Seeking advise on portfolio 34yo (switching out of Vanguard advising services)

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Topic Author
jazzzz2016
Posts: 9
Joined: Thu Sep 05, 2019 5:05 pm

Seeking advise on portfolio 34yo (switching out of Vanguard advising services)

Post by jazzzz2016 » Tue Sep 10, 2019 7:56 pm

Hi all,

Recently I decided to switch out of Vanguard advising services and invest on my own thanks to reading some books and from this forum! I had different funds from work and merill lynch transferred to Vanguard advising services around 2 years ago. Each time when I asked them to make my portfolio into the simple funds, they recommended against it due to "potential tax implications".

Age: 34. Married. No debt.
Porfolio size: ~100k
Desired AA: 30 bond/70 stocks
Tax rate: 24% Fed, 9%State

Current retirement assets with vanguard advisors

Taxable
Vanguard 500 Index Fund Adm 6.1%
Vanguard Extended Mkt Index Adm 4.5%
Vanguard Growth Index Fund Adm 0.9%
Vanguard Growth ETF 1.8%
Vanguard Value ETF 2.1%
Vanguard Total Int Stock Mkt Idx Adm 18.6%
Vanguard Tot Stock Ix Admiral 17%
Roth IRA
Vanguard Total Bond Mkt Index Adm 9.4%
Vanguard Tot Intl Bond Ix Admiral 4.0%
Vanguard Tot Intl Stock Ix Admiral 0.7%
Solo 401k
Vanguard 500 Index Fund Adm 2.5%
Vanguard Target Retirement 2045 32.2%

New AA to be executed with target %

Taxable
Vanguard Total Int Stock Mkt Idx Adm (VTIAX) 10%
Vanguard Tot Stock Ix Admiral (VTSAX) 40%
Roth IRA
Vanguard 500 Index Fund Adm (VFIAX) 15%
Solo 401k
Vanguard 500 Index Fund Adm 5%
Vanguard Total Bond Mkt Index Adm 30%

Questions
1. Is my new AA is good for tax loss harvesting in future when needed?
2. Should I setup future dividends to be autoreinvested?
2. Any feedback regarding my new AA is greatly appreciated!

CoastalWinds
Posts: 438
Joined: Sat Apr 06, 2019 8:28 pm

Re: Seeking advise on portfolio 34yo (switching out of Vanguard advising services)

Post by CoastalWinds » Tue Sep 10, 2019 8:04 pm

Looks good, although unless you plan to be out of the market for 30 days after TLHing, you’ll (eventually) need to find a suitable partner for your taxable holdings. You could use VTCLX with VTSAX and VFWAX with VTIAX.

The wiki has good info on pros/cons of DIV reinvestment. Personally, I would reinvest in tax-advantaged accounts but for taxable account I would direct DIV to a MM fund (such as VUSXX) and use this to periodically re-buy the under-represented class (to re-balance and avoid excessive lots).

AA looks fine, although I see you are lowering your Intl % pretty significantly from current. It’s fine as long as this is your new plan per an IPS (as opposed to reacting to poor recent performance).

megabad
Posts: 2382
Joined: Fri Jun 01, 2018 4:00 pm

Re: Seeking advise on portfolio 34yo (switching out of Vanguard advising services)

