Portfolio help: Financially conservative couple looking for suggestions

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Filife20Forty
Posts: 17
Joined: Tue Feb 20, 2018 7:44 am

Portfolio help: Financially conservative couple looking for suggestions

Post by Filife20Forty » Fri Mar 02, 2018 10:11 am

Tax filing status: MFJ, early 30's, kids in the next few years
Debt: 30 years remaining on mortgage, $424k, 3.75%
Tax Rate: 33-35% Federal, 5% State
Desired Asset allocation: 60% / 40%
Desired International allocation: 20% of stocks
Summary:
• Emergency funds (cash) - $75k
• Other savings (cash) - $475k
• 401(k) - $365k
• H.S.A.’s - $20k
• Combined base is about $250k and last year combined base + bonus was approximately ~$400k. We hope to continue at this level for the next couple years and will re-assess when we have kids.
• ~$350k across several 401(k)/ IRA/ retirement accounts. We each contribute $18k per year plus very healthy company 401k matches. $30k of Roth space. FY18 goal to consolidate some of our retirement accounts into lower-ER, joint Vanguard account.

Summary of issue: We are both financially conservative by nature (driving older, paid-off cars, etc.), but recognize that the conservative cash accumulating approach has likely cost us a significant amount of potential returns in the past couple of years had we invested more of it for the long term and we have no current knowledge as to why we need this amount of cash on-hand. We struggle with the concept that we could lose a significant amount in a correction, but realize investing more of our cash will help us to retire sooner (hopefully sometime in our 50's, hence the name) and probably more comfortably. Coming to a 60/40 AA was difficult for us. For now, our thought is that we want to keep approximately $200k in somewhat liquid investments (for potential future real estate investments, etc.). The remaining $250k we would invest over a period of time.

Question 1: Suggestions for a plan to draw down our excess cash over the next couple of years. We are trying to develop (i) a game plan how frequently and how much $ we contribute to brokerage account and (ii) on how to maximize returns on the cash to be invested down the road (e.g. short-term CD’s, MM accounts. Having read a lot of posts on here, some advocate for lump sum, but don’t think we can stomach that from a risk standpoint.

Question 2: Are there other things that we should be considering? We were recommended by F.A. to hold off on 529 contributions until we have kids. Do you agree? We’ve played around with the idea of purchasing some 30 year I-bonds/TIPS with our current excess cash flow to create a bit of an “annuity” in retirement given we don’t have access to pensions. Has anyone undertaken a similar strategy or suggestions / criticisms to this approach? Would you consider these as part of overall AA, or should we think of this as a separate investment to create retirement cash flows and have multiple legs of the stool? Is there anything else we should consider?

Question 3: What investment AA do you recommend to best utilize the tax-deferred 401(k), Roth ($30k) H.S.A. ($20k) and brokerage space that we have?

I've learned so much about retirement and investing from this site, and thank you in advance for taking the time to read this post.

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Duckie
Posts: 5679
Joined: Thu Mar 08, 2007 2:55 pm

Re: Portfolio help: Financially conservative couple looking for suggestions

Post by Duckie » Fri Mar 02, 2018 5:30 pm

Filife20Forty, welcome to the forum.
Filife20Forty wrote:~$350k across several 401(k)/ IRA/ retirement accounts. We each contribute $18k per year plus very healthy company 401k matches.
It's $18.5K for 2018.
FY18 goal to consolidate some of our retirement accounts into lower-ER, joint Vanguard account.
At your income you can't contribute to a Roth IRA directly. If you move former employer assets to a rollover IRA you will mess up your ability to use the Backdoor Roth IRA method. Do both of you have an employer plan at a current job? If so, will those plans take incoming rollovers? Are the options decent?
What investment AA do you recommend to best utilize the tax-deferred 401(k), Roth ($30k) H.S.A. ($20k) and brokerage space that we have?
Put the 40% bond AA in the pre-tax 401k plans. Hopefully you have decent bond options. Use stock index funds for the rest of the 401k plans, Roth IRAs and the retirement portion of the taxable account. In the HSAs have at least one year's deductible in cash/bonds and use a stock index fund for the remainder.

What are the options in the 401k plans? Where are you holding the Roth IRAs and taxable account?

Filife20Forty
Posts: 17
Joined: Tue Feb 20, 2018 7:44 am

Re: Portfolio help: Financially conservative couple looking for suggestions

Post by Filife20Forty » Fri Mar 02, 2018 6:30 pm

Duckie wrote:
Fri Mar 02, 2018 5:30 pm
Filife20Forty, welcome to the forum.
Filife20Forty wrote:~$350k across several 401(k)/ IRA/ retirement accounts. We each contribute $18k per year plus very healthy company 401k matches.
It's $18.5K for 2018.

Good call on the $18.5k (we are both maxing at that level. Had started to draft this question a few months ago under FY17 rules and finally got it to a point where I had some sense as to where we needed to focus).
FY18 goal to consolidate some of our retirement accounts into lower-ER, joint Vanguard account.
At your income you can't contribute to a Roth IRA directly. If you move former employer assets to a rollover IRA you will mess up your ability to use the Backdoor Roth IRA method. Do both of you have an employer plan at a current job? If so, will those plans take incoming rollovers? Are the options decent?

We do both have employer plans. My plan has limited options and higher ER options, so unlikely it makes sense from my plan. I've been at my company for several years and a large portion of our retirement savings is with this 401(k) company. Prior employer 401(k) and brokerage is with VG. Need to check on my wife's account options. We will be moving her former employer plans to VG in the coming months via Rollover IRA.
What investment AA do you recommend to best utilize the tax-deferred 401(k), Roth ($30k) H.S.A. ($20k) and brokerage space that we have?
Put the 40% bond AA in the pre-tax 401k plans. Hopefully you have decent bond options. Use stock index funds for the rest of the 401k plans, Roth IRAs and the retirement portion of the taxable account. In the HSAs have at least one year's deductible in cash/bonds and use a stock index fund for the remainder.

May I ask why the suggestion to put the bond funds in the pre-tax plans (assuming to defer any taxes on the dividends and take potential tax losses in the stock funds)?



