DTLALaw wrote:The frustrating thing for me is that my 401(k) plan does not allow conversions between the traditional 401(k) and the Roth, so I have to make the decision now, and would need to quit in order to rejigger it later.
[I]t would really be cutting down on what is currently in the 401(k), and moving most of it into the BlackRock S&P500 index, and then making up for the loss of the mid-cap and international components, by the changes in the Roth IRA. Is that right?
And as for your comment regarding the Extended Market Index fund, saying that it is "a little low for now," that refers to the fact that I would need to keep adding to it in order to reach an approximate total-U.S., given the 401(k) BlackRock index?
I realize that I had failed to list the ER for the Columbia mid-cap value fund in the 401(k) currently. It is 0.21%, only 0.07% more than the Vanguard Extended Market Index Admiral Shares.
In light of that, do you think it might make more sense to shift the goal of the Roth IRA into eliminating the expensive (ER 0.99%) Thornburg International Fund in the 401(k)?
Along a similar tack, although PIMCO isn't that bad (ER of 0.46%), it still is higher than the various index funds. The Vanguard Total Bond Market Index Admiral Shares have an ER of 0.10%; if I put those into the Roth 401(k)[IRA], I could similarly start reducing the PIMCO holdings in favor of the cheaper 401(k) options.
With the last 3% being the I Bonds, which will eventually, I suspect, become an emergency fund in favor of a TIPS fund as part of the retirement investment plan.
The 5% VTSAX in the taxable account is close to the $10,000 minimum needed to keep the admiral shares.
DTLALaw wrote:Long time fan of Vanguard, and just found these forums. Reading them over the last two weeks has been incredibly helpful and educational, and I thought I would dive in and ask for some direct advice.
The theme of this post is "life changes." I've just turned 31, have recently purchased a home, and will get married next year. I want to make sure that I'm on the right course for life and retirement.
Any thoughts and suggestions would be happily welcomed!
Emergency Funds: These are in place. Approximately four months' worth currently, primarily in Vanguard's California Tax-Exempt Money Market Fund.
Debt: Student loans (approx. $45,000, 1.825 fixed APR, $240 monthly payment), car loan (approx. $11,000, 5.69% APR, to be paid off this year; KBB trade-in value is around $21,000), mortgage (approx. $479,000 balance, 4% fixed APR, $2287 monthly payment)?
Valuethinker wrote:Other people will have more complete advice:
1. yes you should buy at least $10k ibonds a year, you and your spouse can do 20k? in 10 years this will be a nice chunk of change
2. at your income, other than maximizing tax exempt space (first) I would think it pays you to repay any debt except that student loan (given that student loan debt would not transfer to your spouse if you died? it's a kind of life insurance).
Accelerated payments on the mortgage would save you money (I realize mortgage is tax deductible in the US, so the after tax cost of that debt is around 2.8%? So it's not a no brainer, but it would still be a *certain* return higher than you can get in government bonds). I would pay down debt before investing in fixed income (stocks is somewhat different-- higher long run expected returns than 2.8%).
Not that you would, but don't go and trade up car just because you've paid it off. Enjoy the luxury for a few years of living in effect car cost free (except for minor things like gas, insurance, repairs ).
3. don't forget to have *lots* of life insurance and good disability cover. You need a detailed workout of life insurance need, but my gut is for the next 20 years (really until you are about 55) you will need at least 5x income (so $1.5m in your case) and maybe up to 10x. This does assume you will have kids, but if your spouse was without you, even on a much reduced standard of living the loss of your income and future retirement savings would be critical.
The trick is to lock in a life rate now whilst you are young and healthy. 20 to 30 year term level premium policies. Probably get (at least) 2 policies, maybe with different insurers. Then, as your savings grow, you can lapse one but keep the other. When you become partner you may find the firm has arrangements.
Disability cover goes without saying. Own occupation. Max you can feasibly buy, with protection against price increase if your health deteriorates.
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