Portfolio review and help please

[velsignet]

Hello,
This post is a long time coming. Frankly I’m embarrassed how sloppy and unwieldy our portfolio has gotten but we’re looking forward now and eagerly anticipating some good advice to consider.

We are married, no children. She retired this month and since we can live off His salary (been doing so for several years in preparation) she is not drawing from retirement savings at this time. He has 5 part time jobs so salary varies a bit. He will draw a pension in 5-7 years plus work part time which will cover most if not all expenses. She can begin withdrawls at this time if necessary or wait for RDMs. She will evaluate SS claiming strategies along the way. He will have no (or very little) SS.

Emergency funds: Yes, 18 months expenses. 12 months CD ladder, balance in money market savings

Debt: Mortgage only. Balance $200k at 3.3%. Extra principal payment $1k monthly. Goal is to pay off within 10 years. Current est value $1 mm.

Tax Filing Status: MFJ

Tax Rate: 24% Federal, 10% State

State of Residence: CA

Age: Him 55, Her 60

Desired Asset allocation: 60% stocks / 40% bonds – suggestions welcome
Desired International allocation: not sure - 20%?

Approx. portfolio size: $1 mm (plus $400k new cash to invest - see question below - and not included in portfolio %)

Current portfolio:

Taxable accounts
Fidelity
2% Fidelity Total Stock Market (FSKAX) (0.015%)
2% Fidelity 500 index (FXAIX) (0.015%)
1.5% iShares Core S&P (ITOT) (0.03%)
0.5% IBM (IBM)
0.3% Merck and Co (MRK)
0.25% Coca Cola (KO)
0.25% Altria Group (MO)
0.2% Cigna (CI)
0.2% Cisco (CSCO)
0.2% Wisdom Tree China (CXSE)
0.1% Ford (F)
0.1% Halliburton (HAL)
0.1% Kraft Heinz (KHC)
0.1% AT&T (T)
0.1% Warner Bros Discovery (WBD)
0.1% Wells Fargo (WFC)

Vanguard
4% VTSAX Total Stock Market (VTSAX) (0.04%)

Her 401k at Fidelity (custom funds/no ticker – just retired so we need to roll over)
30% WM AA2025(0.16%)
4% WM AA2035 (0.16%)
4% WM Total Bond (0.188%)
15% WM Large Cap Stock (0.006%)
8% WM Sm and Mid Cap Stock (0.013%)

Her Roth IRA at Fidelity
0.5% GNMA Fund (FGMNX) (0.45%)
0.5% Fidelity Low Priced Stock (FLPSX) (0.82%)

Her traditional IRA at Fidelity
1% Vanguard Wellesley (VWINX) (0.23%)

Her rollover IRA at Vanguard
9% Vanguard Total Stock Market (VTSAX) (0.04%)

Her Roth IRA at Vanguard
0.5% Vanguard Health Care ETF (VHT) (0.10%)
0.25% Vanguard Total Bond (BND) (0.03%)
0.5% Vanguard Total Stock (VTI) (0.03%)
0.25% Vanguard Total Intl Stock (VXUS) (0.07%)
0.5% Vanguard Real Estate Index (VNQ) (0.12%)
0.5% Vanguard TIPS (VIPSX) (0.20%)

His traditional IRA at Vanguard
0.5% Vanguard TR 2030 (VTHRX) (0.08%)

His Roth IRA at Vanguard
2% Vanguard TR 2030 (VTHRX) (0.08%)

His 403b
2% Voya Fixed III
0.25% Vanguard Inflation Protected (VIPIX) (0.07%)
2% Vanguard Total Stock Market (VSMPX) (0.02%)
0.5% Vanguard Institutional Index Plus (VIIIX) (0.02%)
1% Dodge & Cox (DOXGX) (0.41%)
0.1% Vanguard Mid Cap index (WMCIX) (0.04%)
0.25% Vanguard Developed Markets (VDIPX) (0.04%)
0.3% Vanguard Emerging Markets (VEMIX) (0.10%)
0.15% Dodge & Cox Intl (DOXFX) (0.05%)
0.25% Vanguard REIT (VGSNX) (0.10%)
0.2% PIMCO all asset (PAAIX) (0.80%)

His 457
3% Vanguard Total Stock Market (VSMPX) (0.02%)
1% Dodge & Cox (DOXGX) (0.41%)
100%

