Portfolio Advice for Newlywed Novice Investors

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Portfolio Advice for Newlywed Novice Investors

Postby xcski » Wed May 22, 2013 8:20 am

My wife and I recently got married and I am trying to put together a savings plan/portfolio plan for us as we start our new life together. I consider us to be very good savers and open to some risk, but we are both really novice investors and I am really making a concerted effort to learn more about personal finance, retirement planning, investing etc so that we can better understand how to get the most out of what we are saving. Information about us is below with questions following. Any help is greatly appreciated!

Emergency funds: Yes
Debt: $13,000 car loan at 1.5% apr
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% federal; 8.5% state (DC)
Adjusted Gross Income: $138,163 [updated - previously omitted]
Taxable Income: $118,663 [updated - was previously noted incorrectly as ~$140k)
State of Residence: Washington, DC [updated - previously omitted]
Ages: 29
Current total retirement portfolio: $81,900
Current savings account total: $115,000 in HSBC online savings account with 0.10% APY

Current retirement assets

His 401k at Fidelity - $30,000
12% employee contribution in Fidelity Freedom Index 2050 Fund Class W (FIPFX) (exp ratio: .28% gross, .19% net)
Composition of Fidelity Freedom Index 2050 =
54.39% Equity Funds (Spartan Total Market Index Fund - Class F)
9.3% Commodity Funds (Fidelity Series Commodity Strategy Fund - Class F)
22.5% International Equity Funds (Fidelity Series Global Ex U.S. Index Fund)
13.79% Bond Funds (Spartan U.S. Bond Index Fund - Class F)
0.02% Short-Term Funds & Net Other Assets
Company match? 100% up to 3%, then 50% for additional 2%

His Roth IRA at Vanguard - $9,400
100% in Vanguard Target Retirement 2050 Fund (VFIFX)
Composition of VFIFX:
Vanguard Total Stock Market Index Fund Investor Shares - 62.9%
Vanguard Total International Stock Index Fund Investor Shares - 27.2%
Vanguard Total Bond Market II Index Fund Investor Shares - 9.9%

Her 401k at JP Morgan - $42,500
10% contribution in LifePath Index 2050 NL-G (Blackrock) (exp ratio .11%)
Composition of LifePath Index 2050 NL-G:
50.92% - Russell 1000 Index Non-Lendable E
26.29% - BlackRock MSCI ACWI ex-U.S. IMI Index Non-Lendable Fund F
9.66% - Developed Real Estate Index Non-Lendable Fund E
7.31% - U.S. Debt Index Non-Lendable Fund E
3.83% - BlackRock Dow Jones-UBS Commodity Index Daily Fund E
1.99% - Russell 2000 Index Non-Lendable E
Company match? 50% up to the first 15% of your total annual compensation, subject to an overall annual limit of $7,750

Her Roth IRA at Vanguard
Plans to open soon with the maximum annual contribution up front

Available funds

Funds available in his 401(k)
AF CAP WORLD G&I R6 (RWIGX) 0.45%
CALAMOS GROWTH INST (CGRIX) 1.04%
FID CONTRAFUND K (FCNKX) 0.63%
FID DIVERSIFD INTL K (FDIKX) 0.84%
FID EQUITY INCOME K (FEIKX) 0.54%
FID GROWTH CO K (FGCKX) 0.77%
FID LOW PRICED STK K (FLPKX) 0.76%
FID US EQ INDX 0.04%
ROYCE PA MUTUAL INV (PENNX) 0.91%
SPTN EXT MKT IDX ADV (FSEVX) 0.07%
TMPL INST FRGN SM CO (TFSCX) 1.01%
TRP GROWTH STOCK (PRGFX) 0.7%
VANG FTSE SOCIAL IDX (VFTSX) 0.29%
VANG REIT IDX SIG (VGRSX) 0.1%
VANG TOT INTL STK IS (VTSNX) 0.12%
FID FRDM INDX 2000 W (FGIFX) 0.26%
FID FRDM INDX 2005 W (FJIFX) 0.27%
FID FRDM INDX 2010 W (FKIFX) 0.26%
FID FRDM INDX 2015 W (FLIFX) 0.26%
FID FRDM INDX 2020 W (FPIFX) 0.26%
FID FRDM INDX 2025 W (FQIFX) 0.27%
FID FRDM INDX 2030 W (FXIFX) 0.27%
FID FRDM INDX 2035 W (FIHFX) 0.28%
FID FRDM INDX 2040 W (FBIFX) 0.28%
FID FRDM INDX 2045 W (FIOFX) 0.28%
FID FRDM INDX 2050 W (FIPFX) 0.28%
FID FRDM INDX 2055 W (FDEWX) 0.29%
FID FRDM INDX INC W (FIKFX) 0.26%
OAKMARK EQ & INC I (OAKBX) 0.78%
FID INST SH INT GOVT (FFXSX) 0.45%
PIM TOTAL RT INST (PTTRX) 0.46%
VANG TOT BD MKT INST (VBTIX) 0.07%
WF STABLE FUND C 0.49%

