Portfolio advice for cash flow & retirement

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Topic Author
boglebull
Posts: 5
Joined: Fri Mar 19, 2021 7:06 pm

Portfolio advice for cash flow & retirement

Post by boglebull »

Emergency funds: Covered

Debt: One College going completed freshman year paying for tuition. Expenses 50K/year.
Tax Filing Status: Married Filing Jointly

Tax Rate: 25% Federal, 0% State

State of Residence: Texas

Age: His age 58 her age 50

Health Condition: in Good Health.

Desired Asset allocation: 65% stocks / 35% bonds
Desired International allocation: 35% of stocks

Total Portfolio - 1.7 Mil RealEstate. 186K invested in market. 569K cash to invest.

Home $700K – All paid. No Mortgage
3 Vehicles – All Vehicles paid. No loan.
3 Rental Properties (valued at 1 Mil) – All paid. No Mortgage. Rental income $6k/month total

His Solo 401K at local Bank 1 - Cash - 89K not invested

His IRA at local Bank 2
His Bank 2 Checking A/c - 400K need to invest
Cash & short term - 22K
US large & small cap - 17K invested

Her 401K – with employer 138K
Her Pension – with employer 31K
Her SEP IRA Cash & short term - 42K
HER IRA Cash & short term – 16K

ISSUES: Bank financial advisor not helpful recommending Mgmt fees & higher expense ratios funds.

QUESTIONS:
1. HELP: Need advice from you all. I want to pull my cash out of the bank and invest in a brokerage account. I don’t know where to start.
2. What is your opinion on dividend paying funds & International Funds?
3. I have health insurance coverage under my wife’s employer. They do not have a HSA account. Is it a good idea to open a HSA a/c at a different entity? Can myself and my wife eligible to open a HSA a/c at a different entity even though she has a healthcare coverage by her employer. I am trying to save on the taxes through HSA.
4. Do you think we have to convert our IRA to Roth IRA?
5. Is it a good idea to buy Treasury bill?
6. I have chosen asset allocation as shown above as we both are in good health and also our work conditions are stable.

Her SEP IRA Cash & short term - 42K - is with local bank as cash. It is not invested.
Last edited by boglebull on Tue Jun 28, 2022 5:21 pm, edited 1 time in total.
davidferrer31
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Joined: Sun Feb 13, 2022 4:32 am

Re: Portfolio advice for cash flow & retirement

Post by davidferrer31 »

3) Does your wife have a HDHP? If so, you can open an HSA. However, if your wife's health insurance is not a HDHP, then you are unable to contribute and open an HSA
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retired@50
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Location: Living in the U.S.A.

Re: Portfolio advice for cash flow & retirement

Post by retired@50 »

boglebull wrote: Sun Jun 26, 2022 11:49 pm His IRA at local Bank 2
His Bank 2 Checking A/c - 400K need to invest
Cash & short term - 22K
US large & small cap - 17K invested

QUESTIONS:
1. HELP: Need advice from you all. I want to pull my cash out of the bank and invest in a brokerage account. I don’t know where to start.
Welcome to the forum. :happy

My initial reaction to your statement above is... Whoa! Take it slow and easy until you are sure what you're doing.
Once you have money in an IRA, taking it out, usually means making a withdrawal and paying taxes on it. I don't think that's what you want to do. I suspect what you want to do is transfer this IRA to another custodian (that isn't local Bank 2).

If you want to transfer this IRA someplace else, the first thing to do is decide where you'd like it to be. In the Bogleheads forum, many of the members use places like Vanguard, Fidelity or Schwab. If you have any particular loyalty to any of these organizations, or already have an account at one of them, that may be the answer.

Once the IRA is transferred (typically what's known as an in-kind transfer) then you can decide how you want to invest it. There are a variety of potential "solutions" to this issue, but the first thing to do is select a custodian and initiate the transfer of the IRA. This is usually done by contacting the new, desired custodian (Vanguard, Fidelity, or Schwab etc.) and asking for help.

