Asset Allocation and 401(k) Choices

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Topic Author
shy63
Posts: 2
Joined: Thu Jul 09, 2015 4:00 pm

Asset Allocation and 401(k) Choices

Post by shy63 »

Thanks in advance for any advice. I'm a long time lurker and first time poster. I have learned a lot from all of you since I started reading the forum posts and am eternally grateful. When I began reading our assets were primarily in company stock from our respective employers. Since that time we've diversified our portfolio and our financial picture is as follows:

Emergency Fund: One Year
Debt: None
Tax Filing Status: Married Filing Jointly
Tax Rate: 28% Federal/ 6% State
State of Residence: GA
Ages: Both 52

Desired Asset Allocation: 50%/50%
Desired International Allocation:15%
Current size of Portfolio is low 7 figures

Current Retirement Assets:

His 401(K):
Vanguard Intermediate Term Govt. Bond (VSIGX)--15.47%
Vanguard Total Bond Market (VBTIX)-----------------15.45%
BlackRock Lifepath Index 2020 Non Lendable Fund-00.15%

His Roth IRA
Vanguard Total Bond Market( VBTLX)--------------------1.69%

Her Roth
Vanguard Total Bond Market ( VBTLX)------------------4.16%
Vanguard REIT Index( VGSLX )-----------------------------2.07%
US Treasury Inflation Protected Note--------------1.20%
Vanguard Dividend Growth ( VDIGX )-------------------1.15%


Taxable Accounts:
Vanguard Total Stock Market (VTSAX)-------------------29.29%
Vanguard Total Int'l Stock Market(VTIAX)--------------14.09%
Vanguard Small Cap Index (VSMAX)----------------------5.81%
Vanguard Small Cap Value ( VSIAX)---------------------5.39%

I Bonds---------------------------------------------------4.08%

New Annual Contributions:
His 401(k): $15,000( Includes Co. Match)
His Roth: $6500
Her Roth:$6500


Available Funds in His 401 (k)/ Gross Expense

AF GRTH FUND AMER R4 (RGAEX)---.68%
DAVIS NY VENTURE A (NYVTX)--------.86%
PIONEER DSCPLD VAL A (CVFCX)-----1.19%
VANG GROWTH IDX ADM (VIGAX)------.09%
VANG R1000 INDEX IS (VRNIX)----------.08%
VANG VALUE IDX ADM (VVIAX)----------.09%
ARTISAN MID CAP INV (ARTMX)---------1.2%
JH DSCPL VAL MDCP I (JVMIX)----------.87%
VANG MDCPGR IDX ADM (VMGMX)------.09%
VANG MIDCAP IDX ADM (VIMAX)---------.09%
ROYCE OPPORTUNITY IS (ROFIX)--------1.04%
RS PARTNERS Y (RSPYX)-------------------1.18%
VANG SM CAP IDX ADM (VSMAX)-----------.09%
VANG SMCPVL IDX ADM (VSIAX)------------.09%
AF EUROPAC GRTH R4 (REREX)------------.84%
BRANDES INTL EQUITY (BIIEX)-------------.99%
VANG TOT INTL STK AD (VTIAX)-----------.14%

BTC LIFEPATH 2020 O-----------------------.15%
BTC LIFEPATH 2025 O-----------------------.15%
BTC LIFEPATH 2030 O-----------------------.15%
BTC LIFEPATH 2035 O-----------------------.15%
BTC LIFEPATH 2040 O-----------------------.15%
BTC LIFEPATH 2045 O-----------------------.15%
BTC LIFEPATH 2050 O-----------------------.16%
BTC LIFEPATH 2055 O-----------------------.16%
BTC LIFEPATH RET O-------------------------.15%

DODGE & COX INCOME (DODIX)-----------.44%
MFS GOVT SEC R4 (MFGJX)-----------------.63%
VANG INTM GVT BD ADM (VSIGX)----------.12%
VANG TOT BD MKT INST (VBTIX)-----------.06%
MIP CL 1 (Stable Value )---------------------.79%





