Portfolio Review

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Portfolio Review

Postby mrsscuba » Wed Mar 13, 2013 2:58 pm

After lurking for months and being really impressed with the advice given here, I've finally worked up the courage to share my portfolio for review... :)

A little about us - we both previously worked at a mutual fund company (T. Rowe Price) where we were kind of told that as long as we are are investing, and as long as we were investing at T. Rowe Price, most everything else didn't matter. They did go into risk/return etc., but some of the TRP employees that I know are some of the worst investors ever (example: my friend who was 100% invested in T. Rowe's Science and Technology fund from 1996-2001). I left TRP in 2002 and my hubby left TRP in 2003, but we both remained heavily invested there. I read Bogle's Common Sense investing book in 2011, then looked at TRP's expense ratios, and moved everything I could over to Vanguard (interestingly, hubby was offered a job at Vanguard early in his career, and turned it down).

We've both hit some bumps in the road over the years, both of us are divorced, which was expensive, especially for him (ex-wife took half of his 401(k)). In 2008 (we were not married yet), he panicked and moved his 401(k) out of whatever it was invested in and moved into Cash Reserves :oops: Once I took over the accounts in 2010, I re-invested everything and told him NEVER AGAIN will he EVER DO THAT and I will change the passwords if I have to. In 2008, I did not sell or move anything besides rebalancing. In early 2009, he finally convinced me that the world was ending and I left my retirement accounts the same but sold some of my taxable investments. As it turned out, this was timed right at the bottom... I bought in 90 days later and learned my first lesson about tax-loss harvesting. We're still carrying that loss forward. I feel confident that I won't panic in a downturn, but I know that he will (he listens to every single bit of bad news that comes out about the economy and tells me about it, but I learned not to listen to him anymore).

Emergency Fund = 1 year, although I haven't recalculated it in a while. We are expecting a baby soon and then I'll be adjusting it, obviously.
Mortgage = $250,000 @ 3.357% (30 year, considering refinancing to a 15 year)
Other Debt = none
Tax Filing Status = married filing Jointly
Tax Bracket = 28% Federal / 5% State (Maryland) <-- These are 2012 numbers, our income is higher for 2013, so we may slide up to 33%
Ages: His 41 / Hers 35
Desired asset allocation: I've been trying to follow Vanguard's Retirement 2045 fund

Size of current portfolio:
high six-figures


Emergency Fund (percentages here are percentages of the total of the EF, not of all accounts)
29% I-Bonds
14% Cash
57% Vanguard Short-Term Bond Index VBIRX

*****************
Long Term / Retirement Assets:

Taxable Accounts (25% of Total)
(not saving for anything in particular besides what is noted below, there are no strategies out there for saving for "whatever...")
Overall in the following 3 accounts, 74% are long term holdings (distributed evenly among the 3)
0.01% Vanguard Total Bond Market Index VBMFX
2.99% Vanguard Total International Index VTIAX
7% Vanguard Total Stock Market Index VTSAX

2% Vanguard Tax Managed Balanced Fund VTMFX --> 100% long term

4% Company Stock from Employee Stock Purchase Plan from T. Rowe (TROW) in T. Rowe Direct Brokerage --> 100% of this is long term
8% in other Stocks at Scottrade (almost all of them being high dividend Dow stocks such as KO, DD, PFE, MRK, etc.) --> 75% of this is currently long-term holdings

Retirement Accounts
Him (41% of Total)
0.3% Traditional IRA at Vanguard, Retirement 2045
0.5% Roth IRA at Vanguard, Retirement 2045
6% Rollover IRA Vanguard total International Index VTIAX
2.2% Rollover IRA Vanguard Total Bond Market Index VBTLX
15% Rollover IRA Vanguard Total Stock Market Index VTSAX
17% 401(k) from previous employer currently at Fidelity. Working on rolling this over, will have the same AA as Vanguard 2045
401(k) at current employer - ING 50% match up to 6% of salary, capped at $2000

Her (34% of Total)
0.6% Roth IRA Vanguard Total Stock Market Index VTSMX
2% Rollover IRA Vanguard total Bond Market Index VBTLX
4% Rollover IRA Vanguard Total International Index VTIAX
11% Rollover IRA Vanguard Total Stock Market Index VTSAX
4.4% 401(k) from previous employer, 100% invested in Vanguard 500 Index Fund. Firm is MassMutual. No plans to rollover as long as this fund remains an option.
12% 401(k) with current employer, no company match. This is with CDM. Investments below:

Her Current 401(k) allocation:
25% AMERICAN FUNDS INCOME FND R5 RIDFX .35% expenses
25% AMERICAN FUNDS AMER BAL R5 RLBFX .35% expenses
25% AMERICAN FUNDS AMER MUTUAL R5 RMFFX .37% expenses
25% AMERICAN FUNDS INVT CO AM R5 RICFX .35% expenses

Options for her 401(k) (not including currently invested):
CAPITAL PRESERVATION FUND IP XFDIP --> don't know expenses, link came up not found :confused
PIMCO TOTAL RETURN INSTL PTTRX .46%
FRANKLIN STRATEGIC INC ADV FKSAX .65%
AMERICAN FUNDS CAP WRLD BND R5 RCWFX .57%
AMERICAN FUNDS CAP INC BLDR R5 RIRFX .36%
IVY ASSET STRAT I IVAEX .75%
AMERICAN FUNDS GLOBAL BAL R5 RGBFX .66%
INVESCO BALANCED-RISK ALLOC Y ABRYX .99%
AMERICAN FUNDS GROWTH FUND R5 RGAFX .39%
AMERICAN FUNDS NEW ECONOMY R5 RNGFX .54%
INVESCO GLOBAL REL EST Y ARGYX 1.26%
INVESCO SMALL CAP GROWTH Y GTSYX 1.02%
OPPENHEIMER DEVELOPING MRKTS Y ODVYX 1.03%
AMERICAN FUNDS EUROPACIFIC R5 RERFX .55%
AMERICAN FUNDS NEW PRSPCTV R5 RNPFX .50%
AMERICAN FUNDS SMALLCAP R5 RSLFX .78%
AMERICAN FUNDS CAP WLD G&I R5 RWIFX .50%
American Funds Target Date R5 Funds 2015-2055 .49%

Options for his 401(k):
ING Fixed Account
ING Money Market Portfolio - Class I .34%
AllianceBernstein Global Bond Fund - Class R 1.28%
ING PIMCO High Yield Portfolio - Service Class .75%
ING PIMCO Total Return Portfolio - Initial Class .58%
PIMCO VIT Real Return Portfolio - Administrative Class .65%
Pioneer Strategic Income Fund - Class Y Shares .73%
ING Lifetime Income Protection 2015-2055 - Class II... very confusing prospectus compared to the others (https://www.ingretirementplans.com/fund ... r/2853.pdf) I think they're saying .91% fees?
ING Solution 2015 Portfolio 2015-2055 - Advisor Class 1.54%
ING Solution Income Portfolio - Adviser Class 1.33%
American Funds American Balanced Fund - Class R-3 .95%
American Funds Washington Mutual Investors FundSM - R-3 .96%
ING U.S. Stock Index Portfolio - Institutional Class .26%
Pioneer Fund - Class Y Shares .72%
Vanguard Variable Insurance Fund - Diversified Value Port .39%
American Funds The Growth Fund of America - Class R-3 .98%
Fidelity Advisor New Insights Fund - Class T 1.25%
Baron Asset Fund - Retail Shares 1.33%
CRM Mid Cap Value Fund - Investor Shares 1.03%
Davis Financial Fund - Class A .93%
Franklin Small Cap Value Securities Fund - Class 2 .92%
ING Real Estate Fund - Class A 1.20%
ING Russell™ Small Cap Index Portfolio - Class I .48%
Vanguard Variable Insurance Fund - Small Company Grwth Port .43%
Victory Established Value Fund - Class R 1.23%
American Funds EuroPacific Growth Fund - Class R-3 1.14%
American Funds New Perspective Fund - Class R-3 1.12%


New Contributions
$17,500 His 401k
$17,500 Her 401k
$1,500 His Traditional IRA (Income too high for Roth)
$1,500 Her IRA (Traditional)
$30,000 Taxable
$5,000 I-Bonds (emergency fund)

My biggest questions:
1) Obviously, does this look like we are doing ok?
2) Can I do better with my current 401(k)? I hate the fund offerings, and I have trouble comparing them to funds I actually like (Vanguard).
3) Do we need more money in bonds?
4) The TROW stock was purchased between 1996 and 2003, meaning lots of capital gains. It is doing well, so I haven't sold it, but I hate how much we own as a percentage of our overall portfolio. I don't want to pay the taxes on the sale, but is it worth it? I do take the dividends from that and move it to our Vanguard taxable account a couple of times per year.
5) I know I will get a tsk-tsk on the money listed under "other stocks", but I've found that tinkering with the stock market (less than 10 moves per year) has allowed me to have "fun" with the market without touching the big money elsewhere. I am willing to assume the risk, but I am also open to hearing that I shouldn't invest any more there, or that I should sell some of it. Not all of it - I have some money invested at Disney, for example, that was a college graduation gift from my dad that I don't intend to sell, probably ever.



