40 Year Olds, how are we doing.. and other questions

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
turner2
Posts: 12
Joined: Tue Sep 19, 2017 8:29 am

40 Year Olds, how are we doing.. and other questions

Post by turner2 » Tue Sep 19, 2017 8:49 pm

Specific questions are at the bottom

Emergency funds: Normally 6 months, currently this has dropped to 2, this is priority 1 for the remainder of the year, although I have not decided to divert from tax deferred investments. I consider my taxable account an Ext of my Emergency funds, and would sell whatever required in Taxable as needed.
Debt: Mortgage 95k on 220k-250k House, 4.25% 15 year. 7 ½ years left if no extra payments. Typically I have rounded up to the nearest $100 which knocks a little off the term, but makes little difference at this point. It is just for convenience now.
HELOC: This is a personal HELOC but it is used to help cashflow a LLC interest of mine, and is being paid back by the LLC. I include it here, but it fluctuates greatly. It also has been generally available for Emergency/planned use as needed. 34k Total at 8.08%
Tax Filing Status: Married Filing Jointly,
Tax Rate: 25% Federal, 4.6% State
State of Residence: KS
Age: 40/41
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 30% of stocks

Approximately 500-550k Total Portfolio. All but the 10k in the Taxable account is tax advantaged.
I’ve rounded to remove decimal points.

Current retirement assets

Taxable
1% FIDELITY TOTAL MKT INVESTOR CLASS (FSTMX) (0.09%) )

His 401k Fidelity Brokerage Link
13% Fidelity U.S. Bond Index Fund FSITX 0.045%
20% FIDELITY TOTAL INTL INDEX FD PREMIUM CL (FTIPX) (0.1%) – 1% Redemption Feed (I believe this is just for early redemption)
50% Fidelity Total Market Index Fund FSTVX 0.035%
Company match – 100% up to 5% of Eligible pay

His Cash Pension Plan
7% Vested balance. No new contributions by anyone but does earn a minimum of 5% yearly. I consider this part of my bond allocation. It will be available at 55 as a lump sum or could be setup for lifetime payments at that time or later. No idea how it is invested on the backend, so I just consider it bonds at 5%.

His Roth IRA at Fidelity
3% Fidelity® Total Market Index Fund - Premium Class FSTVX 0.035%

Her Roth IRA at Fidelity
3% Fidelity® Total Market Index Fund - Premium Class FSTVX 0.035%

Her 403B At Fidelity
2% Fidelity® Total Market Index Fund - Premium Class FSTVX 0.035%

HSA account
1% Schwab S&P 500 Index SWPPX 0.090%

529 At Fidelity
I don’t include this is my overall investments, it is in the 2018 Index fund and totals around 20k – We no longer contribute to this, haven’t in years.

Total of All Accounts Together (not each account individually) should equal 100%.

Contributions

New annual Contributions
$9,000 His 401k. + Approx $6300 Employer Contribution
$12,720 her 403b (no matching contributions) This account is effectively maxed (97% contributions)
$5,500 his Roth IRA
$5,500 her Roth IRA
$5-10k taxable

Target is currently 20% Bond/Fixed and 80% Equity


Questions
1. FTIPX in my 401k Brokerage Link account has a 1% redemption fee. This bothers me, but I don’t know why. Is there a better Fidelity option for international stock? I’m comfortable with my other investment options in the other accounts. Can someone explain to me in English when that 1% would kick in, or recommend an alternative?
2. HELOC - This is used as an LLC debt basically, should I just pay it off as quick as possible, due to the high rate? I really like to keep my business interests separate, and this is paid for by the LLC. Obviously I have personally guaranteed the LLC
3. Is it ok to consider my cash pension plan balance as part of my Bond allocation? It earns 5% yearly, nothing fancy but I don’t want to ignore it.
4. Overall. How are we doing for 40? Figure currently at 100k per year in expenses, including taxes, insurance, mortgage and kids. This is starting to decrease as kids age, etc. Would hope to be in a situation where at 60 could retire early while deferring SS for a while. Our number is approx. 2-3M total, will we get there? Most calculators seem to give more than 90-95% chance of being good.
Last edited by turner2 on Thu Sep 21, 2017 8:54 am, edited 1 time in total.

