Portfolio fine-tuning: already a Boglehead believer

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
JCP7
Posts: 12
Joined: Mon Jun 17, 2013 7:48 pm

Portfolio fine-tuning: already a Boglehead believer

Post by JCP7 » Fri Jan 12, 2018 6:00 pm

Hello dear Bogleheads! I have lurked for quite some time but now would appreciate some help. We’ve always been careful about saving and living below our means. We had not realized how difficult it would be to change one’s thinking and start planning to actually to use it!

Emergency funds: $15,000
Debt: None
Tax Filing Status: Married Filing Jointly
Tax Rate: 15% Federal, 4.5% State
State of Residence: NY
Age: W67, H74
Desired Asset allocation: 50% stocks / 50% bonds
Desired International allocation: 15% of stocks

Current total portfolio size: slightly over 1M in Vanguard; slightly over 200K in TIAA Traditional

Current retirement assets

Her Taxable
0.9% Vanguard Total Stock Mkt Index Adm (VTSAX) (.04%)

Her Traditional IRA at Vanguard
8.6% Vanguard Total Bond Mkt Index Adm (VBTLX) (.05%)
9.2% Vanguard Total Intl Stock Index Adm (VTIAX) (.11%)
38.3% Vanguard Total Stock Mkt Index Adm (VTSAX) (.04%)

Her Inherited IRA at Vanguard
2.4% Vanguard Total Intl Stock Index Adm (VTIAX) (.11%)

Her Roth IRA at Vanguard
0.3% Vanguard Wellington Fund Investor Shares (VWELX) (.25%)

His Traditional IRA at Vanguard
12.6% Vanguard Total Bond Mkt Index Adm (VBTLX) (.05%)

His Rollover IRA at Vanguard
3.1% Vanguard Total Intl Bond Index Adm (VTABX) (.12%)

His SEP IRA at Vanguard
6.4% Vanguard Total Intl Bond Index Adm (VTABX) (.12%)
0.6% Vanguard Total Intl Stock Index Adm (VTIAX) (.11%)

His Roth IRA at Vanguard
1.2% Vanguard Total Intl Stock Index Adm (VTIAX) (.11%)

Her 403b at TIAA (retired, no longer contributing - just sitting & growing)
16.4% TIAA Traditional Fixed Annuity (2 contracts)

Contributions

New annual Contributions
$6500 -- her Traditional IRA
About $3500 -- his SEP IRA (varies every year)

Other info:
—Current Income $55,000-65,000
—His pension ($320 mo)
—His earnings: $25,000 - $35,000 per year
—Social Security (His: $1583 mo; Hers: $516 (restricted to spousal benefit; collect own at 70 - about $2200 mo)
—Estimated Living Expenses: $5000 mo
—Would like to travel: $10,000 yr
—Health insurance: Medicare (primary); secondary from former employer
—We are renters with no plans to move.
—No longer own a car

—After sitting out the effects of 2008, and wife’s forced “retirement” in 2011, we had financial plans done in 2013 by TIAA-CREF and by Vanguard. We decided to rollover wife’s 403B CREF funds and $10,000 of TIAA that was eligible to be moved to Vanguard where we both already had accounts. The plan Vanguard set up for us looked at both our assets as a whole. The suggested asset allocation was:
—50% stocks (Large 25%; Mid/small 10%; International 15%);
—50% bonds (US Short term 9%; Intermediate 27%; Long term 4%; International 10%)
—Vanguard included wife’s TIAA Traditional as part of bonds.

—At the time in 2013, wife had about $65,000 in the taxable Vanguard account and that was to be used to supplement our earnings until Social Security kicked in (end of 2013 for him; her beginning of 2017). We are down to the last $11,000 of non-retirement funds, which is in the Vanguard Total Stock Market Index (Admiral). At this point, it is pretty clear that we need to start thinking of withdrawing from our retirement accounts and setting up a stream of income to supplement our pension, social security and husband’s earnings so we can do some traveling, etc.

