Intro and questions

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GRS159
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Joined: Fri Oct 06, 2017 1:09 pm

Intro and questions

Post by GRS159 » Wed Oct 11, 2017 7:33 am

Hello. First post. Really appreciate the forum and associated learning tools. I recently learned that after turning 60 I was eligible to extract funds from my company 401k to invest elsewhere. Because many of the expense ratios on the company plan are high compared to Vanguard, I have defunded much of the company 401k and rolled it over into a VG account. I'm considering a retirement VG target retirement fund - suggestions welcomed. Summation below...if I've missed any pertinent details, please ask.

*Updated 10/31/17 and 11/11/17*
Emergency Fund: Yes, 18,500 in savings @ .28% IR, 7,750 in checking.
Debt: 30,000 Home mortgage - 3.625% IR. 8,800 Auto loan - 2% IR.
Tax Filing Status: Married
Federal Tax Rate: 28%
State of Residence: Washington - 0%
His Age: 60
His Pension est. ~ $2400 - $3100/mo. depending on retirement date
Wife's Age: 57
Her Pension ~ $2500/mo.
Desired Asset Allocation: 60% Bonds / 40% Stocks*
*(Updated 11/11/17 - desired allocation altered to ~ 60% stocks / 40% bonds)
Desired International stock allocation: 20 - 25%
Desired International bond allocation: 12%*
*(Updated 11/11/17 - desired international bond allocation altered to 0%)

Current approximate retirement portfolio: High 6 figures.

Current Retirement assets
Taxable (His) *Scottrade account in kind conversion to VG in process.*
9% Overall - Scottrade - in order of predominance - all are long term holdings:
POSKX - Primecap Odyssey Stock Fund
AAPL - Apple Inc.
DE- Deere & Company
DIS - Disney
USB - U.S. Bancorp
MTCH - Match Group Inc.
CGNX - Cognex Corporation
BUD - Anheiser-Busch Inbev SA
CBOE - CBOE Holdings Inc.
SBUX - Starbucks Corporation
TMUS - T-Mobile US Inc.
PI - Impinj Incorporated
Total unrealized capital gain ~ 22,000
*(Updated 11/11/17 - in kind conversion to Vanguard brokerage account completed)

6% Overall - TIAA CREF*
TIERX - International Equity Fund Retail Class - exp. ratio .78
TIOSX - International Opportunities Fund - exp. ratio 1.10
TLISX - International Small-Cap Equity Fund - exp. ratio 1.11
Total unrealized capital gain ~ 4,000
*(Updated 11/11/17 - converted to Vanguard VTIAX)

His 401k's below:
25% Overall - Vanguard IRA (just funded and uninvested)*
*(Updated as of 10/16/17:
VBTLX total bond market - 60%
VTSAX total stock market - 30%
VTIAX total int. stock index -10%)

1% John Hancock - (recently depleted to fund VG account above) - (Roth IRA available but currently unfunded)
Company contributes 3%
500 Index Fund JFIVX .63 ER* - all holdings
*(Updated 11/11/17 - JFIVX ER lowered to .03%)

His Roth IRA - Scottrade *Transfer in kind to VG in process*
6% Overall - Cash, not currently invested.
*(Updated 11/11/17 - transfer to VTSAX completed)

Her 401k below - (Roth available but currently unfunded)
53% Overall - TIAA CREF - consisting of:
34.5% TIAA Traditional
13.6% TCIEX International Equities - .06 ER
11.5% TIMVX Mid-Cap Value - .41 ER
8.3% TILVX Large-Cap Value - .06 ER
7.8% QCGLPX Global Equities - .44 ER
6.3% QREARX Real Estate Account - .85 ER
6.2% TISBX Small Cap Blend - .06 ER
6.0% QCSTPX CREF Stock Account - .43 ER
3.1% TILIX Large Cap Growth Index - .06 ER
2.7% TIGRX Growth & Income Fund - .42 ER

Contributions
New annual contributions
12,000 his 401k (employer contribution additional 3000)
6,000 her 401k contribution (not sure on matching)
? his Roth (should I continue to fund this? If so, at max?)

Questions
1. Should I immediately invest all of the funds available in the Vanguard IRA, or reinvest over time? If over time...what percent at what interval (monthly, quarterly, etc)?

2. Should I continue to fully fund the Roth, partially fund the Roth, or simply put those available funds into the regular IRA

3. Any other beneficial suggestions?
Last edited by GRS159 on Sat Nov 11, 2017 8:46 am, edited 11 times in total.

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in_reality
Posts: 4329
Joined: Fri Jul 12, 2013 6:13 am

Re: Intro and questions

Post by in_reality » Thu Oct 12, 2017 5:04 am

Hi and welcome,
GRS159 wrote:
Wed Oct 11, 2017 7:33 am

Desired Asset Allocation: 60% Bonds / 40% Stocks<br/>
Desired International stock allocation: 20 - 25%<br/>
Desired International bond allocation: 12%<br/>
<br/>
Current approximate retirement portfolio: High 6 figures.<br/>

Current Retirement assets
Taxable
15% cash<br/>
7% TIAA CREF<br/>
TIERX - International Equity Fund Retail Class - exp. ratio .78
TIOSX - International Opportunities Fund - exp. ratio 1.10
TLISX - International Small-Cap Equity Fund - exp. ratio 1.11
These are too expensive for me. In taxable you should have access to much lower cost funds.

I haven't looked at their performance but it's rare for a fund to continue outperformance by enough to cover those costs.

If you have capital gains and can't sell, you can at least turn of dividend reinvestment. Any maybe you could sell some lots after a loss.


GRS159 wrote:
Wed Oct 11, 2017 7:33 am
His 401K
25% Vanguard IRA (new account - just funded and uninvested)<br/>

1% John Hancock - (recently depleted to fund VG account)
Company contributes 3% - split in thirds:
JH Multimanager Balanced Lifestyle Portfolio - JILBX 1.05% exp. ratio
EuroPacific Grownt Fund - RERFX 1.09% exp. ratio
T. Rowe Price Spectrum Inc. - RPSIX 1.14% exp. ratio
<br/>
His Roth IRA - Scottrade
6% Cash<br/>

Her 401k
53% TIAA CREF (Ticker/expense ratio N/A)<br/>
For the 401ks, what are your options? Don't you have a low cost S&P500 fund?

I would look for the lowest cost 401k fund(s) and use that. Then I would plan my IRA, ROTH, and taxable holdings (because you have more fund choices there) to reach my target AA.

