On the cusp of retirement - seeking Portfolio guidance

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Topic Author
DonFifer
Posts: 85
Joined: Wed May 05, 2021 1:59 pm

On the cusp of retirement - seeking Portfolio guidance

Post by DonFifer »

Good Afternoon,

I want to thank everyone in advance for any help that you can give me.

A little about myself. I’m 72 years old and a lifelong blue collar worker. Have always lived within my means. Since the start of the pandemic, I have been living off Social Security and 2 non-cola pensions which allows me to put all of my current paychecks into the 401K. Last year, RMDs were not mandated and I had no problem managing without them. My wife lives off her Social Security, a small pension and her yearly RMD. (I fund her overhead expenses.) One thing that I have noticed, when looking at my retirement income versus needs and wants, is that my retirement accounts look more and more like an LTC Insurance Policy.

It is only within the last six years that I have given any thought to funding my retirement. It was at that time, that I moved two Traditional IRAs and a Roth IRA to Merrill Edge managed accounts. You will see from the associated ERs and front loads that they really sucked me in. I am currently planning to rectify that mistake.

Six years ago, I created my first personal financial spreadsheet, started reading a lot of investment books and eventually discovered the BH books and the BHF. Found the Vanguard ETF Strategic Model Portfolio.pdf (dated March 31, 2020) on line and I opened and aligned a Vanguard taxable account according to the 60/40 CORE SERIES recommendations (VTI, VXUS, BND & BNDX).

I am 3 weeks from retirement, and about 6 to 8 weeks away from meeting with Merrill Edge. I want out of the managed accounts but I also want to move my 401K into my Merrill Edge self-directed accounts. I am going to permanently set up my accounts to satisfy my Retirement/LTC needs. During retirement, I plan to check on my accounts monthly and to re-balance yearly. Will re-balance sooner if we enter a bear market.

Sometime later this year, I plan to get my wife out of her managed ME account.

Emergency funds: None per se –
Living off guaranteed income (SS and two non-cola Pensions) (SS taken at 70),
Approx. $20K/year in RMDs which I don’t need and will be reinvesting most of it into a taxable account,
A very large (self-sustaining) coin collection to fall back on, if disaster strikes and,
$64,000+ in physical gold and silver.

Debt: None. House and vehicles paid off years ago. CCs paid off monthly.

Tax Filing Status: Married Filing Jointly

Tax Rate:
This year: 22% Federal, 9.3% State
Next year: 22% Federal, 6.0% State (California doesn’t tax Social Security) (Plan to convert some IRA funds to Roth, so the CA tax will probably go back up to 9.3%)

State of Residence: California (no desire to move).

Age: Him 72 / Her 76

Desired Asset allocation: 60/40, but with the current bond situation, I am comfortable with letting it slip towards 70/30 but not beyond.
Desired International allocation: 40% of stocks

Risk Tolerance: I am completely comfortable with “Staying to Course”.

Total portfolio size: 1.1M
Sometime later this year, I will receive a little over $100K (after capital gains). My CPA is currently working out the details. This will go into my Vanguard account. Not included in the 1.1M.

Current retirement assets

His Vanguard Taxable Account
9.8% Vanguard Total Stock Market ETF (VTI) (0.03%)
6.1% Vanguard Total International Stock Market ETF (VXUS) (0.08%)
5.4% Vanguard Total Bond Market ETF (BND) (0.035%)
2.2% Vanguard Total International Bond Market ETF (BNDX) (0.08%)

Merrill Edge Accounts

His Taxable ME Account
0.14% Newmont Corporation (NEM)
2.66% Vanguard CA Intermediate Term (VCAIX) (0.17%)
0.49% Vanguard Inflation (VIPSX) (0.2%)

His Managed ME Traditional IRA
2.39% Pimco Income Fund Cl C (PONCX) (2.24%)
9.82% American Balanced Fund (ABALX) (0.58%) Front Load 5.75%
10.93% J P Morgan Large Cap (OLGAX) (0.94%) Front Load 5.25%

His Self-Directed ME Traditional IRA
0.58% Vanguard Real Estate ETF (VNQ) (0.12%)

His Managed ME Roth IRA
0.62% American Balanced Fund (ABALX) (0.58%) Front Load 5.75%
0.41% Columbia Balanced Fund (CBLAX) (0.95%) Front Load 5.75%

His Self-Directed ME Roth IRA
0.14% Bank of America Corp (BAC)
0.44% Vanguard Dividend (VIG) (0.06%)
0.38% Vanguard High Dividend Yield (VYM) (0.06%)
0.62% Vanguard 500 Index Fund (VOO) (0.03%)
1.10% SPDR S&P 500 ETF Trust (SPY) (0.095%)

Her Managed ME Traditional IRA
1.99% American Balanced Fund (ABALX) (0.58%) Front Load 5.75%
2.93% J P Morgan Large Cap (OLGAX) (0.94%) Front Load 5.25%

Her Self-Directed ME Roth IRA
1.23% Vanguard 80 Index Fund (VOO) (0.03%)
0.85% Vanguard Dividend (VIG) (0.06%)

His 401k at Empower Retirement
All investment options are “Fund of Funds” and have no ticker symbol.
13% Stock Index Fund (Large Cap) (0.08%)
4% Large Cap Stock (0.37%)
8% International Stock Market (0.57%)
3% Emerging Stock Market (0.87%)
7.3% Long Bond Fund (0.36%)
Company Match not relevant since I am about to retire, but it was 3% match on 6% invested.
Current AA of this account is 80/20
Within this account:
Roth approx. $8,000
Pretax approx. $280,000
Post Tax approx. $104,000 (to be converted to a Roth IRA with approx. $82,000 cost basis. Will be required to take an RMD from this account when I retire, which I will use to pay the taxes.)

