Portfolio Review / Long Term Advice - 28yo [Military]

[_james]

First of all, thanks to the advice here I became debt free 1 year ago. Four years ago my net worth was -$45k with $0 assets. I have since been following the portfolio allocation outlined in the book Unconventional Success.

Emergency funds: 3 months ($8k) in a USAA bank savings account
Debt: $0 - full credit card balances paid each month (only $50-300)
Tax Filing Status: Single (military), 0 dependents
Tax Rate: 15% Federal, 15% State
State of Residence: Wisconsin
Age: 28
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 15% of total allocation

Current bills
Internet - $40/month
Renters Insurance ($20k) - $100/year

Current %(Desired %)

Roth IRA (~$23k)
40.72% (40%) - Vanguard Total Stock Market Index Fund
16.96% (15%) - Vanguard European Stock Index Fund
15.23% (15%) - Vanguard REIT Index
14.85% (15%) - Vanguard Inflation-Protected Securities Fund
2.650% (0%) - Vanguard Money Market

TSP ($2.4k)
9.590% (15%) - TSP Government Securities Investment (G Fund)

Total
72.91% stocks
24.44% bonds
2.650% money market

Contributions
$5.5k - Roth IRA (No employer matching)
$14k+ - TSP (No employer matching)

I am putting new money into the Vanguard Money Market until I've maxed 2013 limit and I will open a U.S. Govt Intermediate Bond fund to balance my bonds allocation. I will have enough in 1.5 months for the minimum investment. Once my 2013 Roth IRA is maxed I will drastically increase how much money is taken out of my paycheck and goes directly into my TSP account. I am attempting to put 85% of my pay into my portfolio this year.

Questions
1. Should I move my emergency funds to a different account? I don't make much interest.
2. Is my portfolio too conservative at 70%/30%?
3. I am afraid I will not have enough money to retire because I don't make much money and feel I have started investing too late. I *should* receive a military retirement paycheck when I am 38 with medical benefits.

Thanks for your advice and recommendations.

[jimkinny]

No one is making much on savings type accounts. You might be able to find one paying something, but not much. Others may have researched this.

70% equities is not generally considered conservative. The rules of thumb are age in bonds or age in bonds plus/minus 5-10% percent but also consider the knowledge in this article by Rick Ferri re allocation:

http://www.rickferri.com/blog/strategy/the-flight-path-approach-to-age-based-asset-allocation/

Saving is the most important thing you can do and it is under your control and then getting the right asset allocation that you can live with during bear markets is a close second.The Wiki has some calculators that are useful tools in attempting to estimate if your plan will achieve your goal.

Remember that these are tools. The best provide an opportunity to input inflation, saving rate, rate of return (all variables). No one knows what these will be in the future so think of these calculators as educational tools.

http://www.bogleheads.org/wiki/Tools_and_Calculators

jim

[NYBoglehead]

Congrats on being debt free, and it looks like you've got a good foundation for your portfolio going forward. On an admin note, I think a typo was made on the state income tax line, there is no way your state income tax bracket is 15% (its important to know for planning purposes, not trying to be a jerk).

On to your questions...

1. Nobody is making much interest right now. Could you probably find somewhere that'll pay a little higher? Sure, but the difference is likely to be so trivial that it might not be worth it, especially if you do all of your other banking with USAA.

2. I don't think your portfolio is too conservative, but I'd keep that 70/30 mix for a few years instead of being in a rush to increase the bond allocation.

3. Your concerns are overblown in my opinion. The 25k you've got in your portfolio right now will be worth more than 150k at age 59 if you earn 6% annually, and that is without making any additional contributions. If you stay in the military for 20 years and get your pension you can start doing some serious accumulating in your 40s and 50s when you draw a pension and a salary from your next job. Any deployments going forward will provide an opportunity to save the overwhelming majority of your paycheck. Keep maxing out Roth IRAs and contributing as much as possible to your TSP and you'll be just fine.

On a side note, I recommend not putting your 2013 Roth contribution into a Money Market Fund. With such a long way to go before retiring, there is no need in my opinion to keep anything in a MMF.

[LadyGeek]

First of all, thanks to the advice here I became debt free 1 year ago.

First, I edited your thread title to included [Military] to attract the attention of members who can help you the best.

Here's your old thread: Starting out, Currently Deployed, Where to put tax free pay?

Since your last visit, we've added a page in the wiki that's chock full of tips which are geared to helping Military personnel: Military finances