Move from managed to self-directed investments

[braumeister]

Quote:

Originally Posted by Whisper66 We were assigned a rep back in 2016. Had the same rep ever since. Back then, an account with over $1M of vanguard funds was assigned a rep. That used to be clear from their info published on their web site. Today, it's not clear to me.

One of the things that confused me when I first looked at this was that the amount to get to one of their upper levels had to be invested in Vanguard funds, not just the total you have at their brokerage.

[38Chevy454]

It sounds like with your total assets, being over $1M, you can get Fidelity Private Client services.
Private Client is free advisor, but the advisor won't give you specific investments like your fee based guy does. The advisor will give guidance to help with planning and general investments, but ultimately as a self directed you make the final decisions and execution of trades or withdrawals. The fidelity advisor can help you transfer funds from your current fee based advisor. Fidelity doesn't charge for the advisor, they gain by getting your money under their umbrella, and especially if you invest in Fidelity mutual funds or ETFs. Fidelity has many good low cost funds, some even zero fees.
Another advantage to Fidelity is they have more physical locations than some others. A lot if people also like Fidelity's website better.

[Whisper66]

Quote:

Originally Posted by RetiredHappy .... The VA guy yesterday claimed that things have changed over the years that they no longer have an in-between model. Pay nothing and do it yourself, or pay 0.03% and they do them all....

Sounds like you got someone who either didn't know what he was doing or was purposely trying to push you into the 0.3% FA managed program. If either is true, not a good selling point for VG.

The robo advisor (or "digital advisor") costs 0.15% but can be tried for 90 days free. https://investor.vanguard.com/advice/digital-advisor/ I have not used this service.

[OldShooter]

@RetiredHappy, you're taking the right course here and you're getting some good advice. Some comments:

In any business situation that is relational rather than transactional, the specific person you're dealing with is much more important than the company name on the sign outside. VG is, by plan, a low cost, low touch, business but it sounds like you got a dud. I don't recommend going back, but would suggest that you not confuse one dud with the whole business.

@Whisper66 recommends against VTIAX for tax reaons, which is wise. I recommend against almost all blended funds for another reason: Performance is opaque. All you can see is the blended performance of the whole, with the details of equity performance vs fixed income performance well obscured. Better to have one equity fund that you can compare to benchmarks and one fixed income fund that you can also examine in detail.

The link that @mrfeh provided is good. I'll recommend a little more reading:

"If You Can" by William Bernstein https://www.etf.com/docs/IfYouCan.pdf (free 16 page download)

"The Coffee House Investor" by Bill Schultheis https://www.coffeehouseinvestor.com/ (This is Bills first book; read it before reading his second one.)

"The Bogleheads Guide to Investing" by Taylor Larimore et al https://www.amazon.com/Bogleheads-Gu.../dp/0470067365

Finally, no one can be sure what is the right AA for you, even you. The best you can do is to read and study various arguments for AA. Ignore the idiot ones relating to your age, but consider your total assets, your goal for those assets, and your risk tolerance. On the latter subject, one can only determine the hardness of steel by testing it. Same-o, you will not know your real risk tolerance until it is tested by a sudden market downturn. DW and I have been riding out market downturns since 1986 and after 35 years of it they don't bother us any more at all. When you hit your first big bump, bite your lip until it bleeds but DO NOT sell equities. When the market recovers, which it always does, you will congratulate yourself and be better prepared to ride out the next one.

[Whisper66]

Quote:

Originally Posted by braumeister One of the things that confused me when I first looked at this was that the amount to get to one of their upper levels had to be invested in Vanguard funds, not just the total you have at their brokerage.

Good point. That is definably confusing. The screenshot below is the criteria they use....

Ref: https://investor.vanguard.com/invest...efits/flagship

[pb4uski]

You seem to be savvy enough to DIY and save yourself 0.8% (or even 0.3%).

As you've noted, you'll want to transfer your taxable accounts in-kind so there are no tax consequences to moving your taxable account assets from your current FA, and then decide the way forward for your taxable account assets.

For tax-deferred, you can liquidate the investments in your current FA account, do a rollover to Vanguard (via a trustee-to-trustee transfer) and then invest the proceeds in VTI or similar and a fixed income ETF.

