For those of us that have a spouse that DOES NOT want to OR cannot participate in portfolio development, modification, monitoring, withdrawal strategies and etc.
How do you set up a Portfolio/Retirement/Withdrawal (KISS) strategy that will sustain your spouse throughout the rest of their life AND does NOT require your Widow/Widower to get involved. In other words, an "auto pilot" portfolio and withdrawal strategy?
Is this possible for the DIY investor? OR
Do you need to turnover your portfolio to a Full-service wealth management firm? OR
Another type of wealth management firm OR
A Financial Adviser (fee only?) OR
Thank you for any and all thoughts, suggestions and guidance!!!
To keep it as simple as possible, I would suggest whittling the accounts down to five (assuming you trust your spouse enough to keep all taxable moneys in a joint account):
1. JWROS (or C/P WROS) joint taxable account
2a and 2b Traditional IRA account for each spouse (with other spouse as beneficiary)
3a and 3b Roth IRA account for each spouse (with other spouse as beneficiary)
There are situations where this is not the best arrangement, but it is the simplest and will work for many couples. At death, the IRAs are rolled into the surviving spouse's respective IRAs.
Keep all accounts with a single brokerage (e.g. Fidelity, Schwab, Vanguard, TDA, etc.) Again for simplicity.
A simple robo advisor or a basic target date fund will automatically maintain the selected glide path/asset allocation. IMHO there isn't a huge amount of difference in behaviour or cost between these approaches.
If one wants a little interaction (hand holding) a hybrid robo like Vanguard's (30 basis points, uses Vanguard index funds) may suffice. That also provides someone familiar with the basic needs of the surviving spouse in case questions arise.
There's a fair amount of automation that can be set up for withdrawals, though it might fall just short of what's needed. One can set up automatic RMDs from the traditional IRA to the taxable account, and automated periodic withdrawals from the taxable account to a bank account. I'm not sure how to automate drawing additional money from the IRA to cover the taxable account cash withdrawals. (One can set up a fixed IRA withdrawal amount, but what happens once the required RMD exceeds that amount?)
Drawing only from the T-IRA is sometimes not the optimal withdrawal strategy from a tax perspective. It might be better to split withdrawals between the traditional and Roth IRAs to stay in a lower tax bracket. You could automate that as well, but it would not have the flexibility that an advisor managing a discretionary account could provide.
Absent the discretionary account, the surviving spouse would be responsible for executing advice provided by a financial advisor. That's not completely hands off. Having seen people who freeze at something as simple as moving money from a 0% interest account to a 1.5% bank account, I view "hands off" as a stringent requirement.
I’m less inclined to recommend Warren Buffett’s plan for his wife, discussed extensively here after it was revealed at a Berkshire meeting in 2013. For one, Buffett is hardly your “typical” investor. Secondly, I’m not a fan of index funds and think his plan too risky anyway. Depending on the amount of time you have, this article discusses Buffet’s plan. An embedded link covers practical matters like asset allocation and password management, than deviates into some “off the wall” suggestions like selling the house. https://www.mymoneyblog.com/buffett-simple-advice-after-death.html
Any further suggestions or withdrawal strategies greatly welcomed.