Note: I saw the guidelines for posting portfolio questions AFTER I originally posted this, so I've since cleaned it up to conform to the standard...
Last edited by mrsscuba on Tue Apr 30, 2013 11:49 am, edited 4 times in total.
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Re: Portfolio Review

Postby pkcrafter » Wed Mar 13, 2013 9:16 pm

Welcome, I've made just a few comments for now to get things in line. See below...

mrsscuba wrote:After lurking for months and being really impressed with the advice given here, I've finally worked up the courage to share my portfolio for review... :)

A little about us - we both previously worked at a mutual fund company (T. Rowe Price) where we were kind of told that as long as we are are investing, and as long as we were investing at T. Rowe Price, most everything else didn't matter. They did go into risk/return etc., but some of the TRP employees that I know are some of the worst investors ever (example: my friend who was 100% invested in T. Rowe's Science and Technology fund from 1996-2001). I left TRP in 2002 and my hubby left TRP in 2003, but we both remained heavily invested there. I read Bogle's Common Sense investing book in 2011, then looked at TRP's expense ratios, and moved everything I could over to Vanguard (interestingly, hubby was offered a job at Vanguard early in his career, and turned it down).

We've both hit some bumps in the road over the years, both of us are divorced, which was expensive, especially for him (ex-wife took half of his 401(k)). In 2008 (we were not married yet), he panicked and moved his 401(k) out of whatever it was invested in and moved into Cash Reserves :oops: Once I took over the accounts in 2010, I re-invested everything and told him NEVER AGAIN will he EVER DO THAT and I will change the passwords if I have to. In 2008, I did not sell or move anything besides rebalancing. In early 2009, he finally convinced me that the world was ending and I left my retirement accounts the same but sold some of my taxable investments. As it turned out, this was timed right at the bottom... I bought in 90 days later and learned my first lesson about tax-loss harvesting. We're still carrying that loss forward. I feel confident that I won't panic in a downturn, but I know that he will (he listens to every single bit of bad news that comes out about the economy and tells me about it, but I learned not to listen to him anymore).

Emergency Fund = 1 year, although I haven't recalculated it in a while. We are expecting a baby soon and then I'll be adjusting it, obviously.

Keep the EF separate from the retirement accounts when adjusting your account balances.
Mortgage = $250,000 @ 3.357% (30 year, considering refinancing to a 15 year)
Other Debt = none
Tax Filing Status = married filing Jointly
Tax Bracket = 28% Federal / 5% State (Maryland) <-- These are 2012 numbers, our income is higher for 2013, so we may slide up to 33%
Ages: His 41 / Hers 35
Desired asset allocation: I've been trying to follow Vanguard's Retirement 2045 fund

An Asset allocation that matches TR 2045 is much too aggressive in my opinion, especially since your DH is somewhat risk averse. If you count assets together you should lower the AA. If you count as separate assets, then his definitely needs to be lower.

Size of current portfolio:
high six-figures

Emergency Fund
29% I-Bonds
14% Cash
57% Vanguard Short-Term Bond Index VBIRX
Don't count in total retirement assets.

You did a pretty good job presenting your financial situation, but all assets should equal 100%, not 100% for each account. If that's too much trouble, at least add how much each account is of the total.


Taxable Accounts
(not saving for anything in particular besides what is noted below, there are no strategies out there for saving for "whatever...")
3% Vanguard Total Bond Market Index VBMFX<--should not be in taxable
8% Vanguard Total International Index VTIAX
20% Vanguard Total Stock Market Index VTSAX
5% Vanguard Tax Managed Balanced Fund VTMFX
12% Company Stock from Employee Stock Purchase Plan from T. Rowe (TROW) in T. Rowe Direct Brokerage
21% in other Stocks at Scottrade (almost all of them being high dividend Dow stocks such as KO, DD, PFE, MRK, etc.)
31% Cash (some of this is planned to be used for things for baby, some is for car(s) as we both drive 10+ year old cars, some is for a basement finishing currently in progress, also due to the baby coming)
Don't include this 31% in total retirement assets, it is marked for other, shorter-term goals.

Retirement Accounts
Him
0.6% Traditional IRA at Vanguard, Retirement 2045
1.1% Roth IRA at Vanguard, Retirement 2045
14% Rollover IRA Vanguard total International Index VTIAX
5.3% Rollover IRA Vanguard Total Bond Market Index VBTLX
36% Rollover IRA Vanguard Total Stock Market Index VTSAX
43% 401(k) from previous employer currently at Fidelity. Working on rolling this over, will have the same AA as Vanguard 2045
Currently, no 410(k) offered by new employer until he has been there 90 days, he's at 60 days now. I don't know what the options are there yet. He did contribute the max in 2012 at previous employer.

Her
2% Roth IRA Vanguard Total Stock Market Index VTSMX
5% Rollover IRA Vanguard total Bond Market Index VBTLX
13% Rollover IRA Vanguard Total International Index VTIAX
32% Rollover IRA Vanguard Total Stock Market Index VTSAX
13% 401(k) from previous employer, 100% invested in Vanguard 500 Index Fund. Firm is MassMutual. No plans to rollover as long as this fund remains an option.
35% 401(k) with current employer, no company match. This is with CDM. Investments below:
Find out if you can roll the old 401ks into current ones.


25% AMERICAN FUNDS INCOME FND R5 RIDFX .35% expenses
25% AMERICAN FUNDS AMER BAL R5 RLBFX .35% expenses
25% AMERICAN FUNDS AMER MUTUAL R5 RMFFX .37% expenses
25% AMERICAN FUNDS INVT CO AM R5 RICFX .35% expenses

I'm guessing these 4 funds are in your current 401k, but please confirm.



Options for this 401(k) besides what I am invested in:
CAPITAL PRESERVATION FUND IP XFDIP --> don't know expenses, link came up not found :confused
PIMCO TOTAL RETURN INSTL PTTRX .46%
FRANKLIN STRATEGIC INC ADV FKSAX .65%
AMERICAN FUNDS CAP WRLD BND R5 RCWFX .57%
AMERICAN FUNDS CAP INC BLDR R5 RIRFX .36%
IVY ASSET STRAT I IVAEX .75%
AMERICAN FUNDS GLOBAL BAL R5 RGBFX .66%
INVESCO BALANCED-RISK ALLOC Y ABRYX .99%
AMERICAN FUNDS GROWTH FUND R5 RGAFX .39%
AMERICAN FUNDS NEW ECONOMY R5 RNGFX .54%
INVESCO GLOBAL REL EST Y ARGYX 1.26%
INVESCO SMALL CAP GROWTH Y GTSYX 1.02%
OPPENHEIMER DEVELOPING MRKTS Y ODVYX 1.03%
AMERICAN FUNDS EUROPACIFIC R5 RERFX .55%
AMERICAN FUNDS NEW PRSPCTV R5 RNPFX .50%
AMERICAN FUNDS SMALLCAP R5 RSLFX .78%
AMERICAN FUNDS CAP WLD G&I R5 RWIFX .50%
American Funds Target Date R5 Funds 2015-2055 .49%


My biggest questions:
1) Obviously, does this look like we are doing ok?

