Portfolio Reassessment

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nirvines88
Posts: 391
Joined: Thu Dec 29, 2011 5:38 pm

Portfolio Reassessment

Post by nirvines88 » Sun Sep 08, 2013 9:23 pm

First off, I'd like to thank the Bogleheads for helping me learn so much over the last few years! A special thanks to the Bogleheads that helped me a couple years ago and helped me get to this point. Prior post here: http://www.bogleheads.org/forum/viewtop ... =1&t=87830 Any general feedback on my current portfolio and answers to questions would be appreciated.

Emergency Funds: Yes, 5-6 months
Debt: None
Tax Filing Status: Single
Tax Rate: 15% Federal, 7% North Carolina
Age: 25
Desired Asset Allocation: 80% stocks / 20% bonds (currently: 89%/11%)
Desired International Allocation: 33.3% of stocks (currently: 41%)
Current Portfolio: High five-figures

Current retirement assets

Taxable
22.8% Vanguard FTSE All-World ex-US Index Fund Admiral Shares (VFWAX) (0.15%)
10.9% Vanguard Short-Term Investment-Grade Fund Investor Shares (VFSTX) (0.20%)
3.8% Vanguard Target Retirement 2055 Fund (VFFVX) (0.18%)
7.2% Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) (0.18%)
4.1% Individual Stocks (0.00%)

Roth IRA at Vanguard
23.0% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.05%)

Rollover IRA at Vanguard
14.5% Vanguard FTSE All-World ex-US Index Fund Admiral Shares (VFWAX) (0.15%)

SIMPLE IRA at Vanguard
13.7% Vanguard Small-Cap Value Index Fund (VISVX) (0.24%)

Prudential 401k
0% (see fund options below)

Total of all accounts: 100%

Contributions

New annual Contributions
$2,200 to state pension
$5,500 to Roth IRA
$10,000+ to 401k (no match)


Available funds (excluded funds with an E.R. of 1.0%+)
NC Fixed Income Index Fund (no ticker – tracks the Barclays Aggregate) (0.246%)
NC Large Cap Index Fund (no ticker - tracks the S&P 500) (0.201%)
NC Small/Mid Cap Index Fund (no ticker – tracks the Russell 2500) (0.226%)
NC International Index Fund (no ticker – tracks the MCSI All World ex-US) (0.316%)
NC Stable Value (no ticker – pays 2.24%)


Notes
1. Taxable account notes:
a. I realize that Vanguard Short-Term Investment-Grade is a bit tax-inefficient. However, I'm in a low bracket and this money could potentially be used for relatively short-term goals OR retirement, so I'm okay with it for now.
b. Vanguard Target Retirement 2055 has decent capital gains. I am waiting until December 2014 to sell it to ensure that I pay the long-term capital gains rate (last purchase was made in Dec. 2013).
c. I will likely sell the individual stocks toward the end of the year, depending on the effect of the capital gains on my overall taxes for 2013.

2. SIMPLE IRA notes:
a. No new contributions as the account is from an old employer. Maxed out in the first few months of 2013.
b. Cannot qualify for Admiral Shares in SIMPLE IRAs.

Questions:
1. 40k salary = 15% bracket after standard deduction and personal exemption, correct?

2. I just got a new job. Should I get my bonds back up to my desired allocation by overweighting bond contributions in my new 401k? Or should I add bonds to my Roth IRA? Or should I do a combination of both?

3. Should I use the 401k, the Roth 401k, or a combination of the two? I'll be in a low federal bracket but pay a high state rate for the rest of my career. Also, I will theoretically receive a pension. The low federal bracket and pension makes me lean a bit towards the Roth 401k, or perhaps using a combination of Roth 401k/regular 401k.

4. I'm thinking I can find and hold lower-cost international funds elsewhere in my portfolio, so here's my potential 401k choices/percentages: 60% NC Large Cap Index Fund, 20% NC Small/Mid Cap Index Fund, 20% NC Fixed Income Fund. Look OK for a slight small/mid cap tilt?

