How am I doing on my portfolio?

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sethdf
Posts: 17
Joined: Thu Aug 30, 2007 7:53 am

How am I doing on my portfolio?

Post by sethdf » Wed Oct 11, 2017 9:32 am

Emergency funds: Done
Debt: mortgage at 3.875%
Tax Filing Status: Married filing Jointly
Tax Rate: 25% Federal, 4.67% State
State of Residence: CO
Age: 40
Desired Asset allocation: 90% stocks / 5% bonds

Porfolio: Low to mid six figures


Current retirement assets

Taxable
17% cash (for investing – do not include emergency funds)
(just came into some money, that is why cash % is currently so high)

His 401k - At least 50% of the total value of the 401k has to reside with American Funds, hence I'm stuck with some expensive items.
13% Vanguard Total Stock Market Index (VTSMX) (0.15)
5% Vanguard Total Int'l Stock Market Index Fund (VGTSX) (0.18)
18% American Funds The Growth Fund of America (RGABX)(1.42)
2% Vanguard Total Bond Market Index Fund (VBMFX) (0.15)
2% Western Asset Core Plus Bond Fund (WAPCX) (1.52)

Company match: I'm taking taking as much match as possible.

His Roth IRA at Vanguard
23% Vanguard Total Stock Market Index Fund (VTSAX) (0.04)

Her Roth IRA at Vanguard
15% Vanguard Total International Stock Index Fund (VTIAX) (0.11)
5% Vanguard REIT Index Fund (VGSLX) (0.12)


Contributions

New annual Contributions
$7200 yearly his 401k, including match

I put some in our Roth's here and there, but never consistently.

Available funds

Funds available in his 401(k)
American Funds EuroPacific Gr R2 RERBX 1.6
American Funds Growth Fund of Amer R2 RGABX 1.42
American Funds New Perspective R2 RNPBX 1.55
American Funds SMALLCAP World R2 RSLBX 1.84
American Century Heritage C AHGCX 2
INVESCO Gold & Precious Metals Fund C IGDCX 2.19
MFS Value Fund R1 MEIGX 1.61
Oppenheimer Developing Markets C ODVCX 2.07
American Funds Capital World G/I R2 RWIBX 1.54
American Funds Invmt Co of America R2 RICBX 1.39
American Funds Washington Mutual R2 RWMBX 1.39
Invesco Real Estate C IARCX 1.99
American Funds Capital Inc Bldr R2 RIRBX 1.4
American Funds American Balanced R2 RLBBX 1.37
Calvert Short Duration Income - C CDICX 1.64
Federated High Income Bond C FHICX 1.72
Western Asset Core Plus Bond C WAPCX 1.52
American Funds 2010 Target Date Fund R2 RBATX 1.45
American Funds 2015 Target Date Fund R2 RBJTX 1.45
American Funds 2020 Target Date Fund R2 RBCTX 1.47
American Funds 2025 Target Date Fund R2 RBDTX 1.48
American Funds 2030 Target Date Fund R2 RBETX 1.5
American Funds 2035 Target Date Fund R2 RBFTX 1.51
American Funds 2040 Target Date Fund R2 RBKTX 1.52
American Funds 2045 Target Date Fund R2 RBHTX 1.53
American Funds 2050 Target Date Fund R2 RBITX 1.53
American Funds 2055 Target Date Fund R2 RBMTX 1.54
American Funds 2060 Target Date Fund R2 RBNTX 1.56



Questions:
1. I will probably just take the cash we just got and continue down the Core Four plan i've been sticking with, albeit with lower bond exposure.
I struggle a bit with just putting it all in our retirement fund rather than just mirroring that in a non-retirement vehicle.

2. How does one factor in expected inheritance?

Thank you very much for reading.

Seth
Last edited by sethdf on Wed Oct 11, 2017 9:08 pm, edited 2 times in total.

User avatar
mhc
Posts: 3445
Joined: Mon Apr 04, 2011 10:18 pm
Location: NoCo

Re: How am I doing on my portfolio?

Post by mhc » Wed Oct 11, 2017 10:04 am

You should dump the two expensive funds in your 401k and put it into the other funds you have. Otherwise, your fund choices look good.

I don't count my eggs before they hatch.

User avatar
CyclingDuo
Posts: 791
Joined: Fri Jan 06, 2017 9:07 am

Re: How am I doing on my portfolio?

