BogleBill is ready ...

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
boglebill
Posts: 223
Joined: Sun May 17, 2009 1:08 pm

BogleBill is ready ...

Post by boglebill »

I posted our portfolio almost 3 years ago. I'll be honest ... I haven't pulled the trigger on re-allocating like I should have. We have continued to fund the accounts, but I was trigger shy. I'm ready.

Emergency Fund: Yes (not included below). There are several scenarios because we are dual income and have a rental, so I'll spare the details, but I feel comfortable.

Reason for this post -- determine funds and allocations ... I can allocate the existing balances, but I get overwhelmed when factoring in the new contributions.

Long-term goals 1yr and beyond:
  1. Accumulate taxable wealth (supp income if retire before 59 1/2)
  2. Accumulate retirement growth & income
  3. Retirement overall, we want to reallocate to a less complicated situation.
Debt:
  • 200k mortgage bal (primary) 30yr @ 4.875% (27yrs remain)
  • 128k mortgage bal (rental) 30yr @ 4.75% (30yrs remain - just refinanced after 8 years to help cashflow)
  • 0 Auto, CC, student loans, etc.
Tax Filing Status: Married filing Jointly
Tax Rate: 25% FED 0% State
Age: 32m & 34f - both employed

Desired Asset allocation: 80/20
Current portfolio: 6 figures
Taxable: 0% (all taxable is cash in EF)

Ready to reallocate - current elections are irrelevant.

His Roth at Fidelity: 33.6%
Her Roth at Fidelity: 15.72%
His 401k (6-10% match): 37.94%
Her 401k (0% match): 10.03%
Her 401k #2(0% match): 2.71%

New Annual Contributions
  • $5k his Roth
    $5k her Roth
    $17k his 401k
    $7k her 401k
    $120 her 401k #2 (seriously)
    $5k taxable
Available funds ... I have weeded out the ridiculous ER's.

Funds available in his 401k:
  • XCT EQUITY INDEX TRUST CLASS C 0.10 S&P 500 Index
    RPSIX SPECTRUM INCOME FUND 0.70 Bond
    SVF-N TRP STABLE VALUE FUND - N 0.20 Money Market
    TRRFX RETIREMENT 2005 FUND 0.58
    TRRAX RETIREMENT 2010 FUND 0.61
    TRRGX RETIREMENT 2015 FUND 0.65
    TRRBX RETIREMENT 2020 FUND 0.69
    TRRHX RETIREMENT 2025 FUND 0.72
    TRRCX RETIREMENT 2030 FUND 0.74
    TRRJX RETIREMENT 2035 FUND 0.76
    TRRDX RETIREMENT 2040 FUND 0.76
    TRRKX RETIREMENT 2045 FUND 0.76
    TRRMX RETIREMENT 2050 FUND 0.76
    TRRNX RETIREMENT 2055 FUND 0.76
    TRRIX RETIREMENT INCOME FUND 0.56
Funds Available in her 401k:
  • ING GNMA Income Fund - Class I 0.63 Bonds
    Vanguard Target Retirement 2010 - Investor Shares 0.17
    Vanguard Target Retirement 2015 - Investor Shares 0.16
    Vanguard Target Retirement 2020 - Investor Shares 0.17
    Vanguard Target Retirement 2025 - Investor Shares 0.18
    Vanguard Target Retirement 2030 - Investor Shares 0.18 80/20
    Vanguard Target Retirement 2035 - Investor Shares 0.19
    Vanguard Target Retirement 2040 - Investor Shares 0.19
    Vanguard Target Retirement 2045 - Investor Shares 0.19
    Vanguard Target Retirement 2050 - Investor Shares 0.19
    Vanguard Target Retirement 2055 - Investor Shares 0.19
    ING U.S. Stock Index Portfolio - Institutional Class 0.26 Large Cap Index S&P500
    Vanguard Mid-Cap Index Fund - Institutional Shares 0.08 Mid Cap Index
Funds Available in her 401k #2:
  • VSCIX Vanguard Small Cap Index 0.13
    WFBIX Blackrock Bond Fund Index 0.20
Closing:
  1. Non-retirement ... US index? Tax exempt bond fund?
  2. Looks like wife's ER's are better, we can swap the new contribution amounts. Pull trigger?
  3. I don't have any intention of leaving Fidelity. I believe their spartan funds are competitive.
  4. My wife's employer has a great pension and she has over 10 years with them.
  5. Brain overload on allocaitons ... please help!
Thanks!
-Bill
User avatar
mhc
Posts: 5257
Joined: Mon Apr 04, 2011 10:18 pm
Location: NoCo

Re: BogleBill is ready ...