GRS159 wrote:
Wed Oct 11, 2017 7:33 am
Contributions

New annual contributions
12,000 his 401k (employer contribution additional 3000)<br/>
6,000 her 401k contribution (not sure on matching)<br/>
? his Roth (should I continue to fund this? If so, at max?)<br/>

GRS159 wrote:
Wed Oct 11, 2017 7:33 am
Questions
1. Should I immediately invest all of the funds available in the Vanguard IRA, or reinvest over time? If over time...what percent at what interval (monthly, quarterly, etc)?<br/>
I would do so immediately, especially if the money transferred from the 401k was invested before moving it to the IRA. Why take money out of stocks and wait to put it back in?
GRS159 wrote:
Wed Oct 11, 2017 7:33 am
2. Should I continue to fully fund the Roth, partially fund the Roth, or simply put those available funds into the regular IRA
I am not sure which way works best for you. Roths are nice because you won't be forced to take an RMD you don't want. I suspect I'd use a regular IRA to reduce my taxes and instead maybe incur some capital gains taxes to get out of the higher cost funds in taxable. I generally create different files in TurboTax (using the prior year of course but it's a good ballpark) to see how things would work out.

GRS159
Posts: 15
Joined: Fri Oct 06, 2017 1:09 pm

Re: Intro and questions

Post by GRS159 » Thu Oct 12, 2017 8:37 am

Hello in_reality...thanks for your reply.

Regarding the Taxable 7% TIAA CREF, you wrote:
These are too expensive for me. In taxable you should have access to much lower cost funds.

I haven't looked at their performance but it's rare for a fund to continue outperformance by enough to cover those costs.

If you have capital gains and can't sell, you can at least turn of dividend reinvestment. Any maybe you could sell some lots after a loss.
I agree, the ER's are high, and there are lower cost funds. I purchased these in late Aug. for international exposure. Currently no losses to sell.
For the 401ks, what are your options? Don't you have a low cost S&P500 fund?

I would look for the lowest cost 401k fund(s) and use that. Then I would plan my IRA, ROTH, and taxable holdings (because you have more fund choices there) to reach my target AA.
For my 401k, yes, there is 500 Index Fund JFIVX @ .63 ER, which is the lowest ER available to me with this account. For wife's 401k, I don't know, but I'll investigate.
GRS159 wrote: ↑
Wed Oct 11, 2017 5:33 am
Questions
1. Should I immediately invest all of the funds available in the Vanguard IRA, or reinvest over time? If over time...what percent at what interval (monthly, quarterly, etc)?<br/>

I would do so immediately, especially if the money transferred from the 401k was invested before moving it to the IRA. Why take money out of stocks and wait to put it back in?
Yes, it was invested, but 33% was the RPSIX bonds. As far as why wait, some think market is currently fully valued, but I know the adage about market timing. My Vanguard choice will be more heavily weighted to bonds, closer to 60%.
I am not sure which way works best for you. Roths are nice because you won't be forced to take an RMD you don't want. I suspect I'd use a regular IRA to reduce my taxes and instead maybe incur some capital gains taxes to get out of the higher cost funds in taxable. I generally create different files in TurboTax (using the prior year of course but it's a good ballpark) to see how things would work out.
Thanks, I had not thought about depleting the taxable account to increase IRA contributions.

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in_reality
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Re: Intro and questions

Post by in_reality » Thu Oct 12, 2017 8:57 am

GRS159 wrote:
Thu Oct 12, 2017 8:37 am

Yes, it was invested, but 33% was the RPSIX bonds. As far as why wait, some think market is currently fully valued, but I know the adage about market timing.
Yeah, I get that.

At current valuations we are expecting maybe 3% real. So if inflation is 2%, you can buy the stocks next year for 5% higher. That's how I look at it.

Sure they could crash, but they could crash two years from now after you waited to buy them at 5% higher. And your 60% in safe assets means it's pretty unlikely you'd have to sell at distressed prices. Doesn't it?

At the end of the day, the right decision is the one you are comfortable with.

That said, it feels to me like maybe your recent international purchase was because they've been going up recently and that gives you confidence. Have you been maintaining the same international allocation?

Anyway, post back with alternatives from your 401ks. Also, can you get anything in your taxable account or is it limited to TIAA CREF offerings? If so, what are the alternatives. Moving taxable assets isn't difficult if it makes sense to go someplace for better funds such as what you did for the 401k to IRA move.

SimplicityNow
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Joined: Fri Aug 05, 2016 10:31 am

Re: Intro and questions

Post by SimplicityNow » Thu Oct 12, 2017 10:52 am

Welcome to the forum. In answer to your question regarding investing it all at once or over time there have been hundreds of threads on this forum covering the same topic.

Here are a few.

viewtopic.php?t=193825

viewtopic.php?t=180926

viewtopic.php?t=123543

There are hundreds more.

Investing in a lump sum has been shown (and you can google the studies on your own if you want to read them) to yield slightly better long term results then dollar cost averaging (DCA). DCA's big advantage is its psychological benefit and to allay the fear we have that as soon as we purchase a large amount the market will drop.
At the end of the day there isn't a huge difference and either way is fine. Pick one and do it.

The other argument people make is if you are transferring funds from one place to the other (to lower costs) and those other funds were already invested why would you DCA then back in? That reeks to me a little bit of market timing.

If you are unsure I would use a suggestion made on the boards (I think it was from Livesoft) to invest 50% of it at once and then the other 50% monthly over a 6 - 12 month period. I wouldn't delay it longer then that.

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ruralavalon
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Location: Illinois

Re: Intro and questions

Post by ruralavalon » Thu Oct 12, 2017 11:01 am

Welcome to the forum :)

In my opinion it was a very good idea to do an in-service rollover from the Hancock 401k to the Vanguard IRA.

GRS159 wrote:
Wed Oct 11, 2017 7:33 am
Debt: 30,000 Home mortgage. 8,800 Auto loan.
What are the interest rates on these loans? If the interest rates are high then paying off the debt may be a good "investment".

Please simply add any new information to your original post using the edit button, it helps a lot if all of your information is in one place.

GRS159 wrote:Age: 60
Wife: 57
Desired Asset Allocation: 60% Bonds / 40% Stocks
Desired International stock allocation: 20 - 25%
Desired International bond allocation: 12%
In my opinion your desired asset allocation is within the range of what is reasonable. But in my opinion an international bond allocation is unnecessary and probably not helpful.

GRS159 wrote:Taxable
15% cash
7% TIAA CREF
TIERX - International Equity Fund Retail Class - exp. ratio .78
TIOSX - International Opportunities Fund - exp. ratio 1.10
TLISX - International Small-Cap Equity Fund - exp. ratio 1.11
What fund company is the taxable account currently with? What low expense ratio funds are currently available in this account? Please give fund names, tickers and expense ratios. Please simply add this to your original post using the edit button.

In my opinion the 15% cash needs to be invested, rather than just sitting there giving a negative real return net of inflation.

