Hello – After talking about finances a lot more since I took over managing my own money (and me being transparent about how my accounts have done over the last ~year) my mom has let me take a look at the details of her portfolio (& ask for review here). She currently works with an advisor at Merrill Lynch. The majority of her holdings are a result of inheritance from a relative a few years ago
Emergency funds: Currently mixed into holdings below
Debt: None
Tax Filing Status: Single
Tax Rate: 24% Federal, 2.5% State (may be in 32% bracket this year)
State of Residence: Arizona
Age: 70
Needed Retirement income: Needs discussion (we haven’t gotten into budget details), but 3-4% of portfolio should be comfortable after social security, which she is currently drawing. So – in good shape, but also needs to be fairly conservative
Desired Asset allocation: Needs discussion; see above. From what I’ve read, 50/50 would probably be a good target.
Current retirement assets
CMA 1 (Trust)
30.7% - Single Stocks
7.2% - ISHARES S&P 500 GROWTH - IVW (ER 0.18%)
2.9% - BLACKROCK LIQUIDITY FUND T FUND INSTL CL - TSTXX (ER 0.19%)
2.4% - SPDR S&P 500 ETF TRUST - SPY (ER 0.09%)
2.1% - SPDR DOW JONES INDUST AV ETF TRUST - DIA (ER 0.16%)
1.3% - VANGUARD INTL HIGH DIVID YIELD ETF SHS - VYMI (ER 0.22%)
0.5% - VANGUARD INFORMATION TECH ETF - VGT (ER 0.1%)
0.5% - FIDELITY HIGH DIVIDEND ETF - FDVV (ER 0.15%)
0.5% - SCHWAB US DIVIDEND EQTY - SCHD (ER 0.06%)
2.5% - Brighthouse Life Fixed Rate Annuity MCA (Surrender charge until Dec 2027)
0.4% - (Deposit Program)
0.4% - Single Municipal Series 2 Bond
CMA 2 (Trust) (Paperwork shows as “Franklin Multistrategy Muni Fixed Income”)
9% - FRANKLIN HIGH YIELD TAX FREE INCOME FD CL ADV - FHYVX (ER 0.57%)
13.9% - Various municipal bond holdings
CMA 3 – Investment Account
7.8% - Jackson National Variable Annuity (Surrender Charge until Aug 2029)
IRA 1
0.2% - BANK OF AMERICA, NA RASP
0.1% - INVESCO EMERGING MARKETS SOVEREIGN DEBT ETF - PCY (ER 0.5%)
0.1% - INVESCO PREFERRED ETF - PGX (ER 0.5%)
0.5% - ISHARES 20+ YEAR TREASURY BOND ETF - TLT (ER 0.15%)
0.2% - ISHARES IBOXX $ INVT GRADE CORP BD - LQD (ER 0.14%)
0.6% - ISHARES INC CORE MSCI EMERGING MKTS ETF - IEMG (ER 0.09%)
1.1% - ISHARES MBS ETF - MBB (ER 0.04%)
0.1% - ISHARES TIPS BOND ETF - TIP (ER 0.19%)
0.9% - ISHARES TR CORE MSCI EAF ETF - IEFA (ER 0.07%)
0.6% - SCHWAB SHORT-TERM U.S. TREASURY ETF - SCHO (ER 0.03%)
1.8% - VANGUARD GROWTH ETF - VUG (ER 0.04%)
0.3% - VANGUARD INTERM-TERM GOVT BD - VGIT (ER 0.04%)
0.4% - VANGUARD SCOTTSDALE FDS VANGUARD INTERME - VCIT (ER 0.04%)
0.4% - VANGUARD SHORT-TERM CORPORATE BOND - VCSH (ER 0.04%)
0.3% - VANGUARD SMALL CAP GROWTH ETF - VBK (ER 0.07%)
0.4% - VANGUARD SMALL CAP VALUE ETF - VBR (ER 0.07%)
0.2% - VANGUARD TOTAL INTERNATL BOND ETF - BNDX (ER 0.07%)
2.3% - VANGUARD VALUE ETF - VTV (ER 0.04%)
IRA 2
1.9% - COLUMBIA DIVIDEND INCOME FUND CL INSTL - GSFTX (ER 0.65%)
5.6% - Many (10) US Treasury Notes
Questions:
1) CMA 1: Seems obvious to sell the single stocks & most of the ETF/mutual funds except for SPY, DIA, IVW. This will drive a significant capital gain & NIIT even with the step-up basis from some years ago, but I think the diversification is worth the marginal cost vs. trying to do it over a few years. (The capital gain is ~15% of the total portfolio value). I don’t see a management fee for this account.
