Vanguard Advisor Rant

[NW-Bound]

Hmmm... I have never asked for help on anything from anybody, but I wonder if you have an account with a full-service brokerage that they would do more.

Lemme see. They charge 1% for service, so that's a mere $10K for each million you have with them. The more you have with them, the harder they will work for you.

 

[MRG]

Hmmm... I have never asked for help on anything from anybody, but I wonder if you have an account with a full-service brokerage that they would do more.

Lemme see. They charge 1% for service, so that's a mere $10K for each million you have with them. The more you have with them, the harder they will work for you.

So like maybe Ameriprise or Edward D. Jones? Maybe they'll advise someone(not me)?

 

[pb4uski]

From what I have observed and experienced, what Midpack is looking for and what many of us want is a narrow niche that is not really addressed by FAs, CFP, CPAs or any of them.... that is also why the market for software tools to help you analyze this is thin to nonexistent.

If there were something good out there I'm sure at least one of us would have run across it.

What I'm thinking of is something along the lines of "given your facts and circumstances and the assumptions that we have agreed, we recommend that you Roth convert $x in 2017, $y in 2018, etc. Or even ranges. Along with some cogent explanation as to why.

 

[mathjak107]

fidelity does not get involved either with tax efficiency , to many options and liability . but fidelity does have a nice in house tool for maximizing social security . we had that run for us

 

[DrRoy]

I think there is a difference in a general stmt saying 'do regular Roth conversions due to you being in a lower tax bracket' and someone asking for specific things to do and how much to convert....

He is quite prepared to help with specific calculations. At this point, we do not have the numbers needed.

 

[samclem]

He is quite prepared to help with specific calculations. At this point, we do not have the numbers needed.

If he comes through with a projected withdrawal plan (for the present and outyears) that includes Roths, TIRAs, after-tax accounts, and includes any ACA subsidy considerations, and if the methodology is made known to you (so you can satisfy yourself that appropriate factors, to include a sensitivity analysis of projected growth rates, or at least some projected rins for different growth rates) is included, then let us all know. It would be a feather in the cap of Fido, but I don't think it will come to pass.

 

[Texas Proud]

He is quite prepared to help with specific calculations. At this point, we do not have the numbers needed.

That is good then... and I agree that it is something that is important for a good number of people to know.... and not a lot of people can do the calculation themselves... this board might be the exception....

 

[FiveDriver]

When is the deadline for making a Roth Conversion for 2016 ?? Is it April 15, 2017 ??

I think you could come up with a fair estimate just working backwards from $74,900 (top on 15% bracket). Subtract the Standard Deduction and Exemption - $23,900), You know how much Dividends you're getting. You could come up with a good guess at what's left at the Top of the 15% bracket.

 

[LOL!]

When is the deadline for making a Roth Conversion for 2016 ?? Is it April 15, 2017 ??

I think you could come up with a fair estimate just working backwards from $74,900 (top on 15% bracket). Subtract the Standard Deduction and Exemption - $23,900), You know how much Dividends you're getting. You could come up with a good guess at what's left at the Top of the 15% bracket.

The deadline for conversion to go on one's 2016 taxes is 12/30/2016 since 12/31 is a Saturday.

One can over convert to above the 15% bracket and then recharacterize the amount that is too much up until they file their tax return.

Conversion at Vanguard takes about a minute to enter if one already has the traditional IRA with the assets there.

As for the calculations, www.i-orp.com has a link to a paper about Roth conversion by Welch (the author and maintainer of I-ORP). The conclusion was that Roth conversions were not all that, but read the paper. We intend to keep doing conversions up to the top of the 15% marginal income tax bracket for the next 10 years or so.

 

[Midpack]

Our situation is a little above the 15% bracket, it's not as obvious then. Converting up to the 15% bracket is a relative no brainer with with tax code as it is for now.

 

[youbet]

I asked my rep for a comprehensive withdrawal plan, including taxes showing Roth conversions if recommended.

As others have said, this would be a job for your CPA or other skilled personal advisor well versed in your personal financial situation. And you would have to sign off that he/she was not responsible for inaccuracies over time caused by information you provided (including information concerning variations in your personal financial circumstances in the future), changes in the tax code, investment returns that panned out differently than your forecast, unplanned/unexpected spending needs on your part, etc.

It really is a bit of a crap shoot when making Roth conversion decisions for many people in many situations. What a can of worms Vanguard would be opening if they started passing out specific Roth conversion and tax planning recommendations based on customer supplied data, guesses about future tax code, guesses about future investment returns, etc.

I'm not surprised you didn't get the results you were looking for.

 

[NW-Bound]

When is the deadline for making a Roth Conversion for 2016 ?? Is it April 15, 2017 ??

