Late Start-Seeking Portfolio Advice
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- Posts: 115
- Joined: Mon Jun 26, 2017 9:56 am
- Location: California
Late Start-Seeking Portfolio Advice
Hello Bogleheads!
This is my first post here, although I have been reading the forum posts and wiki for a while. The wonderful people on this forum have taught me so much.
My husband and I were both laid off simultaneously in 2008 (different fields-just bad luck). My husband started his own business (from home) and I am now a SAHM. We paid off an insane amount of credit card debt and started saving for retirement only 5 years ago.
My husband is very smart and talented, but he has no interest in dealing with our finances. I would like to keep our investments simple so he can continue it without any problems if he needed to.
Emergency funds: 100k (10 months) in No penalty CD 1.5% (4 accounts of 25k each).
Debt: 237k remaining on 740k mortgage (27 years remaining at 4.375%). Bought for 925k in 2015.
Tax Filing Status: Married Filing Jointly with 2 Children (11 and 9 years)
Tax Rate: 35% to 28% Federal, 9.3% State (Business income is variable)
State of Residence: CA
Age: 43 (me), 44 (husband)
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 25% of stocks
Current Retirement Assets Total: 422k
Taxable: 58k
14% cash (1.05% savings acct for investing – 11k ROTH, 20k for purchasing iBONDS, 27k remaining to max out i401k.
His individual 401k at Vanguard: 277k
66% Vanguard LifeStrategy Growth Fund Investor Shares(VASGX) (0.15%)
His Roth IRA at Vanguard: 62k
5% Vanguard 500 Index Fund Admiral Shares (VFIAX) (0.04%)
4% Vanguard Windsor Fund Investor Shares (VWNDX) (0.30%)
5% Vanguard Windsor II Fund Investor Shares (ticker symbol) (0.33%)
His old 401k at Fidelity: 15k
4% Fidelity Freedom K® 2040 Fund (FFKFX) (0.69)
iBONDS: 10k
2% Plan to purchase 20k each year.
Her ROTH IRA at Vanguard: $0 (Start this year, Backdoor)
Will start Spousal IRA contributions (max) starting this year
New annual Contributions
$54k his individual 401k(or max allowed by net earnings)
$5.5k her ROTH IRA (backdoor)
$5.5k his Roth IRA (backdoor)
$20k iBONDS
Start contributing to taxable (for retirement) after house is paid off (by end of 2018)
Non-retirement Savings
Cash Savings: 122k
Savings acct at 1.05% for upcoming 2017-2018 expenses (see breakdown below)
11k Property taxes (1 year)
15k Travel/Vacation fund
36k Home repair/maintenance fund. Add 10k each year, and replenish. (cap this at 50k?)
20k 2 month living expenses
30k Estimated taxes fund
10k car purchase/repair fund (our van is old and starting to have a few issues)
529 Accounts: 240k
120k each for 2 kids (ages 11 and 9). Might stop at 200k each to speed up retirement savings in taxable.
Vanguard Variable Annuity: 300k (129k cost basis) No GLWB rider
$115k VVA-Equity income (Large Value Domestic Stock, General) (0.60%)
$22k VVA-Small Company Growth (Small Growth, Domestic Stock, Agressive) (0.66%)
$49k VVA-Growth (Large Growth, Domestick Stock, General) (0.73%)
$101k VVA-Equity Index (0.44%)
$14k VVA-Capital Growth (0.65%)
Other Funds
My father (non-US) gave us 230k this year (used for mortgage per his instructions), and is planning to give us another 230k next year. We will use this money to pay off the mortgage and add to 529.
Available funds in old 401k at Fidelity (added to post as requested)
Only 2 of the 33 funds available have an ER < 0.60%. These are listed below
FID US BOND IDX PR (FSITX) 0.05%
FID 500 INDEX PR (FUSVX) 0.045%
Available funds in Vanguard Variable Annuity
VVA-Equity Income (0.59%)
VVA-Growth (0.71%)
VVA-Money Market (0.45%)
VVA-Total Bond Market Idx (0.44%)
VVA-Equity Index (0.44%)
VVA-Balanced (0.52%)
VVA-International (0.68%)
VVA-Mid-Cap Index (0.48%)
VVA-Short-Term Invest-Gr (0.45%)
VVA-Diversified Value (0.56%)
VVA-High Yield Bond (0.57%)
VVA-REIT Index (0.56%)
VVA-Small Company Growth (0.66%)
VVA-Capital Growth (0.65%)
VVA-Ttl Stock Market Idx (0.45%)
VVA-Conserv Allocation (0.45%)
VVA-Moderate Allocation (0.45%)
Questions
Question1. I would really appreciate some feedback on what to do with husbands ROTH funds.
