Finally getting serious... Need advice

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Fvsa
Posts: 2
Joined: Tue May 31, 2016 3:15 pm

Finally getting serious... Need advice

Post by Fvsa » Tue May 31, 2016 4:59 pm

Hi all. Couple events recently have made me realize that it's time to get serious about my finances. Luckily when I was younger my parents instilled responsible financial behavior in myself so i've been able to save quite a bit. But in terms of managing my assets, and being smart about them, I've been pretty much set and forget until now and not given much thought to it. As my family grows and finances grow, I realized it's time to start digging in and getting a bit more serious. I've stumbled across this group and have been devouring the wiki pages for a bit now, and was wondering if there's any advice I can glean from the group. Here's the situation:

Emergency funds: yes have (although, considering using this as down payment if we find a house)
Debt: none
Tax Filing Status: Married Filing Jointly with Dependent Children
Tax Rate: 28% Federal, 9.3% State
State of Residence: CA
Age: 33
Desired Asset allocation: 70% stocks / 30% bonds (about... happy with 65/35 as well)
Desired International allocation: TBD% of stocks

total portfolio: low six figures.
No his or her... she contributed towards savings, but did not do any investing in future prior to us meeting.

Current assets

Taxable
0% cash (excluding emergency/house fund)
2% Schwab (SWPPX) (expense ratio 0.09)
2% Coca-cola (KO)
1% Intel (INTC)
53% company equity (current employer)

403b at Fidelity (previous employer)
10% FID Dividend GR (FDGFX) (expense ratio 0.69)
20% FID Asset MGR 50% (48% stock/42% bond/10% other) (FASMX) (expense ratio 0.67)
(note this account has access to FSTVX, FSGDX, FSITX to do a DIY 3-fund porfolio here)

403b at TIAA Cref (previous employer)
5% TIAA Traditional
6% CREF Stock R3

Contributions
New annual Contributions
$TBD his 401k with Fidelity (no employer matching, FSITX, FUSVX, FSIVX, FSEVX available for 4-fund style portfolio)
$75k taxable equity in current employer (opportunity to sell ~once per year)

Questions
1. As you can see, my assets are heavily biased in stock. to help balance my asset allocation without dealing with taxes I was going to just push more of my 403b retirement account into bonds. Does this make sense or should I sell taxable socks to push into bonds?

2. similarly as I continue to get more stocks as part of my compensation, I was just going to re balance by shifting more retirement funds into bonds until my 403b's eventually are essentially 100% bond based (except for the TIAA traditional). At this point I would consider selling taxable stocks (picking the lowest performers first) to push into bonds and make sure I'm around my balance target year after year. Does this seem like a reasonable plan for the future?

3. i currently do not contribute to 401k (no matching offered). I can't really afford to put in much without selling some of the shares that are part of my compensation (want to keep adding to the savings bucket in case we buy a house). Does it make sense to sell those shares in order to contribute the 18k 401k yearly max? The shares are significantly outperforming the market, but I feel pretty exposed and that adding bonds in 401k makes sense both from risk and tax. But having trouble wrapping my head around it tax wise (would be selling short term holdings, so capital gain losses from tax would be minimal)

4. shares in my current employer as mentioned are performing really really well. I'm pretty young so don't mind a bit of risk, but having >50% of my eggs in this basket i'm realizing is probably just a bit greedy. So any advice on how to split it up would be great. Note that I'm restricted in the amount i can dump at any one time, so asset relocation from this lump would have to be done over years anyways.

Thanks for any advice/opinions!!!
Last edited by Fvsa on Wed Jun 01, 2016 12:19 am, edited 2 times in total.

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BL
Posts: 8183
Joined: Sun Mar 01, 2009 2:28 pm

Re: Finally getting serious... Need advice

Post by BL » Tue May 31, 2016 6:27 pm

You have a huge investment in a single company stock, which probably is the same company as your job security. It is usually recommended that not more than 5% be in your company stock, 10% at the extreme limit. This is probably your most important issue. Are you required to keep a certain amount?

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Duckie
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Joined: Thu Mar 08, 2007 2:55 pm

Re: Finally getting serious... Need advice

Post by Duckie » Tue May 31, 2016 6:32 pm

Fvsa, welcome to the forum.
Fvsa wrote:$45k in savings (which may be used as a down payment if we find a house)
$20k in some mutual funds and stocks
$150k in stocks of my employer
Are these in taxable accounts?
1) to help balance my asset allocation without dealing with taxes I was going to just push more of my 403b retirement account into bonds. Does this make sense or should I sell taxable socks to push into bonds?
Add more bonds to your 403b.
2) similarly as I continue to get more stocks as part of my compensation, I was just going to re Balance by shifting more retirement funds into bonds until eventually it hits 100%. At this point I would consider selling taxable stocks (picking the lowest performers first) to push into bonds and make sure I'm around my balance target year after year. Does this seem like a reasonable plan for the future?
It'll work but why won't you sell your employer's stock? Your portfolio is very un-diversified. Over half of it is in one stock. That's incredibly risky.
3) i currently do not contribute to 401k (no matching offered). I can't really afford to put in much without selling some of the shares that are part of my compensation (want to keep adding to the savings bucket in case we buy a house). Does it make sense to sell those shares in order to contribute the 18k 401k yearly max?.
It makes sense to me. Are you allowed to sell the employer stock as soon as you get it? What are the restrictions?
The shares are significantly outperforming the market, but I feel pretty exposed and that adding bonds in 401k makes sense both from risk and tax.
You're ridiculously exposed.

