Portfolio help

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beagle1
Posts: 97
Joined: Sat Oct 02, 2010 3:09 pm

Portfolio help

Post by beagle1 » Thu Apr 20, 2017 5:04 pm

Greetings,

Seven years ago I discovered Bogleheads and folks helped me rebalance my investments and simplify (for the most part) my life. It made a tremendous difference and put me on the right path.

About a year ago, I got married and just now we are getting around to figuring out our financial future and retirement. We’re managing our finances separately, though of course are retiring together so the following reflects that. I've completed the template with our collective finances under this assumption. Your help is much appreciated, and we are eager to learn more.

Our template information follows below.
---------------------------

Emergency funds is in place
One year worth (probably more than we need)

Employment:
Him: self-employed, but stable: have run the same consulting business for 22 years. I have a Solo 401k
Her: Full-time, stable (tenure at university). Has 403b.

Debt: No debt, with the exception of:
Him: mortgage of $120k on condo, valued at $350k (our primary residence). Second property mortgage is paid off, rented out
Her: mortgage of $160k on condo, valued at 260k (rented out)

Tax Filing Status: Married filing separately (was to our benefit this year).

Tax Rate:
Him: 28% Federal (low end of the bracket), 9.3% state
Her: 25% Federal, 9.3% State

State of residence: California

Age:
Him: 49
Her: 53

Allocation
Desired Asset allocation:
Stocks/bonds: 70% stocks, 30% bonds
International allocation: 20%

Portfolio is in the high six figures

Current portfolio:
27% in taxable accounts, 73% tax-advantaged

The format we used:

Name of Fund (TICKER, if available) Expense ratio % of portfolio

Taxable
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) 0.05% 16.26%
Vanguard FTSE All-World ex-US Index Fund Admiral Shares (VFWAX) 0.11% 5.93%
Vanguard 2030 Fund (VTHRX) 0.24% 1.08%
EBAY INC (EBAY) n/A 1.26%
MICROSOFT CORP (MSFT) n/A 0.17%
PAYPAL HOLDINGS INC (PYPL) n/A 1.60%
QUALCOMM INC (QCOM) n/A 0.24%
SOUTHWEST AIRLINES COMPANY (LUV) n/A 0.41%
Lending Club variable 0.09%

His Solo 401k at Vanguard (Vanguard does not provide Admiral shares for Solo 401k)
Vanguard Total Bond Market Index Fund Investor Shares (VBMFX) 0.16% 6.93%
Vanguard Total International Stock Index Fund Investor Shares (VGTSX) 0.18% 3.34%
Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) 0.16% 8.55%

His Traditional IRA at Vanguard
Vanguard Inflation-Protected Securities Fund Investor Shares (VIPSX) 0.20% 0.66%
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) 0.06% 1.70%

HIS SEP-IRA at Vanguard
Vanguard Inflation-Protected Securities Fund Investor Shares (VIPSX) 0.20% 2.14%
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) 0.06% 1.90%
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) 0.05% 4.64%


His Roth brokerage at Vanguard
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) 0.06% 0.47%
Vanguard Small-Cap Index Fund Admiral Shares (VSMAX) 0.08% 3.20%
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) 0.05% 10.93%

His Roth Annuity at American National Insurance Company
Eagle Flexible Annuity 0.89%



Her 403b (TIAA-CREF; now managed by Fidelity)
TIAA Traditional Annuity (unclear) 5.44%
CREF Equity Index R2 (QCEQPX) 0.37% 10.80%
CREF Global Equities R2 (QCGLPX) 0.48% 5.65%
CREF Bond Market (QCBMPX) 0.46% 1.77%

Her Roth at Vanguard
Vanguard Target Retirement 2025 (VTTVX) 0.14% 3.00%

Her Traditional IRA at Vanguard
Vanguard 2030 Fund (VTHRX) 0.15% 0.27%

Her Inherited IRA at Vanguard
Vanguard 2030 Fund (VTHRX) 0.15% 0.66%


Contributions

New annual Contributions
$26k his solo 401k
$22k her 403b
No Roth IRA contributions at present

Available funds

Funds available in his 401(k)

Vanguard Total Bond Market Index Fund Investor Shares
Vanguard Total International Stock Index Fund Investor Shares
Vanguard Total Stock Market Index Fund Investor Shares

Funds available in her 403(b)

