First time poster:NEED HELP! We are total newbies and late to the game*updated

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sprintingtoretirment
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First time poster:NEED HELP! We are total newbies and late to the game*updated

Post by sprintingtoretirment » Sun Oct 15, 2017 6:31 pm

Thank you for the review and the help with our finances! We have been long term lurkers but first time posters. We have used this site to build confidence to get started. It took us a while to build the structure of saving diligently . After years of children, sports, work and life we're committed to providing for our retirement .We should have sooner :oops: . For the last two years we have feverishly been saving and reducing our living expenses.

We have two children, both are done with both undergrad and grad school. We have no intention of providing any further support. We have no debt , other than our home which is almost paid off. We have made the decision to invest over paying our home off. We would like to retire or have the option to in 8 years (58). Expect to continue working in a lower capacity ( consult, part time , teach) We intend to retire in place.

We will use Medicare for insurance and pay privately prior to that should we wait to retire. Husband is currently happy at his job.

Please find our financials below: we tried to be through, but are happy to add anything that we missed
Emergency funds: three months
Debt: home $60,000.00 ( interest rate 3.25%). Almost paid off . Equity $840,000. No other debt.
Tax filing status: married filing jointly. No dependents Tax rate: 25% fed, not sure what the state tax bracket is.
State of residence: CA
Annual income : $ >200k single income family.
Age : him 50, her 50
Desired asset allocation : 70/30 ( 20% international inside of stock) . NOTE: we are open to suggestions ( would really like to simplify ) Annual spending : $40,000.00 (reduced after house is paid off by almost half )
Small pension upon retirement : $500
Social security upon retirement : Him $3400.00 Her $1750.00 (age67)



TAX ADVANTAGED ACCOUNTS
HIS ROTH: (% OF PORTFOLIO)/(ER)
VANGUARD FEDERAL MM SETTLEMENT ACCOUNT (5.19%) (0%)
Fidelity international capital appreciation fund FIVX (.07%) (1.14)
FIdelity total bond fund FIBFX (.16%) (.45)
Fidelity total market index fund premium FSTVX (.22%) (.03)
Oak mark international fund investor class OAKIX (.07%) (1.05)

HER TRADITIONAL IRA:
VANGUARD FEDERAL MM (7.09%)

CURRENT VANGUARD 401K:
TGT RETIREMENT 2030 TRUST PLUS (27.96%) (.06)
ESOP STOCK FUND (.83%)
RETIREMENT ACCT IN TGT RETIREMENT 2030 TRUST PLUS (1.18%) (.06)

AVAILABLE INVESTMENT FUNDS FOR VANGUARD 401K:
JP MORGAN STABLE VALUE FD (.38)
BOND FUNDS:
PIMCO TRCTCI2 (.37)
VANGUARD INFLATION PROTECTED SECURITY INSTITUTIONAL VIPIX (.07)
VANGUARD TTL BOND MKT INST. VBTIX (.04)
TGT DATE FUNDS 2015-2065 (.06)
TROWE PRICE INSTL SMALL CAP STK TRSSX (.67)
VANGUARD INST PLUS INDEX FUND VIIIX (.02)
VANGUARD PRIMECAP FUND ADM VPMAX (.33)
VANGUARD WINDSORD//FND ADM VWNAX (.25)
VANGUARD TTL INSTL STK VTPSX (.07)

HER TRADITIONAL IRA:
FED MKT MM FUND 7.09% (0)

OLD 401K AT TROWE PRICE
STATE STREET TGT RET 2020 (15.25%) (0)

Available investments at Old 401K
Blackrock strategic cmpltn nl m SCFMN
Dodge and cox international stock DODFX
State street s&p 500 ind l k CMDVQ
Wells Fargo common stock r6SCSRX
Well as Fargo core bond r6WTRIX
State street target ret. 2015 CMDLW
State street target 2025 CMDNW
State street target 2030CMDOW
State street target 2035 CMDPW
State street target 2040CMDQW
State street target 2045CMDRW
State street target 2050CMDIW

HSA:
CASH: .58%
CURRENT INVESTMENT:
% of portfolio/ER
Vanguard dividend Appreciation index investor VDAIX (1.24%) (.19)
Vanguard 500 index fund admiral shrares VFIAX (2.20%) (.05)
American century madcap value class1 AVUAX (.47%) (.81)
Parnassus madcap institutional PFPMX (.48%) (.77)
Vanguard small cap index admiral class VSMAX (1.17%) (.08)
Vanguard developed market index admiral class VTMGX (.17%) (.09)
Vanguard emerging markets stock index admiral VEMAX (.17%) (.15)
Harbor international fund institutional class HAINX (.08%) (.79)
Vanguard short term investment grade VFSTX (.2%) (.70)
Metropolitan west total return bond class m MWTRX (.20%) (.67)
Vanguard long term bond index investor VBLTX (.72%) (.16)

