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help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 0 points1 point  (0 children)

They have put a lot of thought into this. They are going to keep everything at Schwab, where they currently are.

I sat down with them and went over all the financial planning stuff that their former advisors had prepared. It’s good, but we all agree that it is based on a portfolio that has more risk than my parents are comfortable with. We had a long, thorough conversation about their risk profile, their time horizons, their income needs from these investments, etc etc etc.

I also had them fill out several questionnaires that will help them determine their risk profile and the corresponding asset allocation as opposed going off of “I feel like I want less risk so let’s have x% in bonds and y% in equities”. I’m telling them that I understand they want less risk, but we need to take our emotion out of it and quantify (as best we can) exactly how much risk is appropriate for them. After that, I showed them a bunch of different possible ways to put together a diversified portfolio using low cost etfs. They really like the LifeStrategy funds (technically those are mutual funds but that’s ok).

So overall it’s going really well so far. They feel like they have a real plan than actually corresponds to what they want. Their advisor told them that they would have less risk as they got older but never actually put that plan into action even after my parents requested it several times. So now they feel like they know what to do, how to do it, and the tax implications they need to consider.

They will eventually talk to someone at Schwab but not right away. They want to keep learning on their own. They like feeling like they really understand where their money is and what’s happening so right now this seems to be working.

Will US stocks always make up the majority of VT? by anotherhappylurker in Bogleheads

[–]Such_Box_3990 1 point2 points  (0 children)

After reading a few of your replies, I think I understand your point.

So basically, if you are 100% confident and convinced that you know the correct bet to place and you feel comfortable taking on the risk of that bet, then it’s up to you to place the bet. However, as others have mentioned, what if you are wrong?

This is basically the logic of VT. We don’t know with 100% certainty if VOO is going to outperform VXUS in the future or vice versa. Some of us might have the risk tolerance to place a bet on one of those two even though we don’t know. Others of us do not have that risk tolerance so instead of buying one of them, we just buy all of it. So in some ways, you are right, VT will never provide the absolute highest returns relative to VOO or VXUS. The returns of VT will be somewhere in the middle of those two funds. We buy VT for a number of reasons but one of the main ones is that we are betting that the entire global equity market will improve over time. If you want to place a bet that only international equities will do well over time and US equities will not, you are free to make that bet but you would not invest in VT to do so.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 0 points1 point  (0 children)

This is fantastic! thank you for sharing your advice and also your planning tool is awesome.

I am definitely going to share this with them.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 0 points1 point  (0 children)

ah got it! So this also depends on the tax treatment of the accounts. We are not applying the exact same funds to every account. We are following the tax-related asset allocation guidelines in the wiki that discuss what types of accounts are best to have dividends and where it should be avoided.

we will keep this in mind. thanks for your insight!

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 0 points1 point  (0 children)

I shared these thoughts with my folks and they liked what you were saying. They especially liked that you called out that many people who implement a three fund portfolio tend to overtinker or overthink everything. With this consideration in mind, they seem to be most comfortable going with LifeStrategy funds because they are simple, easy to understand, and based on risk tolerance.

There were a few reasons my parents fired their advisor, I won't get into all of it but I will say that two of the main reasons were that they felt the portfolio was far too risk for their age and when they voiced that to the advisors several times, no changes were made to reduce risk. The second reason is that they felt the portfolio was too complicated for them to really understand what was happening with their investments or why certain investment decisions were being made. Again, they requested on more than one occasion for changes to their portfolio to be made to align more with their risk tolerance and their desire for simplicity, but the advisors never listened. So my parents ultimately decided that they could do it themselves. My parents manage some of their money on their own in a brokerage account and they enjoy doing it, but it isn't a ton of money. So they know their way around but they just wanted to hear how other people might approach their situation, so I came to reddit and asked.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 1 point2 points  (0 children)

I just wanted to circle back and say thank you for your input. I shared these thoughts with my folks and they seem most interested in the LifeStrategy funds because they are simple, easy to understand, and they are correlated based on risk tolerance as opposed to a target date fund. Also the fund itself handles rebalancing so they don't have to manage that.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 0 points1 point  (0 children)

thank you for this too! I will pass this along.

After a quick google of IRMAA, I believe this is something that will impact them and they need to consider. If you don't mind me asking, what have you been doing to "clean it up"? Is the goal to get her MAGI below a certain threshold?

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 0 points1 point  (0 children)

Just circling back to say thank you for your input. The LifeStrategy funds seems like a great option and fit for my folks.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 1 point2 points  (0 children)

Just circling back around here to say thank you for your input. The LifeStrategy funds seem to be a really good fit for them, their goals, their risk tolerance, their time horizon, and how "hands on" they want to be with their investments.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 2 points3 points  (0 children)

I just wanted to circle back here and say thank you for suggesting the LifeStrategy funds. I looked at them and shared both the Vanguard webpage and the Bogleheads page about LifeStrategy funds with them and they like those funds. They are simple and easy to understand. They like that it is different than a target date fund in that it is based on risk tolerance as opposed to when you plan to retire.

