Help Me Complete the Bogleheads Transition

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jonnyboy
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Help Me Complete the Bogleheads Transition

Post by jonnyboy »

About two years ago, I embraced the Bogleheads philosophy. :beer I came up with the following investment allocation:

S&P 500 – 31%
Midcap – 7%
Smallcap – 10%
International – 31%
Bonds – 15%
REIT – 6%

I’ve also reduced my portfolio down to the following:

Taxable account @ TD Ameritrade (51% of total portfolio)
6%, Midcap Value (VOE)
10%, Smallcap Value (VBR)
29%, International (VXUS)
6%, Municipal Bond (MUB)
total = 51%

Roth IRA @ TD Ameritrade (10.6% of total portfolio)
.7%, Midcap Value (VOE)
.7%, Smallcap Value (VBR)
2.4%, Bond (BND)
6.8%, REIT (VNQ)
total = 10.6%

401k (38.4% of total portfolio)
38.4%, S&P 500 Index Fund (BSPIX) .11%

Due to various circumstances (such as consolidating my entire 401k to just the S&P 500 fund, TD Ameritrade changing its fee-free ETF list, change in HSA investment options, etc.), I’ve had cause to sit down and re-evaluate my portfolio. After giving it some thought, I have some questions with which I’m faced. Before getting to those questions, some background:

1. I’m 34 years old and plan to work another 30 years.
2. I’m in the 28% or 33% tax bracket. No state income tax.
3. Given the consolidation to just the S&P 500 fund in my 401k, I am currently over my target allocation for that investment by approximately 20% (and under my target allocation for the other investments as a result). So all capital (other than 401k contributions) have been going and will continue to go towards my other investments until my actual allocation is in line with my target allocation.

And now for the questions:

1. At this point, nearly my entire Roth IRA consists of REIT. Given the lack of tax-advantaged space, in the next year or three (based on market performance), I am likely going to hit the point where my REIT investment will fall below my target allocation of 6%. With every passing year, that shortfall should theoretically get larger, even if all future IRA contributions go to the REIT position. Should I just liquidate the position (at a small gain) and reallocate the dollars to my other investments? Or just hold onto it and eventually have a Roth concentrated 100% in REIT and for which, in the next decade, that REIT position is likely to diminish to 1 or 2% of the portfolio?

2. Assuming the answer to question 1 is sell (thereby having no REIT allocation going forward), is the following allocation appropriate?

S&P 500 – 34%
Midcap – 8%
Smallcap – 12%
International – 36%
Bonds – 10%

I am modeling this off of the Vanguard Target Retirement 2045 Fund (VTIVX). I don’t know the actual domestic midcap/smallcap breakdown of that fund, so I had to take a guess at those numbers for purposes of my allocation.

3. Once again, assuming the answer to question 1 is sell, what securities would you put in the Roth IRA? Just continue filling the space with midcap and smallcap? Does it make sense to put all of my bonds here (although, I like the idea of putting riskier investments here for more potential growth, but that means bonds would go into taxable)?

4. Presently, the investable portion of my HSA has about $1,500 in it and all future contributions will be invested. The HSA is invested 100% in the Wellington fund, but the 50%-70% equity allocation of that fund is a bit too conservative for me. Here are my other HSA investment options:

Vanguard Equity Income (VEIPX) .26
Vanguard 500 Index Fund (VFINX) .14
Vanguard Wellington (VWELX) .25
Vanguard Global Equity Fund (VHGEX) .51
Vanguard Midcap Index Fund (VIMSX) .18
Vanguard Smallcap Index Fund (NAESX) .18
Dodge & Cox Income Fund (DODIX) .43
Schwab Target 2040 Index Fund (SWYGX) .13
Schwab Target 2050 Index Fund (SWYMX) .13
Vanguard Total Bond Market Index Fund (VBTIX) .04
Vanguard Short-Term Investment Grade Fund (VFSIX) .07
Vanguard Inflation Protected Secs. Fund (VIPIX) .07
Vanguard Short-Term Federal Fund (VSGDX) .10

The Total Bond Market Fund is the cheapest and would let me put some bonds here rather than in my taxable. But, once again, I like the idea of growing my tax-advantaged space, which wouldn’t work so well with a 100% allocation to bonds (this is how I ended up selecting the Wellington Fund in the first place – a little bit of bonds with a little bit of growth). In addition, the ERs of the midcap and smallcap funds in the HSA are more expensive than those of the ETFs I purchase at TD Ameritrade. Should I just stick with Wellington? Go 100% bonds in the HSA? Something else?