What is the unrealized capital gain in those international funds? Please simply add this to your original post using the edit button. In the long-run it may be worth selling those funds and suffering the one-time tax liability to save on the expense ratios every year.

You could consider moving this account to a low cost provider like Vanguard, and have expense ratios about 1% lower.

You could also consider depleting this account to enable increased contributions to the two 401ks.

GRS159 wrote:His 401K
25% Vanguard IRA (new account - just funded and uninvested)<br/>

1% John Hancock - (recently depleted to fund VG account)
Company contributes 3% - split in thirds:
JH Multimanager Balanced Lifestyle Portfolio - JILBX 1.05% exp. ratio
EuroPacific Grownt Fund - RERFX 1.09% exp. ratio
T. Rowe Price Spectrum Inc. - RPSIX 1.14% exp. ratio
Instead I suggest investing his 401k in John Hancock VIT 500 Index (JFIVX) ER 0.63%.

I suggest investing the Vanguard IRA soon in:
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%;
Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%; and
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05%.

A target retirement fund, or some other balanced fund, could be a good idea if the other accounts will also be invested in a balanced fund. The main advantage of a target retirement fund is that it is a single fund all-in-one portfolio, requiring no attention or management from the investor.

That advantage is lost if a target retirement fund is combined with regular mutual funds, it just makes it harder to keep track of your asset allocation.

If you want to use a balanced fund in every account, then you could consider Vanguard LifeStrategy Moderate Growth Fund (VSMGX) (60/40 allocation) in the tax-advantaged accounts, and Vanguard Tax-Managed Balanced Fund (VTMFX) (50/50 allocation) in any taxable account.

GRS159 wrote: His Roth IRA - Scottrade
6% Cash
In my opinion the 6% cash needs to be invested rather than just sitting there giving a negative real return net of inflation.

I suggest rolling the Scottrade Roth IRA over to a Vanguard Roth IRA, for easy access to their many low cost mutual funds.

GRS159 wrote:Her 401k
53% TIAA CREF (Ticker/expense ratio N/A)
What funds is she using in her 401k? What other funds are offered in her 401k? Please give fund names, tickers and expense ratios. Please simply add this to your original post using the edit button.

GRS159 wrote:Questions
1. Should I immediately invest all of the funds available in the Vanguard IRA, or reinvest over time? If over time...what percent at what interval (monthly, quarterly, etc)?
I suggest immediately reinvesting the money in the Vanguard IRA. Investing in a lump sum works out better about 2/3 of the time. For a pdf of a Vanguard paper on the subject Google "Dollar-Cost Averaging Just Means Taking Risk Later".

GRS159 wrote:2. Should I continue to fully fund the Roth, partially fund the Roth, or simply put those available funds into the regular IRA?
You are in the 28% tax bracket. Are you eligible to make deductible contributions to a traditional IRA?

Do either of your 401ks permit Roth 401k contributions?

Will either or both of you eligible for a significant pension?

Please simply add this to your original post using the edit button.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

GRS159
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Joined: Fri Oct 06, 2017 1:09 pm

Re: Intro and questions

Post by GRS159 » Wed Oct 18, 2017 7:44 am

To all who have posted so far, thank you. I have posted additional information as requested and look forward to comments based on the more complete overall picture.

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ruralavalon
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Location: Illinois

Re: Intro and questions

Post by ruralavalon » Wed Oct 18, 2017 9:39 am

GRS159 wrote:
Wed Oct 18, 2017 7:44 am
To all who have posted so far, thank you. I have posted additional information as requested and look forward to comments based on the more complete overall picture.
What happened to the 15% cash that was in a taxable account?

What additional funds are offered in her 401k, beyond those she is currently using? Please give fund names, tickers and expense ratios.

Are you eligible to make deductible contributions to a traditional IRA?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

GRS159
Posts: 15
Joined: Fri Oct 06, 2017 1:09 pm

Re: Intro and questions

Post by GRS159 » Wed Oct 18, 2017 5:43 pm

Hello ruralavalon. Thanks for the welcome to the board, and thanks for the input so far. I've been working my way through collecting the additional information you asked about.
ruralavalon wrote:
Wed Oct 18, 2017 9:39 am
What happened to the 15% cash that was in a taxable account?
This was a mistake on my part. There is about 15% in taxable accounts (His Scottrade and His TIAA-CREF), but only 6% is cash - the Scottrade Roth.
What additional funds are offered in her 401k, beyond those she is currently using? Please give fund names, tickers and expense ratios.
TIAA-CREF has a number of choices - too many to list. However, linked here is a selection of mutual funds they offer.
https://www.tiaa.org/public/investment- ... retailonly
When the page opens, change the "Share Class - Mutual Funds" from "Retail Class" to "All" to reveal the full selection.
Are you eligible to make deductible contributions to a traditional IRA?
Yes for him and her.

GRS159
Posts: 15
Joined: Fri Oct 06, 2017 1:09 pm

Re: Intro and questions

Post by GRS159 » Thu Oct 19, 2017 8:30 am

ruralavalon wrote:
Thu Oct 12, 2017 11:01 am
GRS159 wrote:His 401K
25% Vanguard IRA (new account - just funded and uninvested)<br/>

1% John Hancock - (recently depleted to fund VG account)
Company contributes 3% - split in thirds:
JH Multimanager Balanced Lifestyle Portfolio - JILBX 1.05% exp. ratio
EuroPacific Grownt Fund - RERFX 1.09% exp. ratio
T. Rowe Price Spectrum Inc. - RPSIX 1.14% exp. ratio
Instead I suggest investing his 401k in John Hancock VIT 500 Index (JFIVX) ER 0.63%.
The John Hancock 401K has a current balance of ~ $6000, and will receive ongoing paycheck contributions and employee match until retirement. My rough plan is to let it accumulate for some yet undetermined period of time (6 months, 12 months? I'm not sure if there are rules for transfer / rollover that apply here?) and then transfer it to the VG IRA.

For this account, you've suggested JHIVX 500 index. My question...should I not worry about keeping 60% of this account in a bond fund such as the T. Rowe Price RPSIX?
ruralavalon wrote:
Thu Oct 12, 2017 11:01 am
GRS159 wrote: His Roth IRA - Scottrade
6% Cash
In my opinion the 6% cash needs to be invested rather than just sitting there giving a negative real return net of inflation.

I suggest rolling the Scottrade Roth IRA over to a Vanguard Roth IRA, for easy access to their many low cost mutual funds.
For the VG Roth rollover, would you suggest the same Admiral VG funds you suggested for the VG 401K, or something different?

