Search found 221 matches
- Fri Feb 23, 2024 6:46 pm
- Forum: Personal Investments
- Topic: Time to Build my Own Annuity with 20 year Bonds??
- Replies: 28
- Views: 4510
Re: Time to Build my Own Annuity with 20 year Bonds??
I share similar thoughts in DIY annuity when long-term bond yield is high. That's why I invested ~$400K recently split between agency bonds in IRAs (>5% yield to maturity w/ call protection slightly higher than 20y T-Bonds and matures in 20-30 years from Fidelity secondary market https://fixedincome.fidelity.com/ftgw/fi/FILanding ) and I Bonds (using the gift box trick to lock the higher fixed rates of 0.9%-1.3%).
- Fri Feb 23, 2024 6:23 pm
- Forum: Personal Investments
- Topic: Saving for Private School and College - 529/UTMA/Standard Acct balancing
- Replies: 53
- Views: 4071
Re: Saving for Private School and College - 529/UTMA/Standard Acct balancing
My family live in VHCOL area with one kid in private elementary school. Since you still have 5-6 years till your older kid goes to private school at 5th grade, please mind that the private school tuition tends to outpace inflation. Nearby ~5 private school have seen hikes of 4%-8% last year. You might have to increase your budget currently estimated at avg. $26K/y. The top private school in my area comes with a hefty price tag at $57,750 (G6-8) and $62,950 (G9-12) for 2024-2025. On the other hand, I think your family have enough time to consider whether investing in a home within a top school district could save you from private school expenses? Owning such property also preserves wealth for the future providing the flexibility to access th...
- Thu Jan 25, 2024 7:24 pm
- Forum: Personal Investments
- Topic: Early Retirement Plan - Age 38 w/over $2 million
- Replies: 120
- Views: 28649
Re: Early Retirement Plan - Age 38 w/over $2 million
IMHO your plan may only work in theory b/c there are just too many variables for a 60 year retirement w/ 2 elementary school kids. 1. Your 2-2.5% withdrawal rate sounds low but is based on the assumption of a very low $40K annual spending for a young family of 4. Last year, my kid needed myopia treatment as he was playing competitive soccer and didn't want to wear glasses so I need to pay $2600 out-of-pocket. My kid's team did pretty well in the season and the coach organized several tournaments some of which required staying in hotel over the weekend in another city and added several hundred dollar expenses including registration fee for each time. The point is once your kids grow up, they may have their own mind, preferred lifestyle and p...
- Thu Jan 25, 2024 3:05 am
- Forum: Investing - Theory, News & General
- Topic: Rick Ferri's book on Asset Allocation
- Replies: 5
- Views: 1841
Re: Rick Ferri's book on Asset Allocation
Probably similar content of the book could be found in his website: https://core-4.com/
- Fri Jan 19, 2024 5:00 pm
- Forum: Personal Investments
- Topic: Helping my daughter set up a savings and investment plan
- Replies: 6
- Views: 1029
Re: Helping my daughter set up a savings and investment plan
...she will have the option to further contribute ~35K to maximize the mega backdoor Roth limit. If she does that, she'll be left with 25K to save/invest in taxable accounts. The question is, how to decide how to split the 60K into taxable savings, taxable investments, and tax-advantaged investments. ...Given these, what are your thoughts on how to split the 60K? Since she is only 22, I am tempted to tell her to maximize her tax-advantaged space during her early earning years. But that will limit her savings rate. Double check her plan's Roth 401K withdrawal rules assuming she wants to do the in-plan mega backdoor Roth. In my case, I choose not to enable the auto in-plan Roth conversion of After-tax to Roth 401K but do the manual out-of-pl...
- Mon Jan 08, 2024 3:30 pm
- Forum: Personal Investments
- Topic: Merrill Edge Taxable Accounts
- Replies: 30
- Views: 4413
Re: Merrill Edge Taxable Accounts
I invested Vanguard Short-Term Treasury Index Fund (VGSH) ETF in my Merrill Edge taxable account. For low-cost stock index funds in Roth IRA, VTI/VOO/ITOT are good options.
- Mon Jan 08, 2024 2:33 pm
- Forum: Investing - Theory, News & General
- Topic: Two Fund Portfolio Asset Allocation
- Replies: 11
- Views: 2440
Re: Two Fund Portfolio Asset Allocation
Thanks for sharing your thoughts. Definitely need more time for the "paper review".
I have some doubts on the characterization of Cash in your analysis as nowadays most of the time it refers to Money Market Funds or T-bills in investment world. Under the recent interest environment with inverted yield curve (https://www.ustreasuryyieldcurve.com/), the yield for Cash equivalent MMF or T-bills is much higher than the Total US Bond Index (BND w/ avg duration of 6.3 years) used in your analysis.
So, I wouldn't recommend following your suggested Glide path AA at least for the shorter-term investment horizon (e.g., 1, 2, 4 years) especially for the cases like saving for college or house downpayment.
I have some doubts on the characterization of Cash in your analysis as nowadays most of the time it refers to Money Market Funds or T-bills in investment world. Under the recent interest environment with inverted yield curve (https://www.ustreasuryyieldcurve.com/), the yield for Cash equivalent MMF or T-bills is much higher than the Total US Bond Index (BND w/ avg duration of 6.3 years) used in your analysis.
