60/40 balanced fund/what to do for asset management issues

[viking111]

I'm re posting this. The original was incomplete and seemed to be slowly getting off topic with arguments about issues not relevant to this post.

Would you buy this fund to simplify things and not have to rebalance yourself?

Would you do it if you had to sell existing funds and pay capital gains?

So let me add to the mix.

Our primary reason for doing something like this would be our concern of the following:

a. Both cannot manage funds due to cognitive issues.
b. One passes and the other does not want OR due to cognitive issues can't manage funds.

If we sell some funds now and buy balanced funds, then they will rebalance themselves and we can set up automatic withdrawals. Our basis will be lower so the cap gains tax we pay for selling now and combining funds will be less.

That brings up another topic. Does it matter if the current funds increase in value significantly and then we combine them years from now VS. doing them now and paying less cap gains? The later option, the cap gains will higher but so will the value of the funds.

I thought about hiring a Flat fee advisor or low Aum (fidelity etc) to manage the funds starting now but I'm not sure if it is needed just now if the cap gains issue is a non issue.

So DIY is fine unless we can't DIY if we are cognitively unable to do it.

I don't want to get family involved and we don't have any kids. I believe this is an issue many people struggle with and it is a good topic to review.

 

[big-papa]

I'm re posting this. The original was incomplete and seemed to be slowly getting off topic with arguments about issues not relevant to this post.

Would you buy this fund to simplify things and not have to rebalance yourself?

Would you do it if you had to sell existing funds and pay capital gains?

So let me add to the mix.

Our primary reason for doing something like this would be our concern of the following:

a. Both cannot manage funds due to cognitive issues.
b. One passes and the other does not want OR due to cognitive issues can't manage funds.

If we sell some funds now and buy balanced funds, then they will rebalance themselves and we can set up automatic withdrawals. Our basis will be lower so the cap gains tax we pay for selling now and combining funds will be less.

That brings up another topic. Does it matter if the current funds increase in value significantly and then we combine them years from now VS. doing them now and paying less cap gains? The later option, the cap gains will higher but so will the value of the funds.

I thought about hiring a Flat fee advisor or low Aum (fidelity etc) to manage the funds starting now but I'm not sure if it is needed just now if the cap gains issue is a non issue.

So DIY is fine unless we can't DIY if we are cognitively unable to do it.

I don't want to get family involved and we don't have any kids. I believe this is an issue many people struggle with and it is a good topic to review.

There was a good thread over on the bogleheads forum on this topic
https://www.bogleheads.org/forum/viewtopic.php?t=287967

Cheers,
big-papa

 

[38Chevy454]

I'm re posting this. The original was incomplete and seemed to be slowly getting off topic with arguments about issues not relevant to this post.

Would you buy this fund to simplify things and not have to rebalance yourself? No, but I am still able to do the rebalancing as needed

Would you do it if you had to sell existing funds and pay capital gains? Not if the cap gains would put me in higher tax brackets vs doing it over time

So let me add to the mix.

Our primary reason for doing something like this would be our concern of the following:

a. Both cannot manage funds due to cognitive issues.
b. One passes and the other does not want OR due to cognitive issues can't manage funds.

If we sell some funds now and buy balanced funds, then they will rebalance themselves and we can set up automatic withdrawals. Our basis will be lower so the cap gains tax we pay for selling now and combining funds will be less.
You could certainly do worse than a balanced 60/40 fund
That brings up another topic. Does it matter if the current funds increase in value significantly and then we combine them years from now VS. doing them now and paying less cap gains? The later option, the cap gains will higher but so will the value of the funds. The question is can you convert from current funds on a yearly basis to keep tax rates at lower levels. Also consider Uncle Sam is going to get his money one way or the other.

I thought about hiring a Flat fee advisor or low Aum (fidelity etc) to manage the funds starting now but I'm not sure if it is needed just now if the cap gains issue is a non issue. I think you can do it yourself and don't need an FA. If you have sufficient assets, like $1M with Fidelity you can get some advisory services for free.

So DIY is fine unless we can't DIY if we are cognitively unable to do it.

I don't want to get family involved and we don't have any kids. I believe this is an issue many people struggle with and it is a good topic to review.

My answers in bold

 

[SnowballCamper]

I use a Vanguard target date fund in my Roth IRA for the last few years and I'm happy with it. I'm not withdrawing yet and won't be for a while. It's nice to just ignore it. DW uses a target date fund in the TSP and is happy with it. Since these aren't currently taxable accounts for us we didn't have capital gains tax concerns. You should look at your individual tax situation now, and what you think it will be in the future, in order to decide which is better. Good Luck!

 

[viking111]

My answers in bold

I can do it myself. But not if I or my wife become cognitively unable to do it. Then there is no one to do it. Which is the main reason I started this post.

 

[Stormy Kromer]

I am one of the least hands on investors on this forum. And, I hold a bunch of a very popular 60/40 balanced fund from a well known firm popular with DIY investors.

I have been very happy with the buy and hold approach in this fund over the past 13 years and don't need to pay 1% AUM fees to get these results. Taxes on gains are there, but minimal with today's rates. There's no free lunch and paying taxes increases my basis for the time I do sell any of this fund. I don't think about rebalancing, that's not my job.

There are much more complicated ways to get and keep a balanced portfolio and I'm sure some of them can beat buying this one balanced fund. But, not enough difference for the ordinary guy to notice or worse yet, pay 1% for.

 

[RetiredHappy]

Do you have an advanced health care directive for financial and health (separately) where you have named trustee(s)? If/when both of you are cognitively unable to do it, the trustee can step in. There are licensed private fiduciaries who do work like these. They don't get paid until they step in. When I was in California, their rates were only around $50 per hour and these are usually social workers by training before they got their private fiduciary licenses.

https://www.investmentnews.com/what-you-need-to-know-about-professional-fiduciaries-79777

 

[mrfeh]

If you are ok with 60/40 forever and don't want or can't handle any portfolio maintenance at all, I think such a fund is fine.

I'd choose that over a FA slowly sucking blood.

 

[Markola]

I know what I’m doing but gladly pay .30 to Vanguard Personal Advisor Services for AUM. Everybody is a genius investor as long as everything goes up but the expensive mistakes are made when the SHTF in stocks and people decide to “optimize”, costing one hell of a lot more than .30 during the subsequent recovery. Our advisor won’t panic and will keep our allocation steady, making .30 very worthwhile mistake prevention insurance.

Second, if something happens to me, non-finance-interested DW is taken care of for life. YMMV.