Post by mhc »

Here are a couple of things.

1. You can withdraw penalty free from retirement accounts before age 59.5. You should max out tax sheltered accounts before putting money into taxable account.

2. It looks like you should refinance your primary.

3. What percent do you want for International? The normal range is around 20-60% of equities. You could go for something like 50% US, 30% Intl, 20% bonds.

4. Don't pass up any matching funds. Free money is good.

How to build a portfolio.
1. Place funds according to: http://www.bogleheads.org/wiki/Principl ... _Placement
For you, this basically means: put your bonds in a tax sheltered account.
2. Look for the low cost options in each account. Start with your 401k's and choose the lowest cost. Then use your Roths to fill in the holes.
3. Don't worry too much about new contributions. You can rebalance when you add the funds. These are tax sheltered accounts. Rebalancing is easy because there are not tax consequences to rebalancing.

Here's a few clues to get started.
His 401k: S&P500
Her 401k: TR2050
Roths: Spartan US Bond Index, Spartan ex US, Spartan Extended Market (used with S&P500 to cover entire US market)

Try putting together a proposal and let us review it. You will learn better if you do it yourself.
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
User avatar
Kevin M
Posts: 15787
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: BogleBill is ready ...

Post by Kevin M »

Can't you refinance the primary? Rates are much lower than that now.

You know you want 80/20 stock/bond, so that's your starting point for portfolio.

30% of stocks in international is a good default. That's what's in the Vanguard Target Retirement (TR) funds.

The TR funds in wife's 401k are great. I would max her 401k first, and put it all into one of the TR funds. The one you choose depends on what you put elsewhere; i.e., to adjust your stock/bond ratio to target. You can easily look up the stock/bond ratios of the TR funds on the Vanguard site. If you can't figure out how, please ask.

I would max out 401k funds and Roth IRAs before taxable. You can pull contributions out of Roth any time tax and penalty free. You can roll 401k accounts to IRAs and do a 72t (SEPP) to withdraw before 59 1/2. Also, if your plan allows it, I believe you can withdraw from 401k penalty free if you terminate employment at 55 or later.

For international at Fidelity (IRA), use Spartan Global ex US, since it has emerging markets.

Since you have inexpensive 500 index in your 401k, use a spartan extended market or if they have one a small-cap fund to get total market. Use 80/20 ratio.

Whatever you keep in taxable, put it into stocks. Total International (Vanguard) or Spartan Global ex US (Fidelity), and either Vanguard or Spartan total US. Or, you can use taxable to supplement 500 index with small cap.

The rest of it is just math. Do you know how to use a spreadsheet? If so, this is not that difficult to work out.

First just put your 20% in bonds somewhere. Consider the stable value fund if interest rate is 2% or more. At 20% of portfolio, your stocks will dominate performance, so the bond fund won't make much difference. Also consider IRAs for bonds. Personally I would use CDs in IRAs for fixed income, but like I said, it doesn't matter that much.

For equities, start by picking the best fund in the account with the worst choices; e.g., the 500 index fund in your 401k. Then supplement that with extended market or small cap in another account to get to 80/20 ratio. Then use IRA and/or taxable to get 30% of stocks in international. Then use total US and total International in IRAs and taxable to maintain 70/30 US/international ratio. Finally, pick TR fund in wife's account that maintains 80/20 stock/bond ratio; since you've already placed 20% in bonds, the TR 2050 is probably what you'll use. Or, you may place less in bonds elsewhere and use a lower-dated TR fund to get more in bonds there, since it includes a good bond fund (Total Bond). Like I said, a little iteration may be useful.

You may have to iterate a bit, but I think this is the approach I would use--without thinking more deeply about it.

What I am saying is very similar to mhc. We both think you should work this out yourself using the guidelines we're providing. Typically someone will chime in and work it out for you, but it most likely will be following the guidelines we've suggested. If you can work it out yourself, then you will in better shape to keep things in balance as you add new contributions.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
The Wizard
Posts: 13356
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: BogleBill is ready ...

Post by The Wizard »

I don't understand the problem.
OP says he wants to be 80% stocks and 20% bonds. But he doesn't tell us which funds he is presently in or what his present actual AA is.
80% stocks is a bit high for anybody, especially someone who's having problems following through...

From his post of three years ago, looks like their assets are spread all over the place, some in high ER funds. No more than 10% of total assets in any single fund.
Sounds like consolidation into low ER funds would be step one, so identify those destination funds within those available in each situation and get cracking...
Attempted new signature...
User avatar
Kevin M
Posts: 15787
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: BogleBill is ready ...

