Portfolio Review

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Topic Author
Frenchy1011
Posts: 23
Joined: Tue Mar 28, 2017 2:43 pm

Portfolio Review

Post by Frenchy1011 »

Hey all,

Just wanted to state I love this blog and the great information. I am just starting my investment journey. 2017 was my first big year of investing, and although I was happy with how I did, I am planning on going all out in 2018. I would love some feedback on my plan and whether I am missing anything specifically from this. Thank you so much for your responses!!

Emergency Funds: $20,000 (about 4 months of expenses)

Debt:
1) House: Principal of $225,768.55 as of July 2017, Interest rate of 3.125% until June 2020
2) Student Loan: Current Balance of $309,457.31, Interest rate of 7%. I am currently pursuing PSLF, and have made 45 of the 120 required payments. I know this is astronomically high, but I plan on having a large amount of that paid off. Currently paying $992.93 monthly

Tax Filing Status: Married filing jointly with 2 dependent children

Tax Rate: Federal 28% ; State 6.84% (Net Income $175,000, one income household)

State of Residence: Nebraska

Age: 30

Desired Asset Allocation: 90% Stock / 10% Bond

Desired International Allocation: 30% of Stocks

Current Assets: Approximately $40,000 in tax-deferred accounts (403b, 457b) and tax-advantaged accounts (Roth IRA and Spousal Roth IRA)

Planned Retirement Assets for 2018:
1) His 403b ($18,000/yr plus company match of $8,750/yr) Through Wells Fargo:
a. VINIX Vanguard Institutional Index: 62% (Total of $16,585/yr) ; ER of 0.04
b. VIEIX Vanguard Extended Market Index: 14% (Total of $3,745/yr) ; ER of 0.07
c. MWTSX Metropolitan West Total Return Bond Fund: 8% (Total of $2,140/yr) ; ER of 0.38
d. FTGLX Federated Total Return Government Bond Fund: 8% (Total of $2,140/yr) ; ER of 0.30
e. VIPIX Vanguard Inflation-Protected Secs: 8% (Total of $2,140/yr) ; ER of 0.07
OF NOTE: 403b also carries a $52/yr fee for maintenance

2) His 457b ($18,000/yr) Through Wells Fargo:
a. VTIAX Vanguard Total International Index (100%) ; ER of 0.11

3) His HSA ($5,750/yr plus company contribution $1,000/yr) Through Healthcare Bank:
a. VFINX Vanguard 500 Index (100%) ; ER of 0.16

4) His Roth IRA ($5,500/yr) Through Vanguard:
a. VTSAX Vanguard Total Stock Market Index (100%) ; ER of 0.04

5) Her Roth IRA ($5,500/yr) Through Vanguard:
a. VGSIX Vanguard REIT Index (100%) ; ER of 0.26

Overall Allocation:
US Stock: $32,580/yr (58% of Equity, 52% overall)
International Stock: $18,000/yr (32% of Equity, 29% overall)
REIT: $5,500/yr (10% of Equity, 9% overall)
US Bond: $6,420/yr (10% overall)

Total Expense Ratio (As far as I can tell):
$72.40 + $52 (maintenance fee of 403b) = $124.40 = Actual ER of 0.199

Total Contribution:
$62,500/yr, or 35.71% of gross income

Questions:
1) How does this allocation look? Is there a major change that would be beneficial to make?
2) My goal will be to retire early, around age 45-50. I am hoping for a total nest egg of $2,000,000 and SWR of 80,000 yearly. I am hoping I can get there with this (as my pay and match should continue to increase over the years).
3) The next step: Will that be a taxable account? Increase savings/emergency fund? Pay off mortgage? These are tough questions, but thanks anyway!

Overall just looking to make sure that this seems like an appropriate plan for 2018. Thanks so much, I really appreciate this community and the feedback.


Stephen Tetrault
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Tyler Aspect
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Re: Portfolio Review

Post by Tyler Aspect »

Welcome to Bogleheads.

You have significant student loans outstanding. It could make sense to half your 401k contribution rate to pre-pay your student loan.

Consider dialing down your investment risk slightly to 80% stock / 20% bond, since you also have loan risks.

Otherwise the individual investments looked good to me.

https://www.credible.com/blog/4-things- ... repayment/
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.
Topic Author
Frenchy1011
Posts: 23
Joined: Tue Mar 28, 2017 2:43 pm

Re: Portfolio Review

Post by Frenchy1011 »

Thanks for the reply. I am currently doing the PSLF and so am putting the least amount possible to the loans, as they will be forgiven in another 6 years or so. So I'm not planning on putting any extra towards that. Is that what you are talking about? Everything else is great with the recommendations!
billfromct
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Joined: Tue Dec 03, 2013 9:05 am

Re: Portfolio Review

Post by billfromct »

What about a 529 college savings plan for the two "dependent children"?

bill
Topic Author
Frenchy1011
Posts: 23
Joined: Tue Mar 28, 2017 2:43 pm

Re: Portfolio Review

Post by Frenchy1011 »

billfromct wrote:What about a 529 college savings plan for the two "dependent children"?

bill

Yes I do have a 529 plan for each child.Nebraska has a tax break up to $10,000 yearly so I contribute $417 monthly to each child to get to my $10,000 yearly contribution.
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CyclingDuo
Posts: 3672
Joined: Fri Jan 06, 2017 9:07 am

Re: Portfolio Review

Post by CyclingDuo »

Frenchy1011 wrote:Thanks for the reply. I am currently doing the PSLF and so am putting the least amount possible to the loans, as they will be forgiven in another 6 years or so. So I'm not planning on putting any extra towards that. Is that what you are talking about? Everything else is great with the recommendations!

