New Boglehead - please review investment plan

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New Boglehead - please review investment plan

Postby smurflady » Sat Jan 26, 2013 5:45 pm

Thanks in advance for reviewing this post. Our current investments are scattered across quite a few mutual funds thanks to the financial advisor we hired. Rather than show the current allocations, I'm including my proposed allocations for review. Before we let our advisor go, I'm hoping a few experienced Bogleheads could take a look at my plan to make sure it's sound.

Emergency Funds: Yes - 12 months
Debt: $600K 30 yr FRM, 3.5% interest rate, no other debt
Tax Filing Status: Married filing jointly
Tax Rate: 33-35% Federal (depending on amount of stock exercised), 9.3% state
State of Residence: CA
Age: 32/33
Desired Asset Allocation: 60% Stock, 30% Bonds, 10% REIT
Desired International Allocation: 33% of Stock
Total Portfolio Size: high six digits, 45% tax deferred, 10% tax free, 45% taxable

Proposed Retirement Assets:

Taxable:
25% - Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) - 0.06%
15% - Vanguard Tax-Managed International Fund Admiral Shares (VTMGX) - 0.12%
5% - Vanguard Emerging Markets Stock Index Fund Admiral Shares (VEMAX) - 0.20%

His 401K:
21% - BlackRock US Debt Index-T - 0.04%

Her 401K:
9% - VANG TOT BD MKT SIG (VBTSX) - 0.10%
12% - VANGUARD INST INDEX (VINIX) - 0.04%
3% - SPTN EXT MKT IDX ADV (FSEVX) - 0.07%

His Roth IRA:
5% - Vanguard REIT Index Fund Admiral Shares (VGSLX) - 0.10%

Her Roth IRA:
5% - Vanguard REIT Index Fund Admiral Shares (VGSLX) - 0.10%

Total ER - 0.08%

New Annual Contributions:
His 401K: $17,500+$5,400 Employer Match
Her 401K: $17,500+$7,500 Employer Match
His Roth IRA: $5,500 (backdoor)
Her Roth IRA: $5,500 (backdoor)
Taxable: $50,000

Available Funds:

His 401K:
BlackRock US Debt Index-T - (0.07)
Spartan 500 Index-Adv - (0.07)
BlackRock US Equity Market Index-F - (0.08)
BlackRock Extended Equity Market-F - (0.08)
LifePath Index Retirement-Q - (0.11)
LifePath Index 2015-Q - (0.11)
LifePath Index 2020-Q - (0.11)
LifePath Index 2025-Q - (0.11)
LifePath Index 2030-Q - (0.11)
LifePath Index 2040-Q - (0.11)
LifePath Index 2035-Q - (0.12)
LifePath Index 2045-Q - (0.12)
LifePath Index 2050-Q - (0.12)
LifePath Index 2055-Q - (0.12)
Fidelity Instl MM Fds Money Market-Inst - (0.18)
Invesco Charter Strategy - (0.44)
PIMCO Total Return-Inst - (0.46)
Invesco Large Cap Relative Value Strategy - (0.47)
Fidelity Puritan - (0.59)
Harbor International-Inst - (0.79)
Wells Capital Small Cap Value Strategy - (0.8)
Fidelity Low-Priced Stock - (0.88)
Fidelity OTC Portfolio - (0.91)
Fidelity International Discovery - (1.01)

Her 401K:
VANGUARD INST INDEX (VINIX) - (0.04)
SPTN EXT MKT IDX ADV (FSEVX) - (0.07)
VANG TOT BD MKT SIG (VBTSX) - (0.1)
VANG INFL PROT ADM (VAIPX) - (0.11)
FID FREEDOM K 2000 (FFKBX) - (0.39)
FID FREEDOM K INCOME (FFKAX) - (0.39)
FID INTERMED BOND (FTHRX) - (0.45)
FID FREEDOM K 2005 (FFKVX) - (0.46)
FID FREEDOM K 2010 (FFKCX) - (0.5)
FID MGD INC PORT II - (0.5)
FID FREEDOM K 2015 (FKVFX) - (0.51)
FID EQUITY INCOME K (FEIKX) - (0.53)
FID FREEDOM K 2020 (FFKDX) - (0.54)
FID FREEDOM K 2025 (FKTWX) - (0.58)
FID FREEDOM K 2030 (FFKEX) - (0.59)
FID FREEDOM K 2035 (FKTHX) - (0.62)
FID FREEDOM K 2040 (FFKFX) - (0.62)
FID FREEDOM K 2045 (FFKGX) - (0.63)
FID FREEDOM K 2050 (FFKHX) - (0.64)
FID FREEDOM K 2055 (FDENX) - (0.64)
FID GROWTH CO K (FGCKX) - (0.7)
FID LOW PRICED STK K (FLPKX) - (0.76)
TRP BLUE CHIP GRTH (TRBCX) - (0.77)
TRP REAL ESTATE (TRREX) - (0.78)
ABF SM CAP VAL INST (AVFIX) - (0.83)
FID DIVERSIFD INTL K (FDIKX) - (0.84)
TMPL INST FRGN SM CO (TFSCX) - (1.02)

