Portfolio Critique and Advice Request

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Portfolio Critique and Advice Request

Postby DrPeppaPig » Tue Mar 12, 2013 4:17 pm

My 403b and 457 recently changed a few investment options and I'm thinking changing some elections. I've read through many threads and based my current portfolio on others that I've seen on this forum but would appreciate any and all advice. I have pretty thick skin so fire away!

Thanks,
Dean


Emergency funds = Yes

Debt:
- Mortgage: $279K at 3.25% (164 payments left - $2277/mo)
- Student Loan: $75K at 2.875% ($467/mo + $300/mo additional)
- John Deere Tractor: $22K at 0% ($800/mo)

Tax Filing Status: Married Filing Jointly
Tax Rate: 33% Federal , 7.85% State (2012 Income - $308K)
Age: Me 34 , Wife 35, Kids – 6,3,One due in June
Desired Asset allocation: 75/25 to 70/30 updated from 80/20
International Allocation: 30% updated from 20%

Current Retirement Assets:

His 401(k) ($111K)
25.22% Vanguard Institutional Index Fund (VINIX) (.04)
4.27% Principal MidCap S&P 400 Index Separate Acct (No Ticker) (.06) {Similar to MPSIX}
12.92% Principal SmallCap S&P 600 Index Separate Acct (No Ticker) (.06) {Similar to PSSIX}

Her Rollover IRA ($49.5K)
3.96% Vanguard Total Stock Market Index (VTSAX) (.06)
4.38% Vanguard Total International Stock Index (VTIAX) (.16)
2.33% Vanguard Total Bond Index (VBMFX) (.22)
6.24% Vanguard REIT (VGSLX) (.10)
1.91% Vanguard Prime Money Market (VMMXX) (.16)

His Roth IRA ($34.5K)
4.39% Vanguard Total Stock Market Index (VTSAX) (.06)
4.75% Vanguard Total International Stock Index (VTIAX) (.16)
2.12% Vanguard Total Bond Index (VBMFX) (.22)
1.91% Vanguard Prime Money Market (VMMXX) (.16)

Her Roth IRA ($31K)
4.15% Vanguard Total Stock Market Index (VTSAX) (.06)
5.50% Vanguard Total International Stock Index (VTIAX) (.16)
2.12% Vanguard Total Bond Index (VBMFX) (.22)

His 403(b) ($11.5K)
4.35% PIMCO Total Return Admin (PTRAX) (.71)

His 457(b) ($3K)
1.27% PIMCO Total Return A Fund (PTTAX) (.85)

His 457(f) – ($21.5K - Doesn’t vest until 2020)
8.21% PIMCO Total Return A Fund (PTTAX) (.85)

100.0% Total ($262K)


New annual Contributions
$17,500 in 401k (match will be $10,000 for total of $27,500)
$5,500 His backdoor Roth IRA
$5,500 Her nondeductible Traditional IRA
$1200/yr in 457b
$7500 in 2014, $5000 in 2015, $2500 in 2016 in 457f
$0 taxable right now – hoping to start contributing $1000-1500/mo soon
We also put $10,000 into 529


Questions

1) 403b – I’m thinking of changing from PTRAX to VASIX due to the high expense ratio of PTRAX. Since it contains 80% VTIBX, it shouldn’t affect my bond ratio too much. Is that a good idea or not?

2) 457b & f: I’m thinking of changing to 60 % VIFSX, 10% VMISX, 30% NAESX to take advantage of the low expense ratios. I'd buy more bonds in our Roth & IRA to make up for the change. Any thoughts?

3) His Roth & Her Rollover – Should I use the VMMXX funds to buy VBMFX or are there any other bond options that might be beneficial (assuming I change 457 funds)?

4) Roth 401k - A Roth 401k option was recently added. I’m not sure if I should contribute to that or a traditional 401k. I’ve read quite a few articles on it and can convince myself both options are the way to go. Any thoughts?