New annual contributions
$18,000 his 403b and 457
$7,000 his IRA/Roth IRA
$7,000 her IRA/Roth IRA

Available funds in his 403b and 457
American Growth Fund of America (RGAGX) (0.30%)
Artisan International (ARTIX) (1.19%)
DFA International Small Company (DFISX) (0.39%)
Dodge & Cox (DOXGX) (0.41%)
Dodge & Cox Intl (DOXFX) (0.05%)
Federated US Treasury Cash (UTIXX) (0.20%)
Northern Global Sustainability Index Fund (NSRIX) (0.29%)
PIMCO all asset (PAAIX) (0.80%)
TIAA-CREF Social Choice Equity (TISCX) (0.17%)
Vanguard Developed Markets (VDIPX) (0.04%)
Vanguard Emerging Markets (VEMIX) (0.10%)
Vanguard Inflation Protected (VIPIX) (0.07%)
Vanguard Institutional Index Plus (VIIIX) (0.02%)
Vanguard Mid Cap index (WMCIX) (0.04%)
Vanguard REIT (VGSNX) (0.10%)
Vanguard Short-Term Bond Index (VBITX) (0.05%)
Vanguard Small Cap Index (VSCIX) (0.04%)
Vanguard Total Bond Market (VBTLX) (0.05%)
Vanguard Total Stock Market (VSMPX) (0.02%)
Voya Fixed III

Questions:
1. Main goal is to simplify our portfolio where possible and rebalance (currently off kilter at 77/23).

2. We have just received a $400k inheritance to invest; currently sitting in a money market. Is it a good idea to put it all in treasury bills short term while looking into long term investments? What are suggestions for long term investment? Are longer terms treasuries a good idea for a portion of the money? We’ve considered putting a small bit toward the mortgage but that feels like an emotional choice.

3. Her 401k with Fidelity needs to be rolled over to and IRA. Would like suggestions for funding.

4. We’d like to begin moving out of individual stocks in our taxable account. (maybe this is a separate post?) We have winners and losers. Its not a large % of our portfolio and just enough to be annoying! Not sure how long to hang on to the losers - I've long since relaized I’m not a qualified stock picker. Any specific advice on that is appreciated.

Thank you!

[BolderBoy]

4. We’d like to begin moving out of individual stocks in our taxable account. (maybe this is a separate post?) We have winners and losers. Its not a large % of our portfolio and just enough to be annoying! Not sure how long to hang on to the losers - I've long since relaized I’m not a qualified stock picker. Any specific advice on that is appreciated.

Harvest the losers now, for sure (rule of thumb: harvest losses when you recognize them). See how much total $$$ losses result. Then look at the unrealized $$$ gains on the winners and sell enough (or all) of them to net out your gains-losses as close to zero as you can. Take the money from those transactions and buy more of the Total Market Index or S&P500 Index funds.

Welcome to the forum.

[calmaniac]

Not sure how long to hang on to the losers

Don't "hang on to the losers". In taxable accounts: I would tax loss harvest all individual stocks with capital losses (losers) and use those losses against capital gains from selling "winners".

No sense in hanging on to individual stocks waiting for Godot...

This is going to be a multi-year process. You don't want to sell too much in any one year and get hit with a large capital gains tax bill. There is no painless way to clean up the taxable account in one year.

[velsignet]

Thank you for the info on stocks in the taxable account - makes complete sense.

[delamer]

Not sure how long to hang on to the losers

Don't "hang on to the losers". In taxable accounts: I would tax loss harvest all individual stocks with capital losses (losers) and use those losses against capital gains from selling "winners".

No sense in hanging on to individual stocks waiting for Godot...

This is going to be a multi-year process. You don't want to sell too much in any one year and get hit with a large capital gains tax bill. There is no painless way to clean up the taxable account in one year.

The individual stocks are very small positions — $5,000 or less.

Getting rid of them in one year is very doable.

It looks like the majority of the assets are in the Fidelity 401(k). So prioritize getting that rolled over to an IRA.

Once that’s done, it wii be easier to proceed with implementing the preferred allocation.

Put the bonds in the rollover. Then pick one stock fund for each of the other accounts (and remainder of the rollover). Use some combination of total stock, S&P 500, small/cap, and/or international index funds.

You have a lot of good funds in your portfolio, emphasis on a lot.

