Please help, three fund portfolio, not sure about bond placement

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Curlyq
Posts: 788
Joined: Tue Jul 08, 2008 5:26 pm

Please help, three fund portfolio, not sure about bond placement

Post by Curlyq » Tue Oct 03, 2017 6:20 pm

Thank you in advance for any feedback for improvement!

Emergency funds: Almost a year's expenses in money market in taxable. Not included in Asset Allocation.
Debt: None.
Tax Filing Status: Single
Tax Rate: Less than 28% Fed, 0% State
Income: Rental property income, small amount from inherited SPIA, RMD from Inherited IRA
State of Residence: NV
Age: 58
Desired Asset Allocation: 60% Stocks/40% Bonds.
Desired International Allocation: 30% of stocks
Current total portfolio: Low seven figures
Split of taxable to tax-advantaged: 25%/75%

Note: I own three properties outright (value approaching $1M), live in one, rent out others (one actively managed, one professionally managed).
I kept 457 and TIAA-CREF accounts separate for early-withdrawal and loan properties. Will decide later if want to transfer to Vanguard.
Some rounding error, portfolio totals 99.98%

Current Retirement Assets

Taxable at Vanguard
2.52% Vanguard Balanced Index Fund (VBIAX) (0.07)
4.89% Vanguard High Yield Tax Exempt Fund Admiral Shares (VWALX) (0.09)
9.32% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04)
0.74% Fidelity Dividend Growth Fund (FDGFX) (0.62)
1.45% Fidelity Low Priced Stock Fund (FLPSX) (0.88)
1.39% Fidelity Municipal Income Fund (FHIGX) (0.46)
0.73% Fidelity Puritan Fund (FPURX) (0.56)
3.87% WP Carey REIT (unsure)

Rollover IRA at Vanguard
6.86% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04)
0.27% Vanguard Inflation Protected Securities Fund Investor Shares (VIPSX) (0.2)
9.34% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05)
2.67% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11)

Inherited IRA 1 at Vanguard
11.26% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04)
8.22% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05)
3.9% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11)

Inherited IRA 2 at Vanguard
0.3% Vanguard Federal Money Market Fund (VMFXX) (0.11)

Roth IRA at Vanguard
1.42% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04)
1.03% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05)
0.17% Vanguard Federal Money Market Fund (VMFXX) (0.11)
0.76% Vanguard Prime Money Market Fund (VMMXX) (0.16)
0.43% Vanguard Total International Index Fund Investor Shares (VGTSX) (0.18)

Variable Annuity at Vanguard
11.45% Vanguard Annuity Money Market (V VA MM) (not sure)

Variable Inherited Annuity at Vanguard
0.5% Vanguard Annuity Money Market (V VA MM) (not sure)

457 at Transamerica
4.49% Vanguard 500 Index Admiral (VFIAX) (0.04)

TIAA-CREF
0.1% CREF Bond Market R1 (QCBMRX) (0.7)
11.80% CREF Equity Index R1 (QCEQRX) (0.61)
0.1% TIAA Traditional Annuity (not sure)


Proposed Portfolio - keep 457 and TIAA-CREF separate

Taxable at Vanguard
2.52% Vanguard Balanced Index Fund (VBIAX) (0.07)
4.89% Vanguard High Yield Tax Exempt Fund Admiral Shares (VWALX) (0.09)
9.32% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04)
0.74% Fidelity Dividend Growth Fund (FDGFX) (0.62)
1.45% Fidelity Low Priced Stock Fund (FLPSX) (0.88)
1.39% Fidelity Municipal Income Fund (FHIGX) (0.46)
0.73% Fidelity Puritan Fund (FPURX) (0.56)
3.87% WP Carey REIT (unsure)
Of total portfolio = 17.33% Stock funds/7.58% Bond funds, if consider REIT as stock fund)

Rollover IRA at Vanguard
19.14% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05)

Inherited IRA 1 at Vanguard
9.76% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11)
13.62% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05)

Inherited IRA 2 at Vanguard
0.3% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05)

Roth IRA at Vanguard
3.81% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11)

