I am in the process of consolidating what I can of my retirement accounts to Vanguard. I used Vanguard's Financial Planning Services.
Below is my situation, per sticky guidelines and Vanguard's proposal embedded within. I went with the Consolidated Portfolio suggestion, yet had no pressure to do so. Simplicity is my goal here.
Emergency funds = 4 months
Debt: 20,000 auto loan; 110,000 left on 170,000 mortgage to be paid off in 5 years (4.75 15 year term)
Tax Filing Status: Single, but finances combined with Domestic Partner's
Tax Rate: 25% federal both, no state
Age: 55 and 53 Ideal retirement age 62, very doable with 60/40 allocation
The following portfolio proposal is for my account only. My partner has a retirement portfolio that we are keeping separate from the mix due to the current federal non-recognition of non traditional marriages. We are satisfied with my partner's portfolio's allocations/holdings.
Desired Asset allocation: 60/40
Proposed breakdown of asset allocation per Vanguard's plan:
34% Large Caps
14% Mid Cap/Small Cap
12% International stocks
My current retirement portfolio (no taxable funds) is currently app 237,00; partner’s retirement portfolio app 125,000
My current retirement savings: $7000 into Simple IRA, to increase yearly
Vanguard Financial Planning Services recommendations:
Diversified Equity 45, 200
Total Stock Market Index 34,100
Total International Stock 12, 800
Total Bond Market Index 96,200
Total Stock Market Index 20,000
International Portfolio 16,100
Diversified Equity 12, 500
1. The Vanguard financial advisor, when I questioned him about the Diversified Equity fund, said that could easily be replaced by the Total Stock Index. However, I still respect well managed funds so he said I could slice the Diversified Equity fund into some of the fund's holdings: 35% Large Value through Windsor II, 35% Growth through Morgan Growth, 15% mid cap through Strategic Equity and 15% Small Cap through Explorer.
I like slicing up the Diversified Equity Fund as per his suggestion, but beyond adding more complexity and cost to the mix, what value would I be adding? It seems clear Vanguard is hedging its bets between indexing and management in its plan recommendations.
2. The international allocation seems, to me, low. I read the link on wiki to the 1996 Vanguard paper that suggested a 20% of equity, at minimum.
3. I am currently funding my Simple IRA only through work. I could transfer this (currently in STAR) to the Total Stock Index and make it "really simple".
4. I am not concerned about the lack of REITs in my portfolio. My partner's portfolio includes REITs.
We need not need to take any more risk beyond the 60/40 allocation to be fine in retirement.
I welcome suggestions to the suggested portfolio, keeping in mind that after years of juggling various portfolios, I am now convinced indexing is the way to go as is simplicity.
Thank you in advance,