Help with Roth and Taxable investments

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

Help with Roth and Taxable investments

Postby mrennthomas » Sun Feb 10, 2013 11:44 pm

Emergency funds: 12 months of expenses
Debt: None
Tax Filing Status: Married Filing Joint
Tax Rate: 25% Federal, 6.5% State
Income: 100K
State of Residence: WI
Age: 60
Total assets ~ 400K
Desired Asset allocation: 65/35
Desired International allocation: 10-15

42.3% Current Taxable assets:
12.3% - I Bonds
12.2% - Cash
Vanguard Mutual Funds
3.6% -Inflation Protected Securities - VIPSX (.20%)
3% - Mid-Cap Growth - VMRX(.53%)
1.6% - Total Bond Market Index - VBMFX(.22%)
4.1% - Target Retirement 2020 - VTWNX(.16%)
1.2% - Target Retirement 2030 - VTHRX(.17%)
Stocks
1.3% - Ford
2.1% - Johnson & Johnson
.9% - Manitowoc Co

41% Retirement assets:
23.2% - Her Roth Total
4% - CDs
Her Roth at Vanguard
1.6% - 500 Index Fund - VFINX(.17%)
4% - International Explorer fund -VINEX(.42%)
1.4% - Large Cap Index - VLACX(.24%)
1.3% - Small Cap Index - NAESX(.24%)
9.9% - Target Retirement 2015 - VTXVX(.16%)
1% - Stock - Citigroup - .
17.8% - His Roth Total
2.9% CDs -
His Roth at Vanguard
4.5% - Lg Cap Index Admiral - VLACX(.10%)
1.6% - Target Retirement 2015 - VTXVX(.16%)
8.8% - Target Retirement 2020 - VTWNX(.16%)

16.7% - Deferred Compensation Total
Her 457 Deferred Compensation
4.5% - Vanguard Target Retirement 2015
3.7% Vanguard Wellington Admiral
Her Roth Deferred Compensation
.5% - Vanguard Target Retirement 2015
2.6% - Vanguard Wellington Admiral
His 457 Deferred Compensation
.5% Vanguard Target Retirement 2015
His Roth Deferred Compensation
4.9 % Vanguard Target Retirement 2015

2013 Contributions
$6,000 her Roth IRA
$6,000 his Roth IRA
$23, 000 her Roth Deferred Compensation
$25, 000 taxable
Below are the choices for the deferred compensation
Asset allocation
Vanguard Target Retirement Income Inv VTINX 0.17 / 0.17
Vanguard Target Retirement 2015 Inv VTXVX 0.17 / 0.17
Vanguard Target Retirement 2025 Inv VTTVX 0.18 / 0.18
Vanguard Target Retirement 2035 Inv VTTHX 0.19 / 0.19
Vanguard Target Retirement 2045 Inv VTIVX 0.19 / 0.19
Vanguard Target Retirement 2055 Inv VFFVX 0.19 / 0.19
International
American Funds EuroPacific Gr R6 RERGX 0.50 / 0.50
BlackRock EAFE Equity Index Coll T N/A 0.10 / 0.10
MSCI EAFE Index N/A - / -
Small Cap
BlackRock Russell 2000 Index Coll T N/A 0.06 / 0.06
DFA US Micro Cap I DFSCX 0.52 / 0.52
Russell 2000 Index N/A - / -
Mid Cap
BlackRock Mid Cap Index - Collective F N/A 0.04 / 0.04
T. Rowe Price Mid Cap Growth Fund RPMGX 0.80 / 0.80
S & P MidCap 400 Index N/A - / -
Large Cap
Calvert Equity I CEYIX 0.69 / 0.69
Fidelity Contrafund FCNTX 0.81 / 0.81
Vanguard Institutional Index Fund Plus VIIIX 0.02 / 0.02
S & P 500 Index N/A - / -
Balanced
Vanguard Wellington Adm VWENX 0.19 / 0.19
Bond
BlackRock US Debt Index Fund Coll W N/A 0.05 / 0.05
Federated US Government Securities 2-5yr FIGTX 0.84 / 0.59
Vanguard Long-Term Investment Grade Adm VWETX 0.12 / 0.12
Barclays Capital Aggregate Bond Index N/A - / -

Questions

1. Do I have too many funds?
2. Which funds should be in taxable and which in Roth?
3. We will have sufficient income in retirement from fixed annuities through our employment. They are state pensions so we have no choice as to investments.