PFInterest
Posts: 2684
Joined: Sun Jan 08, 2017 12:25 pm

Re: 40 Year Olds, how are we doing.. and other questions

Post by PFInterest » Tue Sep 19, 2017 9:01 pm

why are you investing in taxable when you have tax advantaged space left?

pkcrafter
Posts: 13731
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: 40 Year Olds, how are we doing.. and other questions

Post by pkcrafter » Tue Sep 19, 2017 9:42 pm

FTIPX in my 401k Brokerage Link account has a 1% redemption fee. This bothers me, but I don’t know why. Is there a better Fidelity option for international stock? I’m comfortable with my other investment options in the other accounts. Can someone explain to me in English when that 1% would kick in, or recommend an alternative?
Redemption fees are not uncommon. They are used to discourage investors from frequent trading which increases costs. The redemption time might be 60 days, but it could be from 30 to 365 days. I don't see any problem for a long term investor, but you could check with your plan to find out what it is.

Paul
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.

supersecretname
Posts: 104
Joined: Tue Sep 01, 2015 2:33 pm

Re: 40 Year Olds, how are we doing.. and other questions

Post by supersecretname » Tue Sep 19, 2017 10:03 pm

turner2 wrote:
Tue Sep 19, 2017 8:49 pm
Figure currently at 100k per year in expenses, including taxes, insurance, mortgage and kids.
You serious clark?

If you want to increase your savings, this is the place to start. You don't list income, but if I'm stereotyping here, 100K spent in KS sounds like a crapton of money. Do you have a budget?

Also, get rid of that HELOC balance. Money in fungible and you are bleeding it.

Topic Author
turner2
Posts: 12
Joined: Tue Sep 19, 2017 8:29 am

Re: 40 Year Olds, how are we doing.. and other questions

Post by turner2 » Tue Sep 19, 2017 10:13 pm

PFInterest wrote:
Tue Sep 19, 2017 9:01 pm
why are you investing in taxable when you have tax advantaged space left?

Just recently got access to the 403b with decent options (and no matching)...

I prefer to have a little bit in the taxable because although it isn't the most tax efficient, I want to have some that is accessible in taxable. The intention is to be maxing the 401k again in the next 2-3 years. It was maxed for years before the 403b became available.

Topic Author
turner2
Posts: 12
Joined: Tue Sep 19, 2017 8:29 am

Re: 40 Year Olds, how are we doing.. and other questions

Post by turner2 » Tue Sep 19, 2017 10:15 pm

pkcrafter wrote:
Tue Sep 19, 2017 9:42 pm
FTIPX in my 401k Brokerage Link account has a 1% redemption fee. This bothers me, but I don’t know why. Is there a better Fidelity option for international stock? I’m comfortable with my other investment options in the other accounts. Can someone explain to me in English when that 1% would kick in, or recommend an alternative?
Redemption fees are not uncommon. They are used to discourage investors from frequent trading which increases costs. The redemption time might be 60 days, but it could be from 30 to 365 days. I don't see any problem for a long term investor, but you could check with your plan to find out what it is.

Paul
It is a brokerage link account. So it is just the normal FTIPX fund.
So I believe it is just, what i don't understand is whether it is 90 days from the last purchase or per lot? Doesn't really matter for quite some time I guess, other than possibly rebalancing.

Redemption
0 - 90 Days 1.00%

Topic Author
turner2
Posts: 12
Joined: Tue Sep 19, 2017 8:29 am

Re: 40 Year Olds, how are we doing.. and other questions

Post by turner2 » Tue Sep 19, 2017 10:21 pm

supersecretname wrote:
Tue Sep 19, 2017 10:03 pm
turner2 wrote:
Tue Sep 19, 2017 8:49 pm
Figure currently at 100k per year in expenses, including taxes, insurance, mortgage and kids.
You serious clark?

If you want to increase your savings, this is the place to start. You don't list income, but if I'm stereotyping here, 100K spent in KS sounds like a crapton of money. Do you have a budget?

Also, get rid of that HELOC balance. Money in fungible and you are bleeding it.
I am serious. 100k sounds like a lot, and it is. Approximately 20-30k of that is taxes alone. Not all of KS is wheat fields ;)

We have had a monthly budget for years and after taxes are in the 60k range for expenses. This doesn't include savings, retirement or taxes, I do a budget on net paycheck only. That could certainly come down a bit and likely will over the coming few years. We are at a point in our lives where the expenses will only go down as kids age out soon enough, and the Mortgage is paid off.

