As a couple in late 30s, how bad are we doing?

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sugarandspice
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As a couple in late 30s, how bad are we doing?

Post by sugarandspice »

Edited again with more information and clean up the posting format a bit.

Emergency Funds: 2 years
Debt: Mortgage 4.6% interest
Tax Rate: 28% Federal 9.30% CA
Age: Late 30s

Total size of portfolio is low six figures. We've been putting a lot of money in mortgage (big down payment and paying double monthly payment) and didn't put much in investment at all. So I know we have late start but would like to try to catch up on the investment.

Taxable (65% of our retirement portfolio)
100% cash

His 401K (5% of our retirement portfolio)
100% Fidelity Freedom® Index 2040 (FBIFX)(Gross 0.24% Net 0.16%)
No company match

His Roth IRA
None.

Her 401K (20% of our retirement portfolio)
*the expenses are listed on paper as Total Annual Operating Expense
6% Invesco V.I. Global Real Estate Fund (Series I Shares) (1.14)
5% Franklin US Government Securities VIP Fund-Class 2 (0.75)
7% JPMorgan Insurance Trust Mid Cap Value Portfolio-1(0.80)
12% Fidelity VIP ContraFund Portfolio - Initial Class (0.64)
5% American Century VP Inflation Protection Class II Shares (0.73)
17% Invesco V.I. International Growth Fund (Series II Shares) (1.01)
6% PIMCO VIT CommodityRealReturn Strategy Port - Admin Class (1.14)
4% Pioneer Emerging Markets VCT Portfolio-Class II (1.71)
15% Pioneer Equity Income VCT Portfolio Class II (1.04)
10% Pioneer Strategic Income VCT Portfolio-Class II (1.53)
8% Franklin Small Cap Value VIP Fund-Class 2 (0.92)
5% Templeton Global Bond VIP Fund-Class2 (0.80)
Company match is 4%

Her Roth IRA at Vanguard (10% of our retirement portfolio)
100% Vanguard LifeStrategy Growth (VASGX)(0.17%)

- If you feel Her 401k holdings are not good choices. Please give some suggestions. Below are all the options.
AMC VP BALANCED (0.91)
AMC VP INF PROT II (0.73)
AMC VP INTL (1.42)
AMC VP LG CO VAL II (1.06)
AMC VP ULTRA I (1.01)
AMC VP ULTRA II (1.16)
AMC VP VALUE (0.98)
DRF IP MIDCAP STOCK (0.85)
DRF IP TECH GROWTH (0.83)
DRF SOCIAL RESP GR (0.85)
DRF STOCK INDEX (0.53)
DRF VIF APPREC (0.81)
FED HI INC BOND II (1.02)
FID VIP CONTRAFUND (0.64)
FID VIP EQUITY INC (0.56)
FID VIP GR&INC (0.59)
FID VIP GROWTH (0.66)
FID VIP MIDCAP SRV 2 (0.90)
FID VIP MM SRV CLS 2 (0.51)
FIXED ANNUITY ACCOUNT
FRK FLX CP GR VIP 2 (1.19)
FRK INC VIP 2 (0.72)
FRK MUT SHR VIP 2 (0.96)
FRK S-M CP GR VIP 2 (1.05)
FRK SM CP VAL VIP 2 (0.92)
FRK US GOVT VIP 2 (0.75)
INVSC VI AMER FR II (1.23))
INVSC VI GLBL RE I (1.14)
INVSC VI INT GR II (1.26)
INVSC VI MCP GR II (1.37)
JPMIT MDCP VAL 1 (0.80)
PIMVIT ALLASST ADV (1.43)
PIMVIT COMM RR ADM (1.14)
PIO EMG MKT CLS II (1.71)
PIO EQ INC CLS II (1.04)
PIO HI YIELD CLS II (1.12)
PIO STRTG INC CLS II (1.53)
TEMP DEV MKT VIP 2 (1.26)
TEMP GBL BD VIP 2 (0.80)
TEMP GR VIP 2 (1.03)

- I am not sure how my husband 401K works. But it's with Fidelity so I guess he can probably pick anything from there? The one he is having right now (FBIFX) doesn't seem to have good rating.

- Any suggestions on his Roth IRA?
Last edited by sugarandspice on Mon Jun 29, 2015 10:55 pm, edited 4 times in total.
livesoft
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Re: As a couple in late 30s, how bad are we doing?

Post by livesoft »

My Californian friends tell me that their homes are their 401(k)s because housing where they live is so expensive all their money goes to pay their mortgages. So they do not have much in their 401(k) and other retirement plans. It seems like you are about average in that regard. If you want to be above average, then no reason not to start now.

As for what to invest in, I think contributing more to your 401(k) and employer-sponsored retirement plans is a good step. Since you do not usually get to pick the funds available in your 401(k), perhaps you should list your choices here in this thread?
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letsgobobby
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Re: As a couple in late 30s, how bad are we doing?

Post by letsgobobby »

welcome to the forums,

You haven't really provided enough information to answer because we don't know your annual expenses.

The most important metric is not how your friends are doing, or how you are doing compared to the Bogleheads (which is never a good group to compare yourself to when it comes to money accumulation), but how you are doing relative to your needs.

Your needs are determined by your living expenses in retirement.

You are in the 28% tax bracket which suggests a MFJ income of the high $100ks to mid $200ks. Since you haven't been saving much, you've presumably been spending most of it. Included in that spending are your taxes, your double mortgage payment, and whatever other 'reasons' you allude to. Now some of that may continue in retirement and some will likely not. You need to determine what you require in retirement spending to maintain the lifestyle to which you are accustomed.

Let's say your annual spending - taxes, etc - but excluding your mortgage principal and interest, which you plan to finish off before retirement - amount to $80,000. Is that roughly correct?

You want to generate that in retirement. Your income will come from your portfolio, Social Security, and any pensions; plus any part time work you put together. Add up all those sources to determine how much the portfolio needs to generate. Let's say you will get $25,000 from SS, $15,000 from a pension, and $10,000 from work. Then you only need $30,000 from your portfolio.