We have a similar number of accounts and I’ve got most of them down to 1 fund. There are two accounts with 3 funds.

[velsignet]

Thank you delamer for the insights. I appreciate it! I do really want to get down to just a few funds. The 3 fund portfolios are very attractive and make sense to me.

Also bumping my post for any additional input especially to question #2 - the $400k inheritance. Does it make sense to buy lots (probably not the correct term) of FSKAX over the course of weeks or months to dollar cost average? Maybe invest in t-bills in the interim?

Thanks again.

(edited to correct to FSKAX)

[Raffert]

Firstly, most of us have had unwieldy, messy portfolios at some point. Maybe not everyone, but we sure have, for sure. We still have things we have to deal with! You're not alone But you're in the right place for advice.

Re: Question #2 (and #1):
The standard answer for investing a lump sum is that you're better off investing it all at your desired asset allocation immediately (rather than waiting) since that usually that provides the best returns (over cash). That said, since you seem to be off-kilter vs your desired AA, it seems like a great opportunity to get back to your desired 60/40 AA. Whether you do that immediately or dollar-cost-average back in, it seems like getting back to your desired AA is more important than how fast you do it.

Re: Question #3 & #4:
I'll agree with the folks above: sell the losers in taxable to TLH and offset with selling winners, with the goal of simplifying your taxable account. Along the same vein, it might be daunting to simplify your pre-tax accounts to fewer funds, but once it's done you'll be grateful. There's not reason to keep such small positions <5% in individual holdings. You're on the right path - simplify as much as possible.

Raffert

[velsignet]

Thank you Raffert for the advice and encouragment!

Re the lump sum, the idea to invest all at once does make sense - to stay in the market and also for simplicity which is one of my main goals. However I invested $25k in FSKAX and $25k in FXAIX in March 2022 and almost imediately "lost" $10k. I've been kicking myself ever since as my fantastical thinking says my position would be better today if I'd DCA instead. But since my initial investment in FSKAX is down, that would indicate now is a good time to buy more. Just scary with a big chunk of change.

[delamer]

Thank you Raffert for the advice and encouragment!

Re the lump sum, the idea to invest all at once does make sense - to stay in the market and also for simplicity which is one of my main goals. However I invested $25k in FSKAX and $25k in FXAIX in March 2022 and almost imediately "lost" $10k. I've been kicking myself ever since as my fantastical thinking says my position would be better today if I'd DCA instead. But since my initial investment in FSKAX is down, that would indicate now is a good time to buy more. Just scary with a big chunk of change.

There isn’t anything wrong with DCAing if it makes you more comfortable.

The caveat is that you develop a plan on how to do so, and stick to it regardless of market conditions. Otherwise, it’s too easy to get derailed.

Most of us DCAed with our contributions to our 401(k)s, out of necessity. And it worked out fine.

[velsignet]

Thank you delamer. I get that.

I just read another post about keeping the same funds in all your accounts - re TLH and concerns for wash sales, etc. Would it be best to choose something other than FSKAX in this taxable account since I already own some in other accounts? This seems contrary to simplifying and the "3-fund" approach but I think I also read on this board that that can be more of a concept and not literal.

Thank you everyone for indulging my questions. I'm still reading, learning and trying to take everything in...

[Taylor Larimore]

velsignet:

A bear market is nearly always the best time to sell securities in order to achieve your Three-Fund Portfolio goal of simplicity.

Good luck!
Taylor

Jack Bogle's Words of Wisdom: "Simplicity is the master key to financial success. -- We ignore the real diamonds of simplicity, seeking instead the illusory rhinestones of complexity."

[velsignet]

Thank you, Taylor!

[Nohbdy]

Thank you delamer. I get that.

I just read another post about keeping the same funds in all your accounts - re TLH and concerns for wash sales, etc. Would it be best to choose something other than FSKAX in this taxable account since I already own some in other accounts? This seems contrary to simplifying and the "3-fund" approach but I think I also read on this board that that can be more of a concept and not literal.

Thank you everyone for indulging my questions. I'm still reading, learning and trying to take everything in...

I think it would be best to hold something different (or at least not substantially identical) in the taxable accounts. Loss harvesting is not something you will get rich doing but it helps defer taxes in down years. I prefer ETF’s in taxable. You might want to avoid VTI since it is basically the same thing as VTSAX and I’m not sure what indeces all your various vanguard funds track. My suggestion would be to look at ITOT, SCHB, and/or SPTM as loss harvesting partners in taxable since you want FSKAX in your other accounts.