Funds available in her 401(k)
Vanguard Prime Money Market-Inst (0.09)
Galliard Stable Value Managed Income Fund (.54)
PIMCO Total Return-Inst (.46)
Vanguard Total Bond Market Index-Inst (.07)
Dodge & Cox Balanced (.53)
Dodge & Cox Stock (.52)
Vanguard Institutional Index (.04)
Harbor Capital Appreciation-Inst (.68)
Fidelity Contrafund (.74)
Vanguard Mid-Cap Index-Inst (0.08)
Royce Total Return-Inst (1.03)
Vanguard Small Cap Index-Inst (.08)
Vanguard Explorer-Admiral (.32)
Harbor International-Inst (.72)
Vanguard Developed Markets Index-Inst (.07)
Aberdeen Emerging Markets-Inst (1.1)
LifePath Index Retirement NL-G (.12)
LifePath Index 2015 NL-G (.12)
LifePath Index 2020 NL-G (.12)
LifePath Index 2025 NL-G (.12)
LifePath Index 2030 NL-G (.12)
LifePath Index 2035 NL-G (.12)
LifePath Index 2040 NL-G (.12)
LifePath Index 2045 NL-G (.12)
LifePath Index 2050 NL-G (.12)
LifePath Index 2055 NL-G (.12)

Questions:
1. We are hoping to buy a house in 1-2 years and will rely on the cash in our savings account (~120k) for the down payment, so we'd like to know if it is best to keep our cash savings in our current savings account or if it is worth looking into moving it into a different savings account or other type of account for the short-term that generates a better interest rate than the 0.11% APY we are currently earning. Thoughts?

2. As you can see from our 401k and Roth fund contributions, we have been pretty hands-off up to this point, having stuck with target retirement funds. However, taking into consideration the other funds offered through our 401k plans, and the other funds available through Vanguard for our Roth IRAs, do you recommend a better asset allocation plan for us? I would like to become more hands on if it means I increase my chances of better returns. Also, should we increase the % of our mix that is allocated to bonds? We are both 29 years old.

3. We currently contribute more to our 401k than our company match levels, and I also contributed the max to my Roth IRA last year and plan to do so moving forward. My wife plans to do the same once she opens her Roth soon. However, it would be great to get input on whether we should only contribute up to our company matches for the 401k, continue to contribute the max to the Roth, and then put some remaining savings into the 401k. Not sure how best to determine how much remaining savings to put into the 401ks, as we are constantly trying to weigh how much to set aside for retirement versus how much to continue saving now for a house, future kids, etc. If anyone has any insight to share it would be most appreciated.
Last edited by xcski on Wed May 22, 2013 6:48 pm, edited 4 times in total.
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Re: Portfolio Advice for Newlywed Novice Investors

Postby Savvy » Wed May 22, 2013 1:10 pm

Look at ally.com for a higher yield for savings.

