My plan and questions

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raptor001
Posts: 44
Joined: Wed Mar 01, 2017 4:56 pm

My plan and questions

Postby raptor001 » Fri Mar 17, 2017 9:10 pm

When I first found this site I had a few questions and did not read how to properly post information so you guys could help me. I have since drafted a proper post ( I hope...LOL ) and was hoping that you guys wouldn't mind taking another look. Again this site is a wealth of knowledge and I cant wait till I can learn enough and possibly return the favor one day.


EMERGENCY FUNDS : 40,000 ( Total monthly living expenses 7300.00 – 6 months )

DEBT : Mortgage – 324,000 @2.75% 15year ( 15 years left ) ( House is appraised at 430,000 )
Car – 12,889 @ 2.99
No other debt

TAX FILING : Married filing jointly

TAX RATE : Fed – 28%
State NY – 6.65%

STATE : New York

AGE : Him 36
Her 33
Children 2 and one on the way

LIFE INSURANCE : 30 Year term for both - 1 Million

YEARLY SALARY : HIM 135,000
HER 135,000

PENSION : 50% of Salary - Possible retirement date 2028 and 2027 – Age 46 and 43

DESIRED AA : 80% Stocks ( 20% of stocks in International ?? ) / 20% bonds

TAXABLE VANGUARD : Zero balance – Just opened with Vanguard

His 457 : 127,000 No employer match
31% ( VIIIX ) Vanguard institutional index fund – Institutional plus (.04)
6% ( VBPMX ) Vanguard total bond market index – Institutional plus ( .05 )

HIS ROTH : 5,500 – Just opened with Vanguard
1.5% Not invested in anything yet

HER 457 : 175,000 No employer match
21.5 ( VIIIX ) Vanguard institutional index fund – Institutional plus (.04)
21.5 ( FOCPEX ) Fidelity OTC Fund ( .90 )
8% ( VBPMX ) Vanguard total bond market index – Institutional plus ( .05 )

HER ROTH : : 5,500 Just opened with Vanguard
1.5% Not invested in anything yet

9% Cash to invest aside from emergency funds 30,000

------------------------------------------------------------------------------------
100% Total of all accounts 343,000

HOW WE SAVE :
We save 1880.00 a month ( 22,560 a year ) of after tax money.
We typically receive 10,000 from tax time.

PLANNED CONTRIBUTIONS:
18,000 per year His 457
18,000 per year Her 457
5,500 per year to His Roth ( From monthly savings )
5,500 per year to Her Roth ( From monthly savings )
10,000 per year to State 529 plan ( I receive approx 700.00 per year as a credit for 10,000 invested )
( From tax return )
7,000 per year left over to invest in taxable account ( From monthly savings )
4560 per year to add to cash reserves ( Emergency fund ) ( From monthly savings )

GOALS : Be retired and financially secure by the time we can retire ( 11 years )

Pay for college for two children

Have house paid off before college ( On track with 15 year refi to achieve this )

Not to touch both 457 money to leave for children as legacy when term life runs out
( Im ok with taking half of the interest / gains the 457 and other accounts generate to live off
of and increase quality of life )

OK with using pensions, taxable account, Roths, and cash to live off of. If I could only use the
Pensions and half the interest / gains on all accounts to live off that would be great with me.
I grew up with nothing and leaving future generations of my family better off than when I
started is important to me.




QUESTIONS:

Do you feel I am on track for my goals?

If I am on track and don’t plan on touching the 457 accounts would you still increase bond 1% a year? I was planning on doing this just in case I did need the money for something unforeseen. Im up in the air about this.
Do you think my 80/20 AA for 457 is reasonable?

Would you add anything/ change anything to our portfolio?

Do you feel I should add the 20% of our stock portfolio to international equities?

What would you do with the 30,000 I have on the sidelines to invest? Taxable?

What would you keep our 40,000 emergency fund in? Right now it is in a standard savings account.

What would you suggest for our Roth AA ? How would that change over time?

What would you suggest for an AA for 529? How would that change over time?

What would you suggest for an AA for taxable account ?

My wife has 50% of her equities in the OTC fund. Its got a high ER ( .90 ) but it has done well! I am a firm believer in Bogle’s principles and read all the books. Im on board trust me but its hard to convince her!! Lol. What do you guys think?

Do you think 30 year term and 1 Million for both is adequate?

aristotelian
Posts: 2092
Joined: Wed Jan 11, 2017 8:05 pm

Re: My plan and questions

Postby aristotelian » Fri Mar 17, 2017 9:23 pm

You guys appear to be well on track. Good income, good savings rate, and pensions. Because of the pensions, I would simply go 100% stock (Total Stock or S&P) in all the retirement accounts. No need to mess around with anything else, in my opinion. International Stock in taxable.

Not sure what options you have for the 529 but moderate growth transitioning to conservative growth when the kids are 5-10 years out.

If your wife likes FOCPX for a small portion of her IRA, then so be it. Make her buy you dinner every 10 years if it fails to beat the S&P.

1 million seems a little low. Rule of thumb is 10X salary.