Post back if you have questions.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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CyclingDuo
Posts: 6006
Joined: Fri Jan 06, 2017 8:07 am

Re: Portfolio advice for cash flow & retirement

Post by CyclingDuo »

boglebull wrote: Sun Jun 26, 2022 11:49 pm Emergency funds: Covered

Debt: One College going completed freshman year paying for tuition. Expenses 50K/year.
Tax Filing Status: Married Filing Jointly

Tax Rate: 25% Federal, 0% State

State of Residence: Texas

Age: His age 58 her age 50

Health Condition: in Good Health.

Desired Asset allocation: 65% stocks / 35% bonds
Desired International allocation: 35% of stocks

Total Portfolio - 1.7 Mil RealEstate. 186K invested in market. 569K cash to invest.

Home $700K – All paid. No Mortgage
3 Vehicles – All Vehicles paid. No loan.
3 Rental Properties (valued at 1 Mil) – All paid. No Mortgage. Rental income $6k/month total

His Solo 401K at local Bank 1 - Cash - 89K not invested

His IRA at local Bank 2
His Bank 2 Checking A/c - 400K need to invest
Cash & short term - 22K
US large & small cap - 17K invested

Her 401K – with employer 138K
Her Pension – with employer 31K
Her SEP IRA Cash & short term - 42K
HER IRA Cash & short term – 16K

ISSUES: Bank financial advisor not helpful recommending Mgmt fees & higher expense ratios funds.

QUESTIONS:
1. HELP: Need advice from you all. I want to pull my cash out of the bank and invest in a brokerage account. I don’t know where to start.
Traditionally, Fidelity, Vanguard and Schwab are all good places to start.
boglebull wrote: Sun Jun 26, 2022 11:49 pm2. What is your opinion on dividend paying funds & International Funds?
Welcome to Bogleheads! Index funds are preferred by most of us. Funds such as Vanguard Total Stock Market Index Fund, S&P 500 Index Fund, Vanguard Total International Stock Market Index Fund (or the Fidelity or Schwab versions of these fund). They all pay dividends, but the International currently has a higher dividend yield than the US Index Funds due to higher dividends from international stocks. Traditionally, there is a bit of an opinionated split on holding all US funds, or having some in international. We do invest a percentage in international. Based on your AA goals, I am sure you will deploy some to international.

A few places to start regarding developing a Lazy Portfolio...

If You Can by Bill Bernstein: https://www.etf.com/docs/IfYouCan.pdf

150+ Portfolios Better Than Yours by Jim Dahle at The White Coat Investor: https://www.whitecoatinvestor.com/150-p ... han-yours/

235 Lazy Portfolios better than yours by Portfolio Einstein: https://www.portfolioeinstein.com/235-p ... han-yours/
boglebull wrote: Sun Jun 26, 2022 11:49 pm3. I have health insurance coverage under my wife’s employer. They do not have a HSA account. Is it a good idea to open a HSA a/c at a different entity? Can myself and my wife eligible to open a HSA a/c at a different entity even though she has a healthcare coverage by her employer. I am trying to save on the taxes through HSA.
Worth exploring, but not a deal breaker to build wealth if you do not have an HSA. Kudos to your wealth building via your real estate holdings. Very well done, sir!!!
boglebull wrote: Sun Jun 26, 2022 11:49 pm4. Do you think we have to convert our IRA to Roth IRA?
Why not just start new Roth IRA's? It doesn't look like there is that much to convert at this point, so if your income levels meet the threshold for opening up Roth IRA's - I would begin there. I'm sure others will chime in regarding conversions. Is your income threshold after pension contributions, 401K contributions under the threshold to contribute to Roth IRA's?
boglebull wrote: Sun Jun 26, 2022 11:49 pm5. Is it a good idea to buy Treasury bill?
In what context? Total Bond Funds, TIP Bond Funds, I Bonds are all good places to start. T-Bills could be a part of the overall bond allocation, but what was the reasoning behind asking about them in specific?
boglebull wrote: Sun Jun 26, 2022 11:49 pm6. I have chosen asset allocation as shown above as we both are in good health and also our work conditions are stable.
Keeping it simple with a nice Lazy Portfolio (total US market, total International market, total bond fund - or some bond funds in combination) seems to be what most of us would recommend you do. I would not pay the higher fees through the bank for investing, but get a low cost brokerage account at Fidelity, Vanguard, or Schwab. Getting that $569K invested in a lazy portfolio that meets your desire to have 65/35 stocks to bonds would be the path forward at a low cost brokerage firm. I would imagine you are paying unnecessary fees at your bank, and if it were me - I would look to transfer everything over to one of the big three low cost brokerage firms.

