Porfolio review, consolidation needed

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
Topic Author
LittleGreenSoldiers
Posts: 244
Joined: Fri Nov 14, 2014 5:59 pm

Porfolio review, consolidation needed

Post by LittleGreenSoldiers »

I’ve been reading this forum for some time now. I’ve read a few books and what not and now consider myself a fan of Mr. Bogle. My short term goal is to streamline my portfolio through A. roll-in of orphaned 401(K)s, B. Rollover those orphans to Vanguard IRA or C. a combination of both where it make sense.
Since I have many orphaned accounts with their own laundry list of funds I’ve tried to piece together as concise an AA as possible. I hope to further consolidate into as few of accounts and funds as possible. I’m a believer now in holding the market and staying the course.


In addition to streamlining my portfolio I realize I have to much cash on the side lines. You will see in some side comments that I am contemplating paying off the mortgage, start up a taxable account with a lump deposit and increase my ability to contribute to a taxable account going forward.


Emergency funds: 6-9 Months Cash Savings Account
Debt: Mortgage at 2% About 40% loan to value remaining.

Tax Filing Status: Married Filing Jointly
Tax Rate: 28% Federal, 6% State
State of Residence: GA
Age: Him 45, Her 49

Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 10% of stocks

Current total portfolio: High Sixes

Current retirement assets

Taxable
40% cash (already thinking half of this should pay off mortgage in 2015)

His 401k Current Employer
3% Vanguard Total Stock Index (VTSMX), (ER .05)
Company match? NO

His 401k Former Employer/Orphaned *
34% Vanguard Total Stock Index (VTSMX, or closest available), (ER .06 avg)
8% T.Rowe Price Health Sciences (RHSX) (ER .79)
5% FA Real Estate (FHEAX) (ER 1.16)
* The above is spread across 6 funds in 4 accounts. I grouped similar funds for simplicity. Looking to consolidate to rollover IRA or roll in to current 401K.
It became painfully apparent going though this exercise that many different funds across several orphaned 401Ks is very hard to manage your AA.

His Rollover IRA at Vanguard
5% Vanguard Health Care (VGHCX) (ER .35)

His Roth at Other **
1% Money Market

Her Roth at Other **
2% Money Market

Her Traditional IRA at Other **
2% Money Market

** Planning to move his Roth and her Roth and IRA from monster mega bank to Vanguard.

Contributions

New annual Contributions
$17,500 his 401k (no match)
$his IRA/Roth IRA (always depends on W2)
$her IRA/Roth IRA (always depends on W2)
$12,000 Taxable (Aiming for lump some and additional ~24K/year after mortgage payoff)

Available funds (More funds available, but trying to keep it simple.)

Funds available in his 401(k)
BlackRock High Yield Bond (BRHYX) (ER .56)
Vanguard Total Stock Market (VTSMX) (ER .05)
Fund name (ticker symbol) (expense ratio)

Funds available in orphaned 401(k)s

Questions:
1. In current employer 401(k) I included a small orphaned 401(k) I was planning to roll in before year end. I am also considering rolling in my Vanguard rollover IRA in order to have $0.00 in traditional IRA to make a backdoor Roth an easier option in 2015 and beyond. Is it worth the hassle to do away with any traditional IRAs this year and start with Roth back door in 2015?

2. What to do with the remaining 4 orphaned 401(k)s? There are 3 with Fidelity and 1 with Schwab. The funds are all pretty good. It does make it harder on AA and not sure about identifying fees properly. This one is related to the first question. Would it be good to keep money in these 401(k)s instead of holding a rollover IRA to make backdoor Roth easier?

3. Planning to move his Roth and her Roth and IRA from monster mega bank to Vanguard. Again this is

4. I think I need to start holding bonds in some of my 401(k)s or a new IRA if rolled over. Therefore when I start ramping up a taxable account I can hold equities in that.


Thanks in advance to everyone for all of your contributions to the forum. Please let me know what else I can provide.
ieee488
Posts: 1989
Joined: Thu Dec 10, 2009 7:57 am

Re: Porfolio review, consolidation needed

Post by ieee488 »

1.) You will need to list *all* the funds in your 401K, not just the two you've decided to show us.
BlackRock High Yield Bond (BRHYX) (ER .56) isn't one I would choose.

