45 - Want to Retire - Nervous - Have Questions! (Vanguard, Insurance, Home)

[PennStateCLJ]

I would read the Boglehead's Guide to Investing by Larimore et al and All About Asset Allocation by Rick Ferri.

The short answer is the most important factor is your ratio of stocks/bonds which controls risk. John Bogle preferred age in bonds, but that's just a general guide and you can adjust based on your own risk tolerance. It might behoove you to stat at 50/50 stocks/bonds and see how you feel through a couple of market swings.

Within the stocks and bonds it really doesn't need to get too complicated, this is just an example, you can choose your own percentages. Admiral shares wherever you can.

Bonds-
half in total bond market index
half in TIPS Treasury Inflation Protected securities

Stocks-
half in total stock market index
half in total international stock index

This assumes it's all within tax advantaged accounts. If that's not the case, you would want to hold bonds in tax-advantaged accounts like IRAs,401ks. The stocks are pretty tax-efficient and could go in a taxable account.

 

[pb4uski]

I take a bit of a different approach. I have a personal "investment policy"like a balanced mutual fund would and target allocations for stocks and bonds, and within stocks for domestic and international. Additionally within domestic stocks I looks to be reasonably diversified between growth/value, large/mid and small cap and by sector and wihtin international stocks I want to be reasonably geographically diversified. Within bonds, I typically seek to be diversified across credit quality and duration (though in response to the current interest rate environment I have consciously decided to be short duration and lower credit quality that I would normally be). VGs Portfolio Watch report provides me with a lot of good information on where things stand and I use Portfolio Tester to rebalance.

 

[2B]

Hey All...

Well it surely looks like we will be making a move to Vanguard. After talking with a Vanguard support person, Nicholas, it seems however that they can not just electronically move the funds from Ameriprise to Vanguard. All the funds, except the REIT's, can be moved, but it seems Ameriprise requires it to be done via paper with signatures. So, not sure how this all will be handled.

I would LOVE for this to be done as quickly as possible due to the fact that the markets are down thus closing funds and moving into another will not cost me. (Though more than likely will take a loss.) But at least I will be in better areas after all this. Based on the leveal of funds that will be with them, I guess we can get free advise from them. But I am thinking I will just follow what others have done here and keep it simple.

We do have retirement accounts also (Like SEP's and IRA's) , so I am guessing they stay right where they are. I mean, move them to Vanguard but they stay like they are.

MY wife is researching the insurances to also see where we can cut back.

Thanks for the links to Bogleheads. We are going to go though the videos etc and start our re-education. This time in controlling and managing our own money.

I mean, we done very well in saving etc from when we were married. I just hate to think, and now kind of know, we were burnt. Heck we started off together $22K in the hole, lived in apartment, paid off all the debt in 3 years while saving for our first home and started an on-line startup. Bought our first home 2 years later and, well, never looked back as we were off and running. But fast forward and boy are we lost now. So again...THANKS for the links.

Ameriprise seems to be quite popular these days. It seems I'm running low on new ways to curse them. Hopefully, your "tuition" will be worth it by inspiring you to take control of your own financial destiny. You will ultimately do a better job.

Ameriprise requires a paper form because it will take longer. It will give your account rep an opportunity to call you and tell you what a big mistake you are making. He'll try to get you to verbally agree to stop the transfer. During the conversation, never say "yes" to any question he asks and I mean any. Even if you are emphatic that you want to move, it is not beyond reason that your form will become "lost." You'll have to follow up regularly to make sure it gets done. The time limit used to be 6 weeks (decades ago) but it's probably been shorted with all the electronic transfers involved (or not!). They will drag it out as long as possible. With the size of your account being what it is, you may hear from several Ameriprise reps. You are a big cash cow to them. They will fight letting you go; but whatever they say, get out of there.

Do you suspect I distrust Ameriprise? You betcha!

SEP's and IRA's can stay where they are at; but when you are no longer employed, I suggest you move them to where you have your other accounts. I'm personally a Vanguard booster but others like Fidelity or buy ETFs through discount brokers.

 

[Nathan72]

So, the process is moving along with now some of the funds moved into Vanguard. I was told to expect a charge maybe of $20 to $40 per account when closed and transferred...but NOPE. $100 PER account! Thanks bloated Ameriprise for your continued greed! Even the planner I had was not aware how high the fee was as he also said about $30 per account. (Fitting into the $20 to $40 most people had thought.)

