What Vanguard Fund for $15,000 Investment?

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Topic Author
TVKNSC
Posts: 97
Joined: Fri Feb 01, 2013 11:07 am

What Vanguard Fund for $15,000 Investment?

Post by TVKNSC »

Emergency funds: Yes. 6 months worth
Debt: school loan = $12,000 (2.9%), school loan = $10,000 (6.8%), car loan = $17,000 (1.9%). I am looking to pay off the loan at 6.8%. , and 30-year mortgage = $250,000 (3.4%)
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% fed/7% state
State of Residence: SC
Age: 35
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 30% of stocks
Portfolio size = low six-figures (IVO $200,000)

Current retirement assets

His 401k at TSP = 2.5%
$5,000 in L Fund-2040 (0.025%). I contribute about $1,600 per year in traditional IRA or 4% per month. I can switch to Roth TSP as it's now an option (do not max out each year)
Company match? NO

His Roth IRA at Vanguard = 20%
$40,000 in VG 2040 (0.18%) 62% total stock market / 27 % in international stock index/10% in total bond market (max out each year)

Her Roth IRA at Vanguard = 30%
$60,000 at VG 2040 (0.18%) 62% total stock market / 27 % in international stock index/10% in total bond market (max out each year)

VG Wellington (admiral) = 30%
$60,000 (0.19%)
65% stocks/ 35% bonds-short-term reserves

$15,000 emergency fund and $20,000 to invest = 17.5% of assets

Contributions

New annual Contributions
$5,500 his Roth IRA
$5,500 her Roth IRA

Available funds

After emergency fund, I have roughly $15,000 that I need to invest in a non-retirement account (taxable).

Questions:
1. Based on above, where do I invest the $15,000? I was looking at VG Wellesley or the LifeCycle Growth Fund ( I am drawn to the "three-fund portfolio" which the 2040 follows, but I can only deposit $5,500 into my ROTH VG 2040 ). I also dont want fund overlap and to pay unnecessary ERs.

2. How focused should I be on paying off those loans? My real concern is the school loan at near %7. I am looking at paying that off in-full this week! The other school loan and car loan have reasonable rates, but I still want to chip-away at those.

3. Would you switch from the traditional TSP to Roth TSP and increase the monthly allotment to TSP? I read about the pros/cons of each TSP, but I sort of like having tax-free money when I eventually withdraw. The TSP has the lowest expense ratios around, so increasing my allotment is something I am considering. I can max that out at $17,500 a year.

4. My goal with these non-retirement funds is long-term growth towards retirement. Am I on the right track with the right asset allocations, rate of saving, and level of aggression?

5. We're going to have about $3,000 a month to contribute to a taxable account, so is the right move to put it into the Wellington or another fund I dont have opened yet? Any advantage to ETFs vs other type of fund?
Last edited by TVKNSC on Mon Feb 04, 2013 2:17 pm, edited 1 time in total.
“There seems to be some perverse human characteristic that likes to make easy things difficult. ” ― Warren Buffett
WHL
Posts: 789
Joined: Mon Dec 10, 2012 1:22 pm

Re: What Vanguard Fund for $15,000 Investment?

Post by WHL »

If it was me, I'd max retirement accounts, pay off the loans, then invest in a taxable account.

Don't know enough about Roth 401k / TSP to comment much, but I think it would depend on your income - does the pre-tax contribution drop you into a lower tax bracket?
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damjam
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Location: Brooklyn, NY

Re: What Vanguard Fund for $15,000 Investment?

Post by damjam »

Topic Author
TVKNSC
Posts: 97
Joined: Fri Feb 01, 2013 11:07 am

Re: What Vanguard Fund for $15,000 Investment?

Post by TVKNSC »

WHL,
Thanks on response. The TSP contributions in traditional TSP do not drop me to the 15% bracket. It may if I max out TSP ($17,500) for the year, but I currently dont come near that much.
“There seems to be some perverse human characteristic that likes to make easy things difficult. ” ― Warren Buffett
crowd79
Posts: 640
Joined: Sun Nov 18, 2012 9:37 pm

Re: What Vanguard Fund for $15,000 Investment?

Post by crowd79 »

Get rid of the $10k student loan debt first, then it's a toss-up whether to put the additional $5k against the 2.9% student loan. Depends on how much you hate carrying debt like that around. You can probably outdo 2.9% in the markets over the long haul, so I'd invest it probably.
Topic Author
TVKNSC
Posts: 97
Joined: Fri Feb 01, 2013 11:07 am

Re: What Vanguard Fund for $15,000 Investment?

Post by TVKNSC »

Based on my initial post and with my current AA/diversification, is staying the course with Wellington a good idea for my taxable account? If so, I could put the remaining funds into Wellington. After some research, i like the 3-fund portfolio model that the 2040 follows. I also like the 65/35 AA with the Wellington. Like I mentioned before, fund overlap and unwanted ERs expenses is what I want to avoid with funds that closely mirror each other.
“There seems to be some perverse human characteristic that likes to make easy things difficult. ” ― Warren Buffett
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