We recommend you accumulate 25 times the needed annual draw from your portfolio. In this scenario, you want to accumulate 25x$30,000 or $750,000 by the time you retire.

How do you get from 5 figures (?$50,000) to $750,000 in 30 years? Assume a diversified portfolio that returns 4% real for the next 30 years. Then you need to save about $11,000 per year for the next 30 years to reach your goal. Change your assumptions (initial amount, annual returns, etc), and you'll get a different outcome.

Hope that is helpful.
livesoft
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Re: As a couple in late 30s, how bad are we doing?

Post by livesoft »

^Do not forget to factor in something called inflation. :)
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ktd
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Re: As a couple in late 30s, how bad are we doing?

Post by ktd »

livesoft wrote:My Californian friends tell me that their homes are their 401(k)s because housing where they live is so expensive all their money goes to pay their mortgages. So they do not have much in their 401(k) and other retirement plans. It seems like you are about average in that regard. If you want to be above average, then no reason not to start now.

As for what to invest in, I think contributing more to your 401(k) and employer-sponsored retirement plans is a good step. Since you do not usually get to pick the funds available in your 401(k), perhaps you should list your choices here in this thread?

This is true. My cousin in the Bay Area said the same thing. Their combined income is about 200k. They bought a town home for 825k and they are in their 40s. They don't have much in 401ks. They hope the house will triple the value by the time they retire.
Lafder
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Re: As a couple in late 30s, how bad are we doing?

Post by Lafder »

It is always a great time to stop and take a look at your finances and make the most of them !

In general, maximize your tax deductible retirement accounts to the tax deductible limits. Employer match is in addition to the limits.

Decide a comfortable emergency fund, I think 2 years is excessive ! But if you need it to feel comfortable, consider a 6-12 month immediately accessible account, and a deeper account such as CDs or ? for longer term savings. I consider my taxable account my deeper savings and just keep my overall Asset Allocation at numbers I can sleep well at night with.

Also, consider looking a HELOC on your house. Then you can pay the year or more of expenses you have saved towards your mortgage, and you will know you have the line of credit if you really need it so that extra money is still available to you. Maybe that would make you more comfortable having 6 months in expenses instead of 2 years. Surely paying down your mortgage will give you higher returns than any CD rates or other guaranteed returns you can get.

With any extra funds after your retirement accounts, I would probably do a combo of paying mortgage off faster and investing.

Here is info on tax efficiency for your taxable accounts, in general more bonds are held in retirement accounts. http://www.bogleheads.org/wiki/Principl ... _placement

My taxable account is mostly Total Stock Market Index.

Consider posting everything you have like this for more feedback and to give yourself perspective. viewtopic.php?f=1&t=6212

% of everything but your emergency fund should total 100%. So if you decide you will invest a chunk of your cash savings, include that as an investable % cash. Versus leave it separate as your emergency fund or pay down mortgage fund. (It will put it in perspective if you list it as an available % cash, which you can still decide to put to your emergency fund)

Many people are not good at saving. If you ask on Bogleheads, savings rates are not representative of most Americans by far.

lafder
TFinator
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Re: As a couple in late 30s, how bad are we doing?

Post by TFinator »

There aren't any numbers in your post. It's impossible to say if you're doing well.
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ruralavalon
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Re: As a couple in late 30s, how bad are we doing?

Post by ruralavalon »

Welcome to the forum :) .

It's good to see that you have no credit card debt, or other consumer debt.

I have no idea if you are doing well or not for California.

Late 30's is a little bit of a late start, but not too late to put together a workable plan.

Consider an asset allocation in the area of 70/30 or 75/25 stocks/bonds.

How much are you contributing to each 401k? How much is the employer match in each 402k, if any? How much are you contributing to the IRAs? (All in dollars please.) At your stage, the most important thing you can do is make your savings rate as high as you can comfortably sustain.

What are the funds (fund names, tickers & expense ratios) offered in each 401k? Where are your IRAs located?

Please see the post "asking portfolio questions" for details needed and and format. Please just add to your original post using the edit button, so that all of your information is in one place.
Last edited by ruralavalon on Sat Jun 27, 2015 3:11 pm, edited 1 time in total.
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southbay
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Re: As a couple in late 30s, how bad are we doing?

Post by southbay »

As you start investing more, do not freak out and sell everything when the stock market takes a dive. It will take a dive eventually.

Invest early, invest often, and stay the course. ;)
Novine
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Re: As a couple in late 30s, how bad are we doing?

Post by Novine »

It is a late start and most people your age on Bogleheads probably are further ahead than you are today. But keep in mind that you are 30 years away from your retirement age per Social Security which means you'll likely have several decades of working and saving before you have to use those retirement funds. That's plenty of time to make up for lost time. One of the keys for you will be saving as much for retirement as you can over the next 30 years. Not having children means that you can focus on that without having to worry about college costs, etc.
Topic Author
sugarandspice
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Re: As a couple in late 30s, how bad are we doing?

Post by sugarandspice »

Thank you for all the responses and sorry for not giving enough details. I am not at home right now and don't have the paperwork with me. I will add more details when I have access to those information.

You guys are right about California home. I consider my house in moderate price range for California but we did put a lot in down payment and monthly payment. We are hoping to pay it off in 10 years or less. If combining 401k, Roth ira and saving, we do have six figures but only 50k (roughly) are in investment. My Roth IRA is in VASGX. I can't remember my 401K and need to see paperwork on that. My husband also has 401k but no Roth IRA. In addition to our 401k, we are able to save roughly 1000-2000 a month after all the expenses.

Now we realized we keep too much saving in cash (I mean regular saving account with 0.9% interest) and would like to put them in investment and need suggestions on what will be good choices for us. For example, if I were to add another 20k in investment now, should I just go with another Vanguard balanced funds (maybe one of their target-risk funds?) or should I go with few different class/funds?