So...Ouch. So glad we are doing this and even more so with the $100 fee showing how Ameriprise really is....Greedy. (IMHO) Sorry if I come off harsh. This really has been shocking to us to say the least.

 

[2B]

When I moved most of my accounts from ETrade to Vanguard, I was charged $60 per account by ETrade. This was carried by Vanguard as a negative cash balance in my brokerage account. I didn't make any changes to my accounts since they were all in Vanguard funds when at ETrade. Vanguard switched me into Admiral shares almost immediately. The negative cash balance disappeared about 2 months later. Nothing was sold in any of my accounts to cover the fee. Effectively, I got a free transfer.

Even if you have to pay for the transfer, you will be well ahead by getting out of Ameriprise. Your move has been quicker than what I expected.

 

[Midpack]

So, the process is moving along with now some of the funds moved into Vanguard. I was told to expect a charge maybe of $20 to $40 per account when closed and transferred...but NOPE. $100 PER account! Thanks bloated Ameriprise for your continued greed! Even the planner I had was not aware how high the fee was as he also said about $30 per account. (Fitting into the $20 to $40 most people had thought.)

So...Ouch. So glad we are doing this and even more so with the $100 fee showing how Ameriprise really is....Greedy. (IMHO) Sorry if I come off harsh. This really has been shocking to us to say the least.

That's gouging IMO. When I transferred our 5 accounts from Fidelity to Vanguard a little over ten years ago, there were no account fees at all. It may be different these days though, so my experience may be (way) out of date.

 

[pb4uski]

So, the process is moving along with now some of the funds moved into Vanguard. I was told to expect a charge maybe of $20 to $40 per account when closed and transferred...but NOPE. $100 PER account! Thanks bloated Ameriprise for your continued greed! Even the planner I had was not aware how high the fee was as he also said about $30 per account. (Fitting into the $20 to $40 most people had thought.)

So...Ouch. So glad we are doing this and even more so with the $100 fee showing how Ameriprise really is....Greedy. (IMHO) Sorry if I come off harsh. This really has been shocking to us to say the least.

What does the contract/prospectus say the account closure fee is? That seems really high. Scoundrels.

 

[Midpack]

Looks like the $100 account closing fee is indeed SOP for Ameriprise Brokerage Fees and Brokerage Commissions | Ameriprise Financial. Just shows in writing what "scoundrels" they are. I assume the closing fees are very small compared to the portfolio, but still...

And you'd never know looking at their slick TV (Tommy Lee Jones) and magazine ads. Caveat emptor indeed...

 

[Nords]

So, the process is moving along with now some of the funds moved into Vanguard. I was told to expect a charge maybe of $20 to $40 per account when closed and transferred...but NOPE. $100 PER account! Thanks bloated Ameriprise for your continued greed! Even the planner I had was not aware how high the fee was as he also said about $30 per account. (Fitting into the $20 to $40 most people had thought.)

Apparently the Ameriprise corporate social-media team has been reading your posts on this discussion board...

 

[Nathan72]

Apparently the Ameriprise corporate social-media team has been reading your posts on this discussion board...

Ok, that was funny. But I bet it's also true.

So far all but 3 accounts have now been moved over and those should show up this coming week as they needed to be done via paper and signatures. But most of the funds have been moved.

We are all set to talk with a Vanguard adviser/planer this coming week, I think Thursday. So for now, all the money is still in the same funds as they came over in. We will need to cash them out and buy new at some point after we chat.

So soon we will be in better shape for the future.

Just wanted to follow up.

 

[Nathan72]

Hi...Just an update. Talked with our Vanguard Planner on Thursday and have another appt set up to finish up. Long and short of it...BEST THING WE COULD HAVE EVER DONE!

 

[Nathan72]

Well it has been quite some time now from when you all helped us with your thoughts and incites on financial future. I now find myself coming back again to dig a little deeper on two items. 1) An Annuity we have and 2) New York State and our taxes. And thus am seeking the community thoughts on these two areas.

Current Update...