The current funds in my husband’s ROTH were chosen when he was very young. He forgot all about his account and I discovered it when I set up his 401k at Vanguard.
Would it be ok to exchange the current funds for a 3-fund portfolio of Total Stock (VTSAX), Total International Stock (VTIAX), and Total Bond (VBMFX) according to our AA?
Or should I just leave the current funds, and get to our desired AA with new ROTH contributions and i-BONDs?
Or should I exchange them for Vanguard LifeStrategy Growth Fund Investor Shares(VASGX)? I thought this could limit my options for rebalancing once we start contributing to taxable retirement accounts next year.
Question 2. For my Spousal ROTH contributions I am thinking of doing Vanguard LifeStrategy Growth Fund Investor Shares(VASGX) (0.15%) until enough funds to split into 3-fund according to total AA. Is this a good idea?
Question 3: I wanted to double check that there is no problem with me doing a backdoor ROTH contribution (5.5k each) for 2017 immediately? It seems a lot easier than waiting to see if we can do a direct ROTH, or doing partial contributions at the end of each year? We don’t have any other IRAs. (I came across this suggestion in a number of threads-but was not 100% sure if there were any pitfalls).
Going forward I would like to do a Backdoor ROTH (5.5k each) in January every year, without waiting for end of year earnings report. Any problems with this strategy? (Huge thanks for the wiki and all the threads on this topic. The step-by-step instructions are amazing!)
Question 4: What to do with the old 401k at Fidelity?
I did not do a rollover into an IRA to keep the backdoor ROTH option simple. The individual 401k at Vanguard doesn’t allow rollovers. Can I just leave it at Fidelity? Or should I deal with it now?
Question 5: Not really sure where to include the Variable Annuity in our financial portfolio? Do I ignore the Variable annuity for the purpose of retirement planning? The VVA was opened by my in-laws for my husband a long time ago.
Question 6: After we pay off the mortgage next year, we are going to put the extra money to a taxable retirement account each month. I was planning to put it in (Total stock) VTSMX, (Total International Stock VGTSX), and i-BONDs to start with. Is that a good idea?
Question 7: And finally-are we doing ok? We have tried to prioritize retirement, but it is also important to us to take few great vacations with our boys each year. Do we need to buckle down even more?
Thank you again to all the wonderful contributors on this forum. We could never have come this far without you. You have helped our family so much already! I am grateful for any advice and suggestions you can offer for our portfolio
Best Regards,
SocalLiving
This is my first post here, although I have been reading the forum posts and wiki for a while. The wonderful people on this forum have taught me so much.
My husband and I were both laid off simultaneously in 2008 (different fields-just bad luck). My husband started his own business (from home) and I am now a SAHM. We paid off an insane amount of credit card debt and started saving for retirement only 5 years ago.
My husband is very smart and talented, but he has no interest in dealing with our finances. I would like to keep our investments simple so he can continue it without any problems if he needed to.
Emergency funds: 100k (10 months) in No penalty CD 1.5% (4 accounts of 25k each).
Debt: 237k remaining on 740k mortgage (27 years remaining at 4.375%). Bought for 925k in 2015.
Tax Filing Status: Married Filing Jointly with 2 Children (11 and 9 years)
Tax Rate: 35% to 28% Federal, 9.3% State (Business income is variable)
State of Residence: CA
Age: 43 (me), 44 (husband)
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 25% of stocks
Current Retirement Assets Total: 422k
Taxable: 58k
14% cash (1.05% savings acct for investing – 11k ROTH, 20k for purchasing iBONDS, 27k remaining to max out i401k.
His individual 401k at Vanguard: 277k
66% Vanguard LifeStrategy Growth Fund Investor Shares(VASGX) (0.15%)
His Roth IRA at Vanguard: 62k
5% Vanguard 500 Index Fund Admiral Shares (VFIAX) (0.04%)
4% Vanguard Windsor Fund Investor Shares (VWNDX) (0.30%)
5% Vanguard Windsor II Fund Investor Shares (ticker symbol) (0.33%)
His old 401k at Fidelity: 15k
4% Fidelity Freedom K® 2040 Fund (FFKFX) (0.69)
iBONDS: 10k
2% Plan to purchase 20k each year.