2.) Vanguard Health Care (VGHCX) (ER .35) why this fund?
Dell Optiplex 3020 (Win7 Pro), Dell Precision M6300 (Ubuntu Linux 12.04), Dell Precision M6300 (Win7 Pro), Dell Latitude D531 (Vista)
Lafder
Posts: 4127
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: Porfolio review, consolidation needed

Post by Lafder »

Questions:
1. In current employer 401(k) I included a small orphaned 401(k) I was planning to roll in before year end. I am also considering rolling in my Vanguard rollover IRA in order to have $0.00 in traditional IRA to make a backdoor Roth an easier option in 2015 and beyond. Is it worth the hassle to do away with any traditional IRAs this year and start with Roth back door in 2015?

I prefer to roll orphaned 401ks to Rollover IRAs at Vanguard so I have complete control and am not limited to my current employer's offerings. I prefer to not pay taxes now to do backdoor Roths, I prefer a larger $ number growing from now. ((Many others do think Roths are worth paying taxes now)). Vanguard Total Stock market is a good fund. Is there by chance a Vanguard total bond market fund or Vanguard Total International stock market fund available?

2. What to do with the remaining 4 orphaned 401(k)s? There are 3 with Fidelity and 1 with Schwab. The funds are all pretty good. It does make it harder on AA and not sure about identifying fees properly. This one is related to the first question. Would it be good to keep money in these 401(k)s instead of holding a rollover IRA to make backdoor Roth easier?

Sounds like you should decide if you want Roths or not. I rolled over my own and my husbands 401ks to Rollover IRAs before I knew about backdoor Roths. It would greatly simplify if you rolled all over to either Fidelity or Vanguard for simplicity and ease of calculating AA and rebalancing as you have discovered. You can move as a backdoor Roth or Rollover IRA. Either way you can consolidate at one fiduciary company for simplicity. How bad would you feel paying taxes on it now and seeing the balance go down that much?

3. Planning to move his Roth and her Roth and IRA from monster mega bank to Vanguard.

Sounds good, keep it simple.

4. I think I need to start holding bonds in some of my 401(k)s or a new IRA if rolled over. Therefore when I start ramping up a taxable account I can hold equities in that.

Yes you are short on bond funds, which I prefer to be part of an asset allocation in addition to a cash emergency fund. You said you want 80/20, what are you at now? I would get your retirement accounts out of money markets and cash. Keep your emergency fund or shorter term savings funds cash, invest the rest per your AA.

How did you pick 10% International ? Vanguard recs 20-40% But of course you should do what feels best for you.

Regarding this : 40% cash (already thinking half of this should pay off mortgage in 2015)

If you have enough cash to pay off the mortgage, and still have an emergency fund, why not just pay it off now and be done in 2014 ? Then take what was your mortgage payment amount and trickle it into taxable investments ?

Best wishes
lafder
User avatar
BolderBoy
Posts: 6755
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Porfolio review, consolidation needed

Post by BolderBoy »

LittleGreenSoldiers wrote: Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 10% of stocks
I like the International portion, but think the 80/20 AA is pretty stiff for folks your age.
User avatar
Topic Author
LittleGreenSoldiers
Posts: 244
Joined: Fri Nov 14, 2014 5:59 pm

Re: Porfolio review, consolidation needed

Post by LittleGreenSoldiers »

ieee488 wrote:1.) You will need to list *all* the funds in your 401K, not just the two you've decided to show us.
BlackRock High Yield Bond (BRHYX) (ER .56) isn't one I would choose.

2.) Vanguard Health Care (VGHCX) (ER .35) why this fund?
Funds in current 401K:
Vanguard Target Retirement Fund 2015 through 2060
PIMCO Total Return Fund PTTRX 0.46
BlackRock High Yield Bond Fund BRHYX 0.56
BlackRock Equity Dividend Fund
Vanguard Total Stock Market Index Fund Admiral Shares VTSAX 0.05
Vanguard 500 Index Fund Admiral Shares VFIAH 0.05
American Funds New Economy Fund RNGGX 0.83
Vanguard Established Value Fund VEVIX 1.05
Vanguard Mid Capitalization Index Fund Admiral Shares VIMAX 0.24
AllianceBernstein Discovery Growth Fund CHCIX 1.04
DFA US Targeted Value Fund DFFVX 0.19
Vanguard Small Cap Index Fund Admiral Shares VSMAX 0.09
Eagle Small Cap Growth Fund HSIIX 1.10
Oakmark International Fund OAKIX 0.98
Franklin Mutual Global Discovery Fund MSISX 1.28
Oppenheimer Developing Markets Fund ODVIX 1.32