2) CMA 2: This is a managed account with a 0.25% advisor fee. Looks like it is yielding about 4.4%. This does not seem terrible, but also not great with a good chunk of it in a 0.57% ER mutual fund. Any thoughts?
3) IRA1: This is a managed account. The fee isn’t listed (there’s an asterisk) but there is one reported on the statements – it’s just very small (<0.1% of account value). I don’t really see a value in the picks here; seems like it would be easy to consolidate to a 3-fund portfolio.
4) IRA2: This is a managed account. Mixture of Columbia Dividend Income Fund and PIMCO US Government 1-3 Year Ladder with a fee of 0.07. Again, does not seem terrible, but has a mutial fund with a high ER.
5) The annuities
5a) I can’t find the paperwork on the details/surrender charges on the Merryl site; do I need to get her to create accounts with the providers? I hesitate to have her ask her advisor for details (I don’t really want them to know I’m looking things over yet). I'd like to understand the surrender fees, but seems like they are typically significant. What do I need to know to evaluate them, aside from that?
5b) I’m pretty much assuming these are locked in until the surrender date and are water under the bridge until then, right?
So, aside from the annuities, it doesn’t seem terrible but I think it could be easily consolidated into a much simpler 3-fund portfolio. But, then, I’m a lot earlier in my path and I know less about the right positions to be in when one is in retirement.
Extra question – if she wanted to move it all over to Fidelity and self-manage, I’m assuming the managed funds would all likely need to be liquidated, right?
Thanks!
Emergency funds: Currently mixed into holdings below
Debt: None
Tax Filing Status: Single
Tax Rate: 24% Federal, 2.5% State (may be in 32% bracket this year)
State of Residence: Arizona
Age: 70
Needed Retirement income: Needs discussion (we haven’t gotten into budget details), but 3-4% of portfolio should be comfortable after social security, which she is currently drawing. So – in good shape, but also needs to be fairly conservative
Desired Asset allocation: Needs discussion; see above. From what I’ve read, 50/50 would probably be a good target.
Current retirement assets
CMA 1 (Trust)
30.7% - Single Stocks
7.2% - ISHARES S&P 500 GROWTH - IVW (ER 0.18%)
2.9% - BLACKROCK LIQUIDITY FUND T FUND INSTL CL - TSTXX (ER 0.19%)
2.4% - SPDR S&P 500 ETF TRUST - SPY (ER 0.09%)
2.1% - SPDR DOW JONES INDUST AV ETF TRUST - DIA (ER 0.16%)
1.3% - VANGUARD INTL HIGH DIVID YIELD ETF SHS - VYMI (ER 0.22%)
0.5% - VANGUARD INFORMATION TECH ETF - VGT (ER 0.1%)
0.5% - FIDELITY HIGH DIVIDEND ETF - FDVV (ER 0.15%)
0.5% - SCHWAB US DIVIDEND EQTY - SCHD (ER 0.06%)
2.5% - Brighthouse Life Fixed Rate Annuity MCA (Surrender charge until Dec 2027)
0.4% - (Deposit Program)
0.4% - Single Municipal Series 2 Bond
CMA 2 (Trust) (Paperwork shows as “Franklin Multistrategy Muni Fixed Income”)
9% - FRANKLIN HIGH YIELD TAX FREE INCOME FD CL ADV - FHYVX (ER 0.57%)
13.9% - Various municipal bond holdings
CMA 3 – Investment Account
7.8% - Jackson National Variable Annuity (Surrender Charge until Aug 2029)
IRA 1
0.2% - BANK OF AMERICA, NA RASP