Post by megabad » Wed Sep 11, 2019 10:33 am

jazzzz2016 wrote:
Tue Sep 10, 2019 7:56 pm
Questions
1. Is my new AA is good for tax loss harvesting in future when needed?
I would prefer to hold mostly 500 Index in taxable personally instead of Total Stock since it is ever so slightly more tax efficient. Obviously Vanguard is right that you will be paying an unnecessary tax bill on these transactions, but the amount should not be overwhelming giving the current size of your portfolio and it will likely not get significantly smaller in the distant future. If you are depleting your taxable anyway, probably not a big deal (I can't tell). I would strongly suggest using the 401k and IRAs first and that is 68k per year right there. If you aren't doing that, than I think you should just deplete your taxable to fund those.
2. Should I setup future dividends to be autoreinvested?
Are you adding to the taxable with contributions each year? If you adding significantly each year, it probably doesn't matter much either way. If not, you may want to redirect dividends to rebalance.
2. Any feedback regarding my new AA is greatly appreciated!
You are quite a bit lower on international exposure than many folks and firms currently suggest. Completely up to you though. Just thought I should point it out. Also, be ready to change your fund choices since your accounts might see rapid growth (from contributions). I can see you eventually having a pretty big large focus unless you add an ext mkt fund in there. If you want a large tilt, this is ok I suppose, but this is not a very common tilt these days.

Topic Author
jazzzz2016
Posts: 9
Joined: Thu Sep 05, 2019 5:05 pm

Re: Seeking advise on portfolio 34yo (switching out of Vanguard advising services)

Post by jazzzz2016 » Wed Sep 11, 2019 11:13 pm

CoastalWinds wrote:
Tue Sep 10, 2019 8:04 pm
Looks good, although unless you plan to be out of the market for 30 days after TLHing, you’ll (eventually) need to find a suitable partner for your taxable holdings. You could use VTCLX with VTSAX and VFWAX with VTIAX.

The wiki has good info on pros/cons of DIV reinvestment. Personally, I would reinvest in tax-advantaged accounts but for taxable account I would direct DIV to a MM fund (such as VUSXX) and use this to periodically re-buy the under-represented class (to re-balance and avoid excessive lots).

AA looks fine, although I see you are lowering your Intl % pretty significantly from current. It’s fine as long as this is your new plan per an IPS (as opposed to reacting to poor recent performance).
Thank you so much!

Topic Author
jazzzz2016
Posts: 9
Joined: Thu Sep 05, 2019 5:05 pm

Re: Seeking advise on portfolio 34yo (switching out of Vanguard advising services)

Post by jazzzz2016 » Wed Sep 11, 2019 11:17 pm

megabad wrote:
Wed Sep 11, 2019 10:33 am
jazzzz2016 wrote:
Tue Sep 10, 2019 7:56 pm
Questions
1. Is my new AA is good for tax loss harvesting in future when needed?
I would prefer to hold mostly 500 Index in taxable personally instead of Total Stock since it is ever so slightly more tax efficient. Obviously Vanguard is right that you will be paying an unnecessary tax bill on these transactions, but the amount should not be overwhelming giving the current size of your portfolio and it will likely not get significantly smaller in the distant future. If you are depleting your taxable anyway, probably not a big deal (I can't tell). I would strongly suggest using the 401k and IRAs first and that is 68k per year right there. If you aren't doing that, than I think you should just deplete your taxable to fund those.
2. Should I setup future dividends to be autoreinvested?
Are you adding to the taxable with contributions each year? If you adding significantly each year, it probably doesn't matter much either way. If not, you may want to redirect dividends to rebalance.
2. Any feedback regarding my new AA is greatly appreciated!
You are quite a bit lower on international exposure than many folks and firms currently suggest. Completely up to you though. Just thought I should point it out. Also, be ready to change your fund choices since your accounts might see rapid growth (from contributions). I can see you eventually having a pretty big large focus unless you add an ext mkt fund in there. If you want a large tilt, this is ok I suppose, but this is not a very common tilt these days.
Thank you for the feedback!

Lafder
Posts: 3979
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: Seeking advise on portfolio 34yo (switching out of Vanguard advising services)

Post by Lafder » Thu Sep 12, 2019 12:06 am

There are no tax consequences to moving around your retirement accounts.

There may be capital gains taxes due if you sell and move your taxable accounts. Have you looked at your cost basis on all of your taxable holdings to look at worst case scenario taxes due if you sell current holdings to buy new?

I have my dividends set to reinvest most of the time. I thought I might need more cash so I set my taxable account to not reinvest so the tax is already paid on the dividends if I need to spend them.

lafder

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