Thanks to all for their thoughts.
Last edited by jonnyboy on Tue Nov 21, 2017 7:04 pm, edited 1 time in total.
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Tyler Aspect
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Re: Help Me Compete the Bogleheads Transition

Post by Tyler Aspect »

Welcome to Bogleheads. I would suggest the following allocation for you:

60% US stock
20% International stock
20% US bond

10% bond is a bit too aggressive, so that I have dialed down the risk a bit with 20% bond.

I agree with your observation that your REIT allocation at your Roth IRA will shrink relatively. Your only having a S&P 500 option in your 401k as the low expense option put a lot of restrictions to what is possible. You may just have to fill the HSA and Roth IRA with bond funds.

You can also purchase IBonds to increase bond allocation. [edited]
Last edited by Tyler Aspect on Sat Nov 18, 2017 11:18 pm, edited 1 time in total.
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venkman
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Re: Help Me Compete the Bogleheads Transition

Post by venkman »

jonnyboy wrote: Sat Nov 18, 2017 2:11 pm 2. Assuming the answer to question 1 is sell (thereby having no REIT allocation going forward), is the following allocation appropriate?

S&P 500 – 34%
Midcap – 8%
Smallcap – 12%
International – 36%
Bonds – 10%

I am modeling this off of the Vanguard Target Retirement 2045 Fund (VTIVX). I don’t know the actual domestic midcap/smallcap breakdown of that fund, so I had to take a guess at those numbers for purposes of my allocation.
Vanguard's TR Funds invest directly in other VG funds, and use VTSMX for their US stock allocation.

Ways to approximate VTSMX can be found in the wiki: https://www.bogleheads.org/wiki/Approxi ... ock_market
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Re: Help Me Compete the Bogleheads Transition

Post by gostars »

In looking back through your earlier posts, it appears you have PTTAX as an option in your 401k. While it is an active fund at a higher ER than most would consider ideal, it's not terrible and the net fund performance compares favorably with BND over pretty much every term, so you might consider it, especially if it frees up Roth space and give you more flexibility. Definitely check your plan documents and make sure the front end load doesn't apply to purchases through your 401k. If the load does apply, then disregard, because no fund is worth 3.75%.
BogleBoogie
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Re: Help Me Compete the Bogleheads Transition

Post by BogleBoogie »

Who is your competition?
PFInterest
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Re: Help Me Compete the Bogleheads Transition

Post by PFInterest »

BogleBoogie wrote: Sat Nov 18, 2017 10:57 pm Who is your competition?
The world! Or us...
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ruralavalon
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Re: Help Me Compete the Bogleheads Transition

Post by ruralavalon »

Accounts?
It's hard for me to think about these questions in the abstract.

Would you tell us the relative sizes of the accounts? Like this:
Taxable account, aa%
401k, bb%
Roth IRA, cc%
HSA, dd%
Total = 100%

Also what contributions will be made to each account?


Asset allocation.
jonnyboy wrote: Sat Nov 18, 2017 2:11 pm1. I’m 34 years old and plan to work another 30 years.
Tyler Aspect wrote: Sat Nov 18, 2017 7:39 pm Welcome to Bogleheads. I would suggest the following allocation for you:

60% US stock
20% International stock
20% US bond
I agree with Tyler Aspect.

At age 34 I suggest about 20 - 25% in bonds. This is expected to substantially reduce volatility (risk), with only a relatively slight decrease in return. Graph, "An Efficient Frontier: the power of diversification". Please see the wiki articles Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk", and "Asset allocation".

I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities". Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6). You can find lots of debate here on international allocation, opinions rangeing all the way from 00% to 50% of stocks in international stocks. If you want more viewpoints on international stocks please try the Google search box (upper right, this page).