Seems to be some overlap in retirement funds. Hopefully someone more knowledgeable than me will add comments.
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Re: Portfolio Advice for Newlywed Novice Investors

Postby WHL » Wed May 22, 2013 1:55 pm

xcski wrote:Debt: $13,000 car loan at 1.5% apr
Current savings account total: $115,000 in HSBC online savings account with 0.10% APY


Funds available in his 401(k)

FID US EQ INDX 0.04%
VANG TOT INTL STK IS (VTSNX) 0.12%
VANG TOT BD MKT INST (VBTIX) 0.07%

Funds available in her 401(k)

Vanguard Total Bond Market Index-Inst (.07)
Vanguard Institutional Index (.04)
Vanguard Mid-Cap Index-Inst (0.08)
Vanguard Small Cap Index-Inst (.08)


Questions:
1. We are hoping to buy a house in 1-2 years and will rely on the cash in our savings account (~120k) for the down payment, so we'd like to know if it is best to keep our cash savings in our current savings account or if it is worth looking into moving it into a different savings account or other type of account for the short-term that generates a better interest rate than the 0.11% APY we are currently earning. Thoughts?

2. As you can see from our 401k and Roth fund contributions, we have been pretty hands-off up to this point, having stuck with target retirement funds. However, taking into consideration the other funds offered through our 401k plans, and the other funds available through Vanguard for our Roth IRAs, do you recommend a better asset allocation plan for us? I would like to become more hands on if it means I increase my chances of better returns. Also, should we increase the % of our mix that is allocated to bonds? We are both 29 years old.

3. We currently contribute more to our 401k than our company match levels, and I also contributed the max to my Roth IRA last year and plan to do so moving forward. My wife plans to do the same once she opens her Roth soon. However, it would be great to get input on whether we should only contribute up to our company matches for the 401k, continue to contribute the max to the Roth, and then put some remaining savings into the 401k. Not sure how best to determine how much remaining savings to put into the 401ks, as we are constantly trying to weigh how much to set aside for retirement versus how much to continue saving now for a house, future kids, etc. If anyone has any insight to share it would be most appreciated.


Pay off the car.

1. Move the savings to ING, Barclays, Ally, etc. which will give you 7-10 times your current interest rate. Do not invest this money if you're planning on using it in ~2 years.

2. I hand picked a few funds from your 401k choices. They are quite amazing, I wish my options were that good! Utilize the wiki here to find out what choices are for you, but utilizing both of your 401k's and Roth IRA's you can easily replicate a 3-fund portfolio (though it may require more than 3 funds).

3. You're on the right plan. Typically, it's 401k to company match, max Roth IRA, max 401k. If you can max both 401k's and both Roth IRA's, you should. I would do that before saving for kids education - gotta look after #1.
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Re: Portfolio Advice for Newlywed Novice Investors

Postby nimo956 » Wed May 22, 2013 2:08 pm

These are the best funds in his 401k:
FID US EQ INDX 0.04%
SPTN EXT MKT IDX ADV (FSEVX) 0.07%
VANG REIT IDX SIG (VGRSX) 0.1%
VANG TOT INTL STK IS (VTSNX) 0.12%
VANG TOT BD MKT INST (VBTIX) 0.07%

These are the best funds in her 401k:
Vanguard Prime Money Market-Inst (0.09)
Vanguard Total Bond Market Index-Inst (.07)
Vanguard Institutional Index (.04)
Vanguard Mid-Cap Index-Inst (0.08)
Vanguard Small Cap Index-Inst (.08)
Vanguard Developed Markets Index-Inst (.07)

1. Pay off the car loan. Look at an Ally Bank online savings account for the house savings.

2. There are many ways to configure this, but as an example, let's say that you want 70/30 stocks/bonds with 30% in international.

His 401k- 37%
20% VANG TOT INTL STK IS (VTSNX)
17% VANG TOT BD MKT INST (VBTIX)

His Roth IRA- 11%
11% Vanguard Total International Stock Index

Her 401k- 52%
13% Vanguard Total Bond Market Index-Inst (.07)
31% Vanguard Institutional Index (.04)
8% Vanguard Small Cap Index-Inst (.08)

I chose the international fund in his 401k because hers only contains developed markets. Also, in her 401k, I split the Vanguard Institutional Index and Vanguard Small Cap Index-Inst in roughly 80/20 proportions to approximate the total US stock market.