Doing OK, but need to get a little more efficient.
2) Can I do better with my current 401(k)? I hate the fund offerings, and I have trouble comparing them to funds I actually like (Vanguard).
3) Do we need more money in bonds?

I think your current target AA is too high considering...


4) The TROW stock was purchased between 1996 and 2003, meaning lots of capital gains. It is doing well, so I haven't sold it, but I hate how much we own as a percentage of our overall portfolio. I don't want to pay the taxes on the sale, but is it worth it? I do take the dividends from that and move it to our Vanguard taxable account a couple of times per year.

You should lower it to <10%, but not highest priority.

5) I know I will get a tsk-tsk on the money listed under "other stocks", but I've found that tinkering with the stock market (less than 10 moves per year) has allowed me to have "fun" with the market without touching the big money elsewhere.

Tsk-Tsk--got that covered. :wink:


I am willing to assume the risk, but I am also open to hearing that I shouldn't invest any more there, or that I should sell some of it. Not all of it - I have some money invested at Disney, for example, that was a college graduation gift from my dad that I don't intend to sell, probably ever.


Note: I saw the guidelines for posting portfolio questions AFTER I originally posted this, so I've since cleaned it up to conform to the standard...

You did a pretty good job, but need to correct % of total

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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Re: Portfolio Review

Postby Grt2bOutdoors » Wed Mar 13, 2013 10:24 pm

Welcome to the forum!
Congrats on the baby!

If it's any consolation - John Bogle also owns stock in TROW - I believe at his last interview in October he stated it was worth about $250K and his annual dividends equal his cost basis in the stock. A few posters on the board hold individual equities (myself included) as well as index funds.....you stated you are comfortable with the risk/reward, I just wouldn't add more to it. If you classify those holdings as Large Blend/Large Value, you could then focus on trying to complement those holdings with other asset classes - Small Value Index, etc.

Also agree with other poster - since spouse is risk-averse, maybe you can compromise and tone down the asset allocation to 70/30 or 80/20, I believe the 2045 fund is 90/10?
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Re: Portfolio Review

Postby mrsscuba » Wed Mar 13, 2013 11:03 pm

So, this is my total portfolio, not just retirement assets (why EF was included, as well as all the other stuff). This is the part that baffles me sometimes. I don't consider our taxable accounts to be "retirement" assets per se, I just consider them "savings." But, we aren't saving for something in particular. They're not emergency fund, they're not for other stuff, they're just sitting there, unused, until we need or want to use them for something - which MAY not happen until retirement. I have so much trouble when estimating what my "retirement" assets are because of this. If I am doing an online calculator, I include those accounts. I don't have any desire or burning urge to spend them on something, I just stare at them in confusion because I don't know whether to label them short term or long term investments. I would suspect that we will start moving some of them into a 529 sooner rather than later, but that is the only looming expense I see at the moment...

I'm going edit my original post with the suggestions above.
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Re: Portfolio Review

Postby mrsscuba » Wed Mar 13, 2013 11:05 pm

Also, with regards to my reference to adjusting my EF, I actually wasn't really talking about a rebalance, I was more referring to adding more $ to it once the baby comes, since our expenses will change.
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Re: Portfolio Review

Postby mrsscuba » Wed Mar 13, 2013 11:29 pm

Ok, I updated my first post to make the Taxable accounts part of retirement assets (which, like I say in my above post, I don't know whether they are or not, I know that sounds silly!). And, I made all investments a percentage of total retirement accounts. I left the EF break down, just in case anyone has any feedback on that, since that's important too :happy

Grt2bOutdoors wrote:Welcome to the forum!
Congrats on the baby!

If it's any consolation - John Bogle also owns stock in TROW - I believe at his last interview in October he stated it was worth about $250K and his annual dividends equal his cost basis in the stock. A few posters on the board hold individual equities (myself included) as well as index funds.....you stated you are comfortable with the risk/reward, I just wouldn't add more to it. If you classify those holdings as Large Blend/Large Value, you could then focus on trying to complement those holdings with other asset classes - Small Value Index, etc.

Also agree with other poster - since spouse is risk-averse, maybe you can compromise and tone down the asset allocation to 70/30 or 80/20, I believe the 2045 fund is 90/10?


I was kind of expecting to hear that due to my hubby being risk-averse, I should tone it down some. I'll be honest, I've been trying to stay somewhat higher risk because I feel like we're playing "catch up" a little bit from losing so much money, either from mistakes made selling in 2008, or because of divorce(s). But, maybe it is time to settle it down some since we haven't been burned on that risk yet and he is risk averse.
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Re: Portfolio Review

Postby mrsscuba » Wed Mar 13, 2013 11:37 pm

Sorry for responding post after post...

If VBMFX should not be in taxable, what should I put that money into? I don't see an issue doing an exchange for another fund, as the rate on return since we bought it (8/2011) is very small.
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Re: Portfolio Review

Postby pingo » Fri Apr 05, 2013 6:19 pm

Hey, where'd everybody go? :D

A couple more requests:
1. Perhaps your husband could speak with a fellow employee to see if that employee will go online and print a copy of the 401k plan document for him, so that you can include his expected 401k options in the original post?
2. Can you indicate where there are any long/short-term losses/gains in funds in the taxable account? (This may be a dead end for me, but it might help.)
3. Please update your original post with the following information (you can fill in the blanks and copy/paste):

New Contributions
$xx,xxx His 401k
$xx,xxx Her 401k
$x,xxx His IRA (Roth or Traditional?)
$x,xxx Her IRA (Roth or Traditional?)
$xx,xxx Taxable
$xx,xxx I-Bonds (indicate whether for retirement, emergency, or same as taxable account)

I realize that at least some of the above is already there, but it's hard to find at a glance and looking at one's financial situation takes a lot of glancing back and forth.
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Re: Portfolio Review

Postby Peter Foley » Fri Apr 05, 2013 7:01 pm

Just to add to Paul's comments. You are a little light on bonds. You might want to take a look at the Capital Preservation fund. It sounds like a stable value fund. That might be a good option for a portion of your non equities. I'd recommend at least 30% in non equities overall.
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Re: Portfolio Review

Postby mrsscuba » Mon Apr 08, 2013 10:31 am

pingo wrote:Hey, where'd everybody go? :D

A couple more requests:
1. Perhaps your husband could speak with a fellow employee to see if that employee will go online and print a copy of the 401k plan document for him, so that you can include his expected 401k options in the original post?
2. Can you indicate where there are any long/short-term losses/gains in funds in the taxable account? (This may be a dead end for me, but it might help.)
3. Please update your original post with the following information (you can fill in the blanks and copy/paste):

New Contributions
$xx,xxx His 401k
$xx,xxx Her 401k
$x,xxx His IRA (Roth or Traditional?)
$x,xxx Her IRA (Roth or Traditional?)
$xx,xxx Taxable
$xx,xxx I-Bonds (indicate whether for retirement, emergency, or same as taxable account)

I realize that at least some of the above is already there, but it's hard to find at a glance and looking at one's financial situation takes a lot of glancing back and forth.


I updated as requested, still trying to get info on his 401k. I admit, we don't contribute much to IRAs, and the contributions that we've made so far have mostly been because we've reached the point where we are "highly compensated" and end up getting some of our 401k contributions tossed back to us at the end of each year (this has only happened to him so far, but with 2013 I have reached the highly compensated levels, and since my employer doesn't match, I would say I'll get some money back this year).

