40 year old new investor asset allocation question

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patriots4
Posts: 2
Joined: Mon Dec 05, 2016 10:41 pm

40 year old new investor asset allocation question

Post by patriots4 » Mon Dec 05, 2016 11:05 pm

Hi, first time posting, any help would be appreciated.

I am a 40 yr. old, married father of 2. My wife and I earn (AGI) anywhere between $170 & 190k, depending on bonus amount. I started really paying attention to my investments probably 1-2 years ago. I've read Common Sense Investing by John Bogle as well as The Bogleheads Guide to Investing. Enjoyed them both.

Just looking for some recommendations. At present, I have a 401k with about 71k, a pension (private), a cash balance with Fidelity of 50 k, $41k traditional ira with fidelity (50/50 stock/bonds asset allocation, mostly managed funds), and 9k Roth IRA with Vanguard (65 percent s&p500 index and 45 percent total bond). I would like to move my trad ira to vanguard and begin employing a 3 fund index fund portfolio within my traditional IRA - total stock market, total bond and total international stock.i intend to continue to invest in my Roth until I'm unable.

My plan is to take 20 k cash and retain that as an emergency fund. Take the other 20k, invest in Roth IRA, this year and next for my wife and I. I use the other 10k to help offset daycare costs. We have 20 percent equity in a 600k plus home and have paid off our student loans.

A couple of questions...

- for my traditional IRA, how does that allocation look? I was thinking 65 percent stocks, 35 percent bonds?
- for my wife Roth IRA, $5500 contribution, would the vanguard balanced fund be recommended?
-how easy is it to convert fidelity IRA to Vanguard's?
-for 2017 tax year, we'll be on agi fence as it relates to Roth income limits, any advice as to how this should be approached? Still invest in the event we fall under, but risk going over and paying 6 percent penalty?

Sincere thanks for reviewing this.

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

Re: 40 year old new investor asset allocation question

Post by investor1 » Tue Dec 06, 2016 8:00 am

If you are comfortable with 65/35, then it is reasonable.
If you want a 3 fund portfolio, then setup a 3 fund portfolio rather than a 3 fund account.
You didn't mention what you hold in FIDO. The easiest thing to do is call VG and let them handle it. Though, you should check to see if you can roll this into your 401k (assuming you have a good one). This would allow you to solve the next question using a Backdoor Roth IRA (read the wiki).
See above.

Jack FFR1846
Posts: 6829
Joined: Tue Dec 31, 2013 7:05 am

Re: 40 year old new investor asset allocation question

Post by Jack FFR1846 » Tue Dec 06, 2016 8:40 am

As investor1 said and I'm going to emphasize.....you setup your asset allocation across all accounts. While you would optimally set specific funds to accounts like taxable, Roth and traditional IRA/401k, you add up the whole thing to get your overall allocation. You do NOT try to put 3 funds in each account. As some examples of my own accounts, my Vanguard rollover IRA only has developed international. My Schwab taxable account only has equity. But my excel spreadsheet shows me (to 2 digit precision) my asset allocation across the board and makes it easy for me with a breakdown of US and international equity percentages.
Bogle: Smart Beta is stupid

JW-Retired
Posts: 6735
Joined: Sun Dec 16, 2007 12:25 pm

Re: 40 year old new investor asset allocation question

Post by JW-Retired » Tue Dec 06, 2016 9:05 am

patriots4 wrote: -for 2017 tax year, we'll be on agi fence as it relates to Roth income limits, any advice as to how this should be approached? Still invest in the event we fall under, but risk going over and paying 6 percent penalty?
Shouldn't be a penalty. (1) You are allowed to just remove your excess contribution if it turns out you go over, or (2)You can just wait until early April 2018 to make your 2017 Roth contributions after you know exactly how much you will be allowed. Or (3) maybe the best plan would be to do a "Backdoor" Roth work around of the whole going over problem. To do that you would need to first "hide" your current tIRA assets in your 401k.
See https://www.bogleheads.org/wiki/Backdoor_Roth_IRA

If you choose (3) make sure you positively understand how to fill out the form 8606 paperwork needed before you actually do anything. Dry run it and check it with us.

Welcome to the forum!
JW
Retired at Last

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