Vanguard Target Retirement Funds
Vanguard Extended Market Index (Admiral), VEXAX
VG Total Bond Market (Admiral) , VBTLX
VG Total International Stock (Admiral), VGTSX
VG Total International Bond Index (Admiral), VTABX
VG Target Retirement Funds, including VTHRX, VTTVX

Below are actively managed funds available. I’m not providing ticker symbols for these.
Black Rock Total Return K
Causeway Intl Val Is
Dfa Inf Prt Sec Port
Dfa Us Target Value
Dodge & Cox Global
Harding Lovener Intl Eq Is
Htfd Schr Emg Mkt I
Prmcp Odyssey Growth
Tchstn Intl Smcap I
Trp Inst Lg Cap Val
Voya Stabilizer
Wm Blair Smidcp Gr I

Also available: self-directed brokerage option (BrokerageLink) via Fidelity

Other:
1) She is paying $1000 per month into her mortgage principal on another property (rented out). No immediate plan to sell property. Mortgage rate is 4.25%
2) Lending Club was a very small investment ($500/$750), more of an experiment. Principal + interest slowly being transferred back to bank account. Individual stocks were long-term buy and hold, and leftovers from another investment era.

Questions:
1. To reduce fees, we want to convert her CREF funds to either VG target retirement funds via existing options or Fidelity BrokerageLink. To be more tax-efficient, we also will convert the taxable VG 2030 Retirement Fund to VG Total Stock Market (and shift equities in tax-advantaged accounts to bonds to offset). Any thoughts/suggestions on a course of action?
2. What do you think about the TIAA annuity as part of this portfolio?
3. Is it worth considering switching his solo 401k to a different broker given that Vanguard will not provide Admiral shares (see viewtopic.php?t=192919, for example)? He can switch to Fidelity (or wherever) if it's worth doing.
4. Should he consolidate SEP and traditional IRA accounts?
5. Any other ideas on consolidation and tips to have us working in harmony? Honestly we are just beginning to consider how we do this. It seems like our investment philosophies are generally tracking and consistent, but we may be missing something. i.e. for her retirement, using VG international bond market index fund to further diversify our bond portfolio.
6. Would her $1k/month be better used contributed to an index fund rather than paying down mortgage? Or is essentially “earning” 4.25% compounded interest by paying the mortgage the best way to go?
7. Time to let go of individual stocks, or not significant enough portion to matter?
8. Other comments are welcome. We want to learn and improve, and definitely appreciate your guidance and thoughts.

Thank you in advance!

pkcrafter
Posts: 11882
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: Portfolio help

Post by pkcrafter » Fri Apr 21, 2017 10:44 am

Bump Up for review
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

venkman
Posts: 183
Joined: Tue Mar 14, 2017 10:33 pm

Re: Portfolio help

Post by venkman » Fri Apr 21, 2017 2:34 pm

beagle1 wrote:6. Would her $1k/month be better used contributed to an index fund rather than paying down mortgage? Or is essentially “earning” 4.25% compounded interest by paying the mortgage the best way to go?
7. Time to let go of individual stocks, or not significant enough portion to matter?


A guaranteed safe return of 4.25% is pretty compelling, given that:
1. Your portfolio is already big enough that adding another 12k/year is going to have a relatively small effect.
2. A lot of smart people are predicting equity returns close to 4% over the next decade. That doesn't mean they'll be right, but the current bull market has gone on for quite awhile now.

If you don't care about the individual stocks, I would get rid of them (assuming the tax hit won't be too bad), just for simplicity's sake. If the tax hit would be bad, consider donating them and getting a tax write-off.

beagle1
Posts: 97
Joined: Sat Oct 02, 2010 3:09 pm

Re: Portfolio help

Post by beagle1 » Fri Apr 21, 2017 2:38 pm

Thanks, all makes sense. Leaning toward what you suggested already.

venkman wrote:
beagle1 wrote:6. Would her $1k/month be better used contributed to an index fund rather than paying down mortgage? Or is essentially “earning” 4.25% compounded interest by paying the mortgage the best way to go?
7. Time to let go of individual stocks, or not significant enough portion to matter?


A guaranteed safe return of 4.25% is pretty compelling, given that:
1. Your portfolio is already big enough that adding another 12k/year is going to have a relatively small effect.
2. A lot of smart people are predicting equity returns close to 4% over the next decade. That doesn't mean they'll be right, but the current bull market has gone on for quite awhile now.

If you don't care about the individual stocks, I would get rid of them (assuming the tax hit won't be too bad), just for simplicity's sake. If the tax hit would be bad, consider donating them and getting a tax write-off.

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