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Stop me before I do something stupid
Old 09-01-2020, 06:10 PM   #1
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Stop me before I do something stupid

I'm 59 and hoping to retire next spring. I have about 2.3m, but it's spread out in three piles and I want to consolidate it into one big pile and am trying to figure out if I should DIY or turn it all over to a FA. I've opened an account with M1 Finance (anyone else using this online brokerage?) and what I am considering doing is to create a pie made up of Vangaurd ETFs something like this:

Vangaurd ETFAsset Class% Allocation
VOO Large Blend10%
VOOV Large Value10%
VIOO Small Blend10%
VB Small Value10%
VXUS Total Intl 10%
VNQ REIT 10%
BND Total Bond 40%

Currently, my holdings are spread across Fidelity, Ed Jones, and Etrade and they look like this (in Ks):

Fidelity:
Taxable - 123
Trad IRA - 1134
401K - 127

Ed Jones:
Taxable - 47
Wife's IRA - 58
Wife's ROTH - 142
My ROTH - 138

ETRADE:
Taxable (stocks) - 311
Wife's ROTH - 88
My ROTH - 88

Right now, I'm paying Fidelity to manage my IRA and some of the other money, and of course I'm paying Ed Jones. I was thinking I would close out my Ed Jones money and move my IRA into the pie above and my ROTHs into a similar pie. I think I'm paying Fidelity about .83% and I don't even know what I'm paying EJ, but I know it ain't cheap.

So I guess my questions are, does it make sense to do this? Is this basically what others are doing?

A big concern I have with DIY retirement investing is, how do you know which account to draw from to minimize your tax liability? If I turned it all over to a FA, they would be able to help with this. Thank you for the input and advise!
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Old 09-01-2020, 06:22 PM   #2
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The difference between "doing it perfectly" and fumbling through it in an obviously incorrect was is less than it costs to pay an advisor under almost any "AOM" scheme.

In other words, you DIYing it "wrong" would put you ahead of paying X% per annum on assets under management.

If you are at all inclined to play with it, you can get your distributions optimized, or at least pretty darn good. It's not rocket science. You generally spend after tax first, and many people will do Roth conversions to fill up low marginal tax brackets. By the time your after tax runs low, you'll be an old hand at it, and it won't seem at all daunting.

There are tools, but we don't need to go there today. Know that you have tools and a place to ask about them. From people who were just like you, and are now comfortable in the DIY world.

For now, consolidate brokerages, if you wish, and certainly quit paying the AOM fees. I'm not sure why you'd want to go anywhere besides Fidelity, as you already have an account there. Fidelity and Vanguard are my two...both have good customer service and low cost or free trades. Not sure about M1... never heard of it.
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Old 09-01-2020, 06:23 PM   #3
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The FA's at VG that I've talked to don't seem to be much/any help when it comes to withdrawal strategies that consider taxes. I'd skip going the FA route, and consolidate as you're thinking. No reason to pay 0.83%, when you can pay 0.01-0.05%. Ensure that you roll over tax-deferred accounts so that you don't take an immediate tax hit.


Once that's done, I'd create a spreadsheet that helps you with a tax strategy.

Taxable accounts: Determine your basis (purchase prices), and calculate the % of the current total that are STCGs or LTCGs. If you're under RMD age, you may want to harvest LTCGs at the 0% tax rate (MFJ adjusted gross income <$80K). Others may advise ROTH conversions.

Traditional IRA and 401(k): Proceeds are 100% taxable, at normal tax brackets. Normally, you'd tap these starting at age 59.5, unless you retired between the year your turn 55 and 59.5, in which you can take proceeds penalty-free.


ROTH IRA: Earnings are tax-free, as long as you start distributions at 59.5 or later. Principal may be withdrawn at any time, tax-free, even before 55.

You may well be able to have a spending rate of $120K and pay no federal taxes if you use the LTCGs rule to your benefit.
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Old 09-01-2020, 07:16 PM   #4
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I know a couple FAs socially - they aren't that knowledgeable on taxes. They know enough to prepare a return but that's often different from advising someone on tax matters related to investing.