3. I think you should max out your tax-deferred space every year. Your income certainly allows for it. That means: $17.5k each year to both 401ks = $35k; $5.5k each year to Roth IRAs = $11k. Also check to see if you are allowed to make after-tax contributions to your 401k. Depending on your plan, these can be withdrawn a few times a year and moved into your Roth IRA (not affected by $5500 limit). A 401k allows a max of $51k per year. After $17.5k in elective deferrals and your employer match (let's estimate this at $3.5k), you can add an additional $30k each year to your Roth, or $60k total for you and your wife. In summary: $17.5k x 2 = $35k 401k + $5.5k x 2 = $11k Roth IRA + $30k x 2 = $60k after-tax Roth = $106k per year in tax-deferred space. I haven't even taken into consideration HSAs and 529 plans. As you can see, there's a lot of room you can fill up before investing in a taxable account. I'd definitely recommend at least $46k per year in 401ks and Roth IRAs; you can then find a balance between house savings and further retirement contributions.
50% VTI / 50% VXUS
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Re: Portfolio Advice for Newlywed Novice Investors

Postby Bob's not my name » Wed May 22, 2013 2:22 pm

xcski wrote:Tax Rate: 25% federal
Total taxable income: ~$140,000
Most people cite gross income, since taxable income depends on 401k contributions, which you're considering changing.

$140,000 of taxable income would mean at least $180,000 gross income. Is that right? The answer is relevant to the questions you ask.

$140,000 taxable income
+ $7,800 personal exemtpions
+ $12,200 standard deduction
-------------
$160,000 AGI
+ $18,000 401k contributions (guess based on your statements about exceeding the minimum for full match)
+ $2,000 pre-tax health, dental, and disability insurance premiums withheld from your pay (guess)
-------------
$180,000 gross income

Also, what state are you in?
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Re: Portfolio Advice for Newlywed Novice Investors

Postby mnvalue » Wed May 22, 2013 2:58 pm

You could put the downpayment in a 12 month Ally High Yield CD for an even better rate than Ally's savings. When that matures, either roll it over (if it'll still be another year) or withdraw it and buy a no penalty CD from them. Alternatively, if you're willing to trust that Ally will consent to an early withdrawal (they say they will, but the terms were changed a little while ago to leave it up to their discretion), put it in a 5 year high yield CD. You could put your emergency fund in a savings account with them, to earn higher yield.
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Re: Portfolio Advice for Newlywed Novice Investors

Postby xcski » Wed May 22, 2013 4:59 pm

Original poster here. Thank you for all of the replies thus far. They have been very helpful. I need to correct an error in the total taxable income I included in my original reply, as well as provide a few more tidbits that may be helpful for your responses. See below:

Tax rate: 25% federal, 8.5% state (DC)
Total Gross Income: $138,163
Taxable Income: 118,663
State of Residence: Washington, DC
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Re: Portfolio Advice for Newlywed Novice Investors

Postby Bob's not my name » Wed May 22, 2013 6:00 pm

xcski wrote:Total Gross Income: $138,163
Taxable Income: 118,663
That can't be right. See my illustrative stack of numbers. This would be true only if you made zero 401k contributions, zero FSA contributions, and paid no pre-tax insurance premiums. Personal exemptions and the standard deduction alone reduce your taxable income by $20,000 from your gross. Maybe that's your AGI rather than your gross?
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Re: Portfolio Advice for Newlywed Novice Investors

Postby xcski » Wed May 22, 2013 6:55 pm

Yes, you are correct - that is my AGI. Sorry for the confusion. See below for our 2012 federal tax return stats:

Adjusted Gross Income $ 138,163.00
Taxable Income $ 118,663.00
Total Tax $ 21,726.00
Total Payments/Credits $ 22,562.00
Effective Tax Rate 15.72%
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Re: Portfolio Advice for Newlywed Novice Investors

Postby Default User BR » Wed May 22, 2013 7:08 pm

I would NOT pay off a 1.5% car loan.


