Help to choose right 401k mix

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Re: Help to choose right 401k mix

Postby retiredjg » Fri Mar 22, 2013 10:47 am

Adding in the $30k of I Bonds...this is what you actually have. However, this only adds up to 98.4% instead of 100%. You rounded numbers then I tinkered with your rounded numbers, throwing things even a little more off. I'll work with it unless you want to make it more accurate.

Total Portfolio = 132k

Taxable account 25%
2.3% Vanguard Total Stock Market Index
22.7% Ibonds

His 401k 31.7% (42k)
12% NORTHERN TR CL S&P 500 IDX 
4.4% NORTHERN TR CL RUSSELL 2000 
15.2% NORTHERN TR CL AGG BD IDX 

Her 401k 24.7% (33k)
18.8% Fifth Third Equity Index Fund 
5.9% Lord Abbot Bond Fund

His Roth IRA 8.5% (11k)
8.5% Vanguard Total International

Her Roth IRA 8.5% (11k)
8.5% Vanguard Total International

So, unless I messed up the math, you currently have 56.2% stocks, 43.8% bonds, with 30% of your stocks in international. Before I go further, see if you think I've got this right.
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Re: Help to choose right 401k mix

Postby retiredjg » Fri Mar 22, 2013 10:54 am

samsnow25 wrote:For MFS, the contribution limit for Roth is 0 for AGI >=10,000.

Oh yes. So easy to forget. :oops:

On a separate note, I plan to start diverting funds from some of my CDs to I-Bonds as they mature rather than adding more and more of new money to I-bonds.

That sounds fine. But keep them as "emergency fund", not included in your retirement portfolio calculations.

There will come a time that it can all be lumped together, but not until your portfolio is larger (in my opinion). When the emergency fund becomes a small part the whole bucket, I think it can be lumped together. Right now, if you lumped it and then had to take out the whole emergency fund, it would wreck your portfolio's asset allocation. Better to avoid that.
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Re: Help to choose right 401k mix

Postby retiredjg » Fri Mar 22, 2013 11:08 am

Since you have to make a change in your 401k, you can just flip flop your US stocks in His 401k with the International in the Roth IRAs. This does not change things greatly.


Total Portfolio = 132k

Taxable account 25%
2.3% Vanguard Total Stock Market Index
22.7% Ibonds

His 401k 31.7% (42k)
16.4% 21.3% Blackrock MSCI ACWI IMI Index non-lendable fund – ER = 0.07 <--same as Vanguard's Total International Index
15.2% NORTHERN TR CL AGG BD IDX 

Her 401k 24.7% (33k)
18.8% Fifth Third Equity Index Fund (500 Index)
5.9% Lord Abbot Bond Fund

His Roth IRA 8.5% (11k)
8.5% Vanguard Extended Market Index (in place of the Mid cap and Small cap you used to have - completes the 500 Index in Her 401k)

Her Roth IRA 8.5% (11k)
8.5% Vanguard Total Stock

From here, do you want to adjust the stock to bond ratio before going forward (this is what I'd do) or do you want to let your contributions bring the bond percentage down?
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Re: Help to choose right 401k mix

Postby samsnow25 » Fri Mar 22, 2013 11:42 am

1. We can work with your percentages. They are pretty close to 100%.
2. I think I should adjust going forward and with new money (10k) except for the one time swap between 401k and Roth.
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Re: Help to choose right 401k mix

Postby retiredjg » Fri Mar 22, 2013 12:25 pm

samsnow25 wrote:2. I think I should adjust going forward and with new money (10k) except for the one time swap between 401k and Roth.

Ok. Gotta go for now. I'll come back later to finish. :happy
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Re: Help to choose right 401k mix

Postby retiredjg » Fri Mar 22, 2013 4:54 pm

Total Portfolio = 132k

Taxable account 25% <---$10k
2.3% Vanguard Total Stock Market Index
22.7% Ibonds

His 401k 31.7% (42k) <---$14k
16.4% 21.3% Blackrock MSCI ACWI IMI Index non-lendable fund – ER = 0.07 <--same as Vanguard's Total International Index
15.2% NORTHERN TR CL AGG BD IDX 

Her 401k 24.7% (33k) <---$14k
18.8% Fifth Third Equity Index Fund (500 Index)
5.9% Lord Abbot Bond Fund

His Roth IRA 8.5% (11k)
8.5% Vanguard Extended Market Index (in place of the Mid cap and Small cap you used to have - completes the 500 Index in Her 401k)

Her Roth IRA 8.5% (11k)
8.5% Vanguard Total Stock

So there's $38k left to contribute this year. You want to contribute less than 35% to the bonds in order to bring your bond percentage down. Here's a gut estimate (not done with math).

Taxable $10k <--all to Vanguard Total International Index
His 401k $14k <--$9.5k to bonds, $4.5k to Blackrock International
Her 401k $14k <--All to 500 Index


Here's an alternative approach: don't contribute to bonds at all until the bond percentage has dropped back to about 35%. Then recalculate what you have left to invest the rest of the year and send 35% of that to bonds, about 20% to international stocks, and the rest to US stocks.

I actually think it might be easier to go at this differently - rebalance now to your target and then send in the contributions in a way to maintain those percentages.

I don't recall just how much you wanted in international - I've been using 30% of stocks, but I'm not sure that is right.
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Re: Help to choose right 401k mix

Postby samsnow25 » Sat Mar 23, 2013 9:15 pm

I guess my reclassification of Ibonds is triggering more changes than what I was prepared for :o . To ease it out on my mind, I am going to consider my Ibonds contribution starting this year (10k) as a part of overall Bond portfolio.

Thank you for pointers around extended market, I had completely missed it in the swap.
If I were to add 38k (2013 projected) to the portfolio as of today, this is what it would look like.

His 401k 37.5% (69.8k)
24% Blackrock MSCI ACWI IMI Index non-lendable fund
13.6% NORTHERN TR CL AGG BD IDX

Her 401k 31.6% (47.6k)
22.3% Fifth Third Equity Index Fund
9.3% Lord Abbot Bond Fund

His Roth IRA 7.6% (11.3k)
7.6% Vanguard Extended Market Index

Her Roth IRA 7.9% (11.8k)
7.9% Vanguard Total Stock

Taxable account 15.4 (23.2k)
6.2% Vanguard Total Stock Market Index (additional 6k)
6.6% (10k) Ibonds
2.7% (4k) Ohio Muni (I am obviously obsessed with this one :) )

This get me pretty close to desired allocation (yes, desired international is 30%).
Any major flaws in this plan?
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Re: Help to choose right 401k mix

Postby retiredjg » Sun Mar 24, 2013 1:36 pm

samsnow25 wrote:Any major flaws in this plan?

No, I don't see any major flaws. Yes, I think you have a hankering for the munis.

How are you going to categorize the $30k you currently have in I Bonds?
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Re: Help to choose right 401k mix

Postby samsnow25 » Sun Mar 24, 2013 2:51 pm

No, I don't see any major flaws. Yes, I think you have a hankering for the munis.

Thank you. I am relieved :happy. I guess one of the reasons for munis is diversification (similar to stocks). With IBonds and current choices in 401ks, I have good exposure to Treasury & Govt. related, Corp bonds.

How are you going to categorize the $30k you currently have in I Bonds?

I have considered 10k from this year in Bond allocation, 20k from last year as emergency funds. From this point forward, I plan to consider new Ibonds purchases in my bond allocation.
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Re: Help to choose right 401k mix

Postby retiredjg » Sun Mar 24, 2013 3:16 pm

Seems reasonable to me. Good luck!
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