Advice for a young couple starting investing and financial plan?

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pirate412
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Advice for a young couple starting investing and financial plan?

Postby pirate412 » Sat Apr 15, 2017 12:00 am

I'm pretty new to investing and could really use advice on my financial plan and on starting investing. Here's our situation.

Emergency fund: 6 months
Debt: 9k (2.64%/2yrs left) auto loan, 41k (6.5%/27yrs left) student loans for me, and 68k (4.26%/9yrs left) student loans for my wife.
Assets: We rent our house and have 2 cars. I have 30k (1.5%/4yrs left) in CDs, 19k in checking/savings, 31.5k in my 403b, just started contributing to wife 401k, 11k in an HSA (6k of which is in a TD Ameritrade account), and 11k in Roth IRAs (TD Ameritrade)
Tax Filing Status: Married Filing Jointly
Tax Rate: 28% Federal, 6.65% State
Combined income: 190k (145k from me, and 45k from wife who works part time)
State of Residence: NY
Age: 32
Desired Asset allocation: Help?
Desired International allocation: Also help?
Other: We just had our first kid, but probably will have a couple more. We're both healthcare providers. We will probably be looking at buying a house in 4-5 years when we figure out where to settle.

Our current strategy: I contribute 5% to my 403b to get my 4% max match, my wife just started to contribute 5% for her 4% max match to her 401k. We are using target date funds because they are easy. I can no longer contribute to an HSA (stupid HRAs), but I plan on keeping that 11k as a stealth IRA. The 6k of the HSA in the TD Ameritrade and the 11k in the Roth IRA with TD Ameritrade is all invested in a lazy portfolio, which I'll give below. I am currently paying nothing on my loans (paid ahead from some loan repayment), because I will probably wipe out all but 4k of my loans with government loan repayment in the next 3 years. I plan on throwing 4k towards my loans this year to eliminate unnecessary 6.5% interest accumulation. We currently aren't paying anything extra on the wife's loans as I wanted to put some money into CDs or Roth IRAs that could be used as a down payment when we look to buy (hopefully won't have to touch the Roth). We plan on maxing out our Roth IRAs from here out.

The lazy portfolio I'm using is 50% Vanguard Total Stock Market ETF (VTI), 30% Vanguard FTSE All-World ex-US ETF (VEU), and 20% Vanguard Total Bond Market ETF (BND). My 403b is through Ascensus (funds below) and I picked a target date fund JPMorgan SmartRetirement 2045 (JSAZX) with an expense ratio of 1.52%. My wife's 401k is through Nationwide (funds below), and we picked the target date fund NW Dest 2045 A with an expense ratio of 0.87%.

With the little I know about finance/investing, here are my thoughts. I figure getting the employer match is a priority, paying 4k on my loan to eliminate that higher interest amount that won't be covered by loan repayment would be another no-brainer. I'm trying to balance my desire to pay off my wife's loans with saving for a down payment over the next 4-5 years. We live fairly modestly, and I'm interested in paying down debt aggressively. We plan to give about 10% of our net in charitable donations a year. I think we are pretty set with our life, disability, auto, and renter's insurance coverage. I don't have any interest in whole life. We make too much to deduct traditional IRAs, and barely are below the cutoff two we can contribute the full Roth amount. We may have to do a back door Roth in the future, so I think that means traditional IRAs are out. I enjoy finances, but I also like to simplify things, so I like the idea of a lazy portfolio that I'm just able to follow and rebalance as needed. I'd like to set and forget.

I'd love some general thoughts/feedback on our plan, but I also have some specific questions. I'm thinking I should ditch the target funds due to the expense ratio and switch 100% to the TIAA-CREF Institutional S&P 500 Index Fund (TRSPX) with it's 0.3% expense ratio AND NW S P 500 Indx Svc (GRMSX) with its 0.57% expense ratio? If I do this, how should I rebalance my lazy portfolio? Also, is that a good choice for a lazy portfolio (I tried to work within TD Ameritrade's commission free ETFs)? I imagine as time goes on I want to rebalance towards a lower risk, but I'd like to be somewhat aggressive now. Should I max out our Roth each year, or should I put more in the employer retirement plans? We can't deduct traditional IRA contributions, and we will likely have to do a backdoor Roth in the future, so traditional IRAs are out. I like the flexibility of a Roth should we need to pull money out for a down payment, but we are in a high tax bracket now, so that benefit of the Roth is lost on us. If you suggest I max out the employer retirement plans, or max out the Roth, how should that affect my lazy fund allocation percentages?