HSA AVAILABLE INVESTMENTS:
Davis New York venture class y DNVYX (1.24)
J.P. Morgan large cap growth class 1SEEGX (.86)
Vanguard dividend appreciation index investor VDAIX (.17)
Schwab fundamental us large company index SFLNX (.25)
Vanguard 500 index fund admiral shares VFIAX (.04)
Artisan small cap institutional APHSX (1.01)
Oppenheimer Main Street class yMIGYX (.69)
American century mid cap value class 1 AVUAX (1.01)
Parnassus mid cap nstitutional PFPMX (.99)
Vanguard small cap index admiral classVSMAX (.06)
J.P. Morgan small cal value class 1 PSOPX (1.19)
Dodge & cox international stock fund DODFX (.64)
Thorn burg international value class 1 TGVIX (2.02)
Vanguard developed markets index admiral VTMGX (.07)
Vanguard emerging market stock index admiral VEMAX (.14)
Harbor international fund institutional class HAINX (.79)
American euro pacific growth fund class r6RERGX (.5)
Amy managers amending intermediate gov n MGIDX (.89)
Vanguard short term investment grade VFSTX (.2)
DoDge & cox income fund DODIX (.43)
Metropolitan west total return bond class m MWTRX (.44)
Vanguard long term bond index investor VBLTX (.15)
Vanguard lifestartegy conservative growth investor VSCGX (.13)
Vanguard lifestartegy moderate growth investor VSMGX (.14)
American 2020 target date class r6 RRCTX (.37)
American 2025 target date RFDTX (.39)
American 2030 RFETX (.43)
American 2040 RFGTX (.43)
American 2045 RFHTX (.43)
American 2050RFITX (.43)
American 2055 RFKTX (.43)

AFTER TAX
ALLY (NON EMERGENCY) (6.28% of portfolio)
VANGUARD BRKG ACCT (26.89% of portfolio) * none of this has been invested; we are seeking advice particularly in this area

NEW CONTRIBUTIONS : 2018 ( everything has been funded for 2017)
$24,000 401k + company match of 6%
$6750 HSA
$6500 Spousal IRA
$6500 his ROTH
$60,000 after tax ;for investing
** HSA is used as a super
Questions:
1) Is our asset allocation aggressive enough or too aggressive given our age? We would like to be fairly aggressive. We expect to live off of pension and SS.
2)We aren't sure how to simplify given some funds shouldn't be in both taxable and pre-tax. Apparently there is a rule that could potentially create a " wash " sale.
3) All critical help welcome as it relates to best investment opportunities
4) We were considering IBonds for inflation protection in the future...thoughts ?

​​​
Last edited by sprintingtoretirment on Mon Oct 16, 2017 1:46 am, edited 3 times in total.

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Sandtrap
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Location: Hawaii😀 Northern AZ.😳

Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by Sandtrap » Sun Oct 15, 2017 6:35 pm

Some helpful links:
Bogle Philosophy
https://www.bogleheads.org/wiki/Boglehe ... philosophy
Here are links to the wiki's "Getting Started" and "Investing Startup Kit" pages:
https://www.bogleheads.org/wiki/Getting_started
https://www.bogleheads.org/wiki/Boglehe ... art-up_kit
Define General Investment Goals and Objectives
https://www.bogleheads.org/wiki/Invest ... _statement
Suggested Reading List
https://www.bogleheads.org/RecommendedReading.php
Post format
viewtopic.php?f=1&t=6212

sprintingtoretirment
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Joined: Sun Oct 15, 2017 6:10 pm

Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by sprintingtoretirment » Sun Oct 15, 2017 7:05 pm

Thanks Sandtrap!
I have read some of the wiki's that you posted. I was hoping that we could get some high level experience from the well educated folks on this forum. I would certainly appreciate it. We tried to post in the manner requested.
We were hoping for the type of financial review tht we've seen before.

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Tyler Aspect
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Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by Tyler Aspect » Sun Oct 15, 2017 7:08 pm

Hi,
Can you provide more details in the taxable brokerage account? Thanks.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

sprintingtoretirment
Posts: 13
Joined: Sun Oct 15, 2017 6:10 pm

Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by sprintingtoretirment » Sun Oct 15, 2017 7:17 pm

Hi Tyler,

Our Brokerage account is literally cash. It's as a result of having auto payroll deductions.

mrsytf
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Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by mrsytf » Sun Oct 15, 2017 7:20 pm

Can you edit your post to put the fund names in addition to the tickers? I have no idea what those tickers represent.

What is the estimated size of your portfolio?
Low 7's, high 6's? What is your goal and how close are you to reaching it.

What is in the brokerage account that seems to represent a quarter of the portfolio?
I would recommend total stock market and total international according to your allocation.