Post by CyclingDuo » Wed Oct 11, 2017 10:15 am

sethdf wrote:
Wed Oct 11, 2017 9:32 am
Emergency funds: Done
Debt: mortgage at 3.875%
Tax Filing Status: Married filing Jointly
Tax Rate: 25% Federal, 4.67% State
State of Residence: CO
Age: 40
Desired Asset allocation: 90% stocks / 5% bonds

Porfolio: Low to mid six figures


Current retirement assets

Taxable
17% cash (for investing – do not include emergency funds)
(just came into some money, that is why cash % currently)

His 401k - up to 50% of total account value can be pushed to Ameritrade, hence the Vanguard funds
13% Vanguard Total Stock Market Index (VTSMX) (0.15)
5% Vanguard Total Int'l Stock Market Index Fund (VGTSX) (0.18)
18% American Funds The Growth Fund of America (RGABX)(1.42)
2% Vanguard Total Bond Market Index Fund (VBMFX) (0.15)
2% Western Asset Core Plus Bond Fund (WAPCX) (1.52)

Company match: I'm taking taking as much match as possible.

His Roth IRA at Vanguard
23% Vanguard Total Stock Market Index Fund (VTSAX) (0.04)

Her Roth IRA at Vanguard
15% Vanguard Total International Stock Index Fund (VTIAX) (0.11)
5% Vanguard REIT Index Fund (VGSLX) (


Contributions

New annual Contributions
$7200 yearly his 401k, including match

I put some in our Roth's here and there, but never consistently.

Available funds

Funds available in his 401(k)
American Funds EuroPacific Gr R2 RERBX 1.6
American Funds Growth Fund of Amer R2 RGABX 1.42
American Funds New Perspective R2 RNPBX 1.55
American Funds SMALLCAP World R2 RSLBX 1.84
American Century Heritage C AHGCX 2
INVESCO Gold & Precious Metals Fund C IGDCX 2.19
MFS Value Fund R1 MEIGX 1.61
Oppenheimer Developing Markets C ODVCX 2.07
American Funds Capital World G/I R2 RWIBX 1.54
American Funds Invmt Co of America R2 RICBX 1.39
American Funds Washington Mutual R2 RWMBX 1.39
Invesco Real Estate C IARCX 1.99
American Funds Capital Inc Bldr R2 RIRBX 1.4
American Funds American Balanced R2 RLBBX 1.37
Calvert Short Duration Income - C CDICX 1.64
Federated High Income Bond C FHICX 1.72
Western Asset Core Plus Bond C WAPCX 1.52
American Funds 2010 Target Date Fund R2 RBATX 1.45
American Funds 2015 Target Date Fund R2 RBJTX 1.45
American Funds 2020 Target Date Fund R2 RBCTX 1.47
American Funds 2025 Target Date Fund R2 RBDTX 1.48
American Funds 2030 Target Date Fund R2 RBETX 1.5
American Funds 2035 Target Date Fund R2 RBFTX 1.51
American Funds 2040 Target Date Fund R2 RBKTX 1.52
American Funds 2045 Target Date Fund R2 RBHTX 1.53
American Funds 2050 Target Date Fund R2 RBITX 1.53
American Funds 2055 Target Date Fund R2 RBMTX 1.54
American Funds 2060 Target Date Fund R2 RBNTX 1.56



Questions:
1. I will probably just take the cash we just got and continue down the Core Four plan i've been sticking with, albeit with lower bond exposure.
I struggle a bit with just putting it all in our retirement fund rather than just mirroring that in a non-retirement vehicle.

2. How does one factor in expected inheritance?

Thank you very much for reading.

Seth
The underlined and red colored should be removed as the fees are too high. Utilize the total stock market, total international stock market, and total bond fund space in your 401k and your IRA's to cover those two. You could also consider adding some Total Bond Fund in the Roth IRA's if you need the space outside of the 401k? At age 40, you have very little bond exposure so that might be a priority. You could also add the Vanguard Municipal Bond Fund in your taxable to increase your bond exposure.

Edit: Are you saying that 50% of the 401k has to be invested on that list of available funds with the high expense ratios?

retiredjg
Posts: 30368
Joined: Thu Jan 10, 2008 12:56 pm

Re: How am I doing on my portfolio?

Post by retiredjg » Wed Oct 11, 2017 1:24 pm

A 95% stock allocation is high risk even for a younger person. I think you should consider increasing it to 20 or 25% at least.