IF your AA includes international equity ETFs, then you want those in your taxable account.

I would suggest an online savings account for your $100k liquidity fund... they currently yield 0.4-0.5% and are FDIC insured. I have had DiscoverBank for years and they are pretty good... rarely the highest rate but usually in the hunt enough that it isn't worth switching for 10 bps and the service has beeen very good.

If you want more yield and are willing to take a little credit risk, you could check out GM RightNotes, Dominion Energy Reliability Investment Notes or Toyota IncomeDrive Notes... yielding 1.50%, 1.25% and 1.35%, respectively.

I wouldn't bother with VBIAX... just go with VTI and a fixed income ETF in your tax deferred account.

[OldShooter]

FWIW, I believe Schwab's threshold for "Pinnacle" class service is $1M of household account assets held there. There is a second level at the $10M point but I don't remember the name; accounts at this level are assigned to dedicated staff in New York.

We're Pinnacle and have a dedicated local rep. Also our customer service calls are routed (based on account number we key in) to a higher-capability support staff. It's not a big deal but both benefits are nice to have.

I'm sure Fido has something similar.

[RetiredHappy]

Thank you everyone for the tremendous information. I have learned alot from all of you. In fact, our thinking of moving away from managed portfolio has been triggered by this forum. I am sharing this thread with my husband so that he gets the same information/shared wisdom.

[RetiredHappy]

A question regarding dividends. If I do not re-invest dividends and they are large enough to meet additional cash or emergency needs, would that substitute the need for setting aside cash reserves so that we are not forced to sell in a down market?

[pb4uski]

If they are large enough and don't get cut in a recession, then yes.

Most of us do not reinvest dividends in taxable accounts if we are at th same time relying on taxable account money for spending... why reinvest to just later take it out?... doesn't make sense. I had my taxable account dividends automatically sent to my checking account.

[RetiredHappy]

Quote:

Originally Posted by pb4uski If they are large enough and don't get cut in a recession, then yes. Most of us do not reinvest dividends in taxable accounts if we are at th same time relying on taxable account money for spending... why reinvest to just later take it out?... doesn't make sense. I had my taxable account dividends automatically sent to my checking account.

Thank you so much! We told the Vanguard FA yesterday that we do not want to re-invest dividends and he said they could not do that. Under managed service, all dividends will be re-invested. That was one of the deal breakers for us.

[MichaelB]

I’m not sure an expected future dividend is a reasonable substitute for an emergency fund. The emergency fund needs to be available on demand and guaranteed.

It’s reasonable to expect a dividend to fund some of the annual budget, but there is no guarantee, and if the dividend is suddenly unavailable, it’s pretty certain the stock price has fallen as well.

[RetiredHappy]

Quote:

Originally Posted by MichaelB I’m not sure an expected future dividend is a reasonable substitute for an emergency fund. The emergency fund needs to be available on demand and guaranteed. It’s reasonable to expect a dividend to fund some of the annual budget, but there is no guarantee, and if the dividend is suddenly unavailable, it’s pretty certain the stock price has fallen as well.

Our plan is to just let dividends sit in the Vanguard taxable accounts and accumulate through the years until it is too much and then we will re-invest or buy a Ferrari. IRA accounts where we need to make RMD withdrawals are the only ones which we will have a gap between dividends and RMD amount. We will probably ensure we have about 100K+ cash sitting in the account all the time. Our income needs will be fully met between 4 years to 7 years from now, without necessary additional withdrawals from taxable accounts. Our total withdrawal rate is less than 2% for our retirement.

[mrfeh]

Quote:

Originally Posted by RetiredHappy A question regarding dividends. If I do not re-invest dividends and they are large enough to meet additional cash or emergency needs, would that substitute the need for setting aside cash reserves so that we are not forced to sell in a down market?

Dividends are merely a portion of total return. I don't see how they relate to having cash reserves.

If you hold equity index funds and the dividends (roughly 2% these days) are enough to cover your annual expenses, then you've got way more money than you'll ever need.