Thanks in advance! I'm a newbie. I could also use a suggestion on a good primer for investing for someone that wants to make smart choices, but prefers a simple approach over very active management.

My 403B Fund Choices:
Alger Mid Cap Growth Institutional R AGIRX 1.82%
American Century Ginnie Mae R AGMWX 1.05%
American Century Strat Allc: Agrsv R AAARX 1.66%
American Century Strat Allc Cnsrv R AACRX 1.50%
American Century Strat Allc: Mod R ASMRX 1.57%
American Funds EuroPacific Gr R2 RERBX 1.59%
American Funds Growth Fund of Amer R2 RGABX 1.42%
American Funds Washington Mutual R2 RWMBX 1.39%
BlackRock Equity Dividend R MRDVX 1.28%
BlackRock Global Allocation R MRLOX 1.48%
Delaware REIT R DPRRX 1.58%
Deutsche Health and Wellness C SUHCX 2.10%
Franklin Gold and Precious Metals Fund C FRGOX 1.86%
Franklin High Income R FHIRX 1.14%
Invesco Growth Allocation R AADRX 1.38%
Ivy Mid Cap Growth R WMGRX 1.60%
Ivy Science and Technology R WSTRX 1.57%
Janus Triton R JGMRX 1.44%
JPMorgan SmartRetirement Income R2 JSIZX 1.32%
JPMorgan SmartRetirement 2015 R2 JSFZX 1.30%
JPMorgan SmartRetirement 2020 R2 JTTZX 1.33%
JPMorgan SmartRetirement 2025 R2 JNSZX 1.36%
JPMorgan SmartRetirement 2030 R2 JSMZX 1.38%
JPMorgan SmartRetirement 2035 R2 SRJZX 1.42%
JPMorgan SmartRetirement 2040 R2 SMTZX 1.48%
* JPMorgan SmartRetirement 2045 R2 JSAZX 1.52%
JPMorgan SmartRetirement 2050 R2 JTSZX 1.59%
Oppenheimer International Bond R OIBNX 1.29%
Perkins Mid Cap Value R JDPRX 1.12%
Putnam Global Health Care R PHSRX 1.34%
PIMCO Total Return R PTRRX 1.11%
Royce Total Return Fund Retirement RTRRX 1.84%
Templeton Global Bond R FGBRX 1.21%
Oppenheimer Government Cash Reserve R CSNXX 1.22%
American Beacon Small Cap Value Adv AASSX 1.32%
JPMorgan SmartRetirement 2055 R2 JFFRX 1.67%
TIAA-CREF S&P 500 Index R TRSPX 0.30%

Wife's 401k Fund Choices:
Targed Date Funds
NW Dest 2010 A  NWDAX 0.86%
NW Dest 2015 A  NWEAX 0.87%
NW Dest 2020 A  NWAFX 0.87%
NW Dest 2025 A  NWHAX 0.87%
NW Dest 2030 A  NWIAX 0.88%
NW Dest 2035 A  NWLAX 0.88%
NW Dest 2040 A  NWMAX 0.87%
NW Dest 2045 A  NWNAX 0.87%
NW Dest 2050 A  NWOAX 0.87%
NW Dest 2055 A  NTDAX 0.88%
NW Dest 2060 A  NWWRX 0.89%
NW Inv Dest Aggr A  NDAAX 0.88%
NW Inv Dest Cnsrv A  NDCAX 0.81%
NW Inv Dest Mod A  NADMX 0.87%
NW Inv Dest Mod Aggr A  NDMAX 0.90%
NW Inv Dest Mod Cnsrv A  NADCX 0.83%
Bonds
EV Inc Fd of Boston A  EVIBX 1.00%
LeggM BW Glbl Oppr Bd A  GOBAX 0.92%
LrdAbt Ttl Rtn A  LTRAX 0.68%
NW Bd Indx A  GBIAX 0.66%
PIMCO Real Rtn A  PRTNX 0.85%
International Stocks
AmFds New Prspct R3  RNPCX 1.11%
AmFds New Wld R3  RNWCX 1.34%
Lazard Intl Strat Eq Open  LISOX 1.08%
Opp Intl Gr A  OIGAX 1.14%
Large-Cap Stocks
AmFds Invmt Co Am R3  RICCX 0.95%
MFS Val A  MEIAX 0.86%
NW S P 500 Indx Svc  GRMSX 0.57%
Prudntl Jnisn Gr A  PJFAX 1.03%
Mid-Cap Stocks
EV Atlnta Cap SMID Cap A  EAASX 1.21%
Vic Syc Estblshd Val A  VETAX 0.99%
Small-Cap Stocks
JPM SmCap Eq A  VSEAX 1.30%
Vic Syc Sm Co Oppr A  SSGSX 1.31%
Specialty
Dtsch RREEF GlblRelEsSec A  RRGAX 1.33%
PIMCO ComdtyRealRtnStrat A  PCRAX 1.19%