That works out to about 20% bonds, 20% international stock, and 60% domestic stock. Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.



Funds to use.
jonnyboy wrote: Sat Nov 18, 2017 2:11 pmAbout two years ago, I embraced the Bogleheads philosophy. :beer I came up with the following investment allocation:

S&P 500 – 31%
Midcap – 7%
Smallcap – 10%
International – 31%
Bonds – 15%
REIT – 6%

I’ve also reduced my portfolio down to the following:

Taxable
Midcap Value (VOE)
Smallcap Value (VBR)
International (VXUS)
Municipal Bond (MUB)

Roth IRA
Midcap Value (VOE)
Smallcap Value (VBR)
Bond (BND)
REIT (VNQ)

401k
S&P 500 Index Fund (BSPIX) – only viable option in 401k
. . . . .
3. Given the consolidation to just the S&P 500 fund in my 401k, I am currently over my target allocation for that investment by approximately 20% (and under my target allocation for the other investments as a result).
1) One possible solution then is to increase the allocation to the S&P 500 fund. You could eliminate the allocation to mid-cap value.

For domestic stocks I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund is good enough by itself for domestic stocks. "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations". An S&P 500 index fund covers 81% of the U.S. stock market, and in the 25 years since the creation of the first total stock market fund the performance of the two types of funds has been almost identical. Morningstar “growth of $10k” graph, VFINX vs VTSMX. In the first 10 years the S&P 500 fund did better, in the last 10 years the total market fund did better, and over the 25 years the total market fund gave a little more return (0.11% per year), but at the cost of a little more volatility (risk): nisiprius post, in the forum discussion "Exchanging the S&P 500 for the TSM". See also Allan Roth, CBS Moneywatch, "John C. Bogle on the S&P 500 vs. the Total Stock Market".

If you want a tilt, then I suggest using a small-cap value index fund at around 25-30% of domestic stocks. Rick Ferri, etf.com, "To Tilt Or Not To Tilt?". I use Vanguard Small-cap Value Index Fund Admiral Shares (VSIAX), the ETF share class is VBR.


gostars wrote: Sat Nov 18, 2017 10:50 pm In looking back through your earlier posts, it appears you have PTTAX as an option in your 401k. While it is an active fund at a higher ER than most would consider ideal, it's not terrible and the net fund performance compares favorably with BND over pretty much every term, so you might consider it, especially if it frees up Roth space and give you more flexibility. Definitely check your plan documents and make sure the front end load doesn't apply to purchases through your 401k. If the load does apply, then disregard, because no fund is worth 3.75%.
2) I agree with gostars. Another possible solution is to use some PIMCO Total Return Fund Administrative Class (PTTAX) ER 0.85% in your 401k account.

PIMCO Total Return apparently offered in your 401k is a good choice for a bond fund. Although actively managed with a highish expense ratio it is a well diversified intermediate-term bond fund with a performance history similar to Vanguard Total Bond Market. Nisiprius post in forum discussion "Bond Fund for Three-Fund Portfolio", Total Bond Market vs PTTRX?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
BogleBoogie
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Re: Help Me Compete the Bogleheads Transition

Post by BogleBoogie »

PFInterest wrote: Sat Nov 18, 2017 11:01 pm
BogleBoogie wrote: Sat Nov 18, 2017 10:57 pm Who is your competition?
The world! Or us...
Haha! The title of this post had me wondering that.
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jonnyboy
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Re: Help Me Compete the Bogleheads Transition

Post by jonnyboy »

And I proofread the title twice! :oops:

Thank you to all for the responses. My 401k options have changed and are now as follows:

JP MORGAN TOTAL RETURN CL A (JMTAX) 1.02
LOOMIS SAYLES STRATEGIC INCM A (NEFZX) .96
LORD ABBETT HIGH YIELD FUND (LAHYX) .68
PIMCO REAL RETURN BD FD CL A (PRTNX) 1.04
WELLS FARGO GOVT SECURITIES A (SGVDX) .88
AB HIGH INCOME FUND A (AGDAX) .86
FEDERATED CAPITAL PRES CL ISP (FCPFT) .74 (stable value fund)

How does this change the analysis given that PIMCO Total Return is no longer available?

