Portfolio Question - Maxed 401k/ROTH - Now What?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
XtremeSki2001
Posts: 1618
Joined: Fri Mar 09, 2007 2:28 pm
Location: Philadelphia, PA

Portfolio Question - Maxed 401k/ROTH - Now What?

Post by XtremeSki2001 » Wed May 09, 2018 3:34 pm

Questions (refer to completed portfolio template below)

1.  Our 401k/403b/Roth are in Vanguard Target 2055 (90% stock / 10% bonds) and Star Fund (65% stocks / 25% bonds / 12% reserves). Should we allocate things differently? They're aligned with our risk appetite and we generally try not to be too cute with investments.
2. We're on track to max 401k and Roth for the first time this year. Should we roll the 403b into an IRA for my wife (no earned income / left workforce) so we can begin contributing to it?
3. Once we've maxed my 401k/Roth and her IRA, what should we do next? We have 3 (going on 4) children so college savings is an option, but unlikely to make a decent dent given how many we've decided to have 8-) . Perhaps it's more wise to just put money in taxable accounts (e.g., once the RS/TSRUs vest)?
4. No idea if we're 'on track', but if we're maxing everything then we're probably in good shape … even if we started maxing a bit late. Are there other glaring issues with our portfolio?

Basics

Emergency funds:
6 months of living expenses

Debt:
Mortgage ($305k @ 3.625%, 25 years to go, $100k+ in equity)

Tax Filing Status:
Married

Dependents:
3 Children (going on 4)

Tax Rate:
Federal: 25%/15% (Marginal / Effective)
State: 3.07%
State of Residence: PA
Age: Mid-30's

Current Total Portfolio:
~$242k (~$342k if you count home equity, but I don't count it)

Current retirement assets

Taxable:
~$24k in restricted stocks and total shareholder return units on vesting schedule

His 401k at Fidelity:
~200k in Vanguard Target Retirement 2055 Fund (VFFVX)
Company Match: 100% of the first 3% and 50% of the next 3%

His Roth IRA at Vanguard:
~$1k in Vanguard Target Retirement 2055 Fund (VFFVX)

Her 403b at Vanguard:
~17k in Vanguard Star Fund (VGSTX)
Company match: No earned income / left workforce

Contributions

Planned Annual Contributions:
18,500 for his 401k and company match, which is 100% of the first 3% and 50% of the next 3%
$0 for her 403b (no earned income / no longer in workforce)
$5,500 for his Roth IRA
$0 her IRA/Roth IRA
$0 taxable (for retirement, not short term goals)

Available funds 

Funds available in his 401(k)
TARGET RETIREMENT FUNDS - Gross Expense Ratio is 0.05% for each
VANGUARD INCOME
VANGUARD TARGET 2015
VANGUARD TARGET 2020
VANGUARD TARGET 2025
VANGUARD TARGET 2030
VANGUARD TARGET 2035
VANGUARD TARGET 2040
VANGUARD TARGET 2045
VANGUARD TARGET 2050
VANGUARD TARGET 2055
VANGUARD TARGET 2060

CORE INVESTMENT OPTIONS
BP LARGE CAP VALUE (Gross Expense Ratio: 0.32%)
DODGE & COX INTL (Gross Expense Ratio: 0.64%)
INTL EQUITY INDEX (Gross Expense Ratio: 0.10%)
LARGE CAP GROWTH (Gross Expense Ratio: 0.43%)
MIDCAP EQUITY INDEX (Gross Expense Ratio: 0.03%)
NT S&P 500 INDEX (Gross Expense Ratio: 0.02%)
OPPHMR DEV MKTS (Gross Expense Ratio: 0.80%)
RUSSELL 2000 SC INDX (Gross Expense Ratio: 0.04%)
T ROWE SMALL CAP STK (Gross Expense Ratio: 0.67%)
DIVERSIFIED BOND (Gross Expense Ratio: 0.26%)
T ROWE STABLE VALUE (Gross Expense Ratio: 0.27%)