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Re: Portfolio Advice for Newlywed Novice Investors

Postby Bob's not my name » Wed May 22, 2013 7:23 pm

xcski wrote:Yes, you are correct - that is my AGI. Sorry for the confusion. See below for our 2012 federal tax return stats:

Adjusted Gross Income $ 138,163.00
Taxable Income $ 118,663.00
Total Tax $ 21,726.00
Total Payments/Credits $ 22,562.00
Effective Tax Rate 15.72%
OK, so that clarifies that you are solidly in the 25% bracket, almost $30,000 below the 28% bracket, and almost $50,000 above the 15% bracket, so no fine-tuning of 401k contributions will put you into a different bracket. Until you have children, you will not be in any phaseouts such as the child tax credit phaseout. Phaseouts make your marginal rate even higher.

Also, you are in a high tax "state", and you don't itemize, so your marginal rate is 33.5%. That's a painfully high rate and argues for maxing your 401k's before contributing anything to Roth IRAs, especially since your 401k choices are good. $11,000 of Roth IRA contributions require $16,500 of gross income, on which you pay $5,500 of taxes.

Here are some articles that may be useful to you:

http://thefinancebuff.com/your-traditio ... -fund.html
http://thefinancebuff.com/how-to-build- ... art-1.html
http://thefinancebuff.com/how-to-build- ... art-2.html
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Re: Portfolio Advice for Newlywed Novice Investors

Postby PedsDoc » Wed May 22, 2013 8:07 pm

Bob's not my name wrote:Also, you are in a high tax "state", and you don't itemize, so your marginal rate is 33.5%. That's a painfully high rate and argues for maxing your 401k's before contributing anything to Roth IRAs, especially since your 401k choices are good. $11,000 of Roth IRA contributions require $16,500 of gross income, on which you pay $5,500 of taxes.


I agree that in your situation I would max out the 401k's first.

Paying off the car is what I would do, but I hate having debt. Some would argue that since the interest rate is so low you would do better to just make the payments and invest any extra money you would use to pay extra. This is a debatable point as you can see from the responses above.
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Re: Portfolio Advice for Newlywed Novice Investors

Postby Duckie » Wed May 22, 2013 10:48 pm

xcski, you didn't specify an AA so I'm going to recommend 75% stocks, 25% bonds, with 30% of stocks in international. That breaks down to 52% US stocks, 23% international stocks, and 25% bonds. Here is a possible retirement portfolio:

His 401k at Fidelity -- $30K -- 37%
6% (N/A) Fidelity US Equity Index Fund (0.04%) <-- This is a 500 Index fund like FUSVX.
8% (FSEVX) Spartan Extended Market Index Fund Advantage Class (0.07%) <-- Roughly 80% large caps (Equity Index and Institutional Index) plus 20% mid/small caps (Extended Market) makes up the total US stock market.
23% (VTSNX) Vanguard Total International Stock Fund Institutional Shares (0.12%)
0% (VBTIX) Vanguard Total Bond Market Index Fund Institutional Shares (0.07%) <-- For possible future use.

Her 401k at JP Morgan -- $42.5K -- 52%
27% (VINIX) Vanguard Institutional Index Fund Institutional Shares (0.04%)
25% (VBTIX) Vanguard Total Bond Market Index Fund Institutional Shares (0.07%)

His Roth IRA at Vanguard -- $9.4K -- 11%
11% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.17%)

Her Roth IRA at Vanguard -- $0 -- 0%
0% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.17%)

My comments:
  • This has Total International in His 401k because it's better than Her 401k options.
  • This has Extended Market in His 401k because it's easier to use than the separate mid cap and small cap funds in Her 401k.
Something to think about.
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Re: Portfolio Advice for Newlywed Novice Investors

Postby xcski » Wed Dec 04, 2013 1:14 pm

I am following up to my post from earlier this year and asking for help with revising my updated portfolio plan. I took into account the replies (namely from Bob's not my name about maxing out 401k contributions before making Roth contributions given our current state of residency/tax bracket/no itemized deductions) and decided to not allocate anything new at this point to my Roth and just focus on my 401k and my wife's 401k, maxing those out or at least coming very close. Given that and reviewing all the replies, I would appreciate anyone's input on the following updated plan. My questions are below it.