Congratulations on the real estate all being paid off. Very well done and you are in excellent shape. Others will chime in, but welcome to the forums and we would advise taking time to digest everything before making moves.

CyclingDuo
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
deikel
Posts: 1616
Joined: Sat Jan 25, 2014 6:13 pm

Re: Portfolio advice for cash flow & retirement

Post by deikel »

boglebull wrote: Sun Jun 26, 2022 11:49 pm

QUESTIONS:
1. HELP: Need advice from you all. I want to pull my cash out of the bank and invest in a brokerage account. I don’t know where to start.
2. What is your opinion on dividend paying funds & International Funds?
3. I have health insurance coverage under my wife’s employer. They do not have a HSA account. Is it a good idea to open a HSA a/c at a different entity? Can myself and my wife eligible to open a HSA a/c at a different entity even though she has a healthcare coverage by her employer. I am trying to save on the taxes through HSA.
4. Do you think we have to convert our IRA to Roth IRA?
5. Is it a good idea to buy Treasury bill?
6. I have chosen asset allocation as shown above as we both are in good health and also our work conditions are stable.
1: Open a brokerage account at Fidelity, Schwab or Vanguard online. Connect your checkings account to the brokerage account online. Make payments into the brokerage account (or have the brokerage account draw on the checking account for a sum you dictate. The money will transfer and go into a holding position. The make an investment selection and move the money in teh account (as cash equivalent) into the investment - repeat as needed.

2: Dividend paying funds are like other funds, they are managed (and cost more fees), they are higher concentrated in utility stocks (old, established stocks that reinvest less of their profit and pay out more of their profits in dividends). As a consequence of their dividend payout, they may be tax disadvantages. Ultimately, don't fall into the trap of divendend paying funds being 'safer' or 'better' - the S+P 500 index fund does pay out dividends as well, but has a different diversity towards a broader range of stocks. Ideally, get a total market fund.

3: Only if your wife has an eligible high deductible plan , which she probably does not since they don't offer an HSA. Don't let the tax advantage tail shake the dog.

4: You are severely underfunded in tax advantaged accounts, so no, you should increase 401k/IRA contributions if at all possible. To make sense of that, the first something thousand dollars taken out of a 401k/IRA in retirement is tax free...you don't have enough in tax advantaged space to provide that level of draw for your retirement yet and its the easiest tax savings ever. Think of it in terms of cash flow when being retired paired with a constant low tax rate during retirement

5: yield is low, I Bonds maybe to prevent loss to inflation, but they still don't provide any yield to speak of. As a part of your bond portfolio maybe...I have none and I currently see no use in them until we are at a red hot economy and I would want to lock in a decent yield for years to come and to cover the next (or overnext) recession

6: The asset allocation should be reflective of your level of risk taking to prevent you from making rash decisions during a downturn and to provide money to live on when the next crash comes....health plays into this only a secondary thought, job stability also only plays into this as a secondary thought - both health and job loss should be covered by the size of your emergency fund...maybe a bit formalistic to look at it that way, but you should set your asset allocation for almost ever (less a possible glide path) and not make it dependent on sudden events - regardless how likely they will happen, that's the whole point of it.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.
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ruralavalon
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Location: Illinois

Re: Portfolio advice for cash flow & retirement

Post by ruralavalon »

Welcome to the forum :) .

It's great to see that you are debt free, with a total portfolio of about 2.5 million ("1.7 Mil RealEstate. 186K invested in market. 569K cash to invest"). You are doing great in my opinion.


boglebull wrote: Sun Jun 26, 2022 11:49 pmISSUES: Bank financial advisor not helpful recommending Mgmt fees & higher expense ratios funds.
In selecting funds strive for a combination of both broad diversification (to reduce risk) and low expense ratios (to increase your net return). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Please see:
1) Wiki article "Three-fund portfolio";
2) Forum discussion, "The Three-Fund Portfolio"; and
3) Taylor Larimore post, "Articles recommending the three-fund portfolio".


boglebull wrote: Sun Jun 26, 2022 11:49 pm Age: His age 58 her age 50

Health Condition: in Good Health.

