checking accounts, and not have part of it sitting in IRA's waiting for withdrawal in a few years.

Topic Author
Sillyivan
Posts: 6
Joined: Thu Sep 06, 2018 2:20 pm

Re: A Schwab Story... but some Vanguard too

Post by Sillyivan » Thu Mar 14, 2019 5:27 pm

Thanks for heads up re Value Advantage Money Market. Much to research.

S

User avatar
unclescrooge
Posts: 3888
Joined: Thu Jun 07, 2012 7:00 pm

Re: A Schwab Story... but some Vanguard too

Post by unclescrooge » Fri Mar 15, 2019 4:51 pm

Personal capital keeps telling me I'm too conservative as well.

It fails to realize that my EM fund isn't part of my long term investment strategy.

It also does a poor job of accurately categorizing closed end funds, and marks them as unknown.

Post Reply