Super Newb Vanguard question

[NorCal_dental]

I'm in my mid 30's and have just begun to save like I should have been long ago.  I'm embarrassed to say I know very little about it.  I have a 401k through work and opened an IRA through Vanguard yesterday.  In the process of getting myself going(taking the WCI course, Fire your Financial Advisor), I transferred both my parents IRA from Ameriprise to Vanguard.  They have 15 stocks, 5 ETFS and 2 mutual funds.  60 percent stocks, 37 percent bonds and 2.4 percent short term reserves. Combined they have about 200k.  My Dad is 62 and my Mom is 58.  Overall, financially they are doing well.

 

What's the best way to set them up?  To get the money out from each stock do I simply sell all of them one by one?  Or is best to call Vanguard advisor to get me going? I was looking into doing a 3 fund portfolio.  Thoughts?  Again sorry for the super newbie questions.  I'm pretty sure a couple years from now I will get a nice chuckle from my first post.

[ajm184]

If these assets are in an IRA and these assets are all tax-deferred contributions (vs. non-deductible contributions), then selling the current assets (stocks, ETF's, MF's) and moving towards a different asset allocation is fine all at once.

Couple concerns:  Though overall you are taking the right steps and understanding that you are seeking to look out for your parents interests, you are putting alot of upon yourself and are now responsible for your parent's retirement savings.  Also, not knowing alot about your parent's income, spending, earnings outside their age, a 200K retirement account does not appear sufficient ($8K/year at a 4% withdraw rate).

[ENT Doc]

NorCal_dental wrote:

Combined they have about 200k.  My Dad is 62 and my Mom is 58.  Overall, financially they are doing well.

Click to expand...

$200k income or investments?  If the latter, I would not regard that as doing well.  As ajm184 stated, this is a very small contribution at a 4% withdrawal rate.  Do they have other income expected via pension or otherwise?

I would sell stocks or lots at a loss and purchase into an index fund fitting to their desired asset allocation.  Turn dividend reinvestment off if it's on and funnel that money into mutual fund purchasing.  You can offset selling stocks at a gain with the losses as well.  Point is, get out of stocks as efficiently and quickly as possible and into mutual funds.  If they actually have $200k in investments you don't want the increased idiosyncratic risk of various companies  - diversify that away.

For you, put 2018 and 2019 contributions (non-deductible) into your TIRA and do Roth conversions.  File an 8606 form for your 2018 taxes, or send in separately if already filed.  Welcome.

[CordMcNally]

Are they completely ok with you doing this? I only ask because at some point the market is going to go down and I'm guessing they don't have even a base understanding of the stock market so they're going to blame you when their portfolio loses money whether it's your fault or not.

 

Can you expound on "financially doing ok"?

[Peds]

NorCal_dental wrote:

Combined they have about 200k.  My Dad is 62 and my Mom is 58.  Overall, financially they are doing well.

Click to expand...

um, no. 200K will support 8K/year in withdrawals.

NorCal_dental wrote:

60 percent stocks, 37 percent bonds and 2.4 percent short term reserves

Click to expand...

are they comfortable with a 60:40 split? they will lose ~60K of their 200 in the next major drop. if so thats fine.

NorCal_dental wrote:

What’s the best way to set them up?  To get the money out from each stock do I simply sell all of them one by one?  Or is best to call Vanguard advisor to get me going?

Click to expand...

if it is an IRA, you just sell everything, and buy whatever you like.

consider a TDF or LS fund as a 1 and done option.

NorCal_dental wrote:

gain sorry for the super newbie questions.  I’m pretty sure a couple years from now I will get a nice chuckle from my first post.

Click to expand...

no worries. we all started there.

and yes, you will laugh.

 

[Faithful Steward]

CordMcNally wrote:

Are they completely ok with you doing this?

Click to expand...

Agree. Beware that, at some point, your parents may come down with Powdered Butt Syndrome (PBS). PBS is a condition where people start to question financial advice from people whose butt they've powdered. It presents itself most often when said person makes a financial move that results in a sub-optimal outcome.

[NorCal_dental]

Thanks for the quick responses.

They have 2 gas stations that run mostly on their own and bring in good money.  They are very basic people and could live off 3k a month.  Their house is paid off and cars are paid off.  They could easily do without the money in the IRA.

All the assets are in an IRA.

They are ok with me handling it because they had zero idea what was going on.

Vanguard does offer a financial advisor to manage your money.  Might be a good route to take.

Overall, I am looking for a easy starting point and something that is more of a set it and forget it route.

 

[Faithful Steward]

NorCal_dental wrote:

Vanguard does offer a financial advisor to manage your money.  Might be a good route to take.

Click to expand...

This could be a good option, with you keeping an eye on things.

[Hank]

Any siblings? If things aren’t 100% golden with your siblings, you’ll get 100% of the blame for any short term decline in portfolio value and exactly none of the credit for outperforming the old Ameriprise returns.

Brothers and sisters say they’re looking out for mom and dad, but they really are looking at their possible inheritance.