pirate412
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Re: Advice for a young couple starting investing and financial plan?

Postby pirate412 » Sat Apr 15, 2017 1:59 pm

I updated the post to match forum formatting and include our employer plans' fund options. Thanks!

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BL
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Re: Advice for a young couple starting investing and financial plan?

Postby BL » Sat Apr 15, 2017 2:30 pm

I think you have the right idea to use only the lower-ER S&P500 funds in work accounts.

Add up all dollars in retirement accounts. That is 100%.
50 % goes to S&P + total US Stock: 401k, 403b, remainder in Roth
30% to Int. stocks in Roths
20% to bonds inRoths
Check every year or 2 and rebalance if off more than 5-10%.
Good enough.

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Peter Foley
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Re: Advice for a young couple starting investing and financial plan?

Postby Peter Foley » Sat Apr 15, 2017 4:30 pm

Here is another alternative:

Definitely the S&P 500 fund in your 403b. That is the only good option you have. While not great, you could put your bond allocation in your wife's 401k. Expense ratios are a drag over long period of time, kinda the reverse of compound interest. A few years with an expense ratio of under .75 will not matter much.

At your age you could go 75/25 for asset allocation. That would mean that the bulk of your tax deferred retirement savings would be relatively low cost.

You could hold international in Roths.

I would not hold much other than emergency funds in taxable - look to paying down debt as a form of "bond" holdings.

btenny
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Re: Advice for a young couple starting investing and financial plan?

Postby btenny » Sat Apr 15, 2017 5:51 pm

Switch to the lower er SP500 funds for your work accounts. Put all your 403b in the SP500 fund. Do not worry that you are not using whole market funds. Switch your wifes' 401K to the SP500 fund as well. With your low $$ in those accounts you will not use up all your US stock allocation. Then invest your taxable money in a Vanguard International fund like VXUS and the rest of that account and your CDs in a Tax free muni fund like VWITX to provide you some bond allocation.

Adjust the amounts to get to a 50/20/30 allocation.

Good Luck.

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Duckie
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Re: Advice for a young couple starting investing and financial plan?

Postby Duckie » Sat Apr 15, 2017 6:10 pm

pirate412 wrote:Age: 32
Desired Asset allocation: Help?

At your age you could have 20% to 25% bonds.

Desired International allocation: Also help?

Vanguard has found between 20% and 40% of stocks in international to be the "sweet spot". See the Vanguard paper link and the discussion. I usually split the difference and recommend 30% of stocks.

I'm thinking I should ditch the target funds due to the expense ratio and switch 100% to the TIAA-CREF Institutional S&P 500 Index Fund (TRSPX) with it's 0.3% expense ratio AND NW S P 500 Indx Svc (GRMSX) with its 0.57% expense ratio?

Holy moly, Batman. Those are terrible expense ratios. Yes, drop the target-date funds.

If I do this, how should I rebalance my lazy portfolio?

See below.

Should I max out our Roth each year, or should I put more in the employer retirement plans?