Also, what are the thoughts on getting rid of the REIT allocation? It seems everyone is on board with that.
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jonnyboy
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Re: Help Me Compete the Bogleheads Transition

Post by jonnyboy »

ruralavalon wrote: Sun Nov 19, 2017 6:58 am Accounts?
It's hard for me to think about these questions in the abstract.

Would you tell us the relative sizes of the accounts? Like this:
Taxable account, aa%
401k, bb%
Roth IRA, cc%
HSA, dd%
Total = 100%

Also what contributions will be made to each account?
Taxable account, 51%
401k, 39%
Roth IRA, 10%
Total = 100%

HSA is negligible at $1,400 invested in addition to the required $2,000 cash balance (for a total of $3,400 - this was my first year of contributing to it). I will continue to max out the HSA going forward.

Backdoor Roth and 401k will continue to get maxed out every year.
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Re: Help Me Compete the Bogleheads Transition

Post by gostars »

jonnyboy wrote: Sun Nov 19, 2017 9:40 am How does this change the analysis given that PIMCO Total Return is no longer available?
SGVDX is not abysmal, I guess, but I'd agree with your choice of avoiding the bond options in the 401k. Consider complaining to the plan administrator about the lack of options. Several of those funds seem redundant, so maybe the next time they do an update they can replace one with something less objectionable.
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ruralavalon
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Re: Help Me Compete the Bogleheads Transition

Post by ruralavalon »

Whatt fund firm (s) are the taxable account and Roth IRA located with?

What percentage of the total portfolio is in each of the ETFs in the taxable account?

What percentage of the total portfolio is in each of the ETFs in the Roth IRA account?

Please use this format:

Taxable account @ ???? (51% of total portfolio)
aa%, Midcap Value (VOE)
bb%, Smallcap Value (VBR)
cc%, International (VXUS)
dd%, Municipal Bond (MUB)
total = 51%

Roth IRA @ ???? (10% of total portfolio)
ee%, Midcap Value (VOE)
ff%, Smallcap Value (VBR)
gg%, Bond (BND)
hh%, REIT (VNQ)
total = 10%

401k (39% of total portfolio)
39%, S&P 500 Index Fund (BSPIX) ER ???%


How much do you expect that you will be contributing to each account annually? How much is the employer match in the 401k annually?

Please see this for format: "Asking Portfolio Questions". Please simply add this to your original post using the edit button, so that all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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jonnyboy
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Re: Help Me Complete the Bogleheads Transition

Post by jonnyboy »

Thanks, gostars and ruralavalon. Edited per your request.
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jonnyboy
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Re: Help Me Compete the Bogleheads Transition

Post by jonnyboy »

ruralavalon wrote: Tue Nov 21, 2017 6:11 am How much do you expect that you will be contributing to each account annually? How much is the employer match in the 401k annually?
I will be maxing out the 401k and Roth annually. Employer match is 50% of contribution up to 4% (I think). Contribution to taxable is roughly $100k per year.
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jonnyboy
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Re: Help Me Complete the Bogleheads Transition

Post by jonnyboy »

Bumping this to get some additional thoughts. Thanks again!
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ruralavalon
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Re: Help Me Compete the Bogleheads Transition

Post by ruralavalon »

jonnyboy wrote: Tue Nov 21, 2017 7:53 pm
ruralavalon wrote: Tue Nov 21, 2017 6:11 am How much do you expect that you will be contributing to each account annually? How much is the employer match in the 401k annually?
I will be maxing out the 401k and Roth annually. Employer match is 50% of contribution up to 4% (I think). Contribution to taxable is roughly $100k per year.
With that level of contributions and the tax-INefficient nature of a REIT fund, I don't see a solution to your REIT dilemma unless there is a decent real estate fund offered in your 401k. (Your posts from 2016 didn't indicate a low expense ratio real estate fund offered in your 401k.)

Absent that I think you should eventually drop the REIT allocation.