I think you could come up with a fair estimate just working backwards from $74,900 (top on 15% bracket). Subtract the Standard Deduction and Exemption - $23,900), You know how much Dividends you're getting. You could come up with a good guess at what's left at the Top of the 15% bracket.

The 15% bracket for a joint return tops out at $75,300 for 2016. But that is for 'taxable' income, which does not count the deduction and exemptions.

So, you do not subtract but add the Standard Deduction (unless your itemized deduction is higher) and Exemption to the 15% bracket. For 2016, a couple filing a joint return with no dependents will have a Standard Deduction of $12,600 and 2 personal exemptions of $4,050 x 2 = $8,100.

This means the top of the 15% bracket for joint filers is really at $75,300 + $12,600 + $8,100 = $96,000.

You then subtract out other incomes. The left-over is what you can convert for the 15% tax rate.

 

[NW-Bound]

I forgot to answer the question above about the deadline for Roth conversion.

No, it is not April 15, 2017. It's Dec 31st of this year.

 

[Midpack]

As others have said, this would be a job for your CPA or other skilled personal advisor well versed in your personal financial situation. And you would have to sign off that he/she was not responsible for inaccuracies over time caused by information you provided (including information concerning variations in your personal financial circumstances in the future), changes in the tax code, investment returns that panned out differently than your forecast, unplanned/unexpected spending needs on your part, etc.

It really is a bit of a crap shoot when making Roth conversion decisions for many people in many situations. What a can of worms Vanguard would be opening if they started passing out specific Roth conversion and tax planning recommendations based on customer supplied data, guesses about future tax code, guesses about future investment returns, etc.

I'm not surprised you didn't get the results you were looking for.

Again, then why does the statement below appear on their website? Vanguard can't provide something like I-ORP? I well understand the uncertainties, so I wouldn't expect Vanguard to guarantee anything. They already have plenty of disclaimers like 'past performance is no guarantee of future results' and I'd be happy to sign a waiver if needed. They recommend funds, how is developing a straightforward distribution plan more risky for them?

Minimizing your taxes
The less you pay in taxes, the more money you keep. According to our research, an advisor can help minimize an investor's tax burden in two ways: first, by efficiently allocating assets between taxable and tax-advantaged accounts; and second, when the time comes to withdraw money, such as for retirement, by developing a tax-smart distribution plan.

https://investor.vanguard.com/financial-advisor/financial-planning

 

[H2ODude]

My experience as a Fido Private group client is that these companies want nothing to do with giving any tax advice whatever. To do so would open them up to lawsuits if things don't go as expected. MRG makes a good point, I miss the tax projection that used to be included in the RIP planner. I guess you can back into it by doing some subtractions.

As for Roth conversions, I've done some modest ones each year simply because I never expected rates to go down. Now with the new bunch coming in that seems a little less certain, so I'm going to wait and see. I did the I-orp thing once and it confused me; however IIRC it made recommendation that I convert almost all my sizable IRA which I simply won't do. At 65 I have some years left to move some more....

 

[MRG]

Again, then why does the statement below appear on their website? Vanguard can't provide something like I-ORP? I well understand the uncertainties, so I wouldn't expect Vanguard to guarantee anything. They already have plenty of disclaimers like 'past performance is no guarantee of future results' and I'd be happy to sign a waiver if needed. They recommend funds, how is developing a straightforward distribution plan more risky for them?


https://investor.vanguard.com/financial-advisor/financial-planning

If I am reading correctly that's about PAS. A service that you pay for, and sign an agreement written by Vanguard attorneys.

Sure Vanguard has developers and IT expertise, but developing an I-ORP is not the same as the knowledge Vanguard has on staff. I know you say no gaurentee is fine, from my time in the industry, that's not what Vanguard's attorneys would say!

Of course then you might have a piece of software telling you different answers than a human advisor. How would Vanguard answer those type of questions? Then if the software was "free" how might Vanguard justify the PAS offering?

From my time in the fund industry one of the biggest costs of maintaining software was the ever changing tax laws. There wasn't a choice, you had to provide the information to the IRS and the clients. I could imagine going to the CIO and suggest another high maintenance software project that takes revenue off the table!

 

[ERD50]

If I am reading correctly that's about PAS. A service that you pay for, and sign an agreement written by Vanguard attorneys....

That's how I see it also - not part of the free service.

On the Vanguard site the link Midpack gave:

https://investor.vanguard.com/financial-advisor/financial-planning

and that page has a line/link:

Find out how you can benefit from low-cost advice

https://investor.vanguard.com/financial-advisor/financial-planning


that shows:

Keep more with our low financial advisor fee of only 0.30%

You'll get the benefit of a Vanguard advisor, a customized financial plan, ongoing investment advice, and more for an annual cost of 0.30% of your assets under management. That's less than one-third the industry average of 1.02%.*

Seems like a misunderstanding - maybe time to undo the rant?

