My elderly parents have been using the same financial advisor for the past 30 years or so who is part of their circle and church. But he is retiring and rather than get handed off to someone they don't know, they finally asked me to help them set up and manage their own portfolio through Vanguard.
As far as financial advisors go, he was not that bad. Charged them a 0.5% AUM and took care of a lot of details like RMDs and their charitable contributions. But he had them in a bewildering array of stocks and obscure funds that in the end balanced out to a 60/40 portfolio. I counted over 100 different holdings.
Details. He is 86 and she is 85. They have no debt and live in an independent living retirement village with a life lease. With their dual social security and my dad's pension they have more income than they spend and donate the excess to charity. Their investment portfolio they do not touch except to donate about half of their RMDs to various charities and let the rest grow in a taxable account. The last time they withdrew anything from their portfolio was four years ago to help out my brother with a home purchase. So the portfolio I'm managing for them has no real purpose for them other than future emergencies, charitable contributions, and eventual legacy to me and my two brothers.
After discussing with them their objectives, we decided to keep their previous 60/40 asset allocation they had with their financial advisor and settled on an 80/20 domestic/international split for both stocks and bonds. Which was basically splitting the difference between the 40% international in Vanguard's life strategy funds, and 0%. This is the portfolio that I came up with using the four standard Vanguard Index ETFs (Total Stock, Total Bond, Total Int'l Stock, Total Int'l Bond) across all their accounts.
Portfolio Size: $924,000
Taxable: $275,000
6% Vanguard Money Market (about $18,000). This is essentially their black swan emergency fund that will likely never be tapped.
77% Vanguard Total Stock Market ETF (VTI) (ER 0.03%)
17% Vanguard Total Int'l Stock ETF (VXUS) (ER 0.08%)
His Traditional IRA $377,000
44% Vanguard Total Bond ETF (BND) (ER 0.03%)
35% Vanguard Total Stock Market ETF (VTI) (ER 0.03%)
11% Vanguard Total Int'l Bond ETF (BNDX) (ER 0.07%)
10% Vanguard Total Int'l Stock ETF (VXUS) (ER 0.08%)
Her Traditional IRA $135,000
44% Vanguard Total Bond ETF (BND) (ER 0.03%)
35% Vanguard Total Stock Market ETF (VTI) (ER 0.03%)
11% Vanguard Total Int'l Bond ETF (BNDX) (ER 0.07%)
10% Vanguard Total Int'l Stock ETF (VXUS) (ER 0.08%)
His Roth IRA $137,000
44% Vanguard Total Bond ETF (BND) (ER 0.03%)
35% Vanguard Total Stock Market ETF (VTI) (ER 0.03%)
11% Vanguard Total Int'l Bond ETF (BNDX) (ER 0.07%)
10% Vanguard Total Int'l Stock ETF (VXUS) (ER 0.08%)
According to Vanguard's Portfolio Watch page their portfolio allocations are the following
Stocks 59% (allocated 80% domestic and 20% international)
Bonds 39% (allocated 81% domestic and 19% international)
Short-term reserves 2%
And their total expense ratio is 0.04%
What I basically did was fill their taxable with all stocks using the target 80/20 ratio and then distributed the remaining assets in equal ratios across the 3 IRAs to keep all of the bond funds in tax-deferred accounts for tax purposes.
For the next several years, all I anticipate happening with this portfolio is that they will slowly deplete their two traditional IRAs according to the RMD schedule, putting about half of the RMDs in their joint taxable account and donating the other half to their preferred charities. They have a sizable savings account of about $50,000 with their regular bank into which they put their excess savings from social security and pensions (mostly in CDs) that I'm not involved with. They also have a very Cadillac long term care policy that they purchased long ago that they are maintaining. Far better than anything one could buy today. So while this portfolio might eventually be needed for long-term care for one or both, that isn't necessarily likely.
Advice? Anything I should change? Either in the portfolio itself or my management of it?
At this point I have limited authority over their accounts which lets me see all of them in my Vanguard portfolio page and move money about. They are not very online so I'll probably just print quarterly statements for them to put in their files and initiate any transfers to and from their regular bank if they ever have need of funds since they don't really know how to go online and do that. They don't even do online banking with their regular bank. They just keep a paper checkbook ledger, review their monthly paper statements the old way, and my dad prefers to do his banking by walking down to the branch in person.
At some point I anticipate needing to gain more authority over their finances. But this is what we could do now online without notarized power of attorney paperwork. They don't even know their Vanguard login and passwords (and don't really want to know as long as they get quarterly statements) so I think it is unlikely that anyone could commit fraud against them. The 2-factor authentication notice on both their accounts goes to my cell phone so no one is logging into their accounts including them without me knowing it. Which is what I'm comfortable with now. They are both completely lucid and not showing signs of senility yet, but I do notice they are slowing down pretty fast. So that time will come at some point.
