Help with steps for simplifying/rebalancing for parents portfolio

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
waldo81
Posts: 8
Joined: Sat Jun 27, 2020 7:23 am

Help with steps for simplifying/rebalancing for parents portfolio

Post by waldo81 » Mon Jun 29, 2020 3:52 pm

Ok, So I've been crunching the numbers. Situation is my parents have a total of 262,753 split between three different accounts at Fidelity. They have each given my full authority to take over and simplify their fund situation. My Dad's only instruction so far has to been to keep approximately the same ratio of stocks to bonds to start. Here goes. My mom and dad are 76 and 71 respectively. My Dad also has 190K in TSP with about 20/80 asset allocation. They also each have a trust also that will pass to me and my sister. My dad's is 80K with 20/80 allocation and my Mom's is 55K with 20/80 alocation. My Dad's is at Fidelity and my Mom's is at Vanguard. I think she basically slowly transferred her small IRA to the trust. They basically fill these with RMDs at this point and they are revocable and could be used as emergency fund. They have pension income of about 100K and own their home (about 170k). The only big expense in their future is they may want to move closer to me as they get older and I live in a higher cost of living area. I'm focusing on the Fidelity accounts to start. For simplicity sake, i do not plan to touch the small percent in FDRXX and i just included that in the bond asset allocation. Also a lot of the stock funds have a small intl allocation except where noted in which case it is a larger.

Total 262,753 (56/44)
Rollover IRA 164,911 (40/60)
Roth IRA Dad 48,735 (64/36)
Roth IRA Mom 49,107 (100/0)

Rollover IRA
Stocks
AKREX 30206 1.32
FUNDX 14526 1.84
ACMVX 11892 .98
VIGI (intl) (ETF) .2

Bonds
DLSNX 17212 .68
MWCRX 12458 1.03
OSTIX 11429 .85
DLFNX 9872 .73
INCMX 9728 1.63
JAFIX 9629 .7
VFSTX 9010 .2
FGMNX 8631 .45

Short Term
FDRXX 10753

Roth IRA (Dad) 48735
Stocks
FCNTX 20222 .85
Balanced fund
VWINX (38/62) 28507 .23

Roth IRA (Mom) 49107
Stocks
ARTRX (intl) 17631
VDIGX 31476

My goals are three fund portfolio with 50/50 allocation. About 80/20 for domestic/intl split so would be 40/10/50 for final result so I will need to transition a small amount of stocks to bonds to achieve this. I am thinking do each step over a period of day so as to avoid a ton of moves on the same day
Step 1 - start with stocks in Rollover IRA and my Dad's Roth IRA. This will take care of the minor stock to bond shift
FUNDX 14526 and ACMVX 11892 both to FXNAX
FCNTX 20222 and VWINX 28507 both to FSKAX
Step 2 - Move remaining stocks in Rollover IRA
AKREX 30206 to FSKAX
VIGI (ETF) 9533 to FTIHX
Step 3 - Move stocks in Mom's Roth IRA
ARTRX 17631 to FTIHX
VDIGX 31476 to FSKAX
Step 4 - consolidate all remaining bonds in rollover IRA to FXNAX (might not do this all on same day)

End result:
FSKAX 110411 42%
FTIHX 27164 10%
FXNAX 114387 44%
FDRXX 10786 4%

I guess I just need to show this to someone to make sure this doesn't sound crazy to do this. Any and all thoughts appreciated. Next step maybe not even this year would be talk to my Dad about this 50/50 asset allocation at his age but I'll save that for another post. :)

retired@50
Posts: 2985
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Help with steps for simplifying/rebalancing for parents portfolio

Post by retired@50 » Mon Jun 29, 2020 3:57 pm

You should probably include the full mutual fund or ETF name so contributors don't have to look up all those ticker symbols. Don't forget the expense ratios too. Use the pencil icon to edit your original post.

Regards,
This is one person's opinion. Nothing more.

