AA question, please help

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AA question, please help

Postby MCDavis » Fri Apr 05, 2013 12:27 pm

I have been reading about 3-fund portfolio and would like to seek help in getting my AA settled. Please help.

Emergency funds: 6 months
Debt: mortgage, 3.375%/30y.
Tax Filing Status: Married Filing Jointly
Tax Rate: 15% 25% Federal, 7% State
State of Residence: North Carolina
Age: 40/38
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 30% of stocks

Taxable:
2% VWSTX (Vanguard Short-Term Tax-Exempt Fund Investor Shares) 0.20%

His 401K (4% company match):
5% Vanguard Target Ret. 2035 Trust I 0.08%
5% Vanguard Target Ret. 2040 Trust I 0.08%
3% SSgA Total Bond Market Index Fund 0.05%
9% SSgA S&P 500 Equity Index Fund 0.02%
2% SSgA S&P MidCap 400 Equity Index Fund 0.07%
2% SSgA Russell 2000 Equity Index Fund 0.05%
7% SSgA MSCI EAFE Intern'l Equity Index 0.14%
2% Company stock fund 0.02%


His ROTH at Fidelity:
6% FFNOX (FIDELITY FOUR IN ONE INDEX) 0.21%

His Roth at Vanguard:
6% VTSAX (Vanguard Tot Stk Mkt Idx Admiral) 0.06%

Her Roth 403b:
7% FSTVX SPTN TOT MKT IDX ADV 0.07%
3% FSIVX SPTN INTL INDEX ADV 0.17%

Her Pre-tax 403b:
16% FSTVX SPTN TOT MKT IDX ADV 0.07%
7% FSIVX SPTN INTL INDEX ADV 0.17%

Her Roth at Fidelity:
12% FFNOX (FIDELITY FOUR IN ONE INDEX) 0.21%

College saving:
5% North Carolona 529 Plan 0.38%
1% Coverdell ESA (still cash, will decide soon)
2% iBonds



Contributions

New annual Contributions
$17500 his 401k (4%)
$17500 her 403b (no match)
$5000 his Roth IRA
$5000 her Roth IRA
$12000 taxable (for retirement, not short term goals)

Available funds

Funds available in his 401(k)
Fund Name Type ER
Company Stock Fund Company stock 0.02%
PTTRX PIMCO Total Return Fund Fixed income 0.46%
SSgA Total Bond Market Index Fund Fixed income 0.05%
Stable Value Fund Fixed income 0.42%
American Funds EuroPacific Growth Fund International equity 0.50%
SSgA MSCI EAFE International Equity Index Fund International equity 0.14%
SSgA S&P 500 Equity Index Fund Large-cap blend 0.02%
Winslow Capital Large Cap Growth Portfolio Large-cap growth 0.56%
VWNAX Vanguard Windsor II Fund Admiral Shares Large-cap value 0.27%
SSgA S&P MidCap 400 Equity Index Fund Mid-cap blend 0.07%
VMGRX Vanguard Mid-Cap Growth Fund Mid-cap growth 0.54%
VASVX Vanguard Selected Value Fund Mid-cap value 0.38%
VMRXX Vanguard Prime Money Market Fund Money Market 0.09%
SSgA Russell 2000 Equity Index Fund Small-cap blend 0.05%
T. Rowe Price New Horizons Trust Small-cap growth 0.66%
RSEIX Royce Special Equity Fund Small-cap value 1.03%
SSgA U.S. Total Market Equity Index Fund Total market 0.09%
Vanguard Target Retirement 2030 Trust I Target Retirement Funds 0.08%
Vanguard Target Retirement 2035 Trust I Target Retirement Funds 0.08%
Vanguard Target Retirement 2040 Trust I Target Retirement Funds 0.08%
Vanguard Target Retirement 2045 Trust I Target Retirement Funds 0.08%