I also think you are on the right track in thinking in terms of asset classes to construct the 3 fund portfolio. You might also be just fine with no loss harvesting, it depends on what is most important to you: simplicity or tax optimization.

In the current rate environment you can get more than 3.3% with treasuries. If simplicity is your goal then pay off the house now. Otherwise, why not take that $1k / month and buy treasuries to pay it off at some predetermined date? If you are disciplined you could pay it off faster with slightly less contributions and if rates drop, then direct the money from treasuries to the mortgage, which was your plan all along.

[velsignet]

Thank you Nohbdy.

I think it would be best to hold something different (or at least not substantially identical) in the taxable accounts. Loss harvesting is not something you will get rich doing but it helps defer taxes in down years. I prefer ETF’s in taxable. You might want to avoid VTI since it is basically the same thing as VTSAX and I’m not sure what indeces all your various vanguard funds track. My suggestion would be to look at ITOT, SCHB, and/or SPTM as loss harvesting partners in taxable since you want FSKAX in your other accounts.

I was also thinking it may be too much trouble if I want to keep it simple. I've been reading that in many cases the benefit is very small considering the extra effort and learning curve for the novice. That being said, as long as I'm revamping the portfolio now, it may make sense to set it up for potential TLH. Is there a tool to compare funds to avoid a substantially identical one? Or as you infer can I simply select one that tracks another index? I already own some FSKAX and FXAIX in my taxable account so in this case I would need to sell those (which would be at a loss at this time which could be harvested? - see there I'm already going back on what I said earlier) then would I have to wait 30 days to buy more ITOT? I've been reading a lot about TLH and still learning.

In the current rate environment you can get more than 3.3% with treasuries. If simplicity is your goal then pay off the house now. Otherwise, why not take that $1k / month and buy treasuries to pay it off at some predetermined date? If you are disciplined you could pay it off faster with slightly less contributions and if rates drop, then direct the money from treasuries to the mortgage, which was your plan all along.

Can you explain a little more on this?

Thank you!

[Herekittykitty]

...... He will have no (or very little) SS.

.........Debt: Mortgage only. Balance $200k at 3.3%. Extra principal payment $1k monthly. Goal is to pay off within 10 years. Current est value $1 mm.

.......Age[/b]: Him 55, Her 60

........Her 401k at Fidelity (custom funds/no ticker – just retired so we need to roll over)

......We have just received a $400k inheritance to invest......We’ve considered putting a small bit toward the mortgage but that feels like an emotional choice.

......Her 401k with Fidelity needs to be rolled over to and IRA. Would like suggestions for funding.

A couple of miscellaneous comments:

Regarding paying off the mortgage: There is a lot to be said for a paid off mortgage at ages 55 and 60. Even a mortgage at 3.3%. Arguments can be made for any combination of paying it down, paying it off, paying part of it off, continuing as you are paying $1,000 a month toward it, and only paying the payments due each month. Sure, there are likely emotions involved in whichever way you go on this. Risk tolerance is not just an objective assessment - it includes a "sleep well at night" look at it too.

OTOH I would pay off the mortgage with $200,000 regardless of how the financial part of the decision plays out - so there's my bias (which I admit).

A different question: Does your wife's former workplace require she rollover the 401k? If so, is there a time by which she has to do that? That would be a good date to know in order not to miss it. (Not all employers are the same.)

Best wishes and well done on your and her financial progress thus far.

[Herekittykitty]

...... He will have no (or very little) SS.

.........Debt: Mortgage only. Balance $200k at 3.3%. Extra principal payment $1k monthly. Goal is to pay off within 10 years. Current est value $1 mm.

.......Age[/b]: Him 55, Her 60

........Her 401k at Fidelity (custom funds/no ticker – just retired so we need to roll over)

......We have just received a $400k inheritance to invest......We’ve considered putting a small bit toward the mortgage but that feels like an emotional choice.

......Her 401k with Fidelity needs to be rolled over to and IRA. Would like suggestions for funding.