Funds available in her 403(b) - Could not bring myself to look up all the expenses ratios for these (sorry!)
VANGUARD FEDERAL MONEY MARKET FUND - VMFXX
VANGUARD TREASURY MONEY MARKET FUND - VUSXX
VANGUARD PRIME MONEY MARKET FUND - VMMXX
VANGUARD SHORT-TERM TREASURY FUND ADMIRA - VFIRX
VANGUARD SHORT-TERM INVESTMENT-GRADE FUN - VFSUX
VANGUARD GNMA FUND ADMIRAL SHARES - VFIJX
VANGUARD CORE BOND FUND ADMIRAL SHARES - VCOBX
VANGUARD TOTAL BOND MARKET INDEX FUND AD - VBTLX
VANGUARD INFLATION-PROTECTED SECURITIES - VAIPX
VANGUARD INTERMEDIATE-TERM INVESTMENT-GR - VFIDX
VANGUARD TOTAL INTERNATIONAL BOND INDEX - VTABX
VANGUARD HIGH-YIELD CORPORATE FUND ADMIR - VWEAX
VANGUARD LONG-TERM TREASURY FUND ADMIRAL - VUSUX
VANGUARD CONVERTIBLE SECURITIES FUND - VCVSX
VANGUARD LIFESTRATEGY INCOME FUND - VASIX
VANGUARD TARGET RETIREMENT INCOME FUND - VTINX
VANGUARD LIFESTRATEGY CONSERVATIVE GROWT - VSCGX
VANGUARD WELLESLEY INCOME FUND ADMIRAL S - VWIAX
VANGUARD TARGET RETIREMENT 2015 FUND - VTXVX
VANGUARD TARGET RETIREMENT 2020 FUND - VTWNX
VANGUARD TARGET RETIREMENT 2025 FUND - VTTVX
VANGUARD BALANCED INDEX FUND ADMIRAL SHA - VBIAX
VANGUARD LIFESTRATEGY MODERATE GROWTH FU - VSMGX
VANGUARD STAR FUND - VGSTX
VANGUARD WELLINGTON FUND ADMIRAL SHARES - VWENX
VANGUARD TARGET RETIREMENT 2030 FUND - VTHRX
VANGUARD TARGET RETIREMENT 2035 FUND - VTTHX
VANGUARD LIFESTRATEGY GROWTH FUND - VASGX
VANGUARD TARGET RETIREMENT 2040 FUND - VFORX
VANGUARD TARGET RETIREMENT 2045 FUND - VTIVX
VANGUARD TARGET RETIREMENT 2050 FUND - VFIFX
VANGUARD TARGET RETIREMENT 2055 FUND - VFFVX
VANGUARD TARGET RETIREMENT 2060 FUND - VTTSX
VANGUARD TARGET RETIREMENT 2065 FUND - VLXVX
VANGUARD CAPITAL VALUE FUND - VCVLX
VANGUARD EQUITY INCOME FUND ADMIRAL SHAR - VEIRX
VANGUARD U.S. VALUE FUND - VUVLX
VANGUARD VALUE INDEX FUND ADMIRAL SHARES - VVIAX
VANGUARD WINDSOR FUND ADMIRAL SHARES - VWNEX
VANGUARD WINDSOR II FUND ADMIRAL SHARES - VWNAX
VANGUARD 500 INDEX FUND ADMIRAL SHARES - VFIAX
VANGUARD 500 INDEX FUND INVESTOR SHARES - VFINX
VANGUARD DIVIDEND APPRECIATION INDEX FUN - VDADX
VANGUARD DIVIDEND GROWTH FUND - VDIGX
VANGUARD FTSE SOCIAL INDEX FUND INVESTOR - VFTSX
VANGUARD GROWTH AND INCOME FUND ADMIRAL - VGIAX
VANGUARD GROWTH AND INCOME FUND INVESTOR - VQNPX
VANGUARD TOTAL STOCK MARKET INDEX FUND A - VTSAX
VANGUARD CAPITAL OPPORTUNITY FUND ADMIRA - VHCAX
VANGUARD DIVERSIFIED EQUITY FUND - VDEQX
VANGUARD GROWTH INDEX FUND ADMIRAL SHARE - VIGAX
VANGUARD MORGAN GROWTH FUND ADMIRAL SHAR - VMRAX
VANGUARD PRIMECAP CORE FUND - VPCCX
VANGUARD PRIMECAP FUND ADMIRAL SHARES - VPMAX
VANGUARD U.S. GROWTH FUND ADMIRAL SHARES - VWUAX
VANGUARD MID-CAP VALUE INDEX FUND ADMIRA - VMVAX
VANGUARD SELECTED VALUE FUND - VASVX
VANGUARD EXTENDED MARKET INDEX FUND ADMI - VEXAX
VANGUARD MID-CAP INDEX FUND ADMIRAL SHAR - VIMAX
VANGUARD STRATEGIC EQUITY FUND - VSEQX
VANGUARD MID-CAP GROWTH FUND - VMGRX
VANGUARD MID-CAP GROWTH INDEX FUND ADMIR - VMGMX
VANGUARD SMALL-CAP VALUE INDEX FUND ADMI - VSIAX
VANGUARD EXPLORER VALUE FUND - VEVFX
VANGUARD SMALL-CAP INDEX FUND ADMIRAL SH - VSMAX
VANGUARD STRATEGIC SMALL-CAP EQUITY FUND - VSTCX
VANGUARD EXPLORER FUND ADMIRAL SHARES - VEXRX
VANGUARD SMALL-CAP GROWTH INDEX FUND ADM - VSGAX
VANGUARD GLOBAL EQUITY FUND - VHGEX
VANGUARD TOTAL WORLD STOCK INDEX FUND IN - VTWSX
VANGUARD INTERNATIONAL VALUE FUND - VTRIX
VANGUARD DEVELOPED MARKETS INDEX FUND AD - VTMGX
VANGUARD TOTAL INTERNATIONAL STOCK INDEX - VTIAX
VANGUARD INTERNATIONAL GROWTH FUND ADMIR - VWILX
VANGUARD INTERNATIONAL EXPLORER FUND - VINEX
VANGUARD PACIFIC STOCK INDEX FUND ADMIRA - VPADX
VANGUARD EUROPEAN STOCK INDEX FUND ADMIR - VEUSX
VANGUARD EMERGING MARKETS STOCK INDEX FU - VEMAX
VANGUARD REAL ESTATE INDEX - ADMIRAL - VGSLX
VANGUARD HEALTH CARE FUND ADMIRAL SHARES - VGHAX
VANGUARD ENERGY FUND ADMIRAL SHARES - VGELX
VANGUARD PRECIOUS METALS AND MINING FUND - VGPMX
A box of rain will ease the pain and love will see you through