Her ROTH IRA at Vanguard: $0 (Start this year, Backdoor)
Will start Spousal IRA contributions (max) starting this year
New annual Contributions
$54k his individual 401k(or max allowed by net earnings)
$5.5k her ROTH IRA (backdoor)
$5.5k his Roth IRA (backdoor)
$20k iBONDS
Start contributing to taxable (for retirement) after house is paid off (by end of 2018)
Non-retirement Savings
Cash Savings: 122k
Savings acct at 1.05% for upcoming 2017-2018 expenses (see breakdown below)
11k Property taxes (1 year)
15k Travel/Vacation fund
36k Home repair/maintenance fund. Add 10k each year, and replenish. (cap this at 50k?)
20k 2 month living expenses
30k Estimated taxes fund
10k car purchase/repair fund (our van is old and starting to have a few issues)
529 Accounts: 240k
120k each for 2 kids (ages 11 and 9). Might stop at 200k each to speed up retirement savings in taxable.
Vanguard Variable Annuity: 300k (129k cost basis) No GLWB rider
$115k VVA-Equity income (Large Value Domestic Stock, General) (0.60%)
$22k VVA-Small Company Growth (Small Growth, Domestic Stock, Agressive) (0.66%)
$49k VVA-Growth (Large Growth, Domestick Stock, General) (0.73%)
$101k VVA-Equity Index (0.44%)
$14k VVA-Capital Growth (0.65%)
Other Funds
My father (non-US) gave us 230k this year (used for mortgage per his instructions), and is planning to give us another 230k next year. We will use this money to pay off the mortgage and add to 529.
Available funds in old 401k at Fidelity (added to post as requested)
Only 2 of the 33 funds available have an ER < 0.60%. These are listed below
FID US BOND IDX PR (FSITX) 0.05%
FID 500 INDEX PR (FUSVX) 0.045%
Available funds in Vanguard Variable Annuity
VVA-Equity Income (0.59%)
VVA-Growth (0.71%)
VVA-Money Market (0.45%)
VVA-Total Bond Market Idx (0.44%)
VVA-Equity Index (0.44%)
VVA-Balanced (0.52%)
VVA-International (0.68%)
VVA-Mid-Cap Index (0.48%)
VVA-Short-Term Invest-Gr (0.45%)
VVA-Diversified Value (0.56%)
VVA-High Yield Bond (0.57%)
VVA-REIT Index (0.56%)
VVA-Small Company Growth (0.66%)
VVA-Capital Growth (0.65%)
VVA-Ttl Stock Market Idx (0.45%)
VVA-Conserv Allocation (0.45%)
VVA-Moderate Allocation (0.45%)
Questions
Question1. I would really appreciate some feedback on what to do with husbands ROTH funds.
The current funds in my husband’s ROTH were chosen when he was very young. He forgot all about his account and I discovered it when I set up his 401k at Vanguard.
Would it be ok to exchange the current funds for a 3-fund portfolio of Total Stock (VTSAX), Total International Stock (VTIAX), and Total Bond (VBMFX) according to our AA?
Or should I just leave the current funds, and get to our desired AA with new ROTH contributions and i-BONDs?
Or should I exchange them for Vanguard LifeStrategy Growth Fund Investor Shares(VASGX)? I thought this could limit my options for rebalancing once we start contributing to taxable retirement accounts next year.
Question 2. For my Spousal ROTH contributions I am thinking of doing Vanguard LifeStrategy Growth Fund Investor Shares(VASGX) (0.15%) until enough funds to split into 3-fund according to total AA. Is this a good idea?
Question 3: I wanted to double check that there is no problem with me doing a backdoor ROTH contribution (5.5k each) for 2017 immediately? It seems a lot easier than waiting to see if we can do a direct ROTH, or doing partial contributions at the end of each year? We don’t have any other IRAs. (I came across this suggestion in a number of threads-but was not 100% sure if there were any pitfalls).
Going forward I would like to do a Backdoor ROTH (5.5k each) in January every year, without waiting for end of year earnings report. Any problems with this strategy? (Huge thanks for the wiki and all the threads on this topic. The step-by-step instructions are amazing!)