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ruralavalon
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Location: Illinois

Re: Intro and questions

Post by ruralavalon » Thu Oct 19, 2017 1:07 pm

GRS159 wrote:
Thu Oct 19, 2017 8:30 am
ruralavalon wrote:
Thu Oct 12, 2017 11:01 am
GRS159 wrote:His 401K
25% Vanguard IRA (new account - just funded and uninvested)<br/>

1% John Hancock - (recently depleted to fund VG account)
Company contributes 3% - split in thirds:
JH Multimanager Balanced Lifestyle Portfolio - JILBX 1.05% exp. ratio
EuroPacific Grownt Fund - RERFX 1.09% exp. ratio
T. Rowe Price Spectrum Inc. - RPSIX 1.14% exp. ratio
Instead I suggest investing his 401k in John Hancock VIT 500 Index (JFIVX) ER 0.63%.
The John Hancock 401K has a current balance of ~ $6000, and will receive ongoing paycheck contributions and employee match until retirement. My rough plan is to let it accumulate for some yet undetermined period of time (6 months, 12 months? I'm not sure if there are rules for transfer / rollover that apply here?) and then transfer it to the VG IRA.
What fees are associated with doing the in-service distribution (sometimes called an in-service rollover)?

I don't believe there is a legal limit on how often you may us do an in-service distribution. There may be a limit set in your 401k plan.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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ruralavalon
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Re: Intro and questions

Post by ruralavalon » Thu Oct 19, 2017 6:31 pm

Debt.
GRS159 wrote:
Wed Oct 11, 2017 7:33 am
Emergency Fund: Yes, 18,500 in savings @ .28% IR, 7,750 in checking.
Debt: 30,000 Home mortgage - 3.625% IR. 8,800 Auto loan - 2% IR.
About how many months of basic living expenses would be covered by that $28k in checking and savings?

In my opinion the interest rates are not high enough to manage any accelerated pay off of those loans.

At the standard payment will the mortgage be paid off by your expected retirement date?


Roth vs traditional contributions?
GRS159 wrote: Tax Filing Status: Married
Federal Tax Rate: 28%
State of Residence: Washington - 0%
His Age: 60
His Pension est. ~ $2400 - $3100/mo. depending on retirement date
Wife's Age: 57
Her Pension ~ $2500/mo.
You are both eligible for good pensions. This indicates to me that you will likely be better off making Roth IRA contributions. For an explanation please see the TFB blog post "Most TSP participants should switch to a Roth TSP". That analyzes the effect of a federal pension, but the analysis should be the same for those with a private pension.

I suggest fully funding two Roth IRAs, one for each of you.

Will your 401k plans allow Roth 401k contributions?


Asset allocation.
GRS159" wrote:Desired Asset Allocation: 60% Bonds / 40% Stocks
Desired International stock allocation: 20 - 25%
Desired International bond allocation: 12%
I suggest not using International bonds. In my opinion they are unnecessary, add complexity and additional expense to a portfolio, for no readily apparent benefit.

This works out to an asset allocation of about 60% bonds, 10% International stocks, and 30% domestic stocks.



Fund selection & placement.
In selecting funds to use strive for a good combination of broad diversification (to decrease your risk) and low expense ratios (to increase your net returns). To achieve that I suggest a three-fund type portfolio. Please see the wiki article "three-fund portfolio" and the forum discussion "the three-fund portfolio".

It's usually better to treat all accounts together as a single unified portfolio, rather than try to put all components of the three-fund portfolio (total domestic stocks, total international stocks, and total bonds) in each account.

Domestic stocks. I prefer a total stock market index fund if available, if not available in a 401k the a S&P 500 index fund (such as the John Hancock VIT 500 index in his 401k) is good enough for the domestic stock component of a three-fund portfolio. The TIAA CREF Equity Index Fund in her 401k tracks the Russell 3000 Index, so it is a total stock market index fund. The Vanguard Total Stock Market Index Fund in his rollover IRA and the Roth IRAs also qualifies.

International stocks. The Vanguard Total International Stock Index Fund is very tax-efficient so is suitable for the taxable account. Please see the wiki article "tax-efficient fund placement". The Vanguard fund covers stocks of both larger and smaller companies, in both emerging and developed markets including Canada. The TIAA CREF Equity Index Fund in her 401k tracks the MSCI EAFE Index, with covers larger companies in developed markets except Canada. I have not suggested adding a small amount of TIAA CREF Emerging Markets Index Fund to better diversify, the allocation would be a meaningless fraction of a percent.

Fixed Income/bonds. You did not indicate whether she preferred keeping the TIAA Traditional, I left that in in my example. It counts as part of a bond allocation. The TIAA CREF Bond Index Fund offered in her 401k tracks the Bloomberg Barclays U.S. Aggregate Bond Index, so it is a total bond market index fund. The Vanguard Total Bond Market Index in his 401k also qualifies. Bond funds are not very tax-efficient, and should be in tax-advantaged accounts, preferably tax-deferred accounts like his rollover IRA and her 401k. Please see the wiki article "tax-efficient fund placement".

To make portfolio management and rebalancing easy it's important to have at least one large account which contains all three basic asset types (domestic stocks, international stocks, and bonds). That could be his rollover IRA and her 401k.


Account suggestions & Example portfolio.
Here is an example portfolio which you could consider. This is a three-fund type portfolio. The asset allocation is about 60% bonds, 10% international stocks, and 30% domestic stocks. The current portfolio = "high six figures". I suggest maximum contributions to both 401ks and both Roth IRAs. The idea is to switch both existing balances and new contributions to the funds indicated. The percentages given are percentages of the total current portfolio, not percentages of any particular account. All percentages are rounded off so may not add up exactly.
GRS159 wrote:Current Retirement assets
Taxable (His)
9% Overall - Scottrade - in order of predominance - all are long term holdings:
POSKX - Primecap Odyssey Stock Fund
AAPL - Apple Inc.
DE- Deere & Company
DIS - Disney
USB - U.S. Bancorp
MTCH - Match Group Inc.
CGNX - Cognex Corporation
BUD - Anheiser-Busch Inbev SA
CBOE - CBOE Holdings Inc.
SBUX - Starbucks Corporation
TMUS - T-Mobile US Inc.
PI - Impinj Incorporated
Total unrealized capital gain ~ 22,000
Turn off any automatic dividend reinvestment you may have set up for those stocks, so you don't accumulate more of these stocks.

You could sell the stocks with the lowest unrealized capital gains, and use the resulting cash to fund living expenses you would otherwise have paid out of your paychecks, enabling you to increase your payroll contributions to your 401ks and increase funding to his IRA and add a IRA for her. This in effect transfers some of your taxable investment into your 401ks and IRAs.

GRS159 wrote: 6% Overall - TIAA CREF
TIERX - International Equity Fund Retail Class - exp. ratio .78
TIOSX - International Opportunities Fund - exp. ratio 1.10
TLISX - International Small-Cap Equity Fund - exp. ratio 1.11
Total unrealized capital gain ~ 4,000
I suggest selling the 3 TIAA CREF international funds. I think a lower expense ratio from using Vanguard funds will rapidly repay the tax liability incurred.