PFInterest
Posts: 2684
Joined: Sun Jan 08, 2017 12:25 pm

Re: Portfolio Question - Maxed 401k/ROTH - Now What?

Post by PFInterest » Wed May 09, 2018 3:40 pm

Don't need star fund.
You can open a rIRA for your wife as your income is her income.
Otherwise taxable, save for car/vacation, spend some.

User avatar
badbreath
Posts: 918
Joined: Mon Jul 18, 2016 7:50 pm

Re: Portfolio Question - Maxed 401k/ROTH - Now What?

Post by badbreath » Wed May 09, 2018 3:52 pm

taxable account or a 529
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

fourkids
Posts: 145
Joined: Mon Mar 23, 2015 9:40 am

Re: Portfolio Question - Maxed 401k/ROTH - Now What?

Post by fourkids » Wed May 09, 2018 3:55 pm

529s for sure.
like a Roth, they grow tax-free if income is used for education
plus you get a state tax deduction
plus they can be transferred between kids if needed.

User avatar
XtremeSki2001
Posts: 1618
Joined: Fri Mar 09, 2007 2:28 pm
Location: Philadelphia, PA

Re: Portfolio Question - Maxed 401k/ROTH - Now What?

Post by XtremeSki2001 » Thu May 10, 2018 7:21 am

PFInterest wrote:
Wed May 09, 2018 3:40 pm
Don't need star fund.
You can open a rIRA for your wife as your income is her income.
Otherwise taxable, save for car/vacation, spend some.
Would you propose replacing the STAR fund with a Target 2055 like I have with my other investments?

Right now we spend $21k a year on vacations and other 'wants' (also some charitable donations) so we feel we have a healthy balance.
fourkids wrote:529s for sure.
like a Roth, they grow tax-free if income is used for education
plus you get a state tax deduction
plus they can be transferred between kids if needed.
Nice handle, might have to change mine to 4kids come next month :D Looks like the max contribution is $15k (me) / $15k (spouse). Did you open one per kid or just one for all 4? Since they can be transferred among children I guess it's safer to err on having one for each?

One other question, unrelated to the above. Say I convert my wife's 403b to an IRA ... she has no earned income so any contributions we make will have already been taxed. How do we avoid being taxed twice?
A box of rain will ease the pain and love will see you through

SRenaeP
Posts: 774
Joined: Tue Jan 19, 2010 9:05 pm

Re: Portfolio Question - Maxed 401k/ROTH - Now What?

Post by SRenaeP » Thu May 10, 2018 7:26 am

[quote=XtremeSki2001 post_id=3921160 time=1525954875 user_id=996]
[b]One other question, unrelated to the above. Say I convert my wife's 403b to an IRA ... she has no earned income so any contributions we make will have already been taxed. How do we avoid being taxed twice?[/b]
[/quote]

You can *rollover* her 403b to an IRA. A rollover is not a taxable event. The question is, why would you like to do so? Having traditional/pre-tax funds in an IRA will cause complications if you ever want to do a backdoor Roth IRA.

User avatar
XtremeSki2001
Posts: 1618
Joined: Fri Mar 09, 2007 2:28 pm
Location: Philadelphia, PA

Re: Portfolio Question - Maxed 401k/ROTH - Now What?

Post by XtremeSki2001 » Thu May 10, 2018 7:46 am

SRenaeP wrote:
Thu May 10, 2018 7:26 am
XtremeSki2001 wrote:
Thu May 10, 2018 7:21 am
One other question, unrelated to the above. Say I convert my wife's 403b to an IRA ... she has no earned income so any contributions we make will have already been taxed. How do we avoid being taxed twice?
You can *rollover* her 403b to an IRA. A rollover is not a taxable event. The question is, why would you like to do so? Having traditional/pre-tax funds in an IRA will cause complications if you ever want to do a backdoor Roth IRA.
Understood the rollover won't cause tax implications.

