Rebalance 401K for diversity and remaining Savings/Emergency fund advice.

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Topic Author
Poisns1
Posts: 95
Joined: Thu Apr 13, 2017 2:19 pm

Rebalance 401K for diversity and remaining Savings/Emergency fund advice.

Post by Poisns1 »

First time poster and looking for some advice from the excellent financial experts on this forum :)

Advice/Opinions on which option YOU would choose in my situation please...

I am 51 (wife is 50) and we are targeting retirement at around age 65 so I/We have about 14 years left in the workforce.

Our Married filing jointly AGI was $152,815 this year, with taxable income of $113,095. We live in Illinois with state sales tax of 7.075% and pay State Income Tax (paid 3.3% tax on Income this year), Federal (paid 13% of taxable income). We have NO other types of debt (credit, car, student loans etc) other than our primary house mortgage (below):

Mortage: 30 year fixed at 4.75% (initiated 2011) original loan balance of $193,000. We have been paying additional $500 toward principal the last 4 years. We currently owe $145,000 and debating whether to refi to 10 year fixed rate at 3.125% to save some interest $ prior to retirement or just continue as is contributing the extra principal toward payoff?

I am contributing the max allowed (18,000) to my company 401K and I am the bread winner of the family. I recently opted for the additional catch-up contribution of 6K to the 401K. My 401K is aggressive and with the current market sits at about $650K. My wife works full time for a very modest salary and has an rollover IRA from here other employers valued at about 100K but not currently contributing because she will be vested with a small retirement pension in another 5 short years (monthly payroll deductions to IMRF pension fund (Illinois Municipal Retirement Fund), vested and gets pension with 5 more years of service. I'm honestly not sure WHAT if anything my wife can contribute to an IRA (or other retirement account) and gain tax savings?

* Sooooo, knowing my portfolio is very aggressive, I'm contemplating the folowing 3 options:

1) Move a large portion of my company match $ (AT&T stock; currently 32% of portfolio) to the Bond Fund and the International Fund to diversify portfolio based on a recent analysis/suggestion from Financial Engines (30% bonds, 50% US Stock, 20% Intern. Stock).

2) Leave as is, as portfolio has recovered quite well form the 2008/2009 crash with the recent run-up in the market

3) Take entire allocation (below) and move everything into Fidelity Asset Allocation 2030 which will automatically adjust allocations toward my retirement target (currently carries My allocation is as follows:


Name/Initial Purchase Date Category % Invested Balance Cost Basis YTD Expense Ratio
AT&T SHARES FUND 10/24/2011 Specialty 32.41% $203,489.56 $153,907.46 -2.36% .01%
LG CAP US STCK INDEX 10/24/2011 Large Ca 26.03% $163,402.41 $80,983.92 5.35% .01%
SM & MID US STK INDX 10/24/2011 Mid-Cap 19.84% $124,559.61 $71,061.07 3.21% .02%
TOTAL US STOCK INDEX 10/24/2011 Large Cap 12.85% $80,665.19 $41,342.07 4.98% .01%
INTL STOCK INDEX 10/24/2011 Inter. 7.23% $45,361.13 $39,735.83 7.93% .02%
AT&T TOT RETURN BOND 10/24/2011 Income 1.64% $10,315.89 $8,292.79 1.98% .38%

* AT&T ASSET ALOC 2030 11/01/2007 Blended* 0% 0% 0 5.57% .18%



Lastly, my total liquid Savings is $278K in 3 bank accounts (diverse for highest interest including $25K Kasasa account earning 2.5% interest, 10K in credit union earning 3% and remaining balance ~ 243K in Alliant Savings earling 1.1%). My savings is for purchasing new vehicles for cash, helping my son pay for college (just started tech school/college), loss of job 6 month savings and other large purchases that I don't want to use credit to pay for as the mortgage is my only outstanding debt. Any advice for investing the remaining 243K without subjecting myself to a large amount of additional market risk?

Thanks in advance to the financial experts on this site! :)
Last edited by Poisns1 on Fri Apr 14, 2017 12:47 pm, edited 1 time in total.
User avatar
Duckie
Posts: 9777
Joined: Thu Mar 08, 2007 1:55 pm

Re: Rebalance 401K for diversity and remaining Savings/Emergency fund advice.

Post by Duckie »

3nickles, welcome to the forum.
3nickles wrote:I'm honestly not sure WHAT if anything my wife can contribute to an IRA (or other retirement account) and gain tax savings?
At your joint income she can contribute $6500 to either a TIRA or a Roth IRA. The TIRA may or may not be deductible but she can at least contribute.
Sooooo, knowing my portfolio is very aggressive, I'm contemplating the folowing 3 options:
I'd get rid of everything except the following in the 401k:
  • TOTAL US STOCK INDEX 0.01%
    INTL STOCK INDEX 0.02%
    AT&T TOT RETURN BOND 0.01%
You currently have:
  • Taxable for investing -- $243K
    His 401k -- $650K
    Her Rollover IRA -- $100K
    Her future pension -- ??current cash value
Anything else? Where is her Rollover IRA held? What funds are in it?
Any advice for investing the remaining 243K without subjecting myself to a large amount of additional market risk?
You could use $145K to pay off your 4.75% mortgage. The best options for a long-term taxable account are a total US stock fund and a total international stock fund.
Topic Author
Poisns1
Posts: 95
Joined: Thu Apr 13, 2017 2:19 pm

Re: Rebalance 401K for diversity and remaining Savings/Emergency fund advice.