I suggest transferring the taxable account to Vanguard, call Vanguard and they can help with the transfer. Ask for an "in-kind" transfer of the individual stocks to avoid any unnecessary income tax liability.

Taxable account @ Vanguard, ex-TIAA CREF account + ex-Scottrade account (15% of portfolio)
09%, PRIMECAP Odyessy Stock Fund (POSKX) ER 0.69%, and 11 individual stocks
06%, Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%


GRS159 wrote:His 401k's below:
25% Overall - Vanguard IRA (was new account - just funded and uninvested)
As of 10/16/17:
VBTLX total bond market - 60%
VTSAX total stock market - 30%
VTIAX total int. stock index -10%

1% John Hancock - (recently depleted to fund VG account above) - (Roth IRA available but currently unfunded)
Company contributes 3% - split in thirds:
JH Multimanager Balanced Lifestyle Portfolio - JILBX 1.05% exp. ratio
EuroPacific Grownt Fund - RERFX 1.09% exp. ratio
T. Rowe Price Spectrum Inc. - RPSIX 1.14% exp. ratio
His 401k @ John Hancock (01% of portfolio, adds $24k/yr + $3k employer match, then periodic in-service rollover to Vanguard IRA)
01%, John Hancock VIT 500 Index (JFIVX) ER 0.63%

Rollover IRA @ Vanguard, in-service rollover from 401k (25% of portfolio; adds periodic in-service rollovers from 401k)
11%, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%
02%, Vanguard Total International Index Fund Admiral Shares (VTIAX) ER 0.11%,
12%, Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05%

GRS159 wrote:His Roth IRA - Scottrade
6% Overall - Cash, not currently invested.
I suggest rolling over his Scottrade Roth to a Roth IRA at Vanguard.

I also suggest that she start Roth IRA at Vanguard.

His Roth IRA @ Vanguard, ex-Scottrade Roth IRA (06% of portfolio; adds $5.5k per year)
06%, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%

Her Roth IRA @ Vanguard (00% of portfolio; adds $5.5k per year)
00%, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%

GRS159 wrote:Her 401k below - (Roth available but currently unfunded)
53% Overall - TIAA CREF - consisting of:
34.5% TIAA Traditional
13.6% TCIEX International Equities - .06 ER
11.5% TIMVX Mid-Cap Value - .41 ER
8.3% TILVX Large-Cap Value - .06 ER
7.8% QCGLPX Global Equities - .44 ER
6.3% QREARX Real Estate Account - .85 ER
6.2% TISBX Small Cap Blend - .06 ER
6.0% QCSTPX CREF Stock Account - .43 ER
3.1% TILIX Large Cap Growth Index - .06 ER
2.7% TIGRX Growth & Income Fund - .42 ER
It somewhat unusual to see all share classes offered as choices in a 401k.

I suggest using fewer funds with the broadest diversification, with lower expense ratios. To eliminate overlap an unnecessary duplication, I suggest the Equity Index Fund alone instead of 5 domestic stock funds, and using just the International Equity Index Fund alone for international stocks. This also eliminates the funds with higher expense ratios.

I don't know if she has a preference for continuing a real estate fund. I have omitted it in my example.

I don't know if she has a preference for keeping the TIAA Traditional. In my example have I kept the TIAA Traditional and counted it as part of the bond allocation.

Her 401k @ TIAA CREF (53% of portfolio)
03%, TIAA CREF Equity Index Fund Institutional (a Russell 3000 index fund) (TIEIX) ER 0.05%
02%, TIAAF CREF International Equity Index Fund Institutional (a MSCI EAFE index fund) (TCIEX) ER 0.06%
30%, TIAA CREF Bond Index Fund Institutional (a Bloomberg Barclays U.S. Aggregate Bond Index fund) (TBIIX) ER 0.12%
18%, TIAA Traditional


Rebalancing.
Because the funds will grow at different and unpredictable rates , every year or so you may need to rebalance to bring the portfolio back.to your desired asset allocation. Please see the wiki article "Rebalancing". You can rebalance simply be exchanging between funds inside this rollover IRA, or inside her 401k.

. . . . .

I suggest that you read one or two books on general investing, please see the wiki article "books: recommendations and reviews".

If you have any questions just ask.

I hope that this helps.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Intro and questions

Post by GRS159 » Fri Oct 20, 2017 7:24 am

Hello ruralavalon. At this point, all I can say is that I am stunned by the thoroughness of your response, and incredibly appreciative of the time it took to write it. I will get busy on the reading recommendations. I will work my way through the various questions and post back with answers. Thank you...

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Re: Intro and questions

Post by GRS159 » Fri Oct 20, 2017 7:51 am

ruralavalon wrote:
Thu Oct 19, 2017 6:31 pm

Domestic stocks. I prefer a total stock market index fund if available, if not available in a 401k the a S&P 500 index fund (such as the John Hancock VIT 500 index in his 401k) is good enough for the domestic stock component of a three-fund portfolio.
There is a total stock market index fund - Total Stock Market Index Fund JHIVT (Ticker JETSX) with a .75 ER. Prospectus says it tracks the Wilshire 5000 Index, albeit with slightly lower historic returns.

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Re: Intro and questions

Post by ruralavalon » Fri Oct 20, 2017 8:12 am

GRS159 wrote:
Fri Oct 20, 2017 7:51 am
ruralavalon wrote:
Thu Oct 19, 2017 6:31 pm

Domestic stocks. I prefer a total stock market index fund if available, if not available in a 401k the a S&P 500 index fund (such as the John Hancock VIT 500 index in his 401k) is good enough for the domestic stock component of a three-fund portfolio.
There is a total stock market index fund - Total Stock Market Index Fund JHIVT (Ticker JETSX) with a .75 ER. Prospectus says it tracks the Wilshire 5000 Index, albeit with slightly lower historic returns.
At most fund companies the expense ratios for their S&P 500 and total market index funds are identical. At Vanguard both types have expense ratios of 0.04%, at Fidelity both types have expense ratios of 0.035%.

At John Hancock the total market VIT has an expense ratio 0.12 higher than the S&P 500 VIT, historically enough to erase the very small diversification benefit from using a total market index fund over a S&P 500 index fund.

So at John Hancock the two types should be virtually identical in terms of performance.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Intro and questions

Post by GRS159 » Sun Oct 22, 2017 8:56 am

ruralavalon wrote:
Thu Oct 19, 2017 1:07 pm
What fees are associated with doing the in-service distribution (sometimes called an in-service rollover)?
I phoned John Hancock - they do not charge a fee for in-service rollover. The third party plan administrator does charge $50.00 to process each request
ruralavalon wrote:I don't believe there is a legal limit on how often you may us do an in-service distribution. There may be a limit set in your 401k plan.
No limit in my 401k plan.

