Edited 4/23 Please help with overall investment plan for retirement

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Sagefemme
Posts: 36
Joined: Mon Mar 12, 2018 9:31 pm

Edited 4/23 Please help with overall investment plan for retirement

Post by Sagefemme » Mon Apr 16, 2018 2:51 am

I've been posting on random subjects but finally got to putting this "big picture" together this evening. My husband and I have not looked at our retirement accounts together, ever, so there is some shifting around we should likely do to get optimal allocation across all accounts.

The taxable account (Schwab brokerage) I inherited from my mom in 2015. It was managed for her by FAs who use DFA funds. I fired them recently with the idea that the 1% annual fee could be put to better use. But now I am left with the difficulty that DFA funds seem worth keeping, I think, but my understanding (from all of you on this forum) is I can't buy more or even rebalance among funds without the financial advisor, which concerns me. The FAs have me in a large array of funds. Any advice on whether or how to change this is welcome. It seems overly complex to me.

Emergency funds: About $100,000 in cash accounts (checking accounts and savings accounts). More than enough for 6 months.
Debt: None, we pay credit cards off at the end of every billing cycle.
Own one home, mortgage is paid off, supposed market value about $570,000. We plan to continue living in it.
We own one car, paid cash for it.
One kid (age 22) in college, going to state university and tuition/expenses are do-able for us. Other child (age 24) did not go to college, she is working full-time but my guess is going to want to go to college and we would plan to help her with tuition/expenses.
Tax Filing Status: Married filing jointly
Tax Rate: 28% Federal, 9% State
State of Residence: Oregon
Age: 57 (both of us)
Desired Asset allocation: 60% stocks / 40% bonds--this is how I think we should allocate, currently we have more than 80% in stocks.
Desired International allocation: I am not sure about this.

Current retirement assets: total cash and retirement accounts in the low 7 figures. No pensions. Social security estimated for him $2400 monthly and for her $2000. Remomnyc asked whether husband has TIAA traditional available---I'm not sure will try to find out.

Taxable: brokerage account at Charles Schwab
CASH AND MONEY MARKET 1.17%
Name of Fund/Percent at Chuck/Expense Ratio/Percent of total Portfolio
DFUSX (DFA US LARGE CO PORTFOLIO) 12.54% 0.08% 2.90
DFLVX (DFA US LARGE CAP VALUE... ) 15.14% 0.27% 3.50
DFCEX (DFA EMERGING MKTS CORE EQUITY) 8.15% 0.53% 1.88
DFISX (DFA INTL SMALL CO PORTFOLIO) 9.02% 0.53% 2.08
DTMVX (DFA TAX MANAGED US TARGETED VALUE)5.42% 0.44% 1.25
DFIEX (DFA INTL CORE EQTY PORT... ) 5.67% 0.30% 1.31
TBGVX (TWEEDY BROWNE GLOBAL VALUE FUND)6.58% 1.38% 1.52
DFSCX (DFA US MICRO CAP PORT INSTL) 4.86% 0.52% 1.12
DTMIX (DFA TAX MANAGED INTL VALUE) 1.9% 0.53% 0.44
DIPSX (DFA INFLATION PROTECTED SECURITIES) 2.67% 0.12% 0.62
DFSMX (DFA SHORT TERM MUNI BOND...) 3.46% 0.22% 0.80
DFIHX (DFA ONE YEAR FIXED INCOME) 1.64% 0.17% 0.38
DFEQX (DFA SHORT TERM EXTENDED QUALITY) 4.18% 0.22% 0.96
DFGBX (DFA FIVE YEAR GLBL FIXED INCOME) 5.27% 0.27% 1.22
LSBDX (LOOMIS SAYLES BOND FUND) 5.36% 0.66% 1.24
DFGEX (DFA GLOBAL REAL ESTATE SECURITIES) 6.97% 0.24% 1.61

His 401K
TIAA-CREF Bond Index Fund - Institutional Class 20% 0.12% 5.90
TIAA-CREF International Equity Index Fund - Instl Class 20% 0.06% 5.90
TIAA-CREF S&P 500 Index Fund - Institutional Class 60% 0.06% 17.80

His 403B
TIAA-CREF International Equity Index Fund - Instl Class 20% 0.06% 4.06
TIAA-CREF S&P 500 Index Fund - Institutional Class 60% 0.06% 12.16
TIAA-CREF Bond Index Fund - Institutional Class 20% 0.12% 4.06


Her 401K at Fidelity
FUSVX (Fidelity 500 Index Fund Premium Class) 100% ER 0.035% 17.54


Her Traditional IRA at Schwab
SWAGX (SCHWAB US AGGREGATE BOND INDEX) 10.32% 0.04% 0.98
SWISX (SCHWAB INTL INDEX FUND) 25.66% 0.06% 2.43
SWTSX (SCHWAB TOTAL STOCK MKT INDEX) 64.01% 0.03% 6.05

The last column for all these funds adds up to CLOSE TO 100%. There is a little error somewhere that I got tired of looking for.