Post by Kevin M »

I decided to give you an example of how to do the math.
  1. 80% stocks x 70% US = 56% of portfolio in US stocks
  2. 80% large cap x 56% US stocks = 45% of portfolio in large-cap US
  3. You have about 38% in his 401k, which has the decent 500 index fund, so put it all in that fund. That leaves 45-38=7% to go for large cap US. Come back to this later. Some will be in her 401k.
  4. 80% stocks x 30% international = 24% of portfolio in international. You can hold that, or some of it in taxable, and get the rest in His Roth. Or all in hist Roth. You may need to come back and adjust this down, since you will own some international in her 401k.
  5. 80% stocks x 70% US x 20% small/mid = 11% of portfolio mid/small US. Pick that up in his Roth.
  6. Her 401k has about 10% of portfolio, so use the TR 2010 fund to maximize bonds. Calculate % of portfolio now in bonds.
  7. With whatever is left in all accounts, distribute it among the the minimum number of lowest-cost funds to get your AA to target (45% large US, 11% small US, 24% total international, 20% bonds).
Now that I think more about it, you actually might want to start with TR 2010 in her 401k, then work the other steps, since you'll know what percentages you have left to fill out each asset class. You can't adjust the US/International (or US large/mid/small) in the TR fund, just the stock/bond ratio. But hopefully you get the idea.

Future contributions: contribute enough to get the maximum match in your 401k, then max out her 401k, then back to your 401k or Roth IRAs (or both), then to taxable. You may need to switch TR funds in her 401k to keep your AA on target.

This is one solution. There are others. The key is just to work through it a step at a time.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
Topic Author
boglebill
Posts: 223
Joined: Sun May 17, 2009 1:08 pm

Re: BogleBill is ready ...

Post by boglebill »

Thank you for the replies! I have the data in a spreadsheet and will fill in the fine allocation details this weekend and post the results for review. I do appreciate the help!

- I think the missing piece in my mind clicked when MHC and Kevin said to pick the best ERs in the 401k's and work backwards from there to balance it with what we have more control over.

- Refinancing the primary - We did it under HARP 1.0 due to property values. I have called lender a few months ago to ask about refi, but we were unable. It sounds like it may be possible under HARP 2.0. I will call.

- International... 30% ... I am always hesitant with this one ... my gut says lower but I know that isn't necessarily correct and we have to start somewhere.

- Free money is REALLY good, major part of the reason I changed jobs.

Wizard - I think the current allocations are irrelevant because I need to sell and rearrange. The old 401k from 3 years ago (with bad ERs) has been improved with new employer. Rolled the old 401k into Roth. His 401k is all in a TRowe Target, her Roth is all in a Fidelity Target, her 401k is all in a Vanguard Target ... so we have done some meddling, just not the overhaul and proper allocation.
User avatar
Kevin M
Posts: 15787
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: BogleBill is ready ...

Post by Kevin M »

boglebill wrote: - International... 30% ... I am always hesitant with this one ... my gut says lower but I know that isn't necessarily correct and we have to start somewhere.
Then go with 20%. Like I said, Vanguard uses 30% in their TR and LS funds. Also it's in the middle of their recommended range of 20%-40%. I use 40%, so if you use 20%, we'll balance each other out. :wink:

Kevin
If I make a calculation error, #Cruncher probably will let me know.
Topic Author
boglebill
Posts: 223
Joined: Sun May 17, 2009 1:08 pm

Re: BogleBill is ready ...

Post by boglebill »

Ok - first crack at this ... shooting for 70/30, 20% International ...

I put together a massive spreadsheet and if correct, the calculations are:
53.97% US Equity (~14% mid-cap, ~3% small cap)
20.53% International
25.00% Bonds

His ROTH - 33.6%
20.16% Total - FSGUX - Spartan Global ex U.S. Index Fund - Investor Class 0.24ER 60.00% Account (w/ Emerging Markets)
6.72% Total - FSEMX - Spartan Extended Market Index Fund - Investor Class 0.10ER 20.00% Account (Mid-Cap)
6.72% Total -FBIDX - Spartan US Bond Index Fund - Investor Class 0.22ER 20.00% Account

Her ROTH - 15.72%
15.72% Total - FBIDX - Spartan US Bond Index Fund - Investor Class 0.22ER

His 401k - 37.94%
37.94% Total - XCT - EQUITY INDEX TRUST CLASS C 0.10ER (S&P 500 Index)

Her 401k - 10.03%
5.02% Total - VTENX- Vanguard Target Retirement 2010 - Investor Shares 0.17ER 50% Account
5.02% Total - VMCIX - Vanguard Mid-Cap Index Fund - Institutional Shares 0.08ER 50% Account

Her 401k #2 - 2.71%
2.71% Total - VSCIX - Vanguard Small Cap Index 0.13ER
User avatar
mhc
Posts: 5257
Joined: Mon Apr 04, 2011 10:18 pm
Location: NoCo

Re: BogleBill is ready ...