I work with a lot of very skilled tax preparation people but when I explained tax loss harvesting or tax rate arbitrage strategies with Donor Advised Funds, they looked at me like I was speaking Martian.
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Old 09-02-2020, 12:41 AM   #5
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40% bonds are way too high, in my opinion.

And, read this https://www.bogleheads.org/forum/vie...p?f=10&t=88005
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Old 09-02-2020, 02:24 AM   #6
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Originally Posted by davebarnes View Post
40% bonds are way too high, in my opinion.

And, read this https://www.bogleheads.org/forum/vie...p?f=10&t=88005
For retiring next spring at age 59? Why?

I don’t see where your link suggests lower bond allocation.
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Old 09-02-2020, 02:29 AM   #7
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Your AA looks quite reasonable to me. Taxes can be complex and your best strategy depends on when you plan to take SS. I would hire an accountant to advice on taxes. That would be a lot cheaper than using a financial advisor.
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Old 09-02-2020, 03:59 AM   #8
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For retiring next spring at age 59? Why?

I donít see where your link suggests lower bond allocation.
Two unrelated items.
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Old 09-02-2020, 04:30 AM   #9
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I would consolidate at Fidelity, and DIY. I did just that myself.
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Old 09-02-2020, 04:40 AM   #10
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I would put it in one pile at Vanguard. Call Vanguard, talk to an advisor and explain your situation. They should be able to pick out an investment mix to suit your needs. And they will handle the $ move.

That's essentially what I did. But DW has hers with an FA, and I put about 30% of mine with the same FA.

Assuming all things equal, you should be able to beat an FA's investment mix by about 1% if you manage your portfolio DIY.
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Old 09-02-2020, 05:26 AM   #11
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I would consolidate at Fidelity, and DIY. I did just that myself.
+1 same here, plus you can join the Private Client group at Fidelity and can receive some investment assistance at no cost.
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Old 09-02-2020, 05:44 AM   #12
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Originally Posted by sengsational View Post
The difference between "doing it perfectly" and fumbling through it in an obviously incorrect was is less than it costs to pay an advisor under almost any "AOM" scheme.

In other words, you DIYing it "wrong" would put you ahead of paying X% per annum on assets under management.

If you are at all inclined to play with it, you can get your distributions optimized, or at least pretty darn good. It's not rocket science. You generally spend after tax first, and many people will do Roth conversions to fill up low marginal tax brackets. By the time your after tax runs low, you'll be an old hand at it, and it won't seem at all daunting.....
This is great advice. Notwithstanding their advertising, there's no guarantee a paid FA firm will do any better, especially to cover their fee.
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Old 09-02-2020, 06:05 AM   #13
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Originally Posted by Crnhzkr View Post
.... A big concern I have with DIY retirement investing is, how do you know which account to draw from to minimize your tax liability? If I turned it all over to a FA, they would be able to help with this. Thank you for the input and advise!
An FA isn't going to be able to help you decide where to draw to minimize taxes. The other issue is where you say minimize taxes.... do you mean current year taxes or long run taxes.

For example, I could easily make my tax liability nil for the current year, but I would pay more taxes in the long run.... so I do low tax cost Roth conversions to reduce future RMDs and over the last 6 years have paid about 9% now vs 22% or more later.

On your question, why not consolidate everything at Fido and self manage? A broad based US equity ETF, international ETF and bond ETF would probably perform similar to your proposed portfolio with much less complexity.
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Old 09-02-2020, 06:06 AM   #14
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+1 same here, plus you can join the Private Client group at Fidelity and can receive some investment assistance at no cost.
+2 I don't think Vanguard is going to offer you any more than Fido.
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Old 09-02-2020, 06:24 AM   #15
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So I guess my questions are, does it make sense to do this? Is this basically what others are doing?

A big concern I have with DIY retirement investing is, how do you know which account to draw from to minimize your tax liability? If I turned it all over to a FA, they would be able to help with this. Thank you for the input and advise!
Do it yourself. It's not difficult, and infinitely better than paying others 5 figures a year.

