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What do to with taxable brokerage account? Fees? General suggestions?

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  • What do to with taxable brokerage account? Fees? General suggestions?

    Since residency I've been using a CFP whom I've generally liked, but over the last few months, I've been reading about fees and people having 'loaded' mutual funds or high expenses which they may not realize.   I just got a call from my accountant yesterday that my taxes were ready for next year and that I'd owe about 11,000 additional in taxes from what had been withheld from my pay mainly due to capital gains from my taxable brokerage account. It's not the first time I've had to pay in additional money around time time.  I've only had a taxable account for about 5 years, and it's really only been the last few years that it's accumulated more money. Is it common to have to pay in additional taxes due to a taxable brokerage account?    I'm trying to figure out what questions I should be asking and if the fees I am paying seem reasonable.  I was looking up some of the funds my accounts and they don't seem to be 'loaded' types but I'm not really sure I know what I am looking for to determine this.  I've plugged in some information below and am looking for suggestions about my situation.  Does it seem appropriate?  Would any additional information help?

     

    Emergency funds: 180,000 (checking account and HSA)
    Debt:
    Mortgage-130,000 @4.0%
    Student Loans-60,000 @ 1.2%
    Tax Filing Status: Single
    Tax Rate: 39 (?)% Federal, 3.75% State
    Age: 38

    Current retirement assets
    Current Total Portfolio: About 2,100,000 (72% Taxable/18% 401k/ 10% Roth IRA)

    I've listed the Name, followed by Ticker, plus the  % of my Portfolio it represents
    Taxable Brokerage Account
    BlackRock Funds II, Strategic Income Opportunities Ptf Instituti BSIIX 3.63
    BROKERAGE MONEY MARKET 0.81
    CGM REALTY FUND CGMRX 0.90
    Fidelity Advisor New Insights Fund: Class I FINSX 6.14
    FIRST EAGLE GLOBAL FUND CLASS I SGIIX 4.57
    Floating-Rate Municipal Income Fund - Class I EILMX 1.89
    HARBOR INTERNATIONAL FUND INSTI CL HAINX 4.35
    iShares Core S&P 500 ETF IVV 2.02
    iShares MSCI EAFE ETF EFA 1.58
    OPPENHEIMER DEVELOPING MARKETS FUND CLASS Y ODVYX 5.04
    PRIMECAP ODYSSEY AGGRESSIVE GROWTH FUND POAGX 3.76
    PRIMECAP ODYSSEY GROWTH FUND POGRX 0.85
    Vanguard Dividend Appreciation Index Fund Admiral Shs VDADX 8.65
    Vanguard High-Yield Tax-Exempt Fund Admiral Shares VWALX 7.30
    Vanguard Mid-Cap ETF - DNQ VO 1.13
    Vanguard Mid-Cap Index Fund Admiral Shares VIMAX 5.38
    Vanguard Russell 2000 ETF VTWO 0.59
    Vanguard Small-Cap Value ETF - DNQ VBR 6.18
    Vanguard Tax Managed Small Cap Fund Admiral Cl VTMSX 5.99
    Vanguard Total International Stock ETF VXUS 0.67

    401K Plan
    AMG Yacktman Fund YACKX 0.83
    BROKERAGE MONEY MARKET 0.18
    Dodge & Cox International Stock Fund DODFX 1.57
    Dodge & Cox Stock Fund DODGX 1.10
    Fidelity Advisor Floating Rate High Income Fund: Class I FFRIX 0.65
    Fidelity School Street Trust: Fidelity Strategic Income Fund FSICX 1.62
    iPath Bloomberg Commodity Index Total Return ETN DJP 0.36
    iShares Cohen & Steers REIT ETF ICF 0.83
    iShares Core S&P 500 ETF IVV 2.74
    iShares TIPS Bond ETF TIP 0.76
    T. ROWE PRICE BLUE CHIP GROWTH FUND, INC. TRBCX 1.78
    T. ROWE PRICE NEW HORIZONS FD PRNHX 1.36
    T. ROWE PRICE SMALL-CAP VALUE FD INC. PRSVX 0.98
    TEMPLETON GLOBAL BOND FUND ADVISOR CLASS TGBAX 0.47
    Vanguard Emerging Markets Stock Index Fd Admiral Shs VEMAX 0.46
    Vanguard FTSE Emerging Markets ETF VWO 0.48
    Vanguard Mid-Cap ETF - DNQ VO 1.82

