28, Single, No Debt, Seeking Portfolio Advice

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arowback
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Joined: Mon Jun 19, 2017 2:09 pm

28, Single, No Debt, Seeking Portfolio Advice

Postby arowback » Mon Jun 19, 2017 3:38 pm

Emergency funds: 6 months of expenses
Debt: $0
Tax Filing Status: Single
Tax Rate: 25% Federal, 6.45% State
State of Residence: New York
Age: 28
Income: ~80k (variable with commission)

Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: 30% of stocks

Current retirement assets
Size of the portfolio: Mid five-figures

401k at Fidelity Company matches up to 6% contributions
52% Fidelity 401k State Street S&P 500® Index Non-Lending Series Fund Class K (CMDVQ) (0.013%)

Roth IRA at Vanguard
11% Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) (0.150%)
29% Vanguard Total International Stock Index Fund Investor Shares (VGTSX) (0.180%)
8% Vanguard Total Bond Market Index Fund Investor Shares (VBMFX) (0.150%)

HSA (started contributing this year)
1% Vanguard Total Bond Market Index Fund Institutional Plus Shares (VBMPX) (0.030%)

New annual Contributions
$9k 401k + 6% company match (~$2,300) (will max for the year)
$0 Roth IRA (already maxed for the year)
$1.8k HSA (will max for the year)
$10k+ Taxable account (this is where I'm a bit lost)

Available funds

Funds available in 401(k)
JPMCB SmartRetirement® Passive Blend Income Fund CF (0.26%)
JPMCB SmartRetirement® Passive Blend 2015 Fund CF (0.26%)
JPMCB SmartRetirement® Passive Blend 2020 Fund CF (0.26%)
JPMCB SmartRetirement® Passive Blend 2025 Fund CF (0.25%)
JPMCB SmartRetirement® Passive Blend 2030 Fund CF (0.25%)
JPMCB SmartRetirement® Passive Blend 2035 Fund CF (0.25%)
JPMCB SmartRetirement® Passive Blend 2040 Fund CF (0.25%)
JPMCB SmartRetirement® Passive Blend 2045 Fund CF (0.25%)
JPMCB SmartRetirement® Passive Blend 2050 Fund CF (0.26%)
JPMCB SmartRetirement® Passive Blend 2055 Fund CF (0.29%)
State Street S&P 500® Index Non-Lending Series Fund Class K (CMDVQ) (0.013%)
State Street Russell Small/Mid Cap® Index Non-Lending Series Fund Class K (0.04%)
State Street Global All Cap Equity Ex-U.S. Index Non-Lending Series Fund Class K (0.11%)
State Street U.S. Bond Index Non-Lending Series Fund Class K (0.04%)
Small Cap Blend Fund (0.7056%)
International Equity Blend Fund (0.2935%)
Capital Preservation Fund (0.3493%)

Sorry for the lack of ticker symbols on most of these. The website does not make it easy to find these at all. Hopefully the expense ratio + full description is enough.

Funds available in HSA
VANGUARD SMALL CAP VALUE INDEX ADMIRAL (VSIAX) (0.07%)
VANGUARD TARGET RETIREMENT 2060 INV (VTTSX) (0.16%)
VANGUARD GROWTH INDEX INSTITUTIONAL (VIGIX) (0.05%)
VANGUARD TARGET RETIREMENT 2020 INV (VTWNX) (0.14%)
VANGUARD WELLESLEY INCOME ADMIRAL (VWIAX) (0.15%)
VANGUARD TARGET RETIREMENT 2040 INV (VFORX) (0.16%)
VANGUARD TARGET RETIREMENT INCOME INV (VTINX) (0.13%)
VANGUARD EXTENDED MARKET INDEX INSTLPLUS (VEMPX) (0.05%)
VANGUARD TOTAL INTL STOCK IDX INSTLPLS (VTPSX) (0.07%)
VANGUARD SHRT-TERM INFL-PROT SEC IDX ADM (VTAPX) (0.07%)
VANGUARD INSTITUTIONAL INDEX INSTL PL (VIIIX) (0.02%)
VANGUARD EMERGING MKTS STOCK IDX INSTL (VEMIX) (0.11%)
VANGUARD SHORT-TERM BOND INDEX ADM (VBIRX) (0.07%)
VANGUARD TARGET RETIREMENT 2030 INV (VTHRX) (0.15%)
VANGUARD MATERIALS INDEX ADMIRAL (VMIAX) (0.10%)
VANGUARD MID-CAP VALUE INDEX ADMIRAL (VMVAX) (0.07%)
VANGUARD SMALL CAP INDEX ADM (VSMAX) (0.06%)
VANGUARD TOTAL INTL BD IDX ADMIRAL (VTABX) (0.12%)
VANGUARD INFLATION-PROTECTED SECS I (VIPIX) (0.07%)
VANGUARD TARGET RETIREMENT 2050 INV (VFIFX) (0.16%)
VANGUARD REIT INDEX INSTITUTIONAL (VGSNX) (0.10%)
VANGUARD VALUE INDEX ADM (VVIAX) (0.06%)
VANGUARD TOTAL BOND MARKET IDX INSTLPLS (VBMPX) (0.03%)