Question 4: What to do with the old 401k at Fidelity?
I did not do a rollover into an IRA to keep the backdoor ROTH option simple. The individual 401k at Vanguard doesn’t allow rollovers. Can I just leave it at Fidelity? Or should I deal with it now?
Question 5: Not really sure where to include the Variable Annuity in our financial portfolio? Do I ignore the Variable annuity for the purpose of retirement planning? The VVA was opened by my in-laws for my husband a long time ago.
Question 6: After we pay off the mortgage next year, we are going to put the extra money to a taxable retirement account each month. I was planning to put it in (Total stock) VTSMX, (Total International Stock VGTSX), and i-BONDs to start with. Is that a good idea?
Question 7: And finally-are we doing ok? We have tried to prioritize retirement, but it is also important to us to take few great vacations with our boys each year. Do we need to buckle down even more?
Thank you again to all the wonderful contributors on this forum. We could never have come this far without you. You have helped our family so much already! I am grateful for any advice and suggestions you can offer for our portfolio
Best Regards,
SocalLiving
Last edited by SocalLiving on Wed Jun 28, 2017 8:27 am, edited 2 times in total.
Re: Late Start-Seeking Portfolio Advice
Welcome to the forum! Consider creating an ips to guide you in the future. https://www.bogleheads.org/wiki/Investm ... _statement
1.I think you could go either way with the Roth. The 3 fund portfolio is the goto here. For someone with no interest in finances, using a ls or tr fund is reasonable. Certainly it is easier to do rebalancing with individual funds. Whether you want to continue with the lifestrategy funds or switch entirely to 3 fund depends on if you want to spend the time doing the yearly rebalancing. You could always leave instructions for your husband to switch to tr or ls funds if you die first.
2. Either ls growth or a target retirement fund would be fine.
3. Doing a backdoor Roth at the beginning of the year is fine.
4.Fidelity is a great co, no problem with leaving his old 401k there. I would just switch it to fidelity freedom index 2040 FBIFX if possible. If you have access to a cheaper fund such as s&p 500, then use that.
5. Dunno
6. Sounds good. You could also use ca tax exempt bond fund, as there is a limit to the amount of i bonds you can buy.
7. Whether you need to save more depends on what you plan to do in retirement and what your projected expenses will be. Will you stay in a hcol area, or sell your house and move someplace cheaper? The general goal is to have a 4% or lower withdrawal rate, i.e. 25x yearly expenses. Use something like cfiresim to see if you will meet that goal at your current savings rate.
http://www.cfiresim.com/
1.I think you could go either way with the Roth. The 3 fund portfolio is the goto here. For someone with no interest in finances, using a ls or tr fund is reasonable. Certainly it is easier to do rebalancing with individual funds. Whether you want to continue with the lifestrategy funds or switch entirely to 3 fund depends on if you want to spend the time doing the yearly rebalancing. You could always leave instructions for your husband to switch to tr or ls funds if you die first.
2. Either ls growth or a target retirement fund would be fine.
3. Doing a backdoor Roth at the beginning of the year is fine.
4.Fidelity is a great co, no problem with leaving his old 401k there. I would just switch it to fidelity freedom index 2040 FBIFX if possible. If you have access to a cheaper fund such as s&p 500, then use that.
5. Dunno
6. Sounds good. You could also use ca tax exempt bond fund, as there is a limit to the amount of i bonds you can buy.
7. Whether you need to save more depends on what you plan to do in retirement and what your projected expenses will be. Will you stay in a hcol area, or sell your house and move someplace cheaper? The general goal is to have a 4% or lower withdrawal rate, i.e. 25x yearly expenses. Use something like cfiresim to see if you will meet that goal at your current savings rate.
http://www.cfiresim.com/
Re: Late Start-Seeking Portfolio Advice
20% bonds at your ages is a little low. I'd bump that up to 30%.SocalLiving wrote:Age: 43 (me), 44 (husband)
Desired Asset allocation: 80% stocks / 20% bonds
Reasonable.Desired International allocation: 25% of stocks
Those 0.30-0.33% expense ratios are high (for Vanguard). I'd put everything in either Total Stock Market (TSM) or Total International Stock Market (TISM).Question1. I would really appreciate some feedback on what to do with husbands ROTH funds.