So, I wouldn't recommend following your suggested Glide path AA at least for the shorter-term investment horizon (e.g., 1, 2, 4 years) especially for the cases like saving for college or house downpayment.
- Sat Dec 09, 2023 7:16 pm
- Forum: Personal Investments
- Topic: VBTLX - Am I looking at this fund incorrectly for long term investing?
- Replies: 60
- Views: 8580
Re: VBTLX - Am I looking at this fund incorrectly for long term investing?
Are you saying your VBTLX holdings are in taxable account, and you really need the dividend distributions as "passive income" for 5-6 years?jbreittling wrote: ↑Sat Dec 09, 2023 3:40 pm ...I've been looking at my VBTLX as a way to generate 'passive income' that adds to my portfolio every month until I reach retirement age in 5-6 yrs.
Not sure about your tax situation but in general I won't use VBTLX for such purpose. Instead, I might consider buying muni bond fund in brokerage, treasury bills/notes and iBond to bridge the gap before retirement.
It looks fine to me to have VBTLX as a long-term holding to meet your target 65/35 AA.
- Thu Nov 30, 2023 2:29 pm
- Forum: Personal Investments
- Topic: Portfolio Review 44y/o DIYer
- Replies: 2
- Views: 986
Re: Portfolio Review 44y/o DIYer
2. Is it worth considering investing in ibonds right now, even though they'd be such a small portion of my portfolio? The problem I see them helping solve is income prior to normal retirement age, but I know there are other ways around that problem. I just purchased $20K iBonds this week. Have bought over $200K iBonds in the last 2 years using my kid's TD minor's account and the gift box tricks b/t my and spouse's TD accounts. Plan to buy more after RSU sales by year end. The iBond in my portfolio serves dual-purpose: emergency fund and cover the living expenses b/t early retirement and social security income. I don't like holding TIPS in taxable due to the tax efficiency, complexity and fluctuations in value during the holding period befo...
- Tue Nov 21, 2023 5:25 pm
- Forum: Personal Investments
- Topic: Aggressive portfolio checkup - 34 y/o
- Replies: 13
- Views: 2364
Re: Aggressive portfolio checkup - 34 y/o
Questions 1. I recognize a weakness of my portfolio being employer stock concentration risk (currently 20% of my individual portfolio). I am working to trim that down while being mindful of taxes. Since my employer is a large holding within VTI also, should I add that VTI percentage as part of the concentration risk? (for example, if my company comprised 5% of VTI, does that mean my total exposure is actually +5%). What is a recommended concentration risk? IMO the biggest risk is not just about the company stock holdings but your employment income. Just imagine in the worst case scenario, your mega corp is not doing well and you get laid off and the company stock is also dropped which you might need to sell at low if emergency fund is depl...
- Thu Nov 09, 2023 5:15 pm
- Forum: Personal Investments
- Topic: Retirement Anxiety w/ Vanguard 50:50 Bond allocation
- Replies: 34
- Views: 5956
Re: Retirement Anxiety w/ Vanguard 50:50 Bond allocation
At the beginning 2023 I changed my portfolio AA from 70:30 to 50:50. I haven't seen noticeable loss of my portfolio (~$2.7M as of Nov), so I plan to stick to it for a while though my family's financial status is still at accumulating phase.
For the fixed income / bond portfolio, I don't hold any international bond fund. I have more than half of the bond portfolio in Total Bond Index and the rest is in iBond (for inflation protection; used the gift box trick and bought >$200K in the last two years), EE savings (as DIY annuity to hold until doubling at 20y maturity equivalent to 3.5% APY) and long-term individual agency bonds (in Fidelity IRAs).
For the fixed income / bond portfolio, I don't hold any international bond fund. I have more than half of the bond portfolio in Total Bond Index and the rest is in iBond (for inflation protection; used the gift box trick and bought >$200K in the last two years), EE savings (as DIY annuity to hold until doubling at 20y maturity equivalent to 3.5% APY) and long-term individual agency bonds (in Fidelity IRAs).
- Fri Sep 01, 2023 3:55 pm
- Forum: Personal Investments
- Topic: Question on Coupon Frequency and YTM
- Replies: 10
- Views: 1537
Re: Question on Coupon Frequency and YTM
Yes I agree. As the referred paper suggested, the somewhat misleading "compounded YTM" metric may provide some value in terms of comparing coupon reinvestment efficiency of different bonds (e.g., monthly vs. semiannually) at terminal or future value but there is a lot of unknowns.FactualFran wrote: ↑Fri Sep 01, 2023 1:18 pmWhat you generally prefer is not what YTM measures.majiaknight wrote: ↑Fri Sep 01, 2023 12:19 pm I think I got inconsistent messages here from the earlier reply.
Your reply seems to indicate the x12 monthly interest payment equal to the x2 semiannual interest payment. If this is the case, then the CD with monthly coupon frequency is generally preferred as I can get the interest early to reinvest.