Where are these accounts held?

Any reason the old 401k money hasn't been rolled over in to anything? Will the new 401k accept pretax money?

I think 70-30 is reasonable for your age and risk tolerance. How many more years on the mortgage? At your inter st rate I would focus on investing as well. The good news is that you have quite a bit of excess at the end of the month to contribute to your goals.

sprintingtoretirment
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Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by sprintingtoretirment » Sun Oct 15, 2017 7:21 pm

I should also say that we would like to invest according to the three fund portfolio ,but need to make things less complicated

mrsytf
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Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by mrsytf » Sun Oct 15, 2017 7:25 pm

A third of your portfolio is in cash?!?!!
Ummmm why?

Are you sure you can handle a 70-30 stock/bond allocation? Most folks who are that aggressive don't have so much cash lying around. Think carefully about your true risk tolerance. What allocation in the old 401k target retirement fund of 2020? How does that fit in your plan?

sprintingtoretirment
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Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by sprintingtoretirment » Sun Oct 15, 2017 7:29 pm

The portfolio just less than $400,000.00 . We've been aggressive for the last two years. The taxable is at vanguard as is the current 401k. It accepts roll-ins but is that it will vest shortly . The mortgage has about 5 years or less

sprintingtoretirment
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Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by sprintingtoretirment » Sun Oct 15, 2017 7:32 pm

We are sure about the desired asset allocation, but sort of unsure where to invest it, so we just keep saving. Both the old and the current 401k are in target date funds entirely.

Dottie57
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Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by Dottie57 » Sun Oct 15, 2017 8:51 pm

For swr of 4% you will need at least $1million To generate 40k. You need to more than double you portfolio. Will you sell the home to add funds to your portfolio. Your home is valued at twice your portfolio. Does this seem maintainable?

And I don't understand your current expenses of 40k which seem way low. Are you including property taxes, health insurance, medical?

My biggest suggestion is to Up your savings rate since you don't have the advantage of multiple decades of growth. In order for agressive growth to work, you need to save and invest lots of money.

sprintingtoretirment
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Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by sprintingtoretirment » Sun Oct 15, 2017 9:53 pm

Hi Dottie57,
Thanks for your reply. Our monthly/yearly expenses are very low. We have no debt other than our mortgage . Our children are grown. We intend to keep up a very high savings rate up through 58 ( and possibly beyond should my husband decide to continue to work) the 40k includes health insurance, taxes, and all expenses . It is our intention to invest and not use the money to live off of. We would have a income stream that would cover our expenses that at age 59 that would be almost half of our current expenses ( roughly 20k).
Our home is currently worth $900,000.00 . It will be paid off soon. We have no intention of selling the home.

We are saving 70+% of our income , and will save more after the home is paid off.

We are seeking investment help, that's why we are seeking the very knowledgeable people here at Bogleheads.

krow36
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Location: WA

Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by krow36 » Sun Oct 15, 2017 10:06 pm

I’ve taken the liberty to make your information easier to read. Perhaps you could use the edit pencil and modify your original post (OP)? Using spacing and bolding really helps. Please supply names for the funds in His Roth. In the current VG 401k, why is the Tgt Ret 2030 Trust Plus listed twice? Since your current 401k has excellent fund choices, you should probably roll over the old 401k to the current one. I would probably prefer the VG Target Ret fund over the TR Price State Street Tgt Ret fund. Have you compared how they have done in the past? On the HSA, if you add the names to the VG funds now in the account as well as the names of the other available VG funds, that would be helpful. Finally please give the percent of the total portfolio for each account. These edits will help others give you advice on improving your portfolio.

TAX ADVANTAGED ACCOUNTS
HIS ROTH: (% OF PORTFOLIO)/(ER)
VANGUARD FEDERAL MM SETTLEMENT ACCOUNT (5.19%) (0%)
FIVX (.07%) (1.14)
FIBFX (.16%) (.45)
FSTVX (.22%) (.03)
OAKIX (.07%) (1.05)

HER TRADITIONAL IRA:
VANGUARD FEDERAL MM (7.09%)

CURRENT VANGUARD 401K:
TGT RETIREMENT 2030 TRUST PLUS (27.96%) ()
ESOP STOCK FUND (.83%)
RETIREMENT ACCT IN TGT RETIREMENT 2030 TRUST PLUS (1.18%) ??

AVAILABLE INVESTMENT FUNDS FOR VANGUARD 401K:
JP MORGAN STABLE VALUE FD (.38)
BOND FUNDS:
PIMCO TRCTCI2 (.37)
VANGUARD INFLATION PROTECTED SECURITY INSTITUTIONAL VIPIX (.07)
VANGUARD TTL BOND MKT INST. VBTIX (.04)
TGT DATE FUNDS 2015-2065 (.06)
TROWE PRICE INSTL SMALL CAP STK TRSSX (.67)
VANGUARD INST PLUS INDEX FUND VIIIX (.02)
VANGUARD PRIMECAP FUND ADM VPMAX (.33)
VANGUARD WINDSORD//FND ADM VWNAX (.25)
VANGUARD TTL INSTL STK VTPSX (.07)

HER TRADITIONAL IRA:
FED MKT MM FUND 7.09% (0) Listed twice?

