Lower Income Looking for Advice on Investments

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newbie9
Posts: 1
Joined: Tue Dec 27, 2016 2:37 pm

Lower Income Looking for Advice on Investments

Post by newbie9 » Tue Dec 27, 2016 3:15 pm

His (41)
salary: $30,000
accounts:
traditional IRA $20,500 @ Vanguard 15% Total World Stock, 60% Total Stock Market Index admiral, 15% Total Bond Index
403b $6,900 @ OneAmerica 30% State Street Equity 500 Index, 10% AUL Fixed, 10% Columbia Mid Cap Index, 15% TIAA-CREF Bond Indx, 25% Vanguard FIF Small Comp Grth, 10% Mgd Asset Allocation (contributing 230 per month)

Her (34)
salary: $40500 + 2500 extra income
accounts:
403b $9,500 @ Fidelity 15% Fid INT TR IDX, 65% FID TOT MKT IDX, 20% Fid 500 IDX (contributing 60 per month)
403b $10,700 @ Florida Retirement System - 12 different funds primarily into FRS US Stock Market Index, FRS Foreign Stock Market Index Fund, FRS Core Plus Fixed Income, FRS US Large Cap Equity Fund, FRS US Bond Enhanced Index Fund (contributing 200 per month)
401a $800 @ Bencore - not sure what to do with this, would like to roll over but it is under 1,000 and don't know how to convert it to something like an IRA.
account for kids college $900 (contributing 25 a month)
emergency funds in taxable account $800 just started six months ago because I realized we needed something (contributing 100 a month)

Situation: married with 2 kids (1 and 3) 15% tax bracket, no state income tax. Home value 200,000 mortgage 126,000 @4.375%. Other debt 25,000 for credit cards and personal loan, 24,000 for 2 car loans. I've started paying more attention to finances over the last six months and have made some improvements. I started the emergency fund since we never seemed to have any savings and I am working on the debt, I know it is bad to have it. I rolled over and set up my husbands Vanguard account and rolled over and set up my Fidelity account. Those previously were in accounts in which I was paying high expense ratios and other fees without realizing it. I'm happy with those two accounts but I don't really know what to do with the 401a or the two primary retirement accounts (One America and Florida Retirement System). Should I change those allocations some more?

2retire
Posts: 371
Joined: Wed Jun 13, 2012 9:00 am

Re: Lower Income Looking for Advice on Investments

Post by 2retire » Tue Dec 27, 2016 10:23 pm

Although you appear to have most of the information we request when asking for portfolio help, it is hard to parse out of the big blocks of text.

If you follow this post on formatting the information, you may get more help.

viewtopic.php?f=1&t=6212

Note, when listing percentages, we ask that you do it as a percent of the whole portfolio, not of each account. It makes it easier to see what you have for stock/bond/international allocations without us having to do the calculations.

I did notice a few places where it looks like you could simplify some things.

In HER 403B @ Fidelity, there is no reason to invest in both the FID TOT MKT IDX and Fid 500 IDX. They are both, basically, the same thing. Pick one or the other. The total market fund is more diversified. Here is a post from last year talking about their differences:

viewtopic.php?t=157446

In HER 403B @ FRS, there is no reason to invest in both FRS US Stock Market Index and FRS US Large Cap Equity Fund, unless you meant to intentionally overweight large cap stocks. You can simplify it down to owing just FRS US Stock Market Index. The reason is almost the same as above.

In HIS tIRA @ Vanguard, I'm not sure why you'd own Total World Stock and Total Stock Market. Total World Stock has both Total International Stock and Total Stock Market in it. You are effectively overloading Total Stock Market. If what you wanted to do was add some international exposure, you should have added Total International Stock instead of Total World Stock.

Until you can get your debt paid off, and an emergency fund built up, you should only be investing money up to what ever your employer matches.

livesoft
Posts: 63012
Joined: Thu Mar 01, 2007 8:00 pm

Re: Lower Income Looking for Advice on Investments

Post by livesoft » Tue Dec 27, 2016 10:37 pm

Stop the money going to children's college savings plans. You stated you had $25,000 in credit card debt and personal loan. That's HUGE in my book. That $25 a month (or is it $50) is not helpful, so stop it. Put it towards the credit card debt. Maybe cut up the credit cards, too.
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Eric76
Posts: 149
Joined: Fri Nov 07, 2014 4:02 am

Re: Lower Income Looking for Advice on Investments

Post by Eric76 » Tue Dec 27, 2016 11:17 pm

I don't claim to be an expert, but my point of view is (1) establish a 6 month emergency fund (2) pay off those credit cards (3) pay off the cars. I'm assuming that the interest on the credit cards and car loans far exceed what you could reasonably expect to make through investments. I wouldn't focus on investing until the non mortgage debt is gone.

The other thing I can add is that you should consolidate all of your FRS investments and future investments into the U.S. Stock Index fund. The .02 expense ratio can't be beat, and you don't need the money spread to all those different funds when the U.S. Stock Index fund is broadly diversified.

dabblingeconomist
Posts: 115
Joined: Wed Jul 13, 2016 8:42 pm

Re: Lower Income Looking for Advice on Investments

Post by dabblingeconomist » Tue Dec 27, 2016 11:35 pm

I agree with the others that eliminating the credit cards and personal loan should be the top priority, after building an emergency fund. The implicit returns from doing so are so high that you should consider cutting back retirement and college fund contributions until they are paid off. Consider that your credit cards and personal loan could easily be costing you 10-20% annually, whereas the bonds in your retirement accounts have an expected return in the short run of around 0-2%. A guaranteed return of 10-20% from foregone interest is way higher, and it even easily beats the somewhat higher (7%?) risky expected return on stocks.

Depending on your car loan rate, this may also apply to a lesser degree for your car.

I understand that there may be psychological benefits from putting funds into a retirement account or college fund, because the savings are directly tied to the some tangible purpose down the road - but I'm not sure that any psychological advantage is worthwhile when it's costing you so much in debt service. Maybe you can construct a plan that will replicate the same good feelings while also giving you the juicy 10-20% return.

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