Since TDAmeritrade has dropped Vanguard ETFs from its no transaction fee list, have you considered transferring your taxable account and Roth IRA to Vanguard?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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jonnyboy
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Re: Help Me Compete the Bogleheads Transition

Post by jonnyboy »

ruralavalon wrote: Mon Nov 27, 2017 6:26 pm
jonnyboy wrote: Tue Nov 21, 2017 7:53 pm
ruralavalon wrote: Tue Nov 21, 2017 6:11 am How much do you expect that you will be contributing to each account annually? How much is the employer match in the 401k annually?
I will be maxing out the 401k and Roth annually. Employer match is 50% of contribution up to 4% (I think). Contribution to taxable is roughly $100k per year.
With that level of contributions and the tax-INefficient nature of a REIT fund, I don't see a solution to your REIT dilemma unless there is a decent real estate fund offered in your 401k. (Your posts from 2016 didn't indicate a low expense ratio real estate fund offered in your 401k.)

Absent that I think you should eventually drop the REIT allocation.

Since TDAmeritrade has dropped Vanguard ETFs from its no transaction fee list, have you considered transferring your taxable account and Roth IRA to Vanguard?
I think dropping the REIT allocation is my only option at this point as well. What would you recommend putting in the Roth? I was planning on using that for midcap, smallcap, and bonds so that I could reallocate as needed tax-free. (I was not going to put international (keep that only in taxable) or S&P fund (keep that only in 401k) in there.)

What were your thoughts on the HSA? Just invest in the bond fund? Or stay in the Wellington fund (even though it is a bit too conservative for me but would accomplish my goal of getting some growth in that account)? Something else?

I've gone back and forth on the TDAmeritrade situation. I've been reading all the threads on here and people have made really great points for staying and leaving. Right now, TDAmeritrade gave me 20 free trades in my accounts good for a year, so I've got some time. I may make the move to Merrill Edge at some point in the future, but if I can get TDA to continue to give me free trades or am comfortable with the new fee-free funds, I may just end up staying. I've gotten really good customer service at TDA, and it's tough to give that up (especially if we're only talking about commissions of $20-$40 per year).
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ruralavalon
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Re: Help Me Compete the Bogleheads Transition

Post by ruralavalon »

jonnyboy wrote: Mon Nov 27, 2017 6:53 pm I think dropping the REIT allocation is my only option at this point as well. What would you recommend putting in the Roth? I was planning on using that for midcap, smallcap, and bonds so that I could reallocate as needed tax-free. (I was not going to put international (keep that only in taxable) or S&P fund (keep that only in 401k) in there.)
As stated previously I think a larger bond allocation is warranted, around 20%.

So in the Roth IRA I suggest using Vanguard Total Bond Market ETF (BND) ER 0.05%.

jonnyboy wrote: Mon Nov 27, 2017 6:53 pmWhat were your thoughts on the HSA? Just invest in the bond fund? Or stay in the Wellington fund (even though it is a bit too conservative for me but would accomplish my goal of getting some growth in that account)? Something else?
In the HSA I suggest using Dodge & Cox Income Fund (DODIX) ER 0.43%. That is a good actively managed, intermediate-term, investment-grade bond fund; average effective duration = 4.20 years; average credit quality = BBB; well diversified, 17% government, 39% corporate, 36% securitized; with a good long-term performance history.


jonnyboy wrote: Mon Nov 27, 2017 6:53 pmI've gone back and forth on the TDAmeritrade situation. I've been reading all the threads on here and people have made really great points for staying and leaving. Right now, TDAmeritrade gave me 20 free trades in my accounts good for a year, so I've got some time. I may make the move to Merrill Edge at some point in the future, but if I can get TDA to continue to give me free trades or am comfortable with the new fee-free funds, I may just end up staying. I've gotten really good customer service at TDA, and it's tough to give that up (especially if we're only talking about commissions of $20-$40 per year).
I am a huge Vanguard fan, but if TDAmeritrade will still let you have commission free trades in Vanguard ETFs you could simply stay with TDAmeritrade.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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jonnyboy
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Re: Help Me Compete the Bogleheads Transition

Post by jonnyboy »

ruralavalon wrote: Tue Nov 28, 2017 7:13 am
jonnyboy wrote: Mon Nov 27, 2017 6:53 pm I think dropping the REIT allocation is my only option at this point as well. What would you recommend putting in the Roth? I was planning on using that for midcap, smallcap, and bonds so that I could reallocate as needed tax-free. (I was not going to put international (keep that only in taxable) or S&P fund (keep that only in 401k) in there.)
As stated previously I think a larger bond allocation is warranted, around 20%.

