Portfolio plan review

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Topic Author
cadk
Posts: 12
Joined: Wed Dec 20, 2017 5:43 pm

Portfolio plan review

Post by cadk »

Hi All,

Thanks to everyone that contributes to this forum. Especially those of you that have contributed to the wikis. I’ve been pouring over the site and the boggleheads’ guide to investing book the last few weeks to try and sort out my portfolio. I’ve got a lot to learn.

I’ve been very fortunate in the last few years on two fronts. My company granted, for me, an unusually high number of RSUs a few years back and the company has also went through a rapid growth period (stock has risen over 350% in 5 years). I’ve been somewhat remiss in selling off the RSUs and just holding it in cash with no real plan. Figuring out the kid’s 529 recently has finally forced me to get my act together and start addressing the situation.

EF / contingency: 100k
Other cash: 250k
Debt:
house - 680k @ 4.5% Mkt Value ~2M
rental unit - 350k @ 4.125% Mkt Value ~1M 3.5k rent
no cards or loans debt
Tax: married filing jointly
tax rate: Fed 35%, 9.3% State
State: CA
Age: 37, spouse 41
1 3 year old kid
Desired AA: 80 / 20
Desired international allocation: 30%

Current retirement assets (% don’t include cash on the sidelines)

Current AA: 93 / 7

Taxable
66k (11%) VFIAX Vanguard 500 Index Fund Admiral
185k (30%) company stock

401k
350k (57%) Vanguard Target Retirement 2045 (90/10 AA)

HSA
10k cash (1.5%)

Spouse
30% employer’s stock
70% various mutual funds in 401k
60k cash

529
50k vanguard aggressive age based (just opened. treating as separate from retirement)

The priority at the moment is sorting out my half of our portfolio. Obviously my spouse also needs to diversify the company stock; sorting out my half is leading by example :)

Both of us max out our 401ks every year. Going forward I plan to contribute an additional 12 - 20k each year to the taxable investments.

My spouse will be contributing $400 a month towards the 529 (I opened it with a one off lump).

We would like to continue working until we are 65.

We like to keep one year’s of expenses, including the ability to carry the rental unit, in the event of a downturn / layoff (our area is HCOL and tends to go through boom and bust cycles). This money is sitting in a 1.25% ally savings account. I will be moving half of it into ally’s 2% 1 year CD later today / tomorrow (thanks to threads here bringing it to my attention).

Outside of the EF / contingency fund I have another 250k in cash. I estimate I will have an addition $120k after taxes from selling the remaining company stock. I plan to invest $170k of this as one off lump.

The other 200k is in a holding pattern. It has been a bit of a dream fund for either moving across town or putting a down payment on an additional rental unit. House prices have almost doubled in the last 5 years in our area so we are starting to re-evaluate this fund. It may just be invested into the general portfolio sometime in the next 6-9 months. Toying with this idea, and re-reading the wiki on AA many times, are the main drivers that are shifting me to an 80/20 AA. The other option, of course, is to toss it into the existing mortgage.

Current Plan

I am planning on moving to the 3 fund portfolio and bringing my AA to 80 / 20 (excluding the contingency and dream fund). I am thinking of the following:

Taxable
11% - VFIAX Vanguard 500 Index Admiral
29% - VTSAX Vanguard Total Stock Admiral

401K
10% - VTSAX Vanguard Total Stock Admiral
30% - VTIAX Vanguard Total International stock Admiral
18.5% - VBTLX Vanguard Total Bond Admiral

HSA
1.5% - TBD

If the market “crashed” I would switch VFIAX over to VTSAX as part of loss harvesting

The California HSA is a difficult one given it's a taxable account from the state's pov. The idea of ~10% of all new contributions, between the two of us, going towards TIPS seems excessive. I go back forth on just sucking this up and doing the double ledger thing for feds and CA versus just investing the 6k in a taxable account. I need to re-read the various HSA threads and play with turbo-tax to finalize my decision.

Questions / Concerns

1. If we end up just plowing the “dream fund” into the portfolio then my 401k is less than my taxable investments. For re-balancing purposes, should I consider having both total-stock & total-intl in the 401K and taxable accounts so I can re-balance within the 401k entirely?
2. For rebalancing between domestic and international stocks I assume, unless it’s a gross imbalance, it’s best to just divert new contributions accordingly if both are not in a tax deferred account.
3. My company offers both a 401k and a Roth 401k. Am I correct in thinking it's something of a toss-up given we are currently in a high tax bracket?
4. Am I correct in thinking that it’s a toss-up between holding total-intl vs total-stock in taxable?
5. Is there anything obvious that I am missing?

Thanks in advance
goblue100
Posts: 1278
Joined: Sun Dec 01, 2013 10:31 am

Re: Portfolio plan review

Post by goblue100 »

cadk wrote: Wed Dec 20, 2017 5:57 pm
Questions / Concerns

1. If we end up just plowing the “dream fund” into the portfolio then my 401k is less than my taxable investments. For re-balancing purposes, should I consider having both total-stock & total-intl in the 401K and taxable accounts so I can re-balance within the 401k entirely?
I think what you outlined above looks fine. You may be over estimating how much rebalancing you will do between equity funds,
you will do more between bonds and equitys in general. Set your rebalancing bonds wider than narrower, less is more, imho.

2. For rebalancing between domestic and international stocks I assume, unless it’s a gross imbalance, it’s best to just divert new contributions accordingly if both are not in a tax deferred account.
That is what I would do
3. My company offers both a 401k and a Roth 401k. Am I correct in thinking it's something of a toss-up given we are currently in a high tax bracket?
You are likely to be in a high tax bracket now and when you retire. I would fund some into the Roth, if you can. The advantage to the Roth is no RMD's at the age of 70. Having both gives you some flexibility in withdrawal strategy
4. Am I correct in thinking that it’s a toss-up between holding total-intl vs total-stock in taxable?
I believe so. In general, the main consideration is tax inefficient funds in tax advantaged, Bonds, Reits, High Dividend.
5. Is there anything obvious that I am missing?
Nothing jumps out at me.

