2nd yr Boglehead Anniversary - Annual Checkup - 26 yr old.

[SobeCane]

I first found Boglehead's 2 years ago and have learned a bunch from the members of the forum (shout-out to Taylor, Livesoft, & sscritic) as well as the blogs of Mike Piper, Allan Roth, and The Finance Buff.

I am asking for a checkup on my 2 year anniversary of becoming a Boglehead. I like to get a financial checkup from the Boglehead community similar to how I receive a free preventative care physical once a year from my doctor. Please let me know of any suggestions or areas that I have overlooked or need improvements:

My 1st year anniversary checkup was posted here:
http://www.bogleheads.org/forum/viewtop ... 8#p1218488


Age: 26
Salary: 60-70k
Debt: None
Tax: To the edge of the 15% federal bracket / 0% state

Desired Portfolio: 80/20 with a 40% of the stocks International

Cash (Emergency Fund)
$15k in Rewards Checking Acct (3% Interest)

Roth IRA
$85k Vanguard Total Stock Market

401(k)
$32k John Hancock Total Bond Market

Taxable
$75k Vanguard FTSE-All World EX-US (Would prefer Total International but harvested losses earlier this year and now have a 10k unrealized gain in FTSE)

Health Savings Account
$6k earning 2.5% interest. (Count this with bonds. Plan to never touch the HSA balance and will pay medical expenses with other money)

[Grt2bOutdoors]

I first found Boglehead's 2 years ago and have learned a bunch from the members of the forum as well as the blogs of Mike Piper, Allan Roth, and The Finance Buff.

I am asking for a checkup on my 2 year anniversary of becoming a Boglehead. I like to get a financial checkup from the Boglehead community similar to how I receive a free preventative care physical once a year from my doctor. Please let me know of any suggestions or areas that I have overlooked or need improvements:

My 1st year anniversary checkup was posted here:
http://www.bogleheads.org/forum/viewtop ... 8#p1218488


Age: 26
Salary: 60-70k
Debt: None
Tax: To the edge of the 15% federal bracket / 0% state

Desired Portfolio: 80/20 with a 40% of the stocks International

Cash (Emergency Fund)
$15k in Rewards Checking Acct (3% Interest)

Roth IRA
$85k Vanguard Total Stock Market

401(k)
$32k John Hancock Total Bond Market

Taxable
$75k Vanguard FTSE-All World EX-US (Would prefer Total International but harvested losses earlier this year and now have a 10k unrealized gain in FTSE)

Health Savings Account
$6k earning 2.5% interest. (Count this with bonds. Plan to never touch the HSA balance and will pay medical expenses with other money)

This is what I came up with:

Total Portfolio Value: $198K
Current allocation - Fixed Income - 19.1%, am not counting your E-fund as part of the fixed income.
Equity - 80.9%; Domestic is 53.6%, International is 47.3%. You need to sell approximately $10K of international and re-allocate to Domestic.

You could do this in 1 of 2 ways - make two consecutive year contributions to your Roth of $5K (2012) and $5.5K (2013) or sell down in taxable, but then you would incur a tax hit of roughly $1,500. If it were me, I would just keep on contributing to the Roth.

P.S. The nurse will take your $25 co-pay at the door. See you next year! Have a nice day.

[SobeCane]

You could do this in 1 of 2 ways - make two consecutive year contributions to your Roth of $5K (2012) and $5.5K (2013) or sell down in taxable, but then you would incur a tax hit of roughly $1,500. If it were me, I would just keep on contributing to the Roth.

P.S. The nurse will take your $25 co-pay at the door. See you next year! Have a nice day.

Thanks for the advice. The 2012 contribution to the Roth has already been made. I will contribute 5k in early 2013 to get the allocation closer to the target. As long as the international allocation is between 40-50%, I really don't mind.

[Grt2bOutdoors]

You could do this in 1 of 2 ways - make two consecutive year contributions to your Roth of $5K (2012) and $5.5K (2013) or sell down in taxable, but then you would incur a tax hit of roughly $1,500. If it were me, I would just keep on contributing to the Roth.

P.S. The nurse will take your $25 co-pay at the door. See you next year! Have a nice day.

Thanks for the advice. The 2012 contribution to the Roth has already been made. I will contribute 5k in early 2013 to get the allocation closer to the target. As long as the international allocation is between 40-50%, I really don't mind.

Just so you know, next year's max contribution amount allowed is $5,500.

[Bogle101]

That's a sweet 3% on your checking account. Didn't realize such rates were still available in today's environment.

I'm still a newbie so can't really comment on what you should do to improve, but it seems like you're doing a solid job.

[NYBoglehead]

26 years old and 200k in invested assets...I'd say you're absolutely crushing it. I'll echo that you probably should get heavier on domestic equities, but it looks like you're already planning on doing that.

[thebogledude]

interesting tax loss harvesting partnering. I am considering setting up the same. stay the course.

[mojave]

I would be curious to see where you started two years ago, would you care to share?

I am a year older than you and quite impressed with your portfolio, granted I make significantly less than you do and have a few thousand in debts that I am focusing on paying off first.

[phish_indexer]

Can I ask how you have 85k in a Roth by age 26? Rollover from 401k -> Roth recharacterization? I'm also 26 and have about 17k in mine, but have only contributed for three years.

As for the portfolio, looks good. I wouldn't sweat the domestic/intl allocations being off, especially since you can re-balance with new contributions in a little more than a month's time.

[SobeCane]

Just so you know, next year's max contribution amount allowed is $5,500.

You have earned your $25 co-pay.

interesting tax loss harvesting partnering. I am considering setting up the same. stay the course.

I use Total International and FTSE All World Ex-US as "TLH Partners". I would prefer to have Total International instead of the Ex-US at this point but I have a large unrealized gain in Ex-US. Both funds should perform similarly so I will stay put unless the fund drops dramatically. Plus, recognizing the losses helps me stay just a hair below the 25% marginal bracket which is also a sweet spot where my qualified dividends are taxed at 0%!

I would be curious to see where you started two years ago, would you care to share?

I have included the link from 1 year ago. I have worked since graduating college at 22 and have maxed 401(k), Roth IRA, and any excess in Taxable every year. Also maxed out my Roth IRA while working part time while still in college. Not rocket science, just "stay the course"

[SobeCane]

Can I ask how you have 85k in a Roth by age 26? Rollover from 401k -> Roth recharacterization? I'm also 26 and have about 17k in mine, but have only contributed for three years.

Before I found this forum, I was contributing to a Roth 401(k) instead of Traditional 401(k). This post by The Finance Buff http://thefinancebuff.com/case-against-roth-401k.html made me realize that for my situation, the traditional 401(k) made more sense to get me down into the 15% bracket where qualified dividends are not taxed. Also, wanted more tax diversity. So the Roth IRA balance is high because it has about 3 years of maxed Roth 401(k) that has been rolled over as well as many years of Roth IRA contributions.

[phish_indexer]

That makes sense. I figured it was either that or that you were an employee of Bain Capital.

[SobeCane]

OK - It seems like I have passed another year of financial physicals from the Boglehead doctors.

Thanks everyone for your input and see you next year!

Hopefully after many years, I will be able to look back on the annual posts and see a pattern of "staying the course!"