    Roth IRA Conversion
    BROKERAGE MONEY MARKET 0.03
    IVY ASSET STRATEGY FUND CLASS C WASCX 1.74
    T. Rowe Price Retirement 2040 Fd Advisor Cl PARDX 1.22

    Contributions
    New annual Contributions
    I do the maximum 401K contribution per year (53,000?), the maximum for a backdoor Roth IRA each year, and the max into a health savings account.
    I have been been doing 40,000 per month contribution to Taxable Brokerage account for the past few years to decrease the amount of cash I have on hand.  My current annual income is about 750,000 per year, but within the next year or so, I imagine it will decrease to somewhere around 300,000 to 500,00 per year--or less. The hospital I work in was bought out, so the future of my contracted group is up in the air for now.)

    Fees

    Advisory fees listed on my tax forms were about $9800 last year.

  • #2
    You have a dividend fund, a bond income fund, and looks like REIT (unfamiliar with it) fund in your taxable. Those are not where you want to place these funds as it increases taxes a lot. An advisor should know that and allocate across your portfolios accordingly in their sleep, makes little sense at all.

    I try to make my overall allocation as tax efficient as possible. Any regular bonds, reits, or higher dividend funds go into tax deferred. Munis and etfs with lower dividends go into taxable. Very simple and less headache. I'd probably switch out your taxable mutual funds for etfs in general since they are more tax efficient.

    Comment


    • #3
      WOW-that is quite a list of funds.

      This is what I would do---I would take my taxable money and put it in either:

      --a 3 fund portfolio such as Vanguard total stock, total international, and the Vanguard intermediate tax exempt mutual fund and divide it per your risk tolerance-if you feel like managing the money yourself and taking the time to do it, then it would certainly be alot cheaper and will get you market results.

      --OR you could put in a robo-advisor--I use Betterment and really like it--I have an 80/20 stock bond allocation (age 46) and it automatically invests once I send it money, rebalances, tax-loss harvests, etc...Could I do it myself? Sure, but I don't have the time to given job, kids, etc. I have close to 350K in taxable-already max'd everything else.

      Also you could look at the Vanguard Robo (Personal advisor services), Schwab, Wealthfront, and others.

      Just a suggestion.

      Good luck!

      Comment


      • #4
        Why so many funds? And to what end are you saving, i.e., what's your plan? Hard to give any advice without this knowledge and also the reason your account generated so much income last year. Lot of liquidations? LTCG and dividend distributions? Rebalancing?
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

        Comment


        • #5
          I may be in the minority here, but I would write a check today to pay off the student loans! I understand the math with the low interest rate, but there is something about getting rid of that debt that is really freeing.

          Think of it this way- if you had no student loan, would you borrow $60,000 at 1.2% to invest in the market? Just something to consider!

          Comment


          • #6
            So where can I sign up for the Fund of the Month club?  :|

            Your CFP may be generally likeable, and I'm sure your CFP really likes you.  But the portfolio looks like a mess, sorry.

            With about a $1.5 million taxable portfolio, tax efficiency and expenses should be your primary concerns.  A three fund or four fund portfolio (See Bogleheads) would achieve that and simplify your portfolio immensely.  I have posted my portfolio online as one example of a tax-efficient, low cost, fairly aggressive portfolio.  WCI has posted 150 more.

            The 401(k) doesn't need for than 1 or 2 funds, in my opinion.  Same goes for the Roth and HSA.  I like to keep it simple.

            Comment


            • #7




              I may be in the minority here, but I would write a check today to pay off the student loans! I understand the math with the low interest rate, but there is something about getting rid of that debt that is really freeing.