What are the options in the 401k plans? Where are you holding the Roth IRAs and taxable account? Roth is 50% VG (rollover IRA) and 50% with my current employer's plan. Taxable account is with VG. Company 401(k) is a lot of target date funds with higher than desirable ERs,
and the following:

(NEFRX) (Loomis Sayles Core Plus Bond Fund (Class A)) [0.73% ER]
(MHYIX) (MainStay High Yield Corporate Bond Fund (Class I)) [0.70%]
(PRRIX) (PIMCO Real Return Fund (Institutional Class)) [0.64%]
(DODIX) (Dodge & Cox Income Fund) [0.43%]
(IARIX) (Invesco Real Estate Fund (Class R5)) [0.89%]
(PSCZX) (Prudential Jennison Small Company Fund (Class Z)) [0.81%]
(TIDDX) (T. Rowe Price International Discovery Fund (Class I)) [1.08%]
(ODVYX) (Oppenheimer Developing Markets Fund (Class Y)) [1.07%]
(VTIAX) (Vanguard Total International Stock Index Fund (Admiral Shares)) [0.11%]

I think from a structuring standpoint, and happy to hear your thoughts, I should utilize as much of the total stock exposure in the VTIAX in our overall AA, as possible to minimize ER.


dbr
Posts: 27065
Joined: Sun Mar 04, 2007 9:50 am

Re: Portfolio help: Financially conservative couple looking for suggestions

Post by dbr » Fri Mar 02, 2018 6:47 pm

Filife20Forty wrote:
Fri Mar 02, 2018 10:11 am


Question 1: Suggestions for a plan to draw down our excess cash over the next couple of years. We are trying to develop (i) a game plan how frequently and how much $ we contribute to brokerage account and (ii) on how to maximize returns on the cash to be invested down the road (e.g. short-term CD’s, MM accounts. Having read a lot of posts on here, some advocate for lump sum, but don’t think we can stomach that from a risk standpoint.

That means your selection of an asset allocation is wrong or you don't understand risk.

I would suggest some introspection into exactly what it is you can't stomach. The usual complaint is that one one would regret investing only to experience a downturn that would have been avoided if one had not moved so quickly. Of course that is irrational because the same downturn can occur immediately after one has reached full investment after delaying. A downturn can occur later, but we don't turn around and take all the money out and slowly put it in again to avoid it. The whole idea is chasing a chimera, the chimera being that somehow the slow placement of money means that you are not taking any risk in investing -- presumably because at least that risk will be avoided this month. Otherwise there is no plan except to follow some arbitrary schedule that by some inexplicable process you can look in the eye. Take six months, take a year, take two years and see if that feels better. It might.

As far as the cash, there is no practical way to maximize the return in any really helpful way. To maximize the return the procedure is to invest the money. If you really can't do that then maybe a good idea is to go ahead and put it all in whatever bonds you were going to use and transfer over on some schedule. If you are worried that even bonds fluctuate in value, then investing is not for you in the first place.

JW-Retired
Posts: 6760
Joined: Sun Dec 16, 2007 12:25 pm

Re: Portfolio help: Financially conservative couple looking for suggestions

Post by JW-Retired » Fri Mar 02, 2018 9:17 pm

Filife20Forty wrote:
Fri Mar 02, 2018 10:11 am
Tax filing status: MFJ, early 30's, kids in the next few years
Debt: 30 years remaining on mortgage, $424k, 3.75%
Tax Rate: 33-35% Federal, 5% State
Desired Asset allocation: 60% / 40%
Desired International allocation: 20% of stocks
Summary:
• Emergency funds (cash) - $75k
• Other savings (cash) - $475k
• 401(k) - $365k
• H.S.A.’s - $20k
• Combined base is about $250k and last year combined base + bonus was approximately ~$400k. We hope to continue at this level for the next couple years and will re-assess when we have kids.
• ~$350k across several 401(k)/ IRA/ retirement accounts. We each contribute $18k per year plus very healthy company 401k matches. $30k of Roth space. FY18 goal to consolidate some of our retirement accounts into lower-ER, joint Vanguard account.
I'm not really understanding what your current assets are? Is there any overlap between the $365k 401k and the $350k spread across several other accounts? What do you mean by $30k of Roth space? Your income looks like way too much to contribute directly to a Roth and your tIRA accounts will likely mess up doing any "backdoor Roth" maneuver, so that may be an orphaned $30k.

If you could tell us exactly what kind of accounts the $350k is spread over that would help me.
thanks,
JW
Retired at Last

Filife20Forty
Posts: 17
Joined: Tue Feb 20, 2018 7:44 am

Re: Portfolio help: Financially conservative couple looking for suggestions

Post by Filife20Forty » Fri Mar 02, 2018 9:58 pm

dbr wrote:
Fri Mar 02, 2018 6:47 pm
Filife20Forty wrote:
Fri Mar 02, 2018 10:11 am


Question 1: Suggestions for a plan to draw down our excess cash over the next couple of years. We are trying to develop (i) a game plan how frequently and how much $ we contribute to brokerage account and (ii) on how to maximize returns on the cash to be invested down the road (e.g. short-term CD’s, MM accounts. Having read a lot of posts on here, some advocate for lump sum, but don’t think we can stomach that from a risk standpoint.

That means your selection of an asset allocation is wrong or you don't understand risk.

I would suggest some introspection into exactly what it is you can't stomach. The usual complaint is that one one would regret investing only to experience a downturn that would have been avoided if one had not moved so quickly. Of course that is irrational because the same downturn can occur immediately after one has reached full investment after delaying. A downturn can occur later, but we don't turn around and take all the money out and slowly put it in again to avoid it. The whole idea is chasing a chimera, the chimera being that somehow the slow placement of money means that you are not taking any risk in investing -- presumably because at least that risk will be avoided this month. Otherwise there is no plan except to follow some arbitrary schedule that by some inexplicable process you can look in the eye. Take six months, take a year, take two years and see if that feels better. It might.

As far as the cash, there is no practical way to maximize the return in any really helpful way. To maximize the return the procedure is to invest the money. If you really can't do that then maybe a good idea is to go ahead and put it all in whatever bonds you were going to use and transfer over on some schedule. If you are worried that even bonds fluctuate in value, then investing is not for you in the first place.
Thank you for taking the time to reply. I think it's hard to see the lump sum approach (of course it's an amazing feeling if the market is up and it's gut wrenching if way down). Understood on the short-term lack of return. From your perspective, if we were going to invest the money over 3-4 years, would you put any of the money to be deployed in years 2 onwards in bonds tomorrow?

