Daughter & Husband portfolio rebalance

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Topic Author
Winsome
Posts: 51
Joined: Mon Feb 23, 2015 2:36 pm

Daughter & Husband portfolio rebalance

Post by Winsome »

I would like your expert help in rebalancing daughter and son-in-laws accounts across the board. If you think their 40l accounts are OK, then would you do the other 4. They have a lot of cash in these 4 accounts because the accounts haven't been rebalanced for a long time and also because contributions have been made to the ROTH accounts, but left un-deployed. They could do much better than this I am sure, but I don't know how to do it.

Ages 52 and 49 - file married, joint - tax 25% + 3.4 State
Have 2 or 3 months emergency funds - not included here
No debt
2 dependents
Desired allocation 60/40 - but would consider more equities and less fixed. I am concerned about having a lot of International assets. My pick would be 20% but according to what I read that is low. That is why I am asking the Board. I have read that John Bogle feels International is not necessary.

Portfolio is in the high 6 figures

Her IRA - 25% of total
VTSAX VG Total Stock 8%
VISVX VG SC Val 3.5%
VEIEX VG EM Index 2%
VBTLX VG Total Bond 4.4%
VBiRX VG ST Bond 4.5%
VVMWX VG Prime MM 2.6%

Her Roth - 11.94% of Total
VVIAX VG Val Index 3%
VGSLX VG Reit 1.1%
VEIEX VG EM .62%
VTIAX VG Total Intl 1.95%
VBTLX VG Total Bond 2.17%
VBIRX VG ST Bond 1.5%
VG Prime MM 1.6%

Her Taxable Acct - 12.09% of Total
VTSZX VG Total Stock 4.6
VBTLX VG Total Bond 2.4%
VBIRX, VG ST Bond, 2.9%
VG Prime MM 2.19%

His R oth - 12% of Total
VTSAX VG Total Stock 2.25%
VVIAX VG Val Index 2%
VGSLX VG Reit 1.9%
VTIAX VG Total Intl 1.74%
VBTLX VG Total Bond 2.2%
VG Prime MM 1.9%

Her 40l 4.74% of Total
VG Target 2025 4.74%

His # 1 - 401 20% of total
JP Morgan Bal Fund (VG Wellington) 10% (.19 ER)
S&P 500 Index Fund 10% (2% E.R.)
(other options include all the VG Target Funds at .58 ER, Intl Equiity, .65 ER, SC Value, .76ER, LC Growth .50 ER, Large Value, .42 ER and a Stable Value Fund based on 3 month treasuries, .36 ER


His # 2 - 401 14.38% of total
Will never have any additions to it

Am Europacific Growth 3.43 (.54 ER)
SSGA Russell SC Index, 4.45% (.16 ER)
Black Rock U.S. Debt Index, 6.5% (.17 ER)
(other choices Am Cap World G & I, .49 ER, Am Funds Growth Fund of America .39 ER, Black Rock Cap App .84ER
Last edited by Winsome on Mon May 18, 2015 6:07 am, edited 2 times in total.
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Aptenodytes
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Re: Daughter & Husband portfolio rebalance

Post by Aptenodytes »

Although it is a good impulse to try to follow the guidelines on how to post all your relevant information, it is even more important to work out what your question is, and state it right at the top so readers know what you are looking for.
Lafder
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Location: East of the Rio Grande

Re: Daughter & Husband portfolio rebalance

Post by Lafder »

Yes International is part of AA. Usually listed as stocks/bonds, % of International stocks.

Vanguard recs 20-40% International, but recently raised their all in one funds to 40%. We are at 30%

What is your desired International stock % ?

We are 46 and 50 and our AA is 70/30, 30% International.

You can greatly simplify your holdings to just 3 or 4 funds and their equivalents. Your smaller accounts can be just one fund and you can rebalance in the bigger accounts and with ongoing contributions. See this http://www.bogleheads.org/wiki/Lazy_portfolios

It is usual to hold bonds in your retirement accounts unless you are saving for a shorter term goal. See this http://www.bogleheads.org/wiki/Principl ... _placement

Great job listing your holdings % to add up to 100 for total, it makes it easier to rebalance.

What is your current AA ?

I do not think there is reason to hold cash/money market in your investment accounts. It is losing money at the rate of inflation. I stick to cash in just my emergency fund. Some disagree with this.

