General feedback - Specific feedback about taxable path forward

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Topic Author
tx_hombre
Posts: 19
Joined: Tue Jun 27, 2017 7:25 am

General feedback - Specific feedback about taxable path forward

Post by tx_hombre »

First time poster here. Have spent the last few weeks reading just about every post here! What a fantastic community.

Looking for feedback primarily on how we plan to expand into taxable going forward, as well as general feedback on our portfolio and financial situation.

Emergency funds: 6 months of expenses (noted below).
Debt: None, except a (new) mortgage -- 30 year fixed at 4% with $373,000 left. (Put 20% down a few months back.)
Tax Filing Status: Married Filing Jointly, two children with one more on the way
Salary: Base $155,000 with quarterly stock compensation pay outs of $15k-30k.
Tax Rate: 28% Federal, 0% State
State of Residence: Texas
Age: mid-30s
Desired Asset allocation: 90% stocks / 10% bonds; drifting more towards 80/20 in the next 1-2 years
Desired International allocation: 30% of stocks


Short Term Reserves and “Emergency” Fund: $117,000
$67,000 “emergency” fund (covers 6-8 months)
$15,000 in Ally 1% Savings
$35,000 in Ally 1.5% 11 month CD

Joint Taxable: $25,000
$25,000 VTSAX .04%

Non-Taxable: ~$240,000 Currently 88% stocks (70% US, 30% int’l) 12% bonds
His 401k
$22,000 FUSVX Fidelity 500 Index .045%
$14,000 FSIVX FidelityTotal International Index .08%
$10,500 FSEVX Fidelity Extended (mid/small cap) Market Index .07%
$8,000 MWTRX Metropolitan West Total Return Bond Fund .67%

His Roth IRA at Fidelity
$23,500 FSTVX Fidelity Total Market Index .045%
$14,500 FSGDX Fidelity Global ex-US Total Index .11%

Her Roth IRA at Vanguard
$38,000 VTSAX Vanguard Total Market Index
$16,000 VTIAX Vanguard Total Int’l
$10,000 VBTLX Vanguard Total Bond

Her Traditional IRA at Vanguard
$1,600 VTSAX — We only have this as a result of excess contribution to her Roth in 2015

Also have two 529s with $11k each that we plan to continue to fund more regularly going forward

Contributions
New annual Contributions
Maxing 401k + employer matches up to 4%


Questions:
Open ended: Please let me know if you have any feedback at all on the overall portfolio. Still relatively new to the passive-focused approach.

1. We just opened our taxable account, starting with $25k into VTSAX. Would like to nail down our taxable plan going forward now. Current thinking that I’d like feedback on there: Deploy $10-15k into VTIAX (int’l) and then, down the road, start with VWITX (tax exempt intermediate) — all according to our asset allocation. Any reason to get more complicated than that?

2. Property taxes for us are around $14-16k. I like the idea of not having to think about it, hence the $15k (for 2017) $35k (for '18 and beyond) in Ally. I know it could be working for us more. But the peace of mind of not having to worry about this for a while…Comforting. (Guess this is the behavioral part of personal finance!) Is this crazy? Does anyone else save this far in advance for something like property taxes?

3. Bond choices in 401(k). Currently holding MWTRX as noted above at .67%. Wanted a second look at the other choices:
FAGIX Fidelity Capital & Income .75%
PTRAX PIMCO Total Return .72%
VAIPX Vanguard Inflation-Protected Securities .1%

Thank you!!
Last edited by tx_hombre on Wed Jun 28, 2017 6:25 am, edited 2 times in total.
PFInterest
Posts: 2684
Joined: Sun Jan 08, 2017 12:25 pm

Re: General feedback - Specific feedback about taxable path forward

Post by PFInterest »

i dont think your tax bracket is correct based on those numbers.
Topic Author
tx_hombre
Posts: 19
Joined: Tue Jun 27, 2017 7:25 am

Re: General feedback - Specific feedback about taxable path forward

Post by tx_hombre »

Hi -- We brought in just over $230k last year, which I believe puts us into 33%, right?
Compensation is salary + stock compensation, which I hopefully outlined accurately in the original post. Happy to edit and correct though.
aristotelian
Posts: 8622
Joined: Wed Jan 11, 2017 8:05 pm

Re: General feedback - Specific feedback about taxable path forward

Post by aristotelian »

For property taxes, I have an automatic transfer out of our primary checking account every month with the prorated amount into our secondary checking account. Then I cut a check from the secondary account whenever taxes are due.

Your taxable account looks good.