Filife20Forty
Posts: 17
Joined: Tue Feb 20, 2018 7:44 am

Re: Portfolio help: Financially conservative couple looking for suggestions

Post by Filife20Forty » Fri Mar 02, 2018 10:11 pm

JW-Retired wrote:
Fri Mar 02, 2018 9:17 pm
Filife20Forty wrote:
Fri Mar 02, 2018 10:11 am
Tax filing status: MFJ, early 30's, kids in the next few years
Debt: 30 years remaining on mortgage, $424k, 3.75%
Tax Rate: 33-35% Federal, 5% State
Desired Asset allocation: 60% / 40%
Desired International allocation: 20% of stocks
Summary:
• Emergency funds (cash) - $75k
• Other savings (cash) - $475k
• 401(k) - $365k
• H.S.A.’s - $20k
• Combined base is about $250k and last year combined base + bonus was approximately ~$400k. We hope to continue at this level for the next couple years and will re-assess when we have kids.
• ~$350k across several 401(k)/ IRA/ retirement accounts. We each contribute $18k per year plus very healthy company 401k matches. $30k of Roth space. FY18 goal to consolidate some of our retirement accounts into lower-ER, joint Vanguard account.
I'm not really understanding what your current assets are? Is there any overlap between the $365k 401k and the $350k spread across several other accounts? What do you mean by $30k of Roth space? Your income looks like way too much to contribute directly to a Roth and your tIRA accounts will likely mess up doing any "backdoor Roth" maneuver, so that may be an orphaned $30k.

If you could tell us exactly what kind of accounts the $350k is spread over that would help me.
thanks,
JW
Thanks for your response. The $365k and $350k are one and the same (I wrote this post and refined over the last 2 months before posting and updated one place but not the other).

Current assets are the $365k of retirement savings, $550k of cash (including the emergency fund of $75k).

The $335k is in pre-tax contributions to employer 401(k) accounts, held with a few employer-sponsored plans. I have ~$30k of after-tax account that I could reallocate to a certain investment-type (e.g. small cap, Int'l, etc.). Currently, it's a mix of equity funds and target date funds. Early in my career, I contributed to an after-tax account, which is how I have these amounts.

Let me know if there's anything else I missed in your questions.

JBTX
Posts: 3236
Joined: Wed Jul 26, 2017 12:46 pm

Re: Portfolio help: Financially conservative couple looking for suggestions

Post by JBTX » Fri Mar 02, 2018 10:29 pm

Filife20Forty wrote:
Fri Mar 02, 2018 10:11 am
Tax filing status: MFJ, early 30's, kids in the next few years
Debt: 30 years remaining on mortgage, $424k, 3.75%
Tax Rate: 33-35% Federal, 5% State
Desired Asset allocation: 60% / 40%
Desired International allocation: 20% of stocks
Summary:
• Emergency funds (cash) - $75k
• Other savings (cash) - $475k
• 401(k) - $365k
• H.S.A.’s - $20k
• Combined base is about $250k and last year combined base + bonus was approximately ~$400k. We hope to continue at this level for the next couple years and will re-assess when we have kids.
• ~$350k across several 401(k)/ IRA/ retirement accounts. We each contribute $18k per year plus very healthy company 401k matches. $30k of Roth space. FY18 goal to consolidate some of our retirement accounts into lower-ER, joint Vanguard account.

Summary of issue: We are both financially conservative by nature (driving older, paid-off cars, etc.), but recognize that the conservative cash accumulating approach has likely cost us a significant amount of potential returns in the past couple of years had we invested more of it for the long term and we have no current knowledge as to why we need this amount of cash on-hand. We struggle with the concept that we could lose a significant amount in a correction, but realize investing more of our cash will help us to retire sooner (hopefully sometime in our 50's, hence the name) and probably more comfortably. Coming to a 60/40 AA was difficult for us. For now, our thought is that we want to keep approximately $200k in somewhat liquid investments (for potential future real estate investments, etc.). The remaining $250k we would invest over a period of time.

Question 1: Suggestions for a plan to draw down our excess cash over the next couple of years. We are trying to develop (i) a game plan how frequently and how much $ we contribute to brokerage account and (ii) on how to maximize returns on the cash to be invested down the road (e.g. short-term CD’s, MM accounts. Having read a lot of posts on here, some advocate for lump sum, but don’t think we can stomach that from a risk standpoint.
In theory, on average it is best to lump sum invest. I am not sure if there is research on lump sum investing vs dollar cost averaging when the market is at historically high valuations. So I would say come up with a plan that you are comfortable with, as long as you understand spreading it out may not reduce your risk, and it may very well decrease your future returns.

Normally I wouldn't advocate paying off or accelerating mortgage payments at your age, but if you are sitting on a half million in cash earning next to nothing, paying it down faster may make sense.

Question 2: Are there other things that we should be considering? We were recommended by F.A. to hold off on 529 contributions until we have kids. Do you agree?
I personally wouldn't do a 529 without kids.
We’ve played around with the idea of purchasing some 30 year I-bonds/TIPS with our current excess cash flow to create a bit of an “annuity” in retirement given we don’t have access to pensions. Has anyone undertaken a similar strategy or suggestions / criticisms to this approach? Would you consider these as part of overall AA, or should we think of this as a separate investment to create retirement cash flows and have multiple legs of the stool? Is there anything else we should consider?
Ibonds aren't a bad idea. You can only do $20k per year, but they are likely better than cash, and tax is deferred until you withdraw them. TIPS typically aren't recommended in taxable accounts. You will have to pay tax on the annual interest, and you are at a high tax rate. Again, paying down mortgage may make more sense than investing in taxable bonds.

These would be part of your asset allocation.
Question 3: What investment AA do you recommend to best utilize the tax-deferred 401(k), Roth ($30k) H.S.A. ($20k) and brokerage space that we have?

I've learned so much about retirement and investing from this site, and thank you in advance for taking the time to read this post.
Generally you look at your asset allocation across all of your accounts combined. If you are going for 60/40, that is fine. It is pretty conservative for your age, but perhaps that is appropriate for you.