**************************************************************************************************************************************************************

401(k) Funds Available

Principal Stable Value Institutional Fund (No Ticker) – (.52)

Delaware High-Yield Opportunities Institutional Index (DHOIX) – (.88)
MFS Bond R4 Fund (MFBJX) – (.60)
PIMCO Total Return Institutional Fund (PTTRX) – (.46)
Wells Fargo Advantage Government Securities I Fund (SGVIX) – (.57)

Principal Trust Retirement Income Fund (No Ticker) – (.47)
Principal Trust Retirement 2015 Fund (No Ticker) – (.49)
Principal Trust Retirement 2020 Fund (No Ticker) – (.50)
Principal Trust Retirement 2025 Fund (No Ticker) – (.51)
Principal Trust Retirement 2030 Fund (No Ticker) – (.51)
Principal Trust Retirement 2035 Fund (No Ticker) – (.51)
Principal Trust Retirement 2040 Fund (No Ticker) – (.52)
Principal Trust Retirement 2045 Fund (No Ticker) – (.52)
Principal Trust Retirement 2050 Fund (No Ticker) – (.52)
Principal Trust Retirement 2055 Fund (No Ticker) – (.52)
Principal Trust Retirement 2060 Fund (No Ticker) – (.52)

Principal Equity Income Institutional Fund (PEIIX) – (.52)
Principal Large Cap Growth I Institutional Fund (PLGIX) – (.63)
Vanguard Institutional Index Fund (VINIX) – (.04)

Principal MidCap S&P 400 Index Separate Acct (No Ticker) – (.06) {Similar to MPSIX}
Principal SmallCap S&P 600 Index Separate Acct (No Ticker) – (.06) {Similar to PSSIX}

American Funds EuroPacific Growth R6 Fund (RERGX) – (.50)
Oppenheimer Developing Markets Y Fund (ODVYX) – (1.03)


403(b) Funds Available

Transamerica Partners Institutional Stock Index (DISFX) – (.30)
American Funds Growth Fund of America R3 (RGACX) – (.98)

TransAmerica Partners Institutional Mid Value (DIMVX) – (.90)
Columbia Small Cap Value II Z (NSVAX) – (1.06)
Nuveen Small Cap Select (EMGRX) – (1.32)

American Funds EuroPacific Gr Re (RERCX) – (1.14)

Vanguard LifeStrategy Income (VASIX) – (.13)
Vanguard LifeStrategy Conservative Growth (VSCGX) – (.15)
Vanguard LifeStrategy Moderate Growth (VSMGX) – (.17)
Vanguard LifeStrategy Growth (VASGX) – (.16)

Transamerica Partners Institutional High Yield Bond (DIHYX) - (.85)

PIMCO Total Return Admin (PTRAX) – (.71)

Transamerica Partners Institutional Money Market (DFINX) – (.50)


457(b) & 457(f) Funds Available

Principal Money Market Institutional Fund (PVMXX) – (.00)

Delaware High-Yield Opportunities A Fund (DHOAX) – (1.18)
Principal Government & High Quality R5 Fund (PMREX) – (.77)
MFS Bond A Fund (MFBFX) – (.85)
PIMCO Total Return A Fund (PTTAX) – (.85)

Principal LifeTime 2010 R5 Fund (PTAPX) – (.92)
Principal LifeTime 2020 R5 Fund (PTBPX) – (.97)
Principal LifeTime 2030 R5 Fund (PTCPX) – (1.01)
Principal LifeTime 2040 R5 Fund (PTDPX) – (1.03)
Principal LifeTime 2050 R5 Fund (PTEFX) – (1.04)
Principal LifeTime Strategic Income R5 Fund (PLSPX) – (.89)

Fidelity Advisor New Insights A Fund (FNIAX) - (1.01)
MFS Value A Fund (MEIAX) - (.96)
Vanguard 500 Index Signal Fund (VIFSX) – (.05)

Vanguard Mid Cap Index Signal Fund (VMISX) - (.10)
Vanguard Small-Cap Index Inv Fund (NAESX) - (.24)

American Funds EuroPacific Growth R4 Fund (REREX) – (.85)
Oppenheimer Developing Markets A Fund (ODMAX) – (1.36)
Last edited by DrPeppaPig on Wed Mar 13, 2013 12:55 pm, edited 1 time in total.
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Re: Portfolio Critique and Advice Request

Postby Occupier » Tue Mar 12, 2013 11:32 pm

Regarding the question about trading to get lower fees - do it. I often tell people to find the cost analyzer at the Vanguard site and compare costs over a 20 year or more period with some average return like 8.5% You would be staggered by how much appreciation you lose to costs. Regarding the rest I don't know. My inclination regarding the ROTH non ROTH 401 is stick with the traditional. Your in a high tax bracket now. I doubt you will be in one when you retire. Dave
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Re: Portfolio Critique and Advice Request

Postby Duckie » Wed Mar 13, 2013 12:57 am

DrPeppaPig, you want an AA of 80% stocks, 20% bonds (a little low for your ages), with 20% of stocks in international. That breaks down to 64% US stocks, 16% international stocks, and 20% bonds. Here is a possible retirement portfolio:

