retirement planning

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Tjb
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Joined: Mon Jul 20, 2015 4:17 pm

retirement planning

Post by Tjb » Thu Mar 14, 2019 6:14 pm

Question

I have just started the Vanguard Advisor process. I want to know is there an incentive for the advisor to get you to do something ? For example I have started moving money from my employer ESOP and I have put 250K into a 3 year 3% CD. Just to park it until I move the rest which is over 5M. I have moved 1M and I have some in Balanced Index VBIAX and Some in intermediate bond VBILX and the CD. The advisor recommended selling the CD, which for 3 years I can't see it.
'
Keep in mind, I am shooting for a very conservative portfolio. I have taken enough risk, and in fact probably the worst, but ended up being the most lucrative risk in having everything in Employer stock. Now, I'm pulling it out with a plan to retire in 2 years and want to set up a sustaining withdrawal plan, with minimal risk but decent income. 3-4% maybe 75 bond and CD's and 25 index funds.

Our first look at this a few months back, I got the basic total stock market portfolio, but I really would prefer to have as little in stocks a possible. I am curios if the advisor goal is just to get you spread out into funds because they were compensated for that. No CD's and no individual bonds, and she really wanted me out of the balanced index fund VBIAX. Not that its a bad plan, but what wrong with a little more safety and VBIAX is 60/40 Stock bond, as a portion of the mix.

I'm sure I'll ask some more questions once I get more transfers going into Vanguard.

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Taylor Larimore
Advisory Board
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Vanguard Personal Advisor Services (PAS)?

Post by Taylor Larimore » Thu Mar 14, 2019 7:16 pm

I have just started the Vanguard Advisor process. I want to know is there an incentive for the advisor to get you to do something ?
Tjb:

Vanguard advisors are NOT paid a commission or other incentive to recommend specific funds. Vanguard itself has no reason to recommend specific funds because Vanguard is the only mutual fund company whose profits go back to their shareholders in reduced costs.

Vanguard has no conflict-of-interest which is prevalent in much of the financial industry.

Our family uses Vanguard PAS service. We are very satisfied.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

JBTX
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Joined: Wed Jul 26, 2017 12:46 pm

Re: retirement planning

Post by JBTX » Thu Mar 14, 2019 8:10 pm

Tjb wrote:
Thu Mar 14, 2019 6:14 pm
Question

I have just started the Vanguard Advisor process. I want to know is there an incentive for the advisor to get you to do something ? For example I have started moving money from my employer ESOP and I have put 250K into a 3 year 3% CD. Just to park it until I move the rest which is over 5M. I have moved 1M and I have some in Balanced Index VBIAX and Some in intermediate bond VBILX and the CD. The advisor recommended selling the CD, which for 3 years I can't see it.
'
Keep in mind, I am shooting for a very conservative portfolio. I have taken enough risk, and in fact probably the worst, but ended up being the most lucrative risk in having everything in Employer stock. Now, I'm pulling it out with a plan to retire in 2 years and want to set up a sustaining withdrawal plan, with minimal risk but decent income. 3-4% maybe 75 bond and CD's and 25 index funds.

Our first look at this a few months back, I got the basic total stock market portfolio, but I really would prefer to have as little in stocks a possible. I am curios if the advisor goal is just to get you spread out into funds because they were compensated for that. No CD's and no individual bonds, and she really wanted me out of the balanced index fund VBIAX. Not that its a bad plan, but what wrong with a little more safety and VBIAX is 60/40 Stock bond, as a portion of the mix.

I'm sure I'll ask some more questions once I get more transfers going into Vanguard.
Did the advisor have the benefit of knowing your entire situation. By itself, sitting on $250k of cds seems overly conservative. But taken in context of having 4-5 million in employer stock options, it is very reasonable.

All equal, I'd get out of the employer stock options as soon as I realistically could. With 5 million you can spend $150k to $200k per year with no other income, but only with a more aggressive allocation. Once out of stock options, if it were me I'd go heavier than 25% stocks. I'd go 50-60%, but you need to do what you are comfortable with. If you young (less than 50) be prepared that mostly bonds and cash will necessitate lower withdrawal rates. Assume bonds and cash after tax roughly equal inflation. If you need your portfolio to last 40 years, 100/40=2.5% annual withdrawal rate for your bond/cash investments. 50 years = 2.0%. So your $150k+ per year goes down to $100k-$125k per year.