Going for 75/25 stock/bond mix with 30% International stocks:

His 401k at Fidelity -- $38K -- 45%
10% Fidelity US Equity Index Fund (0.04%)
12% (FSEVX) Spartan Extended Market Index Fund Advantage Class (0.07%)
23% (VTSNX) Vanguard Total International Stock Fund Institutional Shares (0.12%)

Her 401k at JP Morgan -- $51K -- 55%
30% (VINIX) Vanguard Institutional Index Fund Institutional Shares (0.04%)
25% (VBTIX) Vanguard Total Bond Market Index Fund Institutional Shares (0.07%)

My Questions:
1) I am a true novice when it comes to this, and am getting a bit lost in figuring out the percent allocations, both at the overall level (his 401k vs her 401k) and within each of those plans. I'd appreciate any advice on changes to make here.

2) As I said, I am a true novice, so this may be a silly question but I will ask: if we are both looking to max out our 401k contributions, shouldn't the percentages allocated to his 401k vs to her 401k be equal and one not outweigh the other? I'm confused about how to interpret some of these percentages and move forward without complicating this too much.

Thank you in advance!
Last edited by xcski on Wed Dec 04, 2013 3:18 pm, edited 1 time in total.
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Re: Portfolio Advice for Newlywed Novice Investors

Postby niceguy7376 » Wed Dec 04, 2013 1:35 pm

xcski,
Since it is almost end of the year to make any changes to contributions for 2013, could you inform what you are thinking right now about contributions for 2014?
Do you plan on making upto the limit for both 401ks? (2 * 17.5K = 35K)

I dont think you can contribute to Direct Roth but only through Backdoor. Your income is definitely less than limit to contribute to max of Trad IRA. What you do the next day (convert to Roth or leave it as is is not relevant here for AA). Do you plan on contributing the max to IRA (5.5K * 2 = 11K).

Based on those answers and your year end values of your current 401K, responses provided will help immensely.
I am no expert in recommending the funds but definitely good at Math to inform you of the % needed in each of the funds and how you do your paycheck contributions.
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Re: Portfolio Advice for Newlywed Novice Investors

Postby xcski » Wed Dec 04, 2013 3:27 pm

Thanks for the reply.

Yes, we do plan on making up to the limit in 2014 for both 401Ks. Currently we haven't been doing so, contributing about 8-10k each this year.

My plan was to not contribute to my Roth IRA next year at all, unless I find we have enough left over in savings to warrant that. The reason being is because I'd rather prioritize investing in the pre-tax plans and max those out first. I haven't done that to date but I'd like to take that strategy moving forward. Therefore, I wouldn't factor the Roth IRA into the equation of the % allocations since I'm not sure if I'll be contributing to it next year.

The year end values of the 401ks will be in the ballpark of 38K for His and $52K for hers. I'd appreciate any help with the percentages. Please let me know if you need any further detail from me.

Thanks!
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Re: Portfolio Advice for Newlywed Novice Investors

Postby Duckie » Wed Dec 04, 2013 10:44 pm

xcski wrote:1) I am a true novice when it comes to this, and am getting a bit lost in figuring out the percent allocations, both at the overall level (his 401k vs her 401k) and within each of those plans. I'd appreciate any advice on changes to make here.

You add up the dollar value of each account (His 401k, Her 401k, His Roth IRA) in the retirement portfolio. For example:
His 401k -- $38K
Her 401k -- $51K
His Roth IRA -- $10K
38 + 51 + 10 = 99
38 / 99 = 38, 51 / 99 = 52, 10 / 99 = 10

So it becomes:
His 401k -- $38K -- 38%
Her 401k -- $51K -- 52%
His Roth IRA -- $10K -- 10%

Then with your AA of 52/23/25 you know His Roth IRA is going to be all total stock and you want the 25% bonds in Her 401k and the 23% international in His 401k. That gives you:
His 401k -- $38K -- 38%
23% (VTSNX) Vanguard Total International Stock Fund Institutional Shares (0.12%)
Her 401k -- $51K -- 52%
25% (VBTIX) Vanguard Total Bond Market Index Fund Institutional Shares (0.07%)
His Roth IRA -- $10K -- 10%
10% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.05%)

Then you add the Institutional Index to Her 401k:
Her 401k -- $51K -- 52%
27% (VINIX) Vanguard Institutional Index Fund Institutional Shares (0.04%)
25% (VBTIX) Vanguard Total Bond Market Index Fund Institutional Shares (0.07%)