I would hold stock index funds in taxable and increase the bond portion in the 401k.

It does not appear to me that you are saving nearly enough for retirement. If there is a future inheritance, that could make it OK. But what if there isn't a future inheritance? I would not count those chickens before they hatch.

mega317
Posts: 907
Joined: Tue Apr 19, 2016 10:55 am

Re: How am I doing on my portfolio?

Post by mega317 » Wed Oct 11, 2017 3:22 pm

CyclingDuo wrote:
Wed Oct 11, 2017 10:15 am
Edit: Are you saying that 50% of the 401k has to be invested on that list of available funds with the high expense ratios?
This is how I read it. Which is too bad but at least it's not 100%!
I didn't research all of your options but the two you chose seem fine and are among the least expensive options.
It does not appear to me that you are saving nearly enough for retirement.
Yeah. What are you projected retirement expenses and age? If you add 7200 a year and work until you're 65, with good market returns you could have ~1.5 million (I estimated "low to mid six figures" as 300k). That's 60k a year (don't forget taxes). But in the 25% bracket you're likely making north of 100k, and if only saving 7k a year you are spending more than that.

With regards to the inheritance I would weigh it like any other uncertain event. If the person is currently wealthy and terminal, that makes it fairly likely. If they are wealthy and healthy, they may very well not be wealthy by the time they pass.

sethdf
Posts: 17
Joined: Thu Aug 30, 2007 7:53 am

Re: How am I doing on my portfolio?

Post by sethdf » Wed Oct 11, 2017 9:14 pm

@mhc Yes, CyclingDuo and mega317 are correct, I am stuck with 50% of the total value of my 401k in American Funds and with those pretty poor choices. I'm paying $100 a year to have 50% of it self-directed in an Ameritrade account.

@retiredjg Yes, I am starting to slowly increase my bond exposure but should probably accelerate. I am going to do my best to try to put a bit more away. Any recommended calculators to estimate where I may be in 20 years so I can mess with the numbers?

@mega317 Your estimates are pretty accurate.

Yes, I will behave as though inheritance is not going to happen and try to sock away more, in addition to increasing my bond exposure.

Thank you everyone for your input!

mega317
Posts: 907
Joined: Tue Apr 19, 2016 10:55 am

Re: How am I doing on my portfolio?

Post by mega317 » Wed Oct 11, 2017 10:07 pm

sethdf wrote:
Wed Oct 11, 2017 9:14 pm
Any recommended calculators to estimate where I may be in 20 years so I can mess with the numbers?
I like to use excel, and this is how I came up with that 1.5 million estimate in my previous post:
Excel's financial functions let you solve for the rate, number of periods, contributions (pmt), present value, or future value by entering all the other numbers. So for your example I used Future Value
=fv(rate, nper, pmt, pv). I used 5% for "good market returns" so (0.05, 25, -7200, -300000) = 1.36M.

But you can solve for any variable. Let's say you can increase your contributions to 10k, and want to know how long to reach that same 1.36 million figure.
=nper(rate,pmt,pv,fv) (0.05,-10000,-300000,1360000) = 23 years.

Or how much do I need to save to get 1.36 million in 20 years?
=pmt(.05,20,-300000,1500000) = $17,000 a year.

FYI I use a rate of 3% which may or may not be too conservative. I'm at least 20 years from retirement so any precision is an illusion.

retiredjg
Posts: 30368
Joined: Thu Jan 10, 2008 12:56 pm

Re: How am I doing on my portfolio?

Post by retiredjg » Thu Oct 12, 2017 1:58 pm

There are several kinds of calculators in the Wiki.

User avatar
CyclingDuo
Posts: 791
Joined: Fri Jan 06, 2017 9:07 am

Re: How am I doing on my portfolio?

Post by CyclingDuo » Fri Oct 13, 2017 7:56 am

sethdf wrote:
Wed Oct 11, 2017 9:14 pm
@mhc Yes, CyclingDuo and mega317 are correct, I am stuck with 50% of the total value of my 401k in American Funds and with those pretty poor choices. I'm paying $100 a year to have 50% of it self-directed in an Ameritrade account.
In that case, continue to lobby your employer for a better, lower cost 401K plan. They are out there and if enough employees pound the table on this, perhaps the strings can be cut with the American Funds plan, or at the very least can be reconsidered. HR needs to know how disappointing the plan they chose is for the employees.

