YAPC - Yet Another Portfolio Check (please)

Have a question about your personal investments? No matter how simple or complex, you can ask it here.

YAPC - Yet Another Portfolio Check (please)

Postby TimeRunner » Sat Dec 29, 2012 10:47 pm

Greetings, I *think* I've taken much Bogleheads advice to heart, but it never hurts to have another set of eyes on my portfolio. Here goes:

Employer: US Gov civilian agency, non-law enforcement/non special-pay position
Emergency funds: $20K
Debt: Mortgage, $465K fixed 30 @4%, about $455K remaining with accelerating payments will be paid off in 12 years. Small house in highly desirable near-beach location, value $850K. Would like to retire in place, however Calif taxes may drive me to Nevada (?) by age 70. Prop tax approx $9K/year.
Tax Filing Status: Single, considering marriage, no kids, potential spouse 8 years younger, working full-time, her gross income approx $68K.
(EDITED PER FIRST REPLY BELOW) Tax Rate: 33% Federal in 2011/2012, else 28%, 9.3% CA State
State of Residence: Calif
Age: 58
Desired Asset allocation: 65s/35b but open to advice
Desired International allocation: 30-50% of stocks (Intl been good to me so far.)

Current retirement assets
Taxable
$500 Vanguard CA Tax-Exempt MM Fund (VCTXX) (0.17%) (Sweep acct)
$29K Vanguard Emerg Mkts Stock Index Fund Admiral VEMAX (0.20%)
$48.6K Vanguard Total Intl Stock Index Fund Admiral VTIAX (0.18%)
$30K Vanguard Total Stock Mkt Index Fund Admiral VTSAX (0.06)
$4.2K Vanguard VAW ETF (0.19%)
$65K AAPL (cost $39K LT)
$74.4K GOOG (cost $36.4K LT)

His 401k
$1.04M USGOV TSP L2020, contrib max every year since 1987, currently $22K pre-tax,
Employer match approx $7K (5%); target retirement date 5/2016.

Roth IRA at Vanguard (converted approx $216K in 2010 from TIRA, split as income between 2011 and 2012 tax returns)
$53.6K Vanguard VEMAX (0.20)
$62K Vanguard VBTLX (0.10%)
$68.6K Vanguard VTIAX (0.18%)
$121.6K Vanguard VTSAX (0.06%)

Expected CSRS Pension 5 years approx $10.5K/year @ age 62
Expected FERS Pension 32 years approx $49.3K/year @ age 62
Planning to not file for Soc Security until age 70, expected $40.5K/year @ age 70

New annual Contributions
$22.5K into TSP L2030 + employer match $7K
$6K into Roth via backdoor nondeductible TIRA contribution, zeroing out TIRA every year

Questions:
Age 58, will retire at 62 (god and gov't willing), should I continue to hold AAPL and GOOG or sell in 2013? I am somewhat uncomfortable with these large holdings.
Rebalance recommendation? or change holdings?
Invest $6500 backdoor Roth for 2013 into which fund?

Thanks all! :)
Last edited by TimeRunner on Sun Dec 30, 2012 12:07 am, edited 1 time in total.
User avatar
TimeRunner
 
Posts: 263
Joined: 29 Dec 2012
Location: Central Coast Beach Town, CA

Re: YAPC - Yet Another Portfolio Check (please)

Postby bdpb » Sat Dec 29, 2012 11:38 pm

TimeRunner wrote:Debt: Mortgage, $465K fixed 30 @4%, about $455K remaining with accelerating payments will be paid off in 12 years. Small house in highly desirable near-beach location, value $850K. Would like to retire in place, however Calif taxes may drive me to Nevada (?) by age 70. Prop tax approx $9K/year.

(Effective 2012) Tax Rate: 20% Federal, 9.3% State

Questions:
Age 58, will retire at 62 (god and gov't willing), should I continue to hold AAPL and GOOG or sell in 2013? I am somewhat uncomfortable with these large holdings.
Rebalance recommendation? or change holdings?


You need to report your marginal tax rate, not effective.

In the grand scheme of things, your AAPL and GOOG holdings are not that big, around 5% of your portfolio. I wouldn't sell until I was in a better tax situation for selling.

With tax laws changing soon, I would wait before I made too many moves.

I would use taxable assets to pay down/off the mortgage.

After retiring, I would move to NV for a while to do Roth conversions, visiting my former home in CA once in a while.

Do you make charitable contributions? Donate the taxable assets with the largest CGs.
bdpb
 
Posts: 1192
Joined: 6 Jun 2007

Re: YAPC - Yet Another Portfolio Check (please)

Postby TimeRunner » Tue Jan 01, 2013 12:20 am

Thanks bdpb, for the reply. Good advice. I want to take another look at this more holistically with my fiancee's finances - something I really haven't seriously done to date, but which I really need to do. Gulp! She's extremely responsible, so I don't expect any surprises. I'll repost with her info in the next month or so. In the meantime, I *think* I understand your advice re: roth conversions post retirement...which I think is looking at filling the buckets below 28 or 33% tax bracket or so with Roth IRA conversions using TSP money that has been transferred to a TIRA.

Thanks again!
Ferris: Life moves pretty fast. If you don't stop and look around once in a while, you could miss it.
User avatar
TimeRunner
 
Posts: 263
Joined: 29 Dec 2012
Location: Central Coast Beach Town, CA

Re: YAPC - Yet Another Portfolio Check (please)

Postby hoppy08520 » Tue Jan 01, 2013 12:47 am

TimeRunner wrote:...with Roth IRA conversions using TSP money that has been transferred to a TIRA....