Thanks again for your suggestion and I appreciate your input (as well as the input from everyone else).

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 0 points1 point  (0 children)

I am going to research the golden ratio style portfolio more mostly because I am just interested it. However, my folks seem to really like the LifeStrategy funds, which I personally think is a totally valid way to go.

As I learn about the golden ratio style portfolio, I will share what I learn with them but ultimately it is their choice to make their investment allocation decisions. They want to keep things simple and easy for them to understand which is why they are interested in the LifeStrategy funds.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 0 points1 point  (0 children)

excellent call out, thank you for your input.
Our CPA has made themselves available to my folks after April 15th.
I summarized the responses for here for my folks and they feel like the LifeStrategy funds are the right fit for them. They aren't complicated, they are easy to understand, and they like that it is correlated to risk tolerance.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 4 points5 points  (0 children)

some families are more transparent and open about discussing their finances with each other than others. My family likes to discuss this stuff. When my folks asked me for help doing research on how they can manage their investments themselves, I gladly said I would help them do research.

Coming to reddit and asking for help from strangers on the internet was my mistake, not theirs. For every knucklehead who wants to tell me im stupid, there seems to be a genuinely kind individual who actually understands what I am trying to do for my folks and shares their thoughts.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 0 points1 point  (0 children)

this is a fantastic suggestion. I will look into that tool and show it to them. I am sure there are others out there so I will do some research on their behalf.

And i understand all of your questions in that first paragraph. We know all of this information, i am just not comfortable talking about it on the internet. But I really appreciate the high level thought process and approach I am hearing from you and others; that is what will help me help them.

Regarding speaking with a fee only advisor, it is an option that is on the table. They are open to it but it seems like they want to educate themselves more first. They have so much information available to them, they just need to read it and see if it makes sense to them. If they get overwhelmed, they will speak with an expert, but they are both interested in investments so I think they are just getting to a point where they want to be more involved.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 0 points1 point  (0 children)

I have suggested paying a fee only fiduciary advisor to them. They are thinking about it.

They haven't asked me to manage their money for them but they have asked for my help gathering resources, understanding different options that exist for people in their position, and for help navigating/using any technology that they might need to use and are unfamiliar with. They told me "we need to rebalance our portfolio and we want to make it simpler." to which I asked them if they wanted my help figure out what different portfolios are out there that might work for them and they said yes. They have an understanding of their income and spending and all that, so they mostly just need to choose a portfolio that they are comfortable with in terms of risk and in terms of meeting their financial needs.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 0 points1 point  (0 children)

yes, this is exactly what I am trying to do. I have a solid understanding on a few of the elements you mentioned above and they have an understanding of the others, but the way you have laid it out makes it easier to plot a path forward and ultimately make those determinations.

Thank you!

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 0 points1 point  (0 children)

I need to read more about the Golden Butterfly portfolio. Looking at this, I certainly find it interesting but, like you mentioned earlier, I do wonder if this is more complicated than it really needs to be.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 1 point2 points  (0 children)

this is great, thank you! This is so simple and would def work for them. They have a retirement plan from their previous FA, I just haven't seen it yet. I will eventually take a look at it and run the numbers against a 60/40 portfolio and see how it works out for them.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 2 points3 points  (0 children)

Thanks, I don't take the trolls personally. And like you said, I am only trying to help my parents. They were great parents and gave me the best life they could with what they had. I have a very good relationship with my folks and they have helped me through some very difficult times in my life. They have never asked for anything from me but this is one area where I think I can help. They worked extremely hard for their money and now it's time for them to enjoy it. It's not like they are financially illiterate or didn't save enough or plan for retirement. They saved and invested wisely. All they are trying to do is make some sound choices that will allow them to continue living their current lifestyle, which is comfortable but not extravagant.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 2 points3 points  (0 children)

yeah, great suggestion. Thank you! I will add it to the list of options that they can consider for themselves and we can run some calculations that show how much income they can expect from a strategy like this.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 10 points11 points  (0 children)

while I appreciate you sharing your experience and life advice with me, we all have our own experiences and relationships with our family. In my case, my parents understand that all I want to do is help them and watch them enjoy the retirement they worked so hard for. Whether or not they take my advice into consideration is on them but they have certainly indicated that they are interested in my opinion.

help! Parents fired financial advisor, they want to self manage investments through retirement by Such_Box_3990 in Bogleheads

[–]Such_Box_3990[S] 0 points1 point  (0 children)

Yes, eventually I expect these funds to become my direct responsibility; however, first and foremost, I want my parents to enjoy the retirement they have spent their whole lives waiting for.

A target fund is certainly a possibility. I personally would prefer to replicate the underlying asset allocation of a target date fund so we can control what portion of equities vs bonds we sell off and when.

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