widow/widower portfolio Question

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Topic Author
paisa
Posts: 8
Joined: Tue Jun 15, 2021 7:54 pm

widow/widower portfolio Question

Post by paisa »

Hi,
My spouse passed away earlier this year–took care of our finances and taxes. We were/am fans of Jack Bogle, kept assets with Vanguard as much as possible. Now I am lost. Luckily found Bogleheads podcast and forum. Spouse was 65, working full time but very very sick in the last few months of life. No social security or retirement savings withdrawal (employer paid disability). I managed to roll over all spouse's retirement plans into a Roll over IRA with Vanguard (see R/O IRA). Need opinion with investing/rebalancing portfolio.

Emergency funds: Yes

Debt: Mortgage: $113,000 (autopay ~$2300/month, interest 2.65%) will be fully paid by 2027; credit card debt: none (autopay monthly)

Tax Filing Status: Single starting 2022

Tax Rate: 35% Federal, 6.5% State

State of Residence: Connecticut

Age: 63, working full-time, hope to retire in 5 years and take social security when 70 years)

Desired Asset allocation: Not sure ?66% stocks / 34% bonds
Desired International allocation: Not sure ?15% of stocks

Size of current total portfolio: high 7 ~ low 8 figure (getting there)
Taxable Brokerage at Vanguard: 44%
4% Fed Money Mkt Settlement Fund
0.5% Vanguard Capital Opportunity Fund Investor Shares (VHCOX) (0.44%)
9% Vanguard Health Care Index Fund Admiral Shares (VHCIX) (0.1%)
11.5% Vanguard PRIMECAP Core Fund (VPCCX) (0.46%)
19% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04%)

Traditional IRA at vanguard: 16%
0.5% Vanguard Capital Opportunity Fund Investor Shares (VHCOX) (0.44%)
0.5% Vanguard Health Care Fund Investor Shares (VGHCX) (0.32%)
3% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05%)
12% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04%)

Roll Over IRA at Vanguard: 24%
20% Fed Money Mkt Settlement Fund:
2% Vanguard PRIMECAP Core Fund Investor Shares (VPCCX) (0.46%)
0.5% Vanguard PRIMECAP Fund Investor Shares (VPMCX) (0.38%)
0% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05%)
1.5% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04%)

Employer Retirement Account with TIAA (including 45B): 16% (my contribution 44%, employer 56%)
7% Vanguard Emerging Markets Stock Idx Fund Institutional Plus Shares (VEMRX) (0.08%)
6% Vanguard Total Bond Market Index Fund Institutional Shares (VBTIX) (0.035%)
3% Vanguard Total Stock Market Index Fund Institutional Plus Shares (VSMPX) (0.02%)
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David Jay
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Location: Michigan

Re: widow/widower portfolio Question

Post by David Jay »

Welcome to the forum!

The first thing I want to say is that your spouse left you in great shape financially. You will be just fine financially regardless of how you invest these assets and when you choose to retire (including immediately).

That being said, your fund allocations look pretty good. I think many Bogleheads would want to move out of the higher cost funds (those with ERs in the .3 and .4 range) over time, but there really is no need to do anything immediately. Take everything slowly so you don't overwhelm yourself.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
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Peter Foley
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Location: Lake Wobegon

Re: widow/widower portfolio Question

Post by Peter Foley »

One of the first things I would do would be to look at your current tax rate and compare it to your tax rate when you are taking required minimum distributions. Note that this year you will be able to file MFJ and in future years single. Are you sure you will be in the 35% bracket this year?

If not, I would suggest a substantial Roth conversion this year.

With a relatively high portfolio net worth, are there accounts you could disclaim that might pass to children?

Taxes are only one aspect of money management and financial planning. While you should not let the proverbial tail wag the dog, you should take a close look at your potential tax liability for this year and for 2022.

For someone close to retirement, I would be more comfortable with a slightly more conservative AA. My personal preference would be 50/50.
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Wiggums
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Re: widow/widower portfolio Question

Post by Wiggums »

Very sorry for your loss. I agree with David Jay’s comments regarding your portfolio. Making no changes to your investments at this time is completely reasonable. My neighbor would also like to retire at age 68. Working might be the best medicine for you right now. Just know that you have a sizable portfolio and you have the option to retire whenever you want.

Your spouse did a great job with your investments. There is no perfect portfolio, but this one is easy to manage and very reasonable. Long term, I think you would benefit from learning more about taxes since your estate is close to 10M. Again, there is no rush or alarm bells sounding.

