How are we doing?

[MO-RN]

This is my first time posting in Bogleheads. I appreciate any feedback. My wife and I are 38 y/o. We've been investing on our own since we were married 12 years ago. To simplify; We have about $573K in retirement accounts. We save approximately $49K per year in Roth/401K. Our current AA is almost 100% equities. We have about $36K in cash reserves as well. Given our income ($150K/year) and our projected retirement age (62 years), should we be saving more? Is our allocation too aggressive? Is there a preferred model portfolio?

Thanks,

MO-RN

[stan1]

You are asking us to do a lot of arithmetic for you. Could you edit the post so that everything adds up to 100% of your portfolio, instead of 100% for each account? Also, would help if you give fund names instead of ticker symbols for the Vanguard funds.

Generally its simpler to manage a married couple's portfolio as one -- unless there's a reason why its separate (prenup, strong personal feelings towards keeping things separate, marriage not recognized by all states/federal govt, etc.). Looks like you are managing them as two portfolios right now, so managing them as one would simplify considerably. It looks like you are fortunate to have lots of good investment choices.

[letsgobobby]

for more specific investment info please follow stan1's recommendation to edit your post.

From a high level view, accumulating 4x your gross income before age 40 is doing very well.

Going forward, saving 30+% of your gross will continue to see you in good stead.

Other than specific portfolio advice, ensure you have adequate life, disability, health, and liability insurance (both personal and professional).

[letsgobobby]

re: your edits,

100% equities is too aggressive. You will easily meet your goals with a 60/40 allocation. I have a similar situation as you: we are also in our late 30s, we save half of our income and have a lot saved up. We are quite comfortable with 60/40 and know we will meet our goals easily (barring a major financial/social catastrophe) without taking nearly as much risk as you are taking.

I recommend no more than 80/20, possibly as low as 60/40.

[TRC]

Our current AA is almost 100% equities.

100% equities at your age (at any age really) is not good. A general rule of thumb is to hold your age in bonds. As you age, your portfolio becomes less volatile.

Given our income ($150K/year) and our projected retirement age (62 years), should we be saving more?

Hard to answer. How much do you want to have by age 62?

Is our allocation too aggressive?

Yes. You need bonds.

Is there a preferred model portfolio?

Yes. Here's an example of some http://www.bogleheads.org/wiki/Lazy_Por ... portfolios

FWIW, my wife and I are 35 and have nearly the same sized nest egg. Our portfolio is 35% bond funds (TIPS and Total Bond Market Index) and 65% stocks (of which, 70% is US total stock market index and 30% international index fund). When stuff gets out of whack, we rebalance, forcing us to buy low and sell high.

[NYBoglehead]

I'd say you need to start shifting some to fixed income. That said, I don't think you need to do it all at once, I'm guessing you haven't sold out everytime the market has dipped seeing as you've been able to save ~580k by 38. I'd start by putting 80% of your future contributions into bonds and 20% into equities and over the next several years your portfolio will gradually become more conservative and less volatile.

As far as how you are doing goes, it all depends on how much you plan on spending in retirement. Calculate your estimated costs in retirement and then figure out how much of that will be covered by social security, how much your portfolio can reasonably pay out monthly, and then evaluate if you've got a surplus, deficit, or if you're right on the money.

[jojay]

You're doing great. The average American has less then $80k saved for retirement and that includes people 20 years older than you.

Your savings rate is outstanding. Good for you.

Watch your investments in the future - I'm a fan of 100% equities over time and you've got 20 plus years to allocate differently.

Congrats.

[mrpotatoheadsays]

Given our income ($150K/year) and our projected retirement age (62 years), should we be saving more? Is our allocation too aggressive? Is there a preferred model portfolio?

Thanks,

MO-RN

Yes. Yes. Yes. Benjamin Graham recommended never having less than 25% of your portfolio in bonds or stocks. What percentage you establish is dependent upon your own situation and the state of the market. If you don't know how to judge the market, do a simple 50/50 split between stocks and bonds.

[MO-RN]

Thank you to those who responded. The consensus seems to be to reduce risk. I've long thought we were a little too aggressive but haven't adjusted AA yet. I've viewed the lazy portfolio pages and will most likely use one of those. Thanks again.

MO-RN

[letsgobobby]

Don't think you need to save more necessarily, but to increase your chances of reaching your goal saving more would help.

Starting with $573k, and assuming tax-deferred growth for 24 more years, and assuming contributions of $49k per year, you only need to get growth of 4% real to reach $3,400,000 real. 3% withdrawal from that gets you $100,000 per year in income, from which you'll have to pay taxes. That is about what you live on now. You should be able to sustain a 3% withdrawal rate for many decades, and maybe you'll get SS or a pension that will help out.

Of course no one can guarantee a 4% real return and with bond yields so low who knows. That's why saving a little more, while not necessary, would make your odds better.