Sorry if I sound like I don't have much knowledge in investment. I've been reading a lot but it's so new to me i still don't have much clue. I did read all the answers 3 times though LOL and will do additional research on the advices you guys gave me (some of them I still don't quite understand what it is so I need to study more). So far I've only used Vanguard for investment and pretty happy with it. My 401k is with Symetra but my company has some financial guys managing it so I only look at the statement.
livesoft
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Re: As a couple in late 30s, how bad are we doing?

Post by livesoft »

sugarandspice wrote: For example, if I were to add another 20k in investment now, should I just go with another Vanguard balanced funds (maybe one of their target-risk funds?) or should I go with few different class/funds?
I don't think so. Instead, I would put that money into your two 401(k)s and his Roth IRA. For instance, change your paycheck contributions to 401(k)s to the maximum possible so that you both contribute $18,000 this year to your 401(k)s. If that doesn't leave enough to pay expenses, then pay them from your emergency fund. It will look like you are moving money from your emergency fund into your 401(k)s, right?
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stan1
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Re: As a couple in late 30s, how bad are we doing?

Post by stan1 »

You mentioned that you are trying to pay off your mortgage in 10 years. If it was me I would strive for a balance between paying off the mortgage and investing in retirement/investing accounts. I can understand the desire to be mortgage free but being diversified with different investments also is important. If you have taxable investment accounts you can have liquidity without holding 2 years worth of cash.
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Watty
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Re: As a couple in late 30s, how bad are we doing?

Post by Watty »

Be sure to see the getting started wiki;

http://www.bogleheads.org/wiki/Getting_started

The Bogleheads guide to investing is also worth reading.

http://www.amazon.com/s/?search-alias=a ... Bogleheads

One thing I do is to keep a simple spreadsheet that adds up my assets and debts each year on January 1st so that I can can see my progress over the years.

There really isn't enough information to give you many good suggestions but in your tax bracket it would be an easy decision to max out any deductible retirement accounts before paying extra on your mortgage.
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sugarandspice
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Re: As a couple in late 30s, how bad are we doing?

Post by sugarandspice »

livesoft wrote:
sugarandspice wrote: For example, if I were to add another 20k in investment now, should I just go with another Vanguard balanced funds (maybe one of their target-risk funds?) or should I go with few different class/funds?
I don't think so. Instead, I would put that money into your two 401(k)s and his Roth IRA. For instance, change your paycheck contributions to 401(k)s to the maximum possible so that you both contribute $18,000 this year to your 401(k)s. If that doesn't leave enough to pay expenses, then pay them from your emergency fund. It will look like you are moving money from your emergency fund into your 401(k)s, right?
livesoft, I understand what you are saying, basically max out our 401k and Roth IRA first before doing anything else, correct? But am I being too paranoid to think that it is too scary to lock almost all the money in 401k since we can't really take it out until we are 60? I know we have emergency fund but I have many scary thoughts such as what if we really need big chunk of money? what if the market crashes when we are 59 and our 401k just happen to get hit really really hard? I just feel more comfortable knowing that we have some investments outside the 401k as well . If we max out on both of us, there won't be money left to invest outside 401k. But please correct me if these thoughts are not making sense. I need to hear different perspectives.
livesoft
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Re: As a couple in late 30s, how bad are we doing?

Post by livesoft »

Many folks can start taking money from a 401(k) at age 55 if they are separated from service from their employer.

As one nears retirement, one would change the asset allocation in the 401(k) to be more conservative. I don't see how one could see any difference in investments in a 401(k) or taxable or Roth IRA as these are just holding accounts for the investments. Investments that lose money in the 401(k) will also lose money in a taxable account. I'll guess that you might not quite understand asset allocation yet and that it is different from asset location.

The tax savings from 401(k) contributions is so great that it overwhelms putting money in a taxable account. But also, you all have more than enough money and income to fully fund the 401(k) AND put more money in a taxable account.
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Meg77
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Re: As a couple in late 30s, how bad are we doing?

Post by Meg77 »

Welcome! Considering you have a lot of equity in your home and 6 figures saved/invested, I'd say you aren't doing badly at all. Of course you probably could have saved more, but oh well. You have plenty of time to catch up, especially if you don't have kids.

Speaking of which, do you plan to have kids? If so, I'd leave at least one year of expenses in cash. If not, you can probably safely take it down to 6 months.

1. Stop paying extra on your mortgage. After the tax break your effective interest rate is probably close to 3%, and you can do better in investments over decades (especially within tax advantaged investment accounts). Plus you need to catch up with investing and already have tons of home equity. Time is the biggest thing you have on your side so the more you can invest sooner, the better.

2. Max out your 401ks as well as an HSA if you have access to one. Also max out backdoor Roth IRAs each year (search the Wiki in this forum for details on that). Even if you can't afford to do this from your budget, effectively you can draw down savings slowly to supplement your income while you dedicate more cash flow to these ax advantaged accounts.

3. Repeat annually until you have enough to retire. If you have money leftover after maxing out retirement accounts and can save more in taxable accounts, then great. If not, it's not a big deal (though you may have to work until mid 60s or later or relocate to a lower cost of living area if you can't work that long for some reason). If you're putting aside $36K into 401ks and $11K into Roth IRAs, plus 401k matching and maybe an HSA, then you will likely be putting aside enough to at least retire one day relatively comfortably.

As for your question about asset allocation, I'd say an 80% stock/20% bond portfolio may work just fine, especially if you maintain a large cash cushion outside of that. Put 20% of the stocks into international index funds or ETFs. Within your 401k, just pick the cheapest index funds (hopefully you have at least an S&P 500 index option). Then use the Roth IRAs for bond and international exposure.

But don't stress about your asset allocation too much; your savings rate matters more than anything until you have well into the 6 figures invested. I'd just stick your Roth IRAs into target retirement date funds until you have $10K in each account and can switch to Admiral share classes of a fund (which requires a minimum of $10k in one fund). For example, you could both put your 401ks into Total stock market or S&P 500 index funds, then have your Roth in a total international fund and his Roth in a Total bond market fund.
Last edited by Meg77 on Sat Jun 27, 2015 5:37 pm, edited 1 time in total.
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ruralavalon
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Re: As a couple in late 30s, how bad are we doing?