I would avoid the bond choices in your 401k and increase bond holdings in Roth and taxable.
delamer
Posts: 10677
Joined: Tue Feb 08, 2011 6:13 pm

Re: General feedback - Specific feedback about taxable path forward

Post by delamer »

tx_hombre wrote:Hi -- We brought in just over $230k last year, which I believe puts us into 33%, right?
Compensation is salary + stock compensation, which I hopefully outlined accurately in the original post. Happy to edit and correct though.
You taxable income determines your bracket, not your gross.
mega317
Posts: 4582
Joined: Tue Apr 19, 2016 10:55 am

Re: General feedback - Specific feedback about taxable path forward

Post by mega317 »

233k is bottom of 33%. Minus two exemptions and standard deduction puts you in 28% all else being equal. And you'll be itemizing with the mortgage.

If your tax-advantaged space has room for all your bonds you probably don't need bonds in taxable. (There are some varying opinions on this point.) I'd put all your bonds in Roth and get rid of the expensive one in 401k. Tax-exempt bonds in taxable is definitely a reasonable alternative, and some people want only stocks in Roth.

For saving property taxes--you have an emergency fund plus the savings for taxes, so you really just have a larger emergency fund. You can look into "placing cash needs in tax-advantaged" in the wiki, but I might not do that until your taxable is a little larger.

Overall you're doing great!
https://www.bogleheads.org/forum/viewtopic.php?t=6212
Topic Author
tx_hombre
Posts: 19
Joined: Tue Jun 27, 2017 7:25 am

Re: General feedback - Specific feedback about taxable path forward

Post by tx_hombre »

delamer wrote:
tx_hombre wrote:Hi -- We brought in just over $230k last year, which I believe puts us into 33%, right?
Compensation is salary + stock compensation, which I hopefully outlined accurately in the original post. Happy to edit and correct though.
You taxable income determines your bracket, not your gross.
Just opened our 2015 return and, my mistake, we are not in 33%. Will update the original. Apologies.
Topic Author
tx_hombre
Posts: 19
Joined: Tue Jun 27, 2017 7:25 am

Re: General feedback - Specific feedback about taxable path forward

Post by tx_hombre »

mega317 wrote:If your tax-advantaged space has room for all your bonds you probably don't need bonds in taxable. (There are some varying opinions on this point.) I'd put all your bonds in Roth and get rid of the expensive one in 401k. Tax-exempt bonds in taxable is definitely a reasonable alternative, and some people want only stocks in Roth.
Thank you! Appreciate that. Great (and now obvious) point about moving bond out of the 401(k) because of the choices there.
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KlingKlang
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Re: General feedback - Specific feedback about taxable path forward

Post by KlingKlang »

tx_hombre wrote:1. We just opened our taxable account, starting with $25k into VTSAX. Would like to nail down our taxable plan going forward now. Current thinking that I’d like feedback on there: Deploy $10-15k into VTIAX (int’l) and then, down the road, start with VWITX (tax exempt intermediate) — all according to our asset allocation. Any reason to get more complicated than that?
Sounds good to me.

If you are less than 30 years from your expected retirements you can also take a look at Series I US Savings Bonds. They can be useful as a tax-deferred emergency fund/fixed income and tax-free educational alternative.
tx_hombre wrote:2. Property taxes for us are around $14-16k. I like the idea of not having to think about it, hence the $15k (for 2017) $35k (for '18 and beyond) in Ally. I know it could be working for us more. But the peace of mind of not having to worry about this for a while…Comforting. (Guess this is the behavioral part of personal finance!) Is this crazy? Does anyone else save this far in advance for something like property taxes?
Ouch! I guess that's the price that you pay for not having state income taxes (And local residential income taxes, local employment income taxes, local piggyback sales taxes, local sin taxes - Heck, I think that I'll move to Texas). I have no problem with holding lots of cash if it lets you sleep well and you understand that you need to have a higher total portfolio to reach your goals.
tx_hombre wrote:3. Bond choices in 401(k). Currently holding MWTRX as noted above at .67%. Wanted a second look at the other choices:
FAGIX Fidelity Capital & Income .75%
PTRAX PIMCO Total Return .72%
VAIPX Vanguard Inflation-Protected Securities .1%
MWTRX jumped out as your weakest fund. VAIPX could be a good alternative, especially since your wife has VBTLX in her Roth IRA (I hold equal amounts of each). Also check if you have a decent stable value fund in your 401(k). It's a fixed income alternative that you can only get in a 401(k) type account. Don't worry that it's not technically a bond fund.
Last edited by KlingKlang on Wed Jun 28, 2017 9:10 am, edited 2 times in total.
Topic Author
tx_hombre
Posts: 19
Joined: Tue Jun 27, 2017 7:25 am

Re: General feedback - Specific feedback about taxable path forward

Post by tx_hombre »

Amazing - less than two hours, and have already gotten some great feedback. Thank you all again!
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