Good luck to you.
Last edited by Wiggums on Sat Jun 26, 2021 4:47 pm, edited 1 time in total.
123
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Re: widow/widower portfolio Question

Post by 123 »

With your portfolio size what purpose is there to keep on working? You could likely receive a widow/widower benefit on your spouse's social security (if his/her work was covered) and leave your own benefit till age 70 unreduced. Alternatively you could take a reduced benefit now and take an unreduced widow/widower's benefit at your FRA. Social Security can figure both numbers for you and then you can decide what strategy works best. Your own benefit is increased after your FRA if you don't receive it but the widow/widowers benefit is not.
The closest helping hand is at the end of your own arm.
Jablean
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Re: widow/widower portfolio Question

Post by Jablean »

paisa wrote: Sat Jun 26, 2021 1:32 pm

Age: 63, working full-time, hope to retire in 5 years and take social security when 70 years)

Desired Asset allocation: Not sure ?66% stocks / 34% bonds
Desired International allocation: Not sure ?15% of stocks

Size of current total portfolio: high 7 ~ low 8 figure (getting there)
Taxable Brokerage at Vanguard: 44%
4% Fed Money Mkt Settlement Fund
0.5% Vanguard Capital Opportunity Fund Investor Shares (VHCOX) (0.44%)
9% Vanguard Health Care Index Fund Admiral Shares (VHCIX) (0.1%)
11.5% Vanguard PRIMECAP Core Fund (VPCCX) (0.46%)
19% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04%)

When you take funds as needed out of taxable sell these two high expense and limited transportability funds so that if you ever decide to go elsewhere (Fidelity as an example) you'll be able to transfer in-kind instead of liquidate. Also make sure all dividends are NOT being reinvested.

Traditional IRA at vanguard: 16%
0.5% Vanguard Capital Opportunity Fund Investor Shares (VHCOX) (0.44%)
0.5% Vanguard Health Care Fund Investor Shares (VGHCX) (0.32%)
3% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05%)
12% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04%)

Move things out of VHCOX and into VBTLX, perhaps invest in VHT as an EFT instead of the Vanguard Health care Investor shares

Roll Over IRA at Vanguard: 24%
20% Fed Money Mkt Settlement Fund:
2% Vanguard PRIMECAP Core Fund Investor Shares (VPCCX) (0.46%)
0.5% Vanguard PRIMECAP Fund Investor Shares (VPMCX) (0.38%)

0% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05%)
1.5% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04%)

Again, out of the Investor shares and you want the cash in the account invested. An easy split for the whole account would be 50% Bonds VBTLX and 50% stocks VTSAX

Employer Retirement Account with TIAA (including 45B): 16% (my contribution 44%, employer 56%)
7% Vanguard Emerging Markets Stock Idx Fund Institutional Plus Shares (VEMRX) (0.08%)
6% Vanguard Total Bond Market Index Fund Institutional Shares (VBTIX) (0.035%)
3% Vanguard Total Stock Market Index Fund Institutional Plus Shares (VSMPX) (0.02%)
I've made my notes in color above. What do you want your money/investments to do for you? Travel, Retirement, Safety, Heirs?
billfromct
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Joined: Tue Dec 03, 2013 9:05 am

Re: widow/widower portfolio Question

Post by billfromct »

Good idea to check a SS calculator like opensocialsecurity.com to see when you may want to start SS.

You can collect survivor SS benefits at your full retirement age (between 66-67) while still working without any penalty. If you collect SS before your full retirement age & make over $19k, SS will claw back $1 of SS for every $2 of earnings over $19k. Your SS benefit will be adjusted for the claw back once you reach your full retirement age but I don’t think it’s worth the administrative trouble.

Then as you mentioned, you could collect your own SS benefit at age 70 if higher than your survivor benefits.

I believe Connecticut has an estate tax for estates over about $7M. I think the rate is 11% or 12%, but you should check “the google”. If you have children or others you care about, you may want to plan to give away some assets over the years to get your estate under the $7M figure. CT isn’t as bad as Oregon or Massachusetts who change estate tax on estates over $1M.

I personally like Vanguard Primecap & Vanguard Healthcare funds & have invested in them over many years so why make changes especially as it appears you will stick with Vanguard.

bill
ivgrivchuck
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Joined: Sun Sep 27, 2020 6:20 pm

Re: widow/widower portfolio Question

Post by ivgrivchuck »

paisa wrote: Sat Jun 26, 2021 1:32 pm Size of current total portfolio: high 7 ~ low 8 figure (getting there)
This would be roughly 10 million. Did you perhaps mean "high 6 ~ low 7"? I'm just double checking...

If ~10M is indeed correct, then you have nothing to worry about... Take your time before taking any action.
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
Topic Author
paisa
Posts: 8
Joined: Tue Jun 15, 2021 7:54 pm

Re: widow/widower portfolio Question

Post by paisa »

Peter Foley wrote: Sat Jun 26, 2021 4:35 pm One of the first things I would do would be to look at your current tax rate and compare it to your tax rate when you are taking required minimum distributions. Note that this year you will be able to file MFJ and in future years single. Are you sure you will be in the 35% bracket this year?
Yes, I am sure about the taxes - 35% as MFJ this year (and also past several years) and same as Single for 2022 onwards. We were/I am not eligible for Roth. But will revisit after retirement and before RMD kicks in. Spouse did want to establish a charitable scholarship fund but I have to work on the details.