OLD 401K AT TROWE PRICE
STATE STREET TGT RET 2020 (15.25%) (0)

Available investments at Old 401K
SCFMN
DODFX
CMDVQ
SCSRX
WTRIX
CMDLW
CMDNW
CMDOW
CMDPW
CMDQW
CMDRW
CMDIW

HSA:
CASH: .58%
CURRENT INVESTMENT:
% of portfolio/ER
VDAIX (1.24%) (.19)
VFIAX (2.20%) (.05)
AVUAX (.47%) (.81)
PFPMX (.48%) (.77)
VSMAX (1.17%) (.08)
VTMGX (.17%) (.09)
VEMAX (.17%) (.15)
HAINX (.08%) (.79)
VFSTX (.2%) (.70)
MWTRX (.20%) (.67)
VBLTX (.72%) (.16)

HSA AVAILABLE INVESTMENTS:
DNVYX (1.24)
SEEGX (.86)
VDAIX (.17)
SFLNX (.25)
VFIAX (.04)
APHSX (1.01)
MIGYX (.69)
AVUAX (1.01)
PFPMX (.99)
VSMAX (.06)
PSOPX (1.19)
DODFX (.64)
TGVIX (2.02)
VTMGX (.07)
VEMAX (.14)
HAINX (.79)
RERGX (.5)
MGIDX (.89)
VFSTX (.2)
DODIX (.43)
MWTRX (.44)
VBLTX (.15)
VSCGX (.13)
VSMGX (.14)
RRCTX (.37)
RFDTX (.39)
RFFTX (.43)
RFGTX (.43)
RFHTX (.43)
RFITX (.43)
RFKTX (.43)

AFTER TAX
ALLY (NON EMERGENCY) (6.28% of portfolio)
VANGUARD BRKG ACCT (26.89% of portfolio)

NEW CONTRIBUTIONS : 2018 ( everything has been funded for 2017)
$24,000 401k + company match of 6%
$6750 HSA
$6500 Spousal IRA
$6500 his ROTH
$60,000 after tax ;for investing
** HSA is used as a super ROTH
Last edited by krow36 on Mon Oct 16, 2017 1:39 am, edited 1 time in total.

Dottie57
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Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by Dottie57 » Sun Oct 15, 2017 11:01 pm

sprintingtoretirment wrote:
Sun Oct 15, 2017 9:53 pm
Hi Dottie57,
Thanks for your reply. Our monthly/yearly expenses are very low. We have no debt other than our mortgage . Our children are grown. We intend to keep up a very high savings rate up through 58 ( and possibly beyond should my husband decide to continue to work) the 40k includes health insurance, taxes, and all expenses . It is our intention to invest and not use the money to live off of. We would have a income stream that would cover our expenses that at age 59 that would be almost half of our current expenses ( roughly 20k).
Our home is currently worth $900,000.00 . It will be paid off soon. We have no intention of selling the home.

We are saving 70+% of our income , and will save more after the home is paid off.

We are seeking investment help, that's why we are seeking the very knowledgeable people here at Bogleheads.

Hi OP,

I'll let others give recommendations. I could not give any suggestions without better context refarding your resources expenses. For me the expenses seem wrong -especiaaly regarding property tax. I have no idea of your property tax rate.
Anywho , the best advice is given when there is good detain.
Last edited by Dottie57 on Mon Oct 16, 2017 7:43 am, edited 1 time in total.

Dottie57
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Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by Dottie57 » Sun Oct 15, 2017 11:01 pm

Deleted
Last edited by Dottie57 on Mon Oct 16, 2017 7:42 am, edited 1 time in total.

sprintingtoretirment
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Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by sprintingtoretirment » Sun Oct 15, 2017 11:25 pm

Hi krow36,
Thank you very much for helping to make the post more readable. I've updated the post.

runner540
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Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by runner540 » Mon Oct 16, 2017 12:06 am

sprintingtoretirment wrote:
Sun Oct 15, 2017 7:29 pm
The portfolio just less than $400,000.00 . We've been aggressive for the last two years. The taxable is at vanguard as is the current 401k. It accepts roll-ins but is that it will vest shortly . The mortgage has about 5 years or less
Congrats on coming to the forum and taking good steps to save more and plan ahead. I'm going to leave the specific funds/asset allocation to other posters. What I see is, you have $400k, you are adding ~$100k/year and hope to retire in 8 years, when you are 58. At that point, you will have $1.2MM, under a conservative assumption of no real growth. That would provide ~$48k of income at 4% withdrawal. That may be enough, depending on taxes and healthcare expenses, and how firm the $40k of expenses is. The expense number is key to get right. Is the $40k something you and spouse have sustained for a few years, or is it new along with the high savings rate? It seems low relative to your income and house value. (I am using the no real growth because your timeframe is short and you currently have a heavy cash allocation).