Total Income varies but is normally in the 140-150k range. Savings is 40k off of that.
I'm not sure I really do WANT to increase savings, that is why I am asking were we are at. Certainly we can increase savings, if we choose. Trying to strike a balance without screwing up the future or being too much of a hermit.

User avatar
Watty
Posts: 18017
Joined: Wed Oct 10, 2007 3:55 pm

Re: 40 Year Olds, how are we doing.. and other questions

Post by Watty » Tue Sep 19, 2017 10:39 pm

You may get better responses if you edit your post to include the names of the funds and not just their ticker symbols.
turner2 wrote:
Tue Sep 19, 2017 8:49 pm
Debt: Mortgage 95k on 220k-250k House, 4.25% 15 year. 7 ½ years left if no extra payments. Typically I have rounded up to the nearest $100 which knocks a little off the term, but makes little difference at this point. It is just for convenience now.
HELOC: This is a personal HELOC but it is used to help cashflow a LLC interest of mine, and is being paid back by the LLC. I include it here, but it fluctuates greatly. It also has been generally available for Emergency/planned use as needed. 34k Total at 8.08%
You should be able to get a 5, 7, or 10 year ARM in the low 3% range. You should look at refinancing and consolidating these into one loan. You are kidding yourself my thinking the HELOC is really connected to the LLC.
turner2 wrote:
Tue Sep 19, 2017 8:49 pm
3. Is it ok to consider my cash pension plan balance as part of my Bond allocation? It earns 5% yearly, nothing fancy but I don’t want to ignore it.
I would not treat it like a bond since it will not change value as interest rates go up and down. People try to shoehorn too many thing into being a stock or a bond when they are really a different asset class. For example things like real estate, and precious metals are also all different asset classes that are not a stock or bond.

What I would do instead is to try to use your pension value for to try to reduce your retirement investment income goal. For example (in made up numbers) if you expect for your pension to provide $10,000 of your $100,000 retirement goal then you would lower your investment income goal to $90,000.

turner2 wrote:
Tue Sep 19, 2017 8:49 pm
4. Overall. How are we doing for 40? Figure currently at 100k per year in expenses, including taxes, insurance, mortgage and kids.
I didn't try to crunch the numbers but you are doing great especially since you could likely work a few more years if you really needed to. A lot of how you your investments are doing in 20 years really depends on the investment returns over those 20 years so trying to make any firm predictions is pretty futile.

$100K a year with no mortgage, kids out on their own, and no more FICA taxes is a lot of income and probably more than most people would really need. You also need to look at your expenses at different ages. You might spend a lot on things like travel when you first retire but I have seen relatives naturally slow down by the time they were in their mid 70's even though their health was still relatively good. At that point they didn't want to travel much and even doing things like going out to diner was less common since it required more effort than it was worth. With a paid off house there were often months when they didn't even spend their entire Social Security check.

Topic Author
turner2
Posts: 12
Joined: Tue Sep 19, 2017 8:29 am

Re: 40 Year Olds, how are we doing.. and other questions

Post by turner2 » Tue Sep 19, 2017 10:46 pm

Watty wrote:
Tue Sep 19, 2017 10:39 pm
You may get better responses if you edit your post to include the names of the funds and not just their ticker symbols.

I think that I did that, did I miss some?
turner2 wrote:
Tue Sep 19, 2017 8:49 pm
Debt: Mortgage 95k on 220k-250k House, 4.25% 15 year. 7 ½ years left if no extra payments. Typically I have rounded up to the nearest $100 which knocks a little off the term, but makes little difference at this point. It is just for convenience now.
HELOC: This is a personal HELOC but it is used to help cashflow a LLC interest of mine, and is being paid back by the LLC. I include it here, but it fluctuates greatly. It also has been generally available for Emergency/planned use as needed. 34k Total at 8.08%
You should be able to get a 5, 7, or 10 year ARM in the low 3% range. You should look at refinancing and consolidating these into one loan. You are kidding yourself my thinking the HELOC is really connected to the LLC.