- Fri Sep 01, 2023 3:44 pm
- Forum: Personal Investments
- Topic: Question on Coupon Frequency and YTM
- Replies: 10
- Views: 1537
Re: Question on Coupon Frequency and YTM
Wow, the paper clears all my doubts on the YTM calcultion! Thanks a lot!IntlRetiree wrote: ↑Fri Sep 01, 2023 1:07 pmThat assumption is often stated but apparently erroneous:RyeBourbon wrote: ↑Thu Aug 31, 2023 3:03 pm YTM assumes that you will invest the coupons in something that yields the YTM. This may or may not be possible. My personal preference would be for semi annual coupons if you are reinvesting it, or monthly if I was spending it.
https://www.economics-finance.org/jefe/ ... lpaper.pdf
- Fri Sep 01, 2023 12:19 pm
- Forum: Personal Investments
- Topic: Question on Coupon Frequency and YTM
- Replies: 10
- Views: 1537
Re: Question on Coupon Frequency and YTM
In this case, the CDs are new ones whose price is the same as the maturity value. Because of that, the YTM depends only on the interest payments and not also on a difference between the purchase price and the maturity value. Because the sum of the interest payments for a year is the same regardless of the number of interest payments per year, in this case, the YTM as an annual rate is the same regardless of the number of interest payments per year. I think I got inconsistent messages here from the earlier reply. Your reply seems to indicate the x12 monthly interest payment equal to the x2 semiannual interest payment. If this is the case, then the CD with monthly coupon frequency is generally preferred as I can get the interest early to rei...
- Thu Aug 31, 2023 4:14 pm
- Forum: Personal Investments
- Topic: Question on Coupon Frequency and YTM
- Replies: 10
- Views: 1537
Re: Question on Coupon Frequency and YTM
Got it! Thanks!RyeBourbon wrote: ↑Thu Aug 31, 2023 3:03 pm YTM assumes that you will invest the coupons in something that yields the YTM. This may or may not be possible. My personal preference would be for semi annual coupons if you are reinvesting it, or monthly if I was spending it.
- Thu Aug 31, 2023 2:28 pm
- Forum: Personal Investments
- Topic: Question on Coupon Frequency and YTM
- Replies: 10
- Views: 1537
Question on Coupon Frequency and YTM
I'm new to purchasing CDs and individual bonds. I've read some basics but still have one naive question on whether coupon frequency has any relationship with yield-to-maturity (YTM)? e.g. two CDs have the same coupon rate (and YTM) of 5.1% and the same maturity date 9/8/2025. The only diff is the coupon frequency: semi-annually vs. monthly. https://i.postimg.cc/sDBk9sWf/frequency.jpg Is my understanding correct that it is no brainer that I should purchase (<$250K in Roth IRA) the CD with Monthly coupon frequency so that I could invest the interests in e.g., money market fund or short-term treasury ETF to gain slightly more? Which one will you choose and why? In general, I'm not sure how the YTM calculation of CDs/Bonds would assume the valu...
- Mon Dec 19, 2022 5:02 am
- Forum: Personal Investments
- Topic: Age 40 - Plan to Retire 50.
- Replies: 43
- Views: 7364
Re: Age 40 - Plan to Retire 50.
... But, frankly speaking, the returns on most stock index funds are more or less as tax deferred as those of i-bonds. Sure, you pay taxes on dividends every year. But that's nothing in relation to the historical returns of any total market stock fund. With i-bonds, you'll defer all taxes, but your gains will be so small that you'll likely come out behind a 10 year investment in a stock fund. (None of this is to say you shouldn't max i-bonds and contribute to a stock fund. But it should be food for thought.) IMHO It doesn't make much sense to compare I Bond with any Stock index funds. The idea is to optimize fund allocation for tax efficiency borrowing the idea by grabiner in responding to my post (e.g. purchase I Bond / Muni in taxable an...
- Tue Dec 13, 2022 5:01 pm
- Forum: Personal Investments
- Topic: Age 40 - Plan to Retire 50.
- Replies: 43
- Views: 7364
Re: Age 40 - Plan to Retire 50.
Same age, similar tax situation with smaller portfolio size of $2.3M. I plan to front load ~$100K I bond in DW’s and my TD gift box account to lock the 0.4% fix rate from now to February 2023. And I also plan to gradually add CA muni bond fund in my taxable account. I gave up the idea of adding long TIPS ETF/MF as it’s a little complex for me to fully understand how the combination of high inflation and rising interest rates would affect the TIPS fund performance and how it could recover from the loss (e.g. LTPZ down -31% YTD) over time. I Bond is much simpler to understand and hold with enough flexibility. I expect to hold $400-500K total I bond before 55 (target retirement age) in 10+ years for about half of my fixed income portfolio to ...
- Tue Dec 13, 2022 3:21 pm
- Forum: Personal Investments
- Topic: Age 40 - Plan to Retire 50.
- Replies: 43
- Views: 7364
Re: Age 40 - Plan to Retire 50.
Same age, similar tax situation with smaller portfolio size of $2.3M. I plan to front load ~$100K I bond in DW’s and my TD gift box account to lock the 0.4% fix rate from now to February 2023. And I also plan to gradually add CA muni bond fund in my taxable account. I gave up the idea of adding long TIPS ETF/MF as it’s a little complex for me to fully understand how the combination of high inflation and rising interest rates would affect the TIPS fund performance and how it could recover from the loss (e.g. LTPZ down -31% YTD) over time. I Bond is much simpler to understand and hold with enough flexibility. I expect to hold $400-500K total I bond before 55 (target retirement age) in 10+ years for about half of my fixed income portfolio to h...