Funds available in her 403(b)
Name Asset Class Category Gross ER
SPTN 500 INDEX INST (FXSIX) Stock Investments Large Cap 0.05%
VANGUARD 500 IDX SIG (VIFSX) Stock Investments Large Cap 0.05%
SPTN EXT MKT IDX ADV (FSEVX) Stock Investments Mid-Cap 0.07%
SPTN TOT MKT IDX ADV (FSTVX) Stock Investments Large Cap 0.07%
SPTN US BOND IDX IS (FXSTX) Bond Investments Income 0.07%
SPTN INFL PR IDX ADV (FSIYX) Bond Investments Income 0.10%
SPTN INT TR IDX ADV (FIBAX) Bond Investments Income 0.10%
SPTN LT TR IDX ADV (FLBAX) Bond Investments Income 0.10%
SPTN ST TR IDX ADV (FSBAX) Bond Investments Income 0.10%
VANG GROWTH IDX SIG (VIGSX) Stock Investments Large Cap 0.10%
VANG MID CAP IDX SIG (VMISX) Stock Investments Mid-Cap 0.10%
VANG SM CAP IDX SIG (VSISX) Stock Investments Small Cap 0.10%
VANG TOT BD MKT SIG (VBTSX) Bond Investments Income 0.10%
VANG VALUE IDX SIG (VVISX) Stock Investments Large Cap 0.10%
VANG GNMA ADM (VFIJX) Bond Investments Income 0.11%
VANG INFL PROT ADM (VAIPX) Bond Investments Other 0.11%
VANG INTM BD IDX SIG (VIBSX) Bond Investments Income 0.11%
VANG TOT INTL STK S (VTSGX) Stock Investments International 0.16%
SPTN INTL INDEX ADV (FSIVX) Stock Investments International 0.17%
VANG WELLINGTON ADM (VWENX) Blended Investments N/A 0.17%
SPTN REAL ES IDX ADV (FSRVX) Stock Investments Specialty 0.20%
VANG EQUITY INC ADM (VEIRX) Stock Investments Large Cap 0.21%
SPTN MID CAP IDX ADV (FSCKX) Stock Investments Mid-Cap 0.22%
FID FOUR IN ONE IDX (FFNOX) Stock Investments Large Cap 0.23%
VANG SM GRTH IDX INV (VISGX) Stock Investments Small Cap 0.24%
VANG MORGAN GRTH ADM (VMRAX) Stock Investments Large Cap 0.26%
SPTN GLB XUS IDX ADV (FSGDX) Stock Investments International 0.28%
FID SEL MONEY MARKET (FSLXX) ?Short-Term Investments N/A 0.30%
SPTN SM CAP IDX ADV (FSSVX) Stock Investments Small Cap 0.30%
SPTN EM Mkts IDX ADV (FPMAX) Stock Investments 0.35%
<Other funds with ER > 0.30% are omitted>


QUESTIONS:
(1) What is the most efficient way of moving money among funds/accounts to achieve my desired AA?
(2) How to decide on the investment in ESA account?
(3) Any suggestions/points for consideration on the future priorities among iBonds, Muni Bonds, TIPS or other taxable investment venues?
Last edited by MCDavis on Fri Apr 05, 2013 4:05 pm, edited 1 time in total.
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Re: AA question, please help

Postby Grt2bOutdoors » Fri Apr 05, 2013 1:08 pm

Hello and welcome to the forum!

You have some great choices there. What is your intention with your current 401k selections? Typically when using a Target Retirement fund - that one fund is enough to provide a well diversified, low cost option. In your current make-up you are holding 2 Target Retirement funds, plus an assortment of other indexes that already are included within the Target Retirement funds.

Have you considered either using one Target Retirement fund in your 401k account.
In your wife's account you could use the Total Stk Market Index, Total International Stock Index and Total Bond Mkt index to approximate your planned asset allocation percentages.

Can't provide more precise details right now, but I'm sure someone else will chime in shortly.
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Re: AA question, please help

Postby MCDavis » Fri Apr 05, 2013 1:13 pm

I started with Target funds in my 401K before I decided to go with individual funds later, but I did not try to convert the previously held Target funds. That's why you see them still remaining in my portfolio. It is my goal to go to fewer funds with lower/lowest ERs in my whole portfolio.
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Re: AA question, please help

Postby Twins Fan » Fri Apr 05, 2013 1:32 pm

Well, you certainly have a lot of good low cost funds to choose from... that's a good thing!!

From a simplification standpoint, can you transfer some of the Roths in your portfolio to get them all over to Vanguard? You have a bunch of accounts going now that would add some complexity or overlap to a three fund portfolio.