The current funds in my husband’s ROTH were chosen when he was very young. He forgot all about his account and I discovered it when I set up his 401k at Vanguard.
You could, but I'd avoid bonds in a Roth account. In general it's better to put assets with higher expected growth (stocks) in Roth accounts and assets with lower expected growth (bonds) in pre-tax accounts. You have plenty of room for bonds in his solo 401k.Would it be ok to exchange the current funds for a 3-fund portfolio of Total Stock (VTSAX), Total International Stock (VTIAX), and Total Bond (VBMFX) according to our AA?
Don't keep the current funds. The expense ratios are high.Or should I just leave the current funds, and get to our desired AA with new ROTH contributions and i-BONDs?
Buy either TSM or TISM.Or should I exchange them for Vanguard LifeStrategy Growth Fund Investor Shares(VASGX)? I thought this could limit my options for rebalancing once we start contributing to taxable retirement accounts next year.
Just buy either TSM or TISM Investor shares. Next year after you add the 2018 contribution switch to Admiral shares.Question 2. For my Spousal ROTH contributions I am thinking of doing Vanguard LifeStrategy Growth Fund Investor Shares(VASGX) (0.15%) until enough funds to split into 3-fund according to total AA. Is this a good idea?
No problems.Question 3. I wanted to double check that there is no problem with me doing a backdoor ROTH contribution (5.5k each) for 2017 immediately? It seems a lot easier than waiting to see if we can do a direct ROTH, or doing partial contributions at the end of each year? We don’t have any other IRAs. (I came across this suggestion in a number of threads-but was not 100% sure if there were any pitfalls).
Going forward I would like to do a Backdoor ROTH (5.5k each) in January every year, without waiting for end of year earnings report. Any problems with this strategy?
0.69% is high. What are the other options in his old 401k? List the names, ticker symbols, and plan expense ratios. The cheapest option is frequently a S&P 500 Index fund. Is one available? Also, it's only $15K. He could roll/convert it to his Roth IRA, take the one-time tax-hit, and be done with it.Question 4. What to do with the old 401k at Fidelity?
I did not do a rollover into an IRA to keep the backdoor ROTH option simple. The individual 401k at Vanguard doesn’t allow rollovers. Can I just leave it at Fidelity? Or should I deal with it now?
Have you considered rolling his solo 401k plan to Fidelity? They do allow incoming rollovers and also allow for cheaper Premium class shares. It's an option.
If he is allowed to change the options inside the annuity then it would be part of the portfolio. Can he get out of it? Maybe he shouldn't but can he? After looking at the options I think the Total Stock Market Index Portfolio option is the best choice (if he can swap with minimal cost).Question 5. Not really sure where to include the Variable Annuity in our financial portfolio? Do I ignore the Variable annuity for the purpose of retirement planning? The VVA was opened by my in-laws for my husband a long time ago.
Your fund choices are fine. After the I-bonds pick one fund and get it to Admiral shares before adding the next fund.Question 6. After we pay off the mortgage next year, we are going to put the extra money to a taxable retirement account each month. I was planning to put it in (Total stock) VTSMX, (Total International Stock VGTSX), and i-BONDs to start with. Is that a good idea?
The following example of a retirement portfolio has an AA of 80% stocks, 20% bonds, with 25% of stocks in international. That breaks down to 60% US stocks, 20% international stocks, and 20% bonds. You could have:
Taxable at Treasury Direct -- $10K -- 2%
2% I-bonds
Taxable at Vanguard -- $0 -- 0% <-- For future use.
0% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)
His Individual 401k at Vanguard -- $277K -- 42%
13% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.15%)
11% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.18%)
18% (VBMFX) Vanguard Total Bond Market Index Fund Investor Shares (0.15%)
His old 401k at Fidelity -- $15K -- 2%
2% (FUSVX) Fidelity 500 Index Fund Premium Class (0.045%)
Variable Annuity at Vanguard -- $300K -- 45%
45% (N/A) Total Stock Market Index Portfolio (0.45%)
His Roth IRA at Vanguard -- $62K -- 8%
8% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)
Her Roth IRA at Vanguard -- $5.5K -- 1%
1% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.18%)
My comments:
- This uses the desired 80/20 AA although I think you need more bonds.
- This ignores the $58K you have listed in taxable because it's for future spending (even though the spending will end up in tax-sheltered accounts).