Why Vanguard Health Care (VGHCX)? A few months ago I had an AA all over the map. What you see now is greatly consolidate even though fund are held across many 401Ks and IRAs. VGCHX was a hold I left alone for now as it was performing nicely. In the end I am hoping for a 3 fund portfolio.
User avatar
Topic Author
LittleGreenSoldiers
Posts: 244
Joined: Fri Nov 14, 2014 5:59 pm

Re: Porfolio review, consolidation needed

Post by LittleGreenSoldiers »

BolderBoy wrote:
LittleGreenSoldiers wrote: Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 10% of stocks
I like the International portion, but think the 80/20 AA is pretty stiff for folks your age.
I am not opposed to higher bond holding. Maybe 70/30. Coming from basically 100 equities 20 is a big first step for me.
placeholder
Posts: 8421
Joined: Tue Aug 06, 2013 12:43 pm

Re: Porfolio review, consolidation needed

Post by placeholder »

I personally wouldn't have a problem keeping old 401k accounts if it makes financial sense to do so meaning that the way for backdoor Roth is clear and there are good choices available or you just pick a good TD fund in the new and pull everything together and then look at taxable and Roth to complement.
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: Porfolio review, consolidation needed

Post by retiredjg »

1) Roll all the orphans and the rollover IRA into His Current 401k. The choices are good there.

2) Fill the Current 401k with PIMCO Total Return Fund PTTRX 0.46 and Vanguard Total Stock Market Index Fund Admiral Shares VTSAX 0.05 and hold you international allocation in the taxable account.

3) I too think 80/20 is too aggressive.

4) Once all His IRAs are out of the way, start contributing to Roth IRA through the back door. http://thefinancebuff.com/the-backdoor- ... ow-to.html

5) She can use the back door as well, but will have to convert Her tIRA to Roth since she apparently has no 401k. Converting to Roth at 28% is high, but it is such a tiny sliver, it will be worthwhile so that she can grow Her Roth IRA.
User avatar
Topic Author
LittleGreenSoldiers
Posts: 244
Joined: Fri Nov 14, 2014 5:59 pm

Re: Porfolio review, consolidation needed

Post by LittleGreenSoldiers »

Thank you everyone for your responses so far. I initially thought rolling over and consolidating orphaned 401Ks to a single IRA was the best option. Of course this conflicts with any plans to increase Roth holdings through the backdoor. I didn’t even think about converting her tIRA to Roth and then using backdoor on her Roth as well. The 4 prior 401Ks are with Fidelity(3) and Schwab(1). All have good funds available with decent expenses.

Here is the plan I have come up with based on feedback.

1. Keep Fidelity and Schwab 401Ks for now in order to hold no tIRA. My current 401K is with MassMutual and I am not interested in rolling major parts of my portfolio in right now.
2. Hold a single fund in each orphaned 401K. (almost there already)
3. Roll-in small ADP 401K from prior to current 401K (2014)
3.a. Roll-in Vanguard IRA to current 401K (2014)
4. Convert her tIRA to Roth (2014)
5. Start backdoor contributions to Roth accounts. (2015)
6. Pay off mortgage
7. Open taxable account with remaining cash

New stream lined account holdings AA:
Equities 70% portfolio
US 70% equity holding
401K Orphan 1(Fidelity) Vanguard Inst Index Fund VINIX 0.04
401K Orphan 2(Fidelity) Sptn 500 Index Fund FUSVX 0.07
401K Orphan 3(Fidelity) Sptn 500 Index Fund FXSIX 0.05
401K Orphan 4(Schwab) Vanguard 500 Index Admrl 0.05
Her Roth Vanguard Total Stock Market VTSAX 0.05
His Roth Vanguard Total Stock Market VTSAX 0.05

International 30% equity holding
Taxable Need a good Vanguard International(thinking VEMAX 0.15)

Bonds 30% total portfolio
401K Orphan 4(Schwab) Vanguard Long-Term VWESX 0.22
401K Current (MassMutual) PIMCO Total Return Fund PTTRX 0.46


Contribution going forward:
$18,0000/year to Current 401K
$5,500/year to His Roth via backdoor
$6,000/year to Her Roth via backdoor
$24,000/year(old mortgage payments) to Taxable Account


I might end up holding a larger percentage of international equities in taxable account in a couple years bases on forecast contribution rate. I guess I would just rebalance some into US index fund. Also rebalance across 401K if I need to hold more bonds.