- Tue Dec 06, 2022 8:07 pm
- Forum: Personal Investments
- Topic: Where do you invest money now?
- Replies: 101
- Views: 18054
Re: Where do you invest money now?
Equity side I plan to add 10% small cap value index (VSIAX) using new money over time. To my surprise it has had a much lower YTD loss compared to total stock index. The potential long term return also seems to be promising after listening to Paul Merriman’s Bogleheads youtube talk and reading his free ebook recently. Bond side I plan to front load ~$100K I bond in DW’s and my TD gift box account to lock the 0.4% fix rate from now to February 2023. And I also plan to gradually add CA muni bond fund in my taxable account. I gave up the idea of adding long TIPS ETF/MF as it’s a little complex for me to fully understand how the combination of high inflation and rising interest rates would affect the TIPS fund performance and how it could recov...
- Wed Nov 16, 2022 3:37 pm
- Forum: Personal Investments
- Topic: Empower Retirement Plan
- Replies: 16
- Views: 2786
Re: Empower Retirement Plan
I manage my wife’s 401K plan at Empower which offers very popular Vanguard VIIIX and VBTLX funds. Her employer is Apple.
Update: add a screenshot of invesetment options of DW's 401k at Empower. Just found out the thread quoted in below replies has a very different fund line up so it really depends on which employer.
Update: add a screenshot of invesetment options of DW's 401k at Empower. Just found out the thread quoted in below replies has a very different fund line up so it really depends on which employer.
- Fri Nov 11, 2022 11:51 pm
- Forum: Personal Investments
- Topic: Purchase 20-year STRIPS in tax-deferred retirement accounts?
- Replies: 24
- Views: 2409
Re: Purchase 20-year STRIPS in tax-deferred retirement accounts?
Thanks a lot! It's clear to me now. I think I may start with holding long-term TIPS/Treasury ETF/MF now, and gradually add intermeidate- and short-term TIPS/Treasury ETF/MF when approaching retirement years.grabiner wrote: ↑Fri Nov 11, 2022 10:24 pm If you use TIPS ETFs, you can change your duration to match your time horizon. Once you are retired, you can have a 30-year ladder, or a portfolio mixing short-term, intermediate-term, and long-term funds in the same ratios that you would have in such a ladder. Similarly, if you are five years from retirement, you could have a ladder of bonds from 5-30 years. which you could do with an intermediate-term and long-term bond fund.
- Fri Nov 11, 2022 5:39 pm
- Forum: Personal Investments
- Topic: Purchase 20-year STRIPS in tax-deferred retirement accounts?
- Replies: 24
- Views: 2409
Re: Purchase 20-year STRIPS in tax-deferred retirement accounts?
In your tax bracket, you probably want most of your bonds to be CA munis in your taxable account, rather than any type of bond in your retirement account. The reason is that you pay more than double the normal 15% tax rate on stock dividends and capital gains in your taxable account, but no more than anyone else on CA munis. (The tax cost of a municipal bond is the difference between yields on muni and corporate bonds of comparable risk.) But I don't think you want long-term STRIPS for the rest of your holdings, because of the inflation risk. Your mortgage will be paid off before the STRIPS mature, so you don't have a fixed-dollar liability to match; your other expenses are more likely to grow with inflation. Thus you might hold long-term ...
- Tue Nov 08, 2022 8:16 pm
- Forum: Personal Investments
- Topic: Purchase 20-year STRIPS in tax-deferred retirement accounts?
- Replies: 24
- Views: 2409
Re: Purchase 20-year STRIPS in tax-deferred retirement accounts?
Thanks a lot vineviz. Now I think I have a better understanding of your points and need some time to digest the 37 pages discussion of your post:
-> First 20% of bonds in long-term Treasuries: viewtopic.php?t=287627&start=1550
-> First 20% of bonds in long-term Treasuries: viewtopic.php?t=287627&start=1550
- Tue Nov 08, 2022 5:39 pm
- Forum: Personal Investments
- Topic: Purchase 20-year STRIPS in tax-deferred retirement accounts?
- Replies: 24
- Views: 2409
Re: Purchase 20-year STRIPS in tax-deferred retirement accounts?
I'm not familiar with STRIPS and can't predict its future yield. Ideally it's a good idea to build a ladder as what I did for my EE savings. The reason I chose 20 year STRIPS is because it has higher yield than the 30 year ones as shown in the below Fidelity Fixed Income dashboard. If you really believe (and understand) the first sentence quoted above, you'll see why it is incompatible with a belief in the second sentence and reveals the fool-hardy nature of the third sentence. In other words, you're right that you can't predict future yields. So don't create a strategy that requires such a prediction! . Instead, buy bonds whose cash flows and/or duration best matches your expected future expenses . Now I'm a little confused based on your ...
- Tue Nov 08, 2022 3:00 pm
- Forum: Personal Investments
- Topic: Purchase 20-year STRIPS in tax-deferred retirement accounts?
- Replies: 24
- Views: 2409
Re: Purchase 20-year STRIPS in tax-deferred retirement accounts?