So in the Roth IRA I suggest using Vanguard Total Bond Market ETF (BND) ER 0.05%.

jonnyboy wrote: Mon Nov 27, 2017 6:53 pmWhat were your thoughts on the HSA? Just invest in the bond fund? Or stay in the Wellington fund (even though it is a bit too conservative for me but would accomplish my goal of getting some growth in that account)? Something else?
In the HSA I suggest using Dodge & Cox Income Fund (DODIX) ER 0.43%. That is a good actively managed, intermediate-term, investment-grade bond fund; average effective duration = 4.20 years; average credit quality = BBB; well diversified, 17% government, 39% corporate, 36% securitized; with a good long-term performance history.
Once again, thank you very much for the great advice. Based on all of the comments I've received on this thread, I am leaning towards the following:

Asset Allocation
S&P 500 – 34%
Midcap – 9%
Smallcap – 12%
International – 25%
Bonds – 20%

The assets would be placed as follows:

Taxable account
Midcap Value (VOE)
Smallcap Value (VBR)
International (VXUS)
Municipal Bond (MUB)

Roth IRA
Bond (BND)
Midcap Value (VOE)
Smallcap Value (VBR)
NOTE: I didn't want to invest 100% of the Roth in BND - this way I have some room for growth and an ability to possibly do some reallocation tax-free as needed. I will buy more MUB in the taxable instead unless this is a bad idea.

401k
S&P 500 Index Fund (BSPIX)

HSA
Dodge & Cox Income Fund (DODIX) or Vanguard Total Bond Market Index Fund (VBTIX)

Some questions:

1. Thoughts on the above allocation and investment placement?

2. In the HSA, why did you recommend Dodge & Cox Income Fund over Vanguard Total Bond Market Index Fund? Is it for diversification?

3. I don't know much about individual bonds, but one recommendation was to buy I bonds (or any other kind of government issued bond for that matter). If I do this, it would clear up some space in the Roth and/or taxable accounts. Would you recommend this?

Thanks again! All of the advice has proven invaluable.
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jonnyboy
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Re: Help Me Complete the Bogleheads Transition

Post by jonnyboy »

Just bumping this again for thoughts (and sorry for being annoying!).
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Re: Help Me Compete the Bogleheads Transition

Post by boglewill34 »

jonnyboy wrote: Tue Nov 28, 2017 9:07 am
International – 25%

The assets would be placed as follows:

Taxable account

International (VXUS)
Free bump, and also just out of curiosity I checked out the emerging content of the above. 25% in VXUS will end up with 5% total weighting in emerging. Just curious if anyone thinks that given your age and horizon, 33yo and 30 years, whether that's a smidge underweight in emerging?

I'm at 8% currently myself in a late-bloomer portfolio, 43yo and 20 years out...
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Re: Help Me Compete the Bogleheads Transition

Post by TheHouse7 »

Tyler Aspect wrote: Sat Nov 18, 2017 7:39 pm Welcome to Bogleheads. I would suggest the following allocation for you:

60% US stock
20% International stock
20% US bond

10% bond is a bit too aggressive, so that I have dialed down the risk a bit with 20% bond.

I agree with your observation that your REIT allocation at your Roth IRA will shrink relatively. Your only having a S&P 500 option in your 401k as the low expense option put a lot of restrictions to what is possible. You may just have to fill the HSA and Roth IRA with bond funds.

You can also purchase IBonds to increase bond allocation. [edited]
+1 (This is my AA@30)
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ruralavalon
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Re: Help Me Compete the Bogleheads Transition

Post by ruralavalon »

boglewill34 wrote: Thu Nov 30, 2017 11:59 am
jonnyboy wrote: Tue Nov 28, 2017 9:07 am
International – 25%

The assets would be placed as follows:

Taxable account

International (VXUS)
Free bump, and also just out of curiosity I checked out the emerging content of the above. 25% in VXUS will end up with 5% total weighting in emerging. Just curious if anyone thinks that given your age and horizon, 33yo and 30 years, whether that's a smidge underweight in emerging?