Size of portfolio is correct (high 7 ~ low 8). The cash in money market is a lot due to roll over and I feel like I should invest it wisely.

Really appreciate your time.
Thank you.
Topic Author
paisa
Posts: 8
Joined: Tue Jun 15, 2021 7:54 pm

Re: widow/widower portfolio Question

Post by paisa »

123 wrote: Sat Jun 26, 2021 4:40 pm With your portfolio size what purpose is there to keep on working? You could likely receive a widow/widower benefit on your spouse's social security (if his/her work was covered) and leave your own benefit till age 70 unreduced. Alternatively you could take a reduced benefit now and take an unreduced widow/widower's benefit at your FRA. Social Security can figure both numbers for you and then you can decide what strategy works best. Your own benefit is increased after your FRA if you don't receive it but the widow/widowers benefit is not.
I am grateful for my job. We were/I am academic physician/s. Teaching and healing brings meaning to life and has helped me with my loss.

"I believe Connecticut has an estate tax for estates over about $7M."

CT estate taxes kick in at 5.8 million but is unlimited for surviving spouse. The spousal inheritance is half the portfolio (so less than the limit anyway), the other half is my retirement saving.
"What do you want your money/investments to do for you? Travel, Retirement, Safety, Heirs?"

Thanks a lot, Jablean, for your suggestions. I plan to travel, spend time with child (x1 adult, independent) and grandchild (x1) and work on spouse's dream scholarship fund to pay for medical school for one student every year.
Topic Author
paisa
Posts: 8
Joined: Tue Jun 15, 2021 7:54 pm

Re: Social Security Survivor for widow

Post by paisa »

Dear Bogleheads,

Thanks for your collective advice. I have started listening to Rick Ferri on Bogleheads on Investing podcast regularly. Since my last posting, I managed to stay off Vanguard Personal Advisor (0.3% AUM) and invested all the cash from my husband's retirement funds in Vanguard's Bond Index funds (Total, Inflation-Protected and Tax-Exempt). My portfolio looks more like this: 64.5% stocks (57.5% VTSAX, 7% VEMRX [thru TIAA/my employer]) and 35.5% bond (VBTLX 29% and VAIPX 2.5% in tax-deferred, VTEAX 4% in taxable)

New question: My husband was 65 years old when he passed away earlier this year, I am 63 and still working full time. I believe I can apply for survivor benefits from Social Security. Should I pursue it? My marginal tax bracket is 35% (as MFJ this year and as Single next year). Am I eligible for survivor benefits on his Social Security? The extra money would not bump my income tax bracket. But are there any other pros and cons? Heard Rick Ferri on the Bogleheads podcast say never leave money on the table. I am planning to take my SS benefits at 70.
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dodecahedron
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Re: Social Security Survivor for widow

Post by dodecahedron »

paisa wrote: Tue Jul 20, 2021 2:43 pm

New question: My husband was 65 years old when he passed away earlier this year, I am 63 and still working full time. I believe I can apply for survivor benefits from Social Security. Should I pursue it? My marginal tax bracket is 35% (as MFJ this year and as Single next year). Am I eligible for survivor benefits on his Social Security?
Technically, yes, you are eligible to file for Social Security survivor (widow's) benefits right now BUT because you are continuing to work fulltime, they would be subject to reduction for your earned income until you reach your Full Retirement Age (FRA). Given the likely amount of your pay as an academic physician, the benefits would be reduced to zero.

Since you are 63 now, your FRA for widow's benefits would be either 66 yrs 2 months (if born in 1957) or 66 yrs 4 months (if born in 1958.)

Once you hit FRA, you should definitely apply for widow's benefits, because the earnings test disappears at FRA, and you have the right to file a *restricted* application for your widow's benefits, which will not any way reduce your eventual own record benefits at age 70.

If for any reason you decide to discontinue working (or severely cutback to part-time or otherwise lower paid work) prior to FRA, you would be well advised to consider filing for widow's benefits prior to FRA.
Topic Author
paisa
Posts: 8
Joined: Tue Jun 15, 2021 7:54 pm

Re: widow/widower portfolio Question

Post by paisa »

Thanks. Much appreciated.
Anina
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Joined: Thu Oct 13, 2016 4:16 pm

Re: widow/widower portfolio Question

Post by Anina »

If you are interested in starting a scholarship/endowment, you should go to White Coat Investor website. He explains how to do it very nicely.

I am sorry for your loss.
Topic Author
paisa
Posts: 8
Joined: Tue Jun 15, 2021 7:54 pm

scholarship endowment

Post by paisa »

Thanks, Anina. Will check it out.
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