Or you could think about it now and possibly avoid the reinvestment risk altogether. In other words, instead of playing a market timing game you are likely to lose you could just choose not to play. Buy a series of STRIPS and/or TIPS which mature every year from the date of your expected retirement until the longest available bonds (eg 2052). The focus on 20 year STRIPS seems unnecessarily arbitrary. Wonderful wisdom, vineviz! OP: It's easy to understand the allure of 20 year STRIPS, currently at 4.71% YTM right now whereas 10 year STRIPS are at 4.30% YTM and 30 year STRIPS are at 4.16%. The 20 year is close to the peak of the nominal yield curve but having so much come due at one time creates significant reinvestment risk if the maturing ...
- Tue Nov 08, 2022 2:49 pm
- Forum: Personal Investments
- Topic: Purchase 20-year STRIPS in tax-deferred retirement accounts?
- Replies: 24
- Views: 2409
Re: Purchase 20-year STRIPS in tax-deferred retirement accounts?
Looking at yields greater than 4% after enduring years of tiny yields seems pretty enticing. But I would argue that you really can't know which direction interest rates will go short-term or long-term. One things this past year has taught most people is that inflation can really erode purchasing power. I would argue that you could just as easily buy a "one-and-done" bond--if you really want to do that--by purchasing TIPS maturing in 2042. The real rate is nearly 2% and you won't really have to concern yourself with inflation. I agree that high inflation is a big concern for me when locking the 4.7% rate for 20 year as compared to the I Bond interest rate at 9.62%-6.89% this year. I thought my I Bond holdings ($150K) would address...
- Tue Nov 08, 2022 2:39 pm
- Forum: Personal Investments
- Topic: Purchase 20-year STRIPS in tax-deferred retirement accounts?
- Replies: 24
- Views: 2409
Re: Purchase 20-year STRIPS in tax-deferred retirement accounts?
But presumably if there are 20 year strips coming out paying 4.7%, there are strips on the secondary market with other durations paying something close. Why not build a ladder instead? Or, if you don't need the money then, why not invest in equities? You'll most likely earn better than 4.7%. The worst 20 years in S&P 500 history returned 6.4%. Yes, I should also look into buidling a ladder from secondary market as another reply also suggested the same. Thanks! With 70/30 AA for my current size of the portfolio $2.3M, we will have $700K in bond like investment which currently includes BND/EE Savings/I Savings. So, the idea discussed here is whether it makes sense to replace a portion of the bond portfolio with the 20 year STRIPS at 4.7%...
- Tue Nov 08, 2022 2:31 pm
- Forum: Personal Investments
- Topic: Purchase 20-year STRIPS in tax-deferred retirement accounts?
- Replies: 24
- Views: 2409
Re: Purchase 20-year STRIPS in tax-deferred retirement accounts?
Do you anticipate $500,000 in expenses in 2042? If not, why would you want that many bonds maturing at that time? No need. I will have 20 year to think about how to re-invest that money when it's matured. :wink: Or you could think about it now and possibly avoid the reinvestment risk altogether. In other words, instead of playing a market timing game you are likely to lose you could just choose not to play. Buy a series of STRIPS and/or TIPS which mature every year from the date of your expected retirement until the longest available bonds (eg 2052). The focus on 20 year STRIPS seems unnecessarily arbitrary. I'm not familiar with STRIPS and can't predict its future yield. Ideally it's a good idea to build a ladder as what I did for my EE s...
- Tue Nov 08, 2022 1:59 pm
- Forum: Personal Investments
- Topic: Purchase 20-year STRIPS in tax-deferred retirement accounts?
- Replies: 24
- Views: 2409
Re: Purchase 20-year STRIPS in tax-deferred retirement accounts?
No need. I will have 20 year to think about how to re-invest that money when it's matured.toddthebod wrote: ↑Tue Nov 08, 2022 8:09 am Do you anticipate $500,000 in expenses in 2042? If not, why would you want that many bonds maturing at that time?
Here is my thought process:
From portfoliovisualizer backtesting, Total US Bond Market historical return (1994-2022) CAGR was 4.11%. The YTD return of BND was -15.82%. So, if I compare these data with the current offering of 20-year zero coupon US treasuries at 4.7% annual rate, I could lock the higher averaged bond fund return for 20 years w/ almost no risk.
- Tue Nov 08, 2022 1:47 pm
- Forum: Personal Investments
- Topic: Purchase 20-year STRIPS in tax-deferred retirement accounts?
- Replies: 24
- Views: 2409
Re: Purchase 20-year STRIPS in tax-deferred retirement accounts?
Selling a big chunk of stock index funds when the market is down 20% in order to purchase treasuries seems like the inverse of normal rebalancing process. Wouldn’t you want to be purchasing stocks when the market is down, or at least not selling? We still plan to put money from every paycheck to invest in Stock Index MF to maximize both our mega-backdoor 401Ks ($61K*2) by the end of this year. With current 80/20 AA, the volatility of our portolio is a little bit too high as we have had 4 times month-to-month (Jan, Apr, Jun, Sep) drop > $100K (or -5.1% to -8.4% monthly drop) this year. Even with significant YTD contribution (maxed IRA*2, HSA, $20K EE, $80K I Bond, on track to max 401K*2 within 2 months), our portofio was still down -$200K Y...
- Mon Nov 07, 2022 9:33 pm
- Forum: Personal Investments
- Topic: Purchase 20-year STRIPS in tax-deferred retirement accounts?
- Replies: 24
- Views: 2409
Purchase 20-year STRIPS in tax-deferred retirement accounts?