—We have already taken our 2018 RMDs from husband’s SEP IRA and Wife’s Inherited IRA. Wife also took $10,000 from her Traditional IRA recently. All in all, we have taken out about $24,545 from Vanguard Total Stock Mkt Index Admiral in the three accounts. We cut the end of 2017 pretty close and would like to do this in a more organized fashion in the future.

Questions:
1. One way wife could start a small stream of income would be by taking interest only payments from her TIAA Traditional. This would amount to about $681 per month. Wife could also annuitize all or part of TIAA Traditional, but really would rather wait till a later age, if at all. Another possibility is to do 10 withdrawals of about $24,000 over 10 years and roll over to Vanguard. Can anyone suggest whether any of these would be a preferred method instead of withdrawing extra funds from our Vanguard retirement accounts?

2. The way Vanguard set up husband’s accounts, his RMD can only come out of Total International Stock or bond funds. Does anyone have suggestions on tweaking this? We took the 2018 out of the Total International Stock, but now we are below our allocation target for international stocks. Should he be all in bonds by age 74 now?

3. If our tax accountant says it will lower our taxes, where should we get our IRA and SEP IRA contributions from?

4. Lastly, wife has usually called Vanguard and gotten help with rebalancing. However, the last time was about two years ago and then wife started reading the Bogleheads more closely after that. Our balance is now about 47.2% in bonds (that includes the TIAA Traditional) and 52.8% in stocks. Since we really don’t have the income to increase our holdings, we will just be rebalancing it, along with withdrawing from it. So, as many Bogleheads have posted, “just ask us.”

Here we are! Any help would be greatly appreciated.

JCP7
Last edited by JCP7 on Thu Mar 01, 2018 9:21 am, edited 1 time in total.

User avatar
Tyler Aspect
Posts: 1080
Joined: Mon Mar 20, 2017 10:27 pm
Location: California
Contact:

Re: Portfolio fine-tuning: already a Boglehead believer

Post by Tyler Aspect » Sat Jan 13, 2018 1:34 pm

JCP7 wrote:
Fri Jan 12, 2018 6:00 pm
Hello dear Bogleheads! I have lurked for quite some time but now would appreciate some help. We’ve always been careful about saving and living below our means. We had not realized how difficult it would be to change one’s thinking and start planning to actually to use it!
Welcome to Bogleheads.

Emergency funds: $15,000
Debt: None
Tax Filing Status: Married Filing Jointly
Tax Rate: 15% Federal, 4.5% State
State of Residence: NY
Age: W67, H74
Desired Asset allocation: 50% stocks / 50% bonds
Desired International allocation: 15% of stocks

Current total portfolio size: slightly over 1M in Vanguard; slightly over 200K in TIAA Traditional
I can see his investments are almost entirely bond only. I would suggest lowering her stock percentage and upping his stock percentage by the same amount.

Current retirement assets

Her Taxable
0.9% Vanguard Total Stock Mkt Index Adm (VTSAX) (.04%)

Her Traditional IRA at Vanguard
8.6% Vanguard Total Bond Mkt Index Adm (VBTLX) (.05%)
9.2% Vanguard Total Intl Stock Index Adm (VTIAX) (.11%)
38.3% Vanguard Total Stock Mkt Index Adm (VTSAX) (.04%)
Exchange 8% Total Stock Market to Total Bond Market.

Her Inherited IRA at Vanguard
2.4% Vanguard Total Intl Stock Index Adm (VTIAX) (.11%)

Her Roth IRA at Vanguard
0.3% Vanguard Wellington Fund Investor Shares (VWELX) (.25%)

His Traditional IRA at Vanguard
12.6% Vanguard Total Bond Mkt Index Adm (VBTLX) (.05%)
Exchange 8% Total Bond Market to Vanguard Total Stock Market (VTSAX).

