Recent Retiree - Consolidating Accts

[Swampy]

Howdy All. I've been lurking around for quite a while and have been trying to soak up as much knowledge as possible. The amount of useful info presented by people on this website is amazing. I'm living in central MA and currently recuperating from hip replacement surgery that I had a few days ago so have a lot of time on my hands to finally do something about organizing my retirement funds.

I recently semi-retired last year and am now looking to simplify my various retirement accounts into 3 or 4 funds. I am thinking of combining my pre-tax accounts (401k, SEP-IRA totaling around 1.4M) into Fidelity funds along the lines of:

40% Total Market Index Fund
15% Total International Index Fund
5% Extended Market Index Fund (to increase small/mid cap exposure slightly) and
40% Total Bond Fund

I was debating whether to include the ZERO funds for the total market, international and extended market funds but not sure if the expense ratio savings (approx. 0.015%) are worth it as the ZERO funds have about 1000 fewer holdings per fund than the others. For example, the ZERO Extended Market currently has 1928 holdings vs. 3218 for the non-zero fund. Similar for the total and international funds. Do you think that makes a difference in being more diversified or the percent of these additional holdings is so minor to be inconsequential? Any thoughts on this or my fund selection would be appreciated.

 

[PussInBoots]

40% Total Market Index Fund
15% Total International Index Fund
5% Extended Market Index Fund (to increase small/mid cap exposure slightly) and
40% Total Bond Fund

Is this your current allocation? If yes go for it.

 

[PaunchyPirate]

I don't know the Fidelity funds myself as I'm consolidated at Vanguard, but the way you describe them seems reasonable. I will give a strong vote toward account consolidation efforts. I LOVE having 1 taxable account, 1 Traditional IRA and 1 Roth IRA. I chose to put all 3 at Vanguard, but I would understand if someone wanted to spread them out at different brokerages. Starting my 3rd year of retirement, I still have some complexity in that I have some less desired mutual funds/ETFs and individual stocks. But I'm balancing capital gains and income controls to help pay for ACA health insurance, so I don't have full flexibility to simplify further. But each year, I do what I can to further simplify. Go for it.

 

[OldShooter]

The proposed allocation looks quite reasonable and 60/40 is certainly middle-of-the-road. Including the extended market fund indicates you know what you're doing.

I would implement the plan by holding no more than four tickers, regardless of which account you might have them in. Conventional wisdom wants the bond fund in a tax-sheltered account, I think. There are tax strategy experts here who can opine.

 

[Sunset]

OP - if that is your current bond allocation, and you are simply moving holdings as in tranfer "In Kind". I see no issue.

Personally, I recently in the past year bought bond funds to have a safe place for some money... and the values have sunk a few percent. Even though interest rates didn't go up.

Should have stuck with CD's at the bank.

 

[Swampy]

Thanks for your replies all. That's the pre-tax portion of the portfolio. After-tax is primarily in cash ($130K) while Roth IRA portion ($400K) in similar 60/40 index funds with Vanguard. Any thoughts on ZERO funds vs. regular index funds or really doesn't matter?

Old Shooter - Are you a current or former Bullseye competitor? I've recently gotten into that but am not very good as of yet.

 

[OldShooter]

Thanks for your replies all. That's the pre-tax portion of the portfolio. After-tax is primarily in cash ($130K) while Roth IRA portion ($400K) in similar 60/40 index funds with Vanguard. Any thoughts on ZERO funds vs. regular index funds or really doesn't matter?

First, I would manage to an overall AA, not trying to look at the pieces. It's a forest vs trees thing. Then allocate the positions to minimize taxes.

Re zero-fee, we are in VG at Schwab. VG fees are so low that Fido's zeros don't move us. Also, we are in total world VTWAX which has no analog at Fido AFIK. IIRC the zeros use some home-made indexes. Probably the tracking errors are negligible vs true total market funds though.

Old Shooter - Are you a current or former Bullseye competitor? I've recently gotten into that but am not very good as of yet.

Worse, former shooter -- never did get very good but I ended up with some nice guns in the safe.

 

[Swampy]

Good point regarding looking at the total AA. Will do the allocation as I've indicated and then look to tweak other accounts to get where I want to be.

Old Shooter - Yes, I've ended up with a few "investments" in my safe as well. At least that is what I tell my wife. Not part of the portfolio though.

Thanks to all who replied.

 

[Brat]

The grandchildren's 529 funds are in the Utah program. They offer Vanguard funds, both International Growth and Total International. I prefer International Growth because it can account for political risk. There are a couple of holdings that are US firms with significant international business. Vanguard's International Growth has much higher returns than Vanguard Total International.

Vanguard's International Growth is available at Fidelity for $75.

 

[OldShooter]

Good point regarding looking at the total AA. Will do the allocation as I've indicated and then look to tweak other accounts to get where I want to be. ...

FWIW for a long time I didn't worry about whether individual accounts matched the AA, looking only at the totals. I finally decided, though, that withdrawals were easier to manage if each account roughly matched the AA, subject to tax considerations. YMMV, of course.

 

[Animorph]

I'm pretty sure the Zero funds came after I was already using these funds at Fidelity:
FXAIX - S&P 500
FSMAX - Extended Market
FSGGX - Global Ex-U.S.
FXNAX - Bonds

Those are all in retirement accounts, except for a little FSGGX in taxable. Darn tax-loss harvesting.

I try to use FZROX and FSPSX in the taxable account since they are different enough to avoid wash sales with the retirement accounts. Plus I have a few other funds with too much capital gains to sell right now.

It has never seemed worth the trouble to move to all Zero funds, and they haven't seemed to match the structure of my current funds to be a one-for-one substitution. But any of those funds would be a good choice.