- This assumes he can swap assets inside his annuity.
- This means all rebalancing will be done in his solo 401k. Everything else could have just one fund.
Last edited by Duckie on Tue Jun 27, 2017 4:55 pm, edited 1 time in total.
-
- Posts: 115
- Joined: Mon Jun 26, 2017 9:56 am
- Location: California
Re: Late Start-Seeking Portfolio Advice
Thank you mhalley and Duckie for your responses. They were incredibly helpful.
I will create an IPS this week. It will also be extremely productive for my husband and I to work on this together. Thank you.
Regarding his ROTH account-
I will give serious thought to switching the entire portfolio to 3-fund, including our 401k. It might actually be simpler and easier. The IPS should be a huge help while I think about this.
Regarding doing a backdoor ROTH early in the year
Regarding old 401k at Fidelity
FID US BOND IDX PR (FSITX) 0.05%
FID 500 INDEX PR (FUSVX) 0.045%
One of them is s&p500 with ER 0.045%, as suggested by both mhalley and Duckie. I will switch to that. Thank you!
I had not considered this option. Thank you for pointing it out. Will explore it if I need it in the future.
Regarding the variable annuity
We cannot make any changes to the annuity for now. My in-laws would be hurt if we were to get out of it, or make any changes to it. They ask to see statements every quarter so they can monitor the growth of their gift. I would not want them to feel like we do not appreciate their generosity. But, I will also call and find out if any of the options you outlined are possible. Can’t hurt to know. For now, we can exclude it from our portfolio.
Regarding Taxable retirement account
Regarding our overall financial progress
Thank you again mhalley and Duckie for taking the time to help me with the portfolio. It was exactly the kind of input I was looking for. Really appreciate it!
mhalley wrote:
Welcome to the forum! Consider creating an ips to guide you in the future.
I will create an IPS this week. It will also be extremely productive for my husband and I to work on this together. Thank you.
I have had the occasional moment of second guessing our 80/20 AA. Will definitely consider 70/30. For some reason I had only considered 60/40, and that felt too conservative for us.Duckie wrote:
20% bonds at your ages is a little low. I'd bump that up to 30%.
Regarding his ROTH account-
mhalley wrote:
The 3 fund portfolio is the goto here. For someone with no interest in finances, using a ls or tr fund is reasonable. Certainly it is easier to do rebalancing with individual funds. Whether you want to continue with the lifestrategy funds or switch entirely to 3 fund depends on if you want to spend the time doing the yearly rebalancing. You could always leave instructions for your husband to switch to tr or ls funds if you die first.
Duckie wrote:
Those 0.30-0.33% expense ratios are high (for Vanguard). I'd put everything in either Total Stock Market (TSM) or Total International Stock Market (TISM).
Switching to 3-fund sounds like the most straightforward option, with yearly rebalancing. I will exchange the current funds for TSM, TISM, and prioritize putting bonds in 401k before ROTH if possible.Duckie wrote:
You could, but I'd avoid bonds in a Roth account. In general it's better to put assets with higher expected growth (stocks) in Roth accounts and assets with lower expected growth (bonds) in pre-tax accounts. You have plenty of room for bonds in his solo 401k.
I will give serious thought to switching the entire portfolio to 3-fund, including our 401k. It might actually be simpler and easier. The IPS should be a huge help while I think about this.
Regarding doing a backdoor ROTH early in the year
mhalley wrote:
Doing a backdoor Roth at the beginning of the year is fine.
Thank you! I will do the 2017 backdoor contributions this month, and then 2018 backdoor contributions in January.Duckie wrote:
No problems.
Regarding old 401k at Fidelity
mhalley wrote:
Fidelity is a great co, no problem with leaving his old 401k there. I would just switch it to fidelity freedom index 2040 FBIFX if possible. If you have access to a cheaper fund such as s&p 500, then use that.
I edited my original post to include the 2 funds that our available with ER < 0.60%.Duckie wrote:
0.69% is high. What are the other options in his old 401k? List the names, ticker symbols, and plan expense ratios. The cheapest option is frequently a S&P 500 Index fund. Is one available? Also, it's only $15K. He could roll/convert it to his Roth IRA, take the one-time tax-hit, and be done with it.