His Rollover IRA at Vanguard
3.1% Vanguard Total Intl Bond Index Adm (VTABX) (.12%)

His SEP IRA at Vanguard
6.4% Vanguard Total Intl Bond Index Adm (VTABX) (.12%)
0.6% Vanguard Total Intl Stock Index Adm (VTIAX) (.11%)

His Roth IRA at Vanguard
1.2% Vanguard Total Intl Stock Index Adm (VTIAX) (.11%)

Her 403b at TIAA (retired, no longer contributing - just sitting & growing)
16.4% TIAA Traditional Fixed Annuity (2 contracts)

Contributions

New annual Contributions
$6500 -- her Traditional IRA
About $3500 -- his SEP IRA (varies every year)

Other info:
—Current Income $55,000-65,000
—His pension ($320 mo)
—His earnings: $25,000 - $35,000 per year
—Social Security (His: $1583 mo; Hers: $516 (restricted to spousal benefit; collect own at 70 - about $2200 mo)
—Estimated Living Expenses: $5000 mo
—Would like to travel: $10,000 yr
—Health insurance: Medicare (primary); wife’s former employer pays for health insurance (secondary) + pharmacy
—We are renters in a large NYC rent stabilized apartment with no plans to move.
—No longer own a car

—After sitting out the effects of 2008, and wife’s forced “retirement” in 2011, we had financial plans done in 2013 by TIAA-CREF and by Vanguard. We decided to rollover wife’s 403B CREF funds and $10,000 of TIAA that was eligible to be moved to Vanguard where we both already had accounts. The plan Vanguard set up for us looked at both our assets as a whole. The suggested asset allocation was:
—50% stocks (Large 25%; Mid/small 10%; International 15%);
—50% bonds (US Short term 9%; Intermediate 27%; Long term 4%; International 10%)
—Vanguard included wife’s TIAA Traditional as part of bonds.

—At the time in 2013, wife had about $65,000 in the taxable Vanguard account and that was to be used to supplement our earnings until Social Security kicked in (end of 2013 for him; her beginning of 2017). We are down to the last $11,000 of non-retirement funds, which is in the Vanguard Total Stock Market Index (Admiral). At this point, it is pretty clear that we need to start thinking of withdrawing from our retirement accounts and setting up a stream of income to supplement our pension, social security and husband’s earnings so we can do some traveling, etc.

—We have already taken our 2018 RMDs from husband’s SEP IRA and Wife’s Inherited IRA. Wife also took $10,000 from her Tradition IRA recently. All in all, we have taken out about $24,545 from Vanguard Total Stock Mkt Index Admiral in the three accounts. We cut the end of 2017 pretty close and would like to do this in a more organized fashion in the future.

Questions:
1. One way wife could start a small stream of income would be by taking interest only payments from her TIAA Traditional. This would amount to about $681 per month. Wife could also annuitize all or part of TIAA Traditional, but really would rather wait till a later age, if at all. Another possibility is to do 10 withdrawals of about $24,000 over 10 years and roll over to Vanguard. Can anyone suggest whether any of these would be a preferred method instead of withdrawing extra funds from our Vanguard retirement accounts?
2 years of interest only withdrawals, followed by 10 years withdrawal.

2. The way Vanguard set up husband’s accounts, his RMD can only come out of Total International Stock or bond funds. Does anyone have suggestions on tweaking this? We took the 2018 out of the Total International Stock, but now we are below our allocation target for international stocks. Should he be all in bonds by age 74 now?
No, the age differential is not that great. I already suggested equalizing somewhat the amount of stocks between accounts.

3. If our tax accountant says it will lower our taxes, where should we get our IRA and SEP IRA contributions from?
IRA contributions are from earned income.

Here we are! Any help would be greatly appreciated.

JCP7
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.

User avatar
JCP7
Posts: 12
Joined: Mon Jun 17, 2013 7:48 pm

Re: Portfolio fine-tuning: already a Boglehead believer

Post by JCP7 » Tue Jan 16, 2018 3:36 pm

Thank you for your reply, Tyler Aspect.

--I used the Portfolio Tester and rounded up the 8% suggestion and it came out to the percentages below. Would you suggest even going a bit further and setting it back to 50/50?