Post by ruralavalon »

More information is needed in order to give you concrete suggestions.

How much are you contributing to each 401k? How much is the employer match in each 402k, if any? How much are you contributing to the IRAs? (All in dollars please.) At your stage, the most important thing you can do is make your savings rate as high as you can comfortably sustain.

What are the funds (fund names, tickers & expense ratios) offered in each 401k? Where are your IRAs located?

Please see the post "asking portfolio questions" for details needed and and format. Please just add to your original post using the edit button, so that all of your information is in one place.

In general you should contribute to tax-protected accounts before doing taxable investing.

In your tax bracket there is a huge advantage in the tax deduction for contributions to a traditional 401k. Also there is a great benefit in the tax-deferred compounding in a traditional 401k, and a great benefit in the tax-free compounding and growth in a Roth.

Don't pass up those benefits by omitting or limiting your tax-protected investing.
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Grt2bOutdoors
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Re: As a couple in late 30s, how bad are we doing?

Post by Grt2bOutdoors »

ktd wrote:
livesoft wrote:My Californian friends tell me that their homes are their 401(k)s because housing where they live is so expensive all their money goes to pay their mortgages. So they do not have much in their 401(k) and other retirement plans. It seems like you are about average in that regard. If you want to be above average, then no reason not to start now.

As for what to invest in, I think contributing more to your 401(k) and employer-sponsored retirement plans is a good step. Since you do not usually get to pick the funds available in your 401(k), perhaps you should list your choices here in this thread?

This is true. My cousin in the Bay Area said the same thing. Their combined income is about 200k. They bought a town home for 825k and they are in their 40s. They don't have much in 401ks. They hope the house will triple the value by the time they retire.
Alot of folks who believe that or hope for that are going to be in for a "big surprise". Especially if inflation rears it's ugly head, then sure their home will be worth $2.5 million, but only be worth $1-$1.5 million in today's dollars. I guess you forgot to inform them that a house is a place to live, not an investment.
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stemikger
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Re: As a couple in late 30s, how bad are we doing?

Post by stemikger »

It's really not that much of a late start. I didn't start saving until I was in my mid thirties and at 51, I did alright. Like others said, most of your net worth is in your home. When you are ready for retirement, you can sell your home and downsize and there you have a big portion of retirement.

However, I would start now, you probably have 20 plus years ahead of you to save. I know people who didn't start saving until they were in their 50s. Did they have as much as they would have started in thbook for eir 20s, no, but so what, they still had a decent amount. The best time to start saving is today.

A good book for late starters is Start Late Finish Rich by David Bach. The second half of the book, you could ignore, but the first half is good for encouraging people who feel it is too late to save.
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countofmc
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Re: As a couple in late 30s, how bad are we doing?

Post by countofmc »

ktd wrote:
livesoft wrote:My Californian friends tell me that their homes are their 401(k)s because housing where they live is so expensive all their money goes to pay their mortgages. So they do not have much in their 401(k) and other retirement plans. It seems like you are about average in that regard. If you want to be above average, then no reason not to start now.

As for what to invest in, I think contributing more to your 401(k) and employer-sponsored retirement plans is a good step. Since you do not usually get to pick the funds available in your 401(k), perhaps you should list your choices here in this thread?

This is true. My cousin in the Bay Area said the same thing. Their combined income is about 200k. They bought a town home for 825k and they are in their 40s. They don't have much in 401ks. They hope the house will triple the value by the time they retire.
Man, this seems so risky. Isn't this basically how a lot of people got in trouble during the last recession? If jobs and home prices crash in unison in the Bay Area (which isn't farfetched at all if the tech economy goes sour), it's not going to be pretty.
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Re: As a couple in late 30s, how bad are we doing?

Post by countofmc »

OP, as far as how you are doing against your peers. I'd point out the obvious in saying most online anecdotes regarding people's finances skew towards the extremes. Most bogleheads tend to be higher-income higher net worth folks, for any age bracket. Generally people only share their finances online if they are feeling pretty good about them. And then once in a while you hear the stories about folks really struggling, six figure student loan debts, low incomes, etc.

I'd say you are in the vast majority that is doing "okay" for your age group. Able to own a home, put away some for retirement, decent incomes. My wife and are in our early 30s, also live in California. We do not (and at this point cannot) own a home, and have about 200k spread out over savings and investment/retirement accounts. I'd say most of my friends/ peers are like you or me. If they've been able to buy a home here in California, they can't put away as much but still manage to save some. If they do not own a home, they are able to put away a bit more, but not near the figures you see touted on this forum.
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sugarandspice
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Re: As a couple in late 30s, how bad are we doing?

Post by sugarandspice »

Thank you so much you guys. I admit I feel a little embarassed of how little I know but I am really glad I found this website. After reading and rereading all the answers, things are starting to make more sense now and I can see where our mistakes are. I will also have a major discussion with my husband on how to balance the mortgage and investment better.

Again, I can't express how thankful I am for you guys who spend your time giving answers in such a detail to a complete stranger on the internet. I will definitely check out all the links and reading materials that were recommended. Study time!
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sugarandspice
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Re: As a couple in late 30s, how bad are we doing?

Post by sugarandspice »

countofmc wrote:I'd say you are in the vast majority that is doing "okay" for your age group. Able to own a home, put away some for retirement, decent incomes. My wife and are in our early 30s, also live in California. We do not (and at this point cannot) own a home, and have about 200k spread out over savings and investment/retirement accounts. I'd say most of my friends/ peers are like you or me. If they've been able to buy a home here in California, they can't put away as much but still manage to save some. If they do not own a home, they are able to put away a bit more, but not near the figures you see touted on this forum.
countofmc, this is very true. We bought our home in early 30s and basically wiped out our saving at that time. That's why I am scratching my head every time I read on the internet that people managed to buy a house, paying for mortgage and still have hundreds of thousands dollars in investment/saving in their 30s. My husband and I are making decent money. We live comfortably but definitely not a big spender in anyway and I just can't see how could that (house and big investment combo) happen with our income (we were making less when we were younger of course). Now I can see that we could have done better if we set aside some investment money earlier though.
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Re: As a couple in late 30s, how bad are we doing?