His 401k -- $111K -- 43%
31% (VINIX) Vanguard Institutional Index Fund Institutional Shares (0.04%)
4% (MPSIX) Principal MidCap S&P 400 Index Fund (0.06%)
8% (PSSIX) Principal SmallCap S&P 600 Index Fund (0.06%) <-- Roughly 80% large caps (in 401k, 403b, 457b, 457f) plus 20% mid/small caps makes up the total US stock market. (See Approximating Total Stock Market).
0% (PTTRX) PIMCO Total Return Fund Institutional Class (0.46%) <-- If/when needed in the future.

His 457b -- $3K -- 1%
1% (VIFSX) Vanguard 500 Index Fund Signal Shares (0.05%)

His 457f -- $21.5K -- 8%
8% (VIFSX) Vanguard 500 Index Fund Signal Shares (0.05%)

His 403b -- $11.5K -- 4% <-- Is this from a former employer? If so, can it be rolled into His 401k?
4% (DISFX) Transamerica Partners Institutional Stock Index Fund (0.30%)

His Roth IRA at Vanguard -- $34.5K -- 13%
7% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.06%)
4% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.16%)
2% (VBMFX) Vanguard Total Bond Market Index Fund Investor Shares (0.22%) <-- Higher to meet fund minimums.

Her Roth IRA at Vanguard -- $31K -- 12%
12% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.16%)

Her Rollover IRA at Vanguard -- $49.5K -- 19%
19% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.10%)

Keep the international at Vanguard. You have very inexpensive alternates for US stock, and a reasonable alternate for bonds in the employer plans, but nothing good for international.

DrPeppaPig wrote:A Roth 401k option was recently added. I’m not sure if I should contribute to that or a traditional 401k. I’ve read quite a few articles on it and can convince myself both options are the way to go. Any thoughts?

In general, the higher the tax bracket you're in now, the better the traditional 401k option is. Check out these two articles written by tfb who frequently posts here:
The Case Against Roth 401(k)
Roth 401(k) for People Who Contribute the Max

Something to think about.
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Re: Portfolio Critique and Advice Request

Postby Duckie » Wed Mar 13, 2013 7:52 pm

DrPeppaPig wrote:Desired Asset allocation: 75/25 to 70/30 updated from 80/20
International Allocation: 30% updated from 20%

With the change in AA to 75% stocks, 25% bonds, and 30% of stocks in international, the new breakdown is 52% US stocks, 23% international stocks, and 25% bonds.

His 401k -- $111K -- 43%
28% (VINIX) Vanguard Institutional Index Fund Institutional Shares (0.04%)
4% (MPSIX) Principal MidCap S&P 400 Index Fund (0.06%)
7% (PSSIX) Principal SmallCap S&P 600 Index Fund (0.06%)
4% (PTTRX) PIMCO Total Return Fund Institutional Class (0.46%)

His 457b -- $3K -- 1%
1% (VIFSX) Vanguard 500 Index Fund Signal Shares (0.05%)

His 457f -- $21.5K -- 8%
8% (VIFSX) Vanguard 500 Index Fund Signal Shares (0.05%)

His 403b -- $11.5K -- 4%
4% (DISFX) Transamerica Partners Institutional Stock Index Fund (0.30%)

His Roth IRA at Vanguard -- $34.5K -- 13%
11% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.16%)
2% (VBMFX) Vanguard Total Bond Market Index Fund Investor Shares (0.22%)

Her Roth IRA at Vanguard -- $31K -- 12%
12% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.16%)

Her Rollover IRA at Vanguard -- $49.5K -- 19%
19% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.10%)

-- Always get the international AA set up first because it should stay at Vanguard, then bonds, then the US stock mix.
-- Ref your PM, you wrote you couldn't rollover the 403b. Is it from your current employer? Will you be able to roll it over when you change jobs?
-- Be aware that editing a post does not make a thread "bump" up the list. You have to make a new post for that.

Just some possibilities.
Last edited by Duckie on Fri Mar 15, 2013 5:58 pm, edited 1 time in total.
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Re: Portfolio Critique and Advice Request

Postby DrPeppaPig » Fri Mar 15, 2013 3:36 pm

Thank you Duckie and Occupier for the advice.

@Duckie, The 403b is with my current employer and can be rolled over when changing jobs, although that's not likely to happen anytime soon.
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