Retirement planning + management advice please!

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Simplelife10
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Retirement planning + management advice please!

Post by Simplelife10 »

Hi folks, first post here! Sincerely appreciate your advice in advance.

Setting:
My parents (mom: 67y, retired this year; dad: 71y, plans to retire in 4 years) are not financially savvy at all. While I'm trying to break this trend for myself, I'm not fully there yet. They have worked incredibly hard for what they've accumulated thus far, so the goal is not to lose their returns on very high fees. However, they cannot DIY, and certainly need help with basic portfolio management, tax loss harvesting as needed, withdrawal strategies, while also minimizing tax hits. Also, I'm considering pros-cons of Roth conversions for them to lower RMDs (that they really won't be relying on given pension x1 + SS x2); they file MFJ. 
They are old-school and need a friendly (+trust-worthy and fiduciary) face to review financial matters and portfolio state once/twice a year. Thus, Vanguard Personal Advisor Service is out. Also, fee-only advisors are out because they need continued management.

Fidelity experience: 
Parents and I met with Fidelity Wealth Management service, as they have local branches near us. Essentially, they meet all our needs mentioned above. However AUM is 1.1% + taxable account HAS to be actively managed (cannot be Fidelity's broad-based index funds), thus funds have average ER of 0.3

Qs: 
1) Has anyone used Fidelity's Wealth Management service? Pros/cons/review?
2) Does anyone have experience with other firms (with local branches in Northeast) that would offer a better deal than Fidelity?
3) Does this tactic make sense?
-I invest and manage their pre-tax (both rollover IRAs) accounts in fidelity broad-based index funds. Benefit: Save AUM fee on this big chunk of $. I don't need to get fancy with tax loss harvesting, no tax consequences to buy/sell to rebalance portfolio.
-Allow Fidelity Wealth Management to only manage their taxable account. Thus, AUM on smaller portion of their portfolio.
4) Brainstorming pros-cons of Roth Conversions. Seems like their tax bracket will be 22% both now and in the future (pension, SS, and RMDs). 
-Pros: They'll pay same % tax regardless, but their heirs will save on a big tax hit (myself and sis will stay in 35% bracket for the next ~20y years). Obviously, they can use it for themselves later with tax-free growth too.
-Con: I hear Roth IRA is not as sheltered from Medicare spend-down as Rollover IRA?

Sorry for the long post, but I really appreciate you sticking with it and providing advice :happy
ClaycordJCA
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Re: Retirement planning + management advice please!

Post by ClaycordJCA »

My father, age 92, converted most, but not all, of his Fidelity Accounts to accounts managed by Fidelity several years ago. I believe his AUM is .8, but his accounts are slightly above $1M. Generally, he is pleased with the service, performance and handholding.

My observations: (1) Although he is in a tax managed program, there are frequent trades so his tax reporting will be extensive and there may be unnecessary capital gains incurred from the trading in addition to the capital gains passed on by the managed funds; and (2) The performance as of his last six-month review was basically about 1% below the return of the comparable Vanguard Life Strategy Fund (60/40) or just about the AUM fees.

You might determine your parents’ interest in and suitability for a one fund solution. Fidelity has index-based target date funds - the Freedom Index Funds. Make sure “Index” is in the name of the fund as Fidelity also has the actively managed target date “Freedom Funds.” AUM is a much more palatable .12%. Another option I suppose would be to purchase the Vanguard Target Date or Life Strategy Fund and pay the commission ($75, I think) for the purchase.

I also recommend investigating what options exist with Schwab, as I assume they likely have an office close by since Fidelity does. When I was in the process of rolling over my IRA, Schwab reminded me they have a managed program that uses index funds at a much lower AUM fee. But, I believe Schwab keeps a good chunk of those portfolios in cash, allowing them to profit from lending it out so your parents could lose some return from that component. That said, my uncle was very happy with Schwab’s program.

I would think carefully about managing your parents’ investments. I decided not to manage my father’s investments because I did not want him to blame me if/when his portfolio decreases. I figure the .8% he is paying to Fidelity is worth keeping the peace since unfortunately, he is beginning to exhibit signs of dementia and becomes agitated over certain things. :(
chassis
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Re: Retirement planning + management advice please!

