(My other thread was lost in the crash)
I’m a 27 year old pharmacist, and I’m looking for some advice with my 401k and I would also like to invest in a taxable account.
My emergency fund is in place
I currently only have two debts, a student loan of about 6,000, and a mortgage of about 200k (low interest of 3.875)
Tax status is married filing jointly, and I live in GA. I’m in the 28% federal tax bracket.
My desired AA is about 75/25, but I like to be a little safer so I may go with 70/30.
All of my investments are currently in tax-deferred accounts: 68k in my 401k, and 10k in my Roth. All of my wife’s investments are also in tax-deferred: 20k in 401k.
My 401k is through JP Morgan. I currently contribute 12,500 a year (plus 5000 match and 2800 profit share), however, I will be maxing out as of this year.
My Roth is invested in VWELX. I maxed out last year, and will continue to do so in the future. We are starting a Roth for my wife this year, and will be contributing the max to her account as of this year. As of now, we are going to invest her
account in VWELX, but may decide to do a split of VTI, VXUS, BND. I chose VWELX because I like the safer allocation and low cost of the fund, plus it has performed well and is well established.
My wife’s 401k is through Nationwide. She contributes 4800 a year, but her company isn’t currently providing a match. She doesn’t make nearly what I make and would have to cut her take home pay by more than half to max out her 401 and she just isn’t going to do that right now. We obviously have extra income because we have about 50k available to invest in a taxable account, but she still doesn’t want to see such a huge amount come out of her check.
My JP Morgan available funds:
All the Vanguard Target Retirement Funds (ER 0.13%)
Blackrock Equity Index T (ER 0.03%)
Blackrock Extended Equity Market K (0.11%)
Blackrock ACWI ex-US Index –R (0.12%)
Blackrock US Debt Index – W (0.04%)
Invesco Stable Value (0.35%) – yields 2.55% annually
PIMCO total return (PTTRX) (0.46%)
Vanguard Inflation Protected Securities (VIPIX) (0.07%)
Dodge and Cox Stock (DODGX) (0.52%)
T Rowe Price Large Cap (TRLGX) (0.57%)
Vanguard Capital Opportunity- Admiral (VHCAX) (0.41%)
Dodge and Cox International (DODFX) (0.64%)
My Current Breakdown:
20% Index –T, 15% Market-K, 15% DODGX, 10% TRLGX, 20% VHCAX
My wife’s 401k options: (not many good low-cost options) – listed her percent invested in each after ER
Invesco Eq Inc A (0.81%) --------- 0%
Oakmark Eq Inc (1.09%) -----------28%
American Inflation Adjusted Bond (0.73%) – lowest cost bond ----------- 17%
American Funds World (0.98%) – best international coverage option -----------15%
American Funds Gr Fd Am (0.98%)- best large cap option -----------16%
Prudential Jnisn Midcap group A (1.06%) – best mid cap option ------------10%
LeggM ClrBrdg SmCap Group A (1.32%) – only small cap option ------------12%
I could really use some help here with her 401k, which seems to high a lot of high expense ratios.
1. What changes would you make to mine and my wife’s 401k? She just doesn’t have many options to pick from and has a lot of high cost funds. Would I be better off using the Blackrock funds and avoiding the other mutual funds? Some of those mutual funds have done great for me this past year (VHCAX up about 40%). I could also use a target retirement fund by Vanguard.
2. How about my taxable investment? I’m looking to invest 50k in a taxable account, and I really just don’t know which route I should take. I could invest it in TSM and International, but I hate to see that account be so volatile, even though I know you should view your account as a whole. I wish I would pick a fund with some bonds that wouldn’t be so bad for taxes, but then again some funds with lower bond portions like 20% shouldn’t have much effect on taxes. If I’m reading it right, would a fund with 50k total (10K in bonds that yields 3%) pay about 300 a year in dividends. Then that 300 would be taxed at my normal rate (28% plus Ga tax), so it would cost me about 100 extra a year? That doesn’t really seem like much to be concerned with? How about the Vanguard tax-efficient funds, are these good funds for taxable account? I see they have a balanced fund available.