Hello! I joined the forum some time ago and had some circumstances that kept me from doing this for longer than I ever planned. I would like to follow the Boglehead’s strategy and would really appreciate some help/advice getting started. I feel like I am in a decent financial position, while living a pretty low cost lifestyle. I want to ensure that I set myself up for my next 30 years or so. After reading the book I did open up some Vanguard funds, but now want to fully integrate myself! Unfortunately, no vanguard funds are offered in my 401k and since I recently almost paid off my entire mortgage I don’t have tons of cash. I am a saver, though, and want to start doing what I can the right way.
Emergency funds: Almost 12 months
Debt: Credit card is paid in full monthly. Only other debt is mortgage- owe about $9,750.00 at 3.19% interest and mortgage payments are $98.56/month (taxes & insurance are not escrowed and add up to about double or so my mortgage)
Tax Filing Status: Single, no dependents
Tax Rate: 25% Federal, 7.05% State
State of Residence: Minnesota
Desired Asset allocation: 90%+ stocks / 10% bonds/fixed
Desired International allocation: Do not know what is appropriate. Do want some
Current total portfolio:
$111,500 divided as shown below.
95% equity in my house brings total to about $250k. Not sure how/if that gets counted in my portfolio.
3.59% $4,000 (for investing – not included in emergency funds)
3.05%, Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)(0.18%)
4.86%, American Europacific GR FD R5 (RERFX) (0.55%)
8.69%, Blackrock S&P 500 Index I (MASRX) (0.31%)
39.51%, Fastenal Company Stock (FAST) (0.00%??)
7.11%, Pimco Total Return Port. Instl (PTTRX) (0.46%)
5.46%, Blackrock Global Alloc I (MALOX) (0.89%)
8.94%, American Capital World G & I (RWIFX) (0.5%)
I have tried to stick with the cheapest options available.
Company match? Yes- based on profit sharing formula- last year 86% of up to $5,000 of contributions. Half deposited into company stock and the other half deposited into current investment direction. Company stock can be sold immediately, however I have always kept it.
Roth IRA at Vanguard:
7.13%, Vanguard Total International Stock Index Fund Investor Shares (VGTSX) (0.22%)
Traditional IRA at Vanguard:
4.49%%, Vanguard Prime Money Market Fund (VMMXX) (0.16%)
New annual Contributions:
This is part of what I am seeking advice on. See my questions below.
Funds available in 401(k):
Blackrock EQ Dividend I (MADVX) (0.76%)
John Hancock Disciplined (JVMIX) (1.03%)
JP Morgan U.S. Equity FD CL R5 (JUSRX) (0.59%)
Mainstay Large Cap Growth Fund (MLAIX) (0.92%)
Munder Midcap Core Growth FD Y (MGOYX) (1.08%)
Oppenheimer Main Street SML Y (OPMYX) (0.83%)
Delaware Invstmnt Div INC CL A (DPDFX) (0.92%)
Invesco Stable Value RET CL 3 (ISVET) (0.56%??)
1. Should I invest in a ROTH for 2012 tax purposes? This is my most immediate question.
Note: To date I have not put anything into any sort of IRA for 2012 or 2013 tax purposes
2. I am comfortable putting 40% of my income towards retirement, I want to ensure that I have the right tax strategy and/or tax diversification. Specifically how much I should put in my 401k vs. ROTH IRA, Traditional IRA, taxable investments or otherwise? I plan on using all Vanguard funds outside of my 401k and fund recommendations are very much appreciated.
3. Would moving to an IRA (Roth or Traditional?) immediately after reaching the company’s match ($5000) be the way to go since I will be able to pick much cheaper funds than what is available in my 401k? Or if the company stock does not have any costs should I keep in there?
Note: I am not sure what Bogleheads opinion on investing in company stock is, but FAST is a very solid stock that has been amongst the top performing stocks since it went public in 1987. It has a solid history of growth and in a position to keep that pace. I realize past performance does not indicate future performance, but my 401k would not be what it is today without FAST. Let me know if I am crazy for being so heavily invested in the company I invest my livelihood on. It will be hard to give up... especially with what else is available in the 401k.
4. Do I not want to have too much in my 401k? After age 70 ½ I have to have minimum withdrawals, but there is no such requirement for Roths. I read that somewhere and it seemed to make sense. Please let me know your thoughts.
5. Advice on improving my current portfolio would be very much appreciated. I am nervous about putting much more into stocks right now since things are seeing all-time highs and don’t want to throw money into a bull market that may be near its’ peak.
I am currently putting 22% of my income into my 401k. That is the lowest I have put in for a while due to bull market. Last year put in around 30%.
Income is around $50k
I hope I covered everything. It was a great exercise putting this together! If you need additional information please let me know and I am looking forward to this discussion!
Thank you so much,