Retirement [Portfolio help]

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

Retirement [Portfolio help]

Postby bubbadogs » Thu Mar 14, 2013 12:35 pm

Some advice please!!! Current retirement assets (Roth and 403(b)'s) are in the mid $300K range (wife and I combined). We are both school teachers with a successful summer business. We have three children and have 529 accounts for two of the three (more later). While we've done well lately, as have so many, with our portfolio, I'm well aware that the party won't last. I know that I'm in need of some re-balancing but am a bit lost as to where to go next...

All of our retirement accounts are at Vanguard. Currently, we both max out our Roth contributions ($5500 each) and, until 4 months ago, were contributing an additional $10,000/year toward 403(b)'s. We needed some current income, so we temporarily stopped those contributions until September, 2013 when we intend to start up again. In short, we'll be contributing $21,000 toward retirement by September, 2013. We've also stopped contributing toward children's 529's for same reason. Come September, we will begin those contributions again.

As teachers, we will both be eligible for pensions. I can begin collecting 54% of final year's salary at age 55 (in 9 years), my wife 60% in 17 years. I am also retired military and am eligible to collect $1200/month pension at age 60.

Emergency funds: $6500 in savings account (Admittedly light here. Contributing $600/month. Goal is $25000 minimum)

Debt: Mortgage Balance - $288,000, 13 years remain. Paying approximately $3300/month (includes property tax and insurance)

Tax Filing Status: Married Filing Jointly

Tax Rate: 28% Federal, 3% State

State of Residence: PA

Age: Me 46, Spouse 42

Desired Asset allocation: 70% stocks / 30% bonds

Desired International allocation: 15-20% of stocks

All Vanguard accounts:

Her 403(b)

Small Cap Index - 7.0%
Inflation Protected Securities (TIPS) - 9.5%

Her Roth

International Growth - 13.2%
Short Term Bond Index - 7.0%
Mid-Cap Index Admiral - 8.6%

Him 403(b)

Growth and Income - 13.3%
Total Bond Market Index - 4.2%

Him Roth

Emerging Markets Stock Index Admiral - 4.2%
Health Care - 13.6%
International Growth - 12.2%
REIT - 7.3%

529 Balances
Child #1 (age 12) - $21,277
Child #2 (age 10) - $13,300
Child #3 (age 5) - $0 --- Strategy is that our mortgage, 13 year remaining ($2400/month) will be paid in full by the time #3 begins college.

Any assistance that might be given regarding rebalancing would be great. Thanks so much!!!!
bubbadogs
 
Posts: 4
Joined: Thu Mar 14, 2013 11:29 am

Re: Retirement [Portfolio help]

Postby Sandman62 » Thu Mar 14, 2013 8:32 pm

Are you sure about your pension being based on "final year's salary"? Most that I've heard of are based on average of last 3-5 years.

Are you in a different PA pension system from this?
http://www.psers.state.pa.us/nearingretirement/retirementestimate.htm

Final Average Salary
The most common error in completing the Request for Retirement Estimate form pertains to the final average salary. A member will frequently list his or her final year’s salary and not the average of the three (3) highest year’s salaries. The final average salary is a key element in the calculation that determines your retirement benefit. It is important that the final average salary submitted on the Request for Retirement Estimate is as close to the true final average salary as possible.
Sandman62
 
Posts: 68
Joined: Wed Feb 06, 2013 4:22 pm
Location: Rhode Island

Re: Retirement [Portfolio help]

Postby livesoft » Thu Mar 14, 2013 8:38 pm

I suggest you start with the Three-Fund Portfolio and add only a few extras if you like. My extras would be US Small-Cap Value Index and Foreign Small-Cap Index and perhaps a REIT index.

Things I would not have:
HealthCare
Int'l Growth
Mid-cap index
Small-cap index
Growth-and-Income

So my question to you is this: Are you willing to make big changes to what you have?

You stated:
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 15-20% of stocks

So you can do that with 30% bonds in the funds you have plus 20% in Vanguard Total Int'l Stock Market Index fund and the remaining in the Vanguard Total Stock Market Index fund. If you want to keep the REIT, then carve that out of the Total Stock Market Index fund. If you want to overweight small-cap, then carve out some Small-Cap Value index out of Total Stock Market Index fund. If you want to overweight Large-Cap emerging markets, then carve that out of Total Int'l Stock Market Index fund.

For simplicity, you can make his 403(b) 100% total bond index and her 403(b) Inflation-protected securities. That will give you all your bond allocation. You can make one of the Roths 100% Total US Stock Market index. That leaves the other Roth for all the leftovers and all rebalancing can take place in that one account. Very simple; very easy.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
livesoft
 
Posts: 32504
Joined: Thu Mar 01, 2007 9:00 pm

Re: Retirement [Portfolio help]

Postby bubbadogs » Fri Mar 15, 2013 11:45 am

Sandman62 wrote:Are you sure about your pension being based on "final year's salary"? Most that I've heard of are based on average of last 3-5 years.

Are you in a different PA pension system from this?
http://www.psers.state.pa.us/nearingretirement/retirementestimate.htm

Final Average Salary
The most common error in completing the Request for Retirement Estimate form pertains to the final average salary. A member will frequently list his or her final year’s salary and not the average of the three (3) highest year’s salaries. The final average salary is a key element in the calculation that determines your retirement benefit. It is important that the final average salary submitted on the Request for Retirement Estimate is as close to the true final average salary as possible.


Thank you Sandman. I will be retiring as a military veteran. In New Jersey, that entitles me to retire at 54.5% of my final year's salary. My wife will retire with average of last three years.
bubbadogs
 
Posts: 4
Joined: Thu Mar 14, 2013 11:29 am

Re: Retirement [Portfolio help]

Postby bubbadogs » Fri Mar 15, 2013 11:46 am

Much appreciated Livesoft. You definately gave me some things to consider.
bubbadogs
 
Posts: 4
Joined: Thu Mar 14, 2013 11:29 am

Re: Retirement [Portfolio help]

Postby Sandman62 » Fri Mar 15, 2013 1:55 pm

Oh, I thought you were both teachers.

Either way, double pensions is very 8-)
Sandman62
 
Posts: 68
Joined: Wed Feb 06, 2013 4:22 pm
Location: Rhode Island

Re: Retirement [Portfolio help]

Postby bubbadogs » Fri Mar 15, 2013 4:11 pm

Sorry for confusion. We are both teachers. My wife in PA. and I on NJ. I qualify for a veteran retirement in the New Jersey state pension fund which provides 54.5% of final years salary at age 55 as well as a military pension that I can receive at age 60 (approx $1200/month). Thanks again for your input.
bubbadogs
 
Posts: 4
Joined: Thu Mar 14, 2013 11:29 am

Re: Retirement [Portfolio help]

Postby ruralavalon » Fri Mar 15, 2013 4:30 pm

Welfcome to the forum :) .

You are doing almost everything right: no consumer debt; good savings rate, reasonable asset allocation; use of low cost Vanguard funds, primarily index funds; etc.

I'll second Lifesoft's suggestions about funds to use or not use.

The only thing I would add is do a little reading from a couple of books on these lists -- http://www.bogleheads.org/readbooks.htm ; and Wiki article link: Books: Recommendations and Reviews .
"Everything should be as simple as it is, but not simpler." - Albert Einstein
Wiki article link:Getting Started
User avatar
ruralavalon
 
Posts: 4651
Joined: Sat Feb 02, 2008 11:29 am
Location: Illinois


Return to Investing - Help with Personal Investments

Who is online

Users browsing this forum: Baidu [Spider], CinDrew27 and 20 guests