I'm at 8% currently myself in a late-bloomer portfolio, 43yo and 20 years out...
Vanguard a Total International Stock ETF (VXUS) is about 17% emerging markets, which is market weight. I don't think that can be called underweight.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: Help Me Complete the Bogleheads Transition

Post by retiredjg »

Information is all over the place, so I might have missed something.

Why is the 500 Index in your 401k instead of a bond fund? I'd fill the 401k with bonds or stable value before putting any bonds in Roth IRA or taxable. And I would not fill a Roth with bonds, maybe some bonds but not all bonds.

About your REIT dilemma. As mentioned by ruralavalon, since you are putting $100k into taxable each year, there is no way your Roth IRA is going to have enough space to hold a meaningful allocation of REIT in a few years. You have already seen that and are considering dropping the REIT all together. I think that is just fine - extra REIT might be nice to have but it is not a need that "should" be fulfilled.

However, if you really want the REIT, you could consider a Variable Annuity at Vanguard - their REIT VA is pretty medium priced (probably low priced for a VA) and their VAs do not have the fee traps that other VAs do. I'm not suggesting this is a good idea, only suggesting it is an idea you can consider.
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jonnyboy
Posts: 58
Joined: Tue Jan 14, 2014 10:49 pm
Location: FL

Re: Help Me Complete the Bogleheads Transition

Post by jonnyboy »

retiredjg wrote: Fri Dec 01, 2017 9:26 am Information is all over the place, so I might have missed something.

Why is the 500 Index in your 401k instead of a bond fund? I'd fill the 401k with bonds or stable value before putting any bonds in Roth IRA or taxable. And I would not fill a Roth with bonds, maybe some bonds but not all bonds.

About your REIT dilemma. As mentioned by ruralavalon, since you are putting $100k into taxable each year, there is no way your Roth IRA is going to have enough space to hold a meaningful allocation of REIT in a few years. You have already seen that and are considering dropping the REIT all together. I think that is just fine - extra REIT might be nice to have but it is not a need that "should" be fulfilled.

However, if you really want the REIT, you could consider a Variable Annuity at Vanguard - their REIT VA is pretty medium priced (probably low priced for a VA) and their VAs do not have the fee traps that other VAs do. I'm not suggesting this is a good idea, only suggesting it is an idea you can consider.
Thanks again to everyone for the help and suggestions.

retiredjg, to answer your questions, my 401k is entirely the 500 index because, unfortunately, there are no viable bond options available. The rest of the options are high ER mutual funds or funds in which I have no interest investing.

As for the REIT in the Roth, this morning I sold it. I used the proceeds to double my BND position (to reduce my cost basis), and used the remaining proceeds to buy VOE and VBR. BND now makes up about 45% of the Roth. This is how my investments are presently placed:

Taxable account
Midcap Value (VOE)
Smallcap Value (VBR)
International (VXUS)
Municipal Bond (MUB)

Roth IRA
Bond (BND)
Midcap Value (VOE)
Smallcap Value (VBR)

401k
S&P 500 Index Fund (BSPIX)

Does it make sense to buy municipal bonds in the taxable for the rest of my bond allocation? Or should I consider buying I bonds, laddering CDs, or something else?
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retiredjg
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Joined: Thu Jan 10, 2008 11:56 am

Re: Help Me Complete the Bogleheads Transition

Post by retiredjg »

What about the stable value fund in your 401k? Have you checked to see what it is paying?

I Bonds are always a good choice in my opinion. They are one of the ways to hold bonds in your taxable account very tax-efficiently. They can also function as an emergency fund (after some time).

And I think MUB is a good choice for a tax-exmpt bond fund if you don't have one specific for your state available.

CDs are OK, but since you will pay tax on interest, they lack some tax-efficiency. I would not use a large portion of of CDs, but using some is certainly OK.
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