Post by pkcrafter »

OP, check both 401k plans and then list what's available--fund name, ticker, and expense ratio. If choices are mostly high cost, then just list the lower cost options. Also list your current holdings.

Once you know what choices to use, you can use maybe half of the cash you have on hand to fund the 401ks. You should not be concerned about not having access to the 401k because it's retirement money, not a general pool to use for anything else. Many 401k plans let you borrow, so that might be an extreme option if you ever need it. This is why you hold an emergency fund, plus you will have assets in other places.

If you are now 80% in stock, not counting all that cash, you will not be 80% stock when you get within 8-10 years of retirement. If the idea of keeping a lot of your investments in stock concerns you, then 80% stock now may be too high. Maybe 70% stock is a better compromise between anticipated return and risk.


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BL
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Re: As a couple in late 30s, how bad are we doing?

Post by BL »

Don't forget that the taxes you don't pay contribute to that much more you can put into the 401k! If you put in 18k each to your 401Ks, the 28% fed you don't pay, plus the ??% CA state tax you don't pay, means it is not really costing you that much, maybe around 2/3 of it is your out of pocket and the rest is taxes you don't pay.
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Re: As a couple in late 30s, how bad are we doing?

Post by ruralavalon »

pkcrafter wrote:OP, check both 401k plans and then list what's available--fund name, ticker, and expense ratio. If choices are mostly high cost, then just list the lower cost options. Also list your current holdings.
+ 1

Please see this for what to include & format: "Asking portfolio questions".

Consider reading one or more of the general investing books from this list: "Suggested reading".
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Re: As a couple in late 30s, how bad are we doing?

Post by TIAX »

sugarandspice wrote: We have five figures in 401k, Roth IRA, and saving. We live comfortably and been paying almost double for mortgage every months. Now that I want to put some of our saving toward investment, I need suggestions on asset allocations and asset class. Most of our current investments (which is not much) are in VASGX or something similar.

Thank you so much!
Five figures is not great for late 30s with a high income. Stop paying double mortgage every month and max out both 401(k)s and Roth IRAs. Only then would I consider paying more on the mortgage.
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Re: As a couple in late 30s, how bad are we doing?

Post by Leemiller »

sugarandspice wrote:
livesoft wrote:
sugarandspice wrote: For example, if I were to add another 20k in investment now, should I just go with another Vanguard balanced funds (maybe one of their target-risk funds?) or should I go with few different class/funds?
I don't think so. Instead, I would put that money into your two 401(k)s and his Roth IRA. For instance, change your paycheck contributions to 401(k)s to the maximum possible so that you both contribute $18,000 this year to your 401(k)s. If that doesn't leave enough to pay expenses, then pay them from your emergency fund. It will look like you are moving money from your emergency fund into your 401(k)s, right?
livesoft, I understand what you are saying, basically max out our 401k and Roth IRA first before doing anything else, correct? But am I being too paranoid to think that it is too scary to lock almost all the money in 401k since we can't really take it out until we are 60? I know we have emergency fund but I have many scary thoughts such as what if we really need big chunk of money? what if the market crashes when we are 59 and our 401k just happen to get hit really really hard? I just feel more comfortable knowing that we have some investments outside the 401k as well . If we max out on both of us, there won't be money left to invest outside 401k. But please correct me if these thoughts are not making sense. I need to hear different perspectives.
I can understand your concerns. I prefer to have quite a bit in investment accounts, which I count as our emergency funds. But if you're worried about your 401k being illiquid or subject to a penalty for early withdrawal, it could be much harder to get money out of your home.

Like you I'm surprised at some of the net worth figures for people who make less, but you never know who is honest, or used to make more or had significant family help.
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Re: As a couple in late 30s, how bad are we doing?

Post by livesoft »

To give a different data point and/or perspective … we had to rent an apartment while living in a high cost of living area until we moved out of it in our late 30s. Thus, we were not able to even buy a house until we were probably around the age of the OP. And we had a toddler, too, before moving and another child later on. We didn't ask questions about how bad we were doing.
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Re: As a couple in late 30s, how bad are we doing?

Post by navyasw02 »

Grt2bOutdoors wrote:
ktd wrote:
livesoft wrote:My Californian friends tell me that their homes are their 401(k)s because housing where they live is so expensive all their money goes to pay their mortgages. So they do not have much in their 401(k) and other retirement plans. It seems like you are about average in that regard. If you want to be above average, then no reason not to start now.

As for what to invest in, I think contributing more to your 401(k) and employer-sponsored retirement plans is a good step. Since you do not usually get to pick the funds available in your 401(k), perhaps you should list your choices here in this thread?

This is true. My cousin in the Bay Area said the same thing. Their combined income is about 200k. They bought a town home for 825k and they are in their 40s. They don't have much in 401ks. They hope the house will triple the value by the time they retire.
Alot of folks who believe that or hope for that are going to be in for a "big surprise". Especially if inflation rears it's ugly head, then sure their home will be worth $2.5 million, but only be worth $1-$1.5 million in today's dollars. I guess you forgot to inform them that a house is a place to live, not an investment.
Wages will also have to drastically increase to be able to have a pool of buyers who are willing to buy an overpriced townhouse.
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Re: As a couple in late 30s, how bad are we doing?