1) House: Principal of $225,768.55 as of July 2017, Interest rate of 3.125% until June 2020
2) Student Loan: Current Balance of $309,457.31, Interest rate of 7%. I am currently pursuing PSLF, and have made 45 of the 120 required payments. I know this is astronomically high, but I plan on having a large amount of that paid off. Currently paying $992.93 monthly
You've paid $44,682 to the student loan. You'll pay $74,670 more for a total of $119K. At the end of your 120 months of payments, will you receive full forgiveness of the remaining balance ($190K)? Or does that happen earlier after 7 years of public service?

Great to see you socking away 35.71% of your gross income into tax-deferred savings, Stephen.
Frenchy1011 wrote:2) My goal will be to retire early, around age 45-50. I am hoping for a total nest egg of $2,000,000 and SWR of 80,000 yearly. I am hoping I can get there with this (as my pay and match should continue to increase over the years).
We can appreciate the aggressive goal, but even in a "perfect" world return of averaging 7% nominal using your current amount saved ($40K), and your annual contributions going forward - you most likely will not have reached your $2M goal by age 45. I think a more conservative target of at least age 50 would be a more realistic goal, maybe even older based on what happens in "real life" with expenses, children, returns, salary, taxes, college costs for two children, vacation, etc... . It all depends on returns over the next 15-20 years of course, but at least based on the information you provided just giving you a heads up to be flexible with that retirement age goal. Obviously, things could change (inheritance, becoming a dual income family once the little ones are old enough, larger than inflation salary increases, and what not).

Your investments look pretty solid. We'd probably be less sanguine about the REITS and TIPS at your age and goals. REITS due to the percentage of them already in Vanguard Index Funds along with your home ownership.

https://www.bogleheads.org/wiki/Percent ... ndex_funds
"Save like a pessimist, invest like an optimist." - Morgan Housel
Topic Author
Frenchy1011
Posts: 23
Joined: Tue Mar 28, 2017 2:43 pm

Re: Portfolio Review

Post by Frenchy1011 »

CyclingDuo wrote:You've paid $44,682 to the student loan. You'll pay $74,670 more for a total of $119K. At the end of your 120 months of payments, will you receive full forgiveness of the remaining balance ($190K)? Or does that happen earlier after 7 years of public service?
I've actually paid much less than that so far. For the first three years of paying back the loans, I was in residency, and thus was paying much much less. I would say that for the first three years I probably paid a total of $12,000, and this past year I've paid about $12,000 for a total so far in 4 years of $24,000. The big benefit for this program is the three years of payments when I am not making much money. And yes, at the end of the 120 months I will get the full forgiveness for the remaining balance. I have a feeling it will be even more than the 190k, as my current payments of $1000 monthly are not even covering the interest accrued on a monthly basis. So in the next 6 years I do not see my principal going down at all, rather it will be going up. My current loans sit at 309k so if everything works out that will be the minimum that will be forgiven. Which is pretty amazing stuff.
CyclingDuo wrote:We can appreciate the aggressive goal, but even in a "perfect" world return of averaging 7% nominal using your current amount saved ($40K), and your annual contributions going forward - you most likely will not have reached your $2M goal by age 45. I think a more conservative target of at least age 50 would be a more realistic goal, maybe even older based on what happens in "real life" with expenses, children, returns, salary, taxes, college costs for two children, vacation, etc... . It all depends on returns over the next 15-20 years of course, but at least based on the information you provided just giving you a heads up to be flexible with that retirement age goal. Obviously, things could change (inheritance, becoming a dual income family once the little ones are old enough, larger than inflation salary increases, and what not).

Your investments look pretty solid. We'd probably be less sanguine about the REITS and TIPS at your age and goals. REITS due to the percentage of them already in Vanguard Index Funds along with your home ownership.
Thanks for this info. Yes I figure right now retirement at age 45 doesn't make sense. That being said, the longer I stay in my job, the higher the employer match (from 5% to 8% at 15 years service) and that monetary value will increase as my income increases. I do not see my income going crazy, but going from 175k yearly to 225k yearly eventually is reasonable.

Also, once everything is set up and my emergency fund is stable at 20k, my next step will be to put any extra away in a taxable account. So definitely age 50 is a rough estimate for my retirement currently, with hopes of decreasing it as I continue to save.

