Completely Self Directed 401k, profit sharing and IRA

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Joined: Thu Dec 27, 2007 2:35 pm

Completely Self Directed 401k, profit sharing and IRA

Post by berrisj1 »

Yes - Emergency funds = 3-6 months of expenses

Yes - Debt = Med school loan (135K @ 3%), Mortgage (417K, 30y @ 6.25%)

Tax Filing Status: Married filing Jointly

Tax Rate: 35% Federal, Michigan

Age: 31 and 32

Desired Asset allocation: (90/10)

Intl allocation: 20% of stocks

Current portfolio = Roth IRA ($3K in some bad funds), IRA ($16K cash @5%), 401k ($15k cash @ 5%), Roth 401k (starting 2008), Profit sharing ($12.5k starting 2008)

My situation is a bit unique. I am in charge of all investments in my IRAs, 401ks and profit sharing accounts. I am not limited in what I can invest in. So many options make it difficult to choose a portfolio. I will be contributing $8000 per year in my IRA, $15,500 to my Roth 401k and $12,000 in profit sharing. I also have a defined benefit program that is managed by my company and funded completely by them. They do not match my 401k/profit sharing.

That leaves me $35,500 per year to invest.

I am looking for thoughts.

I was going to set up 3 accounts and mirror the following portfolio in each.

Dodge & Cox Income DODIX Intermediate-Term Bond 15%

Dodge & Cox Internat DODFX Foreign Large Value 20%

Fairholme FAIRX Large Blend 60%

Ivy Global Natural R IGNAX Specialty-Natural Res 5%

I was also thinking of substituting the Fairholme fund for Fidelity Spartan Total Market Index Index FSTMX.
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Joined: Thu Dec 27, 2007 4:10 pm

Post by vinnyv15 »

Have you considered paying off your student loan?
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Post by berrisj1 »

vinnyv15 wrote:Have you considered paying off your student loan?

The student loans are federal consolidated loans. The interest rate is very low and I am on the standard 10 year repayment plan. I can't deduct the interest because my income is too high ($350K), but I think there are other advantages. I don't build any equity if I pay it off early. If on the remote chance I go bankrupt or have not paid them off by age 65 then they are forgiven. I am a physician and so is my wife so I don't think the odds are high this will happen. I would rather invest the money and assuming the market gets historic long term returns I will be ahead.
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Location: San Diego

Post by PatrickS »

I won't comment on any funds because you shouldn't be looking for them yet. Before selecting funds, you should establish an asset allocation. Once you have that, select the best location (ira, 401k, taxable) for each of the asset classes.

If you're in the 35% federal bracket, you are not elligible for either Roth or traditional IRA contributions. Your only option is to start non-deductible iras using after-tax money. You'll have to file a form 8606 with your tax return each year for this.

Be especially careful with the profit sharing money. You will over time have considerable capital gains in a taxable account that make selling anything a tax pain. In other words, you could be stuck in some fund(s) and have to pay a hefty penalty to our government in taxes to move it.

You should start reading from the recommended books from the list
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