MrPotatoHead
Posts: 429
Joined: Sat Oct 14, 2017 10:41 pm

Re: Portfolio help: Financially conservative couple looking for suggestions

Post by MrPotatoHead » Fri Mar 02, 2018 11:10 pm

A point to consider. Because of my self employment and some advice I got from some wealthy folks I always carried a lot of cash. A couple of times in my life I was able to purchase a lot of assets at fire sale prices. 2008 was an example. Not only were equities on sale but I bought up a lot of homes and heavy equipment at bargain prices. In the 2000 crash I acquired a couple of nice vehicles I still have as well as more heavy equipment. My point is, I played to my conservative nature and was able to profit by it. I am not saying that is right for you as much as I am saying there is nothing wrong with having liquidity if that is your nature and especially if you are the type to spot a bargain and profit by it. Fire sale opportunities seem to had 1 to 3 time sin a life, but when they happen you can see a lot of smart money buying up long term assets. Witness Warren Buffett's behavior post 2008.

ivk5
Posts: 274
Joined: Thu Sep 22, 2016 9:05 am

Re: Portfolio help: Financially conservative couple looking for suggestions

Post by ivk5 » Sat Mar 03, 2018 3:59 am

JBTX wrote:
Fri Mar 02, 2018 10:29 pm
Ibonds aren't a bad idea. You can only do $20k per year
Plus 5k via tax refund, 25k total per couple

mortfree
Posts: 979
Joined: Mon Sep 12, 2016 7:06 pm

Re: Portfolio help: Financially conservative couple looking for suggestions

Post by mortfree » Sat Mar 03, 2018 4:11 am

Only one other person mentioned the mortgage.

Have you and your wife thought through your feelings around the mortgage and what it might feel like to accelerate for early payoff? Given your self described conservative nature a mortgage payoff plan combined with investing (balanced approach to accomplish two goals simultaneously) may be something that will help ease your concerns with investing large sums of money.

Filife20Forty
Posts: 17
Joined: Tue Feb 20, 2018 7:44 am

Re: Portfolio help: Financially conservative couple looking for suggestions

Post by Filife20Forty » Sat Mar 03, 2018 8:28 am

JBTX wrote:
Fri Mar 02, 2018 10:29 pm
Filife20Forty wrote:
Fri Mar 02, 2018 10:11 am
Tax filing status: MFJ, early 30's, kids in the next few years
Debt: 30 years remaining on mortgage, $424k, 3.75%
Tax Rate: 33-35% Federal, 5% State
Desired Asset allocation: 60% / 40%
Desired International allocation: 20% of stocks
Summary:
• Emergency funds (cash) - $75k
• Other savings (cash) - $475k
• 401(k) - $365k
• H.S.A.’s - $20k
• Combined base is about $250k and last year combined base + bonus was approximately ~$400k. We hope to continue at this level for the next couple years and will re-assess when we have kids.
• ~$350k across several 401(k)/ IRA/ retirement accounts. We each contribute $18k per year plus very healthy company 401k matches. $30k of Roth space. FY18 goal to consolidate some of our retirement accounts into lower-ER, joint Vanguard account.

Summary of issue: We are both financially conservative by nature (driving older, paid-off cars, etc.), but recognize that the conservative cash accumulating approach has likely cost us a significant amount of potential returns in the past couple of years had we invested more of it for the long term and we have no current knowledge as to why we need this amount of cash on-hand. We struggle with the concept that we could lose a significant amount in a correction, but realize investing more of our cash will help us to retire sooner (hopefully sometime in our 50's, hence the name) and probably more comfortably. Coming to a 60/40 AA was difficult for us. For now, our thought is that we want to keep approximately $200k in somewhat liquid investments (for potential future real estate investments, etc.). The remaining $250k we would invest over a period of time.

Question 1: Suggestions for a plan to draw down our excess cash over the next couple of years. We are trying to develop (i) a game plan how frequently and how much $ we contribute to brokerage account and (ii) on how to maximize returns on the cash to be invested down the road (e.g. short-term CD’s, MM accounts. Having read a lot of posts on here, some advocate for lump sum, but don’t think we can stomach that from a risk standpoint.
In theory, on average it is best to lump sum invest. I am not sure if there is research on lump sum investing vs dollar cost averaging when the market is at historically high valuations. So I would say come up with a plan that you are comfortable with, as long as you understand spreading it out may not reduce your risk, and it may very well decrease your future returns.

Normally I wouldn't advocate paying off or accelerating mortgage payments at your age, but if you are sitting on a half million in cash earning next to nothing, paying it down faster may make sense.

Question 2: Are there other things that we should be considering? We were recommended by F.A. to hold off on 529 contributions until we have kids. Do you agree?
I personally wouldn't do a 529 without kids.
We’ve played around with the idea of purchasing some 30 year I-bonds/TIPS with our current excess cash flow to create a bit of an “annuity” in retirement given we don’t have access to pensions. Has anyone undertaken a similar strategy or suggestions / criticisms to this approach? Would you consider these as part of overall AA, or should we think of this as a separate investment to create retirement cash flows and have multiple legs of the stool? Is there anything else we should consider?
Ibonds aren't a bad idea. You can only do $20k per year, but they are likely better than cash, and tax is deferred until you withdraw them. TIPS typically aren't recommended in taxable accounts. You will have to pay tax on the annual interest, and you are at a high tax rate. Again, paying down mortgage may make more sense than investing in taxable bonds.

These would be part of your asset allocation.

When you say part of asset allocation, you would consider them in the 40% target bond allocation, not as a separate stream of investments intended to act similar to an annuity?
Question 3: What investment AA do you recommend to best utilize the tax-deferred 401(k), Roth ($30k) H.S.A. ($20k) and brokerage space that we have?

I've learned so much about retirement and investing from this site, and thank you in advance for taking the time to read this post.
Generally you look at your asset allocation across all of your accounts combined. If you are going for 60/40, that is fine. It is pretty conservative for your age, but perhaps that is appropriate for you.
Responding to your note on Question 3. I was asking more from a tax perspective, which assets (e.g. small cap, large caps) would you put in the Roth and HSA? I would think you'd want the upside of equities in the accounts in which I'll never have to pay tax on, but not sure if one would want the potential of tax breaks in the taxable brokerage account?