We feel it should be a part of everyone's job search to do some research when applying for jobs. High expense fees on plans can mean an employee has to save twice as much over their 30 - 40 year career to equal the returns of a low cost index fund plan. Here's my favorite table for that as it compares low cost with high cost:

Image
http://www.retireearlyhomepage.com/twopercentrule.html

Look at the difference once you hit 40 years of saving between the low cost and higher cost ER fees!!! Obviously, it is hard to predict how long one will stay with a certain job, but it is absolutely worth researching before accepting a position (if one has the choice to choose between jobs that is). Obviously, there are many other factors at play - salary, location, career advancement, entry level vs. mid-career vs. late career and on and on. However, knowing that the 401k plan may have such high expenses that one is going to have to save twice as much as a similar job that includes the lower cost funds (ER fees) - it adds up over one's full working career. The more future employees consider this, perhaps the more HR departments will take a closer look at their plans and make a move to improve their benefits and 401k plans.

How to do that is mentioned here:

https://www.bogleheads.org/wiki/401(k)# ... re_choices


In the meantime, follow the suggested BH Wiki of prioritizing investments...

Funding priority

Here is a general account funding priority that often works well for many people (not all points will apply to everyone):

1. Contribute to the work-based plan (401(k), 403b,) enough to get the full employer match (the match is like free money, your best possible investment)

2. Pay off high interest debt (a guaranteed high return, the next best thing to free money)

3. Contribute to a Health Savings Account (HSA) if available (unlike many other tax deductions, there are no income restrictions to contribute to an HSA)

4. Contribute the maximum to an IRA, traditional or Roth, depending on eligibility and personal circumstances

5. Contribute the remainder of the maximum employee contribution to the work-based plan

6. Contribute to a taxable investing account or use the backdoor Roth technique

7. Non-deductible IRAs or annuities.

https://www.bogleheads.org/wiki/Priorit ... nvestments

That page also talks about the plans with high cost or mediocre choices...

401(k) plans with high cost funds

See also: Expensive or mediocre choices

Many company plans contain high-cost funds which make them unattractive. If you have such a plan, look for one or two index funds or a bond fund that can be used. If your company offers matching funds up to a certain contribution level, it's always wise to use the company plan. If there is no match, the power of tax-deferred compounding and automatic contributions still favors using the plan with limited contributions.

Also, if you leave your current employer you will most likely be able to rollover the assets in your poor-quality company plan to either a better company plan, or to an IRA.

https://www.bogleheads.org/wiki/Priorit ... nvestments


What's the intended longevity of staying at the current job with the high cost 401k plan? Is there a possibility that your career or job will be moving on at some point in the future?

Certainly stick with contributing the amount to get the company match (the free money part of the deal). Max out the ROTH IRA's as well this year with the cash you came into.

How to factor in expected inheritance? Make sure you read the Windfall Wiki page. Depending on the form you receive the assets in from an inheritance, there will be issues to deal with from a taxation standpoint at that time. Some may be a stretch BDA IRA, some annuities, some may end up in taxable with a stepped up cost basis, etc... - so you will adjust/tweak your current plans when and if the inheritance occurs. Depending on your timeline for that scenario, it wouldn't hurt to read up on all of that before it occurs so you are prepared.

sethdf
Posts: 17
Joined: Thu Aug 30, 2007 7:53 am

Re: How am I doing on my portfolio?

Post by sethdf » Wed Oct 18, 2017 11:56 am

@mega317 I will try to set that up in Excel. Thanks!

@ retiredjg Ah, yes...the Wiki. I'll look there as wel.

@ CyclingDuo Yes, I could mount an effort to get our options changed, but based on the culture at our company, I highly doubt any change would come about. I really like my job...it is the 401k that is one of the worst aspects of it, really. Since I can move 50% of my total 401k value into Vanguard funds (for a fee of $25 a quarter), I feel a bit better about it. I believe I'm the only one in the company exercising this option. The only way I would leave would probably be if I were let go, so I see it as a long term position. Thanks for all the advice!

hightower
Posts: 270
Joined: Mon Dec 12, 2016 2:28 am

Re: How am I doing on my portfolio?

Post by hightower » Wed Oct 18, 2017 12:06 pm

Hard to say how you're doing when you don't give any numbers, only percentages. You're mortgage could be 1,000,000 and you're savings only 200k for all we know;)

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