A couple of miscellaneous comments:

Regarding paying off the mortgage: There is a lot to be said for a paid off mortgage at ages 55 and 60. Even a mortgage at 3.3%. Arguments can be made for any combination of paying it down, paying it off, paying part of it off, continuing as you are paying $1,000 a month toward it, and only paying the payments due each month. Sure, there are likely emotions involved in whichever way you go on this. Risk tolerance is not just an objective assessment - it includes a "sleep well at night" look at it too.

OTOH I would pay off the mortgage with $200,000 regardless of how the financial part of the decision plays out - so there's my bias (which I admit).

A different question: Does your wife's former workplace require she rollover the 401k? If so, is there a time by which she has to do that? That would be a good date to know in order not to miss it. (Not all employers are the same.)

Best wishes and well done on your and her financial progress thus far.

ETA: I knew I forgot something. Not that relevant to the considerations here but anyway - Regarding his Social Security He might as well figure it out so that he makes sure he puts in enough quarters so that he gets something from it rather than nothing for it, especially if it wouldn't mean doing work that qualified much more than he already is. Especially if it wouldn't be much more at all and assuming the difference would be worth it, of course.

[retiredjg]

1. Main goal is to simplify our portfolio where possible and rebalance (currently off kilter at 77/23).

You have 11 accounts spread out over two custodians (not counting the active 403b/457). Consolidation will take care of this quite easily.

Do you want to keep both Fidelity and Vanguard? If not, which do you prefer?

[Nohbdy]

Thank you Nohbdy.

I think it would be best to hold something different (or at least not substantially identical) in the taxable accounts. Loss harvesting is not something you will get rich doing but it helps defer taxes in down years. I prefer ETF’s in taxable. You might want to avoid VTI since it is basically the same thing as VTSAX and I’m not sure what indeces all your various vanguard funds track. My suggestion would be to look at ITOT, SCHB, and/or SPTM as loss harvesting partners in taxable since you want FSKAX in your other accounts.

I was also thinking it may be too much trouble if I want to keep it simple. I've been reading that in many cases the benefit is very small considering the extra effort and learning curve for the novice. That being said, as long as I'm revamping the portfolio now, it may make sense to set it up for potential TLH. Is there a tool to compare funds to avoid a substantially identical one? Or as you infer can I simply select one that tracks another index? I already own some FSKAX and FXAIX in my taxable account so in this case I would need to sell those (which would be at a loss at this time which could be harvested? - see there I'm already going back on what I said earlier) then would I have to wait 30 days to buy more ITOT? I've been reading a lot about TLH and still learning.

In the current rate environment you can get more than 3.3% with treasuries. If simplicity is your goal then pay off the house now. Otherwise, why not take that $1k / month and buy treasuries to pay it off at some predetermined date? If you are disciplined you could pay it off faster with slightly less contributions and if rates drop, then direct the money from treasuries to the mortgage, which was your plan all along.

Can you explain a little more on this?

Thank you!

I definitely think you should simplify so I sincerely hope that I’m not distracting you from that.

Interpretations differ on what might incur a wash sale and the IRS wording is kind of vague. There are some experts on this forum but I am not one. I think it’s a reasonably defensible position to say that if 2 funds track different index then they are not the same and therefore selling one to buy the other would not be a wash sale. With your scenario my concern would be that you sold fskax at a loss in taxable while buying fskax in a retirement account within 30 days. Again, I’m not an expert but that is my concern with what you’re suggesting. My understanding is that your worst case scenario there is that you wouldn’t be able to claim the loss. I’m not aware of a tool, but the wiki has some good stuff: https://www.bogleheads.org/wiki/Tax_loss_harvesting

Mortgage vs investing is an interesting topic. But you are paying 3.3% on your loan right? And you can basically get 4%+ at almost any new treasury. I only brought this up because I noticed that you were prepaying $1k/month on the mortgage, and you also mentioned buying T-bills in a different context. So, do the math for yourself.
Scenario a) put $1k additional on your loan to save 3.3% on the $1k.
Scenario b) put $1k into a 1 year T-bill to earn … whatever that auction gives you but it was 4.7% last week.

https://home.treasury.gov/resource-cent ... nth=202211

FWIW it is a personal goal of mine to have no debt when retired. I hate paying bills, and I hate owing. So with cash in hand I would probably pay it off. But to just chip away $1k at a time as indicated in your initial post … my point is that you can get a very safe return that beats 3.3%.