FID US BOND IDX PR (FSITX) 0.05%
FID 500 INDEX PR (FUSVX) 0.045%
One of them is s&p500 with ER 0.045%, as suggested by both mhalley and Duckie. I will switch to that. Thank you!
Duckie wrote:
Have you considered rolling his solo 401k plan to Fidelity? They do allow incoming rollovers and also allow for cheaper Premium class shares. It's an option.
I had not considered this option. Thank you for pointing it out. Will explore it if I need it in the future.
Regarding the variable annuity
Duckie wrote:
If he is allowed to change the options inside the annuity then it would be part of the portfolio. Can he get out of it? Maybe he shouldn't but can he? After looking at the options I think the Total Stock Market Index Portfolio option is the best choice (if he can swap with minimal cost).
We cannot make any changes to the annuity for now. My in-laws would be hurt if we were to get out of it, or make any changes to it. They ask to see statements every quarter so they can monitor the growth of their gift. I would not want them to feel like we do not appreciate their generosity. But, I will also call and find out if any of the options you outlined are possible. Can’t hurt to know. For now, we can exclude it from our portfolio.
Regarding Taxable retirement account
Will definitely use CA-tax exempt bonds when we need more bonds in taxable.mhalley wrote:
Sounds good. You could also use ca tax exempt bond fund, as there is a limit to the amount of i bonds you can buy.
I have not paid much attention to trying to get to Admiral shares to keep costs down. Thank you for emphasizing that. Will try to do this as much as possible for our portfolio.Duckie wrote:
Your fund choices are fine. After the I-bonds pick one fund and get it to Admiral shares before adding the next fund.
Regarding our overall financial progress
We are planning to stay in our house, and in our HCOL area even in retirement. But, life might intervene and plans might change. I will definitely try using cfiresim. Thanks for the link.mhalley wrote:
Whether you need to save more depends on what you plan to do in retirement and what your projected expenses will be. Will you stay in a hcol area, or sell your house and move someplace cheaper? The general goal is to have a 4% or lower withdrawal rate, i.e. 25x yearly expenses. Use something like cfiresim to see if you will meet that goal at your current savings rate.
Thank you so much for taking the time to give me an example of what my retirement portfolio could look like. It was very helpful to get me to think about the entire portfolio as a whole, rather than individual accounts. I will remove the annuity from our portfolio for now, and then try and apply a 3-fund strategy across all accounts, keeping costs as low as possible. Also, will seriously consider 70/30 AA.Duckie wrote:
The following example of a retirement portfolio has an AA of 80% stocks, 20% bonds, with 25% of stocks in international. That breaks down to 60% US stocks, 20% international stocks, and 20% bonds. You could have:
Taxable at Treasury Direct -- $10K -- 2%
2% I-bonds
Taxable at Vanguard -- $0 -- 0% <-- For future use.
0% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)
His Individual 401k at Vanguard -- $277K -- 42%
13% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.15%)
11% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.18%)
18% (VBMFX) Vanguard Total Bond Market Index Fund Investor Shares (0.15%)
His old 401k at Fidelity -- $15K -- 2%
2% 500 Index or Total Stock
Variable Annuity at Vanguard -- $300K -- 45%
45% (N/A) Total Stock Market Index Portfolio (0.45%)
His Roth IRA at Vanguard -- $62K -- 8%
8% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)
Her Roth IRA at Vanguard -- $5.5K -- 1%
1% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.18%)
My comments:
This uses the desired 80/20 AA although I think you need more bonds.
This ignores the $58K you have listed in taxable because it's for future spending (even though the spending will end up in tax-sheltered accounts).
This assumes he can swap assets inside his annuity.
This means all rebalancing will be done in his solo 401k. Everything else could have just one fund.
Something to think about.
Thank you again mhalley and Duckie for taking the time to help me with the portfolio. It was exactly the kind of input I was looking for. Really appreciate it!
Re: Late Start-Seeking Portfolio Advice
So does this mean you can make changes but choose not to for now?SocalLiving wrote:We cannot make any changes to the annuity for now. My in-laws would be hurt if we were to get out of it, or make any changes to it.
Since all the current funds in the annuity are US stock funds and mostly large caps you could leave the annuity in the portfolio and just consider it as one big US large cap fund.I will remove the annuity from our portfolio for now, and then try and apply a 3-fund strategy across all accounts, keeping costs as low as possible. Also, will seriously consider 70/30 AA.