0.1% - INVESCO EMERGING MARKETS SOVEREIGN DEBT ETF - PCY (ER 0.5%)
0.1% - INVESCO PREFERRED ETF - PGX (ER 0.5%)
0.5% - ISHARES 20+ YEAR TREASURY BOND ETF - TLT (ER 0.15%)
0.2% - ISHARES IBOXX $ INVT GRADE CORP BD - LQD (ER 0.14%)
0.6% - ISHARES INC CORE MSCI EMERGING MKTS ETF - IEMG (ER 0.09%)
1.1% - ISHARES MBS ETF - MBB (ER 0.04%)
0.1% - ISHARES TIPS BOND ETF - TIP (ER 0.19%)
0.9% - ISHARES TR CORE MSCI EAF ETF - IEFA (ER 0.07%)
0.6% - SCHWAB SHORT-TERM U.S. TREASURY ETF - SCHO (ER 0.03%)
1.8% - VANGUARD GROWTH ETF - VUG (ER 0.04%)
0.3% - VANGUARD INTERM-TERM GOVT BD - VGIT (ER 0.04%)
0.4% - VANGUARD SCOTTSDALE FDS VANGUARD INTERME - VCIT (ER 0.04%)
0.4% - VANGUARD SHORT-TERM CORPORATE BOND - VCSH (ER 0.04%)
0.3% - VANGUARD SMALL CAP GROWTH ETF - VBK (ER 0.07%)
0.4% - VANGUARD SMALL CAP VALUE ETF - VBR (ER 0.07%)
0.2% - VANGUARD TOTAL INTERNATL BOND ETF - BNDX (ER 0.07%)
2.3% - VANGUARD VALUE ETF - VTV (ER 0.04%)
IRA 2
1.9% - COLUMBIA DIVIDEND INCOME FUND CL INSTL - GSFTX (ER 0.65%)
5.6% - Many (10) US Treasury Notes
Questions:
1) CMA 1: Seems obvious to sell the single stocks & most of the ETF/mutual funds except for SPY, DIA, IVW. This will drive a significant capital gain & NIIT even with the step-up basis from some years ago, but I think the diversification is worth the marginal cost vs. trying to do it over a few years. (The capital gain is ~15% of the total portfolio value). I don’t see a management fee for this account.
2) CMA 2: This is a managed account with a 0.25% advisor fee. Looks like it is yielding about 4.4%. This does not seem terrible, but also not great with a good chunk of it in a 0.57% ER mutual fund. Any thoughts?
3) IRA1: This is a managed account. The fee isn’t listed (there’s an asterisk) but there is one reported on the statements – it’s just very small (<0.1% of account value). I don’t really see a value in the picks here; seems like it would be easy to consolidate to a 3-fund portfolio.
4) IRA2: This is a managed account. Mixture of Columbia Dividend Income Fund and PIMCO US Government 1-3 Year Ladder with a fee of 0.07. Again, does not seem terrible, but has a mutial fund with a high ER.
5) The annuities
5a) I can’t find the paperwork on the details/surrender charges on the Merryl site; do I need to get her to create accounts with the providers? I hesitate to have her ask her advisor for details (I don’t really want them to know I’m looking things over yet). I'd like to understand the surrender fees, but seems like they are typically significant. What do I need to know to evaluate them, aside from that?
5b) I’m pretty much assuming these are locked in until the surrender date and are water under the bridge until then, right?
So, aside from the annuities, it doesn’t seem terrible but I think it could be easily consolidated into a much simpler 3-fund portfolio. But, then, I’m a lot earlier in my path and I know less about the right positions to be in when one is in retirement.
Extra question – if she wanted to move it all over to Fidelity and self-manage, I’m assuming the managed funds would all likely need to be liquidated, right?
Thanks!
Statistics: Posted by lunch_money — Mon Aug 12, 2024 6:33 pm — Replies 0 — Views 61