Living Free
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Re: retirement planning

Post by Living Free » Fri Mar 15, 2019 7:42 am

Tjb wrote:
Thu Mar 14, 2019 6:14 pm


Our first look at this a few months back, I got the basic total stock market portfolio, but I really would prefer to have as little in stocks a possible.
I agree with above that you need stocks particularly if you've got a decently long life expectancy.

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Raybo
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Re: retirement planning

Post by Raybo » Fri Mar 15, 2019 8:50 am

It is unlikely that an allocation that is 75% bonds will return 4% a year going forward. If you told the FA at Vanguard that you wanted to make 4% a year and you have a CD earning 3%, it makes sense that the FA would suggest selling it and moving it into something else.

We would all like to have a low-risk portfolio that meets our retirement needs. Alas, it usually isn't possible. Especially for those of us whose assets aren't so large that we can get all we need from a 25/75 AA.

You might look into various withdrawal methods to see what options you have. Here is one example: viewtopic.php?t=192105 .
No matter how long the hill, if you keep pedaling you'll eventually get up to the top.

dbr
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Re: retirement planning

Post by dbr » Fri Mar 15, 2019 9:10 am

You would have to ask the advisor why he recommended that, but more to the point what is the overall plan? If all of your assets are going to be at Vanguard under their advice, then that is the plan you want to see. It also needs to be known what the rest of your investment situation is. It could be that addressing tax efficiency is a large consideration for you.

Are you retiring now, already retired, planning for retirement soon, or still working for some time?

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abuss368
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Re: retirement planning

Post by abuss368 » Fri Mar 15, 2019 3:37 pm

Tjb wrote:
Thu Mar 14, 2019 6:14 pm
Question

I have just started the Vanguard Advisor process. I want to know is there an incentive for the advisor to get you to do something ? For example I have started moving money from my employer ESOP and I have put 250K into a 3 year 3% CD. Just to park it until I move the rest which is over 5M. I have moved 1M and I have some in Balanced Index VBIAX and Some in intermediate bond VBILX and the CD. The advisor recommended selling the CD, which for 3 years I can't see it.
'
Keep in mind, I am shooting for a very conservative portfolio. I have taken enough risk, and in fact probably the worst, but ended up being the most lucrative risk in having everything in Employer stock. Now, I'm pulling it out with a plan to retire in 2 years and want to set up a sustaining withdrawal plan, with minimal risk but decent income. 3-4% maybe 75 bond and CD's and 25 index funds.

Our first look at this a few months back, I got the basic total stock market portfolio, but I really would prefer to have as little in stocks a possible. I am curios if the advisor goal is just to get you spread out into funds because they were compensated for that. No CD's and no individual bonds, and she really wanted me out of the balanced index fund VBIAX. Not that its a bad plan, but what wrong with a little more safety and VBIAX is 60/40 Stock bond, as a portion of the mix.

I'm sure I'll ask some more questions once I get more transfers going into Vanguard.
Welcome to the forum! Vanguard launched the PAS service a few years ago. The service is very low cost and the advisor's are not compensated by commissions or other fees.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Peter Foley
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Re: retirement planning

Post by Peter Foley » Sat Mar 16, 2019 10:33 am

Again welcome to the forum.

I'm going to offer a contrarian point of view regarding the CD.

I don't think $250K in a 3% CD is unreasonable when one considers your total portfolio. Given where we are in the long term interest rate cycle, I too would want something to counterbalance total bond fund. As long as the CD's keep up with inflation, they are fine. Going with a shorter term bond fund is also a reasonable approach.

As to an overall conservative approach, 25% equities is pretty conservative. I would be more comfortable with a 40% equities minimum.

Wade Pfau's Rising Equity Glide Path is worth reading. It basically says that being a little extra conservative around the time you retire is not a bad approach as it guards against a poor sequence of returns.

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