I did some more reading and I think I've misunderstood the spousal IRA guidance. It seems, whether I rollover her 403b to an IRA or not (doesn't matter since she can't add to it and she has lots of options), I can open a spousal Roth IRA, which would be after-tax anyway. For a minute there I thought I read spousal IRAs can only be traditional and not Roth.
A box of rain will ease the pain and love will see you through

retiringwhen
Posts: 617
Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: Portfolio Question - Maxed 401k/ROTH - Now What?

Post by retiringwhen » Thu May 10, 2018 8:09 am

XtremeSki2001 wrote:
Thu May 10, 2018 7:46 am
SRenaeP wrote:
Thu May 10, 2018 7:26 am
XtremeSki2001 wrote:
Thu May 10, 2018 7:21 am
One other question, unrelated to the above. Say I convert my wife's 403b to an IRA ... she has no earned income so any contributions we make will have already been taxed. How do we avoid being taxed twice?
You can *rollover* her 403b to an IRA. A rollover is not a taxable event. The question is, why would you like to do so? Having traditional/pre-tax funds in an IRA will cause complications if you ever want to do a backdoor Roth IRA.
Understood the rollover won't cause tax implications.

I did some more reading and I think I've misunderstood the spousal IRA guidance. It seems, whether I rollover her 403b to an IRA or not (doesn't matter since she can't add to it and she has lots of options), I can open a spousal Roth IRA, which would be after-tax anyway. For a minute there I thought I read spousal IRAs can only be traditional and not Roth.
Unless there are terrible fees associated with the 403(b) I would stay with it. She has great funds at low ER (Vanguard target date funds at a minimum)

I had rolled over a 401(k) to a Vanguard IRA a decade ago and just rolled it back into my current employer's 401(K) to make room for doing backdoor Roth's (something I should have done a long time ago). All told unless the plan has bad admin fees, i think there is no upside to rolling it over to an IRA. In the future if/when she goes back to work, you could consider options of simplification to roll all into one plan, but that is just a future decision.

User avatar
XtremeSki2001
Posts: 1618
Joined: Fri Mar 09, 2007 2:28 pm
Location: Philadelphia, PA

Re: Portfolio Question - Maxed 401k/ROTH - Now What?

Post by XtremeSki2001 » Thu May 10, 2018 10:24 am

retiringwhen wrote:
Thu May 10, 2018 8:09 am
XtremeSki2001 wrote:
Thu May 10, 2018 7:46 am
Understood the rollover won't cause tax implications.

I did some more reading and I think I've misunderstood the spousal IRA guidance. It seems, whether I rollover her 403b to an IRA or not (doesn't matter since she can't add to it and she has lots of options), I can open a spousal Roth IRA, which would be after-tax anyway. For a minute there I thought I read spousal IRAs can only be traditional and not Roth.
Unless there are terrible fees associated with the 403(b) I would stay with it. She has great funds at low ER (Vanguard target date funds at a minimum)

I had rolled over a 401(k) to a Vanguard IRA a decade ago and just rolled it back into my current employer's 401(K) to make room for doing backdoor Roth's (something I should have done a long time ago). All told unless the plan has bad admin fees, i think there is no upside to rolling it over to an IRA. In the future if/when she goes back to work, you could consider options of simplification to roll all into one plan, but that is just a future decision.
I have no basis to assess whether the fees are terrible or not ... taking a look at the statement they charge $5/month for 'record keeping' and there's a $2/month administrative fee.
A box of rain will ease the pain and love will see you through

retiringwhen
Posts: 617
Joined: Sat Jul 08, 2017 10:09 am
Location: New Jersey, USA

Re: Portfolio Question - Maxed 401k/ROTH - Now What?

Post by retiringwhen » Thu May 10, 2018 10:41 am

XtremeSki2001 wrote:
Thu May 10, 2018 10:24 am
I have no basis to assess whether the fees are terrible or not ... taking a look at the statement they charge $5/month for 'record keeping' and there's a $2/month administrative fee.
Based on the fact you stated that the fund has $17K in it and the annual charts based on an annual cost of $84. you are looking at a .49% addition to your ER. That may be work enough to consider moving to an IRA IF you don't plan on doing Roth conversions in the near future..

Actually with that amount, you could actually consider transferring the fund to an IRA and actually over a period of time that make sense actually convert it to a Roth if your tax situation makes that beneficial. I am doing something similar with my wife's IRA as she does not have an employer retirement plan available to her. we are doing partial conversions up to the next tax bracket as well as can be planned.

Post Reply