Questions:
1. Given I'm going to be maxing out my 401k, HSA, and Roth this year what's the best route to take if I want to save more? Given my current expenses are low I can afford to likely put away another 10k+ and still live comfortably, but I am not sure the best approach to take. My employer does allow after tax contributions to my 401k (I'm not sure if I can do in-service withdraws). The other option would just being opening a regular taxable account.

2. Once I determine where to contribute the money what would the best fund option(s) be for the taxable account given my current portfolio and situation? Any glaring issues with my current allocation? To give a bit of background and goals, the thought of early retirement does interest me, but ultimately at this point I'm just trying to save as much as I can while I'm young, don't have high expenses, and can afford to. Kind of to makeup for the lack of significant savings in my early 20's.

Tamarind
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Joined: Mon Nov 02, 2015 2:38 pm

Re: 28, Single, No Debt, Seeking Portfolio Advice

Postby Tamarind » Mon Jun 19, 2017 4:30 pm

Nice options you have there in your employer plans!

I'm not familiar with after tax contributions to a 401k and their rules, but anything that would let you make further use of those State Street funds with super low ERs would probably be good.

If you can't do that, add a taxable account at Vanguard and use the same funds you are using in your Roth IRA. You may need to shift your holdings around to keep the bond portion of your AA out of the taxable account.

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flamesabers
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Joined: Fri Mar 03, 2017 12:05 pm
Location: Rochester, MN

Re: 28, Single, No Debt, Seeking Portfolio Advice

Postby flamesabers » Mon Jun 19, 2017 4:40 pm

1. At your tax bracket I don't think making Roth 401k contributions would be ideal. As for where to invest in, I think it depends on what your priorities are now that you maxed out your tax-advantaged accounts. One option would be to invest in a secondary emergency fund just in case you have a rough year in which you don't earn as much in commissions as your normally do. This secondary emergency fund could be established with something like a CD ladder or I-Bonds. Alternatively, if you choose to go with a taxable account, I would recommend investing in a tax-efficient fund like an equity index fund.

2. In general I think any equity index fund would be a good choice to put in a taxable account. For simplicity you could use the equity funds you have in your Roth IRA.

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Meg77
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Location: Dallas, TX
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Re: 28, Single, No Debt, Seeking Portfolio Advice

Postby Meg77 » Mon Jun 19, 2017 4:41 pm

How are you able to save so much on an $80K income in New York?

If the answer is that you are still living at home with your parents, then my suggestion would be to "invest" some of your extra cash flow into getting your own apartment. The independence, experiences and growth you will have will be well worth it.

If the answer is that you live with roommates or are just very frugal, then good job! Keep at it. Boost your emergency fund to $25K (if it's not there already) and then dump the rest into a brokerage account. It's "best" to hold international index funds in brokerage versus in retirement accounts so that you can take advantage of the foreign tax credit and in order to limit taxable distributions.

Overall though your AA and your fund choices look great to me. Don't worry too much about exact AA targets at this point though; your new contributions are the main thing driving your portfolio growth for the forseeable future. AA and fees and fund choices matter, but not nearly as much as your contribution rate until you've got investments well into the 6 figure range. Keep up the good work, and you'll be there in no time!