Contributions

New annual Contributions
his 401k/403b $24,000, employer match 12%
her 401k $24,000 employer match 6%, profit sharing about the same (6% average over the years)


Funds available in his 401(k)/403b
CREF Equity Index R3 (Variable Annuities) +0.23%
CREF Global Equities R3 (Variable Annuities) +0.33%
CREF Growth R3 (Variable Annuities) +0.27%
CREF Stock R3 (Variable Annuities) +0.32%
TIAA-CREF Growth & Income Fund +0.41%
TIAA-CREF International Equity Fund + 0.49%
TIAA-CREF International Equity Index Fund +0.06%
TIAA-CREF Large-Cap Growth Fund +0.43%
TIAA-CREF Large-Cap Value Fund +0.4%
TIAA-CREF Mid-Cap Growth Fund +0.47%
TIAA-CREF Mid-Cap Value Fund +0.41
TIAA-CREF Real Estate Securities Fund +0.51%
TIAA-CREF S&P 500 Index Fund +0.06%
TIAA-CREF Small-Cap Blend Index Fund +0.06%
TIAA-CREF Small-Cap Equity Fund +0.41%
TIAA-CREF Social Choice Equity Fund +0.18%
CREF Bond Market R3 (Variable Annuities) +0.29%
CREF Inflation-Linked Bond R3 (Variable Annuities) +0.24%
TIAA-CREF Bond Index Fund - Institutional Class +0.12%
TIAA-CREF Inflation-Linked Bond Fund - Institutional Class +0.26
TIAA-CREF Short-Term Bond Fund - Institutional Class +0.27%
CREF Money Market R3 (Variable Annuities) +0.23%
TIAA-CREF Money Market Fund - Institutional Class +0.14%
CREF Social Choice R3 (Variable Annuities) +0.27%
TIAA Real Estate (Variable Annuities) +0.85%
I left out all the "Lifecycle" funds based on year of retirement, too tedious to copy and paste them all

Funds available in her 401k Up until very recently the only index fund available to me was the Fidelity 500 fund which I have all my balance in. Just a week or two ago they added the Fidelity Small Cap Index FSSVX.

AF FUNDMNTL INV R6 (RFNGX) Large Cap 0.3%
ALZGI NFJ DIV VL ADM (ANDAX) Large Cap 0.99%
AMG YACKTMAN I (YACKX) Large Cap 0.76%
FID 500 INDEX PR (FUSVX) Large Cap 0.035%
FID CAPITAL APPREC (FDCAX) Large Cap 0.51%
TRP BLUE CHIP GRTH (TRBCX) Large Cap 0.72%
JPM MID CAP GRTH I (HLGEX) Mid-Cap 1%
VRTS C MDCP VAL EQ I (SMVTX) Mid-Cap 1.1%
FID SM CAP INDEX PR (FSSVX) Small Cap 0.05%
VOYA SMALL COMPANY I (AESGX) Small Cap 1.18%
AF CAP WORLD G&I R6 (RWIGX) International 0.45%
AF NEW WORLD R6 (RNWGX) International 0.64%
DODGE & COX INTL STK (DODFX)International 0.64%
OPP DEVELOPING MKT Y (ODVYX)International 1.07%
TRP MEDIA & TELECOMM (PRMTX) Specialty 0.79%
VANG HEALTHCARE INV (VGHCX) Specialty 0.37%
VRTS DP REAL EST A (PHRAX) Specialty 1.41%
DODGE & COX BALANCED (DODBX) Blended 0.53%
JPM SMRTRET 2020 R5 (JTTIX) 0.57%
JPM SMRTRET 2025 R5 (JNSIX) 0.57%
JPM SMRTRET 2030 R5 (JSMIX) 0.6%
JPM SMRTRET 2035 R5 (SRJIX) 0.6%
JPM SMRTRET 2040 R5 (SMTIX 0.61%
JPM SMRTRET 2045 R5 (JSAIX) 0.61%
PIF DVRSD REAL AST I (PDRDX) 0.93%
AMCENT INFL-ADJBD IV (ACITX) 0.47%
BLKRK HIGH YLD BD K (BRHYX) 0.54%
BLKRK STR INC OPP IS (BSIIX) 0.76%
DOUBLELINE CORE FI I (DBLFX) 0.49%
TMPL GLOBAL BOND A (TPINX) 0.99%
PIF GLB MLT-STRAT IS (PSMIX) 2.25%
FID GOVT MMKT (SPAXX) 0.42%


Questions:
1. We have no Roth IRAs. I have a traditional IRA (from rolling over a previous employer's 401k). Should we find a way to get Roth IRAs? They would have to be backdoor, I think.