[RetiredHappy]

Quote:

Originally Posted by mrfeh Dividends are merely a portion of total return. I don't see how they relate to having cash reserves. If you hold equity index funds and the dividends (roughly 2% these days) are enough to cover your annual expenses, then you've got way more money than you'll ever need.

Yes, we have more than we need but just withdrawing dividends from taxable accounts over the next few years will tide us over our gap until I turn 65. After that we can just leave the dividends as cash reserves until we build enough of it and then we will reinvest again. IRA is a different story as the withdrawal percentage is higher to meet RMD requirement.

[mrfeh]

Quote:

Originally Posted by RetiredHappy Yes, we have more than we need but just withdrawing dividends from taxable accounts over the next few years will tie us over our gap until I turn 65. After that we can just leave the dividends as cash reserves until we build enough of it and then we will reinvest again. IRA is a different story as the withdrawal percentage is higher to meet RMD requirement.

As others have said, simply don't re-invest them. Then use the funds for whatever makes sense (expenses, rebalancing, etc).

[Scuba]

Quote:

Originally Posted by 38Chevy454 It sounds like with your total assets, being over $1M, you can get Fidelity Private Client services. Private Client is free advisor, but the advisor won't give you specific investments like your fee based guy does. The advisor will give guidance to help with planning and general investments, but ultimately as a self directed you make the final decisions and execution of trades or withdrawals. The fidelity advisor can help you transfer funds from your current fee based advisor. Fidelity doesn't charge for the advisor, they gain by getting your money under their umbrella, and especially if you invest in Fidelity mutual funds or ETFs. Fidelity has many good low cost funds, some even zero fees. Another advantage to Fidelity is they have more physical locations than some others. A lot if people also like Fidelity's website better.

This is the approach we take and we’ve been very happy with our free FA. You can also hold Vanguard funds and ETF’s in your Fidelity account if you like. We have several Vanguard ETF’s in our taxable account.

We like to keep about 3 years of spending needs in cash or relatively safe fixed income, and are fine with the remainder being in equities. We’ve been retired almost 5 years and this has worked well for us so far. One caveat is that we haven’t been through an extended bear market yet since retiring, but we have some income sources we could turn on - a pension and SS - if we didn’t want to withdraw assets in a declining market (similar to your annuities).

If your equities took a serious hit in value, would you be comfortable holding them until valuations increased? If so, then I think your equity allocation is fine. If you’d want to sell on a big decline, then perhaps you should reduce your equity allocation to a 70/30 or 60/40 allocation and you could sleep better at night, albeit you’d likely be giving up some growth.

[Badger]

Quote:

Originally Posted by RetiredHappy Thank you so much! We told the Vanguard FA yesterday that we do not want to re-invest dividends and he said they could not do that. Under managed service, all dividends will be re-invested. That was one of the deal breakers for us.

We manage our own investments and we both use Vanguard for tIRA, Roth, and a taxable cash account. We don't reinvest dividends but have them swept into a cash account within the tIRA account. The tIRA cash is then used for automatic RMD each year and moved to the taxable account.
I don't know why your investments with Vanguard should be any different.



Cheers!

[TheWizard]

Quote:

Originally Posted by MichaelB I’m not sure an expected future dividend is a reasonable substitute for an emergency fund. The emergency fund needs to be available on demand and guaranteed. It’s reasonable to expect a dividend to fund some of the annual budget, but there is no guarantee, and if the dividend is suddenly unavailable, it’s pretty certain the stock price has fallen as well.

I completely agree on what constitutes a proper Emergency Fund.

And the most significant emergency folks should be targeting is Job Loss and the resulting loss of most income for a while.
But job loss isn't an issue for Retired Folks.

So, with decent insurance coverage, along with a modest bank account balance, Retired Folks no longer need an E Fund...

[OldShooter]

For us, automatic reinvestment in a tIRA is a no-brainer. Those dollars are no different taxwise or any other way than the dollars invested we in other assets. I couldn't tell you how much our dividends are or even what month they get paid. And I don't care.

When we need cash, we sell tactically-chosen assets in the tIRA. If that sale involves assets that were bought with dividends last week, so what?

In a taxable account it is different because each dividend reinvestment results in a lot with a different tax basis. Not a big deal to fool with when selling from the account, but IMO an unnecessary complication.