I feel fairly confident that my tax bracket now is higher than what my tax bracket will be in retirement, so I have a hard time understanding the logic behind putting money into a Roth IRA (via backdoor). I also have trouble seeing the big benefit of a traditional IRA with a high income. So, I've been mostly contributing to taxable accounts after maxing out the 401ks.
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Re: Portfolio Review

Postby pingo » Mon Apr 08, 2013 7:39 pm

Thanks for the update.

mrsscuba wrote:New Contributions
$17,500 His 401k
$17,500 Her 401k
$1,500 His Traditional IRA (Income too high for Roth)
$1,500 Her IRA (Traditional)
$30,000 Taxable
$5,000 I-Bonds (emergency fund)


If one's income is too high to contribute to a Roth, it is definitely too high for a Traditional IRA, unless you are referring to making non-deductible contributions to a Traditional IRA. Have you been making non-deductible IRA contributions? Doing the "Backdoor Roth" may seem a bit overwhelming right now with how complicated you view your portfolio, but it's possible that things become simpler we explored a few more things.

mrsscuba wrote:I feel fairly confident that my tax bracket now is higher than what my tax bracket will be in retirement, so I have a hard time understanding the logic behind putting money into a Roth IRA (via backdoor). I also have trouble seeing the big benefit of a traditional IRA with a high income. So, I've been mostly contributing to taxable accounts after maxing out the 401ks.


Traditional IRA/401k distributions in retirement are the same as income for purposes of taxation by income bracket(s). Since Roth distributions are not taxed and would not affect your tax bracket, there will be times when you can use it to keep your bracket down, even if most of your distributions come out of Traditional accounts. Using Roth distributions could allow you to remain within a certain desired bracket in order to also convert some Traditional assets into Roth assets within the same desired bracket, rather than forcing you to use them or convert them in a higher bracket. If you were able to remain within the 15% tax bracket in any given year, you could cash some of your taxable assets without paying capital gains, so long as those capital gains don't push you beyond 15%. Roths can help with that.

In your tax bracket:
• Tax deductible contributions (401k, IRA, etc.) are preferred over Roth and taxable accounts, so long as you qualify.
• Roth contributions (regular or backdoor) are preferred over taxable savings and non-deductible Trad IRA contributions because you take the same tax hit now, but you eliminate the future drag of taxation on your earnings. Original Roth contributions (not earnings) may be withdrawn without penalty (although it must be 5 years after contribution in the case of backdoor conversions).
• Backdoor Roth conversions are preferred over non-deductible IRAs and after-tax 401k contributions (alone) for the same reasons (same tax hit now; future taxation is eliminated).
• Taxable savings are usually preferred over non-deductible Trad IRA and after-tax 401k contributions (unless the latter two will be quickly converted into Roth assets via backdoor method).

I don't know if you yet realize whether you can get only a little or a lot in your Roth via the Backdoor method, but there's a little more we have to explore to find out:

Here's some more homework:
1. Does each of you have several Rollover IRA accounts at Vanguard from several sources, or does each merely have several holdings in one Rollover?
2. Is there a special reason (ultra low expense ratio, perhaps) that you want to hold onto your old Mass Mutual 401k, when you really could stand for some simplicity?
3. Not that you would necessarily do this, but will the old Mass Mutual 401k allow rollovers into it?
4. Which of the current 401ks allow rollovers of Traditional IRAs and Rollover IRAs into the 401ks?
5. Do you know whether or not He'll get an employer match? If so, will you include the dollar amount under "New Contributions" in the OP?
6. I re-organized a few things from your OP in the post below. Will you review and let me know if I got it right?
7. Does either His or Her 401k (or both) allow for after-tax contributions? Please check your Plan Document(s) to see if either plan 401k allows after-tax contributions as well as in-service withdrawals of those after-tax contributions. Please note that after-tax contributions are not the same as Roth 401k contributions. They're contributions above and beyond Traditional/Roth 401k contributions and are useful for the Backdoor Roth. Here are 4 links talking about after-tax contributions: here, here, here and here.

If your employer allows you to make regular in-service withdrawals of your 401k after-tax contributions (again, these are not the same as Roth 401k contributions), you could have such contributions directly rolled over to your VG Roth account and they'd be tax-free and RMD-free forever. They do not affect your Roth IRA contribution limits.

If in-service withdrawals are not allowed, I wouldn't bother with 401k after-tax contributions.
Last edited by pingo on Mon Apr 08, 2013 7:57 pm, edited 4 times in total.
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Re: Portfolio Review

Postby pingo » Mon Apr 08, 2013 7:46 pm

I have attempted to re-present your situation to be more viewable at a glance. I have eliminated your current holdings, even though I know that some will remain. Normally, I round to the nearest percent, but I preserve the decimals below to avoid making it look like there is nothing in some accounts. Please tell me if anything is out of order:

Emergency Fund 1 year ( 14% Cash, 29% I-Bonds, 57% VG Short-Term Bond)
Tax Filing Status: Married Filing Jointly
Tax Bracket: Probably 33% Federal in 2013 / 5% State (Maryland)
Ages: His 41 / Hers 35
Current portfolio: high six-figures <--Woohoo!


Taxable Accounts
24%

His 401k
00%

His Vanguard Rollover IRAs
40.2%

His Vanguard Traditional IRA
0.3%

His Vanguard Roth IRA
0.5%

Her Vanguard Rollover IRAs
17%

Her Vanguard Roth IRA
0.6%

Her Old Mass Mutual 401k
4.4%

Her Current 401k
12%
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Re: Portfolio Review

Postby mrsscuba » Wed Apr 10, 2013 5:30 pm

Have you been making non-deductible IRA contributions?


We've been making non-deductible IRA contributions only when we are unable to max out our 401ks due to discrimination testing.

Based on what you told me about Roths, which I knew some of but didn't know all of, I need to investigate backdoor contributions, as they have seemed over my head.


Does each of you have several Rollover IRA accounts at Vanguard from several sources, or does each merely have several holdings in one Rollover?

Each of us has several holdings in one Rollover. My husband is in the process of rolling over another account (Fidelity) into another Rollover IRA account at Vanguard. He is moving slowly on this process, mostly because we are also finishing our basement and preparing our house for a newborn, so we have a lot going on. I remind him frequently.

Is there a special reason (ultra low expense ratio, perhaps) that you want to hold onto your old Mass Mutual 401k, when you really could stand for some simplicity?

Part of me is sticking to it because I am not fully vested, and it is reasonable to think that I may return to that employer someday. At that time, I could pick up the vesting again. Since I am not unhappy with the fund options, I haven't moved out of that account. That being said, the amount that I would gain in vesting on the off chance that I returned to that company in the future would be about $5,000 or so (and I would have to stay there for 3.5 years, when I was only there 18 months on the first round), so it's not a huge loss if I wanted to move the money out. At the moment, I don't have any reason to leave my current employer.

Not that you would necessarily do this, but will the old Mass Mutual 401k allow rollovers into it?

Yes, the do allow Roll Ins.

Which of the current 401ks allow rollovers of Traditional IRAs and Rollover IRAs into the 401ks?

It sounds like mine will allow that. I am still trying to get plan information from my husband's HR.

Do you know whether or not He'll get an employer match? If so, will you include the dollar amount under "New Contributions" in the OP?

I know next to nothing about his plan, so I am going to say no.

I re-organized a few things from your OP in the post below. Will you review and let me know if I got it right?

This looks accurate to me.

Does either His or Her 401k (or both) allow for after-tax contributions? Please check your Plan Document(s) to see if either plan 401k allows after-tax contributions as well as in-service withdrawals of those after-tax contributions. Please note that after-tax contributions are not the same as Roth 401k contributions. They're contributions above and beyond Traditional/Roth 401k contributions and are useful for the Backdoor Roth. Here are 4 links talking about after-tax contributions: here, here, here and here.

don't know his (I know this is frustrating), I have already checked on in-service withdrawls from mine once I found out they existed, and they are only allowed over age 59 1/2. Voluntary after-tax contributions are not permitted (I wouldn't have even thought to check on that).
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Re: Portfolio Review

Postby pingo » Wed Apr 10, 2013 8:47 pm

^ Thank you!

mrsscuba wrote:Based on what you told me about Roths, which I knew some of but didn't know all of, I need to investigate backdoor contributions, as they have seemed over my head.


The gist: everyone qualifies to make non-deductible Traditional IRA contributions. As long as an individual doesn't have other deductible Traditional or Rollover IRAs, one immediately converts the non-deductible contributions to a Roth IRA without a tax hit. It becomes an easy backdoor way to make yearly Roth contributions when one cannot contribute to the Roth directly. It exists is because the government is desperate for the additional revenue it might obtain through Roth conversions.