Questions:
1) Since we are in a high tax bracket, does it make sense to use Tax Managed International instead of Total International?
2) Would you recommend allocating the bond portion between TBM and TIPS?
3) I have some funds in Fidelity Spartan Total Stock Market - selling would incur $20K in LT capital gains. Should I keep the fund or swap with Vanguard?
4) Would you recommend going with mutual funds (Admiral) or ETFs?
5) Our taxable and IRA accounts are currently with TD Ameritrade. Is it worth it to move to Vanguard?
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Re: New Boglehead - please review investment plan

Postby Duckie » Sat Jan 26, 2013 7:37 pm

smurflady wrote:)Questions:
1) Since we are in a high tax bracket, does it make sense to use Tax Managed International instead of Total International?
Not to me. I would use all TISM instead of the two international funds.
2) Would you recommend allocating the bond portion between TBM and TIPS?
People on this board like between 0% and 50% TIPS. I'm a 0% myself. But at your ages even if you want TIPS I don't think you need them yet.
3) I have some funds in Fidelity Spartan Total Stock Market - selling would incur $20K in LT capital gains. Should I keep the fund or swap with Vanguard?
Keep it. But if you want you could set it to not reinvest dividends so it won't grow.
4) Would you recommend going with mutual funds (Admiral) or ETFs?
I prefer funds to ETFs. They are less hassle to me. And you would certainly have more than enough for admiral shares.
5) Our taxable and IRA accounts are currently with TD Ameritrade. Is it worth it to move to Vanguard?
For the IRAs, absolutely. For taxable, it depends on the tax hit. But if you're going to sell things anyway to get to your proposed portfolio (which I like) then, yes, move to Vanguard.

Be aware that these are personal opinions and I'm biased toward Vanguard.
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Re: New Boglehead - please review investment plan

Postby Hastibe » Sat Jan 26, 2013 9:55 pm

Duckie wrote:
smurflady wrote:Is it worth it to move to Vanguard?
For the IRAs, absolutely. For taxable, it depends on the tax hit. But if you're going to sell things anyway to get to your proposed portfolio (which I like) then, yes, move to Vanguard.

Be aware that these are personal opinions and I'm biased toward Vanguard.

If you would be willing to explain, I'd be curious to know why it'd be worth it for him to move at least their IRAs from TD Ameritrade to Vanguard.
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Re: New Boglehead - please review investment plan

Postby bdpb » Sun Jan 27, 2013 1:36 pm

Have you checked your 401k for after-tax contributions and in-service withdrawals?
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Re: New Boglehead - please review investment plan

Postby Default User BR » Sun Jan 27, 2013 2:58 pm

Hastibe wrote:If you would be willing to explain, I'd be curious to know why it'd be worth it for him to move at least their IRAs from TD Ameritrade to Vanguard.

The OP is holding mutual funds. TDA will charge transaction fees for new contributions or rebalancing. If the OP had ETFs, then it wouldn't make much sense.


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Re: New Boglehead - please review investment plan

Postby Hastibe » Sun Jan 27, 2013 3:43 pm

Default User BR wrote:
Hastibe wrote:If you would be willing to explain, I'd be curious to know why it'd be worth it for him to move at least their IRAs from TD Ameritrade to Vanguard.

The OP is holding mutual funds. TDA will charge transaction fees for new contributions or rebalancing. If the OP had ETFs, then it wouldn't make much sense.

Got it--thanks for explaining!
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Re: New Boglehead - please review investment plan

Postby smurflady » Sun Jan 27, 2013 7:11 pm

bdpb wrote:Have you checked your 401k for after-tax contributions and in-service withdrawals?


All 401k contributions are pretax. Is there benefit to making after tax contributions instead of contributing to a taxable account? I'm not sure about in service withdrawals - what would be the benefit of this? Wouldn't rolling money into an IRA eliminate the opportunity for back door Roth contributions?

Duckie - thanks for reviewing and commenting!
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Re: New Boglehead - please review investment plan

Postby coinflip » Sun Jan 27, 2013 7:46 pm

smurflady wrote:All 401k contributions are pretax. Is there benefit to making after tax contributions instead of contributing to a taxable account? I'm not sure about in service withdrawals - what would be the benefit of this? Wouldn't rolling money into an IRA eliminate the opportunity for back door Roth contributions?