[Duckie]

Is there a tool to compare funds to avoid a substantially identical one?

There is no tool. You have to check each potential fund/ETF to see what index it follows. (If it's not index but rather active, then there is no wash sale possibility.)

Or as you infer can I simply select one that tracks another index?

Yes. Here is a list of possible Tax-Loss Harvest (TLH) retail partners with the indexes they follow:

• US Total Stock
  • VTSAX (VTI) - CRSP US Total Market Index
  • SCHB - Dow Jones US Broad Market Index
  • ITOT - S&P Total Market Index
  • IWV, VTHR, TIEIX, BKTSX - Russell 3000 Index
  • SWTSX, FSKAX - Dow Jones US Total Stock Market Index
  • FZROX^* - Fidelity US Total Investable Market Index
  • SPTM - S&P Composite 1500 Index
• US Large Cap
  • VFIAX (VOO), WFSPX (IVV), SPY, FXAIX, SWPPX - S&P 500 Index
  • VLCAX (VV) - CRSP US Large Cap Index
  • IWB, VONE - Russell 1000 Index
  • SCHX - Dow Jones US Large-Cap Total Stock Market Index
  • SCHK, SNXFX - Schwab 1000 Index
  • FNILX^* - Fidelity US Large Cap Index
  • MGC - CRSP US Mega Cap Index
• US Mid/Small Cap (aka Extended Market)
  • VEXAX (VXF) - S&P Completion Index
  • SSMKX - Russell Small Cap Completeness Index
  • FSMAX - Dow Jones U.S. Completion Total Stock Market Index
  • USMIX - Wilshire 4500 Completion Index
• US Mid Cap
  • VIMAX (VO) - CRSP US Mid Cap Index
  • IVOO, IJH, SPMD - S&P MidCap 400 Index
  • SCHM - Dow Jones US Mid-Cap Total Stock Market Index.
  • FSMDX - Russell Mid Cap Index
• US Small Cap
  • VSMAX (VB) - CRSP US Small Cap Index
  • VTMSX, VIOO, IJR, SLY - S&P SmallCap 600 Index
  • SCHA - Dow Jones US Small-Cap Total Stock Market Index
  • FSSNX - Russell 2000 Index
• International
  • VTIAX (VXUS) - FTSE Global All Cap ex US Index
  • VFWAX (VEU) - FTSE All-World ex US Index
  • FTIHX, IXUS - MSCI ACWI ex USA IMI Index
  • FSGGX - MSCI ACWI ex USA Index
  • FZILX^* - Fidelity Global ex US Index
  • VTMGX (VEA) - FTSE Developed All Cap ex US Index
  • SCHF - FTSE Developed ex US Index
  • IEFA - MSCI EAFE Investable Market Index
  • EFA, SWISX, FSPSX - MSCI EAFE Index

____^*Proprietary fund not suitable for a taxable account.

To me, if they follow a different index they are not "substantially identical" and there is no chance of a wash sale.

I already own some FSKAX and FXAIX in my taxable account so in this case I would need to sell those (which would be at a loss at this time which could be harvested?

Yes. But make sure you don't buy more in an account which automatically purchases those funds. You have VIIIX in his 403b. Before you sell FXAIX in taxable sell the VIIIX in his 403b and make sure the account is NOT set to purchase more, either through new contributions or reinvested dividends.

then would I have to wait 30 days to buy more ITOT?

Did you sell ITOT for a loss in taxable? If not you don't have to wait to buy it.

[velsignet]

Thank you Herekittykitty.

A different question: Does your wife's former workplace require she rollover the 401k? If so, is there a time by which she has to do that? That would be a good date to know in order not to miss it. (Not all employers are the same.)

I spoke with Fidelity last week and there is no requirement to roll over the 401k and no extra fees to keep it there. We will roll it over though, eventually, for more choice of funds.

Thank you retiredjg

Do you want to keep both Fidelity and Vanguard? If not, which do you prefer?

We plan to consolidate to Fidelity for simplicity. The majority of our funds are there and I do like their customer service.

Thanks again Nohbdy

Mortgage vs investing is an interesting topic. But you are paying 3.3% on your loan right? And you can basically get 4%+ at almost any new treasury. I only brought this up because I noticed that you were prepaying $1k/month on the mortgage, and you also mentioned buying T-bills in a different context. So, do the math for yourself.
Scenario a) put $1k additional on your loan to save 3.3% on the $1k.
Scenario b) put $1k into a 1 year T-bill to earn … whatever that auction gives you but it was 4.7% last week.