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ruralavalon
Posts: 13493
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Finally getting serious... Need advice

Post by ruralavalon » Tue May 31, 2016 6:33 pm

Welcome to the forum :) .

At age 33 with $335k in savings and investments you are doing OK in my opinion..

Some additional information is necessary. Please add some more into your original post using the edit button. In particular -- do you an emergency fund, do you have any debt, what is your tax bracket and tax filing status, what asset allocation do you think that you want to aim for, what sort of accounts do you have these investments in, what specifically are the current investments in each account, what other investments are offered in your 401k, what other investments are offered in the 403b, about how much do you expect you may be able to contribute toward investing annually, what restrictions are there on selling your company stock?

Please see the post "asking portfolio questions" for format.
Fvsa wrote:As you can see, my assets are heavily biased in stock. I have some questions for the group:
1) to help balance my asset allocation without dealing with taxes I was going to just push more of my 403b retirement account into bonds. Does this make sense or should I sell taxable socks to push into bonds?
Moving more of the 403b to bonds is reasonable in my opinion, once you have decided on a target asset allocation.

What funds are offered in the 403b? Please give fund names, tickers and expense ratios.
Fvsa wrote:2)similarly as I continue to get more stocks as part of my compensation, I was just going to re Balance by shifting more retirement funds into bonds until eventually it hits 100%. At this point I would consider selling taxable stocks (picking the lowest performers first) to push into bonds and make sure I'm around my balance target year after year. Does this seem like a reasonable plan for the future?
Contributing to the 401k and buying a bond fund there might be a better idea.

Contributing to the 401k is likely a good move regardless, for the benefit of the tax deduction and tax deferred compounding of growth. That depends somewhat on what funds are offered in the 401k, and their expense ratios.
Fvsa wrote:3)i currently do not contribute to 401k (no matching offered). I can't really afford to put in much without selling some of the shares that are part of my compensation (want to keep adding to the savings bucket in case we buy a house). Does it make sense to sell those shares in order to contribute the 18k 401k yearly max?. The shares are significantly outperforming the market, but I feel pretty exposed and that adding bonds in 401k makes sense both from risk and tax. But having trouble wrapping my head around it tax wise (would be selling short term holdings, so capital gain losses from tax would be minimal)
In my opinion it's not a good idea to have a substantial percent of your investments in company stock. It something awful happens at work, then you might lose both your job and your investments at the same time ala Enron.

It looks like you have nearly half your savings in company stock. We usually suggest keeping company stock at 10% or less of your long-term investments.

Consider selling some company stock, perhaps both to add to your house savings and to enable some 401k contributions. What funds are offered in the 401k? Please give fund names, tickers and expense ratios. If the list is enormous, then just give the 3-4 funds with the lowest expense ratios in each fund category.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

investor1
Posts: 1040
Joined: Thu Mar 15, 2012 8:15 pm

Re: Finally getting serious... Need advice

Post by investor1 » Tue May 31, 2016 6:38 pm

If you are counting on your employer for $125k of salary each year, do you really want to count on them for $65k worth of stock every year? Do you want to also count on them for nearly half of your portfolio?

Advice on this board tends to go the route of being heavily diversified which the above does not accomplish. Why not move out of your position in the company's stock and into something more like a target date fund, or, say, a three fund portfolio that you manage yourself?

I assume at least some of that stock is more than a year old. Meaning you can sell it and pay long term capital gains tax. You should verify that along with the tax rate that you would be charged by the state of California (if any).

From there, you could sell the shares over a year old, stash away the cash you'll need to pay the tax bill, live off of that money, and start max'ing out your 401k (assuming it has good options) as well as a set of IRAs (or backdoor Roth IRAs) for you and your wife. That will give you $29k worth of tax advantaged space to save for retirement using (hopefully) using low cost, heavily diversified mutual funds that represent their market's average.

For the funds beyond that, you could sell and invest in similar funds in a taxable account. Read over the tax efficient fund placement wiki page.

As for your asset allocation, set it to whatever helps you sleep at night and will prevent you from doing something stupid when the market crashes :)

Beyond that, it is difficult to provide sound advice since we don't know what your investment options and costs are in your tax advantaged accounts. You can post those if you are looking for more detailed advice.