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Re: Intro and questions

Post by ruralavalon » Sun Oct 22, 2017 9:28 am

GRS159 wrote:
Sun Oct 22, 2017 8:56 am
ruralavalon wrote:
Thu Oct 19, 2017 1:07 pm
What fees are associated with doing the in-service distribution (sometimes called an in-service rollover)?
I phoned John Hancock - they do not charge a fee for in-service rollover. The third party plan administrator does charge $50.00 to process each request
ruralavalon wrote:I don't believe there is a legal limit on how often you may us do an in-service distribution. There may be a limit set in your 401k plan.
No limit in my 401k plan.
I think you want to do the in-service rollovers infrequently, perhaps just once per year. With a fee of $50 per in-service rollover and contributions of $15k/yr including the employer match, a once a year in-service rollover is a cost of 0.33%, a twice per year in-service rollover is a cost of 0.66%.

Using the in-service rollover you save almost 1.00% per year in expense ratios, so the cost is worth it.

In my opinion that's not a high enough cost to be prohibitive, but you need to be aware of and control the costs.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Intro and questions

Post by GRS159 » Sun Oct 22, 2017 9:53 am

ruralavalon wrote:
Thu Oct 19, 2017 6:31 pm
Debt.
GRS159 wrote:
Wed Oct 11, 2017 7:33 am
Emergency Fund: Yes, 18,500 in savings @ .28% IR, 7,750 in checking.
Debt: 30,000 Home mortgage - 3.625% IR. 8,800 Auto loan - 2% IR.
About how many months of basic living expenses would be covered by that $28k in checking and savings?

In my opinion the interest rates are not high enough to manage any accelerated pay off of those loans.

At the standard payment will the mortgage be paid off by your expected retirement date?
The $28k should cover 6 months living expenses. Current monthly payment would pay off the mortgage in 30 months. I have not established an expected retirement date at this time, but in 30 months I will be 63.5 years old.
ruralavalon wrote: Roth vs traditional contributions?
GRS159 wrote: Tax Filing Status: Married
Federal Tax Rate: 28%
State of Residence: Washington - 0%
His Age: 60
His Pension est. ~ $2400 - $3100/mo. depending on retirement date
Wife's Age: 57
Her Pension ~ $2500/mo.
You are both eligible for good pensions. This indicates to me that you will likely be better off making Roth IRA contributions. For an explanation please see the TFB blog post "Most TSP participants should switch to a Roth TSP". That analyzes the effect of a federal pension, but the analysis should be the same for those with a private pension.

I suggest fully funding two Roth IRAs, one for each of you.

Will your 401k plans allow Roth 401k contributions?

Yes, Roth IRA's are available in both 401K plans.
ruralavalon wrote: Asset allocation.
GRS159" wrote:Desired Asset Allocation: 60% Bonds / 40% Stocks
Desired International stock allocation: 20 - 25%
Desired International bond allocation: 12%
I suggest not using International bonds. In my opinion they are unnecessary, add complexity and additional expense to a portfolio, for no readily apparent benefit.

This works out to an asset allocation of about 60% bonds, 10% International stocks, and 30% domestic stocks.
Do you prefer the slightly heavier stock to bond ratio like the VG retirement funds as opposed to using the age/bond equivalency? VG's 2025 VVTVX is at 35.65% bonds, and the 2020 VTWNX is at 44.21. Perhaps 60% bond allocation that I specified earlier is too much?

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Re: Intro and questions

Post by ruralavalon » Sun Oct 22, 2017 11:00 am

GRS159 wrote:
Sun Oct 22, 2017 9:53 am
ruralavalon wrote:
Thu Oct 19, 2017 6:31 pm
Debt.
GRS159 wrote:
Wed Oct 11, 2017 7:33 am
Emergency Fund: Yes, 18,500 in savings @ .28% IR, 7,750 in checking.
Debt: 30,000 Home mortgage - 3.625% IR. 8,800 Auto loan - 2% IR.
About how many months of basic living expenses would be covered by that $28k in checking and savings?

In my opinion the interest rates are not high enough to manage any accelerated pay off of those loans.

At the standard payment will the mortgage be paid off by your expected retirement date?
The $28k should cover 6 months living expenses. Current monthly payment would pay off the mortgage in 30 months. I have not established an expected retirement date at this time, but in 30 months I will be 63.5 years old.
I don't suggest any accelerated pay off of the debt at those interest rates, and since the mortgage will be paid off by retirement age.


GRS159 wrote:
ruralavalon wrote: Roth vs traditional contributions?
GRS159 wrote: Tax Filing Status: Married
Federal Tax Rate: 28%
State of Residence: Washington - 0%
His Age: 60
His Pension est. ~ $2400 - $3100/mo. depending on retirement date
Wife's Age: 57
Her Pension ~ $2500/mo.
You are both eligible for good pensions. This indicates to me that you will likely be better off making Roth IRA contributions. For an explanation please see the TFB blog post "Most TSP participants should switch to a Roth TSP". That analyzes the effect of a federal pension, but the analysis should be the same for those with a private pension.

I suggest fully funding two Roth IRAs, one for each of you.

Will your 401k plans allow Roth 401k contributions?

Yes, Roth IRA's are available in both 401K plans.
For most people traditional 401k contributions are likely better, most people are in a lower tax bracket during retirement. A significant pension changes that assessment, pension income is taxable and tends to keep your tax bracket higher.

I suggest that you also consider making part or all of your 401k contributions Roth 401k contributions.

For an explanation Google the TFB blog post "Most TSP Participants should switch to the Roth TSP". That discusses the effect of a federal pension, but the analysis should hold for other pensions.


GRS159 wrote:
ruralavalon wrote: Asset allocation.
GRS159" wrote:Desired Asset Allocation: 60% Bonds / 40% Stocks
Desired International stock allocation: 20 - 25%
Desired International bond allocation: 12%
I suggest not using International bonds. In my opinion they are unnecessary, add complexity and additional expense to a portfolio, for no readily apparent benefit.

This works out to an asset allocation of about 60% bonds, 10% International stocks, and 30% domestic stocks.
Do you prefer the slightly heavier stock to bond ratio like the VG retirement funds as opposed to using the age/bond equivalency? VG's 2025 VVTVX is at 35.65% bonds, and the 2020 VTWNX is at 44.21. Perhaps 60% bond allocation that I specified earlier is too much?
I personally favor a more aggressive allocation than a simple "age in bonds" formula. That shouldn't be a strict rule mechanically applied.