I was also in the camp with others - how could they give a detailed tax plan for free, w/o a LOT of time and info understanding the entire situation. It is complex, and I bet with the PAS, you sign contracts to clarify all the limits.

-ERD50

 

[LOL!]

I did the I-orp thing once and it confused me; however IIRC it made recommendation that I convert almost all my sizable IRA which I simply won't do.

I-orp (its author Welch) has responded to this criticism nicely and made some changes to the calculator, and more importantly, to the notes that go with the calculator.

 

[FiveDriver]

The 15% bracket for a joint return tops out at $75,300 for 2016. But that is for 'taxable' income, which does not count the deduction and exemptions.

So, you do not subtract but add the Standard Deduction (unless your itemized deduction is higher) and Exemption to the 15% bracket. For 2016, a couple filing a joint return with no dependents will have a Standard Deduction of $12,600 and 2 personal exemptions of $4,050 x 2 = $8,100.

This means the top of the 15% bracket for joint filers is really at $75,300 + $12,600 + $8,100 = $96,000.

You then subtract out other incomes. The left-over is what you can convert for the 15% tax rate.

Thanks for correcting that, NW. As far as a rough estimate goes......that would get you in the right ballpark. The killer here is the deadline of 12/30/2016 rather than April 2017. I receive a lot of 1099 income which doesn't get mailed to me until late January -- tough to accurately estimate the total.

As usual, they didn't make it easy for us.

 

[NW-Bound]

One does not have to squeeze the last dollar out of this. If one gets within $1K to $2K of the mark, it's OK. I can log into my brokerage accounts to see what divvies the MFs pay late in December. Or I can guesstimate it.

Then, one click of the mouse and my transfer between the IRA and Roth at the same brokerage is done.

I think I am going to do it soon, lest I forget. Old age memory, you know?

 

[FiveDriver]

I couldn't do an accurate estimate of reportable income until the 1099's come in (or don't come , as the case may be). I suppose I could guesstimate it now, and then re-characterize.....but that would be a SWAG at best.

 

[NW-Bound]

My brokerage can show me a tally of the realized cap gain/loss YTD, plus all the stock dividends on the Web. The distributions of the MFs can vary wildly, but mine usually are through with paying out before Christmas. By logging into my accounts after Christmas, I can get an accurate number without the 1099.

 

[eleighj416]

That's how I see it also - not part of the free service.

On the Vanguard site the link Midpack gave:

https://investor.vanguard.com/financial-advisor/financial-planning

and that page has a line/link:

Find out how you can benefit from low-cost advice

https://investor.vanguard.com/financial-advisor/financial-planning


that shows:



Seems like a misunderstanding - maybe time to undo the rant?

I was also in the camp with others - how could they give a detailed tax plan for free, w/o a LOT of time and info understanding the entire situation. It is complex, and I bet with the PAS, you sign contracts to clarify all the limits.

-ERD50

We attempted to deal with two different advisors at Vanguard they both worked within a very limited box and they will not get outside of it! For 0.30% they are going to rebalance your portfolio on a quarterly basis i.e. 0.075% each quarter. Also, they will make all changes overnight when you execute the advisory agreement; regardless of tax consequences etc. My wife and I ended up interviewing several independent CFPs and hired one to create a plan based upon our input and interviews. Also, the wife trusts him. Cost was reasonable, he can monitor the plan, but at this time we handle the transactions. Meet quarterly by phone to review and see if any changes are needed. If there is a tax related question based on a possible transaction we contact our CPA for tax advice. Everything is on an hourly basis and as needed.

Ed

 

[samclem]

I couldn't do an accurate estimate of reportable income until the 1099's come in (or don't come , as the case may be). I suppose I could guesstimate it now, and then re-characterize.....but that would be a SWAG at best.

I think FiveDriver is talking about earned income from customers that is reported on a 1099, not divs/CGs from investment accounts shown on a 1099-(INT?).
FiveDriver--you really can't predict within a few K how much the 1099 will be? I suppose one problem would be a big payment that might occur 31 Dec or 2 Jan.

 

[user5027]

For those on the fence about doing a 2016 Roth Conversion with 1) the unknown anticipated tax policy changes or 2) not having your 1099's, consider this.

You can do a 2016 Roth Conversion (must do before year end) and you can 1) wait and see what happens to policy and/or 2) collect your 1099's and do your taxes. Then you can Recharacterize (undo) all or part of the 2016 Conversion before Oct 2017.

It is what I did in for my 2015 Roth Conversion. I recharacterized the excess to be at the top of the 15% bracket.