Looking for advice

[jenn10md]

I am currently working with a financial advisor and would like to separate ties with her to maximize my return and eliminate her fees.  I have been an attending for 15 years and I'm FINALLY trying to learn about my finances.  I guess better late than never.

I have a tIRA with commonwealth financial network that was a rollover from my previous 401K, this was set up by my FA.  Has 400K in it.  Seems to be a mixed portfolio with mostly large cap growth and value with smaller percentages of mid and small cap and international growth funds.  Should this be gradually switched to Roth IRA or put in Vangsureuard?

I have a 403b with my current employer through Transamerica that has 60K in it.  They match 8% and I have been maxing 18K per year into it.  It not even 2 years old yet.

I have a Charles Schwab account that was recommended many years ago with a different financial advisor that has 30K in various stocks such as Berkshire Hathaway, Pfizer and Dell.  My new FA advised me to continue with these but I am not sure that is the best advice.

Would love to start Backdoor Roth but not sure if I already have a tIRA that this can be done.  I thought for tax purposes you need to have zero balance in your IRA's.

Sorry for my ignorance.  I would appreciate any advice from the forum.

[Miss Bonnie MD]

See if Transamerica (current work 403b) will accept rollovers. If yes, then roll that old TIRA over into it. I have Transamerica for my 403b and they allow rollovers, but every plan is different.

If no, then: generally would not recommend moving the pre-tax TIRA to Roth, esp at that amount and your likely high marginal tax rate, you'd owe taxes at your marginal rate. But find out first ...I bet they will let you roll it over.

 

Is the Schwab account a taxable account?

[jenn10md]

Thanks Bonnie.  Yes Charles Schwab is taxable.  No fees, it is self directed.  Just wondering if it makes sense to keep my money in there , take it out and put into IRA.  I also have a small Student loan of 15k with 3.5% interest rate left to pay off.

[Hatton]

I would sell the Dell and Pfizer stock and pay off the student loan.  I would keep the berkshire hathaway.  Having a taxable account is fine. Schwab is fine. I think you will like the flexibility of having some money in a taxable account as you get closer to retirement.  Do some basic reading like the posts here or WCIs book.  Start thinking about asset allocation and make sure you max out all of your available tax protected space and then fund a taxable account. You are going to do fine.  It is time to learn.  Never be afraid to ask questions.

[Gas_Doc]

Before moving over $400k from a tIRA into a 403b, can you give us a little insight as to the options within the plan (ie the ticker symbols)? I wouldn't put that much money into an employer-sponsored retirement account if there were only high expense ratio, actively managed funds within the plan. Now if there are low cost index funds or a cheap brokerage option (in which you can invest in ETFs), then I think Miss Bonnie MD's idea for the rollover is great.

 

If the rollover isn't an option, I agree that this is not the time to transition from a traditional IRA to a Roth IRA, mainly because of your presumed tax bracket. I'd open up an account with Fidelity or Vanguard and move the tIRA as well as your taxable account all under one roof. I personally agree with hatton1 regarding Berkshire Hathaway. I'm of the "no individual stocks" school because the lack of diversification simply increases risk without increasing expected return. I'd sell all of your individual stocks and put the cash in well-diversified index funds.

[DMFA]

jenn10md wrote:

I am currently working with a financial advisor and would like to separate ties with her to maximize my return and eliminate her fees.  I have been an attending for 15 years and I’m FINALLY trying to learn about my finances.  I guess better late than never.

I have a tIRA with commonwealth financial network that was a rollover from my previous 401K, this was set up by my FA.  Has 400K in it.  Seems to be a mixed portfolio with mostly large cap growth and value with smaller percentages of mid and small cap and international growth funds.  Should this be gradually switched to Roth IRA or put in Vanguard?

I have a 403b with my current employer through Transamerica that has 60K in it.  They match 8% and I have been maxing 18K per year into it.  It not even 2 years old yet.

I have a Charles Schwab account that was recommended many years ago with a different financial advisor that has 30K in various stocks such as Berkshire Hathaway, Pfizer and Dell.  My new FA advised me to continue with these but I am not sure that is the best advice.

Would love to start Backdoor Roth but not sure if I already have a tIRA that this can be done.  I thought for tax purposes you need to have zero balance in your IRA’s.

Sorry for my ignorance.  I would appreciate any advice from the forum.

Click to expand...

Apology?  No way.  This is why these forums exist!

Yes, you should strongly consider rolling over the TIRA into your employer account if you can, *if* your plan has acceptable options.  Otherwise you can obtain even a small amount of self-employment income in 2017 and start an individual 401(k) (not Vanguard bc they don't allow incoming rollovers) and transfer it into there.  Leaving that much in a TIRA would result in massive pro-rata taxation of the conversion of your non-deducted contributions (basically double-taxing them and making the backdoor useless).

Matching is free money.  Get it if you can!