Other Relevant Info: I am a stay at home parent. We have 5 kids with two of those in college. All tuition is fully funded through a combination of 529 accounts and trust funds. Husband hopes to retire in 3-5 years. We haven't rebalanced our portfolio to desired asset allocation after run up in equities. One reason for delay is that we keep dithering over the following two related questions:

1. As you can see from the above the lion's share of our bond portfolio is in tax advantaged accounts and our equities in taxable accounts. Is this wise? Should we have a mix of bonds and equities in both types of accounts. I have no idea what our tax rate during retirement will be not because I don't have a good idea of our income in retirement but because I don't know what the government may do with tax rates. In addition shouldn't we be taking advantage of some potential non taxable growth in our Roth IRA's?

2. As you can see the bond choices in my husband's 401(K) are limited. His investments are currently almost evenly split between Vanguard Total Bond Market and Vanguard Intermediate Term Government Bond. Any advice on allocation within this 401(k) in light of answer to our first question?
Last edited by shy63 on Fri Jul 10, 2015 9:57 pm, edited 1 time in total.
pingo
Posts: 2638
Joined: Sat Sep 19, 2009 8:24 pm

Re: Asset Allocation and 401(k) Choices

Post by pingo »

A few items from a non-expert, non-pro to help get things going.
shy63 wrote:New Annual Contributions:
His 401(k): 4% of annual Salary with 4% Company Match <--Please indicate dollar amounts.
His Roth: $6500
Her Roth:$6500
No more taxable account contributions? (I merely want to be sure it's not an oversight.)

Also, please tell us how much in dollars he is personally contributing to his 401k and how much the match would be in dollars, as well.
shy63 wrote:1. As you can see from the above the lion's share of our bond portfolio is in tax advantaged accounts and our equities in taxable accounts. Is this wise? Should we have a mix of bonds and equities in both types of accounts.
Some prefer to have stocks and bonds in taxable and there's nothing so wrong with it, even though the usual counsel here is to avoid holding bonds in a taxable account. A retirement portfolio can be managed either way. Perhaps the following Wiki article would also be helpful to review:

Placing Cash Needs In A Tax-Advantaged Account

It may not be for everyone, and the explanations typically involve emergency expenses, but in retirement there is little difference between emergency expenses and, well, expenses. They all come from the same assets and an "emergency fund" per se is unnecessary. A few forum discussions on the topic:

viewtopic.php?t=49940
viewtopic.php?t=155076
viewtopic.php?t=119061
viewtopic.php?t=98002
shy63 wrote:I have no idea what our tax rate during retirement will be not because I don't have a good idea of our income in retirement but because I don't know what the government may do with tax rates.
Base your plans on current tax rates. Don't speculate about future tax rates and don't make your tax decisions based on others' speculations. And remember that you have tax diversification via pre-tax, post-tax and taxable accounts. If taxes suddenly turn upside down in the U.S, you can determine one year from the next which types of withdrawals (and in which amounts) will be most advantageous in terms of taxes. That's the best anyone can do.
shy63 wrote:In addition shouldn't we be taking advantage of some potential non taxable growth in our Roth IRA's?
Yes, if possible. Some general considerations (I don't know if they apply to you) tend to be that if it is possible, one should perform Roth conversions of pre-tax assets in the early phase of retirement before social security income will make conversions onerous/undesirable tax-wise and before RMDs force withdrawls/taxation from pre-tax accounts whether you need them or not. Delaying social security can also increase the time one has to do roth conversions.

There is also an assumption that at some point Roth IRAs with or without conversions might be useful to keep you from breaking into an undesirable tax bracket, which is a good thing.
Topic Author
shy63
Posts: 2
Joined: Thu Jul 09, 2015 4:00 pm

Re: Asset Allocation and 401(k) Choices

Post by shy63 »

Thank you Pingo. I edited the original post to include the dollar amount of his 401(k) contribution. We will probably not add to taxable accounts. I will take a look at the articles you referenced and thanks again for taking the time to read and respond.
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