Thoughts on consolidating my portfolio into a bond fund(s) and equity ETF(s).

[aja8888]

After a recent serious health scare, getting real about my old age, and the coming end of high interest rates, is causing me to rethink my portfolio of investment assets. Right now, about 2/3 are in a TIRA and 1/3 in a taxable brokerage account. I also have scattered CD's here and there, and I am consolidating them into my brokerage account as they mature. I am taking RMDs from the TIRA in cash and putting the draw into my brokerage account. My other income streams are SS, taxable interest and dividends. I have a small ROTH but it makes no sense to do any further conversions as being recently single and a decent annual taxable income pushes me into a higher tax bracket for even a small conversion.

My goal is to simplify the assets and leave the bulk to my only living daughter, who flat refuses to attempt to get savvy about investment knowledge. She's a great child, but gee whizz...Oh well.

In the TIRA, it's chock full of corporate bonds, CDs and treasury bills, spread out over a maturity time frame of three more years. There are also some preferred stocks in the portfolio which will remain until called. I want to place maturing funds in the TIRA into a bond fund that pays a respectable dividend and has a long term history of success.

In the brokerage account, which has been my partial source of income to pay bills (SS doesn't cover them all), I would like to consolidate the mix of Municipal bonds, an MLP, a load of cash in SWVXX, and a few soon to mature CDs, into an equity ETF with a good track record.

Bottom line is over the next year, convert my mess of income producing assets into a mix of "roughly" 40% equities, 50% bonds and 10% cash.

I have a paid off house and no big bills so there are no concerns about my day-to-day financial needs. If I sell the house to go into an apartment, or something like that, the equity will go into the brokerage account.

Thoughts on this portfolio conversion?

Suggestions for a good bond fund and equity ETF?

Whatever I do, it will be constructed over time as the current fixed income assets mature.

Thanks!

 

[audreyh1]

Consolidating into way fewer institutions is a good goal.

I assume you already have beneficiaries and POD type stuff set up.

At some point you probably have to not worry about your daughter not wanting to learn asset management. Maybe just identify a few options for getting honest assistance when needed.

In terms of investments I avoid exotics prefer low cost funds which pretty means index funds, avoiding actively managed funds. Just using plain vanilla low cost index funds is a good idea. Don’t get distracted by recent performance history. Focus on keeping it simple.

 

[aja8888]

Consolidating into way fewer institutions is a good goal.

I assume you already have beneficiaries and POD type stuff set up.

At some point you probably have to not worry about your daughter not wanting to learn asset management. Maybe just identify a few options for getting honest assistance when needed.

Yes, she is already set up to be beneficiary and POD on all accounts. I just want to simplify. I have instructions for her to see my Schwab rep when the time comes.

 

[audreyh1]

That sounds good.

I don’t know the Schwab index offerings. I do have their SCHD ETF which is not an equity index but has been a good quality large-cap fund.

A lot of people say to avoid bond index funds but I disagree as I like their higher credit quality and lower correlation to equities. I tend to stay short to intermediate term. I have no idea what Schwab offers in this area - just familiar with Fidelity and Vanguard.

 

[brett]

We did this prior to early retirement. Having new wills done was the impetus. My spouse mentioned that she had no idea where all the accounts were. Despite my efforts to involve her in the process for many years.

So the action item for me was to consolidate, consolidate and arange everything so that if I dropped dead she could carry on the following week (and perhaps meet Mr. Right).

It included putting everything though either one or two credits cards or throught direct pay. Our bank current account would show everthing including which cc's were active.

My parents did the same. It made my work as executor so easy that I was able to complete and submit the final tax returen and Probate requirements without assistance.

 

[aja8888]

We did this prior to early retirement. Having new wills done was the impetus. My spouse mentioned that she had no idea where all the accounts were. Despite my efforts to involve her in the process for many years.

So the action item for me was to consolidate, consolidate and arange everything so that if I dropped dead she could carry on the following week (and perhaps meet Mr. Right).

It included putting everything though either one or two credits cards or throught direct pay. Our bank current account would show everthing including which cc's were active.

My parents did the same. It made my work as executor so easy that I was able to complete and submit the final tax returen and Probate requirements without assistance.

I have redone my will, did a new medical PA, recorded the deed on the house as Transfer on Death deed to her. All that stuff is done. What's left is making a simple portfolio so she can just draw as necessary and sell things to make cash when appropriate. Her inherited IRA (from me) will require her to pull all the funds out in a ten year period.

 

[pb4uski]

I think your plan is good and I have done something similar recently, consolidating everything at Schwab except our HSAs because Schwab doesn't offer individual HSAs.

I also have an eclectic mix of preferred stocks, corporate bonds and Treasuries that I am trying to simplify as well. I may consider a ladder of corporate iBonds for the corporate bond allocation rather than individual corporate bonds but haven't decided yet.

 

[audreyh1]

Corporate IBonds?