Just make sure you keep enough dry powder (aka cash) for all the life stuff that could come at you in the short term - real estate purchases, business start ups, marriage/wedding, children, etc.
"An investment in knowledge pays the best interest." - Benjamin Franklin

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badbreath
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Re: 28, Single, No Debt, Seeking Portfolio Advice

Postby badbreath » Mon Jun 19, 2017 5:27 pm

Your HSA should be more aggressive then bounds. I would put VANGUARD INSTITUTIONAL INDEX INSTL PL (VIIIX) (0.02% in it
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

Masterblaster
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Joined: Tue Jan 31, 2017 6:36 pm

Re: 28, Single, No Debt, Seeking Portfolio Advice

Postby Masterblaster » Mon Jun 19, 2017 5:45 pm

If you do after tax contributions they can be later (provided your employer allows) rolled into a Roth IRA as in service withdrawals. That's the so-called backdoor Roth-IRA. Note that any gains from the after tax contributions can either be split off into a ordinary (taxable) IRA or can be distributed then as taxable income.

My recommendation is to do deductible 401k contributions up to your limit. Then do either a deductible IRA or a ROTH IRA depending on your situation. Then if you have extra money contribute to your 401k as after-tax contributions of which these are later rolled off into a ROTH IRA.

Note also that your employer probably has some upper bound of taxable and deductible income that you can contribute to your 401k.

retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: 28, Single, No Debt, Seeking Portfolio Advice

Postby retiredjg » Mon Jun 19, 2017 5:57 pm

arowback wrote: My employer does allow after tax contributions to my 401k (I'm not sure if I can do in-service withdraws). The other option would just being opening a regular taxable account.

This is the first thing for you to look at. If you can make after-tax contributions and roll that into Roth IRA once a year or so, that is far superior to putting the money (if it is for retirement) into a taxable account.

If you cannot do the in-service distributions, use taxable. The best funds there would be total stock index and/or total international stock index. There are other choices, but those are the ones to start with. This would likely reduce the amount of US stocks needed in your 401k and your bonds might need to move into the 401k to fill the space.

If the money going into taxable is for something other than retirement, there are a couple of ways to approach that.

jbranx
Posts: 58
Joined: Thu Feb 09, 2017 6:57 pm

Re: 28, Single, No Debt, Seeking Portfolio Advice

Postby jbranx » Mon Jun 19, 2017 5:59 pm

Congratulations on the progress you have made already. You have excellent fund choices. For the taxable account you might consider one of the Vanguard Lifestrategy funds or do two funds, Vanguard total domestic and V. total international. One option I like is Vanguard Total World. Since you are in a high tax state, you might also consider V.'s NY muni fund. In all these funds I would set up an auto-investment plan to put money in every month. If you don't have the minimums for the funds, you could open a discount brokerage account and buy the ETF's from Vanguard or Ishares Core, for ex.

The fewer funds, the broadest diversification, the lowest expenses, and determined investment discipline and saving are what it takes. Live below your means. Joking here, but worth considering: don't get married, and if you do, don't get divorced. Get an imaginary dog. They don't need vet care, daily walking, or require pet vacuums. If you must eat out, do Denny's or Ruby Tuesday's, and make sure you get the free birthday meals and clip all their coupons. If you must have a spouse, choose one that agrees with all of the above, wants to also retire very early, and will love that dog.

I lived/worked in Manhattan for 25 years. You'll never need a car, and I'd wait for one of those inevitable real estate slumps before buying any real estate.

arowback
Posts: 2
Joined: Mon Jun 19, 2017 2:09 pm

Re: 28, Single, No Debt, Seeking Portfolio Advice

Postby arowback » Sat Jun 24, 2017 7:53 pm

Thank you to everyone that took the time to respond. You've given me quite a bit to think about and I've been doing quite the reading to get a better understanding of everything.

flamesabers wrote:1. At your tax bracket I don't think making Roth 401k contributions would be ideal. As for where to invest in, I think it depends on what your priorities are now that you maxed out your tax-advantaged accounts. One option would be to invest in a secondary emergency fund just in case you have a rough year in which you don't earn as much in commissions as your normally do. This secondary emergency fund could be established with something like a CD ladder or I-Bonds. Alternatively, if you choose to go with a taxable account, I would recommend investing in a tax-efficient fund like an equity index fund.