Post by mhc »

It looks like you have a really nice portfolio.

Just in case you are not familiar with it, there is a tool that can show the 9-box of a fund or portfolio:

http://portfolio.morningstar.com/NewPor ... =0.7055475

It can be useful.

Good job. Now, make sure you don't wait 3 years to pull the trigger. :D
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
User avatar
Kevin M
Posts: 15787
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: BogleBill is ready ...

Post by Kevin M »

I'm not going to check your math right now, but it looks like you basically have the idea. A few comments.

You say you want 70/30 (which I assume is stocks/bonds), but then below you say 25% bonds. Which is it: 30% or 25% in bonds?

Your target for mid/small is a little light at 17%. You want 20% to be at market weight (assuming 80% is in 500 index). However, if this is because you are constrained by good choices, it's not a big deal. Just direct more future contributions to Her 401k plans, and top up the mid/small caps in those good funds.

Although the TR funds are great in general, by having to use a variety of funds, it might be simpler to just put everything in her 401k into the mid-cap fund, and compensate by switching 3%-5% of total from extended market into the bond fund in His Roth, maybe eventually eliminating extended market in this account and just using the two funds. Easier to figure your AA by not having to break out the TR fund into its underlying asset classes, and by having fewer funds.

For now, I'd just treat mid-cap, small-cap and extended market as one asset class: mid/small. They all track pretty closely. Longer term, you could use Her 401k #2 to beef up your small cap.

If you do something like the above, you can eliminate two funds (at least one now, maybe both now, or maybe one a little later), and simplify calculating your AA. Especially if you really want something closer to 70/30 than 75/25, and your proposed AA comes out to 75/25, then just move all the extended market into the bond fund in His Roth now, and put everything in Her 401k into mid cap. This bumps up your bond allocation a bit, eliminates two funds, and simplifies your AA calculations.

Other than these possible refinements, it looks good.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
YDNAL
Posts: 13774
Joined: Tue Apr 10, 2007 4:04 pm
Location: Biscayne Bay

Re: BogleBill is ready ...

Post by YDNAL »

boglebill wrote:I posted our portfolio almost 3 years ago. I'll be honest ... I haven't pulled the trigger on re-allocating like I should have. We have continued to fund the accounts, but I was trigger shy. I'm ready.

Tax Filing Status: Married filing Jointly
Tax Rate: 25% FED 0% State
Age: 32m & 34f - both employed

Desired Asset allocation: 80/20
Current portfolio: 6 figures
Taxable: 0% (all taxable is cash in EF)

Ready to reallocate - current elections are irrelevant.
  • His Roth at Fidelity: 33.6%
    Her Roth at Fidelity: 15.72%
    His 401k (6-10% match): 37.94%
    Her 401k (0% match): 10.03%
    Her 401k #2(0% match): 2.71%
New Annual Contributions
  • $5k his Roth
    $5k her Roth
    $17k his 401k
    $7k her 401k
    $120 her 401k #2 (seriously)
    $5k taxable $5K her 401K #2
    There should be NO reason to save for retirement in Taxable, in the 25% bracket, when you are not utilizing tax-advantaged options (Her 401K #2).
boglebill wrote:Ok - first crack at this ... shooting for 70/30, 20% International ...

Bill,

Three years... really?

Your most important decision is AA (Stock/Bond split) to meet your goal(s).
  • That would be 70/30 according to your last post that contradicts 80/20 in your OP - all in a span of 3 days.
  • Indecisions and/or anything else that holds you back are not going to be helped by anything offered in this Forum.
  • After the AA, finding diversified and cost-effective solutions to use in a unified portfolio is not brain surgery.
Having said that, which needs to be said IMO, here's my attempt to help:
  • His Roth at Fidelity: 33.6% -- (13% new money), Spartan International, Spartan US Bond Index (complete 20%)
    Her Roth at Fidelity: 15.72% -- (13% new money), Spartan International, Spartan US Bond Index (complete 20%)
    His 401k (6-10% match): 37.94% -- (43% new money), XCT EQUITY INDEX TRUST CLASS C 0.10 S&P 500 Index
    Her 401k (0% match): 10.03% -- (18% new money), Vanguard Mid-Cap Index Fund - Institutional Shares 0.08 Mid Cap Index
    Her 401k #2(0% match): 2.71% -- (13% new money), WFBIX Blackrock Bond Fund Index 0.20 (BarCap Aggregate)
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
Topic Author
boglebill
Posts: 223
Joined: Sun May 17, 2009 1:08 pm

Re: BogleBill is ready ...