User avatar
Duckie
Posts: 7365
Joined: Thu Mar 08, 2007 2:55 pm

Re: Help with steps for simplifying/rebalancing for parents portfolio

Post by Duckie » Mon Jun 29, 2020 7:09 pm

waldo81 wrote:My Dad also has 190K in TSP with about 20/80 asset allocation. They also each have a trust also that will pass to me and my sister. My dad's is 80K with 20/80 allocation and my Mom's is 55K with 20/80 alocation. My Dad's is at Fidelity and my Mom's is at Vanguard. I think she basically slowly transferred her small IRA to the trust.
So it looks like they actually have:
  • His taxable trust at Fidelity -- $80K -- 14%
    Her taxable trust at Vanguard -- $55K -- 9%
    His Thrift Savings Plan -- $190K -- 33%
    His Rollover IRA at Fidelity -- $165K -- 28%
    His Roth IRA at Fidelity -- $49K -- 8%
    Her Roth IRA at Fidelity -- $49K -- 8%
By putting 50/50 in just the three IRAs you are not considering the entire portfolio as a whole. Also, you are shifting from their previous 20/80 to your 50/50. Are you investing for them or for you?
For simplicity sake, i do not plan to touch the small percent in FDRXX and i just included that in the bond asset allocation.
You really don't need a money market account in an IRA since there already is a settlement fund.
My goals are three fund portfolio with 50/50 allocation. About 80/20 for domestic/intl split so would be 40/10/50 for final result so I will need to transition a small amount of stocks to bonds to achieve this. I am thinking do each step over a period of day so as to avoid a ton of moves on the same day
Step 1 - start with stocks in Rollover IRA and my Dad's Roth IRA. This will take care of the minor stock to bond shift
FUNDX 14526 and ACMVX 11892 both to FXNAX
FCNTX 20222 and VWINX 28507 both to FSKAX
Step 2 - Move remaining stocks in Rollover IRA
AKREX 30206 to FSKAX
VIGI (ETF) 9533 to FTIHX
Step 3 - Move stocks in Mom's Roth IRA
ARTRX 17631 to FTIHX
VDIGX 31476 to FSKAX
Step 4 - consolidate all remaining bonds in rollover IRA to FXNAX (might not do this all on same day)

End result:
FSKAX 110411 42%
FTIHX 27164 10%
FXNAX 114387 44%
FDRXX 10786 4%

I guess I just need to show this to someone to make sure this doesn't sound crazy to do this. Any and all thoughts appreciated.
A simpler method is to sell the funds you don't want in each IRA and have that money go into the accounts' settlement funds. Once you've sold everything you can shift the settlement fund cash into the funds you do want at the percentages you do want.

HomeStretch
Posts: 4601
Joined: Thu Dec 27, 2018 3:06 pm

Re: Help with steps for simplifying/rebalancing for parents portfolio

Post by HomeStretch » Mon Jun 29, 2020 7:24 pm

It isn’t 100% clear to me which holdings end up in each of the three Fidelity accounts that combined currently have a 56/44 asset allocation (AA). For the desired 40/10/50 AA in the Fidelity accounts, consider:

Dad’s Roth IRA $48,735:
18% FSKAX US TSM ($48,735)

Mom’s Roth IRA $49,107:
19% FSKAX US TSM ($49,107)

Dad’s Rollover IRA $164,911:
3% FSKAX US TSM ($7,259)
10% FTIHX International TSM ($26,275)
46% FXNAX US TBM ($120,591)
4% FDRXX Govt MMF ($10,786) - consider FXNAX instead

For best feedback on their overall portfolio, consider editing your post to include all information in the “Asking Portfolio Questions” format:
https://www.bogleheads.org/wiki/Asking_ ... _questions