Age: 46 Wife: 38

Currently with Vanguard $2.4M - 63% Stock/37% Bonds. (71% US Stock)
Still with Amerprise = $189K in a REIT's and $285K Annuity
Current Total = $2,874,000.
In 2013 - Expect another $360K invested but that would be that.

Ok...On to the help/thoughts needed...

The Annuity still with Amerprise...By the Numbers...(As of 11/2/12)

$275,000 total investment (put in over 3 separate times. $100K- 2006, $75K - 2008, $100K - 2012)

1.9% Average Fund Charge (The avg over 7 funds it currently has in it and includes the mortality expense of .954%)

Current Value = $285,543.00

Current Gain = $10,543.00

Surrender Value = $268,195.98 ($17,348 Surrender)

Loss vs $ Put in if surrendered = $6,805.00


Question: Seeing that the account has a $10,543 gain currently, would I still be hit with a tax penalty, of I think someone mentioned 10%, on that amount seeing I am taking it out before 59 1/2? Or seeing I would have lost $6,805 because of the surrender charge do I actually have a loss I can claim and have no penalty. (I understand I am giving up $17K in the surrender regardless.) I hope that question came out right. I am just not sure if I am hit even more.

It comes out to a 6% surrender hit. If I had an annuity at Vanguard, it would only be .6%. (I have been advised that an annuity really may not be of help to us tax wise which is where they are usually used based on projected yearly expense of $80K a year withdraw.) Undertand, I have NO IDEA on how any of that all works.

I guess we are still looking to see about if it makes sense to get out of this now vs holding it until 59.5 years of age. We still think we were put into it just some others could make $ as I am not sure how this is helping us.


New York State and Taxes:

So the other things we are still struggling with is being here in NYS and the taxes we pay. We are still strongly considering moving out of NY and head to Texas. The hard part is we love our home...yet...we have shut down the top part of the house as it is not used. We have made the home as we would want it, but it sure is costly without even going into operating costs of the home and yard.

By the simple numbers...

Home = $305,000 town assessed value

Mortgage = $200,000 still own (at 3.5% 14 years)

Town and School taxes = $12,000 (Yes, you read that right.)

State Personal Income Tax Rate = 6.65%

All our income is personal income. Be it from our side projects or when we start to withdraw from our Vanguard funds. So the $12K a year in taxes alone if quite a bite and then we toss in 6.65% in personal income tax. So, it is just a hard thought for sure. We are in Upstate NY.

We do not see things getting any better in NYS that is for sure. We here in upstate pay for NYC and do not even get the use of the items we are expected to help pay for. But I degrees. Our fear is that we are just tossing a lot money out the door to NYS and it does not need to be this way. Yet our family is here though we do currently travel often.

We even considered staying and downsizing but that really only saved us about $3.5 to $4K a year on home taxes.

All in all, we look forward to the community thoughts even though we already know their are no easy answers. (Other than getting into Vanguard when we did.)

Thank you.

(Not sure if I should have started a new thread....maybe will have to as others who have not followed along may not see this new plea for guidance.)

 

[Amethyst]

I can't address the income questions, but here are some thoughts on the "should we move" question:

In considering whether to move to a state that does not tax pension income, I have spent a great deal of time and effort to research the following:

1) Possible alternative places to live. All the other calculations are absolutely dependent on the exact place one chooses to live. You can't just say "State X," you must get down to the county and municipality level, and that means you've got to go check these areas out for yourself.

The rest is Internet research and spreadsheeting:

2) Amount of state/county tax we can expect to pay on our pensions if we stay put (this is the amount we would save by moving to a non-tax state).
3) Relative property tax for a home of similar value in the target state(s).
4) Rough estimate of the cost to sell our current home and buy one in the target state(s). (Broker's fees, staging, carrying costs during for-sale period, closing costs).
5) Rough estimate of the cost to move our stuff, possibly twice (if our house doesn't sell at the exact same time a home we want to buy shows up for sale - a distinct possibility).

There are other factors, such as the cost of owning and operating and repairing and maintaining your current home; but you'd face those anywhere you live. Also, some parts of the U.S. definitely have lower general cost of living than others, but I'm on the fence as to whether COL (aside from cost of housing) is a significant factor compared with the ones I've listed.

Hope this is food for thought.

Amethyst

Current Update...