You will need to cover ~7 years of medical insurance before Medicare kicks in. (58-65)
You will need to cover ~10 years of expenses completely from the portfolio before SS kicks in. (58-68) I would suggest you delay taking benefits, since you have no other stable streams of retirement income.
Then after SS kicks in, you won't need any more from your portfolio as long as both of you are living and collecting SS.

I agree with the poster who suggested downsizing the house. The house/portfolio/income combination seems out of balance to me (I get it, life happens! but consider whether you can still enjoy life in a $500k house, and having $400k more in your portfolio, which allows for $16k/year in additional spending at 4% SWR). That will give you much more margin for unknowns like healthcare expenses, or dropping to one SS check.

Edit: are property taxes and home insurance currently included in your mortgage check? If yes, you need to add these to your annual expenses, because they won't go away once the mortgage is paid off. Also make sure to include home maintenance savings as an expense. Where I live, a $900k house would have $40k in annual taxes/insurance/maintenance expense, before you even buy food or pay the electric bill.

sprintingtoretirment
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Re: First time poster:NEED HELP! We are total newbies and late to the game*updated

Post by sprintingtoretirment » Mon Oct 16, 2017 1:17 am

Thanks for the reply runner540. The post is a bit long and perhaps some information was overlooked.
-Our taxes are included in our mortgage. The home was purchased for a much lower price than its valued at 23 years later. Our current taxes are not nearly $ 40,000 though they are included in our mortgage.
- we will not be withdrawing any funds to cover the 10 year period before full retirement age. ( age 59)We will secure employment that will meet our financial needs at that time, which should be even lower. This employment will also cover healthcare.
- we will semi retire at age 59
- we have been living on a frugal budget for two years or so.
- upon full retirement we will then use SS and a pension to generate living expenses . These funds will be well in excess of what we are currently living on, in fact we should be able to save $ then .
- you are correct, we will have to pay the nominal taxes that we pay upon semi retirement and full retirement.
- the suggestion to sell our home is perplexing , unless all of our plans fall through. Our home is almost paid off and has a tax rate tied to the original purchase price of 23 years ago.
- we do our own maintence, but will upon full retirement ( just before full retirement) we will establish a maintence account. Over the years we have done a good amount of maintence
- we save 70+% of our income prior to paying the house off


I hope that this response provides better clarity. We would really like investment help for the significant cash.

Thanks

krow36
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Re: First time poster:NEED HELP! We are total newbies and late to the game*updated

Post by krow36 » Mon Oct 16, 2017 1:34 am

sprintingtoretirment wrote:
Sun Oct 15, 2017 6:31 pm
Questions:
1) Is our asset allocation aggressive enough or too aggressive given our age? We would like to be fairly aggressive. We expect to live off of pension and SS.
I think the problem with the 70/30 AA is that if there is a large market drop, you could loose half the value of your 70% stocks. You may not have enough time before your retirement to grow it back. I suggest a 60/30 AA might be easier to deal with emotionally during a downturn. Because you plan to “continue working in a lower capacity ( consult, part time , teach)” after age 58, you may be able to support yourselves until SS kicks in? In which case you may not have to draw from your retirement portfolio before SS?

Having a goal of retiring in 8 years, at least partially, is fine. I don’t think you’re burning any bridges, working toward FIRE. As you get closer, you’ll have a better idea of the timing. I agree with other posters that your expense estimate seems low, especially in CA.
2)We aren't sure how to simplify given some funds shouldn't be in both taxable and pre-tax. Apparently there is a rule that could potentially create a " wash " sale.
You have some excellent funds in your pre-tax accounts and you reduce the number of funds to no more 3 (or even just one) per account. You haven’t listed what you have in your VG Brokerage account. If you plan to do tax loss harvesting, then wash sales interfere, but they’re not illegal. It’s best to keep all your information together, so please edit your OP to add funds/stocks in your taxable brokerage account.
3) All critical help welcome as it relates to best investment opportunities
If you haven’t read about the 3 fund portfolio, you should check it out. It’s a BH favorite. https://www.bogleheads.org/wiki/Three-fund_portfolio
4) We were considering IBonds for inflation protection in the future...thoughts ?
I’ve never used iBonds so will leave that for others to comment on. I think your inflation protection will be through your equities. I would use VG Intermediate-term Tax-exempt in your taxable account, and VG Total Bond Mkt in the tax deferred accounts, if possible.