Great job having no debt.

Are you doing the catch up provision of $6000 for him, and her if she turns 50 by 12/31 of this year in retirement accounts ?

You can edit the title of your post :)

You can also go back and edit and add the ERs for each fund it may help you decide to get rid of some.

Do you have specific questions?

lafder
tibbitts
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Re: Daughter & Husband portfolio rebalance

Post by tibbitts »

The key is this:
They could do much better than this I am sure, but I don't know how to do it.


You aren't going to be doing any rebalancing; your children are (or might be.) In almost all aspects of life, kids could do much better if they just did what parents told them. Or at least that's what parents think, regardless of the ages involved.

If they actually want advice, they should come here and post. That way you won't get blamed if/when the results don't turn out as anticipated.
Lafder
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Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: Daughter & Husband portfolio rebalance

Post by Lafder »

Winsome,

It is apparent to me that your daughter and husband want your help, or they would not have shared their account info :)

Now your title makes sense :)

In general, funds with less than 10% and surely less than 5% of total holdings do little to add diversity and growth compared to the complexity of management.

I would suggest they simplify to closer to a 3 fund portfolio. Total bond market alone is sufficient as the bond fund. No need for a short term bond fund or cash. And the taxable account can hold stocks, not bonds.

Can his #2 401k be rolled over to Vanguard to simplify ?

Here is my attempt at simplifying to get 60/40, 20% International stock = 12% of total is International stock, 48% of total is US stock.

There are MANY ways to do this, this is just one attempt. Since the % are of the total it is easy to add any category in one place and subtract somewhere else.

I have taken out REITs. They can be added back in retirement accounts if desired. I would suggest no more than 10% of total, and that would be from the stock % of the allocation.

Having a combo of all in one plus single funds makes calculating AA a lot trickier!

Her IRA - 25% of total
VTSAX VG Total Stock 15%
VBTLX VG Total Bond 10%

Her Roth - 11.94% of Total (while it may not be desireable to have all International in one place for rebalancing, I made it simple since the % of AA was the right size of wanting 12% International. I know Target date and Wellington have a bit of International as well which is sine sine 20% of stock International is at the low end of the rec range:)
VTIAX VG Total Intl 11.94%

Her Taxable Acct - 12.09% of Total
VTSZX VG Total Stock 12.09 %

His Roth - 12% of Total
VTSAX VG Total Stock 6%
VBTLX VG Total Bond 6%


Her 40l 4.74% of Total
VG Target 2025 4.74%
(46% stock, 22% International stock, 24% Bond, 8% International Bond) = approx 2.18 % US stock, 1.04 % International stock, 1.52% bond

His # 1 - 401 20% of total
JP Morgan Bal Fund (VG Wellington) 20% (.19 ER) = if Wellington approx of total holdings 13% stock/7% bond

((Or a Target Date Retirement fund so it can be truly invest and forget and not need future rebalancing. Wellington is 65/35, but a low 6 % International. It makes calculating AA a bit trickier. But 65/35 is close to overall desired AA and reasonable for age in my opinion. When employment at that company ends, this can be moved))


His # 2 - 401 14.38% of total
Will never have any additions to it
WHy not move to Vanguard ? Can buy stocks here if need to rebalance with a market adjustment.
VBTLX VG Total Bond 14.38%

This is just one version of simplifying. I will be curious to see what they come up with as their current rebalance plan. Target date funds could be used for all to really simplify.
lafder
Topic Author
Winsome
Posts: 51
Joined: Mon Feb 23, 2015 2:36 pm

Re: Daughter & Husband portfolio rebalance

Post by Winsome »

Hello Board:

I have their full and complete blessing. Now and for the next few years while they are raising their children, they simply do not have time - even 15 minutes, to sit in front of their computer and do this. Daughter is responsible for getting kids to and from practice and games for the 4 teams the kids are on. S-I-LAw works all kinds of odd hours at distances from home, and when home tries to catch some shut eye. These were their words, "we don't have time" and they don't. It definitely will become their obligation as soon as this time crunch is over. Meanwhile, I am trying to help them into a better allocation of their money. I would appreciate your help.