The big question will probably be whether or not it will be practical to roll the Traditional/Rollover IRAs to 401ks in order to "eliminate" them and thus make the Backdoor Roth practical as well.

mrsscuba wrote:
Pingo wrote:
mrsscuba wrote:Part of me is sticking to it because I am not fully vested, and it is reasonable to think that I may return to that employer someday. At that time, I could pick up the vesting again. Since I am not unhappy with the fund options, I haven't moved out of that account.
Not that you would necessarily do this, but will the old Mass Mutual 401k allow rollovers into it?
Yes, the do allow Roll Ins.


Actually, I'm not sure if I was clear: Will the Mass Mutual 401k accept rollovers from your IRAs now, even though you are not currently employed at that employer?

If the answer is yes, you definitely will need to add information about what Mass Mutual 401k options are available.

mrsscuba wrote:I have already checked on in-service withdrawls from mine once I found out they existed, and they are only allowed over age 59 1/2.


This is often a separate issue, because I think that "in-service withdrawals" is often understood as withdrawals of regular Traditional/Roth and matching contributions, but does not (usually) apply to after-tax contributions (I'm not an expert here). However...

mrsscuba wrote:Voluntary after-tax contributions are not permitted (I wouldn't have even thought to check on that).


...if you can't make voluntary after-tax contributions to begin with, then whether or not you can withdraw them is moot.

Other than clarifying whether the old Mass Mutual will currently accept rollovers (and the options available therein), I guess we'll have to be patient while we wait for information on His future 401k options.

mrsscuba wrote:(I know this is frustrating)


And to think that I was worried you'd lose patience with me because of all my nosy questions! :D
Last edited by pingo on Fri Apr 12, 2013 7:41 pm, edited 1 time in total.
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Re: Portfolio Review

Postby pingo » Wed Apr 10, 2013 11:47 pm

Oh! One more thing:

mrsscuba wrote:My husband is in the process of rolling over another account (Fidelity) into another Rollover IRA account at Vanguard. He is moving slowly on this process, mostly because we are also finishing our basement and preparing our house for a newborn, so we have a lot going on. I remind him frequently.


If you like, we can wait and see what His 401k plan looks like before rolling over the other account. It might make more sense to have the Old 401k rolled into the new one...or not. We'll have to see.
Last edited by pingo on Fri Apr 12, 2013 7:39 pm, edited 1 time in total.
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Re: Portfolio Review

Postby rickmerrill » Thu Apr 11, 2013 2:42 am

e've both hit some bumps in the road over the years, both of us are divorced, which was expensive, especially for him (ex-wife took half of his 401(k)). In 2008 (we were not married yet), he panicked and moved his 401(k) out of whatever it was invested in and moved into Cash Reserves Once I took over the accounts in 2010, I re-invested everything and told him NEVER AGAIN will he EVER DO THAT and I will change the passwords if I have to. In 2008, I did not sell or move anything besides rebalancing. In early 2009, he finally convinced me that the world was ending and I left my retirement accounts the same but sold some of my taxable investments. As it turned out, this was timed right at the bottom... I bought in 90 days later and learned my first lesson about tax-loss harvesting. We're still carrying that loss forward. I feel confident that I won't panic in a downturn, but I know that he will (he listens to every single bit of bad news that comes out about the economy and tells me about it, but I learned not to listen to him anymore


Your understanding of the spousal unit's risk tolerance and investment behavior patterns is amazing! You are so far ahead of many of us in that regard. My impression is that you do not need to let "playing catchup" influence you at all. You are well on the way and toning it down a notch, as mentioned and agreed, seems like the right move. Let it come to you, don't force it. Be sure to mention, at every opportunity, what reacting to the current "news" would have cost you. At least have some fun with it!

I thought that pingo was on to something with the after-tax 401k contributions and then in-service direct roth rollover but it looks like your plan nixed this great idea. You are in very goods hands here!
If I am stupid I will pay.
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Re: Portfolio Review

Postby mrsscuba » Mon Apr 15, 2013 11:14 am

My husband's HR got back to him with the 401k info, but only sent the basic benefit plan summary, not the whole document. So, all I know is that they will match 50% of contributions up to 6% of salary (which covers the whole $17,500). It's through ING. He's really close to being able to enroll, so we'll see when we get the full documents.
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Re: Portfolio Review

Postby Grt2bOutdoors » Mon Apr 15, 2013 12:27 pm

mrsscuba wrote:My husband's HR got back to him with the 401k info, but only sent the basic benefit plan summary, not the whole document. So, all I know is that they will match 50% of contributions up to 6% of salary (which covers the whole $17,500). It's through ING. He's really close to being able to enroll, so we'll see when we get the full documents.


The whole document should be available to all eligible employees, it's manditorily required by either DOL or ERISA regulations.
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Re: Portfolio Review

Postby mrsscuba » Tue Apr 30, 2013 11:45 am

I got my info on my husband's 401k. Here are the available funds:

ING Fixed Account
ING Money Market Portfolio - Class I .34%
AllianceBernstein Global Bond Fund - Class R 1.28%
ING PIMCO High Yield Portfolio - Service Class .75%
ING PIMCO Total Return Portfolio - Initial Class .58%
PIMCO VIT Real Return Portfolio - Administrative Class .65%
Pioneer Strategic Income Fund - Class Y Shares .73%

ING Lifetime Income Protection 2015-2055 - Class II... very confusing prospectus compared to the others (https://www.ingretirementplans.com/fund ... r/2853.pdf) I think they're saying .91% fees?
ING Solution 2015 Portfolio 2015-2055 - Advisor Class 1.54%
ING Solution Income Portfolio - Adviser Class 1.33%

American Funds American Balanced Fund - Class R-3 .95%

American Funds Washington Mutual Investors FundSM - R-3 .96%
ING U.S. Stock Index Portfolio - Institutional Class .26%
Pioneer Fund - Class Y Shares .72%
Vanguard Variable Insurance Fund - Diversified Value Port .39%

American Funds The Growth Fund of America - Class R-3 .98%
Fidelity Advisor New Insights Fund - Class T 1.25%

Baron Asset Fund - Retail Shares 1.33%
CRM Mid Cap Value Fund - Investor Shares 1.03%
Davis Financial Fund - Class A .93%
Franklin Small Cap Value Securities Fund - Class 2 .92%
ING Real Estate Fund - Class A 1.20%
ING Russell™ Small Cap Index Portfolio - Class I .48%
Vanguard Variable Insurance Fund - Small Company Grwth Port .43%
Victory Established Value Fund - Class R 1.23%

American Funds EuroPacific Growth Fund - Class R-3 1.14%
American Funds New Perspective Fund - Class R-3 1.12%
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Re: Portfolio Review

Postby pingo » Tue Apr 30, 2013 9:37 pm

More questions:

mrsscuba wrote:401(k) at current employer - ING 50% match up to 6% of salary, capped at $2000


mrsscuba wrote:So, all I know is that they will match 50% of contributions up to 6% of salary (which covers the whole $17,500).


-Am I right that the total of new contributions to His 401k will be $19,500 once the employer match is added to his personal contributions of $17,500?

-Do you have information as to whether His 401k allows elective after-tax contributions and regular in-service withdrawals of only those contributions?

-We've been assuming His 401k will accept rollovers from Traditional and/or Rollover IRA's. Will you confirm this?

-Can you confirm whether Her Old Mass Mutual 401k currently accepts Traditional and/or Rollover IRA's even though She is not currently employed there? (I think the way I phrased the question before made it sound like if they'd accept rollovers if/when you work there again.)
Last edited by pingo on Wed May 01, 2013 7:54 pm, edited 2 times in total.
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Re: Portfolio Review

Postby dianna » Tue Apr 30, 2013 11:02 pm

Welcome to the forum and congratulations on the upcoming arrival - very exciting!

When we started embarking on the Boglehead philosophy, we found it very helpful to formulate an Investment Policy Statement and there is a wiki (http://www.bogleheads.org/wiki/Investment_Policy_Statement) that outlines what this is and gives some examples.