​​​

sprintingtoretirment
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Re: First time poster:NEED HELP! We are total newbies and late to the game*updated

Post by sprintingtoretirment » Mon Oct 16, 2017 1:44 am

Awesome ! Thanks for your response krow36. Our brokerage account is not invested at all, that's partly what we are asking for recommendations for. I'll update the brokerage account to reflect no stocks , bonds, or mutual funds are invested in.

krow36
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Location: WA

Re: First time poster:NEED HELP! We are total newbies and late to the game*updated

Post by krow36 » Mon Oct 16, 2017 1:56 am

OK on the brokerage account in cash. That can be a good discussion for tomorrow. I'm sure that you'll get excellent help in simplifying your accounts tomorrow also. :happy

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ruralavalon
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Re: First time poster:NEED HELP! We are total newbies and late to the game*updated

Post by ruralavalon » Mon Oct 16, 2017 4:25 am

Welcome to the forum :) .

It's good to see that you are debt free, other than the mortgage note which is almost paid off.

You have some very good funds offered in your 401k, you are fortunate.


Asset allocation.
In my opinion your desired asset allocation of 70/30 is "fairly aggressive" at age 50 and 8 years to retirement. I don't think it's too aggressive. My suggestion would normally be around 60/40, but you do state that your expenses are modest and you plan to live off of Social Security and your small pension.

I suggest around 20-30% of stocks in international stocks. You state "20% of international inside of stock." I assume that you mean 20% of stocks in international stocks.

That works out to about 30% fixed income (bonds + cash), 15% international stocks, and 55% domestic stocks. Asset allocation is a very personal decision which you must make based on your own ability, willingness and need to take risk.


Fund selection and placement.
I think you are wise to want a simple three-fund portfolio.

For domestic stocks that usually means a total stock market index fund. If a total stock market index fund is not offered in a 401k, then a S&P 500 index fund (like Vanguard Institutional Plus in your 401k) is good enough for the domestic stock component of a three-fund portfolio. A S&P 500 index fund covers 81% of the domestic stock market. In the 25 years since the creation of the first total stock market index fund the performance of the two types of fund has been almost identical.

The taxable account should use very tax-efficient funds such as Vanguard Total Stock Market Index Fund and Vanguard Total International Stock Index Fund. Please see the wiki article "tax-efficient fund placement".

For reasons of tax efficiency the bond fund should be in tax-advantaged accounts, preferably tax-deferred accounts like your 401k or her traditional IRA. Please see the wiki article "tax-efficient fund placement".

It's helpful to have at least one large account which contains all three fund types, to make portfolio management and rebalancing easy. That could be your 401k.

To simplify and for better fund selection I suggest rolling your old T. Rowe Price 401k over into your current Vanguard 401k.


Example portfolio.
Here is an example portfolio which you could consider. This is a three-fund type portfolio. Total current portfolio = just less than $400k . New annual contributions = about $115k. The asset allocation is about 30% fixed income (bonds + cash), 15% international stocks, and 55% domestic stocks. The idea is to switch both the existing balances and new contributions to the funds indicated. The percentages given are percentages of the v total portfolio, not percentages of any particular account. All percentages are rounded off.

Taxable account @ Vanguard (27% of portfolio; adds $69k/yr = about 52% of new annual contributions)
20%, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%
07%, Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%

Ally bank (06% of portfolio)
06%, cash

His 401k @ Vanguard, including old T. Rowe Price 401k (45% of portfolio; adds $24 k/yr + employer match = over 21% of new annual contributions)
20%, Vanguard Institutional Plus Index Fund (a S&P 500 index fund) (VIIIX) ER 0.02%
08%, Vanguard Total International Stock Index Fund Institutional (VTPSX) ER 0.07%
17%, Vanguard Total Bond Market Index Fund Institutional (VBTIX) ER 0.04% (OR Vanguard Inflation Protected Security Institutional, VIPIX, ER 0.07%)

His Roth IRA @ Vanguard (07% of portfolio; adds $6.5k/yr = about 6% of new annual contributions)
07%, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%

Her traditional IRA @ Vanguard (07% of portfolio; adds $6.5k/yr =.about 6% of new annual contributions)
07%, Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05%

HSA (08% of portfolio; adds $6.7k/yr = about 6% of new annual contributions)
08%, Vanguard 500 Index Fund Admiral Shares (VFIAX) ER 0.04%


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

Avoid rebalancing by exchanging between funds inside the taxable account, because that will create unnecessary income tax liability.


Retirement planning.
I suggest that you read The Bogleheads Guide to Retirement Planning.

Here is a calculator you can use to help in planning -- www.firecalc.com .