From what I've read, the target retirment funds are not preferred if you can't hold them in all accounts. I.E. if you could hold TR 2035 in all accounts, good to go... if not, it's better to go with a three fund approach separately. And they are not tax efficient in the taxable account, so it may be best to get rid of them in the one account.
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Re: AA question, please help

Postby YDNAL » Fri Apr 05, 2013 1:57 pm

MCDavis wrote:I have been reading about 3-fund portfolio and would like to seek help in getting my AA settled....

Age: 40/38
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 30% of stocks

Welcome!

If it's 3 fund portfolio you want.
Taxable:
2% VWSTX (Vanguard Short-Term Tax-Exempt Fund Investor Shares) 0.20%

His 401K (4% company match):
5% Vanguard Target Ret. 2035 Trust I 0.08%
5% Vanguard Target Ret. 2040 Trust I 0.08%
9% SSgA S&P 500 Equity Index Fund 0.02%
2% SSgA S&P MidCap 400 Equity Index Fund 0.07%
2% SSgA Russell 2000 Equity Index Fund 0.05%
7% SSgA MSCI EAFE Intern'l Equity Index 0.14%
2% Company stick fund 0.02%

28% 3% SSgA Total Bond Market Index Fund 0.05%
7% SSgA U.S. Total Market Equity Index Fund Total market 0.09%


His ROTH at Fidelity:
6% FFNOX (FIDELITY FOUR IN ONE INDEX) 0.21%
6% FSTVX SPTN TOT MKT IDX ADV 0.07%

His Roth at Vanguard:
6% VTSAX (Vanguard Tot Stk Mkt Idx Admiral) 0.06%

Her Roth 403b:
7% FSTVX SPTN TOT MKT IDX ADV 0.07%
3% FSIVX SPTN INTL INDEX ADV 0.17%

10% FPEMX Fidelity Spartan EMkts Idx Inv 0.33% <-- you didn't show >0.30% ER, assuming she has FPEMX
available to complete FSIVX that is missing Emerging Markets


Her Pre-tax 403b:
23% 16% FSTVX SPTN TOT MKT IDX ADV 0.07%
7% FSIVX SPTN INTL INDEX ADV 0.17%

Her Roth at Fidelity:
12% FFNOX (FIDELITY FOUR IN ONE INDEX) 0.21%
12% FSIVX SPTN INTL INDEX ADV 0.17%
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
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Re: AA question, please help

Postby Peter Foley » Fri Apr 05, 2013 2:00 pm

Again, welcome.

If your intent is to transition to a low cost simplified portfolio, your wife's 403bs are a good starting point. You do a lot of good choices so here is what I would recommend and why.

Wife's 403b and Roth 403b - no changes for now - you might want to add bonds later.
His 401k - Use Total Bond and the stable value fund (if the yield on the stable value is ok. Greater than 3% is ok for stable value in this environment.)
Your 401k is about 33% of the total and I assume you want to keep a small position in company stock. So that's 31% in bonds.
His Roth at Fidelity - Use a low cost international here.
His Roth at Vanguard - No change
Her Roth at Fidelity - Either Total US market or Total International to achieve the us/International balance you want.

Taxable - switch to total US stock or total International stock at some point.
I don't see TIPs as being an option in your deferred accounts. If you really want to have TIPs (I split my bonds 3 ways - Total + TIPs + Stable Value), you could put a TIPs fund in one of your Roths and put less in bonds in your 401k. (Substitute index 500 and 400 if you wish). You do not want to hold TIPs in a taxable account. I-Bonds in taxable would be an option, however.

In terms of moving money around. I would calculate out the ideal percentages across all funds just as you have laid them out here. If the advice I presented is of interest, start with the accounts that have no change, decide on whether you want TIPs and where to put them, and reconfigure your 401k accordingly. It's the largest account so it will drive whats needed to be done in the other accounts. Internal account transfers should not be difficult to do - I can do all of mine on line; perhaps you have the same option.

Edit: I see that Landy and I were writing at the same time. While there are some minor differences - we are both headed in the same direction. I usually suggest fewer changes to make the initial process more manageable.
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Re: AA question, please help

Postby tyrion » Fri Apr 05, 2013 2:23 pm

MCDavis wrote:Tax Rate: 15% Federal, 7% State
New annual Contributions
$17500 his 401k (4%)
$17500 her 403b (no match)
$5000 his Roth IRA
$5000 her Roth IRA
$12000 taxable (for retirement, not short term goals)


Are you sure you're in the 15% federal bracket with $57k of annual contributions?
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Re: AA question, please help

Postby MCDavis » Fri Apr 05, 2013 3:34 pm

tyrion wrote:
MCDavis wrote:Tax Rate: 15% Federal, 7% State
New annual Contributions
$17500 his 401k (4%)
$17500 her 403b (no match)
$5000 his Roth IRA
$5000 her Roth IRA
$12000 taxable (for retirement, not short term goals)


Are you sure you're in the 15% federal bracket with $57k of annual contributions?



