Hello Everyone,
I am a long time lurker here, and have learned much from this community. I'm amazed at the range of expertise and knowledge of y'all. I would appreciate any suggestions, comments, and/or advice concerning my investments. My primary objective is to minimize the amount of federal taxes I will face.
I'm newly retired. I will follow the Bogleheads template for outlining my situation, followed by my questions. Please feel free to identify any issues/problems I may have (and likely) missed!
Emergency Funds- I have 3 to 6 months of expenses.
Debt- The only debt I have is $330,000 at 3.25% on a primary residence.
Tax Filing Status- Single
Tax Rate- 35% (federal)
State of Residence- Texas
Age- 61
Desired Asset Allocation- Approximately 90% stocks/10% bonds
Desired International Allocation- Not Sure
Total Portfolio Size- $8.1M
Current Retirement Assets (expenses or costs in parentheses)
A. Accounts with Vanguard
After Tax Brokerage Account #1
3.55% Vanguard Federal Money Market Fund (0.11%)
3.61% Vanguard 500 Index Admiral CL, VFIAX (0.04%)
14.97% Vanguard Total Stock Market Index Admiral CL, VTSAX (0.04%)
1.33% Nvidia Corp, NVDA
Subtotal of total portfolio-23.46%
Traditional IRA Brokerage Account #1
0.89% Vanguard Federal Money Market Fund (0.11%)
2.67% Franklin Income CL A1, FKINX (0.62%)
1.02% Invesco Oppenheimer Intel Growth CL A. OIGAX (1.1%)
2.35% Sector Financial Select Sector SPDR ETF, XLF
0.93% Amazon, AMZN
0.92% Alibaba Group Holdings Ltd, BABA
4.27% Bank of America Corp, BAC
0.96% Celsius Holdings Inc, CELH
0.92% Crowdstrike Holdings Inc CL A, CRWD
2.76% Cisco Systems Inc, CSCO
2.38% GE Aerospace, GE
0.38% GE Healthcare Tech Inc, GEHC
0.83% GE Vernova LLC, GEV
1.00% Haliburton Co, HAL
0.83% Hewlett Packard Ent Co, HPE
1.52% HP Inc, HPQ
1.21% NOV Inc, NOV
1.03% Opendoor Technologies Inc, OPEN
6.53% Procter & Gamble, PG
0.94% PayPal Holdings Inc, PYPL
0.1% Wabtec, WAB
0.97% Zillow Group Inc CL A, ZG
Subtotal of total portfolio- 35.41%
Inherited IRA
2.02% Series TR Unusual Whales Subversive Democratic Trading ETF, NANC
401(k)
1.32% Vanguard Total Bond Market Index Fund Admiral Shares, VBTLX (0.05%)
1.33% Vanguard Total International Bond Index Fund Admiral Shares, VTABX (0.11%)
6.73% Vanguard Total International Stock Index Fund Admiral Shares, VTIAX (0.12%)
10.44% Vanguard Total Stock Market Index Fund Admiral Shares, VTSAX (0.04%)
Subtotal of total portfolio- 19.82%
B. Accounts with Baird
Traditional IRA Brokerage Account #2 (Approx 1.8% Advisory fee)
6.29% Misc Collection of stocks, ETF's and cash
After Tax Brokerage Account #2 (Approx 1.8% Advisory fee)
4.85% Misc Collection of equities, fixed income, and cash
Traditional IRA Brokerage Account #3 (Approx 1.8% Advisory fee)
4.37% Misc Collection of stocks, ETF's and cash
After Tax Brokerage Account #3 (Approx 1.8% Advisory fee)
3.89% Misc Collection of equities, fixed income, and cash
(I realize the Boglehead template calls for me to itemize the contents of each of these Baird accounts. But, 3 of the 4 accounts have about 30 or more components of stocks, ETF's, fixed income assets, other funds...and cash. There is a slight amount of overlap between the Vanguard accounts and the Baird accounts.)
Contributions- At this time, I no longer make any contributions to any tax advantaged account.
Funds Available- All funds are available at this time.
Present Sources of Income-
Over the next 3 years, I will receive approximately $80k/year from my former employment. In addition to that, I plan on withdrawing equal amounts from the Vanguard After-Tax Account (After Tax Brokerage Account #1) and the Vanguard IRA (Traditional IRA Brokerage Account #1) to cover my expenses.
As for Social Security, I plan to draw at age 70 ($57.5k/year).
Expenses- I'm still getting my arms around my expenses, but estimate them at about $150k to $200k/year (excluding federal income taxes).