Post by ruralavalon »

sugarandspice wrote:countofmc, this is very true. We bought our home in early 30s and basically wiped out our saving at that time. That's why I am scratching my head every time I read on the internet that people managed to buy a house, paying for mortgage and still have hundreds of thousands dollars in investment/saving in their 30s. My husband and I are making decent money. We live comfortably but definitely not a big spender in anyway and I just can't see how could that (house and big investment combo) happen with our income (we were making less when we were younger of course). Now I can see that we could have done better if we set aside some investment money earlier though.
How was/is this done? The answer is probably automatic deductions from pay for contributions to 401ks, or automatic monthly contributions to IRAs, or both. Then the "magic" of compounding takes place tax-deferred or tax-free. In your late 30s it is not too late to start.
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Re: As a couple in late 30s, how bad are we doing?

Post by ktd »

countofmc wrote:
ktd wrote:
livesoft wrote:My Californian friends tell me that their homes are their 401(k)s because housing where they live is so expensive all their money goes to pay their mortgages. So they do not have much in their 401(k) and other retirement plans. It seems like you are about average in that regard. If you want to be above average, then no reason not to start now.

As for what to invest in, I think contributing more to your 401(k) and employer-sponsored retirement plans is a good step. Since you do not usually get to pick the funds available in your 401(k), perhaps you should list your choices here in this thread?

This is true. My cousin in the Bay Area said the same thing. Their combined income is about 200k. They bought a town home for 825k and they are in their 40s. They don't have much in 401ks. They hope the house will triple the value by the time they retire.
Man, this seems so risky. Isn't this basically how a lot of people got in trouble during the last recession? If jobs and home prices crash in unison in the Bay Area (which isn't farfetched at all if the tech economy goes sour), it's not going to be pretty.

Many Californians are thinking like my cousins. I have family and friends all over CA and almost every conversation lead to real estate prices. I think they are obsessed with it or something.
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Re: As a couple in late 30s, how bad are we doing?

Post by White Coat Investor »

You found Bogleheads before age 40. I think you're doing great no matter what else has or will happen!
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Re: As a couple in late 30s, how bad are we doing?

Post by sugarandspice »

OP here, I just added additional information on the top of the post. Thank you for all responses!
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Re: As a couple in late 30s, how bad are we doing?

Post by livesoft »

sugarandspice wrote:OP here, I just added additional information on the top of the post. Thank you for all responses!
If you don't list expense ratios, then it is very hard to make any suggestions. There is some kind of suggested format around here someplace for a post like yours.
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Re: As a couple in late 30s, how bad are we doing?

Post by sugarandspice »

I just cleaned up my post again. Hope I did it right this time. Sorry for keep missing information :(
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Re: As a couple in late 30s, how bad are we doing?

Post by ruralavalon »

How much are you able to contribute to each account?

In his 401k are Fidelity Spartan funds offered?

In her 401k, can you please give full names and tickers for these funds?
DRF STOCK INDEX (0.53)
FID VIP CONTRAFUND (0.64)
FID VIP EQUITY INC (0.56)
FID VIP GR&INC (0.59)
FID VIP GROWTH (0.66)
FRK INC VIP 2 (0.72)
FRK US GOVT VIP 2 (0.75)
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Re: As a couple in late 30s, how bad are we doing?

Post by pkcrafter »

ruralavalon wrote:How much are you able to contribute to each account?

In his 401k are Fidelity Spartan funds offered?

In her 401k, can you please give full names and tickers for these funds?
DRF STOCK INDEX (0.53)
FID VIP CONTRAFUND (0.64)
FID VIP EQUITY INC (0.56)
FID VIP GR&INC (0.59)
FID VIP GROWTH (0.66)
FRK INC VIP 2 (0.72)
FRK US GOVT VIP 2 (0.75)
Husband is holding FBIFX, which is Fidelity Freedom Index 2040. Good choice, but ~87% in stock. The other options listed don't appear to be funds--no ticker. Looks like these funds may be wrapped in an annuity. FID VIP equity income is listed as FBYNC.

http://fundresearch.fidelity.com/annuit ... mary/FBYNC

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Re: As a couple in late 30s, how bad are we doing?

Post by sugarandspice »

ruralavalon wrote:How much are you able to contribute to each account?

In his 401k are Fidelity Spartan funds offered?

In her 401k, can you please give full names and tickers for these funds?
DRF STOCK INDEX (0.53)
FID VIP CONTRAFUND (0.64)
FID VIP EQUITY INC (0.56)
FID VIP GR&INC (0.59)
FID VIP GROWTH (0.66)
FRK INC VIP 2 (0.72)
FRK US GOVT VIP 2 (0.75)
Dreyfus Stock Index Svc (0.53)
Fidelity VIP Contrafund Init (0.64)
Fidelity VIP Equity-Income Init (0.56)
Fidelity VIP Growth & Income Init (0.59)
Fidelity VIP Growth Init (0.66)
Franklin Income Securities CI2 (0.72)
Franklin US Government CI2 (0.75)

On my 401K site they don't show the tickers at all. I have paperwork that shows full name but still no ticker. I tried google but not sure if it will be the correct fund. For example, I googled "Fidelity VIP Equity-Income" and got FLOLC. But when I go to the page, the expense ratio is different from my paper. Should I post the tickers (that I got from google) here anyway?

I am doing 13k my husband is doing 5k for 401K (most of his money goes to mortgage which we are going to adjust that). Is Fidelity Spartan name of a fund? I will have to check that when I get home if he has it or not.
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Re: As a couple in late 30s, how bad are we doing?

Post by ruralavalon »

sugarandspice wrote:
Dreyfus Stock Index Svc (0.53)
Fidelity VIP Contrafund Init (0.64)
Fidelity VIP Equity-Income Init (0.56)
Fidelity VIP Growth & Income Init (0.59)
Fidelity VIP Growth Init (0.66)
Franklin Income Securities CI2 (0.72)
Franklin US Government CI2 (0.75)

On my 401K site they don't show the tickers at all. I have paperwork that shows full name but still no ticker. I tried google but not sure if it will be the correct fund. For example, I googled "Fidelity VIP Equity-Income" and got FLOLC. But when I go to the page, the expense ratio is different from my paper. Should I post the tickers (that I got from google) here anyway?
Does the paperwork you have say what index is tracked by "Dreyfus Stock Index Svc (0.53)?"