Filife20Forty
Posts: 17
Joined: Tue Feb 20, 2018 7:44 am

Re: Portfolio help: Financially conservative couple looking for suggestions

Post by Filife20Forty » Sat Mar 03, 2018 8:40 am

MrPotatoHead wrote:
Fri Mar 02, 2018 11:10 pm
A point to consider. Because of my self employment and some advice I got from some wealthy folks I always carried a lot of cash. A couple of times in my life I was able to purchase a lot of assets at fire sale prices. 2008 was an example. Not only were equities on sale but I bought up a lot of homes and heavy equipment at bargain prices. In the 2000 crash I acquired a couple of nice vehicles I still have as well as more heavy equipment. My point is, I played to my conservative nature and was able to profit by it. I am not saying that is right for you as much as I am saying there is nothing wrong with having liquidity if that is your nature and especially if you are the type to spot a bargain and profit by it. Fire sale opportunities seem to had 1 to 3 time sin a life, but when they happen you can see a lot of smart money buying up long term assets. Witness Warren Buffett's behavior post 2008.
Thanks for the input and kudos for taking risks in 2008! I think we sort of align ourselves to this mindset a bit. We're not looking to hold cash for the next 20-30 years until retirement, but we like having liquidity and being opportunistic investing in any type of asset (although realizing that this comment is somewhat un-BH). It's not that we don't want to invest in the market, we've put quite a bit a way each year through 401(k) and company matches, it's us realizing that we probably went a bit overboard in our cash accumulation, and need to (i) contribute a bit more with excess cash flow we have today to brokerage account, and (ii) look to be opportunistic in order to create additional legs of the stool for retirement (in our case, likely additional R.E. investments). Thanks again for sharing your experience.

dbr
Posts: 27065
Joined: Sun Mar 04, 2007 9:50 am

Re: Portfolio help: Financially conservative couple looking for suggestions

Post by dbr » Sat Mar 03, 2018 9:02 am

Filife20Forty wrote:
Fri Mar 02, 2018 9:58 pm
dbr wrote:
Fri Mar 02, 2018 6:47 pm
Filife20Forty wrote:
Fri Mar 02, 2018 10:11 am


Question 1: Suggestions for a plan to draw down our excess cash over the next couple of years. We are trying to develop (i) a game plan how frequently and how much $ we contribute to brokerage account and (ii) on how to maximize returns on the cash to be invested down the road (e.g. short-term CD’s, MM accounts. Having read a lot of posts on here, some advocate for lump sum, but don’t think we can stomach that from a risk standpoint.

That means your selection of an asset allocation is wrong or you don't understand risk.

I would suggest some introspection into exactly what it is you can't stomach. The usual complaint is that one one would regret investing only to experience a downturn that would have been avoided if one had not moved so quickly. Of course that is irrational because the same downturn can occur immediately after one has reached full investment after delaying. A downturn can occur later, but we don't turn around and take all the money out and slowly put it in again to avoid it. The whole idea is chasing a chimera, the chimera being that somehow the slow placement of money means that you are not taking any risk in investing -- presumably because at least that risk will be avoided this month. Otherwise there is no plan except to follow some arbitrary schedule that by some inexplicable process you can look in the eye. Take six months, take a year, take two years and see if that feels better. It might.

As far as the cash, there is no practical way to maximize the return in any really helpful way. To maximize the return the procedure is to invest the money. If you really can't do that then maybe a good idea is to go ahead and put it all in whatever bonds you were going to use and transfer over on some schedule. If you are worried that even bonds fluctuate in value, then investing is not for you in the first place.
Thank you for taking the time to reply. I think it's hard to see the lump sum approach (of course it's an amazing feeling if the market is up and it's gut wrenching if way down). Understood on the short-term lack of return. From your perspective, if we were going to invest the money over 3-4 years, would you put any of the money to be deployed in years 2 onwards in bonds tomorrow?
If I had a sum that was going to go into long term investing and was hesitant to go directly to the eventual target allocation to stocks and bonds, I would start with putting everything in the bonds you are going to have and then make a plan to reallocate to stocks to eventually reach your target. An additional step of phasing from cash to bonds starts to become a little over the top.

JW-Retired
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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by JW-Retired » Sat Mar 03, 2018 9:13 am

Filife20Forty wrote:
Fri Mar 02, 2018 10:11 pm
JW-Retired wrote:
Fri Mar 02, 2018 9:17 pm
If you could tell us exactly what kind of accounts the $350k is spread over that would help me.
thanks,
JW
Thanks for your response. The $365k and $350k are one and the same (I wrote this post and refined over the last 2 months before posting and updated one place but not the other).

Current assets are the $365k of retirement savings, $550k of cash (including the emergency fund of $75k).

The $335k is in pre-tax contributions to employer 401(k) accounts, held with a few employer-sponsored plans. I have ~$30k of after-tax account that I could reallocate to a certain investment-type (e.g. small cap, Int'l, etc.). Currently, it's a mix of equity funds and target date funds. Early in my career, I contributed to an after-tax account, which is how I have these amounts.

Let me know if there's anything else I missed in your questions.
Filife20Forty,
Are all of your "employer-sponsored plan" funds still in the 401k accounts, or did you roll some of them to IRAs? Do either of you have any IRAs at all? That includes a traditional IRA, or rollover IRA, or SEP IRA, & Simple IRA's, i.e. anything called an IRA except a Roth IRA or an inherited IRA.

I ask because if you are going to be in a high tax bracket going forward, putting money in a Roth IRA would be the most highly valuable savings option for you. You can't do this directly because of your high AGI, but you can do it very easily with the "backdoor Roth" method. However, for this to work right it's required that you have no pre-tax savings in any tax-deferred IRA accounts. Having money in 401k accounts doesn't interfere. If 401k's are all you have you could be putting 2x$5500 into your Roths every year, with all earnings never to be taxed. That's much better than putting it in a taxable account where the earnings are taxed yearly and when you realize gains.

See our wiki on the "backdoor" procedure. https://www.bogleheads.org/wiki/Backdoor_Roth_IRA

Before you do anything make sure you understand how it works, and do some practice filling out the "Nondeductible IRAs" IRS 8606 tax form that's needed. People often do get confused by the form, but once you've got it it's trivial. We can refer you to links with filled out form examples.
JW
Retired at Last

Filife20Forty
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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by Filife20Forty » Sat Mar 03, 2018 9:16 am

mortfree wrote:
Sat Mar 03, 2018 4:11 am
Only one other person mentioned the mortgage.

Have you and your wife thought through your feelings around the mortgage and what it might feel like to accelerate for early payoff? Given your self described conservative nature a mortgage payoff plan combined with investing (balanced approach to accomplish two goals simultaneously) may be something that will help ease your concerns with investing large sums of money.
Mortfree - thanks for your reply. We have discussed making additional monthly payments. Before we purchased our house last fall, we were in a condo and were making excess payments on the mortgage. We do like the idea of paying it off faster than 30 years, but we're also trying to be prudent of the after-tax impact of a very low mortgage rate and currently a high tax bracket, as well.

Filife20Forty
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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by Filife20Forty » Sat Mar 03, 2018 9:35 am

JW-Retired wrote:
Sat Mar 03, 2018 9:13 am
Filife20Forty wrote:
Fri Mar 02, 2018 10:11 pm
JW-Retired wrote:
Fri Mar 02, 2018 9:17 pm
If you could tell us exactly what kind of accounts the $350k is spread over that would help me.
thanks,
JW
Thanks for your response. The $365k and $350k are one and the same (I wrote this post and refined over the last 2 months before posting and updated one place but not the other).