Desired Asset allocation: 65% stocks / 35% bonds
Desired International allocation: 35% of stocks
In my opinion your desired asset allocation (35% bonds) is within the range of what is reasonable at ages 50 and 58, with no debt and both of you "in good health and also our work conditions are stable."


boglebull wrote: Sun Jun 26, 2022 11:49 pmHis Solo 401K at local Bank 1 - Cash - 89K not invested
I suggest a rollover of your solo 401k into a new solo 401k at a low cost fund provider like Vanguard, Fidelity or Schwab.

boglebull wrote: Sun Jun 26, 2022 11:49 pmHis IRA at local Bank 2
His Bank 2 Checking A/c - 400K need to invest
Cash & short term - 22K
US large & small cap - 17K invested
I suggest a rollover of your IRA into a IRA at a low cost fund provider like Vanguard, Fidelity or Schwab.

I suggest NOT doing a conversion to a Roth IRA, because of the tax liability ("Tax Rate: 25% Federal, 0% State").

boglebull wrote: Sun Jun 26, 2022 11:49 pm Her 401K – with employer 138K
Her Pension – with employer 31K
Her SEP IRA Cash & short term - 42K
HER IRA Cash & short term – 16K
Which fund firm or brokerage is her SEP IRA with?

Which fund firm or brokerage is her IRA with?

You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.


boglebull wrote: Sun Jun 26, 2022 11:49 pmQUESTIONS:
1. HELP: Need advice from you all. I want to pull my cash out of the bank and invest in a brokerage account. I don’t know where to start.
Do NOT pull any cash from the IRA, because of the tax liability ("Tax Rate: 25% Federal, 0% State") and the 10% penalty.

How much (in dollars) do each of you currently contribute annually to each account? You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.

In general, it's better to make maximum annual contributions to all available tax-advantaged accounts as a priority ahead of contributions to a taxable brokerage account.

Wiki article Prioritizing Investments.


boglebull wrote: Sun Jun 26, 2022 11:49 pm2. What is your opinion on dividend paying funds & International Funds?
Instead of dividend funds I suggest very diversified stock funds like total stock market index funds.

Instead of investing for dividends concentrate on total return (share price appreciation plus dividends).

For improving diversification I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities", available as an archived pdf. Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6). The diversification benefit has varied over time. (You can find lots of debate here on international allocation, opinions ranging all the way from 00% to 50% of stocks in international stocks. If you want more viewpoints on international stocks please try the Google search box, upper right, this page).


boglebull wrote: Sun Jun 26, 2022 11:49 pm3. I have health insurance coverage under my wife’s employer. They do not have a HSA account. Is it a good idea to open a HSA a/c at a different entity? Can myself and my wife eligible to open a HSA a/c at a different entity even though she has a healthcare coverage by her employer. I am trying to save on the taxes through HSA.
Does your wife's employer offer a qualified High Deductible Health Plan (HDHP)? That is a requirement before you can use a Health Savings Account (HSA).

If a HDHP is suitable for your health insurance needs then using a HDHP plus a HSA is a good idea.

Wiki article HDHP.

Wiki article HSA.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
boglebull
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Joined: Fri Mar 19, 2021 7:06 pm

Re: Portfolio advice for cash flow & retirement

Post by boglebull »

davidferrer31 wrote: Mon Jun 27, 2022 6:56 am 3) Does your wife have a HDHP? If so, you can open an HSA. However, if your wife's health insurance is not a HDHP, then you are unable to contribute and open an HSA
No. She does not have a HDHP.
Topic Author
boglebull
Posts: 5
Joined: Fri Mar 19, 2021 7:06 pm

Re: Portfolio advice for cash flow & retirement

Post by boglebull »

davidferrer31 wrote: Mon Jun 27, 2022 6:56 am 3) Does your wife have a HDHP? If so, you can open an HSA. However, if your wife's health insurance is not a HDHP, then you are unable to contribute and open an HSA
No. She does not have a HDHP.
Topic Author
boglebull
Posts: 5
Joined: Fri Mar 19, 2021 7:06 pm