5. Thoughts on adding a Vanguard international small-cap value fund and/or Vanguard REIT?
"Beware of little expenses, a small leak will sink a great ship" - Poor Richard

patrick
Posts: 1567
Joined: Fri Sep 04, 2009 3:39 am
Location: Mega-City One

Re: Portfolio Reassessment

Post by patrick » Sun Sep 08, 2013 10:14 pm

I suspect the 7% state income tax at your income level is higher than in most states -- if you use the non-Roth investment and retire in a different state you would never be paying the high state income tax.

As (presumably) a state employee, would you also have access to a 457 plan at work?

It doesn't seem to matter very much which part of the asset allocation goes in the workplace plan. You could get international about 15 basis points cheaper outside, but US stocks and fixed income are cheaper by a similar amount so in either case the workplace plan is slightly more expensive. However you might want to keep the fixed income outside in order to access inflation protected bonds.

For the SIMPLE IRA it might be a good idea to roll it over to a plain IRA as soon as it is allowed.

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nirvines88
Posts: 391
Joined: Thu Dec 29, 2011 5:38 pm

Re: Portfolio Reassessment

Post by nirvines88 » Mon Sep 09, 2013 8:13 pm

patrick wrote:I suspect the 7% state income tax at your income level is higher than in most states -- if you use the non-Roth investment and retire in a different state you would never be paying the high state income tax.
Anything's possible, but I imagine I'll be here for the rest of my life.
patrick wrote:As (presumably) a state employee, would you also have access to a 457 plan at work?
I do indeed. Doubt I'll ever be able to use it though. Maxing out 401k/IRA is a yearly goal - if I do that, I'm at a 60.5% savings rate (before taxes etc.).
patrick wrote:It doesn't seem to matter very much which part of the asset allocation goes in the workplace plan. You could get international about 15 basis points cheaper outside, but US stocks and fixed income are cheaper by a similar amount so in either case the workplace plan is slightly more expensive. However you might want to keep the fixed income outside in order to access inflation protected bonds.
I might add some I-bonds in the future, but no other plans to add inflation protected bonds in the near term.
patrick wrote:For the SIMPLE IRA it might be a good idea to roll it over to a plain IRA as soon as it is allowed.
I believe 2 years is the rule, which means I've got 21 months to go!
"Beware of little expenses, a small leak will sink a great ship" - Poor Richard

patrick
Posts: 1567
Joined: Fri Sep 04, 2009 3:39 am
Location: Mega-City One

Re: Portfolio Reassessment

Post by patrick » Mon Sep 09, 2013 8:44 pm

patrick wrote:As (presumably) a state employee, would you also have access to a 457 plan at work?
I do indeed. Doubt I'll ever be able to use it though. Maxing out 401k/IRA is a yearly goal - if I do that, I'm at a 60.5% savings rate (before taxes etc.).
[/quote]

The 457 plan might be a better choice than the 401K -- it allows you to withdraw penalty-free at any age once you've left the job.

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nirvines88
Posts: 391
Joined: Thu Dec 29, 2011 5:38 pm

Re: Portfolio Reassessment

Post by nirvines88 » Mon Sep 09, 2013 8:49 pm

patrick wrote:The 457 plan might be a better choice than the 401K -- it allows you to withdraw penalty-free at any age once you've left the job.
Ah did not know that. There is a 457 and 457 Roth option. The 457 has the same fund selection as the 401k above.

Is it just non-governmental 457s that people say are risky? Something like being awarded to creditors in times of bankruptcy?
"Beware of little expenses, a small leak will sink a great ship" - Poor Richard

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nirvines88
Posts: 391
Joined: Thu Dec 29, 2011 5:38 pm

Re: Portfolio Reassessment

Post by nirvines88 » Wed Sep 18, 2013 7:24 pm

Still have another week or so before I can sign up for my retirement plan. If I plan on retiring early, should I go with the 457?! Also, any answers to original questions would be appreciated :happy
"Beware of little expenses, a small leak will sink a great ship" - Poor Richard

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