Fvsa
Posts: 2
Joined: Tue May 31, 2016 3:15 pm

Re: Finally getting serious... Need advice

Post by Fvsa » Wed Jun 01, 2016 12:14 am

thanks so much for the reply guys. my bad, i didn't read the template post. I've edited the original post to match the format, which should also answer a bunch of your guys questions.

please keep it coming. Sounds like re-balancing 403b's to be bond heavy makes sense, and selling shares that are part of my yearly compensation in order to max out my 401k makes sense as well. And finally that maybe i should be looking at off-loading a good chunk of my 1 company heavy portfolio. I only wish it wasn't performing so well, to be perfectly honest, it's hard to curb the greedy side that wants to get as much from it as possible. I'm okay with a fair amount of risk, but having a baby now makes me realize maybe i shouldn't be gambling so much on it.

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catdude
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Location: Central Oregon

Re: Finally getting serious... Need advice

Post by catdude » Wed Jun 01, 2016 1:46 am

Fvsa wrote:And finally that maybe i should be looking at off-loading a good chunk of my 1 company heavy portfolio. I only wish it wasn't performing so well, to be perfectly honest, it's hard to curb the greedy side that wants to get as much from it as possible. I'm okay with a fair amount of risk, but having a baby now makes me realize maybe i shouldn't be gambling so much on it.
Your emotions are perfectly understandable, but I would just point out that Enron's stock was doing very well too, until it dropped like a rock.
catdude | | The only thing between North Dakota and the North Pole is a barbed-wire fence.

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BeBH65
Posts: 1196
Joined: Sat Jul 04, 2015 7:28 am

Re: Finally getting serious... Need advice

Post by BeBH65 » Wed Jun 01, 2016 3:14 am

Hello FVSA,

A first series of answers, with some additional questions. Please update the opening post to keep all info in one place.
Fvsa wrote: Hi all. Couple events recently have made me realize that it's time to get serious about my finances. Luckily when I was younger my parents instilled responsible financial behavior in myself so i've been able to save quite a bit. But in terms of managing my assets, and being smart about them, I've been pretty much set and forget until now and not given much thought to it. As my family grows and finances grow, I realized it's time to start digging in and getting a bit more serious. I've stumbled across this group and have been devouring the wiki pages for a bit now, and was wondering if there's any advice I can glean from the group. Here's the situation:

Emergency funds: yes have (although, considering using this as down payment if we find a house) Generally it is advised to keep 3-12 months of expenses in an emergency fund. It will be important that you keep an EF also when you buy your house, since this is a moment where you are particularly vulnerable.
Debt: none Excellent
Tax Filing Status: Married Filing Jointly with Dependent Children
Tax Rate: 28% Federal, 9.3% State
State of Residence: CA
Age: 33
Desired Asset allocation: 70% stocks / 30% bonds (about... happy with 65/35 as well) within the range normally advised, maybe even on the conservative side (if the stocks would be well diversified)
Desired International allocation: TBD% of stocks

total portfolio: low six figures.
No his or her... she contributed towards savings, but did not do any investing in future prior to us meeting.

Current assets

Taxable
0% cash (excluding emergency/house fund)
2% Schwab (SWPPX) (expense ratio 0.09)
2% Coca-cola (KO)
1% Intel (INTC)
53% company equity (current employer) As others mentioned; you have 50% of your capital invested in one stock, which is also the one that is going to pay you in the future. If anything goes wrong you might loose your job and your investments. Pls define a plan to diversify this position. General advise is to put max 5% in individual stock

403b at Fidelity (previous employer)
10% FID Dividend GR (FDGFX) (expense ratio 0.69)
20% FID Asset MGR 50% (48% stock/42% bond/10% other) (FASMX) (expense ratio 0.67)
(note this account has access to FSTVX, FSGDX, FSITX to do a DIY 3-fund portfolio here)
Could you update with the Expense Ratio's, the expense ratios of your current funds seem highish

403b at TIAA Cref (previous employer)
5% TIAA Traditional
6% CREF Stock R3

Contributions
New annual Contributions
Please have a look at this wiki page on prioritizing_investments; the sequence we advise is: 1/ Contribute to 401k to get the full employer match, 2/ Pay off high interest debt, 3. Contribute to a HSA (if available), 4. Contribute the maximum to an IRA, 5. Contribute the remainder of the 401k, 6. Contribute to a taxable investing account ...
$TBD his 401k with Fidelity (no employer matching, FSITX, FUSVX, FSIVX, FSEVX available for 4-fund style portfolio)
Could you update with the Expense Ratio's
$75k taxable equity in current employer (opportunity to sell ~once per year) It is generally best to look employer equity plans as a part of the salary and participate if the return is worth it (>15%?) and risks are not high (one can sell very quickly - days/weeks )
Regards,
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

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ruralavalon
Posts: 13493
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Finally getting serious... Need advice

Post by ruralavalon » Wed Jun 01, 2016 9:31 am

Where is your taxable account located?

Will your current 401k accept an incoming rollover of your old 403bs?

When are you allowed to sell some of the company stock? How much of the company stock have you held for over one year?

Please give fund names and expense ratios, not just ticker symbols.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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