One part of our IPS has our maxing priorities, predominantly based on tax-efficiency. Since we are just slightly older in age and have a 3 yo, it seemed similar enough that I thought I would share just to give you an idea of what a modification of this might look like for you:

1. Max HIS Traditional 401k up to company match and to annual limit ($17,500)
2. Max Health Savings Account ($6,450) as part of HDHP
3. Max HER Traditional 401k up to annual maximum ($17,500)
4. Max HER Traditional 401k up to max allowed ($51,000) {she is self-employed}
5. Complete Backdoor ROTH IRA ($5,500 / HER only because he already has a T-IRA that would complicate the taxes on the transfer from Trad to Roth)
6. Max Coverdell ESA ($2,000) for child's education {$2,000 per child}
7. Max HIS After-Tax 401k (up to $50,000 minus contributions and match); then convert to Roth IRA
8(tie) Taxable investments: I-bonds or Taxable account
8(tie) Add to 529 for child

You are off to a great start - now it's just some modifications and tweaking....

happy investing!
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Re: Portfolio Review

Postby mrsscuba » Fri May 03, 2013 12:49 pm

First of all, I can not thank everyone enough for continuing to respond and help me with this. I know I am sometimes slow to respond, and it's because I'm now 9 months pregnant, so I have some other stuff going on. If I don't respond for a while, it may be that I've had the baby, so I'm doing my best :)

-Am I right that the total of new contributions to His 401k will be $19,500 once the employer match is added to his personal contributions of $17,500?


Yes, I will update the OP.

-Do you have information as to whether His 401k allows elective after-tax contributions and regular in-service withdrawals of only those contributions?


This is what it says, which tells me no:
You may contribute 1 - 100% of your annual pay, not to exceed $17,500 annually. Annual limitations are set by the IRS and are subject to change. The tax laws may also let you contribute an additional amount over the regular annual limit if you are at least 50 years old. Check with your benefits manager to see if you can take advantage of the increased opportunity to 'catch up' and contribute even more to your employer's plan. If your adjusted gross income does not exceed certain limits, you may be eligible for a tax credit.

-We've been assuming His 401k will accept rollovers from Traditional and/or Rollover IRA's. Will you confirm this?


Yes.
Money from other qualified plans such as 401(k) plans is accepted. Rollover contributions are allowed once the eligibility requirements of the plan have been met.

-Can you confirm whether Her Old Mass Mutual 401k currently accepts Traditional and/or Rollover IRA's even though She is not currently employed there? (I think the way I phrased the question before made it sound like if they'd accept rollovers if/when you work there again.)


I can't find anything that says that they do not. I read through all the documentation and nothing about previous employees.
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Re: Portfolio Review

Postby mrsscuba » Fri May 03, 2013 12:52 pm

1. Max HIS Traditional 401k up to company match and to annual limit ($17,500)
2. Max Health Savings Account ($6,450) as part of HDHP
3. Max HER Traditional 401k up to annual maximum ($17,500)
4. Max HER Traditional 401k up to max allowed ($51,000) {she is self-employed}
5. Complete Backdoor ROTH IRA ($5,500 / HER only because he already has a T-IRA that would complicate the taxes on the transfer from Trad to Roth)
6. Max Coverdell ESA ($2,000) for child's education {$2,000 per child}
7. Max HIS After-Tax 401k (up to $50,000 minus contributions and match); then convert to Roth IRA
8(tie) Taxable investments: I-bonds or Taxable account
8(tie) Add to 529 for child


I started maxing the HSA this year, although I am spending it... I know there is some debate about that, but we have so many medical expenses this year, it's been nice to have the money to spend. Basically, the account is near zero all the time. The second we put money into it at the end of the pay period, I have a medical bill that I spend it on, and then I get another bill even before the end of the next pay period. High deductible plan + pregnancy + switching insurance several times due to job changes...

As for education, I am just starting to understand those. I live in Maryland, so we have a pretty good 529 plan. That's coming up in a few months... :)
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Re: Portfolio Review

Postby mrsscuba » Wed May 15, 2013 10:41 am

bump...
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Re: Portfolio Review

Postby Grt2bOutdoors » Wed May 15, 2013 11:30 am

mrsscuba wrote:bump...


You've bumped it, what other questions do you have? :confused
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Re: Portfolio Review

Postby mrsscuba » Wed May 15, 2013 3:47 pm

Well, I'm still trying to figure out if what I have invested in my 401k looks good, as well as what I should be investing in for hubby's new 401k that he's just starting to contribute to. I know I need to get the bonds out of my taxable account, but where to put them and how to divide them up with the other accounts.
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Re: Portfolio Review

Postby pingo » Wed May 15, 2013 7:41 pm

My apologies. I was still waiting for answers to a couple more questions and I figured you were busy with the little one. :D

pingo wrote:Do you have information as to whether His 401k allows elective after-tax contributions and regular in-service withdrawals of only those contributions?


mrsscuba wrote:This is what it says, which tells me no [...]


I'm not an expert, but let me try to dissect the part you cited:

mrsscuba wrote:You may contribute 1 - 100% of your annual pay, not to exceed $17,500 annually. Annual limitations are set by the IRS and are subject to change.


This is your "Personal Contribution" limit" of $17,500 that may be deferred into a Traditional 401k account, or even Roth 401k account if it's a plan option. Whether one contributes to a Traditional 401k, Roth 401k or both, those Personal Contributions combined cannot exceed $17,500/yr.

mrsscuba wrote:The tax laws may also let you contribute an additional amount over the regular annual limit if you are at least 50 years old. Check with your benefits manager to see if you can take advantage of the increased opportunity to 'catch up' and contribute even more to your employer's plan.


These are known as "Catchup Contributions" of ≤$5,500/yr on top of the ≤$17,500 Personal Contributions and any employer match. Most, if not all 401k plans allow it. Neither of you qualifies for catchup contributions until ≥50 years of age. (Also note that at age 50, each of you would also qualify for ≤$1,000 additional "catchup" contributions to IRAs, on top of the annual $5,500 limit. Of course, that assumes we figure out a plan for backdoor IRA contributions.)

Also, any employer matching, does not count toward the $17,500 Personal Contributions limit or the $5,500 Catchup limit, rather there is a global limit of $51,000 annually that cannot be exceeded, once one combines personal, matching, catchup and elective after-tax contributions.

mrsscuba wrote:If your adjusted gross income does not exceed certain limits, you may be eligible for a tax credit.


I assume this refers to a "Saver's Credit" for people who save a lot relative to a small income.

I'm sorry to harp on the initial question of 401k after-tax contributions even though it may be a long shot, but if it is possible, you may greatly improve your costs and investment options and keep a lid on taxes. I think it could greatly affect fund selection and the balancing of contributions in order to have the most effective plan arranged in a way that is still simple. (I realize it may not look like things are going to be simple with all these details I'm asking about, but hopefully you'll see it once we get there...if we get there.)

pingo wrote:Do you have information as to whether His 401k allows elective after-tax contributions and regular in-service withdrawals of only those contributions?


...elective after-tax contributions do not go toward any of those limits allowed, except toward the global/combined $51,000 limit for all annual 401k savings, but not all plans allow it. Of those plans that do allow it, not all allow the crucial ability to "withdraw" the after-tax contributions by rolling it over directly to a Roth IRA. This is the information I'm looking for.

pingo wrote:Can you confirm whether Her Old Mass Mutual 401k currently accepts Traditional and/or Rollover IRA's even though She is not currently employed there? (I think the way I phrased the question before made it sound like if they'd accept rollovers if/when you work there again.)


mrsscuba wrote:I can't find anything that says that they do not. I read through all the documentation and nothing about previous employees.


I'd call them up and ask, then. (I'd recommend calling about the after-tax contributions above, too, but it is also important to find it in the plan document in case they mistakenly tell you that you can't. It's better to have it in writing in order to be sure.)

It might still be helpful to know what other options are available in that Old MassMutual 401k, even if it does not accept rollovers unless you are actively employed there. So, I'm kinda still hoping to see if it can be confirmed whether you can move TIRAs/Rollover IRAs there and what the options are in that plan.