Topic Author
waldo81
Posts: 8
Joined: Sat Jun 27, 2020 7:23 am

Re: Help with steps for simplifying/rebalancing for parents portfolio

Post by waldo81 » Tue Jun 30, 2020 1:12 pm

Thanks everyone for the feedback so far. Still new to the forum and understanding finances so sorry for not getting things right. I'm at work now so will try to update my post in the correct format tonight. In the interim, I did want to be clear that all the money except for the non-trust accounts is allocated at 20/80. Meaning the trust in my Dad's name is 20/80 and the Trust in my Mom's name is 20/80 and the TSP money is 20/80. The remaining money which is all at Fidelity is divided between three accounts (one Rollover IRA in my Dads name, one Roth IRA in my Mom's name and another Roth IRA in my Dad's name). This money is currently allocated about 56/44 and is spread between a bunch of different funds with high expense ratios as you can see. It is this money that I would am hoping to reallocate all to low index funds in a 50/50 ratio so really just keeping things the same but making the portfolio simpler and with lower expenses. Also, I would like to have Roth IRA with stocks and put any bond or intl funds in the rollover. Whether my Dad wants to make his allocation more or less conservative at age 76 would be deferred to a later time. Thanks again. I'll update my original post will more specifics tonight to help make things easier. Doing this helps me plan it out as well so I appreciate it.

HomeStretch
Posts: 4601
Joined: Thu Dec 27, 2018 3:06 pm

Re: Help with steps for simplifying/rebalancing for parents portfolio

Post by HomeStretch » Tue Jun 30, 2020 1:48 pm

HomeStretch wrote:
Mon Jun 29, 2020 7:24 pm
It isn’t 100% clear to me which holdings end up in each of the three Fidelity accounts that combined currently have a 56/44 asset allocation (AA). For the desired 40/10/50 AA in the Fidelity accounts, consider:

Dad’s Roth IRA $48,735:
18% FSKAX US TSM ($48,735)

Mom’s Roth IRA $49,107:
19% FSKAX US TSM ($49,107)

Dad’s Rollover IRA $164,911:
3% FSKAX US TSM ($7,259)
10% FTIHX International TSM ($26,275)
46% FXNAX US TBM ($120,591)
4% FDRXX Govt MMF ($10,786) - consider FXNAX instead

For best feedback on their overall portfolio, consider editing your post to include all information in the “Asking Portfolio Questions” format:
https://www.bogleheads.org/wiki/Asking_ ... _questions
It looks like your parents' overall portfolio asset allocation (AA) is 36% equities and 64% fixed income. This is based on the current 20/80 allocation in His Trust, Her Trust and His TSP totaling $325k and the current 56/44 allocation in their 3 Fidelity IRA accounts totaling $263k.

Confirm with your dad and mom that 36/64 is their desired AA for their overall portfolio. It's a reasonable, conservative allocation for their age. But in determining their desired overall AA, it would be helpful to know whether their retirement income ($100k for pension, any social security income?, etc.) fully covers all their expenses (including living expenses, healthcare, income taxes, lumpy expenses like car purchases and home repairs/maintenance). It would also be helpful to know whether they have long-term care (LTC) insurance or if they are self-insured for possible future LTC expenses. If self-insured, their home equity could be tapped if necessary to pay LTC expenses.

IMO it is okay to do this as a 2-step process (as long as step 2 follows closely in timing to step 1) -
(1) step 1 - simplify their three Fidelity IRAs into fewer low-cost funds using roughly the same AA as the accounts are currently invested in, and
(2) step 2 - address the TSP and trust holdings.
In completing step 2, you may find that you need to adjust the Fidelity accounts again for tax efficiency, etc.