Thanks in advance
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns
User avatar
CyclingDuo
Posts: 4153
Joined: Fri Jan 06, 2017 9:07 am

Re: Portfolio plan review

Post by CyclingDuo »

cadk wrote: Wed Dec 20, 2017 5:57 pm
EF / contingency: 100k
Other cash: 250k
Debt:
house - 680k @ 4.5% Mkt Value ~2M
rental unit - 350k @ 4.125% Mkt Value ~1M 3.5k rent
no cards or loans debt
Tax: married filing jointly
tax rate: Fed 35%, 9.3% State
State: CA
Age: 37, spouse 41
1 3 year old kid
Desired AA: 80 / 20
Desired international allocation: 30%

Current retirement assets (% don’t include cash on the sidelines)

Current AA: 93 / 7

Taxable
66k (11%) VFIAX Vanguard 500 Index Fund Admiral
185k (30%) company stock

401k
350k (57%) Vanguard Target Retirement 2045 (90/10 AA)

HSA
10k cash (1.5%)

Spouse
30% employer’s stock
70% various mutual funds in 401k
60k cash

529
50k vanguard aggressive age based (just opened. treating as separate from retirement)

The priority at the moment is sorting out my half of our portfolio. Obviously my spouse also needs to diversify the company stock; sorting out my half is leading by example :)

Both of us max out our 401ks every year. Going forward I plan to contribute an additional 12 - 20k each year to the taxable investments.

My spouse will be contributing $400 a month towards the 529 (I opened it with a one off lump).

We would like to continue working until we are 65. :moneybag :moneybag :sharebeer

Current Plan

I am planning on moving to the 3 fund portfolio and bringing my AA to 80 / 20 (excluding the contingency and dream fund). I am thinking of the following:

Taxable
11% - VFIAX Vanguard 500 Index Admiral
29% - VTSAX Vanguard Total Stock Admiral

No need for both of the above - they track each other very well. The Total Stock Market Admiral would be preferable for better tax efficiency and diversification. You could also use the VTEB (Vanguard Municipal Bond Fund) and or VCAIX (California Intermediate Term Tax Exempt Muni Bond Fund) and VCITX (California Long Term Tax Exempt Muni Bond) to keep some bond exposure in your taxable account that will continue to grow over the years. There is a tax exempt California money market fund as well (we used one when we lived in California) that might be worth keeping your cash in at your brokerage.

401K
10% - VTSAX Vanguard Total Stock Admiral
30% - VTIAX Vanguard Total International stock Admiral
18.5% - VBTLX Vanguard Total Bond Admiral

Looks good!

HSA
1.5% - TBD

If the market “crashed” I would switch VFIAX over to VTSAX as part of loss harvesting

The California HSA is a difficult one given it's a taxable account from the state's pov. The idea of ~10% of all new contributions, between the two of us, going towards TIPS seems excessive. I go back forth on just sucking this up and doing the double ledger thing for feds and CA versus just investing the 6k in a taxable account. I need to re-read the various HSA threads and play with turbo-tax to finalize my decision.

No need to lose sleep over it in terms of choice, but make a choice to match your AA.

Questions / Concerns

1. If we end up just plowing the “dream fund” into the portfolio then my 401k is less than my taxable investments. For re-balancing purposes, should I consider having both total-stock & total-intl in the 401K and taxable accounts so I can re-balance within the 401k entirely? I doubt with a 80/20 AA there will be a lot of - and or - frequent rebalancing going on.
2. For rebalancing between domestic and international stocks I assume, unless it’s a gross imbalance, it’s best to just divert new contributions accordingly if both are not in a tax deferred account. The latter, unless we hit another 10-18 year period where either does nothing. Even if that happened, and at your age, doing the latter will simply continue to build a long and strong base of shares which will benefit when either that was in a slump comes out of a prolonged slump period. Those of us who endured international stocks doing nothing for years and year can attest to that.
3. My company offers both a 401k and a Roth 401k. Am I correct in thinking it's something of a toss-up given we are currently in a high tax bracket? Others will provide a better answer than we can. We tried using this link recently to run some numbers to decide Traditional vs Roth employer plans (different income and needs than your case) and appreciated a lot of help from some excellent Bogleheads, so you might want to give it a whirl and see what it says: https://www.i-orp.com/GOPtax/index.html
4. Am I correct in thinking that it’s a toss-up between holding total-intl vs total-stock in taxable? Both are tax efficient and do well in taxable.
5. Is there anything obvious that I am missing? Looks good.

Thanks in advance
"Save like a pessimist, invest like an optimist." - Morgan Housel
Topic Author
cadk
Posts: 12
Joined: Wed Dec 20, 2017 5:43 pm

Re: Portfolio plan review

Post by cadk »

Thanks for the pointers.

I agree that it's probably a good idea to hedge my bets and split my contributions over a 401K and Roth 401K.

For my HSA, I decided the easiest approach was to just throw it into TIPS and reduce my bonds holding in the 401K by the equivalent amount.

Good to know on the CA Money Market Fund. I can see that being handy in the future.

I've bookmarked https://www.i-orp.com/GOPtax/index.html but I still need to play with it a bit more.

I realized over the holidays one of things I was missing. I can do back door roths & my company's plan allows me to do a mega back door roth. I've already done the '17 and '18 back door and I'm going to try and max out the mega back door this year :)

Thanks!
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