It will be very important to have a solid number for your retirement living expenses. Base that on actual recent spending over the last several years, rather than an estimate. Be careful to include medical costs, premiums, deductibles and copays for medical insurance before age 65. After 65 include Medicare part B premiums, part D premiums for drug coverage, premiums for a Medicare Supplement policy.

I have no experience with I-bonds, so can't help on that.

. . . . .

I also 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.
Last edited by ruralavalon on Mon Oct 16, 2017 6:11 am, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

runner540
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Re: First time poster:NEED HELP! We are total newbies and late to the game*updated

Post by runner540 » Mon Oct 16, 2017 6:10 am

sprintingtoretirment wrote:
Mon Oct 16, 2017 1:17 am
Thanks for the reply runner540. The post is a bit long and perhaps some information was overlooked.
-Our taxes are included in our mortgage. The home was purchased for a much lower price than its valued at 23 years later. Our current taxes are not nearly $ 40,000 though they are included in our mortgage.
- we will not be withdrawing any funds to cover the 10 year period before full retirement age. ( age 59)We will secure employment that will meet our financial needs at that time, which should be even lower. This employment will also cover healthcare.
- we will semi retire at age 59
- we have been living on a frugal budget for two years or so.
- upon full retirement we will then use SS and a pension to generate living expenses . These funds will be well in excess of what we are currently living on, in fact we should be able to save $ then .
- you are correct, we will have to pay the nominal taxes that we pay upon semi retirement and full retirement.
- the suggestion to sell our home is perplexing , unless all of our plans fall through. Our home is almost paid off and has a tax rate tied to the original purchase price of 23 years ago.
- we do our own maintence, but will upon full retirement ( just before full retirement) we will establish a maintence account. Over the years we have done a good amount of maintence
- we save 70+% of our income prior to paying the house off


I hope that this response provides better clarity. We would really like investment help for the significant cash.

Thanks
Yes, thanks for clarifying. Now my question is, what are your goals for the portfolio? (Legacy, nicer lifestyle in ret, cushion in case things don't go as planned the next 15 years, other goals??). The answer will help people provide appropriate investment ideas, because those goals have different timelines.

Regarding your question on asset allocation, how did you and spouse react to the 2008-2009 market? If you only recently started investing with a 6-figure portfolio, you may have experienced only an incredible bull market and be overestimating risk tolerance. Is the job/industry cyclical?

It looks like you plan to work (for the next 15 years until SS kicks in, then SS will cover your frugal lifestyle, so if all goes to plan for 15 years, you won't need the investments.

rkhusky
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Re: First time poster:NEED HELP! We are total newbies and late to the game*updated

Post by rkhusky » Mon Oct 16, 2017 8:05 am

The simplest option is to use a Target Retirement (TR) fund in all your tax advantaged accounts and let Vanguard handle all the account management, like rebalancing and glide path adjustments, for you. However, they have 40% of their stocks in international, rather than the 20% you stated. For simplicity, you could even use a TR fund in your taxable account, but that might be a little less tax efficient in the 25% bracket. Alternatively, you could use Vanguard's Tax Managed Balanced fund in your taxable account, but it is 50/50 stock/bond, so may be a bit more conservative than you want, but you could bump the TR funds up 5 years to compensate.

sprintingtoretirment
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Re: First time poster:NEED HELP! We are total newbies and late to the game*updated

Post by sprintingtoretirment » Mon Oct 16, 2017 8:45 am

Ruralavalon,
Your post was very detailed and exactly what I was hoping for. Thank you


Runner540,
I'm glad tht the clarity helped. Our goals are for the portfolio is protection in the event things don't go as planned and or legacy to our children. In response to asset allocation ... We weren't really in the market so the effects were minimal. Oddly enough, because so much of the portfolio is in cash , we unfortunately haven't been exposed to the market run either. Our employment is steady.

Rkhusky,

Thank you for the target date breakdown. We are hoping to be more aggressive than the past. We are currently in target date funds.

rkhusky
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Re: First time poster:NEED HELP! We are total newbies and late to the game*updated

Post by rkhusky » Mon Oct 16, 2017 9:05 am

sprintingtoretirment wrote:
Mon Oct 16, 2017 8:45 am
Ruralavalon,
Your post was very detailed and exactly what I was hoping for. Thank you


Runner540,
I'm glad tht the clarity helped. Our goals are for the portfolio is protection in the event things don't go as planned and or legacy to our children. In response to asset allocation ... We weren't really in the market so the effects were minimal. Oddly enough, because so much of the portfolio is in cash , we unfortunately haven't been exposed to the market run either. Our employment is steady.

Rkhusky,

Thank you for the target date breakdown. We are hoping to be more aggressive than the past. We are currently in target date funds.
The target date funds are good if you want a hands-off approach and simplicity is more important than slight increases in cost and tax inefficiency. If you enjoy accounting and portfolio management, like many of us who post on Bogleheads do, then an individual fund approach, such as suggested by ruralavalon, would be more suitable.