              Think of it this way- if you had no student loan, would you borrow $60,000 at 1.2% to invest in the market? Just something to consider!
              Click to expand...


              Are you serious? I would borrow as much as I could reasonably afford and someone would let me at 1.2%. Yes, I most certainly would do that. Given the right rates, terms and conditions so would a great many people.

              Comment


              • #8







                I may be in the minority here, but I would write a check today to pay off the student loans! I understand the math with the low interest rate, but there is something about getting rid of that debt that is really freeing.

                Think of it this way- if you had no student loan, would you borrow $60,000 at 1.2% to invest in the market? Just something to consider!
                Click to expand…


                Are you serious? I would borrow as much as I could reasonably afford and someone would let me at 1.2%. Yes, I most certainly would do that. Given the right rates, terms and conditions so would a great many people.
                Click to expand...


                Don't get me wrong, I understand the math. After taxes and adjusting for risk, the returns aren't that much greater than 1.2% to me to justify the debt. I'm assuming your house is mortgaged at 100% at 2.75-3% then? I can tell you after doing it both ways, it's much better to me to be out of debt, but just my opinion.

                Comment


                • #9
                  find a new advisor asap    that's insanity

                  Comment


                  • #10










                    I may be in the minority here, but I would write a check today to pay off the student loans! I understand the math with the low interest rate, but there is something about getting rid of that debt that is really freeing.

                    Think of it this way- if you had no student loan, would you borrow $60,000 at 1.2% to invest in the market? Just something to consider!
                    Click to expand…


                    Are you serious? I would borrow as much as I could reasonably afford and someone would let me at 1.2%. Yes, I most certainly would do that. Given the right rates, terms and conditions so would a great many people.
                    Click to expand…


                    Don’t get me wrong, I understand the math. After taxes and adjusting for risk, the returns aren’t that much greater than 1.2% to me to justify the debt. I’m assuming your house is mortgaged at 100% at 2.75-3% then? I can tell you after doing it both ways, it’s much better to me to be out of debt, but just my opinion.
                    Click to expand...


                    Why would you assume such a thing? Those types of risk are very different and really have no bearing on each other. A mortgage at 100% ltv is a guaranteed loss if you sell within anything other than a decade plus with some appreciation, and puts you at different risks.

                    Lets phrase it a different way. It would really be like having the ability to mortgage your retirement costs. You get a lump sum which does not have to be the same as your hopeful retirement amount since you still would have it sit there for a long time, but instead of dollar cost averaging into the market over a decade or so, you pay back this loan. In effect, its all the same reasons but in reverse for paying down the mortgage vs. investing argument. You'd be paying down the loan with dollars that eventually will have depreciated in value all the while your retirement benefits from the exact opposite situation. Remember that a dollar invested in your 30s is worth about a magnitude more than one in your 50s due to amount of time compounding and inflation, etc....

                    I wouldnt view this as a "debt", and I would sleep like a baby and better than I do now since its a great deal (at current rates). Instead of putting money away monthly for my retirement I would be putting it toward the loan, the costs just shift. That said, the terms would have to be amazing and very favorable especially given tax treatments and such. Interesting thought experiment though.

                    Comment


                    • #11
                      Let me offer my opinion:  Cut ties with your financial guy.  What a terrible distribution of funds.  You are winning the game; just get back to basics and keep it simple.   You make a lot of money: pay off the student loans soon and the house in the next couple years.  Then you have no debt.

                      What is your retirement goal?  Are you planning to work until you are 50? Do you plan to get married or have children?

                      Your life goals play a big part in all of the above.

                      Comment


                      • #12
                        I'll echo most of the others - your financial planner doesn't seem to have a coherent plan, doesn't know what assets should be in a taxable account, and has you in too many funds, many of which appear to have higher expense ratios than necessary.  Despite this you have a great start on your portfolio.

                         

                        This discusses tax-efficient placement of your assets although it is a bit complicated if you're just starting to learn about this stuff:

                         

                        https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

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