Background: - dual-income family in early 40s living in the SF Bay Area - 35%-37% fed tax bracket (Married Filing Jointly) - $2.3M total investment assets - $428K mortgage at 2% 15Y fixed I plan to adjust portfolio AA from current 80/20 to 70/30 using only the money in our reitrement accounts to avoid the potential complex "fantom income" tax situations with STRIPS. As of today (11/7/2022), the 20 year STRIPS in Fidelity had YTM rate of ~4.729% (or $39) which was much better than the comparable 3.5% rate of EE Savings if held for 20 years and seemed to be very attractive to me. I also held $160K in EE Savings for DIY annuity to bridge the gap b/t early retirement and SS. I do plan to hold 20 year STRIPS to maturity. -> e.g. Fideli...
- Wed Oct 27, 2021 2:47 am
- Forum: Personal Investments
- Topic: Financial Portfolio Review
- Replies: 12
- Views: 2016
Re: Financial Portfolio Review
Understand your concerns in today's investing environment. It's hard to not trying to time the market in such a long bull market. I'm in late-30s living in VHCOL areas (less HHI than yours but with x2 more assets) and below are my 2 cents: 1) Build a 10-12x monthly expenses emergency fund to be a little bit conservative in your case. (FYI: I've been slowly using I Bond to build up my emergency funds over years; see below "I Bond Manifesto" for details) 2) If your two kids are still very young, you could try to 'superfund' two 529s ($75K/each) and let them grow over a decade and don't need to touch them in the near term. -- https://www.savingforcollege.com/article/10-rules-for-superfunding-a-529-plan 3) If you choose not to superfu...
- Tue Aug 03, 2021 6:37 pm
- Forum: Personal Finance (Not Investing)
- Topic: Semi-FIRE by 40 with kids?
- Replies: 114
- Views: 17062
Re: Semi-FIRE by 40 with kids?
Probably similar age but only have one kid living in VHCOL area. I don't even know how to get accurate estimation of 25x or 30x annual expenses as the biggest variable is kid's K-12 private school tuition which may cost anywhere at ~$2.2K/m as of now (K-G1) and up to $4.5K/m for the best private high school nearby (e.g. Grades 9-12 tuition $53800 for 2021-22). And if he can't get into a decent private school, we may end up renting or buying an expensive house (~$2M) with access to good public schools. I think I may only start to think about semi-FIRE when my kid is at least in high school so that I'll have a clearer picture of the financials.
- Wed Apr 28, 2021 5:03 pm
- Forum: Personal Investments
- Topic: Stop 401k contributions?
- Replies: 10
- Views: 2562
Re: Stop 401k contributions?
...We are both planning to ‘retire’ to part-time jobs in January. We will do so for about 4-5 years in order to supplement our budget as well as to do some Roth conversions. ... My question: Would you recommend, reducing our 401k deductions now to only get the maximum match for the next 8 months? I think you answered the question by yourself. You save the tax in maxing pre-tax 401K contribution at your peak tax rate this year, and in theory after your departure from current company you could covert it to Roth IRA next year paying lower tax rate based on your PT income. If you know you're going to pay less tax next year, why not deferring the tax payment for your W2 income now? For example, assuming you put the pre-tax 401K money in Stable ...
- Wed Apr 28, 2021 1:48 pm
- Forum: Personal Finance (Not Investing)
- Topic: Are my expenses too high?
- Replies: 136
- Views: 16973
Re: Are my expenses too high?
... - 529 Plan: $300 - Home repair fund increase: $150 - Lawn: $140 (new) - Pool: $100 (new) - Pest/termite system: $50 (new) TLDR: Should I feel comfortable with $2.7k PITI + $700 utilities/home services for a family earning $180k? We aren't loose with spending but could always sacrifice more discretionary spend if necessary. Is it ok to spend a few years running flat during the year with young kids if you're hitting your financial retirement goals? Your expenses on housing look good to me. You should expect more budget on child care in the next a few years as it may easily double the expenses adding pre-school tuition and after-school classes. As long as you have maxed 401Ks/IRAs/HSA and have sufficient emergency fund, it is OK to have l...
- Tue Apr 27, 2021 1:15 pm
- Forum: Personal Finance (Not Investing)
- Topic: Tales from this insane real estate market [Home sales]
- Replies: 2905
- Views: 515431
Re: Tales from this insane real estate market
I think this is no surprise to most people on this forum as most of Bogleheads' core stock index holding e.g. S&P500 is up 47% from a year ago during the pandemic which is also crazy. One friend of mine bought 3 new construction SFH ($300-$400K range) in NC/SC early this year trying to diversify their portfolio and reduce their stock exposure when mortgage rate was historically low.ASpenderInRecovery wrote: ↑Tue Mar 23, 2021 8:11 pm - There are no rules in this real estate market
- What people are willing to pay is totally unrelated to the underlying value, lot, size, condition of the home
- Every home sells for over asking, you have to be willing to overpay (10-20%) to buy a home right now
- Mon Apr 26, 2021 5:50 pm
- Forum: Personal Finance (Not Investing)
- Topic: Saving for and paying for a $5m house
- Replies: 68
- Views: 10563
Re: Saving for and paying for a $5m house
If you are really considering the $5m dream house in 3 years while you're renting $5K/m in a $2m TH, why not just upgrade your rental to something similar as your dream house now? As someone mentioned it would cost you $180K/y only for PITI of a $5m house in Bay Area, just use it as a budget and give it a try to rent for a year and then evaluate whether it's worth to pull the trigger. Personally I'd consider Bay Area is a place for work, and I could easily find a 4000sqft dream house in SoCal (e.g. San Diego where my family lived for 2 years before relocating to the Bay Area for jobs) with half that much money for retirement.