As far as financial advisors go, he was not that bad. Charged them a 0.5% AUM and took care of a lot of details like RMDs and their charitable contributions. But he had them in a bewildering array of stocks and obscure funds that in the end balanced out to a 60/40 portfolio. I counted over 100 different holdings.
Details. He is 86 and she is 85. They have no debt and live in an independent living retirement village with a life lease. With their dual social security and my dad's pension they have more income than they spend and donate the excess to charity. Their investment portfolio they do not touch except to donate about half of their RMDs to various charities and let the rest grow in a taxable account. The last time they withdrew anything from their portfolio was four years ago to help out my brother with a home purchase. So the portfolio I'm managing for them has no real purpose for them other than future emergencies, charitable contributions, and eventual legacy to me and my two brothers.
After discussing with them their objectives, we decided to keep their previous 60/40 asset allocation they had with their financial advisor and settled on an 80/20 domestic/international split for both stocks and bonds. Which was basically splitting the difference between the 40% international in Vanguard's life strategy funds, and 0%. This is the portfolio that I came up with using the four standard Vanguard Index ETFs (Total Stock, Total Bond, Total Int'l Stock, Total Int'l Bond) across all their accounts.
Portfolio Size: $924,000
Taxable: $275,000
6% Vanguard Money Market (about $18,000). This is essentially their black swan emergency fund that will likely never be tapped.
77% Vanguard Total Stock Market ETF (VTI) (ER 0.03%)
17% Vanguard Total Int'l Stock ETF (VXUS) (ER 0.08%)
His Traditional IRA $377,000
44% Vanguard Total Bond ETF (BND) (ER 0.03%)
35% Vanguard Total Stock Market ETF (VTI) (ER 0.03%)
11% Vanguard Total Int'l Bond ETF (BNDX) (ER 0.07%)
10% Vanguard Total Int'l Stock ETF (VXUS) (ER 0.08%)
Her Traditional IRA $135,000
44% Vanguard Total Bond ETF (BND) (ER 0.03%)
35% Vanguard Total Stock Market ETF (VTI) (ER 0.03%)
11% Vanguard Total Int'l Bond ETF (BNDX) (ER 0.07%)
10% Vanguard Total Int'l Stock ETF (VXUS) (ER 0.08%)
His Roth IRA $137,000
44% Vanguard Total Bond ETF (BND) (ER 0.03%)
35% Vanguard Total Stock Market ETF (VTI) (ER 0.03%)
11% Vanguard Total Int'l Bond ETF (BNDX) (ER 0.07%)
10% Vanguard Total Int'l Stock ETF (VXUS) (ER 0.08%)
According to Vanguard's Portfolio Watch page their portfolio allocations are the following
Stocks 59% (allocated 80% domestic and 20% international)
Bonds 39% (allocated 81% domestic and 19% international)
Short-term reserves 2%
And their total expense ratio is 0.04%
What I basically did was fill their taxable with all stocks using the target 80/20 ratio and then distributed the remaining assets in equal ratios across the 3 IRAs to keep all of the bond funds in tax-deferred accounts for tax purposes.
For the next several years, all I anticipate happening with this portfolio is that they will slowly deplete their two traditional IRAs according to the RMD schedule, putting about half of the RMDs in their joint taxable account and donating the other half to their preferred charities. They have a sizable savings account of about $50,000 with their regular bank into which they put their excess savings from social security and pensions (mostly in CDs) that I'm not involved with. They also have a very Cadillac long term care policy that they purchased long ago that they are maintaining. Far better than anything one could buy today. So while this portfolio might eventually be needed for long-term care for one or both, that isn't necessarily likely.
Advice? Anything I should change? Either in the portfolio itself or my management of it?
At this point I have limited authority over their accounts which lets me see all of them in my Vanguard portfolio page and move money about. They are not very online so I'll probably just print quarterly statements for them to put in their files and initiate any transfers to and from their regular bank if they ever have need of funds since they don't really know how to go online and do that. They don't even do online banking with their regular bank. They just keep a paper checkbook ledger, review their monthly paper statements the old way, and my dad prefers to do his banking by walking down to the branch in person.
At some point I anticipate needing to gain more authority over their finances. But this is what we could do now online without notarized power of attorney paperwork. They don't even know their Vanguard login and passwords (and don't really want to know as long as they get quarterly statements) so I think it is unlikely that anyone could commit fraud against them. The 2-factor authentication notice on both their accounts goes to my cell phone so no one is logging into their accounts including them without me knowing it. Which is what I'm comfortable with now. They are both completely lucid and not showing signs of senility yet, but I do notice they are slowing down pretty fast. So that time will come at some point.
Statistics: Posted by texasdiver — Thu Mar 14, 2024 1:15 am — Replies 5 — Views 622