Post by chassis »

4) Roth conversions make sense for nearly no one. Roth conversions are mental gymnastics exercises in my view. Multiple successful, smart, reasonably HNW individuals in my circle have either not heard of, have heard of and have rejected, and are not advising their clients to, conduct Roth conversions. In addition to this list of luminaries, my own analysis says Roth conversions are no bueno.

For the very small cohort of investors for whom Roth conversions are beneficial, the benefits are very small, and are realized very late in life (80s+ years of age).
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Re: Retirement planning + management advice please!

Post by Wiggums »

With respect to Roth conversions, you need to do the math with actual numbers. What is ok for MFJ, might be a problem for a single filer after one person passes. Either way, money is owed to the IRS. The decision is more than just defer vs convert. You have to consider Medicare premiums, non spouse inheritance rules, heirs tax bracket, etc.

You mentioned the need for an advisor. If your parents are not financially savvy, what makes you think they are better off going to a local office and being sold something without sleeping on the decision? I’m not saying Fidelity or Schwab. I was not clear what kind of help they need. For example, will a target fund or all in one fund address the nothing to do requirement? They won’t get any meaningful tax or estate planning help.

My in-laws are not financially savvy and they make decisions based on feelings without understanding all the implications. They don’t make good decisions, because they trust what is being told to them is accurate and applies to their situation. A local office can be helpful. I’m just saying that my in-laws only need to know how to transfer money in and out. They get confused and frustrated easily at 77.
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almostretired1965
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Re: Retirement planning + management advice please!

Post by almostretired1965 »

If it were me, I would try to manage it for my parents using a 2 or 3 fund portfolio, rebalanced once a year. Of course this assumes your parents trust you and you can take the heat if things go south in a market correction. The key is to set a AA that they understand and are comfortable with. You could even run some simulations using portfoliovisualizer.com to show them what would have happened in 2008/9 with the same AA, etc.

I would skip the tax loss harvesting and Roth conversion for now. Keep it simple and clean.

This approach, IMO, will likely leave your parents better off than 90% of the advisors out there, with a minimal amount of work for you, commensurate with the fee you can charge them!

A
jdstripling
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Re: Retirement planning + management advice please!

Post by jdstripling »

If they only need asset management but do not need tax or estate planning help then I think it comes down to what they are happiest with. If they feel more comfortable having a face to their asset management and are willing to give up the AUM fees to have someone try and beat the market then that may be the best path for them. It wouldn't be my personal choice but this is about what is best for your parents.

On the other hand if they are looking for estate and tax planning in addition to asset management, perhaps a full service fee based provider could be an option if they are comfortable with a one or two fund portfolio that doesn't require much maintenance on their part. They could meet with their fee based advisor once or twice a year and get an update on their current state of affairs.

If the AUM fees are not putting their retirement at risk, I'd recommend moving forward with what ever option they are most comfortable with. If it were my parents I would just make sure they understand what the active management vs passive investing looks like and the fees associated with each option then let them decide how to proceed.
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Re: Retirement planning + management advice please!

Post by zincTwo »

ClaycordJCA wrote: Mon Nov 22, 2021 8:01 pm You might determine your parents’ interest in and suitability for a one fund solution. Fidelity has index-based target date funds - the Freedom Index Funds. Make sure “Index” is in the name of the fund as Fidelity also has the actively managed target date “Freedom Funds.” AUM is a much more palatable .12%. Another option I suppose would be to purchase the Vanguard Target Date or Life Strategy Fund and pay the commission ($75, I think) for the purchase.
Both valid and sound points. I second ClaycordJCA's idea of the one-fund portfolio (TDF or Vanguard lifestrategy or ishares AOR). The TDF MF may just be easier, and with the MF, the sales processing time is just 1 day at fidelity, and sales or purchases in dollar amounts.
ClaycordJCA wrote: Mon Nov 22, 2021 8:01 pm I would think carefully about managing your parents’ investments. I decided not to manage my father’s investments because I did not want him to blame me if/when his portfolio decreases. I figure the .8% he is paying to Fidelity is worth keeping the peace since unfortunately, he is beginning to exhibit signs of dementia and becomes agitated over certain things. :(
I also second the comment on family sensitivity and preserving the relationship with either parent, or siblings. Sometimes a trusted 3rd party is worth the extra cost.
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JoeRetire
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Re: Retirement planning + management advice please!