- Sat Apr 24, 2021 2:12 pm
- Forum: US Chapters
- Topic: Post your Financial Milestone Announcements Here
- Replies: 3606
- Views: 562390
Re: Post your Financial Milestone Announcements Here
Reached another big milestone in our late-30s. Didn't realize the market had recovered so quickly since the March crash. The 2nd million is indeed much easier :beer . Projected time to reach the 4th milestone by the end of 2024 as we just refinanced mortgage from 5/1 ARM to 15Y fixed @2.875% (just before the March crash :oops: ) and DW wanted to further accelerate the payoff. (04/12/2017) 1st milestone - $1 million counting home equity. (03/02/2019) 2nd milestone - $1 million in investable assets, ignoring home equity. (05/29/2020) 3rd milestone - $2 million if I start counting home equity again! 4th milestone - $2 million in investable assets, ignoring home equity Ultimate milestone - $5 million overall assets (FIRE)!! The past year was r...
- Sat Apr 24, 2021 1:04 am
- Forum: Personal Finance (Not Investing)
- Topic: Discuss Net Worth with Adult Children
- Replies: 176
- Views: 21436
Re: Discuss Net Worth with Adult Children
...On one hand I am reticent to share our net worth in fear it will be a career de-motivator for them. On the other hand knowing about the investments will help prepare them to the eventuality of having responsibility for managing a sizable gift I think it depends. I'm in late 30s and my parents in their early 60s shared their NW several years ago with me per my request as I think they need some help in managing their financials when they both retired. I did help them consolidate a dozen of accounts, build a CD ladder and create/maintain a financial spreadsheet to track all accounts and reminders for maturity dates. I also gifted $10K/y to their retirement portfolio. Financially speaking they are now in very good shape. But if my parents t...
- Fri Apr 23, 2021 4:51 pm
- Forum: Personal Investments
- Topic: What do you define "hitting your number?"
- Replies: 50
- Views: 6740
Re: What do you define "hitting your number?"
IF I can comfortably live with the dividend income (2.5% to 3.0%) from my portfolio, then I would feel like I hit my numbers. That's for about 35 to 40 year long retirement. Living with the dividend income is my ultimate FIRE goal which is equivalent to ~50x annual expenses (e.g. S&P 500 Dividend Yield is at 1.45%, compared to2.31% last year w/ the long term average of 1.87%). I thought this would never deplete the retirement savings considering the fund growth and no need to sell any shares. Why did you say only for 35-40 year long retirement? I think this line of thinking is incorrect. You can go after dividends but your equity side won't grow as much (just check any dividend-paying stock around the ex-div date, the share price goes ...
- Fri Apr 23, 2021 4:33 pm
- Forum: Personal Finance (Not Investing)
- Topic: How much house can we afford?
- Replies: 28
- Views: 4130
Re: How much house can we afford?
... Our stats: Ages 40/40 + 3 kids 2-6 Very high cost of living area Income statement stuff (annual basis): Gross HHI ~950k. Very bonus heavy. Takehome HHI ~500k - net of taxes, 401k contributions, benefits, etc Mortgage + Prop tax = 80k Other spending = 225k Liquid savings = 170k -> flows into our brokerage acct Retirement savings = 130k (401k + HSA + NQ plan + pension contribution) 529 plan savings = 30k So gross paycheck roughly breaks out: 1/3 taxes, 1/3 savings, 1/3 spending Current house = 1.15M (purchase price, 5 yrs ago) Mortgage = 850k @ 3.5% ... If I were you, I'd consider a 5 bedroom (4b+den/office) house in top public school district since you have 3 kids (2-6). If this is in the Bay Area, I'd budget $2.5-$3m which you may affo...
- Fri Apr 23, 2021 3:26 pm
- Forum: Personal Investments
- Topic: What do you define "hitting your number?"
- Replies: 50
- Views: 6740
Re: What do you define "hitting your number?"
Living with the dividend income is my ultimate FIRE goal which is equivalent to ~50x annual expenses (e.g. S&P 500 Dividend Yield is at 1.45%, compared to2.31% last year w/ the long term average of 1.87%). I thought this would never deplete the retirement savings considering the fund growth and no need to sell any shares. Why did you say only for 35-40 year long retirement?
- Wed Apr 21, 2021 12:31 pm
- Forum: Personal Investments
- Topic: I Bonds for a minor
- Replies: 10
- Views: 1012
Re: I Bonds for a minor
My strategy is to prioritize EE savings (double in value if holding 20 years meaning guaranteed 3.5% annual return) over I Bond in TD minor's account as I only plan to use them when my kid is around college age. I do plan to buy $10K I Bond in minor's account in late May this year. I also invest in kid's 529 and UTMA using low cost stock index funds, and has done annual tax-gain harvesting in UTMA based on kiddie tax rule.Sky Man 33 wrote: ↑Wed Apr 21, 2021 10:18 am ...Aside from myself, I'm thinking of doing the same for my infant. Are there any potential downsides that I'm not considering, or is investing in I bonds for the both of us the no-brainer that I think it is (compared to high-yield savings)?