Grt2bOutdoors
Posts: 16345
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: My plan and questions

Postby Grt2bOutdoors » Fri Mar 17, 2017 9:34 pm

OTC fund; if it ain't broke, don't fix it. Many roads to Dublin, you don't have to be 100% indexed to get there. Just so you know though, OTC fund runs a very concentrated portfolio, top 10 holdings are nearly 50% of the funds assets, if the basket drops, so will the value of that fund.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

billfromct
Posts: 436
Joined: Tue Dec 03, 2013 9:05 am

Re: My plan and questions

Postby billfromct » Fri Mar 17, 2017 10:57 pm

The ability to contribute to a normal Roth IRA starts to phase out when your modified adjustable gross income (MAGI) hits $184k for a married couple & completely phases out when your MAGI hits $194k.

Based on the information provided, I don't know if your MAGI falls below that $184k figure & you don't say that your Roth IRA contributions are Backdoor Roth IRA contributions.

I believe that MAGI is basically line 37 (Adjusted Gross Income) of Federal tax form 1040 (bottom of the front page) with some "above the line" deductions like student loan interest, health savings account deductions, etc. added back in. MAGI is before any deductions (state & local taxes, personal exemptions, mortgage interest, etc.) which must be high living in NY.

bill

raptor001
Posts: 44
Joined: Wed Mar 01, 2017 4:56 pm

Re: My plan and questions

Postby raptor001 » Sun Mar 19, 2017 12:15 pm

I was thinking of using the three fund portfolio for the 529. I was just confused on the AA being I would need it sooner then my other funds.

Re: the Roth, I am using the backdoor method.

Artisan
Posts: 297
Joined: Sat Oct 01, 2016 8:30 am

Re: My plan and questions

Postby Artisan » Sun Mar 19, 2017 4:19 pm

I answered some of your questions in PINK

raptor001 wrote:


QUESTIONS:

Do you feel I am on track for my goals?You have a very high savings rate. Congrats. Continue to save aggressively, live below your means and keep your costs low.

If I am on track and don’t plan on touching the 457 accounts would you still increase bond 1% a year? I was planning on doing this just in case I did need the money for something unforeseen. Im up in the air about this.
Do you think my 80/20 AA for 457 is reasonable? Yes it is reasonable. You are both young and can take greater risk because of your pensions. The downside, if there is a downside, is there is risk having both pensions coming from the same source. Although the NYS pension plan has a high funding rate, I think 98-99% last I read, there are other things that can put these pensions at risk.

Would you add anything/ change anything to our portfolio? I'm not a fan of high ER or managed funds. I'd change your wife's fund for an index fund.

Do you feel I should add the 20% of our stock portfolio to international equities? International equities are constantly debated here. Some feel they have enough exposure thru American companies international presence and others feel in the case of a collapse of the US equity market it pays to be internationally diversified. Mr. Bogle is against international investing but says if you do, no more then 20% of your equity portion should be international. Vanguard uses 20% as a minimum. Personally I split the difference and go with 20%

What would you do with the 30,000 I have on the sidelines to invest? Taxable? Yes. Invest according to your Investment Policy Statement. If you don't have one yet create one.

What would you keep our 40,000 emergency fund in? Right now it is in a standard savings account. A high yield savings account like Ally.

What would you suggest for our Roth AA ? How would that change over time? VTSAX, VTIAX.

What would you suggest for an AA for 529? How would that change over time? Would depend on your choices. Is it in the NYS 529? If yes you could pick a simple ratio of VTSAX to VTBLX/Fixed Income (or whatever the institutional symbols are for those funds) and get less aggressive with the AA as they get closer to college age. Do you plan to fund all 3 kids college from 529 funds or are you going to supplement from cash flow?

What would you suggest for an AA for taxable account?Anywhere from 80/20 to 60/40 depending on your risk tolerance.

My wife has 50% of her equities in the OTC fund. Its got a high ER ( .90 ) but it has done well! I am a firm believer in Bogle’s principles and read all the books. Im on board trust me but its hard to convince her!! Lol. What do you guys think? I'll repeat what my husband has learned, Happy Wife, Happy Life. :) She earned it and it should be her decision. That said I'm not a fan or high ER or managed funds as I mentioned above.

Do you think 30 year term and 1 Million for both is adequate?
Yes

raptor001
Posts: 44
Joined: Wed Mar 01, 2017 4:56 pm

Re: My plan and questions

Postby raptor001 » Mon Mar 20, 2017 7:16 am

Thank you so much for all this feedback!!! I was not clear on the children aspect of my profile. I currently have one 2yr old and one child on the way. Not three children. I was planning on paying for both children's college, hopefully with the 529. I am a little confused on how to accurately gauge what i will need for college so far in advance.

Artisan
Posts: 297
Joined: Sat Oct 01, 2016 8:30 am

Re: My plan and questions

Postby Artisan » Mon Mar 20, 2017 10:13 am

raptor001 wrote:Thank you so much for all this feedback!!! I was not clear on the children aspect of my profile. I currently have one 2yr old and one child on the way. Not three children. I was planning on paying for both children's college, hopefully with the 529. I am a little confused on how to accurately gauge what i will need for college so far in advance.


When my kids were very young I had the same question. How much do we need to save?

I located a few online calculators for determining future college costs. I don;t remember which ones anymore but I do remember they had separate calculations for public vs. private college costs.

How did projections match reality? The results of those projected amounts were within a few thousand dollars of actual costs covering all 4 years of school!
The calculators use a formula that factors in a certain percent increase every year.

Our personal plan was that we saved 50 - 70% of the projected costs of 4 years of private college for each child. We also saved the balance of those costs in taxable accounts and any incidentals would be payed out of current cash flows.

One of our kids chose a school that gave her a nice scholarship. That was just icing on the cake.

Good luck.


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