2. In general I think any equity index fund would be a good choice to put in a taxable account. For simplicity you could use the equity funds you have in your Roth IRA.


It does seem like a Traditional IRA would be better given my situation to reduce taxable income. Given I've already maxed out the Roth this year I could open a Traditional IRA in 2018 and contribute to that and just leave the Roth alone?

Also, I've been giving the secondary emergency fund some thought. What are some of the considerations for using a CD ladder vs. I-Bonds? Perhaps take 10k and split it into 5 individual 2k CD's each 1 yr apart? This would be in addition to the 6+ months expenses I have earning 1.05% in an Ally savings account plus I always have a 1 month buffer in my checking account (following the YNAB rule of living on last months income).

Meg77 wrote:How are you able to save so much on an $80K income in New York?

If the answer is that you are still living at home with your parents, then my suggestion would be to "invest" some of your extra cash flow into getting your own apartment. The independence, experiences and growth you will have will be well worth it.

If the answer is that you live with roommates or are just very frugal, then good job! Keep at it. Boost your emergency fund to $25K (if it's not there already) and then dump the rest into a brokerage account. It's "best" to hold international index funds in brokerage versus in retirement accounts so that you can take advantage of the foreign tax credit and in order to limit taxable distributions.

Overall though your AA and your fund choices look great to me. Don't worry too much about exact AA targets at this point though; your new contributions are the main thing driving your portfolio growth for the forseeable future. AA and fees and fund choices matter, but not nearly as much as your contribution rate until you've got investments well into the 6 figure range. Keep up the good work, and you'll be there in no time!

Just make sure you keep enough dry powder (aka cash) for all the life stuff that could come at you in the short term - real estate purchases, business start ups, marriage/wedding, children, etc.


I live upstate so living expenses are probably 1/3 of what they would be if I lived in NYC. Also, since moving jobs and tripling my income a couple years ago I did my best to try to avoid lifestyle creep too much which has allowed me to save the majority of it. It helps that the HSA and 401k are deducted before my paycheck hits my checking account, so I don't feel like I'm missing it. The only thing I do spend quite a bit of money on is food which I'm trying to cut back on. Besides that I consider myself pretty frugal.

Good point in keeping enough cash laying around as well. Currently I have about 15k in my emergency fund and about 10k set aside for when I do pop the question to the girl. No plans for children. I could bump my emergency fund up to 25k though. Do you think utilizing a CD ladder like mentioned above is the best option?

badbreath wrote:Your HSA should be more aggressive then bounds. I would put VANGUARD INSTITUTIONAL INDEX INSTL PL (VIIIX) (0.02% in it


What would the reasoning be? Sorry if it's fairly obvious, just want to make sure I fully understand.

Masterblaster wrote:If you do after tax contributions they can be later (provided your employer allows) rolled into a Roth IRA as in service withdrawals. That's the so-called backdoor Roth-IRA. Note that any gains from the after tax contributions can either be split off into a ordinary (taxable) IRA or can be distributed then as taxable income.

My recommendation is to do deductible 401k contributions up to your limit. Then do either a deductible IRA or a ROTH IRA depending on your situation. Then if you have extra money contribute to your 401k as after-tax contributions of which these are later rolled off into a ROTH IRA.

Note also that your employer probably has some upper bound of taxable and deductible income that you can contribute to your 401k.


retiredjg wrote:
arowback wrote: My employer does allow after tax contributions to my 401k (I'm not sure if I can do in-service withdraws). The other option would just being opening a regular taxable account.

This is the first thing for you to look at. If you can make after-tax contributions and roll that into Roth IRA once a year or so, that is far superior to putting the money (if it is for retirement) into a taxable account.

If you cannot do the in-service distributions, use taxable. The best funds there would be total stock index and/or total international stock index. There are other choices, but those are the ones to start with. This would likely reduce the amount of US stocks needed in your 401k and your bonds might need to move into the 401k to fill the space.

If the money going into taxable is for something other than retirement, there are a couple of ways to approach that.