Variable Annuity at Vanguard
11.45% Vanguard VA Total Stock (V VA TS) (not sure)

Variable Inherited Annuity at Vanguard
0.5% Vanguard VA Total Stock (V VA TS) (not sure)

457 at Transamerica
4.49% Vanguard Developed Markets Index Admiral (VTMGX) (0.07) (International - Foreign Large Blend, surprised at low fee available)

TIAA-CREF
12% CREF Equity Index R1 (QCEQRX) (0.61, lowest ER of any fund choices)

Questions
  • Since I have big chunk of my assets in real estate, should Asset Allocation be closer to 50/50 or 40/60?
  • I don't know what to do with all of the funds in taxable except to draw down high-fee funds/REIT as needed for income and just pay tax at that time. Most have long-term gains. Continue to draw down until have one or two low-fee stock funds?
  • Fund placement concerns: I wasn't sure if I should put bond allocation or international stock allocation into variable annuities. Should Roth be all bond as well?
  • I called Vanguard and they suggested about 14% of bond funds (or 5.6% overall portfolio) in Vanguard Short Term Investment Grade Fund Admiral Shares and place in IRAs. Is the added complexity in the bond portion worth it? Isn't percentage to overall portfolio too small to make any difference?
  • My income is variable, based on vacation rental income being variable, don't have to draw from taxable, and if in 15% tax bracket at some point, should I start converting IRA to Roth? It's probably now or never. Can ramp up income after conversion if I want.
Thanks again for any feedback for improvement!

~ CurlyQ
Last edited by Curlyq on Thu Oct 05, 2017 10:01 am, edited 2 times in total.

Curlyq
Posts: 788
Joined: Tue Jul 08, 2008 5:26 pm

Re: Portfolio Review - Made progress, now want three-fund or close

Post by Curlyq » Tue Oct 03, 2017 6:30 pm

I should add that I contribute $6,500 to Roth IRA annually. Thanks!

Curlyq
Posts: 788
Joined: Tue Jul 08, 2008 5:26 pm

Re: Please help, three fund portfolio, not sure about bond placement

Post by Curlyq » Thu Oct 05, 2017 10:01 am

Bump.

JBTX
Posts: 1682
Joined: Wed Jul 26, 2017 12:46 pm

Re: Please help, three fund portfolio, not sure about bond placement

Post by JBTX » Thu Oct 05, 2017 10:29 am

Curlyq wrote:
Tue Oct 03, 2017 6:20 pm
Thank you in advance for any feedback for improvement!

Emergency funds: Almost a year's expenses in money market in taxable. Not included in Asset Allocation.
Debt: None.
Tax Filing Status: Single
Tax Rate: Less than 28% Fed, 0% State
Income: Rental property income, small amount from inherited SPIA, RMD from Inherited IRA
State of Residence: NV
Age: 58
Desired Asset Allocation: 60% Stocks/40% Bonds.
Desired International Allocation: 30% of stocks
Current total portfolio: Low seven figures
Split of taxable to tax-advantaged: 25%/75%

Note: I own three properties outright (value approaching $1M), live in one, rent out others (one actively managed, one professionally managed).
I kept 457 and TIAA-CREF accounts separate for early-withdrawal and loan properties. Will decide later if want to transfer to Vanguard.
Some rounding error, portfolio totals 99.98%

Current Retirement Assets

Taxable at Vanguard
2.52% Vanguard Balanced Index Fund (VBIAX) (0.07)
4.89% Vanguard High Yield Tax Exempt Fund Admiral Shares (VWALX) (0.09)
9.32% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04)
0.74% Fidelity Dividend Growth Fund (FDGFX) (0.62)
1.45% Fidelity Low Priced Stock Fund (FLPSX) (0.88)
1.39% Fidelity Municipal Income Fund (FHIGX) (0.46)
0.73% Fidelity Puritan Fund (FPURX) (0.56)
3.87% WP Carey REIT (unsure)

Rollover IRA at Vanguard
6.86% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04)
0.27% Vanguard Inflation Protected Securities Fund Investor Shares (VIPSX) (0.2)
9.34% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05)
2.67% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11)