Sorry, typo: should be 25% based on our taxable income in 2012.
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Re: AA question, please help

Postby MCDavis » Fri Apr 05, 2013 3:41 pm

YDNAL wrote:
MCDavis wrote:I have been reading about 3-fund portfolio and would like to seek help in getting my AA settled....

Age: 40/38
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 30% of stocks

Welcome!

If it's 3 fund portfolio you want.
Taxable:
2% VWSTX (Vanguard Short-Term Tax-Exempt Fund Investor Shares) 0.20%

His 401K (4% company match):
5% Vanguard Target Ret. 2035 Trust I 0.08%
5% Vanguard Target Ret. 2040 Trust I 0.08%
9% SSgA S&P 500 Equity Index Fund 0.02%
2% SSgA S&P MidCap 400 Equity Index Fund 0.07%
2% SSgA Russell 2000 Equity Index Fund 0.05%
7% SSgA MSCI EAFE Intern'l Equity Index 0.14%
2% Company stick fund 0.02%

28% 3% SSgA Total Bond Market Index Fund 0.05%
7% SSgA U.S. Total Market Equity Index Fund Total market 0.09%


His ROTH at Fidelity:
6% FFNOX (FIDELITY FOUR IN ONE INDEX) 0.21%
6% FSTVX SPTN TOT MKT IDX ADV 0.07%

His Roth at Vanguard:
6% VTSAX (Vanguard Tot Stk Mkt Idx Admiral) 0.06%

Her Roth 403b:
7% FSTVX SPTN TOT MKT IDX ADV 0.07%
3% FSIVX SPTN INTL INDEX ADV 0.17%

10% FPEMX Fidelity Spartan EMkts Idx Inv 0.33% <-- you didn't show >0.30% ER, assuming she has FPEMX
available to complete FSIVX that is missing Emerging Markets


There is no FPEMX, but there is FPMAX sptn EM Mkts IDX ADV (0.35%). May I ask why we need this individual emerge marker stock index fund? Would it be enough to have TOT INTERNATIONAL STK IDX? Thanks.

Her Pre-tax 403b:
23% 16% FSTVX SPTN TOT MKT IDX ADV 0.07%
7% FSIVX SPTN INTL INDEX ADV 0.17%

Her Roth at Fidelity:
12% FFNOX (FIDELITY FOUR IN ONE INDEX) 0.21%
12% FSIVX SPTN INTL INDEX ADV 0.17%
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Re: AA question, please help

Postby Peter Foley » Fri Apr 05, 2013 5:37 pm

I think you can tell from both Landy's response and mine that while a 3 fund portfolio is possible, a five or six fund portfolio is more realistic for those in the acquisition stage who are trying to keep costs low while owning most market segments (to increase their yield a bit).

For bonds, my preference is total bond, tips and stable value for maximum protection against unforeseen inflation. Thats 3 funds.
Total US Stock, Total International, and Emerging Market (the latter not included in some international funds offered in deferred accounts) adds 3 more to the mix. I personally don't own emerging market. I do have separate large cap and mid cap US because total stock market is not available in my deferred accounts.
If you want to count my older I-bonds and E-bonds, I'm up to 8.

I moderated a small group session at the Minnesota Bogleheads meeting in February on the topic of simple to complex portfolios. There were about 20 of us in the discussion group and most had in the neighborhood of 8 to 12 funds.
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Re: AA question, please help

Postby YDNAL » Fri Apr 05, 2013 6:34 pm

MCDavis wrote:
YDNAL wrote:
MCDavis wrote:Her Roth 403b:
7% FSTVX SPTN TOT MKT IDX ADV 0.07%
3% FSIVX SPTN INTL INDEX ADV 0.17%

10% FPEMX Fidelity Spartan EMkts Idx Inv 0.33% <-- you didn't show >0.30% ER, assuming she has FPEMX
available to complete FSIVX that is missing Emerging Markets


There is no FPEMX, but there is FPMAX sptn EM Mkts IDX ADV (0.35%). May I ask why we need this individual emerge marker stock index fund? Would it be enough to have TOT INTERNATIONAL STK IDX? Thanks.