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Re: Late Start-Seeking Portfolio Advice
I actually didn’t know what I could do with the VVA because of the family issue. But, I looked into all our options yesterday. We can easily change funds through our online account. I think our in-laws would be fine with changing funds if we told them it was to lower expenses of the annuity.Duckie wrote:So does this mean you can make changes but choose not to for now?SocalLiving wrote:We cannot make any changes to the annuity for now. My in-laws would be hurt if we were to get out of it, or make any changes to it.
Since all the current funds in the annuity are US stock funds and mostly large caps you could leave the annuity in the portfolio and just consider it as one big US large cap fund.I will remove the annuity from our portfolio for now, and then try and apply a 3-fund strategy across all accounts, keeping costs as low as possible. Also, will seriously consider 70/30 AA.
I edited my OP to add the funds available in the VVA.
You had suggested switching to VVA-Ttl Stock Market Idx (0.45%). This is probably a dumb question, but I am a little confused by the descriptions of the VVA fund holdings. Is VVA-Ttl Stock Market Idx the same as Vanguard Total Stock Market Index Fund (VTSMX)?
Is the VVA-Ttl STock Market Idx (0.45%) a better choice than VVA-Equity Index (0.44%) because of increased diversification?
I will include the VVA in our portfolio as Domestic Stock allocation, and then rebalance the other accounts to get to 70/30 AA.
Thank you for your advice. It’s amazing how much I’m learning!
Re: Late Start-Seeking Portfolio Advice
It's not exactly the same because it's made up of two parts, the Equity Index Portfolio (like the 500 Index) and the Extended Market Index Fund with an 82/18 ratio. It's the closest annuity option to the total US stock market and for practical purposes is the same as TSM.SocalLiving wrote:Is VVA-Ttl Stock Market Idx the same as Vanguard Total Stock Market Index Fund (VTSMX)?
Yes. It includes the missing mid/small caps.Is the VVA-Ttl STock Market Idx (0.45%) a better choice than VVA-Equity Index (0.44%) because of increased diversification?
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Re: Late Start-Seeking Portfolio Advice
Thank you!
Re: Late Start-Seeking Portfolio Advice
In that case, the following example of a retirement portfolio has an AA of 70% stocks, 30% bonds, with 25% of stocks in international. That breaks down to 52% US stocks, 18% international stocks, and 30% bonds. You could have:SocalLiving wrote:I will include the VVA in our portfolio as Domestic Stock allocation, and then rebalance the other accounts to get to 70/30 AA.
Taxable at Treasury Direct -- $10K -- 2%
2% I-bonds
Taxable at Vanguard -- $0 -- 0% <-- For future use.
0% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)
His Individual 401k at Vanguard -- $277K -- 42%
5% (VTSMX) Vanguard Total Stock Market Index Fund Investor Shares (0.15%)
9% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.18%)
28% (VBMFX) Vanguard Total Bond Market Index Fund Investor Shares (0.15%)
His old 401k at Fidelity -- $15K -- 2%
2% (FUSVX) Fidelity 500 Index Fund Premium Class (0.045%)
Variable Annuity at Vanguard -- $300K -- 45%
45% (N/A) Total Stock Market Index Portfolio (0.45%)
His Roth IRA at Vanguard -- $62K -- 8%
8% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)
Her Roth IRA at Vanguard -- $5.5K -- 1%
1% (VGTSX) Vanguard Total International Stock Index Fund Investor Shares (0.18%)
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Re: Late Start-Seeking Portfolio Advice
I completed the fund exchanges in the old Fidelity 401k, my husband's ROTH and his VVA to get to 70/30 AA (with international 25% of stocks)
I opened the TIRA for both of us and am waiting for the funds to settle so I can do the backdoor ROTH contributions for 2017.
Currently working on our IPS and using retirement calculators to see if we are on target, or need to accelerate our retirement savings even more.
I will post a final completed portfolio when all the dust settles to make sure I didn't miss anything.
Thank you again Duckie and mhalley for your time and advice.
I opened the TIRA for both of us and am waiting for the funds to settle so I can do the backdoor ROTH contributions for 2017.
Currently working on our IPS and using retirement calculators to see if we are on target, or need to accelerate our retirement savings even more.
I will post a final completed portfolio when all the dust settles to make sure I didn't miss anything.
Thank you again Duckie and mhalley for your time and advice.