Inherited IRA 1 at Vanguard
11.26% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04)
8.22% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05)
3.9% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11)

Inherited IRA 2 at Vanguard
0.3% Vanguard Federal Money Market Fund (VMFXX) (0.11)

Roth IRA at Vanguard
1.42% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04)
1.03% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05)
0.17% Vanguard Federal Money Market Fund (VMFXX) (0.11)
0.76% Vanguard Prime Money Market Fund (VMMXX) (0.16)
0.43% Vanguard Total International Index Fund Investor Shares (VGTSX) (0.18)

Variable Annuity at Vanguard
11.45% Vanguard Annuity Money Market (V VA MM) (not sure)

Variable Inherited Annuity at Vanguard
0.5% Vanguard Annuity Money Market (V VA MM) (not sure)

457 at Transamerica
4.49% Vanguard 500 Index Admiral (VFIAX) (0.04)

TIAA-CREF
0.1% CREF Bond Market R1 (QCBMRX) (0.7)
11.80% CREF Equity Index R1 (QCEQRX) (0.61)
0.1% TIAA Traditional Annuity (not sure)


Proposed Portfolio - keep 457 and TIAA-CREF separate

Taxable at Vanguard
2.52% Vanguard Balanced Index Fund (VBIAX) (0.07)
4.89% Vanguard High Yield Tax Exempt Fund Admiral Shares (VWALX) (0.09)
9.32% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04)
0.74% Fidelity Dividend Growth Fund (FDGFX) (0.62)
1.45% Fidelity Low Priced Stock Fund (FLPSX) (0.88)
1.39% Fidelity Municipal Income Fund (FHIGX) (0.46)
0.73% Fidelity Puritan Fund (FPURX) (0.56)
3.87% WP Carey REIT (unsure)
Of total portfolio = 17.33% Stock funds/7.58% Bond funds, if consider REIT as stock fund)

Rollover IRA at Vanguard
19.14% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05)

Inherited IRA 1 at Vanguard
9.76% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11)
13.62% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05)

Inherited IRA 2 at Vanguard
0.3% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05)

Roth IRA at Vanguard
3.81% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11)

Variable Annuity at Vanguard
11.45% Vanguard VA Total Stock (V VA TS) (not sure)

Variable Inherited Annuity at Vanguard
0.5% Vanguard VA Total Stock (V VA TS) (not sure)

457 at Transamerica
4.49% Vanguard Developed Markets Index Admiral (VTMGX) (0.07) (International - Foreign Large Blend, surprised at low fee available)

TIAA-CREF
12% CREF Equity Index R1 (QCEQRX) (0.61, lowest ER of any fund choices)

Questions
  • Since I have big chunk of my assets in real estate, should Asset Allocation be closer to 50/50 or 40/60?
That's a judgement call. Really depends on your level of risk tolerance. I think either is defensible. I'd probably stay 50/50 but is just my gut feeling FWIW.

  • I don't know what to do with all of the funds in taxable except to draw down high-fee funds/REIT as needed for income and just pay tax at that time. Most have long-term gains. Continue to draw down until have one or two low-fee stock funds?
Seems like a reasonable approach. A couple of those funds have been pretty good funds in spite of modest fees. I would not subject yourself to capital gains just to replace them with index funds. Also if your tax rate is low now it could be a better time to liquidate some. It really depends on whether your tax rate will go up or down. Or if we experience a market downturn it may make sense to liquidate some of them then.

  • Fund placement concerns: I wasn't sure if I should put bond allocation or international stock allocation into variable annuities. Should Roth be all bond as well?
Not sure what you are asking re annuities. Pretty much everybody here will recommend against these types of annuities. As to where to place bonds, it is a debated subject but most come down on the side that bonds are better in a tax advantaged account (traditional or Roth ) such that their income which would normally be taxed at regular income tax rates is instead tax deferred.


  • I called Vanguard and they suggested about 14% of bond funds (or 5.6% overall portfolio) in Vanguard Short Term Investment Grade Fund Admiral Shares and place in IRAs. Is the added complexity in the bond portion worth it? Isn't percentage to overall portfolio too small to make any difference?

