Portfolio Review #3 Requested

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Hat
Posts: 53
Joined: Wed Feb 10, 2010 10:27 pm

Portfolio Review #3 Requested

Post by Hat » Sun Apr 02, 2017 1:07 pm

Thanks to everyone for the knowledge available on this forum.

Emergency funds: 1 year

Debt: None

Tax Filing Status: Single
Tax Rate: 28% Federal, 0% State (TX)

Age: about 43

Desired asset allocation: 55% stocks / 45% bonds
Intl allocation: 25% of stocks
Current portfolio: $930k

Taxable
$126k Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11%)
$104k Vanguard Large-Cap Index Fund Admiral Shares (VLCAX) (0.08%)

401k
$318k Bond Index Fund (0.05%)

Roth at Vanguard
$170k Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.05%)

Rollover IRA at Vanguard
$87k Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.05%)
$115k Vanguard Intermediate-Term Bond Index Fund Admiral Shares (VBILX) (0.09%)

HSA
$10k Vanguard LifeStrategy Moderate Growth Fund (VSMGX) (0.14%)

Pension
None (rolled into IRA)

New Annual Contributions
$18k + $5k match 401k
$5.5k Roth
$3.4k HSA
$20k Taxable

Other
Umbrella insurance: $2M
Disability insurance: individual policy
Housing: renting with no plans to buy

401k Fund Choices
Money Market Fund (0.09%)
Short Duration Bond Fund (0.5%)
Bond Fund (intermediate term) (0.46%)
Bond Index Fund (intermediate term treasuries) (0.05%)
Balanced Fund (0.28%)
Balanced Real Asset (0.7%)
Equity Index Fund (S&P 500 index) (0.025%)
Large Cap Growth (0.55%)
Large Cap Value Fund (0.23%)
Small Cap Value Fund (0.78%)
Small Midcap Core Index (0.1%)
Small Cap Growth (0.81%)
Emerging Market Equity (1.31%)
International Fund (0.5%)
International Index (0.1%)
International Value (0.64%)
PreMixed Portfolio Retirement Fund (0.52%)
PreMixed Portfolio Funds: 2015, 2025, 2035, 2045, 2055 (0.54%)

Previous Reviews
Review #1
Review #2

Questions
1. I would like to retire at 53 with a 3% withdrawal rate and annual expenses between $50k to $55k. How feasible is this? Please use SS of $10k/year at 62 to estimate initiating SS benefits at various ages.

2. My asset allocation is close to age in bonds, which some may think is conservative. I feel my need and willingness to take risk are low given my current position. Any feedback on this?

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nedsaid
Posts: 12972
Joined: Fri Nov 23, 2012 12:33 pm

Re: Portfolio Review #3 Requested

Post by nedsaid » Sun May 21, 2017 8:51 pm

Hat wrote:Thanks to everyone for the knowledge available on this forum.

Emergency funds: 1 year

Debt: None

Tax Filing Status: Single
Tax Rate: 28% Federal, 0% State (TX)

Age: about 43

Desired asset allocation: 55% stocks / 45% bonds
Intl allocation: 25% of stocks
Current portfolio: $930k

Taxable
$126k Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11%)
$104k Vanguard Large-Cap Index Fund Admiral Shares (VLCAX) (0.08%)

401k
$318k Bond Index Fund (0.05%)

Roth at Vanguard
$170k Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.05%)

Rollover IRA at Vanguard
$87k Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.05%)
$115k Vanguard Intermediate-Term Bond Index Fund Admiral Shares (VBILX) (0.09%)

HSA
$10k Vanguard LifeStrategy Moderate Growth Fund (VSMGX) (0.14%)

Pension
None (rolled into IRA)

New Annual Contributions
$18k + $5k match 401k
$5.5k Roth
$3.4k HSA
$20k Taxable

Other
Umbrella insurance: $2M
Disability insurance: individual policy
Housing: renting with no plans to buy

Nedsaid: Portfolio looks good, you have done a good job maximizing the tax efficiency of your accounts.


401k Fund Choices
Money Market Fund (0.09%)
Short Duration Bond Fund (0.5%)
Bond Fund (intermediate term) (0.46%)
Bond Index Fund (intermediate term treasuries) (0.05%)
Balanced Fund (0.28%)
Balanced Real Asset (0.7%)
Equity Index Fund (S&P 500 index) (0.025%)
Large Cap Growth (0.55%)
Large Cap Value Fund (0.23%)
Small Cap Value Fund (0.78%)
Small Midcap Core Index (0.1%)
Small Cap Growth (0.81%)
Emerging Market Equity (1.31%)
International Fund (0.5%)
International Index (0.1%)
International Value (0.64%)
PreMixed Portfolio Retirement Fund (0.52%)
PreMixed Portfolio Funds: 2015, 2025, 2035, 2045, 2055 (0.54%)

Previous Reviews
Review #1
Review #2

Questions
1. I would like to retire at 53 with a 3% withdrawal rate and annual expenses between $50k to $55k. How feasible is this? Please use SS of $10k/year at 62 to estimate initiating SS benefits at various ages.

Nedsaid: I did a back of the envelope calculation dividing $55,000 by 3% and came up with a needed portfolio size of $1,834,000 to support $55K annual withdrawals. Your current portfolio size is about $930K which means that you need to almost double your portfolio size in 10 years. That implies a return of about 7% a year from the portfolio but less than that taking into retirement contributions over the next 10 years. Fortunately, you are contributing almost $52,000 a year so you will probably have maybe $550,000 in account contributions over 10 years. So that means your actual portfolio growth needs to be $354,000 from a $930,000 portfolio. To hit that, you will need a bit over 3% compounded return from your portfolio. So yes, it is doable.

I would allow for room for error, if you could work until age 55 that would help. Hopefully your health will hold up and you won't get laid off. I think what I would do is use age 53 as a challenge goal and age 55 or 57 as a more realistic goal.

You are saving awfully hard and I suspect you want to live off of a lot less income in retirement than you are making now.

Hopefully, you are having some fun along the way. Don't build your entire life around your retirement plan. If you have things you want to do and places you want to go, I recommend that you do some of those things now. At age 43, you are relatively young and have money and evidently a very good income. Hopefully you are living now and not deferring everything for retirement. Hate to say it, not everyone lives long enough to retire.


2. My asset allocation is close to age in bonds, which some may think is conservative. I feel my need and willingness to take risk are low given my current position. Any feedback on this?

Nedsaid: If you can keep doing what you are doing, you need only a bit over 3% return on investment to meet your goal. Your asset allocation is okay, don't need to worry about de-risking as you get older, you have already done so.

My honest advice is to invest a bit more aggressively maybe 60/40 or even 65/35, delay retirement from 53 to 57, and take maximum advantage of vacation time and weekends to do those fun things you always wanted to do. Even age 57 is awfully young to retire. If you have generous vacation time, take full advantage of that and defer retirement a bit. You don't want to wind up where you get just too darned old. Plus your cash flow is great now and do the fun stuff when you best can afford it. Another spoiler alert is that when you get into your fifties, you get to be a lay-off target and finding employment gets to be harder. You may find yourself unable to keep up such an aggressive savings rate. Plan for tomorrow but live for today.

A fool and his money are good for business.

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