Thanks again for all the great feedback.
I wish everyone a happy, safe and healthy Thanksgiving.
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: Porfolio review, consolidation needed

Post by retiredjg »

LittleGreenSoldiers wrote:5. Start backdoor contributions to Roth accounts. (2015)
It may be a year before you do the taxes on this. Write yourself a note for the following spring that you didn't contribute to Roth IRA. You did two steps and it has to be reported that way. Contribute to tIRA, do not deduct, convert to Roth. Fill out Form 8606 for both steps.
International 30% equity holding
Taxable Need a good Vanguard International(thinking VEMAX 0.15)
Probably not the best choices. This is just emerging markets, the riskiest of the international stocks. Suggest you use Vanguard Total International Index instead. It contains emerging markets, but holds the developed markets (Europe, Canada, etc.) as well.

You may be paying admin fees on the orphans. If you are, that would be a good reason to reduce it to only one orphan. Seems like Orphan 1 (which offers Vanguard Inst Index at .04) would suffice for all 4 of the orphans. Why hold the same fund in 4 places when you can hold it at one place?
User avatar
Topic Author
LittleGreenSoldiers
Posts: 244
Joined: Fri Nov 14, 2014 5:59 pm

Re: Porfolio review, consolidation needed

Post by LittleGreenSoldiers »

retiredjg,
I plan to get His tIRA rolled to current 401K and Her tIRA converted to Roth by end of 2014. New taxed contributions to IRA and backdoor to Roth would be in 2015. I thought this would be the cleanest for tax purposes as there would be no tIRAs held in 2015.

Thanks for the recommendation on Total International Index. Makes sense.

My reasoning on holding same fund in multiple 401Ks is only toi keep them out of rolloever tIRA. Also, I am not all that impressed with current 401K at MassMutual. I am still working to identify any management fees in my Fidelity and Schwab orphan 401Ks. If I do find fees I will consider rolling into current 401K as needed.
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: Porfolio review, consolidation needed

Post by retiredjg »

LittleGreenSoldiers wrote:My reasoning on holding same fund in multiple 401Ks is only toi keep them out of rolloever tIRA. Also, I am not all that impressed with current 401K at MassMutual. I am still working to identify any management fees in my Fidelity and Schwab orphan 401Ks. If I do find fees I will consider rolling into current 401K as needed.
If you think Orphan 1 has the better choices, roll them all to Orphan 1 rather than your current 401k if Orphan 1 allows it. Many do. And If Orphan 1 does not, maybe Orphan 2, 3 or 4 would take them all.
User avatar
Topic Author
LittleGreenSoldiers
Posts: 244
Joined: Fri Nov 14, 2014 5:59 pm

Re: Porfolio review, consolidation needed

Post by LittleGreenSoldiers »

Ok. This is interesting. I thought you could only roll a previous 401K into your current employer 401K. If an older 401K allows for a roll in then I missed it. The believe the 3 Fidelity and 1 Schwab previous 401Ks are all good options to consider. In the event I could roll in to any of them this would be a great new angle.
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: Porfolio review, consolidation needed

Post by retiredjg »

LittleGreenSoldiers wrote:Ok. This is interesting. I thought you could only roll a previous 401K into your current employer 401K. If an older 401K allows for a roll in then I missed it. The believe the 3 Fidelity and 1 Schwab previous 401Ks are all good options to consider. In the event I could roll in to any of them this would be a great new angle.
Since you have 4 to choose from, there's a pretty good chance. But watch for fees that may not have been charged when you were an employee.

On the other hand, I'm not sure why you don't want to roll things into your current 401k. It seems to have excellent choices to me.
User avatar
Topic Author
LittleGreenSoldiers
Posts: 244
Joined: Fri Nov 14, 2014 5:59 pm

Re: Porfolio review, consolidation needed

Post by LittleGreenSoldiers »

My hesitation on current employer 401K at MassMutual is due more to lack of exposure/familiarity with it. I've only been in it about 4 months. From an ease of use I like Fidelity's NetBenefits user interface best. Second best is Schwab closely followed by Vanguard. MassMutual last. The MassMutual website from my initial experience is very, very basic. I know access to great funds at low cost should be THE driving factors.
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: Porfolio review, consolidation needed

Post by retiredjg »

Do you actually need anything other than "very very basic"? Bells and whistles are nice, but how much are they needed for what you need to do?

There's one argument for using one of the other plans and that is if your employer ever changes plans, at least you'll have a good portion of your money safe from that. Of course, the same could happen with that plan as well.
Post Reply