Topic Author
waldo81
Posts: 8
Joined: Sat Jun 27, 2020 7:23 am

Re: Help with steps for simplifying/rebalancing for parents portfolio

Post by waldo81 » Tue Jun 30, 2020 2:09 pm

HomeStretch wrote:
Tue Jun 30, 2020 1:48 pm
HomeStretch wrote:
Mon Jun 29, 2020 7:24 pm
It isn’t 100% clear to me which holdings end up in each of the three Fidelity accounts that combined currently have a 56/44 asset allocation (AA). For the desired 40/10/50 AA in the Fidelity accounts, consider:

Dad’s Roth IRA $48,735:
18% FSKAX US TSM ($48,735)

Mom’s Roth IRA $49,107:
19% FSKAX US TSM ($49,107)

Dad’s Rollover IRA $164,911:
3% FSKAX US TSM ($7,259)
10% FTIHX International TSM ($26,275)
46% FXNAX US TBM ($120,591)
4% FDRXX Govt MMF ($10,786) - consider FXNAX instead

For best feedback on their overall portfolio, consider editing your post to include all information in the “Asking Portfolio Questions” format:
https://www.bogleheads.org/wiki/Asking_ ... _questions
It looks like your parents' overall portfolio asset allocation (AA) is 36% equities and 64% fixed income. This is based on the current 20/80 allocation in His Trust, Her Trust and His TSP totaling $325k and the current 56/44 allocation in their 3 Fidelity IRA accounts totaling $263k.

Confirm with your dad and mom that 36/64 is their desired AA for their overall portfolio. It's a reasonable, conservative allocation for their age. But in determining their desired overall AA, it would be helpful to know whether their retirement income ($100k for pension, any social security income?, etc.) fully covers all their expenses (including living expenses, healthcare, income taxes, lumpy expenses like car purchases and home repairs/maintenance). It would also be helpful to know whether they have long-term care (LTC) insurance or if they are self-insured for possible future LTC expenses. If self-insured, their home equity could be tapped if necessary to pay LTC expenses.

IMO it is okay to do this as a 2-step process (as long as step 2 follows closely in timing to step 1) -
(1) step 1 - simplify their three Fidelity IRAs into fewer low-cost funds using roughly the same AA as the accounts are currently invested in, and
(2) step 2 - address the TSP and trust holdings.
In completing step 2, you may find that you need to adjust the Fidelity accounts again for tax efficiency, etc.
You are exactly right about their current overall asset allocation (36/64). Both trusts are revocable trusts in taxable accounts that could be used for emergency purposes by them. I think the idea for the trusts was to protect assets for myself and my sister in case the rest of their money gets used for nursing home. They do not have long term care insurance. As far as asset allocation, my Dad has mainly charged me with keeping things the "same" for now other than allowing me to simplify to lower cost index funds. He is tired of reading "newsletters" and doing it himself. Their overall retirement income is 100K (pension and social security combined) and they own their home (about 175K). They have no debt and live in a low cost of living area. Their retirement income fully covers all expenses. So much so that my Dad simply transfers his RMDs from his rollover IRA into the trust in his name. They only take out the RMD and nothing else each year.

The monkey wrench going forward (which probably is best left for a separate post) is my Mom is very much wanting to move closer to me as they age and I live in a higher cost of living area. So whether they bought a new home near me (more likely) or decided to rent (less likely per my Mom), they would then have higher monthly expenses and would definitely have to TAP these retirement savings in a much different way.

Thanks again!

HomeStretch
Posts: 4601
Joined: Thu Dec 27, 2018 3:06 pm

Re: Help with steps for simplifying/rebalancing for parents portfolio

Post by HomeStretch » Tue Jun 30, 2020 2:48 pm

waldo81 wrote:
Tue Jun 30, 2020 2:09 pm
HomeStretch wrote:
Tue Jun 30, 2020 1:48 pm
HomeStretch wrote:
Mon Jun 29, 2020 7:24 pm
It isn’t 100% clear to me which holdings end up in each of the three Fidelity accounts that combined currently have a 56/44 asset allocation (AA). For the desired 40/10/50 AA in the Fidelity accounts, consider:

Dad’s Roth IRA $48,735:
18% FSKAX US TSM ($48,735)

Mom’s Roth IRA $49,107:
19% FSKAX US TSM ($49,107)

Dad’s Rollover IRA $164,911:
3% FSKAX US TSM ($7,259)
10% FTIHX International TSM ($26,275)
46% FXNAX US TBM ($120,591)
4% FDRXX Govt MMF ($10,786) - consider FXNAX instead

For best feedback on their overall portfolio, consider editing your post to include all information in the “Asking Portfolio Questions” format:
https://www.bogleheads.org/wiki/Asking_ ... _questions
It looks like your parents' overall portfolio asset allocation (AA) is 36% equities and 64% fixed income. This is based on the current 20/80 allocation in His Trust, Her Trust and His TSP totaling $325k and the current 56/44 allocation in their 3 Fidelity IRA accounts totaling $263k.