2. I would like to retire in the next year or two, but really afraid to do that. Not sure if we have enough. My husband will work forever, it seems, has no plans to retire until they push him out (university professor/assistant dean). Run FireCalc to figure it out? We are both quite healthy and have longevity in our families, so we are looking at many years post retirement (I hope!).

3. Should I try to get international fund exposure in my 401K (Fidelity) or get all our international exposure in my husband's 401K since he has an international index fund?

Key Points: Neither of us have paid much attention to the details of retirement savings and investing. Luckily we have contributed regularly and over many years, so I think we should do ok in retirement. However I am now interested in tweaking things as best we can to optimize returns. It's crazy to suddenly take an interest so late in the game (age 57), but better late than never, I guess.

EDITED 4/23/2018 New point: Do I have to tax loss harvest in the taxable (Schwab) account?? If so this might kill me, I only just barely understand that stuff. Although I can learn it.

Thank you for any and all suggestions and wise advice!
Last edited by Sagefemme on Mon Apr 23, 2018 9:01 pm, edited 4 times in total.

Chip
Posts: 2079
Joined: Wed Feb 21, 2007 4:57 am

Re: Please help with overall investment plan for retirement

Post by Chip » Mon Apr 16, 2018 6:48 am

Hi, and welcome!

It's difficult to give much advice because we can't tell what the relative sizes of those accounts are. It will take some work, but it would help immensely if you will edit your post (use the pencil icon) to show the percentage each fund represents of your total portfolio, rather than the percentage of each account. For example:

Taxable
Fund A - 10%
Fund B - 15%

403b
Fund C - 35%
Fund D - 40%

Total of all funds add up to 100%

1. Your husband can have the backdoor Roth without complications as he has no traditional IRA. It's worth doing if you would otherwise be contributing to your taxable account. Your own situation is problematic because of the pro rata rule and your traditional IRA. Wiki information here.

2. It's impossible to give advice here without knowing your spending, sources of other income in retirement (e.g. size of pensions, social security, etc.), and the size of your portfolio. But a very rough general rule would be that if you have a portfolio that is 25-33x your net portfolio draw you are in the ballpark for a safe retirement. Yes, Firecalc can help you figure it out.

3. Recommendations here for international allocations are all over the place, from 0% to ~50% of stocks (market weight). Vanguard has said something between 20% and 40% of stocks. Some here, including me, split the difference on that recommendation and aim at 30% of stocks. For a 60/40 portfolio that would put 18% of your portfolio in international stocks. Your husband's plan has the lowest cost international fund, so I would use it. But it lacks emerging markets and small cap. Depending on the size of your IRA you may be able to add them there. Otherwise you might consider buying a total international fund in the taxable account.

You're right that it's a complex task to figure out which funds to keep in your taxable account. I would suggest that you figure out your overall portfolio design first (e.g. the 60/40 you mentioned plus XX% international). Then decide which low cost funds in your 401ks/403b you will use and what you'll be missing (e.g. emerging markets). Then look at the tax efficiency, expense ratios and tax cost to sell (i.e. capital gains exposure). Since you inherited in 2015 you probably have significant gains on all of the stock funds and small losses on the bond funds. There's some DFA tax information here.

While I can't say anything with certainty, I suspect these funds will likely be on the chopping block for tax efficiency reasons:

DIPSX (DFA INFLATION PROTECTED SECURITIES) 2.67% 0.12%
DFIHX (DFA ONE YEAR FIXED INCOME) 1.64% 0.17%
DFGBX (DFA FIVE YEAR GLBL FIXED INCOME) 5.27% 0.27%
LSBDX (LOOMIS SAYLES BOND FUND) 5.36% 0.66%
DFGEX (DFA GLOBAL REAL ESTATE SECURITIES) 6.97% 0.24%

Sagefemme
Posts: 36
Joined: Mon Mar 12, 2018 9:31 pm

Re: Please help with overall investment plan for retirement

Post by Sagefemme » Mon Apr 16, 2018 9:15 pm

Thank you Chip! I appreciate your thoughts. To be honest I knew when I was writing this post that I needed to be refiguring percentages of funds across all accounts. But it was getting very late last night, and I couldn't figure out how to save the entire draft of the post (when I said "save" it said it would only save the subject and I was afraid of losing it) so I just posted it!