I'll look into the ARM again, I have yet to find one that makes sense after closing costs. Point taken on the HELOC, and after digesting and thinking for a while will likely pay it down/off rather quickly. ?
turner2 wrote:
Tue Sep 19, 2017 8:49 pm
3. Is it ok to consider my cash pension plan balance as part of my Bond allocation? It earns 5% yearly, nothing fancy but I don’t want to ignore it.
I would not treat it like a bond since it will not change value as interest rates go up and down. People try to shoehorn too many thing into being a stock or a bond when they are really a different asset class. For example things like real estate, and precious metals are also all different asset classes that are not a stock or bond.

What I would do instead is to try to use your pension value for to try to reduce your retirement investment income goal. For example (in made up numbers) if you expect for your pension to provide $10,000 of your $100,000 retirement goal then you would lower your investment income goal to $90,000.

I'll consider that, I don't really expect it to move the needle on income, it would be under 10k and it is so far out that it is just noise at this point.

turner2 wrote:
Tue Sep 19, 2017 8:49 pm
4. Overall. How are we doing for 40? Figure currently at 100k per year in expenses, including taxes, insurance, mortgage and kids.
I didn't try to crunch the numbers but you are doing great especially since you could likely work a few more years if you really needed to. A lot of how you your investments are doing in 20 years really depends on the investment returns over those 20 years so trying to make any firm predictions is pretty futile.

$100K a year with no mortgage, kids out on their own, and no more FICA taxes is a lot of income and probably more than most people would really need. You also need to look at your expenses at different ages. You might spend a lot on things like travel when you first retire but I have seen relatives naturally slow down by the time they were in their mid 70's even though their health was still relatively good. At that point they didn't want to travel much and even doing things like going out to diner was less common since it required more effort than it was worth. With a paid off house there were often months when they didn't even spend their entire Social Security check.
The 100k retirement income is high, I realize, but I have to assume something. It is a goal, we are to far out for a realistic guess in my opinion of what is really required.

Early retirement would hopefully include a fair amount of travel and other expenses that wouldn't apply in later years. But it provides some buffer for healthcare and other unknowns as well.

pindevil
Posts: 76
Joined: Thu Apr 03, 2014 11:04 am

Re: 40 Year Olds, how are we doing.. and other questions

Post by pindevil » Tue Sep 19, 2017 11:24 pm

turner2 wrote:
Tue Sep 19, 2017 10:13 pm
PFInterest wrote:
Tue Sep 19, 2017 9:01 pm
why are you investing in taxable when you have tax advantaged space left?

Just recently got access to the 403b with decent options (and no matching)...

I prefer to have a little bit in the taxable because although it isn't the most tax efficient, I want to have some that is accessible in taxable. The intention is to be maxing the 401k again in the next 2-3 years. It was maxed for years before the 403b became available.
I'm not sure I understand your reasoning for putting money in taxable over tax advantaged. If you need money in a pinch you can always take your contribution out of Roth, no penalties.

Topic Author
turner2
Posts: 12
Joined: Tue Sep 19, 2017 8:29 am

Re: 40 Year Olds, how are we doing.. and other questions

Post by turner2 » Tue Sep 19, 2017 11:26 pm

pindevil wrote:
Tue Sep 19, 2017 11:24 pm
turner2 wrote:
Tue Sep 19, 2017 10:13 pm
PFInterest wrote:
Tue Sep 19, 2017 9:01 pm
why are you investing in taxable when you have tax advantaged space left?

Just recently got access to the 403b with decent options (and no matching)...

I prefer to have a little bit in the taxable because although it isn't the most tax efficient, I want to have some that is accessible in taxable. The intention is to be maxing the 401k again in the next 2-3 years. It was maxed for years before the 403b became available.
I'm not sure I understand your reasoning for putting money in taxable over tax advantaged. If you need money in a pinch you can always take your contribution out of Roth, no penalties.
Understood, but I just want it built up a little bit to have more options. The tax advantage will be maxed soon enough anyway.

Topic Author
turner2
Posts: 12
Joined: Tue Sep 19, 2017 8:29 am

Re: 40 Year Olds, how are we doing.. and other questions

Post by turner2 » Wed Sep 20, 2017 10:47 pm

Any other thoughts on that taxable?