New York State and Taxes:

So the other things we are still struggling with is being here in NYS and the taxes we pay. We are still strongly considering moving out of NY and head to Texas. The hard part is we love our home...yet...we have shut down the top part of the house as it is not used. We have made the home as we would want it, but it sure is costly without even going into operating costs of the home and yard.

By the simple numbers...

Home = $305,000 town assessed value

Mortgage = $200,000 still own (at 3.5% 14 years)

Town and School taxes = $12,000 (Yes, you read that right.)

State Personal Income Tax Rate = 6.65%

All our income is personal income. Be it from our side projects or when we start to withdraw from our Vanguard funds. So the $12K a year in taxes alone if quite a bite and then we toss in 6.65% in personal income tax. So, it is just a hard thought for sure. We are in Upstate NY.

We do not see things getting any better in NYS that is for sure. We here in upstate pay for NYC and do not even get the use of the items we are expected to help pay for. But I degrees. Our fear is that we are just tossing a lot money out the door to NYS and it does not need to be this way. Yet our family is here though we do currently travel often.

We even considered staying and downsizing but that really only saved us about $3.5 to $4K a year on home taxes.

)

 

[Katsmeow]

I actually thought that Texas property taxes were high! We have a 300k house and pay about $5300 in property taxes. Bear in mind that while we have no state income tax here we do have sales tax. Where I live it is currently 8.25%.

I do think it is reasonable to consider cost of living in where you live during retirement. That said, I know there are factors of being close to family that are important for many and there are also cultural factors. There is a huge cultural difference between NY and Texas so bear that in mind as well.

 

[Nathan72]

Oh...Forgot the local sales tax... 8.25% here also.

NY is 7th highest in cost of living with Hawaii being #1. Texas is 47th. (All things considered)

But compared to NY...Texas is low in property tax. LOL

'There is a huge cultural difference between NY and Texas so bear that in mind as well."

Yes, their is. We have spent time there and will again this winter. We kind of like it actually. Maybe it is us, but people seem much nicer and their is a lot of pride. But yes, something needed to be considered when looking to make a move.

 

[MichaelB]

Oh...Forgot the local sales tax... 8.25% here also.

NY is 7th highest in cost of living with Hawaii being #1. Texas is 47th. (All things considered)

But compared to NY...Texas is low in property tax. LOL

'There is a huge cultural difference between NY and Texas so bear that in mind as well."

Yes, their is. We have spent time there and will again this winter. We kind of like it actually. Maybe it is us, but people seem much nicer and their is a lot of pride. But yes, something needed to be considered when looking to make a move.

So, if you kind of like Texas and also prefer the lower cost of living you might find there, what are your concerns?

 

[pb4uski]

On the annuity:

I see a couple possibilities. One is you may be able to do a 1035 exchange from Ameriprise to Vanguard (actually the insurer sponsoring the Vanguard marketed annuity) which would avoid any tax/penalty implications but reduce your fees at the expense of the surrender charge you would have to "pay". Second, most annuity contracts allow a certain percentage of surrender charge free withdrawals each year (commonly 10%). If your Ameriprise contract allows that you could begin to do the maximum penalty free withdrawals each year as either a 1035 to a Vanguard annuity or simply a cash surrender that you would pay any relevant tax and penalty and then reinvest the net proceeds. Or perhaps a combination of the two - a 1035 exchange to vanguard and then surrender charge free withdrawals and reinvestment in other accounts over time. I think if it were me I'd probably lean to doing a 1035 exchange to vanguard and then letting it sit and annuitizing it later.

On the move:

First, since your move seems to be largely state tax motivated, check to be sure that your state taxes will be what you think they will be once you RE. IIRC, most of your nestegg is in taxable accounts, so if you retire, your taxable income may be a lot less than what you think. You can test this by taking a recent tax return and adjusting it for what will change in retirement and see what it looks like.

Second, check out Find Your Spot. You input things about what you want in a place to live and it provides a list of suggestions for you.

But don't underestimate the importance of having family nearby.

 

[Nathan72]

So, if you kind of like Texas and also prefer the lower cost of living you might find there, what are your concerns?

I think it mostly is emotions. Lived here in this area all our lives. Logically, the numbers tell us to get out now and have a beter chance at a less stressed financial future. It is just hard I guess. And it should not be, we do travel for 6 to 7 months of the year and have been from 2008. But we always did come back "home".