In the documents for her 401k do they provide a "fact sheet" for each fund? If so please link the fact sheets for the above listed funds.

sugarandspice wrote: I am doing 13k my husband is doing 5k for 401K (most of his money goes to mortgage which we are going to adjust that).
What are you contributing to her IRA?

sugarandspice wrote: Is Fidelity Spartan name of a fund? I will have to check that when I get home if he has it or not.
Spartan funds are a group of low expense ratio Fidelity index funds, please see: "Fidelity Index Funds"
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: As a couple in late 30s, how bad are we doing?

Post by ne2ca28 »

Your 401k provider should have a link to the prospectus which should include the tickers or if not, you can ask your provider directly.

There are many calculators for you to see how much difference a 401k (even with high expense ratios) can outperform a taxable account, especially with your high earnings in a high tax state. It should help you with the idea of shoveling money into them.

We are in CA (LA area) mid 30s and probably make similar to you - I max out 401k, Roth and HSA. I just got my wife to max hers out this year. Its crazy how your accounts look once you start to max them out. Its such a good feeling.

We have a 6 month savings in cash and no taxable account right now. Instead of a taxable account, the rest goes to her low interest (but private) student loans. Once that is done in about 8 months, we will do a taxable account and house remodel savings. Mortgage is at 3.875% and federal loans are at less than 3%, so I am not even thinking about paying that down yet.
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Re: As a couple in late 30s, how bad are we doing?

Post by sugarandspice »

ruralavalon, on the paper it shows like this (using Dreyfus as example)

Group Variable Annuity Investment Options
Large Blend
Dreyfus Stock Index Svc .... then the average annual return%, Morningstar Rating
Benchmark: S&P 500 TR .... then the average annual return%, Morningstar Rating
Category: Large Blend .... then the average annual return%, Morningstar Rating

I will have to look around my 401K site to see if there is a link somewhere with more information (hopefully with tickers). Also, just FYI, I didn't pick each selection myself (not enough knowledge) but we have a financial advisor guy at the office who was helping me make selection. On my 401k site, I am able to adjust the % or select new one from the options.

I max out my Roth IRA. My husband doesn't have one yet but we are going to open one for him. Should be able to max it out too. So 5,500 each.
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Re: As a couple in late 30s, how bad are we doing?

Post by sugarandspice »

ne2ca28 wrote:Your 401k provider should have a link to the prospectus which should include the tickers or if not, you can ask your provider directly.

There are many calculators for you to see how much difference a 401k (even with high expense ratios) can outperform a taxable account, especially with your high earnings in a high tax state. It should help you with the idea of shoveling money into them.

We are in CA (LA area) mid 30s and probably make similar to you - I max out 401k, Roth and HSA. I just got my wife to max hers out this year. Its crazy how your accounts look once you start to max them out. Its such a good feeling.

We have a 6 month savings in cash and no taxable account right now. Instead of a taxable account, the rest goes to her low interest (but private) student loans. Once that is done in about 8 months, we will do a taxable account and house remodel savings. Mortgage is at 3.875% and federal loans are at less than 3%, so I am not even thinking about paying that down yet.
ne2ca28, We were a little obsessed with our mortgage :( though there are few other reasons why we didn't start investment until this late as well. We are adjusting our 401k contribution now so we will pay less to mortgage and more to investment but I have to admit I am real nervous about maxing 401k out. I am used to having more cash flow in case "something" happens and that's why we also have such a large emergency fund (which I need to do something with it as well). I know it doesn't make sense and need to fix the attitude :|
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Re: As a couple in late 30s, how bad are we doing?

Post by StormShadow »

Just my opinion, but I don't think you're that bad off. Frankly, the only thing that matters NOW is you found bogleheads (welcome!!) and now you're going to come up with a good plan for the future.

I think 2 years for an emergency fund is a little much. But kudos to you for having it! Much better to have a large EF than to have none at all! For me, 6 months is ok. And I'd plop that into the highest interest savings account I could find. Ally bank is a popular choice for an online savings account.

Your 401k choices aren't ideal (i.e. all have relatively high expense ratios). I'd pick out the LOWEST ER fnds to contribute your 401k into.

Contribute to an IRA to balance your overall portfolio.

And speaking of portfolio... you might want to read up on how to create a diversified portfolio. Most bogleheads are proponents of having a well diversified yet simple portfolio that is inexpensive (i.e. low expense ratio). You could achieve this by spreading your investments among as few as three mutual funds (e.g. a total US stock market index fund, total international stock index fund and a bond fund). Look up "three fund portfolio" in the boglehead search engine at the top right.

Index funds are a popular option here because they are typically very diversified and inexpensive to run. They are passive, meaning, they do not require a manager pick 'n choose which stocks to invest in... instead they simply automatically spread their investments evenly among a group of stocks based upon an index that they are assigned to track. (e.g. VFINX tracking the S&P 500 index).
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Re: As a couple in late 30s, how bad are we doing?

Post by ne2ca28 »

ne2ca28, We were a little obsessed with our mortgage :( though there are few other reasons why we didn't start investment until this late as well. We are adjusting our 401k contribution now so we will pay less to mortgage and more to investment but I have to admit I am real nervous about maxing 401k out. I am used to having more cash flow in case "something" happens and that's why we also have such a large emergency fund (which I need to do something with it as well). I know it doesn't make sense and need to fix the attitude :|
I know exactly how you feel. Truth is, only you and your husband know your history and reasons for holding cash. All of us can only tell you what we've done or heard or what is the typical case. Find a balance between whats comfortable and wise. You really don't have to max out tax favorable investments, but its suggested before paying down a mortgage prematurely or holding cash beyond an adequate emergency savings.

On a related note, your 401k money is actually just as liquid or more liquid than a house. You can get a home equity loan or you could likely get a 401k loan (check with provider to be sure). Getting loans are not recommended, but you do what you have to do. Your 401k money is your money, don't forget that.
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Re: As a couple in late 30s, how bad are we doing?