I realize it isn't the most tax efficient, but with the E fund down low at the moment, I'd rather put fund there and E Fund until that is finished up again.
I suspect it will be about 1 year before I am maxing the 403b and 401k as well. I like the idea of getting a reasonable balance of Traditional, Roth and Taxable in place early on. The E Fund may eventually go away, but not until the taxable account is much larger.

Olemiss540
Posts: 1166
Joined: Fri Aug 18, 2017 8:46 pm

Re: 40 Year Olds, how are we doing.. and other questions

Post by Olemiss540 » Thu Sep 21, 2017 8:33 am

I would refinance that mortgage to a lower rate if possible, work like hell to payoff that HELOC, stop contributing to Roth and Taxable accounts until both pretax accounts are maxed, and consider Roth contributions as a second tier of emergency funds. You would be in much better shape if you could roll the heavy tax burden into retirement accounts and drastically increase your savings amounts per year with no effect on your net pay.

You are in pretty good shape, but with a few small changes could be in GREAT shape. That 8% HELOC IS an emergency IMO.
turner2 wrote:
Wed Sep 20, 2017 10:47 pm
Any other thoughts on that taxable?

I realize it isn't the most tax efficient, but with the E fund down low at the moment, I'd rather put fund there and E Fund until that is finished up again.
I suspect it will be about 1 year before I am maxing the 403b and 401k as well. I like the idea of getting a reasonable balance of Traditional, Roth and Taxable in place early on. The E Fund may eventually go away, but not until the taxable account is much larger.
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

Topic Author
turner2
Posts: 12
Joined: Tue Sep 19, 2017 8:29 am

Re: 40 Year Olds, how are we doing.. and other questions

Post by turner2 » Thu Sep 21, 2017 8:50 am

Just to be clear, there is about 9k left in 401k space left. There is no 403b space left (income limit), so her's is maxed until more money is made.

Topic Author
turner2
Posts: 12
Joined: Tue Sep 19, 2017 8:29 am

Re: 40 Year Olds, how are we doing.. and other questions

Post by turner2 » Sun Sep 24, 2017 8:39 pm

It wouldn't take much effort to update the 401k before year end to max it out this year, and just draw down the taxable as needed. Thoughts on this?

Also, I am showing 14k left in interest on the Mortgage at 4.25%, even a 1% drop in the rate would only save 3k over the life of it.. ANd I can't find rates around here that good, with an average of 1500-2500 closing. I just don't see it being possible, what am I missing?

Bank Rate doesn't show zero closing rates.

Topic Author
turner2
Posts: 12
Joined: Tue Sep 19, 2017 8:29 am

Re: 40 Year Olds, how are we doing.. and other questions

Post by turner2 » Tue Sep 26, 2017 8:26 pm

Made the move to just max the 401k for the rest of this year. (There is enough time).. May pull from taxable for cash flow until it is maxed.

Will pay down/off the HELOC soon enough.

Any other general thoughts?

I don't see any advertised Mortgages that are a benefit for refinancing... At least not anything meaningful.

Olemiss540
Posts: 1166
Joined: Fri Aug 18, 2017 8:46 pm

Re: 40 Year Olds, how are we doing.. and other questions

Post by Olemiss540 » Tue Sep 26, 2017 9:08 pm

turner2 wrote:
Tue Sep 26, 2017 8:26 pm
Made the move to just max the 401k for the rest of this year. (There is enough time).. May pull from taxable for cash flow until it is maxed.

Will pay down/off the HELOC soon enough.

Any other general thoughts?

I don't see any advertised Mortgages that are a benefit for refinancing... At least not anything meaningful.
Sounds great! I think the majority are recommending refinancing to get rid of that horrendous HELOC rate. Maybe a no cost refi with a 3.5% rate or similar? Would cost nothing out of pocket and you could pay it off as s your LLC income allowed?

Any access to an HSA?
I hold index funds because I do not overestimate my ability to pick stocks OR stock pickers.

Topic Author
turner2
Posts: 12
Joined: Tue Sep 19, 2017 8:29 am

Re: 40 Year Olds, how are we doing.. and other questions

Post by turner2 » Tue Sep 26, 2017 9:18 pm

HSA has been maxed for years. Perhaps I forgot to include that. I am slowly converting to not spending HSA funds.


Yeah that would make sense, but I'll just pay the HELOC off rather than mess with a refi. If there was an issue doing that, I could see it for sure..

Post Reply