I will do the arithmetic in the next few days and hopefully bump the post back to the top and get more input.

ExitStageLeft
Posts: 499
Joined: Sat Jan 20, 2018 4:02 pm

Re: Please help with overall investment plan for retirement

Post by ExitStageLeft » Tue Apr 17, 2018 2:19 pm

Sagefemme,

My wife and I are in a similar situation, in that we've been busily contributing to retirement without paying much heed to where we are at. Now that I'm within a couple years of a full retirement I'm taking stock of our assets and expenses and wondering if the math is in our favor.

Your retirement accounts, savings, etc. are one half of the equation. The other is how much money you want or need to live the retirement lifestyle of your choosing. That means having a firm grip on your current and future living expenses. If you've already got that information available through Quicken or some other money management software then you're one step ahead. If not, you'll want to pull the information together and figure out exactly what you need each year. If it looks bleak at first, keep in mind that for many retired couples living expenses drop substantilly when neither spouse is in the workforce.

remomnyc
Posts: 511
Joined: Mon Jan 04, 2016 4:27 pm

Re: Please help with overall investment plan for retirement

Post by remomnyc » Tue Apr 17, 2018 2:30 pm

Yes, redo with percentages adding to 100%. Does he have TIAA traditional available in his 401k/403b?

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Watty
Posts: 13439
Joined: Wed Oct 10, 2007 3:55 pm

Re: Please help with overall investment plan for retirement

Post by Watty » Tue Apr 17, 2018 2:44 pm

In addition to your expenses it would be good to add information about any pensions or Social Security that you expect to get. Some state pensions are instead of Social Security so it would be good to mention if that is the case.

While you are figuring out what to do it would be a good idea to change all the mutual funds in the taxable account to not automatically reinvest the dividends and capital gains distributions. That way you would not be buying more a fund that don't want to keep for the long term and after a while any gains would be long term capital gains.

With that many funds in the taxable account you likely have some with a loss or minimal gain. I would focus on those first and likely sell them to start building a three fund portfolio.

https://www.bogleheads.org/wiki/Three-fund_portfolio

One fund does have a high expense ratio.

TBGVX (TWEEDY BROWNE GLOBAL VALUE FUND)6.58% 1.38%

So I would look at selling that but you would want to figure out if you will need to pay much in capital gains taxes to sell it.

The money in the retirement accounts can be moved around without any tax implications so when you decide what to do that should be easy.

If possible you should try to have your bonds in your retirement accounts for tax efficiency.

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

Sagefemme
Posts: 36
Joined: Mon Mar 12, 2018 9:31 pm

Re: Edited 4/23 Please help with overall investment plan for retirement

Post by Sagefemme » Mon Apr 23, 2018 3:44 pm

Do I need to bump this after editing to get it to the top of the heap?

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Peter Foley
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Joined: Fri Nov 23, 2007 10:34 am
Location: Lake Wobegon

Re: Edited 4/23 Please help with overall investment plan for retirement

Post by Peter Foley » Mon Apr 23, 2018 7:43 pm

Watty wrote:
With that many funds in the taxable account you likely have some with a loss or minimal gain. I would focus on those first and likely sell them to start building a three fund portfolio.

https://www.bogleheads.org/wiki/Three-fund_portfolio

One fund does have a high expense ratio.

TBGVX (TWEEDY BROWNE GLOBAL VALUE FUND)6.58% 1.38%

So I would look at selling that but you would want to figure out if you will need to pay much in capital gains taxes to sell it.
This is where I would start too. I don't think it is absolutely necessary to get to a 3 fund portfolio in taxable. I would certainly want to pare it down to 5 or 6.

Dottie57
Posts: 3677
Joined: Thu May 19, 2016 5:43 pm

Re: Edited 4/23 Please help with overall investment plan for retirement

Post by Dottie57 » Mon Apr 23, 2018 8:24 pm

60/40 to 30/70is appropriate Stock to bonds ratio.

To tell you the truth, the only thing I think is really necessay is to simplify taxable down t 5 or 6funds. Use the ones that are inex and low ER.

Good luck.

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