Critique My Portfolio (age 26 for 2016 taxes)

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Topic Author
Rainmaker41
Posts: 628
Joined: Tue Apr 26, 2016 11:34 am

Critique My Portfolio (age 26 for 2016 taxes)

Post by Rainmaker41 »

Financial Situation

Reserve Funds: $10,000 = 12 months' expenses now. $15,000 = 6 months's married household expenses projected by Q3 2016.

Discretionary Savings: enough to replace laptop when current one (2009) dies.

Wedding savings & parents' contributions = wedding budget + furniture etc. Pretty confident on this as main things have been booked. October 2017. No real net financial gain or loss.

Debt: $0

Income: $41,600 (~ $32,000 for 2016 due to better current job starting in May). Finance Associate for a major US-based NGO.

Tax Filing Status: Single for 2016, Married (probably filing jointly to allow Roth IRAs) 2017+

Tax Rate: 14.88% in aggregate including FICA projected for 2016

Federal: 15% marginal tax bracket

State: 6% marginal tax bracket

State of Residence: DC

Age: will be 26 for 2016 tax year.

Desired Asset allocation: 80-85% Stocks / 15-20% Bonds ?

Desired International allocation: 60% Domestic / 40% International (per VASGX) ?

Current Retirement Assets (with 15 July 2016 contributions)

Total: $10,790 as of 15 July 2016. ~ $17,000 as of year end 2016.

80.8% Stocks / 19.2% Bonds

66% US Stocks / 34% Intl. Stocks

TIRA: $3,650 (contributions + growth)
100% Vanguard LifeStrategy Growth Fund (VASGX) (0.15%)

Roth IRA: $5,500 (contributions + growth)
100% Vanguard LifeStrategy Growth Fund (VASGX) (0.15%)

403b: $1,640 (contributions; started May 2016)
15% Mellon Bond Market Index R5 Fund (0.51%)
70% Principal S&P 500 Index R5 Fund (0.41%)
9% MidCap S&P 400 Index R5 Fund (0.42%)
6% SmallCap S&P 600 Index R5 Fund (0.44%)

New Annual Contributions: $5,500 or limit to Roth IRA, ~ $10,000 (25% gross) to 403b projected in 2017. $5,560 to 403b projected in 2016. ~ 38% of gross income contributed across all retirement accounts in total.

Notes

My main question is with asset allocation. Should I make any changes? If I do, why, how, and when?

For what it's worth, my fiancée expects to have her student loans mostly gone by the time we get married, or at most a couple $K left which we'd probably just liquidate and be done with it. She has sufficient reserve funds for her situation and is saving by paying down loans rather than retirement for now. For multiple reasons (including our collective tax optimization as single filers and previous Boglehead suggestions) we agree this makes sense over various other options the two of us could pursue.
jpelder
Posts: 834
Joined: Mon Jan 26, 2015 3:56 pm
Location: Concord, NC

Re: Critique My Portfolio (age 26 for 2016 taxes)

Post by jpelder »

Hi Rainmaker,
I think this all looks good to me. Nice simple allocation, really high savings rate, and an upcoming wedding (congratulations). Just be sure to watch out for over-partying in DC (I once ordered an $18 cocktail unknowingly at a bar in DC :shock: ). Once you're married (or a little while before), you and your fiancee can work out your joint savings plans.
Topic Author
Rainmaker41
Posts: 628
Joined: Tue Apr 26, 2016 11:34 am

Re: Critique My Portfolio (age 26 for 2016 taxes)

Post by Rainmaker41 »

Thanks jpelder. At this stage I suppose the degree to which I contribute to retirement accounts is more important than the exact asset allocation as long as it is reasonable.

I don't typically go to DC bars that often unless I'm meeting a friend from out of town or something. Was that $18 cocktail before or after the 10% restaurant/bar sales tax? :annoyed
Lafder
Posts: 4076
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: Critique My Portfolio (age 26 for 2016 taxes)

Post by Lafder »

Financial Situation

Reserve Funds: $10,000 = 12 months' expenses now. $15,000 = 6 months's married household expenses projected by Q3 2016.
((Why are the household expenses tripling from 10k a year to 30k a year when married? Your living expenses sounds low to me :)))

Debt: $0 ((Wonderful!!))

Income: $41,600 (~ $32,000 for 2016 due to better current job starting in May). Finance Associate for a major US-based NGO.
((Congrats on the increase in salary))


Age: will be 26 for 2016 tax year.