Post by JoeRetire »

Simplelife10 wrote: Mon Nov 22, 2021 6:24 pm My parents (mom: 67y, retired this year; dad: 71y, plans to retire in 4 years) are not financially savvy at all.
However, they cannot DIY, and certainly need help with basic portfolio management, tax loss harvesting as needed, withdrawal strategies, while also minimizing tax hits.
They are old-school and need a friendly (+trust-worthy and fiduciary) face to review financial matters and portfolio state once/twice a year.
They need a real fiduciary financial advisor. Money well spent.
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Simplelife10
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Retirement planning + management for older parents

Post by Simplelife10 »

[Thread merged into here --admin LadyGeek]

Hi guys! I'm looking to help my newly retired (67y mom) and soon to retire (71y dad; in 3-4 years) parents with setting up finances. Looking to move all accounts to Fidelity as there's a branch close by + ability to meet face-to-face with an actual person about once/year to review portfolio (they are old school). Thus far, they have been with a local FA for 5-6 years who is charging AUMs >1% and actively managing funds with ERs: ~1.5%. They need to move out ASAP!

Current accounts:
-SS: active for both
-Pension: active for mom. Dad won't have this.
-Tax-deferred (401k, 457b): Both have via employer
-Rollover IRA: just dad-Taxable account: combined
-Fixed-rate 5 year annuity: mom; matures in 2023

I'm learning about finances, investing, and retirement planning currently, but certainly not confident enough yet. It seems daunting. And they have little to no knowledge about this matter unfortunately, so certainly need help.

Question is, which option to go with- 1a, 1b, or 2:
1) Use Fidelity Wealth Management Service
We met with their CFP. They refuse to use index funds for this feature. Active mutual funds have ER ~0.5. 
a) For managing entire portfolio (2 rollover IRAs + combined taxable; total ~650k): AUM is 1.137%
b) For managing just combined taxable (total ~$250k): AUM is 1.4%. They said I can just use index funds for the rollovers (set up auto-RMD withdrawal), but they will help with tax efficiency/tax loss harvesting for taxable.
2) I manage both rollover IRAs and Taxable myself, within Fidelity
If doing this, does Fidelity walk customers through tax-loss harvesting and rebalancing portfolio, as courtesy? Feel like both are vital for longevity of the portfolio, but seem daunting. I can't find any good tutorials online.

I don't want my older parents to be fooled or lose returns with high fees. But also, don't want to mess up/lose their hard-earned money. They certainly need hand-holding- either directly via CFP/FA, me, or some combination of both.

Thanks in advance for your advice!
HomeStretch
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Re: Retirement planning + management for older parents

Post by HomeStretch »

Welcome to the forum!

Fidelity is a good choice for self-managing (DIY) a portfolio but expensive for their advisor service. If you/your parents DIY, don’t expect a lot of assistance from Fidelity with tax loss harvesting or rebalancing.

Is DIY a valid option? It doesn’t sound like you have the knowledge base yet to help manage your parents’ portfolio. Consider posting your parents’ portfolio in the “Asking Portfolio Questions” format found here:
viewtopic.php?f=1&t=6212&sid=ae37269ce7 ... f6ad3aaf59
Include information about their retirement income (pension, SS and annuity) and retirement expenses.

You/your parents will get good feedback. Plus you/they will learn a lot and get organized for a possible brokerage change just pulling together all the information.

It’s a good time for your parents to make sure their estate planning is up-to-date - wills, durable power of attorneys (naming who can assist them with financial matters) and healthcare representatives and doctors’ HIPAA forms (naming who will help them with healthcare matters). These documents need to be filed with and recognized by their financial institutions in order for you/someone else to effectively help your parents as needed or in the case of incapacitation.
Last edited by HomeStretch on Mon Dec 06, 2021 1:28 pm, edited 1 time in total.
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Wiggums
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Re: Retirement planning + management for older parents

Post by Wiggums »

We have an account at Fidelity and they’re an excellent broker.

Are you proposing that you leave one financial advisor that is charging an AUM greater than 1% for the Fidelity advisory services which is also greater than 1%? I think it’s great that you’re considering a broker with a local office. The cost of the advisory service is too high from my perspective. Depending on the portfolio size (650k?), you might want to consider an All in one fund. For example the Vanguard life strategy fund, the Fidelity freedom index fund, etc. That may be a more cost-effective way to have your funds managed.
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retire2022
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Re: Retirement planning + management for older parents

Post by retire2022 »

OP

It is better late than never, I would suggest you read up on the wiki, with your parents.