Mr. Bogle phrased it as "roughly your age in bonds", and described it as "crude starting point" for the asset allocation decision to be adjusted according to your personal objectives, personal risk tolerance, and your overall financial circumstances. Please see the wiki article Boglehead's Investment Philosophy, part 3 " Never bear too much or too little risk".

At age 60 I think something like 60/40 stocks/bonds or 50/50 might be reasonable.

For what it's worth, we are both 72 retired with no pension, and our asset allocation is 50/50, has been 50/50 since age 64, and we have no plans to change that allocation.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Intro and questions

Post by GRS159 » Wed Oct 25, 2017 8:01 am

ruralavalon wrote:
Thu Oct 19, 2017 6:31 pm

Taxable account @ Vanguard, ex-TIAA CREF account + ex-Scottrade account (15% of portfolio)
09%, PRIMECAP Odyessy Stock Fund (POSKX) ER 0.69%, and 11 individual stocks
06%, Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%
Hello again ruralavalon.
On the quote above, I'm a little confused. Is the suggestion to leave the 09% Scottrade account (POSKX and 11 individual stocks) where it is? Or to move it to a VG taxable account?

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Re: Intro and questions

Post by ruralavalon » Wed Oct 25, 2017 8:59 am

GRS159 wrote:
Wed Oct 25, 2017 8:01 am
ruralavalon wrote:
Thu Oct 19, 2017 6:31 pm

Taxable account @ Vanguard, ex-TIAA CREF account + ex-Scottrade account (15% of portfolio)
09%, PRIMECAP Odyessy Stock Fund (POSKX) ER 0.69%, and 11 individual stocks
06%, Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%
Hello again ruralavalon.
On the quote above, I'm a little confused. Is the suggestion to leave the 09% Scottrade account (POSKX and 11 individual stocks) where it is? Or to move it to a VG taxable account?
The suggestion is to move to a Vanguard account, tell them you want an "in-kind" transfer of PRIMECAP Odysseus Stock Fund (POSKX) and the 11 individual stocks so that you avoid triggering unnecessary income tax liability in this transfer.

You avoid enlarging the number of accounts to monitor. Also that makes for easy transfer of funds, when you later sell individual stocks to decrease your excess concentration in individual stocks and to increase funding to your IRAs.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Intro and questions

Post by GRS159 » Thu Oct 26, 2017 7:21 am

ruralavalon,
thank you for the clarification, much apprecieated and makes perfect sense :happy

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Re: Intro and questions

Post by GRS159 » Tue Oct 31, 2017 8:08 am

ruralavalon wrote:
Thu Oct 19, 2017 6:31 pm

Fixed Income/bonds. You did not indicate whether she preferred keeping the TIAA Traditional, I left that in in my example. It counts as part of a bond allocation.
ruralavalon wrote:
GRS159 wrote:Her 401k below - (Roth available but currently unfunded)
53% Overall - TIAA CREF - consisting of:
34.5% TIAA Traditional
13.6% TCIEX International Equities - .06 ER
11.5% TIMVX Mid-Cap Value - .41 ER
8.3% TILVX Large-Cap Value - .06 ER
7.8% QCGLPX Global Equities - .44 ER
6.3% QREARX Real Estate Account - .85 ER
6.2% TISBX Small Cap Blend - .06 ER
6.0% QCSTPX CREF Stock Account - .43 ER
3.1% TILIX Large Cap Growth Index - .06 ER
2.7% TIGRX Growth & Income Fund - .42 ER
It somewhat unusual to see all share classes offered as choices in a 401k.

I suggest using fewer funds with the broadest diversification, with lower expense ratios. To eliminate overlap an unnecessary duplication, I suggest the Equity Index Fund alone instead of 5 domestic stock funds, and using just the International Equity Index Fund alone for international stocks. This also eliminates the funds with higher expense ratios.

I don't know if she has a preference for continuing a real estate fund. I have omitted it in my example.

I don't know if she has a preference for keeping the TIAA Traditional. In my example have I kept the TIAA Traditional and counted it as part of the bond allocation.

Her 401k @ TIAA CREF (53% of portfolio)
03%, TIAA CREF Equity Index Fund Institutional (a Russell 3000 index fund) (TIEIX) ER 0.05%
02%, TIAAF CREF International Equity Index Fund Institutional (a MSCI EAFE index fund) (TCIEX) ER 0.06%
30%, TIAA CREF Bond Index Fund Institutional (a Bloomberg Barclays U.S. Aggregate Bond Index fund) (TBIIX) ER 0.12%
18%, TIAA Traditional
Hello ruralavalon.
You mentioned that the TIAA Traditional counts as a bond allocation, which means her current bond allocation is about 70% of her account. In the suggested consolidation, the % of bond holdings increases to > 90% of her account. Both of these allocations to bonds seem too high to me, given her age (57), suggested bond guidelines, etc. Thoughts?

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Re: Intro and questions

Post by ruralavalon » Tue Oct 31, 2017 10:03 am

GRS159 wrote:
Tue Oct 31, 2017 8:08 am
ruralavalon wrote:
Thu Oct 19, 2017 6:31 pm

Fixed Income/bonds. You did not indicate whether she preferred keeping the TIAA Traditional, I left that in in my example. It counts as part of a bond allocation.
ruralavalon wrote:
GRS159 wrote:Her 401k below - (Roth available but currently unfunded)
53% Overall - TIAA CREF - consisting of:
34.5% TIAA Traditional
13.6% TCIEX International Equities - .06 ER
11.5% TIMVX Mid-Cap Value - .41 ER
8.3% TILVX Large-Cap Value - .06 ER
7.8% QCGLPX Global Equities - .44 ER
6.3% QREARX Real Estate Account - .85 ER
6.2% TISBX Small Cap Blend - .06 ER
6.0% QCSTPX CREF Stock Account - .43 ER
3.1% TILIX Large Cap Growth Index - .06 ER
2.7% TIGRX Growth & Income Fund - .42 ER
It somewhat unusual to see all share classes offered as choices in a 401k.

I suggest using fewer funds with the broadest diversification, with lower expense ratios. To eliminate overlap an unnecessary duplication, I suggest the Equity Index Fund alone instead of 5 domestic stock funds, and using just the International Equity Index Fund alone for international stocks. This also eliminates the funds with higher expense ratios.

I don't know if she has a preference for continuing a real estate fund. I have omitted it in my example.

I don't know if she has a preference for keeping the TIAA Traditional. In my example have I kept the TIAA Traditional and counted it as part of the bond allocation.