Just one point... I'm not sure if you're talking about rolling over all or part of your TSP. Before rolling over, think carefully about that as the TSP has the lowest ER you can find, and it has the G Fund which could be a valuable fund for a retiree.
hoppy08520
 
Posts: 1221
Joined: 18 Feb 2012

Re: YAPC - Yet Another Portfolio Check (please)

Postby nedsaid » Tue Jan 01, 2013 4:38 am

You are doing great!! My Gosh, over $1 million in a 401K and well pensioned.

Hate to say it, consider a pre-nup before getting married. Pretty sad to even have to think about things like that. My cousin got pretty well drained by a second wife.

But yet, getting married could be the greatest thing. Nothing better in life than a good marriage. I am just suggesting caution.

Your investments look good. We can quibble about percentages and such. It looks to me you have a good handle on things. The Apple and Google need to be trimmed back. If you have owned them for a while, congratulations. Yet you have a great pension, lots of retirement savings, and emergency funds.

You main problem might be spending too little in retirement.

Congratulations on successfully managing your financial life. Best wishes on a possible marriage.
A fool and his money are good for business.
User avatar
nedsaid
 
Posts: 2034
Joined: 23 Nov 2012

Re: YAPC - Yet Another Portfolio Check (please)

Postby retiredjg » Tue Jan 01, 2013 12:07 pm

TimeRunner wrote:Age: 58
Desired Asset allocation: 65s/35b but open to advice

I think this is too aggressive. First of all, you have no need to take risk. You've already "won the game" so to speak, so what reason do you have to put this money at risk? Second, 35% bonds is more aggressive than "age minus 20" in bonds - and that's about the most aggressive stance that gets much discussion around here.

You may have a willingness to take risk, but you have no need for risk and not that great an ability to take risk since you are only 4 years from retirement. If you consider your willingness, need, and ability to take risk, your 65/35 idea is just too risky in my opinion. At a minimum, you should have 40% in bonds, but I really think 50% would be smarter.

Total = 1,597,500 (nice job :happy). Looking at percentages instead of dollars, your current portfolio looks like this:

Taxable 15.8% 251.7k
0% Vanguard CA Tax-Exempt MM Fund (VCTXX) (0.17%) (Sweep acct)
1.8% Vanguard Emerg Mkts Stock Index Fund Admiral VEMAX (0.20%)
3.05 Vanguard Total Intl Stock Index Fund Admiral VTIAX (0.18%)
1.9 Vanguard Total Stock Mkt Index Fund Admiral VTSAX (0.06)
.3% Vanguard VAW ETF (0.19%)
4.1% AAPL (cost $39K LT)
4.7% GOOG (cost $36.4K LT)

His 401k 65.1%
$1.04M USGOV TSP L2020 (39.7% bonds) contrib max every year since 1987, currently $22K pre-tax, <--what does this mean?


Roth IRA at Vanguard 19.1% ($305.8)
3.4% Vanguard VEMAX Emerging Markets(0.20)
3.9% Vanguard VBTLX Total Bond (0.10%)
4.3% Vanguard VTIAX Total International (0.18%)
7.6% Vanguard VTSAX Total Stock (0.06%)

Your current portfolio is 70% stocks, 30% bonds, with 35% of your stocks in international. Your portfolio is "OK" other than being too aggressive. However, it could be simpler and more efficient if you want. But I suspect you have nothing but gains in your taxable account, right?


Expected CSRS Pension 5 years approx $10.5K/year @ age 62
Expected FERS Pension 32 years approx $49.3K/year @ age 62
Planning to not file for Soc Security until age 70, expected $40.5K/year @ age 70

Do you expect this to cover most of your expenses? I realize that retirement and marriage might change things, but give it your best guess.

New annual Contributions
$22.5K into TSP L2030 + employer match $7K <-----do you mean 2030 or is this a typo? It doesn't make a lot of sense to be adding to your stock percentage - you are already too aggressive.


Age 58, will retire at 62 (god and gov't willing), should I continue to hold AAPL and GOOG or sell in 2013? I am somewhat uncomfortable with these large holdings.

This is 8.8% of your portfolio. Up to 10% in "play money" is not greatly frowned upon around here. 5% might be better. Some would say 0%. And it would not really matter if it all went to zero - you won't be eating cat food in retirement. But, it is your discomfort that indicates you should sell some. You could sit on it and let it become a smaller part of your portfolio as it grows. You could sell a little each year. You could donate some each year - you get the full value of the donation as a deduction. Or you could just pull the bandaid off and dump it if that is what you want.


I want to take another look at this more holistically with my fiancee's finances - something I really haven't seriously done to date, but which I really need to do. Gulp! She's extremely responsible, so I don't expect any surprises. I'll repost with her info in the next month or so

You should not combine portfolios until marriage. Combining portfolios often puts one party at a disadvantage - all the bonds or all the stocks.


I *think* I understand your advice re: roth conversions post retirement...which I think is looking at filling the buckets below 28 or 33% tax bracket or so with Roth IRA conversions using TSP money that has been transferred to a TIRA.

This is often a good idea. But in your case, I think Roth conversions is not necessarily a good idea and will only benefit heirs (perhaps nieces and nephews?). And probably not at 28% and CERTAINLY not at 33%. This can be looked at at a later time though.

With the answers to some questions above, maybe an idea could be given for your consideration. However, with taxable gains in your taxable account, the amount of "improvement" might be limited.
retiredjg
 
Posts: 16287
Joined: 10 Jan 2008


Return to Investing - Help with Personal Investments

Who is online

Users browsing this forum: Baidu [Spider], BigJohn, challenger74, #Cruncher, Ericson32, jackholloway, mudfud, pindevil, tarnation, Yahoo [Bot] and 64 guests