Holdings Percent Difference from Target
Short-term reserves 0.00% 0.00%
Bonds 49.10% –0.90%
Stocks 50.90% 0.90%
Other 0.00% 0.00%
Total 100%

-Can I please ask your reasoning for doing interest only payments from TIAA Traditional for only 2 years and then switching to the 10 even withdrawals? I must admit that I am pretty satisfied that my 2 contracts are paying 4.067% and 4.069%. I could continue this and even just switch to RMD at age 70 1/2. Or, I can annuitize at that point or any point after that, all or part of each contract. As of right now, annuitizing all of my TIAA Traditional would yield me about $1160 per month for a joint lifetime annuity with a 20 year guaranteed period, full benefit to survivor. I also realized that by withdrawing interest only for the next two years, I’d be reducing my “bond” holdings in my total portfolio. All in all, so many moving parts, which is why I posted my question. Am I over-thinking all of this too much?

--A new question related to the bond proportion of our portfolio:
When I had my original consultation with Vanguard in 2013, I asked for a Three Fund Portfolio; they suggested the Four Fund Portfolio and I went with it. Since then, I’ve read BH comments on the (VTABX) Vanguard Total International Bond Index Fund Admiral Shares and wondered if it might be good to exchange (VTABX) Vanguard Total International Bond Index Fund Admiral Shares for (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares where they occur in our accounts? It would simplify our portfolio, at least for me, the one who manages it. Can you see any disadvantages to this move?

Thanks again for your help, and that of any other BH who reads this!

User avatar
Tyler Aspect
Posts: 1080
Joined: Mon Mar 20, 2017 10:27 pm
Location: California
Contact:

Re: Portfolio fine-tuning: already a Boglehead believer

Post by Tyler Aspect » Wed Jan 17, 2018 8:11 pm

JCP7 wrote:
Tue Jan 16, 2018 3:36 pm
Thank you for your reply, Tyler Aspect.

--I used the Portfolio Tester and rounded up the 8% suggestion and it came out to the percentages below. Would you suggest even going a bit further and setting it back to 50/50?

Holdings Percent Difference from Target
Short-term reserves 0.00% 0.00%
Bonds 49.10% –0.90%
Stocks 50.90% 0.90%
Other 0.00% 0.00%
Total 100%
Some people only do adjustments when they are 5% off from their target asset allocation. 0.1% off is basically almost spot on.

-Can I please ask your reasoning for doing interest only payments from TIAA Traditional for only 2 years and then switching to the 10 even withdrawals? I must admit that I am pretty satisfied that my 2 contracts are paying 4.067% and 4.069%. I could continue this and even just switch to RMD at age 70 1/2. Or, I can annuitize at that point or any point after that, all or part of each contract. As of right now, annuitizing all of my TIAA Traditional would yield me about $1160 per month for a joint lifetime annuity with a 20 year guaranteed period, full benefit to survivor. I also realized that by withdrawing interest only for the next two years, I’d be reducing my “bond” holdings in my total portfolio. All in all, so many moving parts, which is why I posted my question. Am I over-thinking all of this too much?
You can think annuitizing as benefiting the owners while disadvantaging the heirs. A straight withdrawal is neutral on the owners and the heirs.

--A new question related to the bond proportion of our portfolio:
When I had my original consultation with Vanguard in 2013, I asked for a Three Fund Portfolio; they suggested the Four Fund Portfolio and I went with it. Since then, I’ve read BH comments on the (VTABX) Vanguard Total International Bond Index Fund Admiral Shares and wondered if it might be good to exchange (VTABX) Vanguard Total International Bond Index Fund Admiral Shares for (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares where they occur in our accounts? It would simplify our portfolio, at least for me, the one who manages it. Can you see any disadvantages to this move?
Vanguard's research recommends international bonds, but many Bogleheads remained unconvinced. If you would like to exchange international bonds into US bonds, then I would tend to agree with you.

Thanks again for your help, and that of any other BH who reads this!
You are welcome!
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.

Post Reply