Investment management
How should your portfolio change now that you are spending it?
While you were saving, you measured the portfolio against the market. Now you measure it against your withdrawal plan, and risk means something different. The danger is a downturn that forces you to sell good investments to cover next month's spending, years before you meant to touch them.
Sound familiar?
- Your money is spread across old 401(k)s, a rollover IRA, and a brokerage account, with no single view of what you own.
- You suspect you are paying for funds that are not earning their keep, but the fee is buried and hard to find.
- You are holding more company stock than you would choose to buy today.
- You know you should take less risk now, and you also do not want to run out of money at 92.
See how the money gets sorted
How I work through it
- 01
Match the money to when you need it
Near-term spending sits in cash and short bonds. Money you will not touch for a decade stays invested for growth. Split that way, a bad year costs you nothing you need this year.
- 02
Own the whole market, cheaply
I use broadly diversified, low-cost funds. I am not trying to pick winners or time entries. Costs and taxes are the parts of the outcome we control, so that is where I spend my time.
- 03
Locate assets where they are taxed least
The same portfolio can produce different after-tax results depending on which account holds which asset. Bonds and other income-producing holdings generally belong in tax-deferred accounts, and the assets with the most growth ahead of them belong in the Roth.
- 04
Trim the winners on a calendar
I fund withdrawals from whatever has run ahead, which sells high without anyone having to feel clever about it. It is unglamorous, and it is most of the value.
What you get
If you are working with an advisor now and none of this sounds familiar, that is worth a conversation.
- A consolidated view of everything you own, including accounts I do not manage
- A written investment policy stating the target mix and why it fits your plan
- A cost review of what you own now and what you are paying for it
- Asset location across taxable, tax-deferred, and Roth accounts
- Tax-loss harvesting in taxable accounts when markets provide the opportunity
- Scheduled rebalancing, with withdrawals funded from the overweight positions
- Concentrated stock unwound on a schedule that respects the tax consequences
What this means for you
A portfolio that funds the plan
Built around your withdrawal schedule rather than a benchmark you do not spend.
Fewer moving parts
Old accounts consolidated where it makes sense, so you have one place to look.
Less lost to costs and taxes
Two of the few things in investing we control.
A hypothetical example
How I think about the next downturn
Markets fall, and when they do, clients with a plan already know which account next year's spending comes from. We picked it in advance, and it is not the one that just dropped. No clever trade beats having set the money aside beforehand.
This is a hypothetical example for illustration only. It does not represent an actual client and is not a guarantee of future results. Your situation, tax brackets, and outcomes will differ.
Questions I get about this
At Charles Schwab, in accounts in your name. I never take custody. I have authority to manage and to bill an agreed fee, and you can see every position and transaction directly at Schwab at any time.
No. I am trying to put you in the best position relative to your goals. If you are looking for market timing or a hot stock tip, I am the wrong advisor and I would rather say so now.
We look at what it would cost in taxes to unwind, and at how much of your future depends on one employer. Usually the answer is a multi-year schedule of sales rather than one painful transaction.
These decisions do not sit still
Change one and the others move. That is the argument for handling them together rather than one specialist at a time.
Let's find out if I can help.
The first conversation is 30 minutes on the phone, and you bring nothing to it. You describe what you are trying to sort out, and I tell you straight whether this is the kind of work I do well.