I get this now!

Duckie

To me, if they follow a different index they are not "substantially identical" and there is no chance of a wash sale.
I already own some FSKAX and FXAIX in my taxable account so in this case I would need to sell those (which would be at a loss at this time which could be harvested?
Yes. But make sure you don't buy more in an account which automatically purchases those funds. You have VIIIX in his 403b. Before you sell FXAIX in taxable sell the VIIIX in his 403b and make sure the account is NOT set to purchase more, either through new contributions or reinvested dividends.
then would I have to wait 30 days to buy more ITOT?
Did you sell ITOT for a loss in taxable? If not you don't have to wait to buy it.

Thank you for the detailed reply! I haven't sold anything yet in the taxable account. I definitely plan to sell the individual stocks. But when it comes to the FSKAX, FXAIX and ITOT I began considering TLH in my plan. And while I've read a lot on Bogleheads, listened to podcasts, and read articles and books, the strategy may be over my head. And I don't want to pay an advisor to handle if for me. Or maybe I'm just overwhelmed with all the moving parts at the moment. I will keep reading and learning!

Question: I thought the TLH and wash sale rule only applied to holdings in my taxable account?

[Duckie]

I thought the TLH and wash sale rule only applied to holdings in my taxable account?

No. You can trigger a wash sale if you sell something, say FXAIX, in taxable for a loss and buy something "substantially identical", say VIIIX, in a tax-sheltered account within the 61-day window. IRAs are definitely an issue (the IRS specifically mentions them) including your spouse's IRAs. There is a disagreement on this forum whether employer plan purchases can trigger a wash sale. I play it safe and take them into consideration.

[retiredjg]

We plan to consolidate to Fidelity for simplicity. The majority of our funds are there and I do like their customer service.

Here is just a rough idea with maximum consolidation for you to consider. It includes the $400k in the taxable account.

Taxable 37.2%
25.2% Total Stock Index
12% Total International Index


Her IRA (401k and 2 tiRAs)50.7%
10.7% 500 index
40% bonds


Her Roth IRA 2.5%
2.5% Extended Market Index


His Roth IRA 1.8% (includes His tiRA converted to Roth IRA)
1.8% Extended Market Index


His 403b 5%
5% Vanguard Institutional Index Plus (VIIIX) (0.02%)


His 457. 2.9%
2.9% Vanguard Institutional Index Plus (VIIIX) (0.02%)

This portfolio idea is 60% stock and 40% bonds with 20% of the stocks (12% of the portfolio) in international. Just a plain old 3 funder equivalent with no bells and whistles.

I'm not necessarily suggesting this is the portfolio to shoot for. It is just an example of a reasonable portfolio after a lot of consolidation...to give you an idea of what is possible.

Regarding the $400k, I would not take much time to get this money invested. We don't know if the market will go up or down or stagnate where it is for months. You cannot plan for or manage the best entry.

If you do not want to invest it in a lump sum, get it invested in 6 months or less. Just make a plan to invest a certain number of dollars every ____ and follow the plan. Completely ignore the market (unless the market drops and you want to invest more than the plan).

[Outer Marker]

Regarding the $400k, I would not take much time to get this money invested. We don't know if the market will go up or down or stagnate where it is for months. You cannot plan for or manage the best entry.

Excellent simplification plan above. One thought would be to use the $400k to pay off the mortgage immediately, and reduce your bond allocation by a corresponding amount. I would be hard pressed to buy bonds in today's market. I use stable value for fixed income. Paying off a 3.3% mortgage is more money that stable bond is yielding and has no interest rate risk, unlike bond. As to your overall picture, you're just as safe if not safer with a paid off house and an 80/20 portfolio than owing on the house and holding 60/40 in investments.

P.S. I wouldn't bother with the completion indexes; just use TSM or the S&P across the board, which would make an 80/20 portfolio a bit "safer" by having less exposure to more volatile small company stocks.

[Herekittykitty]

Regarding the $400k, I would not take much time to get this money invested. We don't know if the market will go up or down or stagnate where it is for months. You cannot plan for or manage the best entry.