Contribute enough to the employer plans to get the full match. Max the Roth IRAs. If there's still more you can contribute, add to the employer plans.

If you suggest I max out the employer retirement plans, or max out the Roth, how should that affect my lazy fund allocation percentages?

See below.

My 403B Fund Choices:

The only decent option is:
  • TIAA-CREF S&P 500 Index R TRSPX 0.30% -- Large caps, 80% of US stocks
Wife's 401k Fund Choices:

The best options are:
  • NW S P 500 Indx Svc GRMSX 0.57% -- Large caps, 80% of US stocks
  • NW Bd Indx A GBIAX 0.66% -- US bonds

The following example has an AA of 80% stocks, 20% bonds, with 30% of stocks in international. This breaks down to 56% US stocks, 24% international stocks, and 20% bonds. You could have:

His 403b -- $31.5K -- 59%
59% (TRSPX) TIAA-CREF S&P 500 Index Fund Retirement Class (0.30%)

Her 401k -- $0 -- 0%
0% (GRMSX) Nationwide S&P 500 Index Fund Service Class (0.57%)
0% (GBIAX) Nationwide Bond Index Fund Class A (0.66%)

His Roth IRA at TD Ameritrade -- $5.5K -- 10%
10% (VEU) Vanguard FTSE All-World ex-US ETF (0.11%)

Her Roth IRA at TD Ameritrade -- $5.5K -- 10%
10% (VEU) Vanguard FTSE All-World ex-US ETF (0.11%)

His old HSA -- $11K -- 21%
21% Cash/bonds (BND)

My comments:
  1. The above assumes the two Roth IRAs have the same amounts.
  2. Find out if the loads are waived in the employer plans. They usually are, but check.
  3. There are two reasons for the cash/bonds in the HSA. First, you need to put fixed income somewhere and right now this is the best place. Second, even though you're planning to hold the HSA as a "stealth IRA" you may need it for medical expenses and you don't want the market to have crashed just at the wrong time. Even when your other accounts get bigger, keeping at least some of the HSA in cash/bonds is prudent.
  4. You'll need to rebalance this portfolio once or twice a year.
  5. I'd move the Roth IRAs to Vanguard and buy Total International Stock which is slightly more complete than VEU, but it's not a big deal.
  6. Eventually you may want to add a mid/small cap fund like VXF. 80% 500 Index plus 20% Extended Market makes up the total US stock market.
Something to think about.

aristotelian
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Re: Advice for a young couple starting investing and financial plan?

Postby aristotelian » Sat Apr 15, 2017 7:03 pm

Seems like you are off to a great start. I would pay down some of that student loan debt with the CDs.

I appreciate your generosity, but you should completely max out retirement accounts before giving away so much money to charity. Look into setting up a donor advised fund to maximize the power of your charitable donations.

pirate412
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Re: Advice for a young couple starting investing and financial plan?

Postby pirate412 » Mon Apr 17, 2017 10:19 pm

BL wrote:50 % goes to S&P + total US Stock: 401k, 403b, remainder in Roth
30% to Int. stocks in Roths
20% to bonds in Roths

I like this. So, if I devote the employer plans to the SP500 funds, what fund (preferably one fund) should I use to balance the representation of total US stock (I guess mid-cap and small-cap if I'm understanding things correctly)? And what sort of ratio would I use, i.e. 3:1, 4:1. Or does it really matter? Can I just max out the employer plans, and then just use VTI for whatever is left to get to 50% (if this works, I'd prefer to keep it simple).

Peter Foley wrote:I would not hold much other than emergency funds in taxable - look to paying down debt as a form of "bond" holdings.

I guess those 30k in CDs are my emergency fund. I'll pay off the 4k of my student loan, which will just leave the rest to be finished off with the government loan repayment if I stay at my job. But for my wife's loan at 4.26% and 9 years left, should I even bother paying any more than the minimum? On the one hand, that's a guaranteed 4.26% return, but on the other hand, won't I likely be getting higher returns investing? As much as I want to pay off that loan (which I do), I also don't know how much we will end up needing for a house purchase and when we will need that.

btenny wrote:Do not worry that you are not using whole market funds.

