Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
I've not used any financial adviser, WEG or other, personally. My situation is simple enough to handle myself; just maximize after-tax value subject to risk tolerance.
Don't dig too deeply into the spreadsheet. It goes beyond obvious simplifications (such as uniform 5% and 7% rates of return and no changes in tax brackets between 2027 and 2042) to the point that conclusions may be suspect.
For example: By assumption, the taxable account is spinning off no income other than sales from gain. If it were otherwise, that income would be used to offset some of the annual surplus/(shortfall). Okay, that's just another simplification.
But it also means that no divs are being reinvested in the taxable account. Consequently the cost basis of the taxable account is decreasing each year as assets are sold off. Meanwhile, despite these selloffs, the total value of the taxable account is increasing (see "Non-qualified Inv. Accts.")
Therefore, the ratio cost basis (going down) :total value (going up) is decreasing.
Yet each year, the spreadsheet says that this ratio is fixed at 75%. It says that the cap gain on each asset is the same 25% of proceeds. This is impossible with a homogeneous portfolio (assumed, just as 5% uniform growth is assumed).
Thus the spreadsheet understates the taxes owned due to cap gains (declining cost basis means greater gain and higher taxes).
There's a more concerning issue. We see equity assets (or other assets generating cap gains) being sold for short term cash flow needs. That's not the way I manage my portfolio.
Of course the spreadsheet is just "for illustration purposes only".
Pretty weak article, and poorly written. Hard to figure out what it is saying anyone holds.
Is it counting ETFs as equities? Asked because it separates out investments in mutual funds (17.57% advised, 20.10% DIY).
Cash? 5.70% advised, 15.71% DIY after 2022Q1!. Maybe the DIY'ers had the right idea (whether by luck or not, can't tell from report).
While the article does note that the study is based on Schwab's PCRA brokerage window in employer-sponsored retirement plans (401(k)s, etc.) it does not mention that employees who use brokerage windows tend to be more aggressive investors. Did the study control for that before drawing its general conclusions about all investors?
Comments
Don't dig too deeply into the spreadsheet. It goes beyond obvious simplifications (such as uniform 5% and 7% rates of return and no changes in tax brackets between 2027 and 2042) to the point that conclusions may be suspect.
For example: By assumption, the taxable account is spinning off no income other than sales from gain. If it were otherwise, that income would be used to offset some of the annual surplus/(shortfall). Okay, that's just another simplification.
But it also means that no divs are being reinvested in the taxable account. Consequently the cost basis of the taxable account is decreasing each year as assets are sold off. Meanwhile, despite these selloffs, the total value of the taxable account is increasing (see "Non-qualified Inv. Accts.")
Therefore, the ratio cost basis (going down) : total value (going up) is decreasing.
Yet each year, the spreadsheet says that this ratio is fixed at 75%. It says that the cap gain on each asset is the same 25% of proceeds. This is impossible with a homogeneous portfolio (assumed, just as 5% uniform growth is assumed).
Thus the spreadsheet understates the taxes owned due to cap gains (declining cost basis means greater gain and higher taxes).
There's a more concerning issue. We see equity assets (or other assets generating cap gains) being sold for short term cash flow needs. That's not the way I manage my portfolio.
Of course the spreadsheet is just "for illustration purposes only".
Make sure to read the comments as they seem to go against the presented info.
Is it counting ETFs as equities? Asked because it separates out investments in mutual funds (17.57% advised, 20.10% DIY).
Cash? 5.70% advised, 15.71% DIY after 2022Q1!. Maybe the DIY'ers had the right idea (whether by luck or not, can't tell from report).
While the article does note that the study is based on Schwab's PCRA brokerage window in employer-sponsored retirement plans (401(k)s, etc.) it does not mention that employees who use brokerage windows tend to be more aggressive investors. Did the study control for that before drawing its general conclusions about all investors?