Excellent simplification plan above. One thought would be to use the $400k to pay off the mortgage immediately, and reduce your bond allocation by a corresponding amount. I would be hard pressed to buy bonds in today's market. I use stable value for fixed income. Paying off a 3.3% mortgage is more money that stable bond is yielding and has no interest rate risk, unlike bond. As to your overall picture, you're just as safe if not safer with a paid off house and an 80/20 portfolio than owing on the house and holding 60/40 in investments.

P.S. I wouldn't bother with the completion indexes; just use TSM or the S&P across the board, which would make an 80/20 portfolio a bit "safer" by having less exposure to more volatile small company stocks.

Keeping in mind that the inheritance is $400,000 and the mortgage is $200,000 - so OP could pay off the house and still have $200,000 of the inheritance to invest.

[Outer Marker]

Keeping in mind that the inheritance is $400,000 and the mortgage is $200,000 - so OP could pay off the house and still have $200,000 of the inheritance to invest.

Exactly. I wouldn't be holding a $200,000 mortgage to hold $200,000 in Total Bond as part of a 60/40 portfolio. Since paying off the mortgage is a near term goal, I'd just go ahead and do it now. Apart from the math, having a paid off house just feels good.

[Jeepergeo]

Before rolling assets out of the 401(k) and into an IRA, consider risk.

In California, your 401(k) is likely formed under the Employee Retirement Income Security Act (ERISA) which includes anti-alienation provisions that make monies in the account close to if not fully protected from siezure to pay debts and judgments. In California, an IRA is not fully protected and a judge can allow assets in the IRA that are above what the owner needs (as determined by a judge) to be siezed.

The fees in an IRA will likely be less than the fees in the 401(k). You might be able to buy an umbrella policy with the savings to provide some protection that equals the protection afforded by the anti-alienation orotections under ERISA... though the umbrella insurance likely only protects one from insurable events and not from intentional acts.

https://www.bsllp.com/erisa-retirement- ... s'%20reach.
"The anti-alienation provision of ERISA requires “each pension plan shall provide that benefits provided under the plan may not be assigned or alienated.” This provision protects funds and contributions made to qualified plans from creditors' reach. With these protections, the plan participant is better able to provide security for their financial future with the funds set aside for retirement. However, these protections are not absolute. Some creditors can access normally protected ERISA funds. This includes federal IRS tax judgments and domestic support orders."

[velsignet]

Before rolling assets out of the 401(k) and into an IRA, consider risk.

In California, your 401(k) is likely formed under the Employee Retirement Income Security Act (ERISA) which includes anti-alienation provisions that make monies in the account close to if not fully protected from siezure to pay debts and judgments. In California, an IRA is not fully protected and a judge can allow assets in the IRA that are above what the owner needs (as determined by a judge) to be siezed.

The fees in an IRA will likely be less than the fees in the 401(k). You might be able to buy an umbrella policy with the savings to provide some protection that equals the protection afforded by the anti-alienation orotections under ERISA... though the umbrella insurance likely only protects one from insurable events and not from intentional acts.

https://www.bsllp.com/erisa-retirement- ... s'%20reach.
"The anti-alienation provision of ERISA requires “each pension plan shall provide that benefits provided under the plan may not be assigned or alienated.” This provision protects funds and contributions made to qualified plans from creditors' reach. With these protections, the plan participant is better able to provide security for their financial future with the funds set aside for retirement. However, these protections are not absolute. Some creditors can access normally protected ERISA funds. This includes federal IRS tax judgments and domestic support orders."

Thanks Jeepergeo for this information - I was not aware and will look into this further including what our existing umbrella policy covers.

retiredjg - excellent and thoughtful suggestions - thank you!

And thank you to Herekittykitty and Outer Marker for additional info especially re cosidering the mortgage payoff. In addition to the "emotional" benefit I could see, I appreciate the addition of sound reasoning and a way to make it part of our AA and overall financial plan.

[lakpr]

Keeping in mind that the inheritance is $400,000 and the mortgage is $200,000 - so OP could pay off the house and still have $200,000 of the inheritance to invest.

Exactly. I wouldn't be holding a $200,000 mortgage to hold $200,000 in Total Bond as part of a 60/40 portfolio. Since paying off the mortgage is a near term goal, I'd just go ahead and do it now. Apart from the math, having a paid off house just feels good.

Except if, the true inheritor wants to keep the inheritance separate from community property.