See this thread: viewtopic.php?f=2&t=66208
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Re: New Boglehead - please review investment plan

Postby pingo » Mon Jan 28, 2013 12:01 am

And this post about after-tax contributions.
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Re: New Boglehead - please review investment plan

Postby smurflady » Mon Jan 28, 2013 11:53 am

Interesting - I never thought about after tax contributions to my 401k plan! Unfortunately, my plan does not allow in-service withdrawals except for cases of hardship, military service, or to withdraw rollover funds. :(

Any other thoughts on my investment plan overall (AA, tax efficient placement, etc)? Thanks!
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Re: New Boglehead - please review investment plan

Postby pingo » Mon Jan 28, 2013 2:51 pm

I don't have much experience with the following questions, but I'll offer my $0.02.

smurflady wrote:Since we are in a high tax bracket, does it make sense to use Tax Managed International instead of Total International?


If you already have Tax Managed International with significant gains, I'd probably keep it. It's not like it doesn't have merit. In a neutral choice between the two, I'd probably go with Total International.

smurflady wrote:I have some funds in Fidelity Spartan Total Stock Market - selling would incur $20K in LT capital gains. Should I keep the fund or swap with Vanguard?


Fido Total Stock is as good a choice as any. If you need to avoid the taxes, keep it.

smurflady wrote:Would you recommend going with mutual funds (Admiral) or ETFs?


If you have access to Admiral Shares, I doubt there are enough good reasons to use ETFs. ETFs are not better than traditional mutual funds. In my mind, their best use is to give you access to good funds when your choices are otherwise poor or limited. Disclosure: I don't care for ETFs, except when they are clearly the best option, but that's me. Definitely read the Wiki: Exchange Traded Funds.

smurflady wrote:Our taxable and IRA accounts are currently with TD Ameritrade. Is it worth it to move to Vanguard?


No personal experience here, but my understanding is that an operation like TD Ameritrade (which I believe offers VG ETFs with zero commissions) is probably a better brokerage than Vanguard (as a brokerage), if it is that you need a brokerage (which you would if you use ETFs). If you use traditional funds, I'd say Vanguard is preferable, but there are those who prefer holding VG funds in a Wells Fargo PMA.
Last edited by pingo on Tue Jan 29, 2013 7:06 am, edited 2 times in total.
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Re: New Boglehead - please review investment plan

Postby pingo » Mon Jan 28, 2013 6:26 pm

Also:

smurflady wrote:BlackRock US Equity Market Index-F - (0.08)
BlackRock Extended Equity Market-F - (0.08)


Are these another S&P 500/Extended Mkt combo or does "US Equity Market Index" cover the total U.S. equity market like Vanguards Total Stock Index Fund?
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Re: New Boglehead - please review investment plan

Postby Duckie » Mon Jan 28, 2013 7:20 pm

pingo wrote:Also:

smurflady wrote:BlackRock US Equity Market Index-F - (0.08)
BlackRock Extended Equity Market-F - (0.08)


Are these another S&P 500/Extended Mkt combo or does "US Equity Market Index" cover the total U.S. equity market like Vanguards Total Stock Index Fund?

It's an S&P 500 Index fund. See here.
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Re: New Boglehead - please review investment plan

Postby pingo » Tue Jan 29, 2013 8:03 am

How strange to have two S&P 500 funds in the same employer plan. :confused

smurflady wrote:Any other thoughts on my investment plan overall (AA, tax efficient placement, etc)? Thanks!


I like your proposed portfolio, too, with my apologies to Duckie, who had already responded here to the same questions that I did a couple posts ago.

I'll add the following:

Duckie wrote:
smurflady wrote:2) Would you recommend allocating the bond portion between TBM and TIPS?


People on this board like between 0% and 50% TIPS. I'm a 0% myself. But at your ages even if you want TIPS I don't think you need them yet.


I'm with Duckie, but just in case you have an itch to scratch:

There's nothing to indicate that you should have TIPS. In a reasonable range of 0 and 50% (of bonds), zero can still be reasonable at any stage. For reference, Vanguard's Target Retirement Funds do not begin to include TIPS until after the portfolio reaches 40% bonds, and they admit that the final amount of TIPS they use down the road is a bit of an educated guess of what is appropriate.

If you feel the inclination to hold them, simplicity dictates that you erase Her 401k Total Bond Fund and used the Inflation-Protected fund instead. That places roughly 1/3 of bonds in TIPS and I think roughly 1/3 of new bond contributions would go there as well. (I haven't looked closely at the numbers.) There's no method to this idea beyond looking at the only place left to hold them and realizing that instead of using Total Bond in Her 401k, using TIPS still falls within the range of reason.

Not a recommendation. Just food for thought. :beer
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