Additional Investments
4% Physical Gold
1.8% Physical Silver
0.045% Ferro Corp Stock (FOE) 27 shares, paper copies, Christmas gift to employee.
_______________________________________________________________

I really appreciate any help you can give me in constructing a solid structure for my retirement accounts.

I am planning to sell my smaller positions in my IRA and Roth accounts and invest in larger, more consolidated, long term positions. I also plan to take the BND and BDNX positions out of my Vanguard taxable account and put them into my IRA, and balance my AA across all of my accounts.

My questions:

When I sell my smaller positions and move the 401K and managed accounts, I plan to invest in VTI, VXUS, BND & BNDX (36/24/28/12%). I am wondering if I should also have some exposure to Vanguard Life Strategy Moderate Growth Fund (VSMGX), since it has the 60/40 AA that I want, but more importantly, it is comprised of underlying funds (VGTSX, VTSAX, VBIAX, VBTLX and VTIBX) that are different from VTI….BNDX. I know that VTI…BNDX is virtually full diversification, but I would feel better if I didn’t have all my eggs in one basket even if it is a very large basket. The ER on VSMGX is higher at 0.13%, but I don’t have to re-balance. Does this make sense or is there another strategy or fund(s) that I should look at for more diversification, or am I being puerile in seeking better diversification? I am not a fan of Target Date Funds. I also do not need regular infusions of cash to support my lifestyle. Please keep in mind that I am really a neophyte when it comes to investing and that I prefer to keep everything relatively simple, especially if my untimely demise or dementia puts these accounts into my wife’s hands.

I am also thinking about increasing my exposure to REITS as another way to get greater diversification. Would raising my 0.58% stake in Vanguard Real Estate ETF (VNQ) to 5% be reasonable? To clarify, I am considering an AA of 5% REIT, 6% physical Gold and Silver and the remaining 89% having a 60/40 AA.

Is there anything else that I am missing and should consider?
User avatar
David Jay
Posts: 14587
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: On the cusp of retirement - seeking Portfolio guidance

Post by David Jay »

DonFifer wrote: Tue Jul 27, 2021 2:13 pmI am wondering if I should also have some exposure to Vanguard Life Strategy Moderate Growth Fund (VSMGX), since it has the 60/40 AA that I want, but more importantly, it is comprised of underlying funds (VGTSX, VTSAX, VBIAX, VBTLX and VTIBX) that are different from VTI….BNDX.
Let me respond to this one, hopefully others will jump in on some of the other questions: The funds you are invested in: VTI, VXUS, BND & BNDX are "ETF" share classes of Vanguard's standard index funds. VTSAX, VBIAX, VBTLX and VTIBX are literally the same funds, they are just a different class - "Admiral" class traditional mutual funds.

Vanguard Total Stock fund: VTSAX/VTI
Vanguard Total International fund: VBIAX/VXUS
Vanguard Total Bond fund: VBTLX/BND
Vanguard Total International Bond fund: VTIBX/BNDX

So "No", there is no advantage to holding LS funds because they hold exactly the same assets as you are holding, it would be wasted complexity.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Topic Author
DonFifer
Posts: 85
Joined: Wed May 05, 2021 1:59 pm

Re: On the cusp of retirement - seeking Portfolio guidance

Post by DonFifer »

I have been wondering if the listed mutual funds are the actual funds in VSMGX.

I found VGTSX, VTSAX, VBIAX, VBTLX and VTIBX listed on a third party website, as the supporting funds for VSMGX. The Vanguard website does not list the ticker, only the names and percentages of the underlying funds:
Vanguard Total Stock Market Index Fund Investor Shares 36.80%
Vanguard Total Bond Market II Index Fund Investor Shares† 27.50%
Vanguard Total International Stock Index Fund Investor Shares 24.10%
Vanguard Total International Bond Index Fund Investor Shares 1 10.70%
Vanguard Total International Bond II Index Fund 0.90%
When I try to look up these funds on the Vanguard website, I get lost, and at least one of them is a closed fund. The VGTSX mutual fund is a fund of funds and I don’t quite understand why it is included.
User avatar
David Jay
Posts: 14587
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: On the cusp of retirement - seeking Portfolio guidance

Post by David Jay »

There are 4 LifeStrategy funds:
VASGX LS Aggressive Growth 80/20
VSMGX LS Moderate Growth 60/40
VSCGX LS Conservative Growth 40/60
VASIX LS Income 20/80

But the bottom line is that the LS funds hold exactly the same 4 assets as you hold now. There is no diversification to be gained by purchasing an LS fund and the expense ratio (ER) is higher for the LS fund.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Topic Author
DonFifer
Posts: 85
Joined: Wed May 05, 2021 1:59 pm

Re: On the cusp of retirement - seeking Portfolio guidance

Post by DonFifer »

Thanks, I appreciate the confirmation.
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