Confirm with your dad and mom that 36/64 is their desired AA for their overall portfolio. It's a reasonable, conservative allocation for their age. But in determining their desired overall AA, it would be helpful to know whether their retirement income ($100k for pension, any social security income?, etc.) fully covers all their expenses (including living expenses, healthcare, income taxes, lumpy expenses like car purchases and home repairs/maintenance). It would also be helpful to know whether they have long-term care (LTC) insurance or if they are self-insured for possible future LTC expenses. If self-insured, their home equity could be tapped if necessary to pay LTC expenses.

IMO it is okay to do this as a 2-step process (as long as step 2 follows closely in timing to step 1) -
(1) step 1 - simplify their three Fidelity IRAs into fewer low-cost funds using roughly the same AA as the accounts are currently invested in, and
(2) step 2 - address the TSP and trust holdings.
In completing step 2, you may find that you need to adjust the Fidelity accounts again for tax efficiency, etc.
You are exactly right about their current overall asset allocation (36/64). Both trusts are revocable trusts in taxable accounts that could be used for emergency purposes by them. I think the idea for the trusts was to protect assets for myself and my sister in case the rest of their money gets used for nursing home. They do not have long term care insurance. As far as asset allocation, my Dad has mainly charged me with keeping things the "same" for now other than allowing me to simplify to lower cost index funds. He is tired of reading "newsletters" and doing it himself. Their overall retirement income is 100K (pension and social security combined) and they own their home (about 175K). They have no debt and live in a low cost of living area. Their retirement income fully covers all expenses. So much so that my Dad simply transfers his RMDs from his rollover IRA into the trust in his name. They only take out the RMD and nothing else each year.

The monkey wrench going forward (which probably is best left for a separate post) is my Mom is very much wanting to move closer to me as they age and I live in a higher cost of living area. So whether they bought a new home near me (more likely) or decided to rent (less likely per my Mom), they would then have higher monthly expenses and would definitely have to TAP these retirement savings in a much different way.

Thanks again!
I am not a trust expert. Maybe someone more knowledgeable will weigh in. My understanding is that a revocable trust is not sufficient to keep Medicaid from requiring that the assets be spent down prior to Medicaid eligibility for nursing home costs (if your parents' income did not cover the cost and if their other assets were mostly depleted). A type of (irrevocable?) trust is needed where the trust assets are not counted for Medicaid eligibility purposes. Perhaps the reason for funding the revocable trusts is that the trusts at their deaths become irrevocable per their trust agreements/wills which could then protect the assets in the trusts you and sibling inherit from creditors, spouse in the event of divorce, a judgment against you, etc. But I am only guessing at your parents' intent and estate planning.

Topic Author
waldo81
Posts: 8
Joined: Sat Jun 27, 2020 7:23 am

Re: Help with steps for simplifying/rebalancing for parents portfolio

Post by waldo81 » Tue Jun 30, 2020 4:09 pm

HomeStretch wrote:
Tue Jun 30, 2020 2:48 pm
waldo81 wrote:
Tue Jun 30, 2020 2:09 pm
HomeStretch wrote:
Tue Jun 30, 2020 1:48 pm
HomeStretch wrote:
Mon Jun 29, 2020 7:24 pm
It isn’t 100% clear to me which holdings end up in each of the three Fidelity accounts that combined currently have a 56/44 asset allocation (AA). For the desired 40/10/50 AA in the Fidelity accounts, consider:

