Am I doing this right?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Karma Skimmer
Posts: 30
Joined: Mon Jan 29, 2018 11:21 am

Am I doing this right?

Post by Karma Skimmer » Tue Feb 13, 2018 11:40 am

Cash Instruments:
$105K in Whole Life Policy cash value
$185K in CDs and Savings

Invested:
$270K in Vanguard Target 2025 in 401K, IRA, and Roth

No debts
No Mortgage (don't plan to buy a house for forseeable future)

Tax Filing Status: Single
Tax Rate: 28%?
State of Residence: FL
Age: 58

Contributions:
2018: $24.5K to 401K and $6.5K to Roth to Vanguard Target 2025

Desired Allocation:
Rebalance to keep 25% in cash instruments and remaining in Vanguard Target 2030 (about 70-30 stock-bond split)

Other info:
1. Though I was unemployed for long years during the recession, I believe I am now employable and will be able to work even in a down economy for an income of 100k, until 62 or 65.
2. Health is good
3. Yearly expenses of 50k - 60k

Questions:
1. I know I have far too much in cash instruments. I am moving $130k from cash instruments into Vanguard Target 2030. My questions is about how to move this money.
2. I am thinking of moving 65k (half) in DCA of $2500 every two weeks for a year
3. And moving the other half in two or three lump sums when the market is down

Does that make sense?

mega317
Posts: 2169
Joined: Tue Apr 19, 2016 10:55 am

Re: Am I doing this right?

Post by mega317 » Tue Feb 13, 2018 11:51 am

There are plenty of issues to address and you would be helped by posting according to "asking portfolio questions".

Your plan is fine but not optimal. Two issues. First, the market has generally gone up over time and we expect it will continue to do so. So mathematically it's better to invest any money as early as possible. That is difficult for many people to stomach and so any old DCA plan is better than nothing.

The problem with "when the market is down" is that is totally nebulous and you can't know it anyway. We are currently "down" from the recent all time high, but up compared to every moment in history up until December. Is this a good time to buy? Or are we headed lower? No one knows.

User avatar
mhc
Posts: 3653
Joined: Mon Apr 04, 2011 10:18 pm
Location: NoCo

Re: Am I doing this right?

Post by mhc » Tue Feb 13, 2018 12:22 pm

In general you look like you are on the right track.

You should read: https://www.bogleheads.org/wiki/Tax-eff ... _placement

Why do you have a life insurance policy since you are single?

Whole life insurance is usually not very desirable.

quantAndHold
Posts: 1701
Joined: Thu Sep 17, 2015 10:39 pm

Re: Am I doing this right?

Post by quantAndHold » Tue Feb 13, 2018 12:29 pm

A couple of questions.

Does yearly income of $100k and expenses of $50-60k mean that you’re actually saving $40-50k per year? That would mean 401k and IRA, plus about $10-20k in taxable.

How much Social Security do you expect? Do you expect any pension?

FoolMeOnce
Posts: 159
Joined: Mon Apr 24, 2017 11:16 am

Re: Am I doing this right?

Post by FoolMeOnce » Tue Feb 13, 2018 12:37 pm

mega317 wrote:
Tue Feb 13, 2018 11:51 am
The problem with "when the market is down" is that is totally nebulous and you can't know it anyway. We are currently "down" from the recent all time high, but up compared to every moment in history up until December. Is this a good time to buy? Or are we headed lower? No one knows.
Exactly. Someone last November-just three months ago-who decided to wait for the market to go down before investing might see this 10% decline as a great opportunity....and would still be buying at a higher price than in November. Waiting for a drop only works if the drop comes right after that decision, and nobody can tell when that will occur.

To ease your mind, maybe lump sum half now and then DCA the rest in scheduled dates over the next few months. But waiting for a drop is a bad idea. A drop that satisfies you might only come after an even bigger run-up.

software
Posts: 77
Joined: Tue Apr 18, 2017 2:02 pm

Re: Am I doing this right?

Post by software » Tue Feb 13, 2018 12:52 pm

Karma Skimmer wrote:
Tue Feb 13, 2018 11:40 am
Other info:
1. Though I was unemployed for long years during the recession, I believe I am now employable and will be able to work even in a down economy for an income of 100k, until 62 or 65.
I'm very curious on this bit...it's oddly specific. Given you were admittedly unemployed during the recession and you are now older (no offense, but agism is a real thing), what exactly gives you the confidence in this statement? Why 100k? Why 62 or 65? How does this "knowledge" factor into your decision making?

Karma Skimmer
Posts: 30
Joined: Mon Jan 29, 2018 11:21 am

Re: Am I doing this right?

Post by Karma Skimmer » Tue Feb 13, 2018 1:09 pm

mhc wrote:
Tue Feb 13, 2018 12:22 pm
Why do you have a life insurance policy since you are single?

Whole life insurance is usually not very desirable.
I have two adult daughters and three grandchildren. But still the whole life policy is not desirable because I can do better in the long run if I invest the cash value and premiums. But for now I see is as a cash instrument. I will consider dissolving it next year. Thanks.

Karma Skimmer
Posts: 30
Joined: Mon Jan 29, 2018 11:21 am

Re: Am I doing this right?

Post by Karma Skimmer » Tue Feb 13, 2018 1:15 pm

quantAndHold wrote:
Tue Feb 13, 2018 12:29 pm
Does yearly income of $100k and expenses of $50-60k mean that you’re actually saving $40-50k per year? That would mean 401k and IRA, plus about $10-20k in taxable.
I didn't work for a while so I had some extraordinary expenses to catch up, but in 2018 I expect to save 10k or more in addition to 401k and Roth.
How much Social Security do you expect? Do you expect any pension?
About $23800/year at 62; $25k at 65. I want to be fin. independent as soon as I can, so I can work on things other than making a salary.