Same question for you as above: Can I just buy VTI to meet the remainder of my 50% after allocating the employer plans towards the SP500? Or do I need to weight it towards lower cap funds?

Duckie wrote:His old HSA -- $11K -- 21%
21% Cash/bonds (BND)

I'm not worried about having to dip into the HSA early for medical expenses, since I figure I could just use our emergency fund and reimburse later. But, if I have to put bonds somewhere, it does make sense to put it in the one area where I theoretically could need to dip into. So this sounds solid.

Duckie wrote:Find out if the loads are waived in the employer plans. They usually are, but check.

Thanks. I didn't know loads were a thing (I'm that new), so that taught me something. The SP500 indexes are no-load.

Duckie wrote:Eventually you may want to add a mid/small cap fund like VXF. 80% 500 Index plus 20% Extended Market makes up the total US stock market.

I guess this answers my question above about what makes up the total US stock market. And it is on the commission free list for TD Ameritrade, so that's perfect. Thanks!

aristotelian wrote:Seems like you are off to a great start. I would pay down some of that student loan debt with the CDs.

Thanks. The CDs are emergency funds and the start of saving for a down payment, and it only makes sense to pay for 4k of my 6.8% student loan (since the loan repayment will take care of the rest if I stay at this job). But what do you think about the 4.26% loan? Does it make sense to pay more than the minimum on that with 9 years remaining, since it is probably around or hopefully lower than the return I'd get investing?

Alright, so how does this sound for a 50/30/20 plan given all of your advice?
1. Switch the employer plans to the SP500 index and minimize costs, while covering a good portion of my US stock
2. Use Roths to fill out the rest of my 50% US stock with VTI to keep it simple (or should I try to get some more mid/small cap representation?)
3. Keep HSA as cash/bonds with BND
4. Use Roths to cover 30% VEU for international stock and any of the remaining 20% bonds as BND
5. Pay off 4k of 6.8% student loan, minimizing interest, but maximizing government loan repayment
6. Keep 30k CD as emergency fund (they are 5 yr CDs but the penalty I think is only 90 days interest, and they are broken up into 10k, 10k, 5k, 5k)
7. Keep putting aside some money for a house down payment in 4-5 years
8. Put any extra savings into my employer plans
9. Rebalance yearly

Remaining questions:
- This is a very newbie question, but could someone give me or direct me to a primer on dividends and what role they play in investing, particularly the type of investing I'm trying to do (keeping a low maintenance, simple portfolio)? Do the funds I'm looking at even pay much in dividends? The question is so simple that I couldn't find a basic enough discussion of it via the forum search. Is this mainly a tax issue (i.e. people do or don't want high dividend stocks because they are investing in taxable accounts)?
- Are CDs an acceptable spot for emergency funds? What is a good place to accumulate a house down payment?
- Another newbie question: If I do decide that I want to throw another several thousand into our employer plans at the end of the year, can this be done as a one time thing like when you contribute to an HSA from your checking account and then just deduct it on your taxes? Or can it only be through changing your payroll contribution? I'm looking at my plan's website now and I don't see any way to contribute outside of the payroll contribution, so I'm thinking the latter. But can you just change your election for one payroll. I don't have things sorted out enough to know exactly how much more I am going to put in beyond maximizing the employer match, but I'd prefer to keep things out of taxable accounts until I have no choice.

Thanks so much guys! You've been very helpful demystifying some of this. I guess I should do some more research myself. I think my insurance agency's financial advisor gave me The Millionaire Next Door, but I never took a look at it. Does it cover much on investing?

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High Income Parent
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Re: Advice for a young couple starting investing and financial plan?

Postby High Income Parent » Mon Apr 17, 2017 10:37 pm

pirate412 wrote:Remaining questions:
- This is a very newbie question, but could someone give me or direct me to a primer on dividends and what role they play in investing, particularly the type of investing I'm trying to do (keeping a low maintenance, simple portfolio)? Do the funds I'm looking at even pay much in dividends? The question is so simple that I couldn't find a basic enough discussion of it via the forum search. Is this mainly a tax issue (i.e. people do or don't want high dividend stocks because they are investing in taxable accounts)?