Getting started

https://www.bogleheads.org/wiki/Getting_started

Lazy Portfolio

https://www.bogleheads.org/wiki/Lazy_portfolios

How to approximate the Total Stock Market using other than Vanguard funds:

https://www.bogleheads.org/wiki/Approxi ... ock_market

Taxes, how to do, publication 17:

https://www.irs.gov/forms-pubs/about-publication-17

Have you looked into Required Minimum Distribution with your Father's account when he turns 72 next year?
delamer
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Re: Retirement planning + management for older parents

Post by delamer »

There are Life Strategy funds at Vanguard that are all-in-one funds — combining stocks and bonds into one investment. They use index funds and are rebalanced by the fund manager to maintian a constant allocation between stocks and bonds.

If your parents can decide on the allocation they are comfortable holding, they are an inexpensive way to invest n retirement accounts: https://investor.vanguard.com/mutual-fu ... trategy/#/

A similar, simpler, option: https://investor.vanguard.com/mutual-fu ... view/vbiax

They can be bought in a Fidelity account,

With a taxable account of $250,000, don’t get too hung up on needing guidance on tax-loss harvesting. It just is not an issue that is going to occur that often. And, generally, it’s better to withdraw from tax deferred accounts first and let taxable investments ride.
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Simplelife10
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Asking portfolio question for retired parents

Post by Simplelife10 »

[Thread merged into here --admin LadyGeek]

Hi everyone! I'm a financial novice here (learning via books and WCI/Bogleheads/other websites). Trying to "set-up" my parents financially in their retirement with Fidelity (branch close, ability for face-to-face annual portfolio review annual/any Qs). They have worked tremendously hard and sacrificed a lot for their assets, are simple blue-collar folks, aren't financially savvy (I'm trying to break this cycle), and thus, need hand-holding. They mean the world to me and I want to help them get established in a good system that will give them a comfortable, stress-free, and financially stable retirement.

--------------------

Profile:

Dad: 71 years (plan to retire at 75)
-Currently getting SS ($16.2k/year)
-Not pension eligible
-Employer 403b: $50k
-Currently rollover IRA: $202k

Mom: 67 years (retired in 2021)
-Currently getting SS ($20.4k/year)
-Currently getting pension ($29.8k/year)
-Employer 457b: $222k

Combined taxable account: $205k

Risk profile: Moderate. Looking at 50/50 stocks/bonds. Just looking to stay ahead of inflation with some growth.

Goal of investments: Combination of SS x2, Pension x1, and RMDs x2 will more than cover their annual expenses. Thus, goal is to allow the remaining investments to grow SAFELY, and allow remainder to pass on to heirs tax-efficiently (assuming via Roth conversions over time).

Emergency Fund: 2 years of expenses in savings account

Debt: none

Tax filing status: MFJ

Annual combined expense: $45k

Guaranteed income/year (SS x2 + pension x1): $66.4k

--------------------

QUESTION 1: Which of below options should I go with (1a, 1b, 2a, 2b)?

Option 1: Use Fidelity's Wealth Management Service
We met with their CFP. They solely use actively managed mutual funds (avg ER 0.5)
a) For managing entire portfolio (2 rollover IRAs + combined taxable; total ~$630k): AUM is 1.137%
b) For managing just combined taxable (total $205k): AUM is 1.41%. They said I can just use index funds for the rollovers (+ set-up auto RMD withdrawals), but they will help with tax loss harvesting and tax efficiency for taxable account.

Option 2: DIY (I'll be setting this up for them). Will save a lot on fees!
-However, I don't have any experiencing with rebalancing and tax-loss harvesting. Would Fidelity help with both as courtesy? How much of a tax-hit is not doing the latter? Thinking about doing both seems so daunting.
I'm trying to formulate the laziest (but coherent) portfolio for them in Fidelity

a) Idea:
-Both rollover IRAs: 50% stock index funds (US + Int'l), 50% bonds index (intermediate-term treasury + high quality short-term)
-Combined taxable: 50% stock index funds, 50% municipal bonds (to avoid federal income tax)
This is the general idea, but exactly which Fidelity funds to use or how to do the breakdown is confusing- need help! Also, I understand that overall asset allocation (50/50) is intended to be done across all 3 accounts, not individually. Again, don't know how to start with this.

b) Idea:
-Keep it very simple and go with one-fund approach (Fidelity Freedom Index 2025 Fund- Investor class; FQIFX) in all 3 accounts?
-Pros: ER: 0.12%, no management fees, no-loads
-Cons: ?
-Will this fund continue to increase the bond ratio over time?
-Is there another single Fidelity fund that would better meet their goal?