Dad’s Roth IRA $48,735:
18% FSKAX US TSM ($48,735)

Mom’s Roth IRA $49,107:
19% FSKAX US TSM ($49,107)

Dad’s Rollover IRA $164,911:
3% FSKAX US TSM ($7,259)
10% FTIHX International TSM ($26,275)
46% FXNAX US TBM ($120,591)
4% FDRXX Govt MMF ($10,786) - consider FXNAX instead

For best feedback on their overall portfolio, consider editing your post to include all information in the “Asking Portfolio Questions” format:
https://www.bogleheads.org/wiki/Asking_ ... _questions
It looks like your parents' overall portfolio asset allocation (AA) is 36% equities and 64% fixed income. This is based on the current 20/80 allocation in His Trust, Her Trust and His TSP totaling $325k and the current 56/44 allocation in their 3 Fidelity IRA accounts totaling $263k.

Confirm with your dad and mom that 36/64 is their desired AA for their overall portfolio. It's a reasonable, conservative allocation for their age. But in determining their desired overall AA, it would be helpful to know whether their retirement income ($100k for pension, any social security income?, etc.) fully covers all their expenses (including living expenses, healthcare, income taxes, lumpy expenses like car purchases and home repairs/maintenance). It would also be helpful to know whether they have long-term care (LTC) insurance or if they are self-insured for possible future LTC expenses. If self-insured, their home equity could be tapped if necessary to pay LTC expenses.

IMO it is okay to do this as a 2-step process (as long as step 2 follows closely in timing to step 1) -
(1) step 1 - simplify their three Fidelity IRAs into fewer low-cost funds using roughly the same AA as the accounts are currently invested in, and
(2) step 2 - address the TSP and trust holdings.
In completing step 2, you may find that you need to adjust the Fidelity accounts again for tax efficiency, etc.
You are exactly right about their current overall asset allocation (36/64). Both trusts are revocable trusts in taxable accounts that could be used for emergency purposes by them. I think the idea for the trusts was to protect assets for myself and my sister in case the rest of their money gets used for nursing home. They do not have long term care insurance. As far as asset allocation, my Dad has mainly charged me with keeping things the "same" for now other than allowing me to simplify to lower cost index funds. He is tired of reading "newsletters" and doing it himself. Their overall retirement income is 100K (pension and social security combined) and they own their home (about 175K). They have no debt and live in a low cost of living area. Their retirement income fully covers all expenses. So much so that my Dad simply transfers his RMDs from his rollover IRA into the trust in his name. They only take out the RMD and nothing else each year.

The monkey wrench going forward (which probably is best left for a separate post) is my Mom is very much wanting to move closer to me as they age and I live in a higher cost of living area. So whether they bought a new home near me (more likely) or decided to rent (less likely per my Mom), they would then have higher monthly expenses and would definitely have to TAP these retirement savings in a much different way.

Thanks again!
I am not a trust expert. Maybe someone more knowledgeable will weigh in. My understanding is that a revocable trust is not sufficient to keep Medicaid from requiring that the assets be spent down prior to Medicaid eligibility for nursing home costs (if your parents' income did not cover the cost and if their other assets were mostly depleted). A type of (irrevocable?) trust is needed where the trust assets are not counted for Medicaid eligibility purposes. Perhaps the reason for funding the revocable trusts is that the trusts at their deaths become irrevocable per their trust agreements/wills which could then protect the assets in the trusts you and sibling inherit from creditors, spouse in the event of divorce, a judgment against you, etc. But I am only guessing at your parents' intent and estate planning.
That makes two of us who are not trust experts! :) My Mom is actually sending me the trust documents this week. All I know is my Mom said that the "trust lawyer" said they money would be protected somehow and that they could use in emergency if needed. Anyway, I figure simplify the Fidelity accounts and don't touch the trusts for now until I understand it better. Maybe never touch them at all hopefully.

Post Reply