- Mon Apr 19, 2021 6:51 pm
- Forum: Personal Investments
- Topic: Need Help with Investment Plan - Close to Retirement
- Replies: 16
- Views: 2929
Re: Need Help with Investment Plan - Close to Retirement
...The dilema is - if the Dimesional Funds are lagging and we purchase Vanguard funds (2 funds or 10 funds) that are not lagging - we are selling low and purchasing high? If we return to Vanguard's Total Stock Market - are we chasing a hot return for the past 10 years? It is difficult choosing 10 Vanguard funds because there are so many. If you really believe the Dimesional funds and the replacement Vanguard funds are tracking the same (or similar) index, this is cutting the fees & eliminating tracking errors NOT selling low and buying high. One important thing you didn't mention is the tax and how much capital gain accumulated in your Dimensional funds if you plan to liquidate them. You should be able to find the Vanguard funds you ne...
- Mon Apr 19, 2021 6:13 pm
- Forum: Personal Finance (Not Investing)
- Topic: First child entering college in the fall... need some advice
- Replies: 186
- Views: 15870
Re: First child entering college in the fall... need some advice
I agree with you and your earlier comments on OP's case. Even I could afford it for my kid, I wouldn't do it though my wife may think it the other way.KlangFool wrote: ↑Mon Apr 19, 2021 5:58 pmmajiaknight,majiaknight wrote: ↑Mon Apr 19, 2021 5:32 pm Congratulations to your daughter!
Being an immigrant coming to US for graduate school with full scholarship, I have a hard time to believe parents with 250K AGI are willing to pay $320K for undergraduate degree in STEM. I don't think there is enough justification for ROI but more from a life experience perspective for you kid if you could easily afford it.
OP would have to take a 100K to 160K student loan to pay for it. I do not think that fits your definition of OP could easily afford it.
KlangFool
- Mon Apr 19, 2021 5:32 pm
- Forum: Personal Finance (Not Investing)
- Topic: First child entering college in the fall... need some advice
- Replies: 186
- Views: 15870
Re: First child entering college in the fall... need some advice
Congratulations to your daughter!
Being an immigrant coming to US for graduate school with full scholarship, I have a hard time to believe parents with 250K AGI are willing to pay $320K for undergraduate degree in STEM. I don't think there is enough justification for ROI but more from a life experience perspective for you kid if you could easily afford it. YOLO so there is no easy comparison b/t top private vs. public college experiences to determine which one is better as everyone is different. Good luck with your choice!
Being an immigrant coming to US for graduate school with full scholarship, I have a hard time to believe parents with 250K AGI are willing to pay $320K for undergraduate degree in STEM. I don't think there is enough justification for ROI but more from a life experience perspective for you kid if you could easily afford it. YOLO so there is no easy comparison b/t top private vs. public college experiences to determine which one is better as everyone is different. Good luck with your choice!
- Fri Apr 16, 2021 8:53 pm
- Forum: Personal Finance (Not Investing)
- Topic: Help me fill out my W4
- Replies: 3
- Views: 507
Re: Help me fill out my W4
Sorry as my comment won't be helpful to answer your question. But why do you aim to break even? There are a lot of variables in the income taxes such as year-end huge bonus, ESPP/RSU sales with huge gains due to stock appreciation which can't be predicted when you calculate W4 right now. If your concern is tax underpayment penalty, there are several exceptions to check. PS: I owe 5 figure Fed tax this year due to the above taxable events, and I don't think I need to pay any penalty.
- Fri Apr 16, 2021 8:42 pm
- Forum: Personal Finance (Not Investing)
- Topic: Can I early retire from my corporate job?
- Replies: 60
- Views: 12092
Re: Can I early retire from my corporate job?
Your plan looks great to me and $5m is also my FIRE number.
I guess I will be in a very similar situation in a few years as I also plan to spend early retirement years back in Asia with parents while our only kid will be in college. Please share more updates from your retirement life in Asia especially on medical insurance abroad, taxes, and early retirement portfolio adjustment. Enjoy!
I guess I will be in a very similar situation in a few years as I also plan to spend early retirement years back in Asia with parents while our only kid will be in college. Please share more updates from your retirement life in Asia especially on medical insurance abroad, taxes, and early retirement portfolio adjustment. Enjoy!
- Fri Apr 16, 2021 7:57 pm
- Forum: Personal Finance (Not Investing)
- Topic: Kiddie Tax Misc 2021
- Replies: 10
- Views: 1015
Re: Kiddie Tax Misc 2021
Read a bunch of threads on the Kiddie Tax. I want to see if this is an accurate understanding. Please correct any misunderstandings... - 2 parents can gift up to $150,000 in the first year ($15k per parent per year, frontloaded by 5 years) - for a child with no other income, the first $2200 of stock gains is tax free (sell stock with basis of $8000 and current price of $10,200), then above @ parent's rate - child tax return must be filed (since gain is > $1100) - child's account may sell the ETF, then immediately rebuy the same ETF one minute later (b/c no wash rules apply) For UMTA accounts... - why does one need to use an UTMA account (instead of just a brokerage account for the child)? - money can transferred into the parent's checking ...