QUESTION 2: Regarding RMDs...
Dad will have to take RMDs from his rollover IRA next year (403b will be exempt until he retires). Mom, however, has 5 more years before RMDs. Since they aren't particularly relying on RMDs for their expenses, goal is to minimize it by starting Roth conversions for her. Will talk to a tax advisor soon, but open to any advice.
Some points:
-How to know tax-brackets later will be higher than now (for conversions to make sense)
-Even without jumping into the next tax-bracket, how much Roth conversion is "too much"... in terms of causing increased % of SS getting taxed & increased Medicare premium?

--------------------

I realize that this post is long and beginner-level. Despite continually learning from books and internet, I just need help talking/thinking some things out and tie concepts together. Thanks a lot for your time and insight. I aim to be in MUCH better shape when it's time for my retirement (32 years currently) :happy
Last edited by Simplelife10 on Mon Dec 06, 2021 10:42 pm, edited 1 time in total.
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Sandtrap
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Re: Asking portfolio question for retired parents

Post by Sandtrap »

Please add projected annual or monthly expenses in retirement (what it takes to cover all their monthly or yearly needs.
You can edit your post using the pencil icon.

If you would like help lowering the costs and optimizing the funds then please list them for taxable and tax advantaged as well. Include: fund name, ticker, ER, and % of total portfolio.

Great job on the format and data!!!!🌺
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WoodSpinner
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Re: Asking portfolio question for retired parents

Post by WoodSpinner »

OP,

For your second question we need to know their current income vs. what is expected when your Dad fully retires. Roth Conversions may or may not make sense depending on their Tax Brackets now vs the future.

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Tdubs
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Re: Asking portfolio question for retired parents

Post by Tdubs »

Questions:

You noted that "Goal of investments: Combination of SS x2, Pension x1, and RMDs x2 will more than cover their annual expenses." How much will the guaranteed portion of their income--the SSx2 and Pension x1--cover of their annual expenses?

What will your father get from your mother's pension if she passes away first? What would his income/expenses picture look like?
dbr
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Re: Asking portfolio question for retired parents

Post by dbr »

Spending the RMD is a method of withdrawals that probably promises to be pretty secure unless there are worst case market returns. But that source of income should not be confused with actual lifetime income streams from SS and pensions.

Whether or not the pension is indexed to inflation or has a fixed COLA is important. The question about SS and pension income if one of the couple passes is important.

The other issue is to evaluate possible spending with an eye to contingencies, including end of life care.
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Re: Retirement planning + management advice please!

Post by LadyGeek »

Simplelife10 - In order to provide appropriate advice, it's best to keep all the information in one spot. I merged your two updates back into the original thread. If you have any questions, ask them here.

(Thanks to the member who reported the post and provided a link to this thread.) -
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Watty
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Re: Retirement planning + management advice please!

Post by Watty »

Simplelife10 wrote: Mon Dec 06, 2021 6:57 pm We met with their CFP. They solely use actively managed mutual funds (avg ER 0.5)
a) For managing entire portfolio (2 rollover IRAs + combined taxable; total ~$630k): AUM is 1.137%
b) For managing just combined taxable (total $205k): AUM is 1.41%.
That is a high. Vanguard will do that for 0.3% and use low cost index funds.
Simplelife10 wrote: Mon Dec 06, 2021 6:57 pm Combined taxable: 50% stock index funds, 50% municipal bonds (to avoid federal income tax)
This is the general idea, but exactly which Fidelity funds to use or how to do the breakdown is confusing- need help! Also, I understand that overall asset allocation (50/50) is intended to be done across all 3 accounts, not individually. Again, don't know how to start with this.
The target date funds like the Fidelity Freedom Index funds can work well but they are always rebalancing so it is not tax efficient so they may not be a good choice in a taxable account.