Karma Skimmer
Posts: 30
Joined: Mon Jan 29, 2018 11:21 am

Re: Am I doing this right?

Post by Karma Skimmer » Tue Feb 13, 2018 1:24 pm

software wrote:
Tue Feb 13, 2018 12:52 pm
Karma Skimmer wrote:
Tue Feb 13, 2018 11:40 am
Other info:
1. Though I was unemployed for long years during the recession, I believe I am now employable and will be able to work even in a down economy for an income of 100k, until 62 or 65.
I'm very curious on this bit...it's oddly specific. Given you were admittedly unemployed during the recession and you are now older (no offense, but agism is a real thing), what exactly gives you the confidence in this statement? Why 100k? Why 62 or 65? How does this "knowledge" factor into your decision making?
For a long time I was in management in small tech companies in Florida. During the years 2005 to 2015, it was difficult to find and keep a job and I burned through a lot of cash. In 2012 I invested in a bootcamp to become (again) a software developer (specifically, .net developer). For two years after that I tried a start up, and then in early 2015 took a job as developer. Today, with three years of hands-on experience (and many years of questionable wisdom) I feel confident about earning 100k for the next 5 - 10 years. At least until AI takes over. :)

Karma Skimmer
Posts: 30
Joined: Mon Jan 29, 2018 11:21 am

Re: Am I doing this right?

Post by Karma Skimmer » Tue Feb 13, 2018 1:28 pm

FoolMeOnce wrote:
Tue Feb 13, 2018 12:37 pm
mega317 wrote:
Tue Feb 13, 2018 11:51 am
The problem with "when the market is down" is that is totally nebulous and you can't know it anyway...
To ease your mind, maybe lump sum half now and then DCA the rest in scheduled dates over the next few months...
That's what I'm doing. I have half in a settlement fund waiting to pounce if the market does go down significantly, and if it doesn't, by the end of the year, I'll go in anyway. And, the other half, I'm DCA'ing in over a period of one year.

The question is whether moving in over one year is too slow for me. I'm 58.

FoolMeOnce
Posts: 159
Joined: Mon Apr 24, 2017 11:16 am

Re: Am I doing this right?

Post by FoolMeOnce » Tue Feb 13, 2018 1:36 pm

Karma Skimmer wrote:
Tue Feb 13, 2018 1:28 pm
FoolMeOnce wrote:
Tue Feb 13, 2018 12:37 pm
mega317 wrote:
Tue Feb 13, 2018 11:51 am
The problem with "when the market is down" is that is totally nebulous and you can't know it anyway...
To ease your mind, maybe lump sum half now and then DCA the rest in scheduled dates over the next few months...
That's what I'm doing. I have half in a settlement fund waiting to pounce if the market does go down significantly, and if it doesn't, by the end of the year, I'll go in anyway. And, the other half, I'm DCA'ing in over a period of one year.

The question is whether moving in over one year is too slow for me. I'm 58.
That is a bit different. Instead of the lump sum now, you are waiting for a decline, which raises the concerns discussed above.

Also, the market just dropped 10%! What more are you waiting for? Do you have a specific number that will trigger you to invest?

Karma Skimmer
Posts: 30
Joined: Mon Jan 29, 2018 11:21 am

Re: Am I doing this right?

Post by Karma Skimmer » Tue Feb 13, 2018 1:52 pm

Also, the market just dropped 10%! What more are you waiting for? Do you have a specific number that will trigger you to invest?
I guess what plays in my mind is the thought that some people think the market will go through a correction this year and then rally towards the end of the year.

I've heard this a lot. I know, I know, to try to time the market is foolish. But nevertheless, this is what plays in my mind.

If the market went down 15% from 1/1/2018 I would put the lump sum portion in. If it doesn't go down I will put it in anyway in six months or so.

ivk5
Posts: 263
Joined: Thu Sep 22, 2016 9:05 am

Re: Am I doing this right?

Post by ivk5 » Tue Feb 13, 2018 3:42 pm

Karma Skimmer wrote:
Tue Feb 13, 2018 1:52 pm
But

quantAndHold
Posts: 1701
Joined: Thu Sep 17, 2015 10:39 pm

Re: Am I doing this right?

Post by quantAndHold » Wed Feb 14, 2018 1:07 am

Karma Skimmer wrote:
Tue Feb 13, 2018 1:15 pm
quantAndHold wrote:
Tue Feb 13, 2018 12:29 pm
Does yearly income of $100k and expenses of $50-60k mean that you’re actually saving $40-50k per year? That would mean 401k and IRA, plus about $10-20k in taxable.
I didn't work for a while so I had some extraordinary expenses to catch up, but in 2018 I expect to save 10k or more in addition to 401k and Roth.
How much Social Security do you expect? Do you expect any pension?
About $23800/year at 62; $25k at 65. I want to be fin. independent as soon as I can, so I can work on things other than making a salary.
So if you’re able to live on $50k/year, and are expecting $25k in SS, then you need your investments to supply roughly $25k per year. In rough, round numbers, you’ll need $7-800k invested at retirement. At your current savings rate, you’re on track. If you can keep health insurance through work until you qualify for Medicare, so much the better.

As far as moving the money from cash into the market, as long as you’re still working and investing new money, I would just lump sum it in. You can still recover from a market downturn if you’re investing new money. If you’re not comfortable with that, then DCA it in monthly over the next year.

Post Reply