Getting ready to repatriate - help with portfolio

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Joined: Sat Sep 23, 2017 5:20 am

Getting ready to repatriate - help with portfolio

Post by repatNL » Sat Sep 23, 2017 6:24 am

Hi all – I recently found the Bogleheads forum and have been doing a lot of reading. I am currently living in Europe on an expat assignment for my company and will be repatriating to the U.S. around the beginning of 2018. I turned 50 this year and my thoughts have been increasingly turning towards early retirement. I’ve really enjoyed the travel opportunities I have had over the last 3 years and I’d like to figure out how I can retire early so I can do more of it.

When I return to the U.S., I will most likely return to Pennsylvania. I currently have a house there that a family member has been living in. It has no mortgage and is in a low cost of living area. Before I moved to the EU, my annual “normal” living expenses were around $50K, plus an additional budget of about $20K for travel and home renovation type expenses. In retirement (and before I am eligible for Medicare), I know I need to budget for health insurance. I’m not really clear on my expenses at this point and will need to get a handle on it over the next few years to determine when I have enough to retire safely/comfortably.

Following is my current situation:

Emergency funds: about 1 year

Debt: Rental property mortgage. Balance $60K, interest rate is 5%. The property cash flows nicely and fully covers its expenses, including funding future improvements and ability to cover vacancies. So while it is debt, I am not concerned about using personal funds to cover it in any way.
No other debt. Personal home is paid for. Current value about $220K.

Tax Filing Status: Single

Tax Rate: 28% Federal, 3.07% State
State of Residence: PA
Age: 50

Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 20% of stocks

My current total portfolio is about $1.2MM, excluding the real estate. This is mostly in my 401k, at about 85%. My company’s 401k allows for after-tax contributions, after the pre-tax limit is reached. I’ve been contributing after-tax for some time and the after-tax portion of my 401k is now about 15%. My 401k plan does not appear to allow the Mega-Backdoor Roth option.

Other accounts:
TD Ameritrade – brokerage – 2%
TD Ameritrade – ROTH – 2%
Other brokerage (company RSU account) – 4%
Cash (credit union savings)- 6% (not including emergency fund)

Current retirement assets

Taxable account – TD Ameritrade
2% in 5 individual US stocks – these are long term positions invested in the 1990’s with dividends reinvested since then

401k – with Fidelity
39% US Large Cap equity index (ticker symbol - none) (ER = 0.013)
19% International equity index (ticker symbol – none) (ER = 0.091)
13% Small and Mid Cap equity index (ticker symbol – none) (ER = 0.031)
11% Fixed income index (ticker symbol – none) (ER = 0.042)
4% Company stock (Megacorp and a Dow Jones company)
Company match is 6% on the first 4.5% contributed, in Company stock

Roth IRA at TD Ameritrade
As noted above, my Roth IRA is 2% of my total portfolio, so all of the below are <1% of the total. Therefore, I haven’t provided percentages.
Intel (INTC)
Vanguard FTSE Emerging Mkt (VWO) (ER = 0.14)
Vanguard Extended Mkt (VXF) (ER = 0.08)
Vanguard Target Fund – 2035) (VTTHX) (ER = 0.15)

Traditional IRA at TD Ameritrade
The value of this account is $0. I created this as a non-deductible tIRA so I could back door contributions to the Roth IRA. I make too much to contribute directly to the Roth.


New annual Contributions
$36K my contributions plus $8K company match into the 401k

I also get an annual bonus (after tax) of about $18K
Additionally, I get RSUs in company stock of about $40K per year. These have a 3 year vesting period.

Available funds

Funds available in the 401(k)
The funds mentioned above are the only passively managed index fund options. The others are actively managed mutual funds and target retirement funds. All with much higher expense ratios. I want to stick with the 4 passively managed index funds.

Following is the info on what these funds investment strategies are:

The Small/Mid Cap Index Fund seeks an investment return that approximates, before expenses, the performance of the Russell Small Cap Completeness Index over the long term.

The US Large Cap Equity Index Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the S&P 500® over the long term.

The Fixed Income Index Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the Bloomberg Barclays U.S. Aggregate Bond Index over the long term.

The International Equity Index Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the MSCI ACWI ex- USA IMI Index over the long term.

Additional Information
I will have a company pension at age 65 of approximately $60K per year.
I would like to defer taking SS until age 70. The SS estimator says it’s $3600 per month, but that assumes I continue working. If I retire early, I’m guestimating it to be around $2500 per month.

1. Please help me rebalance my retirement accounts to my desired asset allocation, approximating the 3 fund portfolio. I know 70/30 is considered aggressive for my age by some on this board. Over time, I know I’ll adjust to be more in bonds, but right now, I’m comfortable with the 70/30.

2.Please help me decide what to do with the cash and the RSUs (when they vest). If I retire early (say at 55), I want to be able to self fund my expenses until 59.5 and then access my retirement accounts. Do I put it into my taxable brokerage account into VTSX (for example), contribute to the non-deductible IRA and backdoor to the Roth (I was doing that before I moved to the EU but haven’t since then), combination, or other?

3. As stated above, my primary goal is to be able to retire early. There are a lot of other variables that I need to work out (like health insurance and spending). But does it look like I’m on track to be able to retire early?

Thanks in advance for the guidance!

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