Post by Poisns1 »

Hi Duckie and thanks!

To answer your other questions:

Her rollover IRA is at Fidelity with funds and balances below:
Fidelity Equity Dividend Income FEQTX $31,895
Fidelity Value FDVLX $39,198
Janus Triton Fund CLS T JATTX $26,065

Her projected pension is as follows:
Work through 1/2022 (age 55) $665/month
Work through 1/2029 (age 62) $991/month
Work through 1/2032 (age 67) $1,637/month

I made one mistake the only bond fund AT&T offers has an expense of .38%, not .01% (below):
Name/Initial Purchase Date Category % Invested Balance Cost Basis YTD Expense Ratio
AT&T TOT RETURN BOND 10/24/2011 Income 1.64% $10,315.89 $8,292.79 1.98% .38%

So you are saying that my best bet for my 401K is to just use the 3 fund approach (US TOTAL STOCK, INTL STOCK and BOND funds?) as opposed to going after the Fidelity target 2030 fund (1 fund plan, no rebalance approach)? If so what percentages/ratios would you suggest at my age (51) and target of 65?

QUOTE: "The best options for a long-term taxable account are a total US stock fund and a total international stock fund."

Are you suggesting I invest all my liquid/cash savings ~243K in stock funds (US and INTL funds)? But I don't want to tie up my liquid reserves and expose myself to all that market risk, in addition to the market risk I'm already exposed to in my 401K?
Topic Author
Poisns1
Posts: 95
Joined: Thu Apr 13, 2017 2:19 pm

Re: Rebalance 401K for diversity and remaining Savings/Emergency fund advice.

Post by Poisns1 »

bump for other advice and answering Duckie's additional questions
Topic Author
Poisns1
Posts: 95
Joined: Thu Apr 13, 2017 2:19 pm

Re: Rebalance 401K for diversity and remaining Savings/Emergency fund advice.

Post by Poisns1 »

TTT looking for other advice and suggestions please..
User avatar
Duckie
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Joined: Thu Mar 08, 2007 1:55 pm

Re: Rebalance 401K for diversity and remaining Savings/Emergency fund advice.

Post by Duckie »

3nickles wrote:Her rollover IRA is at Fidelity with funds and balances below:
Fidelity Equity Dividend Income FEQTX $31,895
Fidelity Value FDVLX $39,198
Janus Triton Fund CLS T JATTX $26,065
Those are expensive funds. FEQTX costs 0.72%, FDVLX costs 0.67%, and JATTX costs 0.93%. She could have much cheaper index funds.
I made one mistake the only bond fund AT&T offers has an expense of .38%, not .01% (below):
In that case put bonds in Her Rollover IRA so there will be fewer bonds in the 401k.
So you are saying that my best bet for my 401K is to just use the 3 fund approach (US TOTAL STOCK, INTL STOCK and BOND funds?) as opposed to going after the Fidelity target 2030 fund (1 fund plan, no rebalance approach)? If so what percentages/ratios would you suggest at my age (51) and target of 65?
At age 51 I'd be 60% stocks and 40% bonds across the entire portfolio.
Are you suggesting I invest all my liquid/cash savings ~243K in stock funds (US and INTL funds)? But I don't want to tie up my liquid reserves and expose myself to all that market risk, in addition to the market risk I'm already exposed to in my 401K?
Actually, I suggest you pay off the $145K mortgage which would leave $98K for taxable investing. An AA of 60% stocks, 40% bonds, with 30% of stocks in international would break down to 42% US stocks, 18% international stocks, and 40% bonds. You could have something like:

Taxable at Fidelity -- $98K -- 11%
11% (FTIPX) Fidelity Total International Index Fund Premium Class (0.11%)

401k -- $650K -- 76%
42% (N/A) Total US Stock Index Fund (0.01%)
5% (N/A) International Stock Index Fund (0.02%)
29% (N/A) Total Return Bond Fund (0.38%)

Her Rollover IRA at Fidelity -- $97K -- 11%
11% (FSITX) Fidelity U.S. Bond Index Fund Premium Class (0.05%)

His Roth IRA at Fidelity -- $6.5K -- 1%
1% (FTIGX) Fidelity Total International Index Fund Investor Class (0.18%)

Her Roth IRA at Fidelity -- $6.5K -- 1%
1% (FTIGX) Fidelity Total International Index Fund Investor Class (0.18%)

I put international in taxable and the Roth IRAs for two reasons. One, I'm not sure what international index is tracked in the 401k; it may be only developed markets. And two, holding international in taxable allows you to take advantage of the Foreign tax credit.

Something to think about.
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