Handful of questions...

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uberme
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Handful of questions...

Post by uberme » Mon Feb 01, 2016 11:37 pm

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Last edited by uberme on Wed Apr 18, 2018 9:15 pm, edited 1 time in total.

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Peter Foley
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Re: Handful of questions...

Post by Peter Foley » Tue Feb 02, 2016 12:06 am

In your 401k the extended market index is a better complement to the S&P 500 if it is available. Yes you are over weighted in terms of holding the whole US market. Is there a stable value fund in your 401k? Sometimes these are better than bonds funds with higher expenses. The expense ratio for PIMCO is not horrible.

Is your wife employed and, if so, does your wife have access to an employer based retirement account?

At your age, ROTHS are a good option. They are a better option if you are in the 15% bracket. (This tops out at $74,900 in taxable income or about $95,000 in gross income.)

JDDS
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Re: Handful of questions...

Post by JDDS » Tue Feb 02, 2016 12:10 am

Does your spouse work? We want to take that into account either way. For example if not, a spousal IRA is also an option.

You are in fact quite a bit overweighted towards small caps. The Vanguard small cap fund represents around 15% of the market.
What other options does your 401(k) have?

For tax-exempt vs. taxable bonds, you pick the one that has the larger after tax return. In the 25% bracket with no state income tax, it is likely to be taxable bonds with today's rates. (This can change over time.)

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FiveK
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Re: Handful of questions...

Post by FiveK » Tue Feb 02, 2016 12:15 am

uberme wrote: Tax Rate: 25% federal, no state tax
Age:Late 20's
Accounts: Only have a 401(k), 52% in S&P 500 index, 48% in Vanguard small-cap index
  • 1. Am I overweight in small-cap stocks? Ideally for our retirement account(s) aiming for a 85/15 allocation. You are overweight compared with the total US stock market. That may or may not be important. Of more interest is the answer to "...overweight in small-cap stocks compared with your Investment Policy Statement?"

    2. Available funds in my 401k aren't great but the PIMCO Total Return (PTRAX, 0.71%) is there, is this a decent fund to add the missing 15%? It's a well known bond fund. That may or may not be important. What other choices do you have?

    3. Looking to open and max a ROTH IRA, holding VTI and VXUS - good/bad? Thought being earning most growth tax free. Are you eligible for a deductible tIRA? If so, the traditional route is likely better at your marginal rate. If not, Roth is better than taxable.

    4. Also looking to open a Vanguard taxable ETF account which would be a general (non-retirement) account with some portion being used possibly in 5-7 yrs for investment property. Aiming for a 30/70 allocation. Am I thinking about this wrong? Should I put this into a savings account? Depends how certain you are about wanting that investment property, and how much risk you are willing to take funding its purchase. Your conservative allocation is a defensible way to hedge your bets, but does retain both the risks (albeit reduced vs. other options) of losing money and not making enough money.

    5. For the general account thinking:
    • 30% VTI - Vanguard Total Stock Market ETF
      35% VWITX - Vanguard Intermediate-Term Tax Exempt
      35% BND - Vanguard Total Bond Market ETF
    6. Since we're in a state w/o income tax is one preferred over another in terms of a tax-exempt verse taxable bond fund? 25% marginal rate is still relatively low in terms of using tax-exempt bonds. You will likely do better overall to ignore them.

uberme
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Re: Handful of questions...

Post by uberme » Tue Feb 02, 2016 10:59 am

please delete
Last edited by uberme on Wed Apr 18, 2018 9:16 pm, edited 1 time in total.

JDDS
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Re: Handful of questions...

Post by JDDS » Tue Feb 02, 2016 11:20 am

This bond fund has a much lower ER and is part of the 3 fund index portfolio:


0.17% 03/08/1990 Bond Investments Income SPTN US BOND IDX ADV (FSITX)

uberme
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Re: Handful of questions...

Post by uberme » Tue Feb 02, 2016 11:30 am

please delete
Last edited by uberme on Wed Apr 18, 2018 9:16 pm, edited 1 time in total.

investor1
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Re: Handful of questions...

Post by investor1 » Tue Feb 02, 2016 12:43 pm

uberme wrote:
  • 1. Am I overweight in small-cap stocks? Ideally for our retirement account(s) aiming for a 85/15 allocation.
    2. Available funds in my 401k aren't great but the PIMCO Total Return (PTRAX, 0.71%) is there, is this a decent fund to add the missing 15%?
    3. Looking to open and max a ROTH IRA, holding VTI and VXUS - good/bad? Thought being earning most growth tax free.
    4. Also looking to open a Vanguard taxable ETF account which would be a general (non-retirement) account with some portion being used possibly in 5-7 yrs for investment property. Aiming for a 30/70 allocation. Am I thinking about this wrong? Should I put this into a savings account?
    5. For the general account thinking:
    • 30% VTI - Vanguard Total Stock Market ETF
      35% VWITX - Vanguard Intermediate-Term Tax Exempt
      35% BND - Vanguard Total Bond Market ETF
    6. Since we're in a state w/o income tax is one preferred over another in terms of a tax-exempt verse taxable bond fund?
Yes, you are overweight in small cap. The Spartan bond fund is a cheaper/better choice.

Yes, a Roth IRA is a good idea. Also, consider opening one for your spouse and contributing to that as well as you can as long as you are married, filing jointly. The total stock market and total international stock market ETFs are excellent choices. Consider adding the total bond market.

Also, you can achieve your desired AA across your portfolio rather than in each account. You can also approximate the total stock market (read the wiki) using the S&P 500 and an extend market fund. You may wish to buy the S&P in your 401k and supplement that with an extended market fund in your IRAs.

If I were in your position, I'd likely buy as much of the S&P in your 401k as you can supplement using the extended market in your IRAs, then buy the Sparten bond fund up to your desired AA and go from there.

Your taxable plan looks fine. You may want to consider a savings account, CDs, and/or I Bonds/TIPS.

uberme
Posts: 37
Joined: Wed Aug 12, 2015 3:17 pm

Re: Handful of questions...

Post by uberme » Tue Feb 02, 2016 4:04 pm

please delete

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