Questions
1. The first issue that jumps out to me, is the large proportion of pre-tax monies as compared to after-tax monies. This ratio is approximately 68:32. Yikes. As a result, I will be hit with very large Required Minimum Distributions (RMD's). And so, I think it would be beneficial to start Roth conversions to reduce the total amount of pre-tax monies. If I target converting 50% of the pre-tax monies (about $2.75M) over 10 years (I will be 62 soon and must start RMD's about age 72), that means I should convert $275,000 each year, right? (I realize this is a gross over-simplification of a very detailed analysis that is beyond me). Doing those conversions should enable me to stay in the 35% tax bracket. So, is there any advantage in doing Roth conversions? The only advantage I can think of is that once converted, I will have greater flexibility and another "bucket" to withdraw from. In addition, although I will still be required to convert the remaining pre-tax monies, the money in the Roth accounts will then grow tax-free forever, correct? (I know, never say "forever")
2. Next, I should probably dump Baird and transfer/roll over those accounts into Vanguard, right? When I began my first real job, I opened an account with Baird. Back then and before my grey hair, I saw value in Baird. However as things progressed, and I discovered the Boglehead way, I now question the higher cost(s) of Baird (I'm not entirely sure of their fee structure and how much I'm being charged). Sure, my Baird financial advisor is a nice guy and I enjoy our periodic telephone calls, but that's really the only benefit I receive from Baird. I used to think it might be safer to keep the monies with different brokerages (such as Baird and Vanguard), but now I would prefer simplicity and reducing the number of accounts and record keeping. Thoughts? Are there any advantages in having two different brokerages?
3. As for my 401(k), now that I'm retired, I see no reason to roll it over to another IRA. If I did roll, the new IRA would be with Vanguard. From what I can tell, the costs for each (the IRA and the 401(k)) are about the same. Perhaps I would have a greater selection of funds for an IRA. Thoughts? Can I just keep that 401(k) account?
4. In addition to the noted portfolio, I have real estate (including the primary residence) totaling about $3.1M. If I were to die soon, my estate value would be close to the current limit for triggering federal estate tax (currently about $13.6M in 2024). As most of you know, if not reset, that limit will be reduced to about $5M (or $7M inflation adjusted) on January 1, 2026. And, from what I've read, the federal estate tax rate will be increased from 40% to 45%! I have two adult children and plan on leaving them the bulk of my estate. So, I need to do something or else the government will take 45% of the estate over $5/$7M. One option is to create an irrevocable trust and transfer a portion of the estate to the trust (i.e. a "dynasty trust" as sometimes called) before the limit is reduced at the end of next year. (Yes, I realize I need to see an estate planning attorney). Thoughts?
5. As for Social Security, I see no reason to draw before 70. Am I missing something?
Thank you in advance for reading this far. Any thoughts would be greatly appreciated!
I am a long time lurker here, and have learned much from this community. I'm amazed at the range of expertise and knowledge of y'all. I would appreciate any suggestions, comments, and/or advice concerning my investments. My primary objective is to minimize the amount of federal taxes I will face.
I'm newly retired. I will follow the Bogleheads template for outlining my situation, followed by my questions. Please feel free to identify any issues/problems I may have (and likely) missed!
Emergency Funds- I have 3 to 6 months of expenses.
Debt- The only debt I have is $330,000 at 3.25% on a primary residence.
Tax Filing Status- Single
Tax Rate- 35% (federal)
State of Residence- Texas
Age- 61
Desired Asset Allocation- Approximately 90% stocks/10% bonds
Desired International Allocation- Not Sure
Total Portfolio Size- $8.1M
Current Retirement Assets (expenses or costs in parentheses)
A. Accounts with Vanguard
After Tax Brokerage Account #1
3.55% Vanguard Federal Money Market Fund (0.11%)
3.61% Vanguard 500 Index Admiral CL, VFIAX (0.04%)
14.97% Vanguard Total Stock Market Index Admiral CL, VTSAX (0.04%)
1.33% Nvidia Corp, NVDA
Subtotal of total portfolio-23.46%
Traditional IRA Brokerage Account #1
0.89% Vanguard Federal Money Market Fund (0.11%)
2.67% Franklin Income CL A1, FKINX (0.62%)
1.02% Invesco Oppenheimer Intel Growth CL A. OIGAX (1.1%)
2.35% Sector Financial Select Sector SPDR ETF, XLF
0.93% Amazon, AMZN
0.92% Alibaba Group Holdings Ltd, BABA
4.27% Bank of America Corp, BAC
0.96% Celsius Holdings Inc, CELH
0.92% Crowdstrike Holdings Inc CL A, CRWD
2.76% Cisco Systems Inc, CSCO
2.38% GE Aerospace, GE
0.38% GE Healthcare Tech Inc, GEHC
0.83% GE Vernova LLC, GEV
1.00% Haliburton Co, HAL
0.83% Hewlett Packard Ent Co, HPE
1.52% HP Inc, HPQ
1.21% NOV Inc, NOV
1.03% Opendoor Technologies Inc, OPEN
6.53% Procter & Gamble, PG
0.94% PayPal Holdings Inc, PYPL
0.1% Wabtec, WAB
0.97% Zillow Group Inc CL A, ZG
Subtotal of total portfolio- 35.41%
Inherited IRA
2.02% Series TR Unusual Whales Subversive Democratic Trading ETF, NANC
401(k)
1.32% Vanguard Total Bond Market Index Fund Admiral Shares, VBTLX (0.05%)
1.33% Vanguard Total International Bond Index Fund Admiral Shares, VTABX (0.11%)
6.73% Vanguard Total International Stock Index Fund Admiral Shares, VTIAX (0.12%)
10.44% Vanguard Total Stock Market Index Fund Admiral Shares, VTSAX (0.04%)
Subtotal of total portfolio- 19.82%
B. Accounts with Baird
Traditional IRA Brokerage Account #2 (Approx 1.8% Advisory fee)
6.29% Misc Collection of stocks, ETF's and cash
After Tax Brokerage Account #2 (Approx 1.8% Advisory fee)
4.85% Misc Collection of equities, fixed income, and cash
Traditional IRA Brokerage Account #3 (Approx 1.8% Advisory fee)
4.37% Misc Collection of stocks, ETF's and cash
After Tax Brokerage Account #3 (Approx 1.8% Advisory fee)
3.89% Misc Collection of equities, fixed income, and cash
(I realize the Boglehead template calls for me to itemize the contents of each of these Baird accounts. But, 3 of the 4 accounts have about 30 or more components of stocks, ETF's, fixed income assets, other funds...and cash. There is a slight amount of overlap between the Vanguard accounts and the Baird accounts.)