Re: Portfolio advice for cash flow & retirement

Post by boglebull »

retired@50 wrote: Mon Jun 27, 2022 8:35 am
boglebull wrote: Sun Jun 26, 2022 11:49 pm His IRA at local Bank 2
His Bank 2 Checking A/c - 400K need to invest
Cash & short term - 22K
US large & small cap - 17K invested

QUESTIONS:
1. HELP: Need advice from you all. I want to pull my cash out of the bank and invest in a brokerage account. I don’t know where to start.
Welcome to the forum. :happy

My initial reaction to your statement above is... Whoa! Take it slow and easy until you are sure what you're doing.
Once you have money in an IRA, taking it out, usually means making a withdrawal and paying taxes on it. I don't think that's what you want to do. I suspect what you want to do is transfer this IRA to another custodian (that isn't local Bank 2).

If you want to transfer this IRA someplace else, the first thing to do is decide where you'd like it to be. In the Bogleheads forum, many of the members use places like Vanguard, Fidelity or Schwab. If you have any particular loyalty to any of these organizations, or already have an account at one of them, that may be the answer.

Once the IRA is transferred (typically what's known as an in-kind transfer) then you can decide how you want to invest it. There are a variety of potential "solutions" to this issue, but the first thing to do is select a custodian and initiate the transfer of the IRA. This is usually done by contacting the new, desired custodian (Vanguard, Fidelity, or Schwab etc.) and asking for help.

Post back if you have questions.

Regards,
I had opened a TD Ameritrade A/c while back and have not funded. I just googled and learnt that Schwab is TD Ameritrade. If I use TD Ameritrade and invest in Vanguard funds, will I be charged a fee by TD Ameritrade? Is it better to buy Vanguard funds using Vanguard brokerage? Does Vanguard have a office in Texas to meet them in person.
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retired@50
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Location: Living in the U.S.A.

Re: Portfolio advice for cash flow & retirement

Post by retired@50 »

boglebull wrote: Mon Jun 27, 2022 5:33 pm I had opened a TD Ameritrade A/c while back and have not funded. I just googled and learnt that Schwab is TD Ameritrade. If I use TD Ameritrade and invest in Vanguard funds, will I be charged a fee by TD Ameritrade?
I don't know if TD Ameritrade will charge a fee for Vanguard mutual funds. You'd have to check with them, or maybe it's mentioned on their website. I would suspect they won't charge a fee if you're using Vanguard ETFs.
boglebull wrote: Mon Jun 27, 2022 5:33 pm Is it better to buy Vanguard funds using Vanguard brokerage?
I don't know about "better", but if you want easy, no-fee access to everything Vanguard offers, then sure, I'd say using Vanguard would be smart.
boglebull wrote: Mon Jun 27, 2022 5:33 pm Does Vanguard have a office in Texas to meet them in person.
Vanguard doesn't have branch offices to my knowledge. I don't think Vanguard offers in person meetings, unless you count video calls. I think they do offer video calls to clients who select their advisory service known as Vanguard Personal Advisory Services.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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ruralavalon
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Location: Illinois

Re: Portfolio advice for cash flow & retirement

Post by ruralavalon »

boglebull wrote: Mon Jun 27, 2022 5:33 pmI had opened a TD Ameritrade A/c while back and have not funded. I just googled and learnt that Schwab is TD Ameritrade. If I use TD Ameritrade and invest in Vanguard funds, will I be charged a fee by TD Ameritrade? Is it better to buy Vanguard funds using Vanguard brokerage? Does Vanguard have a office in Texas to meet them in person.
Most other brokerages will charge a fee to buy regular Vanguard funds. Schwab charges $74.95 to buy Vanguard funds.

Schwab Increases Transaction Fees for Vanguard and Fidelity Funds

Most other brokerages will not charge a fee to buy Vanguard exchange traded funds (ETFs).

If buying Vanguard funds in my opinion there is no good reason to use an account other than at Vanguard.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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