 

[MichaelB]

I think it mostly is emotions. Lived here in this area all our lives. Logically, the numbers tell us to get out now and have a beter chance at a less stressed financial future. It is just hard I guess. And it should not be, we do travel for 6 to 7 months of the year and have been from 2008. But we always did come back "home".

That's understandable, and a difficult choice to make. Have you thought about renting in Texas for a year to see if living there is all you expect it to be? That will cost a few more $$ in the short term but should help you sort through this and get a better understanding of what you want and need for your permanent residence.

 

[Nathan72]

On the annuity:

I see a couple possibilities. One is you may be able to do a 1035 exchange from Ameriprise to Vanguard (actually the insurer sponsoring the Vanguard marketed annuity) which would avoid any tax/penalty implications but reduce your fees at the expense of the surrender charge you would have to "pay". Second, most annuity contracts allow a certain percentage of surrender charge free withdrawals each year (commonly 10%). If your Ameriprise contract allows that you could begin to do the maximum penalty free withdrawals each year as either a 1035 to a Vanguard annuity or simply a cash surrender that you would pay any relevant tax and penalty and then reinvest the net proceeds. Or perhaps a combination of the two - a 1035 exchange to vanguard and then surrender charge free withdrawals and reinvestment in other accounts over time. I think if it were me I'd probably lean to doing a 1035 exchange to vanguard and then letting it sit and annuitizing it later.

On the move:

First, since your move seems to be largely state tax motivated, check to be sure that your state taxes will be what you think they will be once you RE. IIRC, most of your nestegg is in taxable accounts, so if you retire, your taxable income may be a lot less than what you think. You can test this by taking a recent tax return and adjusting it for what will change in retirement and see what it looks like.

Second, check out Find Your Spot. You input things about what you want in a place to live and it provides a list of suggestions for you.

But don't underestimate the importance of having family nearby.

Hi...thanks...but totally lost us on the annuity. Augh...why do they make these things for hard to understand.

In regards to "IIRC, most of your nestegg is in taxable accounts, so if you retire, your taxable income may be a lot less than what you think."

Is not all the $ you take out of retirement also not taxed as personal income? Oh wait, are you only taxed on gains made? But are we thus not taxed on all the dividends made every year? They really do make harder then it should be.

Now getting more and more confused. I guess we are more lost than what we knew even after all the reading. We tried to pay someone to help us...but if you had followed along from the start, you know how that ended up for us.

 

[Nathan72]

That's understandable, and a difficult choice to make. Have you thought about renting in Texas for a year to see if living there is all you expect it to be? That will cost a few more $$ in the short term but should help you sort through this and get a better understanding of what you want and need for your permanent residence.

We have a motor coach that we live in also...so while we have not spent a year in Texas, we also have not spent a year here sense 2008. Even not being year costs us about $1400 a month with taxes and upkeep. (upkeep = home operations needs when no one is here. Does not include mortgage.)

 

[pb4uski]

Hi...thanks...but totally lost us on the annuity. Augh...why do they make these things for hard to understand.

In regards to "IIRC, most of your nestegg is in taxable accounts, so if you retire, your taxable income may be a lot less than what you think."

Is not all the $ you take out of retirement also not taxed as personal income? Oh wait, are you only taxed on gains made? But are we thus not taxed on all the dividends made every year? They really do make harder then it should be.

Now getting more and more confused. I guess we are more lost than what we knew even after all the reading. We tried to pay someone to help us...but if you had followed along from the start, you know how that ended up for us.

A 1035 exchange is where you move your annuity money from one insurer (Ameriprise in your case) to an annuity with another insurer. Since the money is still in an annuity but just with a different company there are no tax implications or early withdrawal penalty implications.

On the other question - you need to be more specific on what it is that you are referring to as a "retirement" account - because the tax treatment differs between different types of retirement accounts. However, in most cases an early withdrawal penalty is assessed on amounts withdrawn from retirement accounts before age 59 1/2 so it would be very costly for you to use money from retirement accounts before you are 59 1/2.

If you have a CPA who does your taxes they should be able to explain the tax implications of using different accounts that you have in retirement. Or your Vanguard planner should be able to explain this as well.