Current assets are the $365k of retirement savings, $550k of cash (including the emergency fund of $75k).

The $335k is in pre-tax contributions to employer 401(k) accounts, held with a few employer-sponsored plans. I have ~$30k of after-tax account that I could reallocate to a certain investment-type (e.g. small cap, Int'l, etc.). Currently, it's a mix of equity funds and target date funds. Early in my career, I contributed to an after-tax account, which is how I have these amounts.

Let me know if there's anything else I missed in your questions.
Filife20Forty,
Are all of your "employer-sponsored plan" funds still in the 401k accounts, or did you roll some of them to IRAs? Do either of you have any IRAs at all? That includes a traditional IRA, or rollover IRA, or SEP IRA, & Simple IRA's, i.e. anything called an IRA except a Roth IRA or an inherited IRA.

I ask because if you are going to be in a high tax bracket going forward, putting money in a Roth IRA would be the most highly valuable savings option for you. You can't do this directly because of your high AGI, but you can do it very easily with the "backdoor Roth" method. However, for this to work right it's required that you have no pre-tax savings in any tax-deferred IRA accounts. Having money in 401k accounts doesn't interfere. If 401k's are all you have you could be putting 2x$5500 into your Roths every year, with all earnings never to be taxed. That's much better than putting it in a taxable account where the earnings are taxed yearly and when you realize gains.

I didn't think that this was something available to us due to the income threshold. Thanks for pointing it out! We do have a small amount of pre-tax savings in a tax deferred IRA - about $8k that was a rollover of a prior employer plan. Is there a way that we could pay the penalties on withdrawing this in order to have access to the Roth backdoor? I estimate the cost basis is ~6k, so the gains aren't that significant.
Just to confirm, do contributions to a brokerage account impact this calculation?

Is it possible for us to do this for each of us @ 2x$5,500 for FY17 contribution and then a second contribution for FY18 purposes? Thanks so much!


See our wiki on the "backdoor" procedure. https://www.bogleheads.org/wiki/Backdoor_Roth_IRA

Before you do anything make sure you understand how it works, and do some practice filling out the "Nondeductible IRAs" IRS 8606 tax form that's needed. People often do get confused by the form, but once you've got it it's trivial. We can refer you to links with filled out form examples.
JW

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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by Lafder » Sat Mar 03, 2018 9:46 am

Have you considered paying off your mortgage? That is a guaranteed return of the interest rate. Then you can trickle the equivalent of the mortgage payments into the market each month. Paying yourself by paying off your own debt is a conservative move in my mind. It decreases your monthly expenses and gives you options. Yes it ties up a chunk of your assets in one home. Have good insurance :) It will relieve the anxiety you are feeling about how to invest this $ in the market.
lafder

gotester2000
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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by gotester2000 » Sat Mar 03, 2018 9:53 am

Filife20Forty wrote:
Sat Mar 03, 2018 9:16 am
mortfree wrote:
Sat Mar 03, 2018 4:11 am
Only one other person mentioned the mortgage.

Have you and your wife thought through your feelings around the mortgage and what it might feel like to accelerate for early payoff? Given your self described conservative nature a mortgage payoff plan combined with investing (balanced approach to accomplish two goals simultaneously) may be something that will help ease your concerns with investing large sums of money.
Mortfree - thanks for your reply. We have discussed making additional monthly payments. Before we purchased our house last fall, we were in a condo and were making excess payments on the mortgage. We do like the idea of paying it off faster than 30 years, but we're also trying to be prudent of the after-tax impact of a very low mortgage rate and currently a high tax bracket, as well.
If you are conservative then payoff the mortgage instead of 550k cash. You can DCA into the market with your salary. Why carry mortgage with so much in cash?

RRAAYY3
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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by RRAAYY3 » Sat Mar 03, 2018 10:02 am

Pay the mortgage off and see it as a guaranteed return

Absolutely no reason to carry that debt with so much cash and hesitance to take on riskier investments

dbr
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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by dbr » Sat Mar 03, 2018 10:13 am

RRAAYY3 wrote:
Sat Mar 03, 2018 10:02 am
Pay the mortgage off and see it as a guaranteed return

Absolutely no reason to carry that debt with so much cash and hesitance to take on riskier investments
I'm not sure about that. The plan as I understand from the OP is recognizing that they are overly conservative and they have arrived at an intention for a 60/40 portfolio. If it were a question of just sitting in cash forever paying off the mortgage would be indicated for sure. But now that idea is not so obvious. That doesn't mean one might not pay off the mortgage.

jehovasfitness
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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by jehovasfitness » Sat Mar 03, 2018 10:25 am

RRAAYY3 wrote:
Sat Mar 03, 2018 10:02 am
Pay the mortgage off and see it as a guaranteed return

Absolutely no reason to carry that debt with so much cash and

hesitance to take on riskier investments
Agreed

RRAAYY3
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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by RRAAYY3 » Sat Mar 03, 2018 10:38 am

dbr wrote:
Sat Mar 03, 2018 10:13 am
RRAAYY3 wrote:
Sat Mar 03, 2018 10:02 am
Pay the mortgage off and see it as a guaranteed return

Absolutely no reason to carry that debt with so much cash and hesitance to take on riskier investments
I'm not sure about that. The plan as I understand from the OP is recognizing that they are overly conservative and they have arrived at an intention for a 60/40 portfolio. If it were a question of just sitting in cash forever paying off the mortgage would be indicated for sure. But now that idea is not so obvious. That doesn't mean one might not pay off the mortgage.
Pay mortgage in full, invest the 50K cash remainder

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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by JW-Retired » Sat Mar 03, 2018 11:31 am

Filife20Forty wrote:
Sat Mar 03, 2018 9:35 am
Is it possible for us to do this for each of us @ 2x$5,500 for FY17 contribution and then a second contribution for FY18 purposes? Thanks so much!
Yes it is possible, but you would each need to either (1) get rid of your current $8k pre-tax IRA balance first by rolling it into one of your 401k accounts, or (2) just convert it along with the $11k you each add for FY17&18. See if your current 401k will take it. They might be more likely to than some of the others.