Thank you for the information on the REITs. I have been underwhelmed with it to this point (have had it about a year). I do obviously have some in the Index funds and my home, and have been going back and forth on whether I should just sell it and put it back into VTSMX, but am still waffling back and forth with that. Thanks for the thoughts!
desiderium
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Joined: Sat Jan 04, 2014 11:08 am

Re: Portfolio Review

Post by desiderium »

Wish I was investing and saving so intelligently at your age. Congrats and good luck.
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CyclingDuo
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Re: Portfolio Review

Post by CyclingDuo »

Frenchy1011 wrote:I've actually paid much less than that so far. For the first three years of paying back the loans, I was in residency, and thus was paying much much less. I would say that for the first three years I probably paid a total of $12,000, and this past year I've paid about $12,000 for a total so far in 4 years of $24,000. The big benefit for this program is the three years of payments when I am not making much money. And yes, at the end of the 120 months I will get the full forgiveness for the remaining balance. I have a feeling it will be even more than the 190k, as my current payments of $1000 monthly are not even covering the interest accrued on a monthly basis. So in the next 6 years I do not see my principal going down at all, rather it will be going up. My current loans sit at 309k so if everything works out that will be the minimum that will be forgiven. Which is pretty amazing stuff.
Amazing and fantastic! :beer
"Save like a pessimist, invest like an optimist." - Morgan Housel
Topic Author
Frenchy1011
Posts: 23
Joined: Tue Mar 28, 2017 2:43 pm

Re: Portfolio Review

Post by Frenchy1011 »

CyclingDuo wrote:
Frenchy1011 wrote:I've actually paid much less than that so far. For the first three years of paying back the loans, I was in residency, and thus was paying much much less. I would say that for the first three years I probably paid a total of $12,000, and this past year I've paid about $12,000 for a total so far in 4 years of $24,000. The big benefit for this program is the three years of payments when I am not making much money. And yes, at the end of the 120 months I will get the full forgiveness for the remaining balance. I have a feeling it will be even more than the 190k, as my current payments of $1000 monthly are not even covering the interest accrued on a monthly basis. So in the next 6 years I do not see my principal going down at all, rather it will be going up. My current loans sit at 309k so if everything works out that will be the minimum that will be forgiven. Which is pretty amazing stuff.
Amazing and fantastic! :beer
I know right! Just fingers crossed it follows through!
Valuethinker
Posts: 41147
Joined: Fri May 11, 2007 11:07 am

Re: Portfolio Review

Post by Valuethinker »

Frenchy1011 wrote:
CyclingDuo wrote:You've paid $44,682 to the student loan. You'll pay $74,670 more for a total of $119K. At the end of your 120 months of payments, will you receive full forgiveness of the remaining balance ($190K)? Or does that happen earlier after 7 years of public service?
I've actually paid much less than that so far. For the first three years of paying back the loans, I was in residency, and thus was paying much much less. I would say that for the first three years I probably paid a total of $12,000, and this past year I've paid about $12,000 for a total so far in 4 years of $24,000. The big benefit for this program is the three years of payments when I am not making much money. And yes, at the end of the 120 months I will get the full forgiveness for the remaining balance. I have a feeling it will be even more than the 190k, as my current payments of $1000 monthly are not even covering the interest accrued on a monthly basis. So in the next 6 years I do not see my principal going down at all, rather it will be going up. My current loans sit at 309k so if everything works out that will be the minimum that will be forgiven. Which is pretty amazing stuff.
What happens if you become ill and are not able to work? Genuine question-- I am not US based, this is all new stuff to me.

You need to plan for disasters, because they do happen in life.
Topic Author
Frenchy1011
Posts: 23
Joined: Tue Mar 28, 2017 2:43 pm

Re: Portfolio Review

Post by Frenchy1011 »

Valuethinker wrote:What happens if you become ill and are not able to work? Genuine question-- I am not US based, this is all new stuff to me.

You need to plan for disasters, because they do happen in life.
The payments do not need to be consecutive, so technically I could leave my job or fall ill for a certain amount of time, and then return to the job and continue on getting my 120 payments. That being said, If I were to be permanently disabled I would not be able to finish with the PSLF program. Definitely a risk I am taking, but a risk that is worth it in my opinion.
katnok
Posts: 171
Joined: Fri Nov 11, 2011 8:36 pm

Re: Portfolio Review

Post by katnok »

Frenchy,

Are you in primary care, such as Pediatrics?

$175k/yr is on the lower side, even for primary care. Primary care salaries have gone up considerably in recent years, and definitely there are jobs that pay you well above (in the range of 225-250k) that plus take care of part of your loans (PSLF).
Topic Author
Frenchy1011
Posts: 23
Joined: Tue Mar 28, 2017 2:43 pm

Re: Portfolio Review

Post by Frenchy1011 »

katnok wrote:Are you in primary care, such as Pediatrics?

$175k/yr is on the lower side, even for primary care. Primary care salaries have gone up considerably in recent years, and definitely there are jobs that pay you well above (in the range of 225-250k) that plus take care of part of your loans (PSLF).
Yes I am in Family Practice in the Midwest (NE). I am in a big city, so even though this is a lowish end of income for FPs, it is reasonable in Omaha and pretty comparable. I am just starting, and this is a two year contract. After the two years, my income will go to a minimum of 200k, so I do anticipate that being my new minimum after next year. Still, I do see your point and continue to try and get higher and higher income.
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