Desired Asset allocation: 80-85% Stocks / 15-20% Bonds ?
((I generally rec a minimum of 20% bonds, and then as you get older age in bonds down to age -20 in bonds. But 15% is reasonable if you prefer it :)))

Desired International allocation: 60% Domestic / 40% International (per VASGX) ?
((Yes this is in the middle of VG's current recs of 30-50% International stocks and bonds))

Current Retirement Assets (with 15 July 2016 contributions)

Total: $10,790 as of 15 July 2016. ~ $17,000 as of year end 2016.
((Max 401k or 403b is 18k under age 50, and that is just employee contribution. Employer match/contribuiton is in addition))

80.8% Stocks / 19.2% Bonds
((This is close to my preferred minimum of 20% bonds :)))

66% US Stocks / 34% Intl. Stocks
((I am at 30% International bonds))

TIRA: $3,650 (contributions + growth)
100% Vanguard LifeStrategy Growth Fund (VASGX) (0.15%)
((Nice and simple all in one fund that rebalances for you. The Target Date Retirement funds are the exact same holdings but they add more bonds with age))

Roth IRA: $5,500 (contributions + growth)
100% Vanguard LifeStrategy Growth Fund (VASGX) (0.15%)

403b: $1,640 (contributions; started May 2016)
15% Mellon Bond Market Index R5 Fund (0.51%)
70% Principal S&P 500 Index R5 Fund (0.41%)
9% MidCap S&P 400 Index R5 Fund (0.42%)
6% SmallCap S&P 600 Index R5 Fund (0.44%)
((What are the options here?))

New Annual Contributions: $5,500 or limit to Roth IRA, ~ $10,000 (25% gross) to 403b projected in 2017. $5,560 to 403b projected in 2016. ~ 38% of gross income contributed across all retirement accounts in total.
((Max your pretax retirement accounts as much as you can))

My main question is with asset allocation. Should I make any changes? If I do, why, how, and when?
((I think 80/20 and 40% International is reasonable. You are closer to 30% International, that is fine too.Figure out what feels best to you and aim for that. Note that when married it will make the most sense to look at both of your assets as one portfolio. I know some would disagree with me, but I would say to gather her info and repost as one portfolio to be sure you do not make changes to yours that were already balanced out by her holdings. Paying down her debt will be good. But if she has any employer match, don't miss out on that. ))

lafder
Topic Author
Rainmaker41
Posts: 628
Joined: Tue Apr 26, 2016 11:34 am

Re: Critique My Portfolio (age 26 for 2016 taxes)

Post by Rainmaker41 »

Ding ding ding! Yes, my living expenses are on the low side. I barely broke even in 2014, pulled ahead in 2015, and 2016 is continuing the happy trend. I am quite frugal (my rent is $410, total monthly budget about $820). How do I manage this in DC? By the expedient of living in a cheap shared basement apartment with occasional annoying problems. As I've earned more I've just saved more. Working for a temp agency 2014 - May 2016 (assigned to my current employer through agency since October 2015) gave me a healthy sense of paranoia about the desirability of lavish reserves. :D

My fiancée lives with her family currently and we plan to move into a nicer apartment than I currently have. The $2,500 household budget estimate comes from doubling my expenses (2 people instead of 1) and then doubling the resulting rent portion again to say $1,600 in order to have a more reasonable housing situation. We'll aim for lower but can't expect to get much lower.
golfallday
Posts: 118
Joined: Sat Feb 14, 2009 3:43 am
Location: College Point, NY

Re: Critique My Portfolio (age 26 for 2016 taxes)

Post by golfallday »

Everything looks fine. Shame the expense ratios in your 403(b) Plan are so high. A .41% ER for an SP500 Index fund seems quite outrageous. I have VIIIX in my 457 plan with a .02% ER for comparison. That said, you have a nice asset allocation. Best wishes.
User avatar
BL
Posts: 9556
Joined: Sun Mar 01, 2009 2:28 pm

Re: Critique My Portfolio (age 26 for 2016 taxes)

Post by BL »

A lot of times those with 403b also have a 457(b) available and didn't know it, so it might be worth double-checking as it just may have some lower-cost funds.

Good luck! You are doing well.
Topic Author
Rainmaker41
Posts: 628
Joined: Tue Apr 26, 2016 11:34 am

Re: Critique My Portfolio (age 26 for 2016 taxes)

Post by Rainmaker41 »

For the 403b funds I looked all the available ones up and ruled out everything with ER over 0.50% (various active funds; the Target Retirements were over 1% if I remember correctly). The index funds I picked are sadly the lowest expense ones available, so I did 15% bonds and approximated Total Stock Market for the rest.

0.41% for the 500 index isn't a joke. For the TR's the 403b administrator advertises dozens of other financial companies that serve as 'multiple advisors for the underlying funds'. That must be where the pile of fees comes from. :annoyed

Still, it makes you wonder how many monkeys it would take to index the market if given infinite time...
http://www.morningstar.com/funds/XNAS/PLFPX/quote.html
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