Her Pre-tax 403b:
23% 16% FSTVX SPTN TOT MKT IDX ADV 0.07%
7% FSIVX SPTN INTL INDEX ADV 0.17%

Her Roth at Fidelity:
12% FFNOX (FIDELITY FOUR IN ONE INDEX) 0.21%
12% FSIVX SPTN INTL INDEX ADV 0.17%

First, IF you had a complete Total International in your 401K, you could use that, but you don't have one that is better than Spartan Total Intl FSIVX.
MCDavis wrote:Funds [International] available in his 401(k)
American Funds EuroPacific Growth Fund International equity 0.50%
SSgA MSCI EAFE International Equity Index Fund International equity 0.14%

Second, the reason to hold Emerging Markets separately is that you want more diversification. Spartan Total Intl. FSIVX is not "TOTAL" because it holds only Large Cap stocks in Developed Countries - and it also doesn't hold Mid/Small Caps. For a Developed/Emerging summary, look at the end of "world regions" in the link.
Link - http://portfolios.morningstar.com/fund/ ... ture=en-us
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Re: AA question, please help

Postby MCDavis » Mon Apr 08, 2013 12:10 pm

YDNAL wrote:
MCDavis wrote:
YDNAL wrote:
MCDavis wrote:Her Roth 403b:
7% FSTVX SPTN TOT MKT IDX ADV 0.07%
3% FSIVX SPTN INTL INDEX ADV 0.17%

10% FPEMX Fidelity Spartan EMkts Idx Inv 0.33% <-- you didn't show >0.30% ER, assuming she has FPEMX
available to complete FSIVX that is missing Emerging Markets


There is no FPEMX, but there is FPMAX sptn EM Mkts IDX ADV (0.35%). May I ask why we need this individual emerge marker stock index fund? Would it be enough to have TOT INTERNATIONAL STK IDX? Thanks.

Her Pre-tax 403b:
23% 16% FSTVX SPTN TOT MKT IDX ADV 0.07%
7% FSIVX SPTN INTL INDEX ADV 0.17%

Her Roth at Fidelity:
12% FFNOX (FIDELITY FOUR IN ONE INDEX) 0.21%
12% FSIVX SPTN INTL INDEX ADV 0.17%

First, IF you had a complete Total International in your 401K, you could use that, but you don't have one that is better than Spartan Total Intl FSIVX.
MCDavis wrote:Funds [International] available in his 401(k)
American Funds EuroPacific Growth Fund International equity 0.50%
SSgA MSCI EAFE International Equity Index Fund International equity 0.14%

Second, the reason to hold Emerging Markets separately is that you want more diversification. Spartan Total Intl. FSIVX is not "TOTAL" because it holds only Large Cap stocks in Developed Countries - and it also doesn't hold Mid/Small Caps. For a Developed/Emerging summary, look at the end of "world regions" in the link.
Link - http://portfolios.morningstar.com/fund/ ... ture=en-us



How about VANG TOT INTL STK S (VTSGX) Stock Investments International 0.16% in her 403b?
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Re: AA question, please help

Postby MCDavis » Mon Apr 08, 2013 12:12 pm

Peter Foley wrote:I think you can tell from both Landy's response and mine that while a 3 fund portfolio is possible, a five or six fund portfolio is more realistic for those in the acquisition stage who are trying to keep costs low while owning most market segments (to increase their yield a bit).

For bonds, my preference is total bond, tips and stable value for maximum protection against unforeseen inflation. Thats 3 funds.

What would be the mixing proportion? One third each?

Total US Stock, Total International, and Emerging Market (the latter not included in some international funds offered in deferred accounts) adds 3 more to the mix. I personally don't own emerging market. I do have separate large cap and mid cap US because total stock market is not available in my deferred accounts.
If you want to count my older I-bonds and E-bonds, I'm up to 8.

I moderated a small group session at the Minnesota Bogleheads meeting in February on the topic of simple to complex portfolios. There were about 20 of us in the discussion group and most had in the neighborhood of 8 to 12 funds.
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