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  • Need help leaving NWM

    Hello,

    About seven years ago when I was a resident and had a little financial knowledge, I signed up with a northwestern mutual financial advisor. I opened a taxable brokerage account and have been dollar cost averaging into various American Fund mutual funds. I’ve enjoyed good market returns over the past seven years and the value of the account is currently $800,000 (had some money before residency as well). The problem is the capital gains taxes have gotten out of control. I owed over $20,000 in capital gains last year and probably will again this year. I would like to move into a Vanguard account with low cost ETF index funds, However I’m afraid of the tax consequences. I have over $200,000 in unrealized gains and selling the American funds would result in a huge tax bill. At the same time I would like to extricate myself from these high cost American funds and NWM in general. Any advice would be appreciated, thanks

  • #2
    Wait for crash.
    Sell funds.
    Profit.

    Ok, maybe not profit, but as far as I know there is no way to get out from capital gains taxes if the value of the funds when you sell is greater than the price you bought them at. As you can see, that wasn’t a tax efficient fund and doesn’t belong in a taxable account, which a decent advisor should have told you. Only problem is your advisor was looking out for his pocketbook and not yours.

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    • #3
      In your shoes, I would look at each individual holding, meaning each individual fund, and analyze what the gain would be if liquidating that particular fund. You can then begin strategically pulling out your money step by step, at least partially, from those funds with the least tax consequences.

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      • #4
        If you donate at any rate, open a DAF and fund your highest appreciated funds there to fund your charity arm.

        There may be a way to transfer funds themselves out...we moved vanguard funds to fidelity without issue...and AUM avoid if there is one attached.

        If you can't and need to liquidate, then have to make harder choices.

        Stop the dollar cost contributions and start vanguard or other self directed with no AUM

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        • #5
          If you currently reinvest dividends​​​​/cap gains, turn that off so you can invest the cash at your new brokerage account.

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          • #6
            I would put this on the really good problems to have list. The above advice is what you need. Turn off dividend reinvestments. Look at each individual fund and make a plan to get out if you can. Little by little, you’ll get it sorted out.

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            • #7
              Originally posted by GasFIRE View Post
              If you currently reinvest dividends​​​​/cap gains, turn that off so you can invest the cash at your new brokerage account.
              Bingo, that is the first step. Open Vanguard account. Transfer assets in kind. You have the rest of your investing life to deal with the problem-not problem. Being invested in American funds is not the end of the world, far from it.

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              • #8
                We just ripped off the bandaid and sold it all. Paid the capital gains tax. And used a large DAF contribution of single stocks that skyrocketed to offset as much of our taxable income as allowed.

                One surprise (maybe pleasant? maybe not) was that our broker had so actively managed our funds that our capitals gains were not as bad as we had thought it would be 🤨 I guess we had already paid the tax man in increments over the years and our broker has made enough money from us.

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