Her 401k @ TIAA CREF (53% of portfolio)
03%, TIAA CREF Equity Index Fund Institutional (a Russell 3000 index fund) (TIEIX) ER 0.05%
02%, TIAAF CREF International Equity Index Fund Institutional (a MSCI EAFE index fund) (TCIEX) ER 0.06%
30%, TIAA CREF Bond Index Fund Institutional (a Bloomberg Barclays U.S. Aggregate Bond Index fund) (TBIIX) ER 0.12%
18%, TIAA Traditional
Hello ruralavalon.
You mentioned that the TIAA Traditional counts as a bond allocation, which means her current bond allocation is about 70% of her account. In the suggested consolidation, the % of bond holdings increases to > 90% of her account. Both of these allocations to bonds seem too high to me, given her age (57), suggested bond guidelines, etc. Thoughts?
Change your focus, please consider all accounts together as a single unified portfolio. That was intended as a unified portfolio for both of you, not as separate portfolios for each of you.

The percentage of bonds in her TIAA-CREF 401k account is not important. The percentage in any one account is not important. What counts is the overall total.

In the 10/19/17 6:31 PM post outlining the total portfolio, TIAA Traditional is just 18% of the total portfolio. Overall the portfolio discussed in that post was 60% bonds as you had requested in your initial post of 10/11/17. The 60% overall total consists of:
18% TIAA Traditional in her TIAA-CREF 401k;
30% TIAA-CREF Bond Index Fund in her TIAA-CREF 401k; and
12% Vanguard Total Bond Market Index Fund in his rollover IRA.

As discussed later in a post of 10/22/17 11:00 AM, in my opinion at ages 57 and 60 something like 60% stocks/40% bonds or 50/50 might be a more reasonable asset allocation.

If you want less than 60% bonds overall a good place to make the change is in her TIAA-CREF 401k moving some of the bond fund or TIAA Traditional to the stock index funds in that same account.
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Re: Intro and questions

Post by GRS159 » Wed Nov 01, 2017 7:54 am

ruralavalon wrote:
Tue Oct 31, 2017 10:03 am

Change your focus, please consider all accounts together as a single unified portfolio.
Thank you - I see exactly what you are saying.

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Re: Intro and questions

Post by GRS159 » Sat Nov 11, 2017 9:11 am

Revised information added to the original post. Once again, thanks to each of you (and especially ruralavalon) for your suggestions.

ruralavalon, I believe I have executed the plan largely as you suggested. After input and assessing my own risk/reward tolerance, stock/bond allocation has been revised to ~ 60/40. International bond allocation target has been eliminated. Per your suggestion to convert taxable to deferred by selling underperforming individual stocks to maximize his 401k contribution, 2017 contributions will max. at 24k, and should be able follow the same strategy to do the same for 2018. No changes have been made to her TIAA-CREF account, although we do have a meeting scheduled with a TIAA advisor to review the overall portfolio and retirement goals. In that meeting I will advocate to simplify by eliminating unnecessary duplication while minimizing ER's.

Regarding the POSKX in his VG brokerage account, for simplification and lower ER, would you advise selling POSKX and moving the available funds to VTIAX?

GRS159

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Re: Intro and questions

Post by ruralavalon » Sat Nov 11, 2017 10:14 am

GRS159 wrote:
Sat Nov 11, 2017 9:11 am
Revised information added to the original post. Once again, thanks to each of you (and especially ruralavalon) for your suggestions.

ruralavalon, I believe I have executed the plan largely as you suggested. After input and assessing my own risk/reward tolerance, stock/bond allocation has been revised to ~ 60/40. International bond allocation target has been eliminated. Per your suggestion to convert taxable to deferred by selling underperforming individual stocks to maximize his 401k contribution, 2017 contributions will max. at 24k, and should be able follow the same strategy to do the same for 2018. No changes have been made to her TIAA-CREF account, although we do have a meeting scheduled with a TIAA advisor to review the overall portfolio and retirement goals. In that meeting I will advocate to simplify by eliminating unnecessary duplication while minimizing ER's.

Regarding the POSKX in his VG brokerage account, for simplification and lower ER, would you advise selling POSKX and moving the available funds to VTIAX?

GRS159
In my opinion the move to a 60/40 asset allocation is wise.

PRIMECAP Odyssey Stock Fund (POSKK) ER 0.69% is a good, well diversified, actively managed (turnover just 08%, low turnover is good, it indicates low trading expenses and a buy and hold approach), U.S. stock fund with some international stock. The expense ratio is higher than I prefer, but no so high as to automatically rule it out.

You stated that your federal tax rate is 28%. What is the unrealized capital gain status of that fund?

If you can switch to an index fund with a much lower expense ratio without a significant tax cost, then that's a good idea. But I don't advocate selling PRIMECAP Odyssesy Stock Fund (POSKK) if there is significant tax cost to the switch.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Intro and questions

Post by GRS159 » Sun Nov 12, 2017 9:17 am

ruralavalon wrote:
Sat Nov 11, 2017 10:14 am
In my opinion the move to a 60/40 asset allocation is wise.

PRIMECAP Odyssey Stock Fund (POSKK) ER 0.69% is a good, well diversified, actively managed (turnover just 08%, low turnover is good, it indicates low trading expenses and a buy and hold approach), U.S. stock fund with some international stock. The expense ratio is higher than I prefer, but no so high as to automatically rule it out.

You stated that your federal tax rate is 28%. What is the unrealized capital gain status of that fund?

If you can switch to an index fund with a much lower expense ratio without a significant tax cost, then that's a good idea. But I don't advocate selling PRIMECAP Odyssesy Stock Fund (POSKK) if there is significant tax cost to the switch.
Unrealized long term gain is ~$7000.

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Re: Intro and questions

Post by ruralavalon » Sun Nov 12, 2017 10:34 am

GRS159 wrote:
Sun Nov 12, 2017 9:17 am
ruralavalon wrote:
Sat Nov 11, 2017 10:14 am
In my opinion the move to a 60/40 asset allocation is wise.

PRIMECAP Odyssey Stock Fund (POSKK) ER 0.69% is a good, well diversified, actively managed (turnover just 08%, low turnover is good, it indicates low trading expenses and a buy and hold approach), U.S. stock fund with some international stock. The expense ratio is higher than I prefer, but no so high as to automatically rule it out.

You stated that your federal tax rate is 28%. What is the unrealized capital gain status of that fund?

If you can switch to an index fund with a much lower expense ratio without a significant tax cost, then that's a good idea. But I don't advocate selling PRIMECAP Odyssesy Stock Fund (POSKK) if there is significant tax cost to the switch.
Unrealized long term gain is ~$7000.
In the 28% bracket for ordinary income, the long-term capital gain rate is currently 15%. Tax hit = $1,050 in a "[h]igh 6 figures" portfolio.

I think you could sell PRIMECAP Odyssesy and reinvest in a total stock market index or total international stock index fund, or you could keep it. PRIMECAP Odyssesy is a good actively-managed, moderate expense fund, and $1,050 isn't pocket change, so I have no strong opinion.
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