I'll take a look again and see what all I come up with under certain assumptions, but it would be great if I could get confirmation on the remaining questions.
Last edited by pingo on Fri Jun 07, 2013 5:04 pm, edited 1 time in total.
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Re: Portfolio Review

Postby pingo » Thu Jun 06, 2013 3:23 pm

I started to wonder if I'd ever get back here. I apologize for the long delay. I have been busy and this is a long thread with many details to bear in mind.

I will post some ideas in the following order:

1. My idea for incorporating a Backdoor Roth via non-deductible Traditional IRA contributions and after-tax 401k contributions in His 401k. I realize this is still a long-shot, but since you haven't confirmed whether or not it can be done, hope springs eternal...especially since it can result in well over $829,000 in total Roth contributions that can grow tax-free and RMD-free. The weighted ER is fairly reasonable at 0.34 and results in the smallest tax burden and greatest flexibility in retirement.

2. My idea for incorporating a Backdoor Roth via non-deductible Traditional IRA only, which can result in well over $333,500 in Roth contributions that grow tax-free and RMD-free. Weighted ER is still reasonable at 0.34.

3. My idea for no Backdoor Roth, which results in the least-expensive portfolio (ER 0.13) but a larger future tax burden.

I hope wiser posters will chime in with their criticisms, because I may not have been the best person to work on this. If any of your circumstances change, if I got something wrong, or if you'd like to voice a dislike or different preference, I'm happy to continue working on this if it just doesn't feel right...

..and my feelings won't be hurt in the least if you realize that none of it feels right ever. :D
Last edited by pingo on Wed Jul 24, 2013 7:36 pm, edited 4 times in total.
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1. Idea with Backdoor Roth AND After-tax 401k

Postby pingo » Thu Jun 06, 2013 3:25 pm

1. Idea with Backdoor Roth via Non-Deducticle TIRA AND After-tax 401k

Emergency Fund 1 year ( 14% Cash, 29% I-Bonds, 57% VG Short-Term Bond)
Tax Filing Status: married filing Jointly
Tax Bracket: 33% Federal / 5% State (Maryland)
Ages: His 41 / Hers 35
Current portfolio: high six-figures (Woohoo!)
Desired AA: 70% Stocks / 30% Bonds
Desired International: 30% of equities

Translation: 49 US / 21 Int'l /30 Bonds


New Contributions
$19,500 His 401k
$17,500 Her 401k
$5,500 His Non-Deductible Traditional IRA <--Deposit into Money Market: convert to Roth soon thereafter.
$5,500 Her Non-Deductible Traditional IRA <--Deposit into Money Market: convert to Roth soon thereafter.
$22,000 His after-tax 401k <--Direct these savings quarterly/yearly to His Roth IRA.
$5,000 I-Bonds (emergency fund)


Her Old MassMutual 401k
04% Vanguard 500 Index Fund

Taxable Accounts (24%) <--I liquidated bond fund and added to Total Int'l.
04% T. Rowe Price (Former) Employee Stock
08% Stocks at Scottrade <--Turn off dividend re-investment; redirect cash to VG.
02% Vanguard Tax Managed Balanced Fund (VTMFX) 0.10 <--Liquidate when practical; add to Total Int'l.
07% Vanguard Total Stock Market (VTSAX) 0.05
03% Vanguard Total International (VTIAX) 0.18

His 401k (40%) <--I transfered all of His Old 401k's/Rollovers here.
16% PIMCO Total Return (PTTRX) 0.58
16% ING U.S. Stock Index (INGIX) 0.26 <--$15,600/yr, or 80% of His Traditional 401k contributions.
08% ING Russell Small Cap Index (IIRSX) 0.48 <--$3,900/yr, or 20% of His Traditional 401k contributions.

His 401k After-Tax Elective Contributions
00% Pimco Total Return (PTTRX) 0.58 <--$22,000/yr after-tax contributions; transfer directly to Roth.

His Vanguard Roth IRA <--His non-deduct TIRA balance is converted to Roth after rollovers go to His 401k.
01% Vanguard Total Bond Admiral (VBTLX) 0.10 <--After-tax 401k transfers go here, directly.
00% Vanguard Total US Stock Admiral (VTSAX) 0.05% <--$5,500/yr non-deductible Trad IRA contributions convert and move here.

Her Vanguard Roth IRA <--Her non-deduct TIRA balance is converted to Roth after rollovers go to Her 401k.
01% Vanguard Total US Stock Admiral (VTSAX) 0.05% <--$5,500/yr non-deductible Trad IRA contributions convert and move here.

Her 401k <--I moved all of Her Rollover IRAs here.
18% EuroPacific Growth (RERFX) 0.55 <--$14,700/yr, or 84% of Her Traditional 401k contributions.
11% Pimco Total Return (PTTRX) 0.46 <--$2,800/yr, or 16% of Her Traditional 401k contributions.

Weighted ER = 0.34% and gradually lowers over time.



*$829,000 in Backdoor Roth contributions result from non-deduct TIRA and after-tax 401k (assumes each contributes to age 65 and then stops). There is also room via Backdoor for an additional $9500/yr through After-tax 401k.
*Tax-free growth of Backdoor Roth contributions; RMD-free, as well.
*For maximum simplicity: In a few years, when His 401k represents only 25% of the portfolio, you could move His entire 401k into Pimco TR, then select a single target fund for each remaining tax-advantaged account. Selecting target funds with 90% stocks / 10% bonds would result in 67.5% Stocks / 32.5% Bonds with roughly 30% of equities in International. Weighted ER should remain roughly the same (still lowering gradually, as time passes).

*Instead of VG Tax-Managed Balanced Fund, you can split taxable savings between i-Bonds and equities, if you like, but I put it all in equities with an understanding of the following WIki article: Placing Cash Needs in a Tax-Advantaged Account (it's the same thing).

*If the Old MassMutual 401k presently allows you to roll in outside accounts, it might have changed the suggestion and cost-effectiveness significantly, but I still don't know what funds in the Old MassMutual 401k.
Last edited by pingo on Wed Jul 24, 2013 7:46 pm, edited 14 times in total.
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2. Idea with Backdoor Roth (NO After-tax 401k)

Postby pingo » Thu Jun 06, 2013 3:26 pm

2. Idea with Backdoor Roth (NO After-tax 401k)

New Contributions
$19,500 His 401k
$17,500 Her 401k
$5,500 His Non-Deductible Traditional IRA <--Convert to Roth soon thereafter.
$5,500 Her Non-Deductible Traditional IRA <--Convert to Roth soon thereafter.
$22,000 Taxable
$5,000 I-Bonds (emergency fund)


Her Old MassMutual 401k
04% Vanguard 500 Index Fund

Taxable Accounts (24%) <--I liquidated the bond fund and added to Total Int'l.
04% T. Rowe Price (Former) Employee Stock
08% Stocks at Scottrade <--Turn off dividend re-investment; redirect cash to VG.
02% Vanguard Tax Managed Balanced Fund (VTMFX) 0.10 <--Liquidate when practical; add to Total Int'l.
07% Vanguard Total Stock Market (VTSAX) 0.05 <--$7,300/yr.
03% Vanguard Total International (VTIAX) 0.18 <--$14,700/yr.

His 401k (40%) <--I moved all of His Old 401ks/Rollovers here.
16% PIMCO Total Return (PTTRX) 0.58
16% ING U.S. Stock Index (INGIX) 0.26 <--$15,600/yr, or 80% of His Traditional 401k contributions.
08% ING Russell Small Cap Index (IIRSX) 0.48 <--$3,900/yr, or 20% of His Traditional 401k contributions.

His Vanguard Roth IRA <--His Trad IRA balance was converted to Roth.
01% Vanguard Total Bond Admiral (VBTLX) 0.10 <--$5,500/yr non-deductible TIRA contributions convert to Roth.

Her Vanguard Roth IRA <--Her Trad IRA balance was converted to Roth.
01% Vanguard Total US Stock Admiral (VTSAX) 0.05% <--$5,500/yr non-deductible TIRA contributions convert to Roth.

Her 401k <--I moved all of Her Rollover IRAs here.
18% EuroPacific Growth (RERFX) 0.55
11% Pimco Total Return (PTTRX) 0.46 <--$17,500/yr.