Contributions- At this time, I no longer make any contributions to any tax advantaged account.
Funds Available- All funds are available at this time.
Present Sources of Income-
Over the next 3 years, I will receive approximately $80k/year from my former employment. In addition to that, I plan on withdrawing equal amounts from the Vanguard After-Tax Account (After Tax Brokerage Account #1) and the Vanguard IRA (Traditional IRA Brokerage Account #1) to cover my expenses.
As for Social Security, I plan to draw at age 70 ($57.5k/year).
Expenses- I'm still getting my arms around my expenses, but estimate them at about $150k to $200k/year (excluding federal income taxes).
Questions
1. The first issue that jumps out to me, is the large proportion of pre-tax monies as compared to after-tax monies. This ratio is approximately 68:32. Yikes. As a result, I will be hit with very large Required Minimum Distributions (RMD's). And so, I think it would be beneficial to start Roth conversions to reduce the total amount of pre-tax monies. If I target converting 50% of the pre-tax monies (about $2.75M) over 10 years (I will be 62 soon and must start RMD's about age 72), that means I should convert $275,000 each year, right? (I realize this is a gross over-simplification of a very detailed analysis that is beyond me). Doing those conversions should enable me to stay in the 35% tax bracket. So, is there any advantage in doing Roth conversions? The only advantage I can think of is that once converted, I will have greater flexibility and another "bucket" to withdraw from. In addition, although I will still be required to convert the remaining pre-tax monies, the money in the Roth accounts will then grow tax-free forever, correct? (I know, never say "forever")
2. Next, I should probably dump Baird and transfer/roll over those accounts into Vanguard, right? When I began my first real job, I opened an account with Baird. Back then and before my grey hair, I saw value in Baird. However as things progressed, and I discovered the Boglehead way, I now question the higher cost(s) of Baird (I'm not entirely sure of their fee structure and how much I'm being charged). Sure, my Baird financial advisor is a nice guy and I enjoy our periodic telephone calls, but that's really the only benefit I receive from Baird. I used to think it might be safer to keep the monies with different brokerages (such as Baird and Vanguard), but now I would prefer simplicity and reducing the number of accounts and record keeping. Thoughts? Are there any advantages in having two different brokerages?
3. As for my 401(k), now that I'm retired, I see no reason to roll it over to another IRA. If I did roll, the new IRA would be with Vanguard. From what I can tell, the costs for each (the IRA and the 401(k)) are about the same. Perhaps I would have a greater selection of funds for an IRA. Thoughts? Can I just keep that 401(k) account?
4. In addition to the noted portfolio, I have real estate (including the primary residence) totaling about $3.1M. If I were to die soon, my estate value would be close to the current limit for triggering federal estate tax (currently about $13.6M in 2024). As most of you know, if not reset, that limit will be reduced to about $5M (or $7M inflation adjusted) on January 1, 2026. And, from what I've read, the federal estate tax rate will be increased from 40% to 45%! I have two adult children and plan on leaving them the bulk of my estate. So, I need to do something or else the government will take 45% of the estate over $5/$7M. One option is to create an irrevocable trust and transfer a portion of the estate to the trust (i.e. a "dynasty trust" as sometimes called) before the limit is reduced at the end of next year. (Yes, I realize I need to see an estate planning attorney). Thoughts?
5. As for Social Security, I see no reason to draw before 70. Am I missing something?
Thank you in advance for reading this far. Any thoughts would be greatly appreciated!
Statistics: Posted by MichiganderinTexas — Mon Oct 14, 2024 8:31 pm — Replies 2 — Views 173