Post by RosieQ »

wrote:
Man, this seems so risky. Isn't this basically how a lot of people got in trouble during the last recession? If jobs and home prices crash in unison in the Bay Area (which isn't farfetched at all if the tech economy goes sour), it's not going to be pretty.
That will be when I buy my first Bay Area property.
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Re: As a couple in late 30s, how bad are we doing?

Post by sugarandspice »

StormShadow wrote:And speaking of portfolio... you might want to read up on how to create a diversified portfolio. Most bogleheads are proponents of having a well diversified yet simple portfolio that is inexpensive (i.e. low expense ratio). You could achieve this by spreading your investments among as few as three mutual funds (e.g. a total US stock market index fund, total international stock index fund and a bond fund). Look up "three fund portfolio" in the boglehead search engine at the top right.
Sorry if this is a stupid question, my investment options are listed by category such as Large Blend, Large Growth, Mid-Cap Blend, Mid-Cap Growth, etc., how do I decide which one? Or how to mix them up? I know for the big picture it will be something like 70% stock market fund, 20% international stock fund and 10% bond fund. But within each group, besides the expense ratio, how do I pick/mix these categories?
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Re: As a couple in late 30s, how bad are we doing?

Post by ruralavalon »

sugarandspice wrote:
StormShadow wrote:And speaking of portfolio... you might want to read up on how to create a diversified portfolio. Most bogleheads are proponents of having a well diversified yet simple portfolio that is inexpensive (i.e. low expense ratio). You could achieve this by spreading your investments among as few as three mutual funds (e.g. a total US stock market index fund, total international stock index fund and a bond fund). Look up "three fund portfolio" in the boglehead search engine at the top right.
Sorry if this is a stupid question, my investment options are listed by category such as Large Blend, Large Growth, Mid-Cap Blend, Mid-Cap Growth, etc., how do I decide which one? Or how to mix them up? I know for the big picture it will be something like 70% stock market fund, 20% international stock fund and 10% bond fund. But within each group, besides the expense ratio, how do I pick/mix these categories?
If you had a total stock market index fund offered in the 401k then you would use that for your domestic stock fund.

Since you don't have that offered in your 401k, then you would just use an S&P 500 index fund instead. In your 401k that would be Dreyfus Stock Index Svc (Benchmark S&P 500) (0.53).

"A total stock market index fund represents the whole market, while an S&P 500 fund does not. Now that total stock market funds exist and have expenses just as low as S&P 500 funds, total stock market funds are preferable. In practice, the importance and magnitude of the difference is a subject of debate. In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki, Three-fund portfolio, "Other considerations".

In general, in selecting funds to use you are looking for the best combination of low expense and broad diversification.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: As a couple in late 30s, how bad are we doing?

Post by dratkinson »

I didn't find this investing concept until I was in my 50s, so your start seems okay to me.


Your husband's Roth IRA can be anything you (plural) want/need it to be.


It is recommended by some that new investors should be 25-30% bond until after you've weathered your first market crash. After the crash, then assess your actions during the crash, and adjust 5-10% as necessary.
--If you sold, then you need more bonds.
--If you didn't sell, but wanted to, then your bonds are about right.
--If you saw the crash as a stock-buying opportunity, then you can have less bonds.

Understand these concepts.
--The arithmetic of active management: http://web.stanford.edu/~wfsharpe/art/active/active.htm
--Principles of tax-efficient fund placement: https://www.bogleheads.org/wiki/Princip ... _placement
--Three-fund portfolio: https://www.bogleheads.org/wiki/Three-fund_portfolio

Your only guarantee. From the Sharpe article, the best you can expect to earn annually is the market return... less your investing costs. Using your lowest cost fund options, placed for tax efficiency, is how you minimize your costs, and so maximize your annual return.

Family portfolio. Our goal is to help you create a low-cost family investing portfolio composed of all your (plural) tax-advantaged investment accounts + your (plural) taxable account(s). You will do this by creating a 3-fund portfolio populated by the lowest cost options available to you, and placed in your accounts for the highest tax efficiency.

Investing space = TA space + taxable space. More Tax-Advantaged space (tax-deferred space: 401k, traditional IRA,... + tax-free space: Roth 401k, Roth IRA,...) is better than less. So you are encouraged to use your full TA allotment every year. If you can invest more than fits in your TA space, then you can begin taxable investing. From your reading above, taxable investing is just like TA investing, the only change is to use tax-efficient (tax-exempt) bonds.

Must you use three funds to create a 3-fund portfolio. No, you can use an all-in-one fund. But an all-in-one fund is probably more aggressive (less bonds) than the recommended (by some) 25-30% starting bond allocation for a new investor. Simple fixes: (1) use a different all-in-one fund with the recommended bond allocation, or (2) add additional bonds to your existing all-in-one fund. Your choice.

Mortgage vs. investing. Your mortgage is 4.6% ARM. Your retirement investments should return >7% over the long-term: some years (much) less, some years more. Logic: So it's better to invest in your retirement than in your mortgage.

ARM. We've been hearing the threat of rising interest rates, so your ARM worries me. Would prefer you in a 15-30 fixed-rate mortgage for your peace of mind; one less thing to worry about if you plan to stay in your home. A few points higher fixed-rate now, might seem like a blessing in a few years when your ARM is reset.

Reading. Begin reading some of the recommended basic books as you need the structured walk-through of the many topics to come up to speed on the material. The Boglehead's Guide to Investing is a good place to start. Why? It gives broad-brush action steps without delving too deeply into the supporting 60-years of academic research into investing. "Just the facts, ma'am." You can also start reading in the Wiki (link: screen top right). The Wiki is how current information is presented so updates the BH guide.

Investing history. You can read about this too, for fun, later.



Welcome.





Edit.
Last edited by dratkinson on Tue Jun 30, 2015 11:20 pm, edited 1 time in total.
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