Post by boglebill »

MHC and Kevin - thanks for continuing to help! Thanks for the new view YDNAL!

Kevin - I revised to shoot for 70/30 but I missed the mark a little :? ...
I've convinced myself that first pass is liquidate and rearrange to the general form ... then rebalance from there to square things up.
I over-spent my time creating a spreadsheet - then played with the #'s until I was blue in the face.

I submitted orders and will rebalance when the Short Term has passed. Needed to push myself and not delay anymore.

YDNAL - I'm VERY interested in the simplicity of the suggestion! Do you think the the mid-cap is too light?

I see that the ER on "Spartan Global ex U.S. Index Fund" is higher than "Spartan International Index Fund" --- is the Emerging Market diversification critical?
YDNAL
Posts: 13774
Joined: Tue Apr 10, 2007 4:04 pm
Location: Biscayne Bay

Re: BogleBill is ready ...

Post by YDNAL »

boglebill wrote:YDNAL - I'm VERY interested in the simplicity of the suggestion! Do you think the the mid-cap is too light?

I see that the ER on "Spartan Global ex U.S. Index Fund" is higher than "Spartan International Index Fund" --- is the Emerging Market diversification critical?
The S&P 500 Fund in His 401K needs help in order to provide better diversification.
  • The most typical option is a completion Fund such as Vanguard Extended Markets.
    https://personal.vanguard.com/us/funds/ ... st=tab%3A2
  • IF you don't mind 3 Funds, you have the option to use Vanguard MID (Her 401K) and Vanguard SMALL (Her 401K #2) to complete the S&P 500 Fund.
  • I opted for simplicity to offer something that may help you get going with this process.
Emerging Markets are the 4th wheel in a Foreign car portfolio.
  • - Europe Developed
    - Japan
    - Australasia
    - Emerging
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
User avatar
Kevin M
Posts: 15787
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: BogleBill is ready ...

Post by Kevin M »

Note that Landy's recommendations are very close, in general, to what you have come up with.

I would pay 0.34% to include emerging markets vs. 0.17% to do without. They are 25% of international, and I don't want to leave that huge chunk out. Definitely. I disagree that they are the fourth wheel; they are the second wheel: Developed and Emerging. This is a much more standard first cut of international. You don't want to own some China, Korea, Taiwan, Brazil, etc.?

As I said, for now you can treat mid, small and extended market the same; they really do not perform that much differently. The good mid-cap fund in Her 401k is good for this. The good small-cap fund in Her 401k#2 is good to push the median market cap closer to small. This is only one fund in each account, so you can't get any simpler.

I agree that pulling the trigger and getting things closer to what you want is much more important than getting it perfect. No more analysis paralysis. What you have is close enough for now. You can fine tune later.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
YDNAL
Posts: 13774
Joined: Tue Apr 10, 2007 4:04 pm
Location: Biscayne Bay

Re: BogleBill is ready ...

Post by YDNAL »

Kevin M wrote:I disagree that they are the fourth wheel; they are the second wheel: Developed and Emerging. This is a much more standard first cut of international. You don't want to own some China, Korea, Taiwan, Brazil, etc.?
I could have considered it the first wheel.... but it is more illustrative when you picture a car portolio standing on only 3 wheels, and you are considering adding (or not) a 4th wheel. :D
Landy | Be yourself, everyone else is already taken -- Oscar Wilde
User avatar
Kevin M
Posts: 15787
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: BogleBill is ready ...

Post by Kevin M »

YDNAL wrote:
Kevin M wrote:I disagree that they are the fourth wheel; they are the second wheel: Developed and Emerging. This is a much more standard first cut of international. You don't want to own some China, Korea, Taiwan, Brazil, etc.?
I could have considered it the first wheel.... but it is more illustrative when you picture a car portolio standing on only 3 wheels, and you are considering adding (or not) a 4th wheel. :D
OK, then I guess I could ask, "would you rather be riding a unicycle or a bicycle?" :wink: Or how about "riding your bike doing a wheelie, or riding on two wheels?"

Kevin
If I make a calculation error, #Cruncher probably will let me know.
Post Reply