Outstanding in theory, but you have to balance it against the additional skim of fees.
For 2024, a married couple has $94,050 taxed in the 0% capital gains bracket plus a standard deduction of $21,900 ($24,000 if both are over 65). So a couple should be able to take a 4% withdrawal from a $3 MM portfolio of $120,000/yr without paying any taxes if it’s almost all qualified dividends and capitals gains, and a small tax-paid cost basis. Direct indexing won’t do any for you in this situation.
If the couple had a $5 MM portfolio, it might make sense to put $2 MM into Direct Indexing. Vanguard will do it for you under their 0.30% of assets Personal Advisor service. (Just make sure that the 0.30% of assets fee isn’t being applied to your first $3 MM) Schwab charges 0.40% on a $100,000 portfolio and presumably a smaller fee on larger ones.
They can only do this for a short time because at some point, social security will kick in, and then shortly thereafter RMDs will kick in. Those could potentially raise their tax payments. But the real biggie is when one spouse dies, the next year, the surviving spouse has to file as single and BOOM usually end up with a much higher tax bill.
Sure. You take the tax advantage while you can, and then make other plans. Hopefully your spouse lives a long, healthy life. I’ve been doing Roth conversions to reduce the size of my RMDs, but will likely limit that in 2024 to pick up some Energy Efficiency freebies courtesy of the Inflation Reduction Act. You do whatever has the best discounted present value at the time.