If it looks like it might not be easy I would probably just Roth convert it along with your new non-deductible contributions and pay tax on the $8k. You only have until mid-April to make a FY17 contribution, so you don't have a lot of time to find a 401k that will take the pre-tax IRA balance to get the $8k "hidden".
JW
ps: Money in taxable mutual funds or other assets in a brokerage account don't come into it..... unless they are in the IRA account types I mentioned.
Retired at Last

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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by JBTX » Sat Mar 03, 2018 1:04 pm

Filife20Forty wrote:
Sat Mar 03, 2018 8:28 am
JBTX wrote:
Fri Mar 02, 2018 10:29 pm
Filife20Forty wrote:
Fri Mar 02, 2018 10:11 am
Tax filing status: MFJ, early 30's, kids in the next few years
Debt: 30 years remaining on mortgage, $424k, 3.75%
Tax Rate: 33-35% Federal, 5% State
Desired Asset allocation: 60% / 40%
Desired International allocation: 20% of stocks
Summary:
• Emergency funds (cash) - $75k
• Other savings (cash) - $475k
• 401(k) - $365k
• H.S.A.’s - $20k
• Combined base is about $250k and last year combined base + bonus was approximately ~$400k. We hope to continue at this level for the next couple years and will re-assess when we have kids.
• ~$350k across several 401(k)/ IRA/ retirement accounts. We each contribute $18k per year plus very healthy company 401k matches. $30k of Roth space. FY18 goal to consolidate some of our retirement accounts into lower-ER, joint Vanguard account.

Summary of issue: We are both financially conservative by nature (driving older, paid-off cars, etc.), but recognize that the conservative cash accumulating approach has likely cost us a significant amount of potential returns in the past couple of years had we invested more of it for the long term and we have no current knowledge as to why we need this amount of cash on-hand. We struggle with the concept that we could lose a significant amount in a correction, but realize investing more of our cash will help us to retire sooner (hopefully sometime in our 50's, hence the name) and probably more comfortably. Coming to a 60/40 AA was difficult for us. For now, our thought is that we want to keep approximately $200k in somewhat liquid investments (for potential future real estate investments, etc.). The remaining $250k we would invest over a period of time.

Question 1: Suggestions for a plan to draw down our excess cash over the next couple of years. We are trying to develop (i) a game plan how frequently and how much $ we contribute to brokerage account and (ii) on how to maximize returns on the cash to be invested down the road (e.g. short-term CD’s, MM accounts. Having read a lot of posts on here, some advocate for lump sum, but don’t think we can stomach that from a risk standpoint.
In theory, on average it is best to lump sum invest. I am not sure if there is research on lump sum investing vs dollar cost averaging when the market is at historically high valuations. So I would say come up with a plan that you are comfortable with, as long as you understand spreading it out may not reduce your risk, and it may very well decrease your future returns.

Normally I wouldn't advocate paying off or accelerating mortgage payments at your age, but if you are sitting on a half million in cash earning next to nothing, paying it down faster may make sense.

Question 2: Are there other things that we should be considering? We were recommended by F.A. to hold off on 529 contributions until we have kids. Do you agree?
I personally wouldn't do a 529 without kids.
We’ve played around with the idea of purchasing some 30 year I-bonds/TIPS with our current excess cash flow to create a bit of an “annuity” in retirement given we don’t have access to pensions. Has anyone undertaken a similar strategy or suggestions / criticisms to this approach? Would you consider these as part of overall AA, or should we think of this as a separate investment to create retirement cash flows and have multiple legs of the stool? Is there anything else we should consider?
Ibonds aren't a bad idea. You can only do $20k per year, but they are likely better than cash, and tax is deferred until you withdraw them. TIPS typically aren't recommended in taxable accounts. You will have to pay tax on the annual interest, and you are at a high tax rate. Again, paying down mortgage may make more sense than investing in taxable bonds.

These would be part of your asset allocation.

When you say part of asset allocation, you would consider them in the 40% target bond allocation, not as a separate stream of investments intended to act similar to an annuity?
Question 3: What investment AA do you recommend to best utilize the tax-deferred 401(k), Roth ($30k) H.S.A. ($20k) and brokerage space that we have?

I've learned so much about retirement and investing from this site, and thank you in advance for taking the time to read this post.
Generally you look at your asset allocation across all of your accounts combined. If you are going for 60/40, that is fine. It is pretty conservative for your age, but perhaps that is appropriate for you.
Responding to your note on Question 3. I was asking more from a tax perspective, which assets (e.g. small cap, large caps) would you put in the Roth and HSA? I would think you'd want the upside of equities in the accounts in which I'll never have to pay tax on, but not sure if one would want the potential of tax breaks in the taxable brokerage account?

As to your asset allocation question above, in terms of ibonds or TIPs, I would include them as part of your overall bond allocation. As to ibonds, you could also use them as part of your emergency fund. Whether you include your EF as part of your asset allocation there are no hard and fast rules there. In my case I have about 6-8 months of expenses in ibonds, which I include in my asset allocation as bonds, but they also serve as somewhat of a liquidity fund in addition to a few months worth of expenses in bank accounts. In contrast I have some TIPS funds in IRA accounts because they spit off annual interest.

As to what to put where, there are different opinions on this. Most here prefer to put taxable bonds, like bond funds or tips, in retirement accounts/HSAs because if they are in taxable accounts the interest is subject to regular tax rates which are higher than capital gains rates of stocks. Then tax efficient stock mutual funds go in the taxable account and they are held for a long time and maybe even used for tax loss harvesting.

The counter argument is the one you are making, put stocks in retirement accounts since they should grow more. If stocks return roughly twice as much as bonds this route may be beneficial. I would say if you hold your stocks diligently in taxable accounts, invest in low turnover index funds, keep them there until retirement and/or tax loss harvest stocks in taxable probably has the edge. I’ve generally done the opposite in that most (80%+) of our investments are in tax deferred and I just have ibonds and bank accounts in taxable.

In terms of bonds, ibonds are best in taxable, because their interest is tax deferred. TIPS are better in a tax deferred account like an IRA, because they spit off annual interest expense.

In terms of Roth vs HSA, what you put in each probably doesn’t much matter. I’d probably keep stocks more in Roth because you may choose to liquidate your HSA down the road for medical expenses and you probably have a better selection of funds in the Roth.