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Old 09-02-2020, 07:11 AM   #16
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OP, do you know how much you've paid in expenses? When we first started investing with FA many expenses were hidden. Listening to Bob Brinker when we were newbies to investing taught us a lot. His advice guided us to DIY with Vanguard and that's where we've been for 20+ years in diverse mutual funds. We're 60/35/5. Vanguard and Fidelity will assist at no cost.
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Old 09-02-2020, 07:32 AM   #17
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You have started with the correct first step: you are asking a very knowledgeable and helpful group for assistance and suggestions for next steps. Best of luck going forward.

-BB
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Old 09-02-2020, 07:56 AM   #18
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Quote:
Originally Posted by Crnhzkr View Post
I'm 59 and hoping to retire next spring. I have about 2.3m, but it's spread out in three piles and I want to consolidate it into one big pile and am trying to figure out if I should DIY or turn it all over to a FA. I've opened an account with M1 Finance (anyone else using this online brokerage?) and what I am considering doing is to create a pie made up of Vangaurd ETFs something like this:

(snipped your tables for brevity)

Right now, I'm paying Fidelity to manage my IRA and some of the other money, and of course I'm paying Ed Jones. I was thinking I would close out my Ed Jones money and move my IRA into the pie above and my ROTHs into a similar pie. I think I'm paying Fidelity about .83% and I don't even know what I'm paying EJ, but I know it ain't cheap.

So I guess my questions are, does it make sense to do this? Is this basically what others are doing?

A big concern I have with DIY retirement investing is, how do you know which account to draw from to minimize your tax liability? If I turned it all over to a FA, they would be able to help with this. Thank you for the input and advise!
There are many ways you could travel. As you follow this thread and comment on advice given, you'll see there are many individual approaches to withdrawals.

Others do this, and as you can tell there are opinions about your choices. There will be many more if you continue to participate in the thread.

The big three institutions are Vanguard, Fidelity and Schwab. Having two go-to financial caretakers might be a better approach. You could 1) take Fidelity off the management structure, and 2) transfer the Eddie money (see what I did there?) to Fidelity.

If you list all of your details on the left side of a spreadsheet, and have transition columns on the right, you can noodle with the arrangement and allocations.

I know little about M1 finance. The reason I mention the big three, is because they will all be in business for a long time. This will cover the time period that includes the passing of both account holders. Some (like me) are adding Schwab to the mostly-Vanguard mix we had. When my survivor(s) need help, they will get it from Schwab. They also will have a number of years talking with me about "things" and what they'll go through.

Most responses, just like mine, eventually result in advice similar to "this is what I do, and it would work for you. On a DIY path though, you have to eventually concede that this will be of your own doing, with difficult choices at times. But it helps to have a complete plan of transition, or you could end up in a corner with your taxable gains, for instance.

So you have a large project and can break it down into smaller tasks that get done as quick as possible, and then you're on to the next activity.
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Old 09-02-2020, 08:05 AM   #19
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Most people would transfer their 401k money to their traditional IRA.

Before you do that, see if your 401k plan has a stable value fund and if so, what it is currently paying and has paid in the past. IF your 401k offers a stable value fund that provides a good interest rate, you would want to keep it as you can't get a stable value fund that pays a decent interest rate in an IRA.

In fact, IF your 401k offers a stable value fund that provides a good interest rate, you might want to transfer money from your IRA to the 401k to take full advantage of it.
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Old 09-02-2020, 08:44 AM   #20
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Great advice already given, and here's a tidbit from my own experience of ditching my FA:

It can take a while to get comfortable with DIY, and knowledge is a powerful help. So invest some time in learning and reading.

For me, it was also helpful to play with a bunch of different options for conversions and AA at i-orp. I needed that to help wrap my brain around it. Use the extended i-orp :
https://www.i-orp.com/EmptyRow/Extended.html

Lastly, when you learn some things, and play with some of the online tools like i-orp, you'll start to form some strategies for avoiding taxes , start documenting your thoughts. DIY is less daunting with the long term plan documented.
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