This is an edit of my initial post with my current thoughts and questions. I would greatly appreciate any input and I thank you in advance. I currently I understand investments just enough to be dangerous but I want to learn. My goal is to simplify my portfolio and position my funds for retirement in 1-3 years. I could retire @ 60 with full benefits (including medical) but I still very much enjoy my profession. Right now my plan is to reduce my hours and continue to work another couple of years. That could change if the frequency of RBD’s (really bad days) increases. I hope this isn't too long, I have tried to include all the necessary information.
EF/House fund: @ least 12 month. Currently all in cash. Most is earmarked for a housing upgrade (complicated family issues) within 1-2 years.
Debt: Home. $27,000 @ 5.5 % interest. Home worth about $350,000.
Tax Filing Status: Single, no children
Federal Tax Rate: 28% State tax rate: 4.63% State: CO
AA goals: 50E/50B with 3 years of income needs in STB’s (bucket approach for early retirement years, psychologically this makes me more comfortable
Desired International allocation: 25%-30%.
Current portfolio is: ~$1.4 million excluding EF’s.
Current household income: low-mid 100k
Retirement Income Needs: ~ 80k
Pension: either annuity (no COLA) of ~$62,000/yr or lump sum of ~870k. I need to learn more about the pros/cons of annuities vs lump sum before I decide. Here are my working plans and questions
. Current allocations are listed below. Am I on the right track? Any suggestion regarding better options?Mortgage-
will pay off using taxable bond funds (slight capital losses) and some ER funds.VANGUARD 401k:
(Currently 18% ROTH)
26% Vanguard Institutional Index Fund Institutional Shares- VINIX ER 0.04
11.5% Vanguard Small-Cap Value Index Fund Institutional Shares VSIIX ER 0.19
12.5% Vanguard International Growth Fund Admiral Shares- VWILX ER 0.36
Bonds: 50% Vanguard Total Bond Market Index Fund Institutional Shares- VBTIX ER 0.07
Would you recommend continuing to fund as ROTH contributions? I am thinking no as my tax bracket will most likely be lower in retirement.
OR I could just go with Vanguard 2015 Target Retirement (.17) TSM 38.9%, Intl 16.7% Bonds 44.4% (TBM 39.4%, TIPS 5%); SCHWAB IRA's-
(no ROTH funds). Currently in actively managed funds. I would like to move to lower cost options unless some are worth keeping.
37.5% SWTSX -Total Stock Market Index (.09)
11.5% SWISX – International Developed Market Index + SFENX Emerging Market Index Not sure what ratio of developed to emerging to use.
Bonds: 50%: 7.5% Short term bond fund, reminder in SWLBX – Total Bond Index
Would ETF’s be better? I have never used ETF’s before but the expense ratios are lower. Any better choices for index funds?
- Would you recommend some inflation protection? I bonds or TIPS?
- Thoughts on need for long term care insurance? I think I can self fund this. I have good medical coverage for retirement.
- ROTH’s confuse me. My impression is that it is advantageous to have both pre and post tax dollars available in retirement. I cannot fund a ROTH IRA for 2012 due to income. I may be able to going forward. I have looked into doing a backdoor conversion but the only way I can see to do one would be to transfer pre-tax IRA contributory dollars to my rollover IRA @ Schwab and then move the rollover dollars into my pre-tax Vanguard 401k. Can I do this? Is it worth the effort?Current Allocations:
54% Equities (8% Mid-Small Cap, 12% International), 46% BondsVANGUARD 401K
– 63% of retirement savings (18% is ROTH)
13% Vanguard Institutional Index Fund Institutional Shares- VINIX ER 0.04
3% Vanguard Mid-Cap Index Fund Institutional Shares- VMCIX ER 0.08
2% Royce Low-Priced Stock Fund Institutional Class- RLPIX ER 1.19
6% Vanguard International Growth Fund Admiral Shares- VWILX ER 0.36
37% Vanguard Total Bond Market Index Fund Institutional Shares- VBTIX ER 0.07 [b]ROLLOVER IRA- SCHWAB
30% of retirement savings
Mix of Oakmark Equity Income (OAKBX ER 0.77), Parnassus Equity Income (PRBLX ER 0.94), and Oakmark International (OAKIX ER 1.06) TRADITIONAL IRA-SCHWAB
(7% of retirement saving, mixed pre and post tax)- SCHWAB 7% of retirement savings
Mix of Royce Premier Investment Class (RYPIZ ER 1.09) and Harbor Bond (HABDX ER 0.55) TAXABLE ACCOUNTS
0.5% DWS Short Duration Fund-S PPIAX ER 0.86 ~9k
0.5% American Century Gvt Bond CPTNX ~8k
2% Harbor International- Instn HAINX ~25kOther available funds in Vanguard 401K
Domestic Stock Options- I omitted some funds with really high ER’s
- Vanguard PRIMECAP Fund Admiral Shares VPMAX ER 0.36
- Vanguard Windsor II Fund Admiral Shares VWNAX ER 0.27
- Vanguard Mid-Cap Growth Index Fund Admiral VMGMX ER 0.1
- Vanguard Small-Cap Value Index Fund Institutional Shares VSIIX ER 0.19
- Vanguard Small-Cap Growth Index Fund Admiral VSGAX ER 0.1
- Dodge & Cox International Stock Fund DODFX ER 0.64
- American Funds New Perspective Fund Class R-5 RNPFX ER 0.51
- Vanguard Developed Markets Index Fund Institutional Shares VIDMX ER 0.08
- Vanguard Short-Term Investment-Grade Fund Institutional Shares VFSIX ER 0.07
- Vanguard Long-Term Investment-Grade Fund Admiral Shares VWETX ER 0.12
- Vanguard GNMA Fund Admiral Shares VFISX ER 0.11
- Vanguard Inflation-Protected Securities Fund Institutional Shares VIPIX ER 0.07
- Vanguard REIT Index Fund Signal Shares VGRSX ER 0.1
- Vanguard Target Retirement 2010, 2015 etc ER 0.17