One simple way to invest when a target date fund would not work well is with a three fund portfolio which is to buy a mix of about three index funds and hold them in the appropriate accounts which are the most tax efficient. (They could likely own all their bonds in their retirement accounts where they would not need to buy muni bonds.) Here are some wikis on this.

https://www.bogleheads.org/wiki/Three-fund_portfolio

https://www.bogleheads.org/wiki/Tax-eff ... _placement

I have not read it but one of the founds of these boards also wrote a book on three fund portfolios.

https://www.amazon.com/Bogleheads-Guide ... 963&sr=8-2
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Simplelife10
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Re: Asking portfolio question for retired parents

Post by Simplelife10 »

Sandtrap wrote: Mon Dec 06, 2021 7:17 pm Please add projected annual or monthly expenses in retirement (what it takes to cover all their monthly or yearly needs.
You can edit your post using the pencil icon.

If you would like help lowering the costs and optimizing the funds then please list them for taxable and tax advantaged as well. Include: fund name, ticker, ER, and % of total portfolio.
Added their annual expenses amount

Currently, all 3 accounts are invested in numerous high ER funds via PIMCO. Too many to list/understand. Hence, didn't list them.
I'm looking to start fresh with Fidelity.
fourwheelcycle
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Re: Retirement planning + management advice please!

Post by fourwheelcycle »

If your parents really need a local advisor who will meet with them and explain a range of financial management concerns, I suggest you try this link to identify a local advisor who primarily uses Dimensional funds https://us.dimensional.com/individuals. They can meet with a few candidates and select one they like, if they find one they like. I have two close relatives/friends who use Dimensional affiliated advisors and like them very much.

However, I think the best solution for your parents is to choose an appropriate and "comfortable" equity/bond/cash allocation and put all their savings in a two fund portfolio based on a low ER total US stock market fund and a low ER total US intermediate-term bond fund. Just set it and forget it. Set all of the dividends to be distributed to their settlement account, to be used for their annual expenses, gifts to children, or fund allocation rebalancing. Forget about any other tax loss harvesting or selling funds to rebalance. I do this at Vanguard, but it can also be done at Fidelity - DIY, with no advisor or robo fees.

Your parents should not sell good holdings and pay capital gains tax to move to this two fund portfolio, but they can stop worrying about their other holdings, sell them or donate them to charity as opportunities arise, and move toward the two fund portfolio with all new investments, including reinvestment of distributed dividends from their other holdings.

On Roth conversions, I have never heard of Medicare spend down. Do yo mean Medicaid spend down? Would your parents want to put themselves in a Medicaid nursing home to protect your inheritance? Medicaid aside, I have recently come to the view that it makes sense for parents to convert IRAs to Roths as long as the average tax rate on the Roth conversion will not be higher than the parents' marginal tax rate without the conversion. They won't be any worse off, and their children will most likely be better off inheriting Roths than IRAs, given the new ten year distribution requirement.
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goingup
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Re: Retirement planning + management for older parents

Post by goingup »

Simplelife10 wrote: Mon Dec 06, 2021 12:22 pm Thus far, they have been with a local FA for 5-6 years who is charging AUMs >1% and actively managing funds with ERs: ~1.5%. They need to move out ASAP!

entire portfolio (2 rollover IRAs + combined taxable; total ~650k
Welcome to BH forum!

Just a few thoughts. It doesn't seem like an urgent situation. Good thoughtful decisions can take a little time. :happy

Their portfolio isn't the size that would make me worry about Roth conversions or tax loss harvesting. You read a lot about it on this forum but most people with modest portfolios aren't generally worried about these housekeeping functions.

The big thing to decide is whether they want an in-person advisor, such as they have now. Are they generally satisfied with their personal advisor now? Why are they deciding to leave him/her? In person individual advice generally costs more than 1% AUM plus fund ERs, as you have noted.

According to what you've researched, going with Fidelity Wealth Mgmt will save about 1% over their current advisory relationship, so that's about $6,500/yr. That seems worthwhile. You could start with that and if you want to cut ties in the future, it is possible to transition to a self-managed set-up.
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Re: Retirement planning + management advice please!

Post by JnyVuko »

almostretired1965 wrote: Mon Nov 22, 2021 9:42 pm If it were me, I would try to manage it for my parents using a 2 or 3 fund portfolio, rebalanced once a year. Of course this assumes your parents trust you and you can take the heat if things go south in a market correction. The key is to set a AA that they understand and are comfortable with. You could even run some simulations using portfoliovisualizer.com to show them what would have happened in 2008/9 with the same AA, etc.