Winsome
Topic Author
Winsome
Posts: 51
Joined: Mon Feb 23, 2015 2:36 pm

Re: Daughter & Husband portfolio rebalance

Post by Winsome »

Replying to Lafder's post:

Sad to say, Son in law's #2 401 is in a plan that cannot be rolled over nor added to because he no longer works in the capacity that gave rise to the 401. Many have tried, but it's just not in the cards.

Winsome
Topic Author
Winsome
Posts: 51
Joined: Mon Feb 23, 2015 2:36 pm

Re: Daughter & Husband portfolio rebalance

Post by Winsome »

I appreciate Lafder's reply to my quandry and I'll try to put it down on a grid. I was really hoping to get more replies. Does anybody else have any ideas for me/them?

Winsome
tibbitts
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Re: Daughter & Husband portfolio rebalance

Post by tibbitts »

If you mean the 7-8% total in MM accounts, sure, you could deploy that across the rest of the investments, and that would probably be a good idea, since the emergency fund is taken care of Beyond that, if you tweaked and simplified to get the "perfect" allocation in taxable vs. deferred, and to duplicate the allocation with as few funds as possible, I just don't see that being that huge an improvement. It just seems like they're doing better than 95% of people, so there's no compelling reason to change anything.

60/40 used to be considered perfectly suitable for people in their position. What seems to have changed is that lots of people here feel that there's no alternative to taking on more risk now - that not doing so will guarantee failure, except of course if you have so much income you simply compensate for lower returns by investing more. So now we get all these "why not 100% stock" posts.

You won't get any consensus here on domestic vs. international. 20-40% is probably the most common recommendation.

It's been conventional to put bonds into retirement accounts and equities into taxable, but you don't have to follow that exactly.
Topic Author
Winsome
Posts: 51
Joined: Mon Feb 23, 2015 2:36 pm

Re: Daughter & Husband portfolio rebalance

Post by Winsome »

Thanks Tibbitts -

Thanks for the compliment - they have done well. Daughter can't stand to owe anybody anything and has made double payments when possible. Learned that from us.

I don't quite follow your second paragaraph. I think you are saying the old rule of thumb for people like daughter and SIL was 60/40 but now people feel like failures if they don't have 70/30 or even 80/20. They are certainly past the age for 100% equities. I believe daughter's Target Fund is about 70/30 - for now and will evolve into 65/35. If I have figured correctly, SIL's 2 401's are at about 71/29. I am in the process of figuring the rest of it.

Many thanks, Winsome
Lafder
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Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: Daughter & Husband portfolio rebalance

Post by Lafder »

So the 401 is at the current company and can not be added to or moved. Interesting.

Is that SSGA Russell SC Index a small cap? If so, it would count towards the US stock allocation, and the bonds I previously had suggested here could be increased elsewhere.

Blackrock US debt index is a bond fund at 0.17 ER that could be used too.

Those are the only 2 I would use if these below are the only options. The % of each can be adjusted.

His # 2 - 401 14.38% of total
Am Europacific Growth 3.43 (.54 ER)
SSGA Russell SC Index, 4.45% (.16 ER)
Black Rock U.S. Debt Index, 6.5% (.17 ER)
(other choices Am Cap World G & I, .49 ER, Am Funds Growth Fund of America .39 ER, Black Rock Cap App .84ER

lafder
Topic Author
Winsome
Posts: 51
Joined: Mon Feb 23, 2015 2:36 pm

Re: Daughter & Husband portfolio rebalance

Post by Winsome »

We danced around this issue some time back, but I didn't get enough votes for the 70/30 allocation to feel comfortable.

I realize the bond market has everyone skittish - but it has for years.

Anyway, having money in bonds, seems to me, is like having coins in a piggy bank. Zero growth.

Back to my dilemma, do you think 70% equities is too high for their ages and portfolio size??

Winsome
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BL
Posts: 9874
Joined: Sun Mar 01, 2009 1:28 pm

Re: Daughter & Husband portfolio rebalance

Post by BL »

Lafder wrote:Winsome,

It is apparent to me that your daughter and husband want your help, or they would not have shared their account info :)

Now your title makes sense :)

In general, funds with less than 10% and surely less than 5% of total holdings do little to add diversity and growth compared to the complexity of management.