Weighted ER = 0.34% and gradually lowers over time.



*Backdoor Roth results in $333,500 of Roth contributions (assumes each contributes to age 65 and then stops).
*Backdoor Roth results in tax-free growth of contributions; RMD-free, as well.
*Instead of VG Tax-Managed Balanced Fund, you can split taxable savings between i-Bonds and equities, if you like, but I put it all in equities with an understanding of the following WIki article: Placing Cash Needs in a Tax-Advantaged Account (it's the same thing).
*If the Old MassMutual 401k presently allows you to roll in outside accounts, it might have changed the suggestion and cost-effectiveness significantly, but I still don't know what funds in the Old MassMutual 401k.
Last edited by pingo on Wed Jul 24, 2013 7:50 pm, edited 8 times in total.
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3. No backdoor Roth; No after-tax 401k

Postby pingo » Thu Jun 06, 2013 3:29 pm

3. No backdoor Roth; No after-tax 401k

New Contributions
$19,500 His 401k
$17,500 Her 401k
$1,500 His Non-Deductible Traditional IRA <--Kicked back from 401k due to high compensation.
$1,500 Her Non-Deductible Traditional IRA <--Kicked back from 401k due to high compensation.
$30,000 Taxable
$5,000 I-Bonds (emergency fund)


Her Old Mass Mutual 401k
04% Vanguard 500 Fund

Taxable Accounts (24%)
08% in other Stocks at Scottrade <--Turnoff dividend re-investment; redirect cash to VG.
04% Company Stock from Employee Stock Purchase Plan from T. Rowe (TROW) in T. Rowe Direct Brokerage
02% Vanguard Tax Managed Balanced Fund VTMFX <--Exchange into VTIAX & VTSAX, if/when tax-prudent.
07% Vanguard Total Stock Market Index VTSAX <--$15,300/yr.
03% Vanguard Total International Index VTIAX <--$14,700/yr.

His 401k
00% Pimco Total Return (PTTRX) 0.58 <--$19,500/yr.

His Vanguard Rollover IRA (40.2%)
10% Vanguard Total US Stock Admiral (VTSAX) ER 0.05
31% Vanguard Total Bond Admiral (VBTLX) 0.10

Her Vanguard Rollover IRA
17% Vanguard Total International Admiral (VTIAX) 0.18

Her Current 401k
12% American Funds Investment Co. of America (RICFX) 0.35 <--$17,500/yr.

His Vanguard Non-Deductible Traditional IRA
0.3% Vanguard Extended Market (VEXMX) ER 0.22 <--$1,500/yr; converts to Admiral (VEXAX) at $10k.

His Vanguard Roth IRA
01% Vanguard Extended Market (VEXMX) ER 0.22

Her Vanguard Roth IRA
01% Vanguard Extended Market (VEXMX) ER 0.22

Her Vanguard Non-Deductible Traditional IRA
00% Vanguard Total Bond (VBMFX) ER 0.22 <--$1,500/yr; converts to Admiral (VBTLX) at $10k.

Weighted ER = 0.13



*I opted for simplicity over having perfect market weights or shaving a basis point here or there.
*Almost all of His new contributions go to bonds since it doesn't hurt you in costs nor in your weighted asset allocation, and since he is the least risk tolerant.
*Remember that the growth of non-deductible Traditional IRA contributions have already been taxed as income, and their growth will be taxed as income in the future, as well.
*Instead of VG Tax-Managed Balanced Fund, you can split taxable savings between i-Bonds and equities, if you like, but I put it all in equities with an understanding of the following WIki article: Placing Cash Needs in a Tax-Advantaged Account (it's the same thing).
Last edited by pingo on Wed Jul 24, 2013 7:55 pm, edited 1 time in total.
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Re: Portfolio Review

Postby mrsscuba » Wed Jul 24, 2013 1:24 pm

I had my baby May 26, now I'm finally getting back to this! Thank you, pingo for all of your hard work. I am going to look over your options and see what looks good.
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Re: Portfolio Review

Postby pingo » Wed Jul 24, 2013 7:58 pm

Woohoo!

Congratulations!

:beer
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Re: Portfolio Review

Postby mrsscuba » Mon Jul 29, 2013 4:28 pm

Ok, right off the bat, I can tell you that I do not want to put any more money or do anything with his 401k besides what I have to. His company HR department has been a nightmare to work with. He was eligible to enroll at the end of April, and it took about 2 weeks to get the info on how to enroll. Then, we got error after error saying HR hadn't set him up yet in the system. Then, instead of fixing it, HR just went in and enrolled him. That means we don't have a username or password to access the account. ING says to contact HR to get this info. Then, he had to fill out a paper form to say what his deduction should be from his payroll. Three pay periods passed before it actually started coming out of his account, but we STILL cannot see the account or gain access. Finally, he requested a PIN but it's from Computershare, not ING, which I don't understand. And, we don't know the username. So, we STILL can't log in. I just requested a pin from ING, but OF COURSE it comes US Mail, not email (WHY? Why is this considered more secure??). So, still waiting to gain access to this account.

Anyway, that was a long vent, but as a result Option #1 is out.
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Re: Portfolio Review

Postby mrsscuba » Mon Jul 29, 2013 4:39 pm

I went ahead and exchanged Total Bond Index into Total International. I do want to do the backdoor roth, although I am intimidated by it for some reason. i need to do more reading on it so I can understand how it works. But, Option 2 seems good to me. I would love to hear others' thoughts if anyone else is following this thread.

Two questions:
1) Things have become further complicated by the baby - we are now going to want to invest in a 529, etc. I'm planning to start a new thread on this (after doing a search - my questions are specifically about Maryland and I think there may be old threads on the subject). Would the Traditional IRA --> Backdoor Roth be the investments to skip if we need to redirect money to a 529?

2) I have emergency fund money in Vanguard Short-Term Bond Index VBIRX, should I liquidate that also? Should I take it out of the Vanguard account and move it to I-Bonds or is there another stable fund in Vanguard that would be wise to use for an emergency fund?
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Re: Portfolio Review

Postby Default User BR » Tue Jul 30, 2013 11:21 am

mrsscuba wrote:I just requested a pin from ING, but OF COURSE it comes US Mail, not email (WHY? Why is this considered more secure??).

Yes, it is considered to be more secure, at least by many. MyMegaCorp will only send such information by regular mail or through a secure web page accessible only from within company. They won't email any PINs or passwords.

Whether it actually is more secure or not is another matter.


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Re: Portfolio Review

Postby pingo » Thu Aug 01, 2013 1:10 am

mrsscuba wrote:I went ahead and exchanged Total Bond Index into Total International.


It took me a while to realize you are referring to Total Bond in the taxable account. (Sorry, it has been a while.)

mrsscuba wrote:I do want to do the backdoor roth, although I am intimidated by it for some reason. i need to do more reading on it so I can understand how it works.


This very short discussion (2 posts) may also help...

Where to setup a backdoor Roth? And post-tax 401k rollovers

...and the key to the Backdoor Roth is not having any Traditional IRA's (or, at least TIRA balance(s) of $0 prior to non-deductible contribution each year) because you'll be forced to pay taxes on a portion of those assets prematurely. If you move the TIRAs out of the way (rolling them into 401ks), it should be as easy as that link describes.

mrsscuba wrote:1) Things have become further complicated by the baby - we are now going to want to invest in a 529, etc. I'm planning to start a new thread on this (after doing a search - my questions are specifically about Maryland and I think there may be old threads on the subject). Would the Traditional IRA --> Backdoor Roth be the investments to skip if we need to redirect money to a 529?


I would think not. You would skip/reduce your new contributions to the taxable account first.

mrsscuba wrote:2) I have emergency fund money in Vanguard Short-Term Bond Index VBIRX, should I liquidate that also? Should I take it out of the Vanguard account and move it to I-Bonds or is there another stable fund in Vanguard that would be wise to use for an emergency fund?


I don't see anything wrong with moving emergency money to i-Bonds, if that makes sense to you. I-Bonds can serve for college savings, too. Qualified education expenses make redemptions tax-exempt, as I understand it.
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