As for holding individual stocks, BRK is considered to be "making Warren Buffett your personal investor," since it's a holding company.  A 100% BRK portfolio is on the WCI post 150 Portfolios Better Than Yours and tends to beat the S&P 500 (10-yr 9.30% vs 7.75% with similar 15-yr).  It works well in a taxable since it doesn't pay any dividends.  Warren's got to pass on at some point, though...I personally eschew the poor predictability of individual companies like Pfizer and Dell, but I don't necessarily oppose it.

I don't explicitly tell people *not* to use a financial adviser to manage their retirement, but I personally don't since I don't feel like they have anything in particular to offer me.  The hardest thing is probably, in my opinion, to prevent the urge to tinker.  Develop a plan and stick with it.

[jenn10md]

Do you have recommendations on your transamerica allocations. I checked with them and they will accept rollovers.

[Miss Bonnie MD]

Every transamerica is different, list the funds offered in your plan. But we all invest differently. I do 100% equities.

[jenn10md]

Short bonds
MetLife fixed interest separate acct

Interm/long term bonds
Vanguard total bond market idx inst pls
50% Dodge and Cox /50% Wells Fargo core bond option

Large cap stocks
50% diamond hill/50% dodge and cox argue value option
Vanguard institutional index istl pls
50% Edgewood:50% harbor large cap growth

Small mid cap stocks
Vanguard extended market idx
50% Champlain/50% diamond hill small cap option
50% J.P. Morgan /50% Morgan global real estate option

Intl stocks
50% causeway/ 50% Dreyfus intl option
Vanguard ftse all world ex- us index
Lazard emerging markets equity instl

Multi-asset
Vanguard Wellington adm
Vanguard institutional target retirement income. Year 2035-40 for me

[DMFA]

Wow. You have awesome options! I'd roll it into there for sure. Just the Vanguard index funds is what I'd put into. What's your overall asset allocation across all your retirement accounts? That'll determine how much to place into which.

[Miss Bonnie MD]

jenn10md wrote:

Short bonds
MetLife fixed interest separate acct

Interm/long term bonds
Vanguard total bond market idx inst pls
50% Dodge and Cox /50% Wells Fargo core bond option

Large cap stocks
50% diamond hill/50% dodge and cox argue value option
Vanguard institutional index istl pls
50% Edgewood:50% harbor large cap growth

Small mid cap stocks
Vanguard extended market idx
50% Champlain/50% diamond hill small cap option
50% J.P. Morgan /50% Morgan global real estate option

Intl stocks
50% causeway/ 50% Dreyfus intl option
Vanguard ftse all world ex- us index
Lazard emerging markets equity instl

Multi-asset
Vanguard Wellington adm
Vanguard institutional target retirement income. Year 2035-40 for me

Click to expand...

ha, this is my 403b, wonder if we work for the same employer.....

I do:

Vanguard institutional index instl pls ~35%

Vanguard extended market idx ~35%

Vanguard ftse all world ex- us index ~15%
Lazard emerging markets equity instl ~15%

I have other stuff in my roth so the above isn't my actual asset allocation.

 

 

 

[jenn10md]

It is currently 1/2 in diamond hill and 1/2 in Edgewood/harbor.

[Miss Bonnie MD]

So you're in 100% large caps. And you're in pricey funds. I'd say you def need to diversify a bit. If you wanna stick to lower cost funds do the funds I have minus Lazarus.

Curious how /why did you pick those funds ?

[jenn10md]

Did your fund allocation bring in a decent yield? I realize it is for the long term and you want to keep fees as low as possible. Hence why I would like to break ties.

[DMFA]

jenn10md wrote:

It is currently 1/2 in diamond hill and 1/2 in Edgewood/harbor.

Click to expand...

Yeah, not great imo.  You're 100% in large-cap US stocks with high fees.  You should strongly consider opting instead for passively-managed, low-cost index funds, which include some small US stocks and some international ones, and most would recommend a small amount of bonds.

What other accounts do you have besides your 403b?  Any Roth IRAs or just your TIRA which you plan on rolling into your 403b?

Bonnie's allocation listed above emphasizes small caps and emerging markets relative to many portfolios, which is fine.  You have to consider what you want in a portfolio before you decide where to put it: growth, stability, balance, how much large vs small, how much US vs int'l, how much equities vs bonds, etc.  Here's some common portfolios to see how it all sort-of fits together.  I'd put together some proportion of:

• Vanguard Inst'l (large cap)


• Vanguard Extended Market (for reference, 4:1 of those two recreates a total stock index fund)


• Vanguard ex-US


• Vanguard total bond

For starters, you could put 48%/12%/30%/10% in that order since that's roughly the allocation that the Vanguard Target 2040 fund has.  If you do that, you get the same thing as the target date fund at a fraction of the cost (since you're using institutional funds with markedly lower fees).  You are free to adjust that alteration as much as you like, add some emerging markets in place of some of the global fund, weight small caps a bit more heavily than large (as Bonnie did).  As long as you get a little exposure from each area (maybe without bonds this far out, this is a difficult topic for starters), you won't be really *wrong.*