I would suggest they simplify to closer to a 3 fund portfolio. Total bond market alone is sufficient as the bond fund. No need for a short term bond fund or cash. And the taxable account can hold stocks, not bonds.

Can his #2 401k be rolled over to Vanguard to simplify ?

Here is my attempt at simplifying to get 60/40, 20% International stock = 12% of total is International stock, 48% of total is US stock.

There are MANY ways to do this, this is just one attempt. Since the % are of the total it is easy to add any category in one place and subtract somewhere else.

I have taken out REITs. They can be added back in retirement accounts if desired. I would suggest no more than 10% of total, and that would be from the stock % of the allocation.

Having a combo of all in one plus single funds makes calculating AA a lot trickier!

Her IRA - 25% of total
VTSAX VG Total Stock 15%
VBTLX VG Total Bond 10%

Her Roth - 11.94% of Total (while it may not be desireable to have all International in one place for rebalancing, I made it simple since the % of AA was the right size of wanting 12% International. I know Target date and Wellington have a bit of International as well which is sine sine 20% of stock International is at the low end of the rec range:)
VTIAX VG Total Intl 11.94%

Her Taxable Acct - 12.09% of Total
VTSZX VG Total Stock 12.09 %

His Roth - 12% of Total
VTSAX VG Total Stock 6%
VBTLX VG Total Bond 6%


Her 40l 4.74% of Total
VG Target 2025 4.74%
(46% stock, 22% International stock, 24% Bond, 8% International Bond) = approx 2.18 % US stock, 1.04 % International stock, 1.52% bond

His # 1 - 401 20% of total
JP Morgan Bal Fund (VG Wellington) 20% (.19 ER) = if Wellington approx of total holdings 13% stock/7% bond

((Or a Target Date Retirement fund so it can be truly invest and forget and not need future rebalancing. Wellington is 65/35, but a low 6 % International. It makes calculating AA a bit trickier. But 65/35 is close to overall desired AA and reasonable for age in my opinion. When employment at that company ends, this can be moved))


His # 2 - 401 14.38% of total
Will never have any additions to it
WHy not move to Vanguard ? Can buy stocks here if need to rebalance with a market adjustment.
VBTLX VG Total Bond 14.38%

This is just one version of simplifying. I will be curious to see what they come up with as their current rebalance plan. Target date funds could be used for all to really simplify.
lafder
+1
I like this. No way would I consider re-balancing all of those existing funds!

They have done well! Even with a lot of funds, they can probably manage just fine with what they have and ignore re-balancing for a few more years! If I didn't look wrong, they have a reasonable amount of bonds so they should do well. Agree to not keeping cash in investment accounts unless there is a good reason.

I think there is a risk if you push them to be more aggressive in that when the crash comes, guess whose fault it is? They are more aggressive than "age in bonds", I believe, so they are well within guidelines and no one knows what the future will hold.
Last edited by BL on Thu Jul 23, 2015 6:43 pm, edited 1 time in total.
Topic Author
Winsome
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Joined: Mon Feb 23, 2015 2:36 pm

Re: Daughter & Husband portfolio rebalance

Post by Winsome »

BL

Why should retirement accounts not have cash? Just curious.

Winsome
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BL
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Re: Daughter & Husband portfolio rebalance

Post by BL »

Well, you could keep them in an online savings account for a bit of interest, or in your checking account for FDIC protection, also. They are not doing anything there, are they? Again, not so critical as interest is minimal all over.
JW-Retired
Posts: 7189
Joined: Sun Dec 16, 2007 11:25 am

Re: Daughter & Husband portfolio rebalance

Post by JW-Retired »

Winsome wrote: We danced around this issue some time back, but I didn't get enough votes for the 70/30 allocation to feel comfortable.

I realize the bond market has everyone skittish - but it has for years.

Anyway, having money in bonds, seems to me, is like having coins in a piggy bank. Zero growth.

Back to my dilemma, do you think 70% equities is too high for their ages and portfolio size??

Winsome
IMO, not too high for age 50. What did they do in 2008/09? Any hint of panic selling?

See these "poll" results for 217 Bogleheads. viewtopic.php?f=10&t=168337&start=250#p2543568

Looks like at age 50, 70% equities is just a very few points greater than a median Boglehead. You can estimate for yourself from the plot.
JW
Retired at Last
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