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Duckie
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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by Duckie » Sat Mar 03, 2018 4:01 pm

Filife20Forty wrote:Need to check on my wife's account options. We will be moving her former employer plans to VG in the coming months via Rollover IRA.
If she creates a rollover IRA her ability to use the backdoor method will be greatly affected.
May I ask why the suggestion to put the bond funds in the pre-tax plans (assuming to defer any taxes on the dividends and take potential tax losses in the stock funds)?
You want to avoid putting bonds in taxable because they kick out ordinary dividends that are taxed at your marginal rate. When it comes to tax-sheltered, in general it's better to put assets with higher expected growth (stocks) in Roth accounts and assets with lower expected growth (bonds) in pre-tax accounts. That's because you've already paid the taxes in the Roth accounts so future growth is tax-free.
Roth is 50% VG (rollover IRA)
Do you mean you have a Roth IRA that was a rollover from a former employer's Roth 401k?
Company 401(k) is a lot of target date funds with higher than desirable ERs, and the following:
Of the options listed the best are:
  • VTIAX Vanguard Total International Stock 0.11% -- Complete international stocks
  • DODIX Dodge & Cox Income 0.43% -- US bonds
You didn't list any US stock funds. You must have some, possibly a decent 500 Index fund.
Is it possible for us to do this for each of us @ 2x$5,500 for FY17 contribution and then a second contribution for FY18 purposes?
You have until mid-April to contribute for 2017. You'll need to add two Form 8606s with your taxes to document the non-deductible contributions. As long as you get rid of that $8K TIRA by 12/31/18, either by rolling it to a current 401k or converting it and paying the taxes, you won't trigger the pro-rata rule when you convert the 2017 and 2018 contributions. You must have NO non-Roth IRAs at the end of the year or the backdoor method doesn't work right.
Last edited by Duckie on Thu Jun 14, 2018 5:57 pm, edited 1 time in total.

Filife20Forty
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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by Filife20Forty » Sat Mar 03, 2018 5:23 pm

Duckie wrote:
Sat Mar 03, 2018 4:01 pm
Filife20Forty wrote:Need to check on my wife's account options. We will be moving her former employer plans to VG in the coming months via Rollover IRA.
If she creates a rollover IRA her ability to use the backdoor method will be greatly affected.

How do people consolidate accounts with one or two providers to make it easy to keep track of? We just want to simplify the number of accounts we have.
May I ask why the suggestion to put the bond funds in the pre-tax plans (assuming to defer any taxes on the dividends and take potential tax losses in the stock funds)?
You want to avoid putting bonds in taxable because they kick out ordinary dividends that are taxed at your marginal rate. When it comes to tax-sheltered, in general it's better to put assets with higher expected growth (stocks) in Roth accounts and assets with lower expected growth (bonds) in pre-tax accounts. That's because you've already the paid the taxes in the Roth accounts so future growth is tax-free.
Roth is 50% VG (rollover IRA)
Do you mean you have a Roth IRA that was a rollover from a former employer's Roth 401k?

Yes, that's correct.
Company 401(k) is a lot of target date funds with higher than desirable ERs, and the following:
Of the options listed the best are:
  • VTIAX Vanguard Total International Stock 0.11% -- Complete international stocks
  • DODIX Dodge & Cox Income 0.43% -- US bonds
You didn't list any US stock funds. You must have some, possibly a decent 500 Index fund.

(VFIAX) (Vanguard 500 Index Fund (Admiral Shares)). Sorry about that.
Is it possible for us to do this for each of us @ 2x$5,500 for FY17 contribution and then a second contribution for FY18 purposes?
You have until mid-April to contribute for 2017. You'll need to add two Form 8606s with your taxes to document the non-deductible contributions. As long as you get rid of that $8K TIRA by 12/31/18, either by rolling it to a current 401k or converting it and paying the taxes, you won't trigger the pro-rata rule when you convert the 2017 and 2018 contributions. You must have NO non-Roth IRAs at the end of the year or the backdoor method doesn't work right.

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Duckie
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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by Duckie » Sat Mar 03, 2018 7:26 pm

Filife20Forty wrote:How do people consolidate accounts with one or two providers to make it easy to keep track of? We just want to simplify the number of accounts we have.
You can consolidate, but if you have rollover IRAs you won't be able to use the backdoor method effectively. You'll have to choose what is more important to you: consolidation for simplicity, lowest expense ratios, being able to use the backdoor method to get more into Roth IRAs, or something else.
You didn't list any US stock funds. You must have some, possibly a decent 500 Index fund.
(VFIAX) (Vanguard 500 Index Fund (Admiral Shares)). Sorry about that.
VFIAX, VTIAX, and DODIX are a good combination. Any other US stock funds in your current 401k like Total US Stock or Extended Market? What are the options in her current employer plan?

Filife20Forty
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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by Filife20Forty » Mon Mar 05, 2018 8:33 am

Need to check on my wife's current options.. she recently switched employers and I haven't had a chance to review the options in her plan. Appreciate all of the help thus far!

JW-Retired
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Re: Portfolio help: Financially conservative couple looking for suggestions

Post by JW-Retired » Mon Mar 05, 2018 3:08 pm

Filife20Forty wrote:
Fri Mar 02, 2018 6:30 pm
Company 401(k) is a lot of target date funds with higher than desirable ERs, and the following:

(NEFRX) (Loomis Sayles Core Plus Bond Fund (Class A)) [0.73% ER]
(MHYIX) (MainStay High Yield Corporate Bond Fund (Class I)) [0.70%]
(PRRIX) (PIMCO Real Return Fund (Institutional Class)) [0.64%]
(DODIX) (Dodge & Cox Income Fund) [0.43%]
(IARIX) (Invesco Real Estate Fund (Class R5)) [0.89%]
(PSCZX) (Prudential Jennison Small Company Fund (Class Z)) [0.81%]
(TIDDX) (T. Rowe Price International Discovery Fund (Class I)) [1.08%]
(ODVYX) (Oppenheimer Developing Markets Fund (Class Y)) [1.07%]
(VTIAX) (Vanguard Total International Stock Index Fund (Admiral Shares)) [0.11%]

I think from a structuring standpoint, and happy to hear your thoughts, I should utilize as much of the total stock exposure in the VTIAX in our overall AA, as possible to minimize ER.
Filife20Forty,
You might be right about the VTIAX choice but..........these ERs look fishy for those in a 401k. I looked up a few and they were all exactly what a Google search turns up for buying the retail fund, so I suspect that's where you got them.

In 401k accounts ERs usually/always are different because of extra costs for admin, your company size, and the varying knowledge of the company people choosing the administrator. If your company folks are fairly clueless the ER's can be far higher than the retail numbers.

I think you need to you look in the 401k literature like the Summary Plan Description for the actual ERs.
JW
Retired at Last

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