For the most part, it is advantageous to put your higher dividend investment in tax-deferred accounts. You want to minimize the taxes paid out of your taxable account when you are a higher income earner paying a greater amount of capital gains tax.
pirate412 wrote:- Are CDs an acceptable spot for emergency funds? What is a good place to accumulate a house down payment?


You could slowly set up a CD ladder as an emergency fund. That way you always have CD's coming due each year. It probably isn't going to be much better that just putting it in the highest online savings/money market account you can find. Plus if you use a savings account you have more control. I would just do that. Then your money is more readily available.
If you could get a higher rate in a CD, then that would be more acceptable for a house downpayment since you can choose when to take out the money.


-
pirate412 wrote: Another newbie question: If I do decide that I want to throw another several thousand into our employer plans at the end of the year, can this be done as a one time thing like when you contribute to an HSA from your checking account and then just deduct it on your taxes? Or can it only be through changing your payroll contribution? I'm looking at my plan's website now and I don't see any way to contribute outside of the payroll contribution, so I'm thinking the latter. But can you just change your election for one payroll. I don't have things sorted out enough to know exactly how much more I am going to put in beyond maximizing the employer match, but I'd prefer to keep things out of taxable accounts until I have no choice.

Thanks so much guys! You've been very helpful demystifying some of this. I guess I should do some more research myself. I think my insurance agency's financial advisor gave me The Millionaire Next Door, but I never took a look at it. Does it cover much on investing?


That is probably most likely up to your employer. If your site is set up only to contribute by payroll deferral then that is probably it, but ask someone in HR if you can do what you want to do.
Children are not a distraction from more important work. They are the most important work. | | C. S. Lewis

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Watty
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Re: Advice for a young couple starting investing and financial plan?

Postby Watty » Mon Apr 17, 2017 10:52 pm

pirate412 wrote:Tax Rate: 28% Federal, 6.65% State
Combined income: 190k (145k from me, and 45k from wife who works part time)


I'm not sure how the numbers work out but the 28% tax rate sounds high for your income. If you are really in the 28% tax bracket then I would increase your 401K contributions to be enough to just barely get down into the 25% tax bracket.



aristotelian wrote:Seems like you are off to a great start. I would pay down some of that student loan debt with the CDs.


+1
If that is part of you emergency fund then you can also use your Roth money if you have a dire emergency.

https://www.bogleheads.org/wiki/Roth_IR ... gency_fund

aristotelian wrote:I appreciate your generosity, but you should completely max out retirement accounts before giving away so much money to charity. Look into setting up a donor advised fund to maximize the power of your charitable donations.


+1

Unless that is part of religious commitment that you follow you should reconsider the amount since you have so much debt.

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Duckie
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Re: Advice for a young couple starting investing and financial plan?

Postby Duckie » Tue Apr 18, 2017 4:09 pm

pirate412 wrote:The SP500 indexes are no-load.

Yes, but the Nationwide Bond Index Fund has a load and you may need that fund. So check to see if the loads are waived in the plan.

Use Roths to cover 30% VEU for international stock and any of the remaining 20% bonds as BND

It's generally better to put assets with higher expected growth (stocks) in Roth accounts and assets with lower expected growth (bonds) in pre-tax accounts. Try to keep your bonds in pre-tax accounts.

This is a very newbie question, but could someone give me or direct me to a primer on dividends and what role they play in investing, particularly the type of investing I'm trying to do (keeping a low maintenance, simple portfolio)?

Since all your retirement assets are tax-sheltered, dividends don't make a difference. It's only when they are in a taxable account that the amount and type (qualified/non-qualified) matter.

If I do decide that I want to throw another several thousand into our employer plans at the end of the year, can this be done as a one time thing like when you contribute to an HSA from your checking account and then just deduct it on your taxes? Or can it only be through changing your payroll contribution?

It's done through payroll and usually there's a time-lag from change of deferral amount to it coming out of your paycheck. If you can do it electronically (I couldn't; I had to send in paper forms.) that makes it easier.

I think my insurance agency's financial advisor gave me The Millionaire Next Door, but I never took a look at it. Does it cover much on investing?