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Re: First time poster:NEED HELP! We are total newbies and late to the game*updated

Post by bottlecap » Mon Oct 16, 2017 9:11 am

Target Date funds are the way to go for you. Pick some that match your desired allocation and aren't too expensive, and go with that.

If you are concerned about tax efficiency in taxable accounts, use a total stock market fund there and adjust the target date fund you pick accordingly.

There is no reason to get more complex than that.

Good luck,

JT

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Re: First time poster:NEED HELP! We are total newbies and late to the game

Post by Sandtrap » Mon Oct 16, 2017 9:30 am

sprintingtoretirment wrote:
Sun Oct 15, 2017 7:05 pm
Thanks Sandtrap!
I have read some of the wiki's that you posted. I was hoping that we could get some high level experience from the well educated folks on this forum. I would certainly appreciate it. We tried to post in the manner requested.
We were hoping for the type of financial review tht we've seen before.
You're welcome.
The high level experience from well educated folks you seek is on the way.
mahalo
j

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WoodSpinner
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Re: First time poster:NEED HELP! We are total newbies and late to the game*updated

Post by WoodSpinner » Mon Oct 16, 2017 10:27 am

OP,

First, let me congratulate both of you for doing such a great job in managing your expenses and upping your savings rate! A number of us could learn a few things from your approach, perhaps best in another thread.

I think one of the keys to success will be the cash flow between semi-retirement at 59 and SS (assume you will be taking this at 67 or 70).

I would be building up a war chest to take care of this period. A couple of suggestions.

- Start funding an IRA for her and max it out.
- Rollover the old 401k to an IRA and simplify the accounts.
- Build up investment in an Intermediate Bond fund (BIV etc.) in a 401k or IRA
- Build up investment in Total stock Market in Roth and Taxable accounts
- Separate out Emergency fund into a CD ladder or a short term bond fund like (VCSH for a bit better return with some addItional Risk).

Keep up your savings and investment rate.

If you are a savvy with Excel, I can share a modeling spreadsheet that you can adapt to develop a cash flow plan. Alternatively there is a more generic one that has been developed by Bigfoot.

Mine is geared for Fed/CA taxes and includes logic I used to plan my Retirement. Not as easy to use, but there is a lot of insight available. PM me if interested.

Congrats on taking this big step and asking your questions. Starting early will be a big help.

8-)

sprintingtoretirment
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Re: First time poster:NEED HELP! We are total newbies and late to the game*updated

Post by sprintingtoretirment » Mon Oct 16, 2017 11:12 am

Thanks for the encouragement Woodspinner! :) The advice is great as well. I'm particularly insterested in the " cd ladder" and your excel spreadsheet that is centered around fed/ca with the extra retirement information. Could you post yours ?

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Re: First time poster:NEED HELP! We are total newbies and late to the game*updated

Post by pkcrafter » Mon Oct 16, 2017 11:17 am

sprintingtoretirment
We are hoping to be more aggressive than the past.
So, you have not been at 70% equity for long. I've been trying to determine what AA I would suggest for you, and here are the considerations.

--Not used to a high equity allocation
--Are you trying to build portfolio for you or for heirs? This will have an influence on need and ability to take risk. If for heirs, you don't need to worry about a bad sequence of return risk just before retirement. If for you, you do have to worry.
--As Wood Spinner mentioned, the SS gap might be a concern if you hold off taking SS until 66.
--Savings rate is very high and will likely have more impact than rate of return
--There isn't that much difference between 60 and 70% equity, but I would tend toward 60% equity for you at this time.
We are currently in target date funds.
Oh no, you are a long way from having all funds in TR. You've got lots of funds with tiny allotments and that just makes things harder to manage without offering any benefit. You need to weed the garden. :happy

For taxable, use either a few very tax-efficient equity funds, or VG tax-managed balanced, VTMFX (50/50).

You might consider LifeStrategy Moderate (60/40) for tax-deferred accounts where available because the AA is fixed. A TR fund will lower AA as date approaches and will hit 30% equity 7 years after the date. Probably won't have the LS option available in company accounts. Anyway, the biggest issue is cleaning up all accounts by discarding all holdings that aren't directly related to the 3-fund strategy. Think of all accounts as parts of a single portfolio or use TR/LS funds, which might be the best low-maintenance option.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

sprintingtoretirment
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Re: First time poster:NEED HELP! We are total newbies and late to the game*updated

Post by sprintingtoretirment » Mon Oct 16, 2017 7:13 pm

Thanks pkcrafter!
With each response I get a new element that should be considered. Your correct that the asset allocation is new, however we think that we can tolerate the risk. Only time will tell. We do hope to leave most of the portfolio to heirs, unless of course the next 15 years don't work out.

Thanks again

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