 

[Texas Proud]

Yes, she is already set up to be beneficiary and POD on all accounts. I just want to simplify. I have instructions for her to see my Schwab rep when the time comes.

THIS!!!

I chose one in the Woodlands that is a CFP so not just a run of the mill FA...

I said that when I go that my DW has zero interest in managing money so it needs to be simple...

I actually do have it 'kinda' simple... but there are some big items that are not... such as my big chunk of my last major mega... it is WAY more than I should have but it is hard to get rid of some as the tax hit can be hard...

But most equities are in Vanguard MF or ETFs... it is the income portion that is more complicated... individual bonds and preferred... but IMO can be held until maturity or called and then added to a bond fund...

The big item is to minimize taxes... I think she will have a big tax hit going to single and RMDs...

 

[audreyh1]

THIS!!!

I chose one in the Woodlands that is a CFP so not just a run of the mill FA...

I said that when I go that my DW has zero interest in managing money so it needs to be simple...

I actually do have it 'kinda' simple... but there are some big items that are not... such as my big chunk of my last major mega... it is WAY more than I should have but it is hard to get rid of some as the tax hit can be hard...

But most equities are in Vanguard MF or ETFs... it is the income portion that is more complicated... individual bonds and preferred... but IMO can be held until maturity or called and then added to a bond fund...

The big item is to minimize taxes... I think she will have a big tax hit going to single and RMDs...

Texas being a community property state, assuming the mega stock is held in a joint account your wife should get a stepped up basis if you predecease her.

 

[Koolau]

I'm just tying to reduce any complexity in my portfolio to make final resolution as simple as possible for DW. She shows very little interest since she knows we have enough. We emphasized Roth conversions back when we were "young" (you know, before RMDs and SS, etc.) That will help her a lot with the taxable situation (which will still be ridiculous upon my passing, I'm afraid.) STILL, she should have plenty. I DO want to get with an elder type attorney to see what we need to do to help make the transition as smooth as possible and, if possible, limit taxation.

 

[tulak]

For low cost equity index funds, I like VTI (ETF), which I can buy at Fidelity, Schwab, etc. If you’re at Fidelity, then FSKAX is their equivalent fund. Both are US Total Stock indexes.

I don’t use a bond fund, but BND could be a good option.

You can take a look at the 3 fund portfolio described on Bogleheads for ideas: Three-fund portfolio - Bogleheads

That page also gives tickers for the various investment firms, both fund and ETFs. Hope this helps!

 

[Texas Proud]

Texas being a community property state, assuming the mega stock is held in a joint account your wife should get a stepped up basis if you predecease her.

OH YEA...

I am shocked how much in unrealized gain that I have in my taxable accounts...

 

[Morgan22]

Since you're at Schwab just use the funds SWTSX for total stock market index fund and SWAGX for total bond index fund. If you want to use ETF's use SCHB and SCHZ.

I use the equivalents at my brokerages plus a MMF for my cash balance. It's simple and set and forget.

When refilling the spending pot I pull from the different asset classes that help me rebalance to my goal allocation. If stocks were down I would pull from the bond fund, etc.

 

[walkinwood]

Simplification is good! If I were to start again, I would put all my equities into the Vanguard Total Market Admiral fund or ETF, and the bond portion in a intermediate treasury index fund. VG has one of those and I"m sure other brokerages have one too. Then it is simple math for your daughter to work with - or not. The asset allocation may drift, but there's no trading need.

We, like you I'm guessing, have more than enough for our needs. Optimizing our portfolio further given an unknowable future return increasingly seems a waste of time to me. I'd rather spend that time getting the best value for my spending.

 

[Phroig]

SCHB is a great option for the equity portion of your portfolio. For fixed income, some of us prefer managed funds. I like Fidelity Total Bond Fund (FTBFX), which is actively managed contrary to what the name suggests. The fund is also available as an ETF - FBND - which you can buy at Schwab.

 

[aja8888]

Thanks for the replies. I look into those suggestions.

 

[pb4uski]

Corporate IBonds?

Yes. iBonds is the trade name for a series of target maturity bond ETFs offered by BlackRock that invests in corporate bonds. They also offer Treasury, TIPS, municipal and high-yield flavors as well.

I'm not sure that I would bother with the Treasury flavor since it is so easy to just buy Treasuries.

https://www.blackrock.com/us/financial-professionals/tools/ibonds

One example:

https://www.blackrock.com/us/financial-professionals/products/310035/ishares-ibonds-dec-2029-term-corporate-etf

 

[aja8888]

SCHB is a great option for the equity portion of your portfolio. For fixed income, some of us prefer managed funds. I like Fidelity Total Bond Fund (FTBFX), which is actively managed contrary to what the name suggests. The fund is also available as an ETF - FBND - which you can buy at Schwab.

I think FBND will be my choice for a good part of the fixed income. Thanks!

 

[Koolau]

What do folks at Vanguard use for fixed? I've got my bond funds there. Otherwise, I use CDs, MYGAs and some old SPDAs and a GIF within my old 401(k). Thanks.