It's not so much about investing as in living below your means and not trying to keep up with the Joneses. Here's a summary.

pirate412
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Re: Advice for a young couple starting investing and financial plan?

Postby pirate412 » Wed Apr 19, 2017 9:26 pm

Watty wrote:If that is part of you emergency fund then you can also use your Roth money if you have a dire emergency.

Thanks, I hadn't considered that. In that case, I'll probably use some of the CDs and pay down some student loans.

Duckie wrote:It's generally better to put assets with higher expected growth (stocks) in Roth accounts and assets with lower expected growth (bonds) in pre-tax accounts. Try to keep your bonds in pre-tax accounts.

Also something I hadn't considered, but makes sense. That being the case, how does the GBIAX bond fund in my wife's 401k compare to Vanguard's BND? If I want to keep bonds primarily in pre-tax accounts, should I just buy GBIAX in her 401k and ditch the SP500 index fund to cover as much of the 20% bonds part of my asset allocation as I can? Or, what percentages to you recommend I set as elections between her SP500 index fund and the GBIAX bond fund? Since I don't yet have any money in her account, your detailed breakdown on your first post didn't show what percentage you'd recommend going to each (as both are currently 0%).

Another newbie question about yields and expense ratios and dividends. So, you accumulate value in a holding by its market price increasing and by dividends right? So when I'm looking at 1yr, 3yr, 5yr performance or percentage yields on finance websites, does this account for dividends (does it assume they are reinvested? or at least count them in any way?) and expense ratios? So far I've understood the yields to be a 1-1 comparison, but if it doesn't account for dividends and expense ratios, it wouldn't be. From my searches on this form it looks like the performance percentages do account for dividends and expense ratios, but not loads, and maybe it doesn't assume reinvestment of dividends (but it looks like the growth of charts do?). Just when I think I'm starting to understand things, my head starts hurting again as you guys unravel another fold. Thanks!

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Duckie
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Re: Advice for a young couple starting investing and financial plan?

Postby Duckie » Wed Apr 19, 2017 10:08 pm

pirate412 wrote:That being the case, how does the GBIAX bond fund in my wife's 401k compare to Vanguard's BND?

They're similar funds but of course BND is a lot cheaper.

If I want to keep bonds primarily in pre-tax accounts, should I just buy GBIAX in her 401k and ditch the SP500 index fund to cover as much of the 20% bonds part of my asset allocation as I can?

Your fixed income AA is 20% and right now your old HSA is 21% of your portfolio. Keep the HSA all bonds/cash and for now put 500 Index in her 401k. Eventually you'll need to add GBIAX to her 401k.

Or, what percentages to you recommend I set as elections between her SP500 index fund and the GBIAX bond fund?

Start with 100% to the 500 Index. In six months take a look at your entire portfolio to see about rebalancing. At that point you'll probably need to add GBIAX.

pirate412
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Re: Advice for a young couple starting investing and financial plan?

Postby pirate412 » Thu Apr 20, 2017 6:12 pm

Duckie wrote:Start with 100% to the 500 Index. In six months take a look at your entire portfolio to see about rebalancing. At that point you'll probably need to add GBIAX.

Makes sense. So, when I need to buy more bond funds, does buying the higher cost GBIAX in a 401k outweigh buying the lower cost BND in a Roth. In other words, while we have these plans, should I serve all my future bond needs with GBIAX in the 401k, or should I also look to buy some bond funds in the Roths as well?

Thanks. You guys were really helpful and allowed me to move beyond my stop-gap measure of maxing the match and picking a lazy portfolio.

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Duckie
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Re: Advice for a young couple starting investing and financial plan?

Postby Duckie » Fri Apr 21, 2017 6:24 pm

pirate412 wrote:So, when I need to buy more bond funds, does buying the higher cost GBIAX in a 401k outweigh buying the lower cost BND in a Roth. In other words, while we have these plans, should I serve all my future bond needs with GBIAX in the 401k, or should I also look to buy some bond funds in the Roths as well?

I'd put bonds in the 401k for three reasons. First, GBIAX is a good bond fund, even though costly. Second, Roth space is too valuable for bonds if it can be avoided. Third, you'll need all the Roth IRA space for international and possibly mid/small caps.


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