bertilak wrote: ↑Sat Aug 28, 2021 11:46 am
My instructions to my wife say PAS is the simplest way to go as opposed to dealing with and/or understanding all the following...
- Multiple accounts (taxable, IRA)
- Multiple funds (three-fund) spread across those accounts
- Gifting
- Taxes
- Paying expenses
- RMDs
- TLH (optional)
- KISS investing principles like low cost, three-fund portfolio, stay-the-course, etc.
- Not getting taken by someone pushing complexity and/or beat-the market schemes
I explain how to deal with all the above but despair it might not be understood or may be thought of as too difficult (despite the elegance of my presentation!) It is a long list. It was after writing up the whole thing I changed its emphasis to PAS.
PAS is an option I won't choose as long as I'm around and (think I am) capable. But, there is the issue of how to simplify things if I'm not around. One option is as you say detailed instructions for streamlining, jettisoning or letting lapse things I don't expect wife (even with help of grown kids) to keep doing (like partly hedging equity position with futures and options to have more upside and defer cg taxes, so just sell down the position to what works with no hedges, giving up any upside or tax deferral advantage, which might anyway change due to basis step up). Then either the portfolio would run on virtual autopilot under simple instructions where to withdraw spending money and do legally required things like RMD's and tax returns generally, and slightly clever but slightly complicated stuff like charitable and family gift transfers of appreciated assets and TLH could fall by the wayside also. Or, I could recommend getting an advisor, like PAS.
Reviews of PAS I've seen say a downside is no TLH, not sure that's accurate, optional anyway you say and I also don't view it as a core function. But it is somewhat of a negative for me if PAS will offer products other than very basic funds. I would not assume Vanguard will put people in crazy stuff, but there would be no reason to add bells and whistles to our portfolio at that stage of the game, even if a good argument could be made for it in theory*. Another aspect I've read in reviews (couldn't find on Vanguard's site) is they 'strongly encourage' all brokerage assets to be at Vanguard under PAS. I understand that from POV of the futility of structuring half a portfolio without knowing the other half. And in a post-me situation fewer brokerages to deal with would be better. OTOH some diversification of unknown/unknown institutional risks could be good. But I assume this doesn't apply to having a nice cushion in bank accounts/CD's which my instructions would recommend. The Vanguard agreement for PAS I saw is also long and complicated, if you seek to fully read and understand everything you sign even from a trusted provider. I'm undecided whether a set of instructions to streamline then KISS, even if not optimal, might still be better. My wife is 'non financial', actively dislikes dealing with financial institutions, but is strong on common sense so prior to severe cognitive decline (and my own cognitive decline could make me derail things while I'm still here) I don't worry about a good sale pitch making her do stupid stuff seeking high returns.
*I guess one of Vanguard's arguments might be that *relatively low cost* active funds have a much better track record generally than high cost active funds, pointing to the centrality of 'costs matter' among BH principals as opposed to absolute strict adherence to 'invest in the whole market' which few BH's strictly adhere to in every case anyway. For example 'whole market among US stocks, no non-US for me, thanks' might be correct or not, let's not debate it for the 10,000th time, but it's simply not the whole investable market.