Then you subtract the 23% international from the 38% in His 401k and get 15%. Now that 15% plus the 27% in Institutional Index in Her 401k totals 42%. That's all US stocks. And roughly 20% of that should be in Extended Market so 42 X .20 = 8.4. So of the 15% left over in His 401k 8% will be Extended Market and the other 7% will be US Equity. So you end up with:

His 401k -- $38K -- 38%
7% Fidelity US Equity Index Fund (0.04%)
8% (FSEVX) Spartan Extended Market Index Fund Advantage Class (0.07%)
23% (VTSNX) Vanguard Total International Stock Fund Institutional Shares (0.12%)

Her 401k -- $51K -- 52%
27% (VINIX) Vanguard Institutional Index Fund Institutional Shares (0.04%)
25% (VBTIX) Vanguard Total Bond Market Index Fund Institutional Shares (0.07%)

His Roth IRA -- $10K -- 10%
10% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.05%)

2) As I said, I am a true novice, so this may be a silly question but I will ask: if we are both looking to max out our 401k contributions, shouldn't the percentages allocated to his 401k vs to her 401k be equal and one not outweigh the other? I'm confused about how to interpret some of these percentages and move forward without complicating this too much.

The percentages are based on the dollar value of all the assets in the retirement portfolio. If you add $17.5K to His 401k and $17.5K to Her 401k but you started with more assets in Her 401k, then Her 401k may be bigger. Or if stocks shoot very high and bonds stay the same the account with the bonds won't gain as much. They're never going to be the same dollar amount or the same percentage.

I wouldn't factor the Roth IRA into the equation of the % allocations since I'm not sure if I'll be contributing to it next year.

Even if you don't add to it for awhile it is still part of the portfolio and should be considered when figuring the percentages.
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Re: Portfolio Advice for Newlywed Novice Investors

Postby xcski » Thu Dec 05, 2013 10:53 am

Duckie,

Thanks so much, this is really helpful. I appreciate the thorough explanation. One follow-up question is that as I was about to make new selections to my investments in His 401k, a notice popped up about the (FSEVX) Spartan Extended Market Index Fund Advantage Class about a redemption fee:

"When redeeming shares of SPTN EXT MKT IDX ADV, a short term fee of 0.75% will be assessed on any shares you have owned 89 days or less"

Is it still recommended I include this fund?
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Re: Portfolio Advice for Newlywed Novice Investors

Postby Duckie » Thu Dec 05, 2013 8:22 pm

xcski wrote:Is it still recommended I include this fund?

Yes. The best way to avoid selling during rebalancing is to make sure the FSEVX contribution AA (how much you contribute each paycheck) is a little under what it should be to keep things in line. Then once a year when you do the manual rebalancing of all accounts you'll end up adding to the fund instead of subtracting. That'll avoid the fee.
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Re: Portfolio Advice for Newlywed Novice Investors

Postby xcski » Sun Dec 08, 2013 5:40 pm

Thanks, one more follow-up question: could you clarify what you meant by "what it should be"?

"make sure the FSEVX contribution AA (how much you contribute each paycheck) is a little under what it should be to keep things in line."
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Re: Portfolio Advice for Newlywed Novice Investors

Postby Duckie » Sun Dec 08, 2013 7:38 pm

xcski wrote:Could you clarify what you meant by "what it should be"?

In the two 401k plans you will have XX% in US stocks. Of that, 80% will be in the two 500 Index funds (US Equity & Institutional Index) and 20% will be in Extended Market. To avoid the redemption fee:

  1. The easiest way would be to make NO contributions to Extended Market and then just add to it when rebalancing.
  2. A little more difficult but more exact way would be to estimate how much in total you would contribute each paycheck to the three US stock funds and make the Extended Market contribution less than 20% of that amount (maybe 15% to be safe) then add to it when rebalancing.
  3. Or you could just make it a straight 20% and when it comes time to rebalance if the Extended Market is higher than it should be just leave it alone. Don't sell. Things often even out on their own.
I'd probably pick #2 but it's your choice.
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