Advice will be appreciated.
mrennthomas
 
Posts: 2
Joined: 10 Feb 2013

Re: Help with Roth and Taxable investments

Postby Johm221122 » Mon Feb 11, 2013 2:49 am

Yes you have to many overlapping funs.Here is link to tax efficient placement
http://www.bogleheads.org/wiki/Principl ... _Placement
Hope this bumps you up
John
Johm221122
 
Posts: 4595
Joined: 13 May 2011

Re: Help with Roth and Taxable investments

Postby Duckie » Mon Feb 11, 2013 11:51 pm

mrennthomas, you want an AA of 65% stocks, 35% bonds (low for your ages), with 10-15% of stocks in international (that's low but I'll pick 15%). That breaks down to 55% US stocks, 10% international stocks, and 35% bonds. Here is a possible retirement portfolio:

Taxable at Treasury Direct -- 12%
12% I Savings Bonds

Taxable at Vanguard -- 30%
20% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.06%)
10% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.18%)

Her 457 DC -- 8%
8% (N/A) BlackRock US Debt Index Fund Coll W (0.05%)

Her Roth DC -- 3%
3% (N/A) BlackRock US Debt Index Fund Coll W (0.05%)

His 457 DC -- 1%
1% (N/A) BlackRock US Debt Index Fund Coll W (0.05%)

His Roth DC -- 5%
5% (N/A) BlackRock US Debt Index Fund Coll W (0.05%)

Her Roth IRA at Vanguard -- 23%
17% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.06%)
6% (VIPSX) Vanguard Inflation-Protected Securities Fund Investor Shares (0.20%)

His Roth IRA at Vanguard -- 18%
18% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.06%)

My comments/questions:
-- This ignores the tax cost of selling in taxable. (And the cost could be major.)
-- This has TISM in taxable to take advantage of the 
Foreign tax credit.
-- Are the Roth DCs also 457 plans?
-- Vanguard has found between 20% and 40% of stocks in international to be the "sweet spot". See the discussion and the Vanguard paper link. Vanguard splits the difference and uses 30% in their Target Retirement and LifeStrategy funds.
-- You wrote:
    2013 Contributions
    $6,000 her Roth IRA <-- The limit is $6,500 for 2013.
    $6,000 his Roth IRA <-- The limit is $6,500 for 2013.
    $23,000 her Roth Deferred Compensation
    $25,000 taxable
Your questions:
1. Do I have too many funds?
-- Yes.

2. Which funds should be in taxable and which in Roth?
-- Stocks go in taxable first. Bonds and TIPS go in tax-sheltered. See above.

3. We will have sufficient income in retirement from fixed annuities through our employment. They are state pensions so we have no choice as to investments.
-- Just be aware that annuities/pensions are income streams like social security. They do not replace the bond component in your AA. They just lessen your need to withdraw from assets.

Something to think about.
User avatar
Duckie
 
Posts: 2288
Joined: 8 Mar 2007

Re: Help with Roth and Taxable investments

Postby mrennthomas » Tue Feb 12, 2013 8:53 pm

Thank you so much for your advice. I will put the $$ I have sitting on the sidelines in stock and look at getting the bonds into my Roth. I did not realize the Roth IRA limit had been raised. Thank you for that information.
mrennthomas
 
Posts: 2
Joined: 10 Feb 2013

Re: Help with Roth and Taxable investments

Postby letsgobobby » Tue Feb 12, 2013 9:09 pm

I encourage you to think about Duckie's implied question: should you really be 65% stocks at age 60? If you lost 1/3 of your entire portfolio, decreasing it to $270,000 or so - would you be ok? if it didn't recover for 10 years?
letsgobobby
 
Posts: 6815
Joined: 18 Sep 2009


Return to Investing - Help with Personal Investments

Who is online

Users browsing this forum: ab0mination, BigFoot48, incongruate, jasc15, Jazz56, jh-1391, kaudrey, Kosmo, letsgobobby, Stan Dup, traveler90, TurnitinBot [Bot], Yahoo [Bot] and 87 guests