Seems like a sound recommendation, not terribly complex and $60k or more is not "nuthin". But you are right it probably won't have a huge impact on your portfolio.
  • My income is variable, based on vacation rental income being variable, don't have to draw from taxable, and if in 15% tax bracket at some point, should I start converting IRA to Roth? It's probably now or never. Can ramp up income after conversion if I want.
Thanks again for any feedback for improvement!

~ CurlyQ
Yes if you find your income is lower in a particular year and you know you will have substantial taxable assets in retirement doing some Roth conversions could make a lot of sense. It is probably a good idea to try to forecast what your income may be in retirement to facilitate that decision. But from my perspective if you find yourself in the 15% bracket in the near future a conversion is probably a no brainer.

Curlyq
Posts: 788
Joined: Tue Jul 08, 2008 5:26 pm

Re: Please help, three fund portfolio, not sure about bond placement

Post by Curlyq » Thu Oct 05, 2017 11:09 am

Hi JBTX,

Thanks for the quick response!
  • 50/50 makes sense, given my age and not working as much anymore. Back to spreadsheet to adjust!
  • I'm stuck with the annuities (former Ameriprise advisor and 20 years working in education). Vanguard wanted to put Int'l Stock into annuities, I put in Total Stock. Not sure it matters?
  • Now that I looked again, Vanguard is suggesting four different bond funds. Even smaller percentages. I want one bond fund.
  • I will watch income and decide Roth Conversion. I can afford to spend more than I am, so it's just a decision to make. It's really hard to spend after being chronic saver for decades.
Thanks very much!

CurlyQ

JBTX
Posts: 1682
Joined: Wed Jul 26, 2017 12:46 pm

Re: Please help, three fund portfolio, not sure about bond placement

Post by JBTX » Thu Oct 05, 2017 11:32 am

Curlyq wrote:
Thu Oct 05, 2017 11:09 am
Hi JBTX,

Thanks for the quick response!
  • 50/50 makes sense, given my age and not working as much anymore. Back to spreadsheet to adjust!
Again just my gut. You can make an argument that since 50% of your net worth is in risky real estate investments that a "safer" investment portfolio is in order. I'd do whatever makes you most comfortable. With $2 million+ in net worth you have ample savings and focusing more on capital preservation does make sense.
  • I'm stuck with the annuities (former Ameriprise advisor and 20 years working in education). Vanguard wanted to put Int'l Stock into annuities, I put in Total Stock. Not sure it matters?

Agree that it doesn't matter between total stock vs international stock. Since annuity income is taxed at regular rates (I think, hopefully somebody will correct me if wrong) it could make sense to have bonds in annuity. I'd rather have higher gaining equities in tax deferred/free accounts or taxable accounts.
  • Now that I looked again, Vanguard is suggesting four different bond funds. Even smaller percentages. I want one bond fund.
That should be fine.
  • I will watch income and decide Roth Conversion. I can afford to spend more than I am, so it's just a decision to make. It's really hard to spend after being chronic saver for decades.
Thanks very much!

CurlyQ
I'm personally a big fan of having diversity between traditional and Roth retirement vehicles. If you can convert at a rate close to or lower than your projected retirement tax rate seems like a win/win to me.

Hopefully others will chime in.

Curlyq
Posts: 788
Joined: Tue Jul 08, 2008 5:26 pm

Re: Please help, three fund portfolio, not sure about bond placement

Post by Curlyq » Thu Oct 05, 2017 12:02 pm

JBTX,

I changed percentages in Inherited IRA 1 to this:

Inherited IRA 1 at Vanguard
2.46% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11)
20.91% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05)

This puts me close to a 52/48 allocation with international stock around 21.5% of stock allocation (in that 20-30% Int'l ballpark) and keeps single funds in all other retirement accounts for simplicity. I can draw down stock allocation in taxable to get to 50/50 eventually, probably the REIT first as it's the highest fee. Figuring that out versus Roth Conversion is a separate analysis, but now I have an idea of what to do.

Getting close! Thanks!

CurlyQ

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