I'm going to see if I can speak with someone just to verify I can do in-service withdrawals. If it turns out to be the case, I'll definitely go that route, perhaps after building up my emergency fund a tad more.

jbranx wrote:Congratulations on the progress you have made already. You have excellent fund choices. For the taxable account you might consider one of the Vanguard Lifestrategy funds or do two funds, Vanguard total domestic and V. total international. One option I like is Vanguard Total World. Since you are in a high tax state, you might also consider V.'s NY muni fund. In all these funds I would set up an auto-investment plan to put money in every month. If you don't have the minimums for the funds, you could open a discount brokerage account and buy the ETF's from Vanguard or Ishares Core, for ex.

The fewer funds, the broadest diversification, the lowest expenses, and determined investment discipline and saving are what it takes. Live below your means. Joking here, but worth considering: don't get married, and if you do, don't get divorced. Get an imaginary dog. They don't need vet care, daily walking, or require pet vacuums. If you must eat out, do Denny's or Ruby Tuesday's, and make sure you get the free birthday meals and clip all their coupons. If you must have a spouse, choose one that agrees with all of the above, wants to also retire very early, and will love that dog.

I lived/worked in Manhattan for 25 years. You'll never need a car, and I'd wait for one of those inevitable real estate slumps before buying any real estate.


Since I live in rural upstate NY I definitely need the car to get around, but I live within my means driving a 07 Ford Focus that hasn't given me any trouble since I've owned it and is now closing in on 190k miles. Not sure the wife/dog is one I will avoid given the current GF of 4 yrs has a pet chihuahua! lol. Food is about the only thing I spent a bit more than I'd like on (groceries and eating out) which I'm working on cutting down to increase savings even further. Thank you for the fund suggestions, this is all helpful and again gives me quite a bit to think about.

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flamesabers
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Location: Rochester, MN

Re: 28, Single, No Debt, Seeking Portfolio Advice

Postby flamesabers » Sun Jun 25, 2017 12:32 am

arowback wrote:
flamesabers wrote:1. At your tax bracket I don't think making Roth 401k contributions would be ideal. As for where to invest in, I think it depends on what your priorities are now that you maxed out your tax-advantaged accounts. One option would be to invest in a secondary emergency fund just in case you have a rough year in which you don't earn as much in commissions as your normally do. This secondary emergency fund could be established with something like a CD ladder or I-Bonds. Alternatively, if you choose to go with a taxable account, I would recommend investing in a tax-efficient fund like an equity index fund.

2. In general I think any equity index fund would be a good choice to put in a taxable account. For simplicity you could use the equity funds you have in your Roth IRA.


It does seem like a Traditional IRA would be better given my situation to reduce taxable income. Given I've already maxed out the Roth this year I could open a Traditional IRA in 2018 and contribute to that and just leave the Roth alone?

Also, I've been giving the secondary emergency fund some thought. What are some of the considerations for using a CD ladder vs. I-Bonds? Perhaps take 10k and split it into 5 individual 2k CD's each 1 yr apart? This would be in addition to the 6+ months expenses I have earning 1.05% in an Ally savings account plus I always have a 1 month buffer in my checking account (following the YNAB rule of living on last months income).


An issue with a traditional IRA is the income eligibility requirements to be able to deduct the contribution. The 2018 figures haven't been released yet, but as of 2017, your MAGI would have to be $62k or less to be able to deduct the full $5.5k deduction.

https://www.irs.gov/retirement-plans/20 ... an-at-work

Assuming you don't have any issues with the Treasury Direct website, I think there is a bit of simplicity of buying $10k of I-Bonds. The interest on I-Bonds are tax-deferred and have a final maturity of 30 years. You don't have to deal with 1099s for the interest every year nor do you have to decide where you want to reinvest your CDS as they mature every year. You do have to wait a year before you can redeem I-Bonds and the current fixed rate is 0%. Depending on the rate of inflation, I-Bonds can have a high variable rate or have a total rate of 0% for a period of six months or more.

If you go with CDs, you may be able to get higher interest rates then with the I-Bonds. However, this interest will be taxable every year and it'll be more paperwork for you to deal with when you file your taxes.

Ultimately, if you really want simplicity with the secondary emergency fund, I suggest going with I-Bonds. If you're willing to shop around for CDs every year and don't mind the additional 1099s, I suggest going with the CD ladder.


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