I would skip the tax loss harvesting and Roth conversion for now. Keep it simple and clean.

This approach, IMO, will likely leave your parents better off than 90% of the advisors out there, with a minimal amount of work for you, commensurate with the fee you can charge them!

A
Agree 100%. When my mother needed help I managed her finances. It was easier for me to be involved from the start rather than try to help unravel issues later. I'd forego the TLH and Roth conversions, at least for now. Keep it simple; for them and you! I'd even consider a 2 index fund portfolio (total stock mkt and total bond), a target date fund or an income fund.

You've come to the right place to figure things out, especially if you want to save money. There are a lot of advisors out there that will be willing to take your money and manage it for you.....for a fee. And you can do this yourself. If I can, any one can!

All the best to you and your parents. I hope they live a long life.
delamer
Posts: 17348
Joined: Tue Feb 08, 2011 5:13 pm

Re: Retirement planning + management advice please!

Post by delamer »

I’m an advocate for all-in-one funds for inexperienced/uninterested investors.

Here are options:

https://investor.vanguard.com/mutual-fu ... irement/#/

https://investor.vanguard.com/mutual-fu ... trategy/#/

There is some danger in taking over investments for someone else:

1. You bear some responsibility for the results, even if they claim to understand the risks.
2. If you are for some reason unable to handle the accounts going forward (death, temporary or permanent disability), then what? At minimum, they need a backup plan. That’s where an all-in-one fund works well.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Topic Author
Simplelife10
Posts: 6
Joined: Sun Nov 21, 2021 12:20 pm

Re: Retirement planning + management advice please!

Post by Simplelife10 »

Thanks for all the replies folks, I truly appreciate it. Will review the suggested links this week. :happy
Agreed, I'm trying to keep it very simple (obviously within reason that it will keep them ahead of inflation and promote growth)
Also agreed, I'm going to ignore tax-loss harvesting and roth conversions (to lower future RMDs) for now.

1) If DIY-ing the 3 accounts (2 rollover IRAs + 1 taxable) with Fidelity:
-Can I get advice for exactly which Fidelity index funds to pick for those accounts? (for both single fund or 2/3 fund strategy)

2) In terms of sequence of withdrawals, does this make sense?
-For expenses: SS x2 + pension x1 + RMDs x2 as needed
-Any left-over from both RMDs they don't need --> Roth conversion? (would like to create & grow a Roth IRA over time) ...or can RMDs not be used for this? If not, what's another alternative for left-over RMDs?
-Since Brokerage account funds aren't needed, just let it ride (neither contribute to, nor withdraw from). That way, definitely don't need to worry about tax-loss harvesting. And can just benefit from step-up in basis benefit when time comes.
delamer
Posts: 17348
Joined: Tue Feb 08, 2011 5:13 pm

Re: Retirement planning + management advice please!

Post by delamer »

Simplelife10 wrote: Tue Dec 07, 2021 11:58 am Thanks for all the replies folks, I truly appreciate it. Will review the suggested links this week. :happy
Agreed, I'm trying to keep it very simple (obviously within reason that it will keep them ahead of inflation and promote growth)
Also agreed, I'm going to ignore tax-loss harvesting and roth conversions (to lower future RMDs) for now.

1) If DIY-ing the 3 accounts (2 rollover IRAs + 1 taxable) with Fidelity:
-Can I get advice for exactly which Fidelity index funds to pick for those accounts? (for both single fund or 2/3 fund strategy)

2) In terms of sequence of withdrawals, does this make sense?
-For expenses: SS x2 + pension x1 + RMDs x2 as needed
-Any left-over from both RMDs they don't need --> Roth conversion? (would like to create & grow a Roth IRA over time) ...or can RMDs not be used for this? If not, what's another alternative for left-over RMDs?
-Since Brokerage account funds aren't needed, just let it ride (neither contribute to, nor withdraw from). That way, definitely don't need to worry about tax-loss harvesting. And can just benefit from step-up in basis benefit when time comes.
You can’t use leftover RMDs to do a Roth conversion. Leftovers can be reinvested in a taxable account.

Remember that it’s highly likely that one of your parents will outlive the other. At that point, the survivor’s income will fall and their expenses will also. But the income drop may be larger than the expense drop, and require more withdrawals from savings. It’s worth doing some planning for this scenario. It should be simple to determine the survivor’s income; expenses can be more tricky.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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