Fund Trader Pro, LLC
Chief Investment Officer
William 'Bill' DeShurko started in the investment industry in 1987, learning early the financial perils of bear markets during Black Monday (October 1987) when the DOW dropped more than 20% in a single day. That lesson has guided Bill's investment strategy ever since. During the "Tech Wreck"in 2000 - 2001, frustrated by the losses in typical "buy and hold/diversified" portfolios, Bill created the computer based algorithm used today at www.FundTraderPro.com. The strategy behind the algorithm was tested using data from 1972 - 2005 by Professors Samuel L. Tibbs and Stanley G. Eakins. The results were co-authored with Mr. DeShurko and resulted in the paper, "Using Style Index Momentum to Generate Alpha" that won the Charles H. Dow Award in 2007. The Charles H. Dow Award is the most prestigious annual award given for the best paper that advances technical analysis in the year. The award is granted by the Market Technicians Association, the home of the Chartered Market Technician® (CMT) Program, the preeminent, global designation for technical analysis.
His blog can be found at: www.deshurkoblog.com
Author of: "The Naked Truth About Your Money" a primer for the Millennial Generation and all new investors to help with making responsible financial decisions. Available at: https://www.amazon.com/Naked-Truth-About-Your-Money/dp/1592576508/ref=sr_1_1?ie=UTF8&qid=1485467128&sr=8-1&keywords=deshurko
Contributor to multiple financial news sites including; www.HorsesMouth.com, www.MarketWatch.com. www.Kiplinger.com, www.theStreet.com and more...
Bill is also a board and finance committee member for Homefull Inc. a non-profit group seeking to end homelessness in Dayton Ohio.
Managing Member and owner of 401 Advisor, LLC a registered investment advisor, since 2004
BA. Economics, University of Rochester
The opinions expressed are those of Bill DeShurko. Past performance is not a guarantee of future success. Consider all risks before investing and it is always advisable to consult with a professional before making investment decisions.
AI Marketing Video Bill DeShurko
No taxes. You will receive a 1099 showing a taxable distribution. The IRS form 1040 asks whether the distribution was taxable on non-taxable. In the summer the IRA administrator issues a 5498 showing transactions that will verify the roll over.
401(k) to an IRA is a direct transfer and is not considered a roll over. No problem with those.
Go traditional and boring. Build a nice portfolio of dividend paying stocks and tax free municipal bonds. You'll have a solid tax advantaged portfolio that can generate steady income when ready to retire. Quality also means liquid. If you want cash from your portfolio for future opportunities big stocks and muni's can sell quickly. Make sure the muni's are laddered.
Reason #2 I hate annuities - they are hard to get out of. Reason #1 is the high expenses.
I assume the original investment was from a taxable account. If it is an IRA you can transfer directly to a mutual fund IRA without any tax penalty.
First, you will only pay taxes and a possible 10% penalty on the gains in the annuity since purchase. If that number is small then you may want to bite the bullet now and liquidate and restart with a self directed brokerage account where you can buy funds, ETF's and/or individual stocks. The greater felexibility and lower fees may be worth the penalty.
Another option is to find a fee based RIA that has experience with no-load variable annuities. You could then do a tax free tranfer from your annuity to a no-load variable annuity product. While you would still be limitted to the variable accounts made available by the provider, you would dramatically lower your expenses. And possibly gain some advice from the RIA. No-load also means no surrender charges. So this option does not lock you into anything. You could do the tax free transfer for now, and if you are not yet 59 1/2, delay moving into a self directed account until then to avoid the 10% penalty.
There are many ways to go here, and honestly a lot more information needed to adequately address. But here are some ideas to explore/think about.
First speak to an estate planning attorney about setting up living trust(s) to hold your investments. The "living" part means that all terms and conditions can be changed at anytime...this need not be a lifetime decision. The trust allows you to manage your money "from the grave". That is, create instructions for who and how beneficiaries may access your estate. That's a lot of money to pass on without any guidance or limitations. If you haven't done this already it should be your first step.
Second step: Make allowances to pay your taxes. And don't fall prey to tax avoidance schemes.
I assume your question primarlily is concerned with investments. If you read any of my answers or articles (www.deshurkoblog.com) you can see that I am a big believer in the long term power of dividends from high quality companies. I would start off by determining how much current income you want from your portfolio. Divide that number by 3.5%. That will give you the amount you need to invest in a dividend portfolio, assuming a 3.5% yield to generate that amount of income. If you want a $250,000 income you would need to invest about $7.2 million.
The S&P 500 has grown its dividends in 44 of the last 45 years since 1973. Furthermore, dividends have compounded at an annual growth rate of 6.5% according to Ned Davis Research, Inc. from January 1, 1930 - December 31, 2016. That means that nearly every year you will get a raise averaging over 6% based on history. You will be set for life. If future opportunities arise, large cap companies that pay dividends are very liquid and can be converted to cash quickly should say a new business opportunities presents itself.
Put the remainder in a laddered portfolio of municipal bonds. Generate tax free income. Choose quality and/or insured bonds and you have another safe stream of very liquid income.
This strategy is how Warren Buffet pays a lower tax rate than his secretary. Emulating the most successful investor of all time seems sound to me.
Even with a stock and bond combination, have you stress tested the allocation to see how much you can lose in a bear market? Look back to 2000 - 2002 and 2007 - 2009 and see how your projected allocation did. Does it hold up well enough to go with, and stick to a buy and hold strategy?
As far as repositioning any portfolio from one strategy to another. Timing is everything. Moving to a buy and hold immediately prior to a major market sell off could be devasting. By following the steps below you will spread out your sells and buys, and lower the risk of changing course at a bad time.
In investing it is said that fundamental analysis tells you what to buy or sell, technical analysis tells you when to buy or sell. In other words I would not just sell everything at one time and rush into your new strategy. You are now looking at realatively short term trading strategy. First let your winners run, no reason to rush out and sell. You can follow the the stock price up with a stop loss order that should trigger with a set back. For example if a stock is at $80 per share, set a stop loss at $75. That way if the stock continues up you continue to gain, and lock in a $75 price if the market reverses. If the stock goes to $85 raise your stop loss to $80. (Understand stop loss orders - they are not guarantees that you will get your stop price.)
Go to any number of web sites and compare a chart of your holdings one at a time to the security you will buy with the proceeds when it sells. This doesn't need to be rocket science, but if what you own is doing better than what you'll be buying, don't switch. When its momentum falls below the new candidate sell and switch.
Sell everything now that has a loss to offset the gains from your other holdings.
Taxes aren't the main issue, its maximizing your gains. No one has ever gone broke taking a profit.