Boglehead Expertise Wanted (& Appreciated!)

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CalinCal
Posts: 5
Joined: Tue May 29, 2018 4:50 pm

Boglehead Expertise Wanted (& Appreciated!)

Post by CalinCal » Tue May 29, 2018 4:55 pm

Hi Bogleheads!

A few months ago, my partner asked me, “Hey, how bad are the mutual fund fees in your 401k plan?” I am embarrassed to say I had no idea what she was talking about. Let’s just say that I’ve spent the last few months doing a deep dive into investing and in the process, discovered Mr. Bogle and this AMAZING forum. I’ve been “lurking” for the past month or so, reading tons of posts and conversations, and learning so much in the process. Thank you all for being so generous with your time.

I wasn’t ready to dive I until now (because frankly, I didn’t even understand half the things you guys were talking about!) but I now know enough to be dangerous, so I’m ready for your help. : )

Before I jump into my current financial picture, let me quickly share the steps I’ve taken over the last few months:
1. Fired my broker and moved IRA accounts to Vanguard. I plan to move the $$ into Vanguard ETF or mutual funds – more on that in a minute.
2. Moved my variable annuity (sold to me by the guy I fired, above) to Vanguard. I have some options on where I can invest those funds – more on that in a minute.
3. Moved all of my high-fee funds in my 401k into Vanguard funds – more on that in a minute.

My Current Picture

Emergency Fund
6+ months of expenses saved

College
I have two kids (12) and have $250k in college funds saved. (My ex will be paying the other half of their college). I don’t have it invested in a 529 plan because I was concerned that it locked me in if one of them decided not to go to college or something else befell them, so right now it’s sitting in a money market account, earning $1.75% annually.

Debt:
No credit card debt or student loans
Auto Loan: $7k balance with 0% interest rate
Mortgage: $845k loan balance (4.125% interest rate). Equity of ~$650k. Just started making an extra $1k per month toward principal and paying bi-weekly to reduce total payments. (This will save ~12 years off the life of the 30-yr loan)

Tax Status:
Single
Tax Rate 38.1% Federal Effective Tax Rate; 10.9% State Effective Tax Rate
State of Residence: California
Age: 48

Current Retirement Assets

401k - $450k
I max out my 401k each year and will contribute $18,500 in 2018. My employer matches 50% of the first 6% of my salary I contribute. When I dug into the options available in my 401k plan, it turned out there were only two low-cost funds: Vanguard Total Stock Market (VFIAX) and Vanguard Inflation Protected (VAIPX), so I recently allocated 90% allocated to VFIAX and 10% to VAIPX.

IRA - $140k
I have a rollover traditional IRA that I just moved to Vanguard. Currently its comprised of a bunch of stocks that my broker had picked for me; I plan to move that into Vanguard funds. I will contribute $5,500 into this in 2018; I do not qualify for a Roth IRA due to my income. This will need to be factored into asset allocation.

Annuity - $150k
I have a variable annuity that I just moved to Vanguard. Vanguard has 18 funds where you can park your money, but you can’t allocate investments within the fund. (For example, you can’t choose 60% Total Stock Market and 40% Total Bond Market.) Currently, I have 100% of the annuity set to the Total Stock Market Index, but there is also a balanced fund available that is a combo platter of equities and bonds that also looks good.

Funds Available to Invest
I have $1MM that I just moved to Vanguard to fund… something. So that needs to be part of the asset allocation strategy.

Other Factors To Consider
I have $900k in stock options in my company that I am holding. Any proceeds (post capital gains and taxes) will be reinvested in my retirement account once I sell. I have a pension ($2000/mo) that I can start collecting at age 65; my SS benefits will be $3k/mo starting age 67.

Risk Tolerance
My desire is to have an extremely simple investing strategy. I am a “set-it-and-forget-it” kind of gal. I don’t trade when the markets tank. I have a very long-term view. My knee-jerk reaction is that 60/40 stock/bond allocation is too conservative for me, especially given Mr. Bogle’s thoughts on the idea that this upcoming decade may be a poor performer. But I am willing to be convinced otherwise. : )

Summary:
$590k in Tax Advantaged Accounts
$1,150k in Taxable Accounts
$1,740k in Total Investments

QUESTIONS:
Mr. Bogle suggested that high wage earners should move bonds into tax-advantaged accounts, or choose bonds that are tax advantaged (like muni bonds). Does that mean that if I am pursuing a 60/40 stock/bond asset allocation strategy, I should allocate ~$700k in bonds in my 401k and IRA accounts? Or would it be better to simply focus on muni/tax advantaged bonds in my taxable account? I will have plenty of flexibility inside my Vanguard IRA to choose bond funds, but my 401k only has that one option for low-cost bond funds (VAIPX).

I have read a bit about tax harvesting and while I *think* I understand it, is this something I should be focused on?

Given the relative inflexibility of the funds inside the Vanguard annuity, should I just switch to the Balanced fund they offer, so that it is automatically set to 60/40?

As I make future investments, should I be putting it into the annuity or simply keep it in the investment account?

Finally, am I an idiot not to have my kids’ college fund in a 529 plan? My main concern for not sticking it there was: What if they don’t end up going to college (or get scholarships, etc.)? But would appreciate any thoughts on this subject.

My thanks to you all for teaching me so much in a short amount of time.

Dawn

dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Re: Boglehead Expertise Wanted (& Appreciated!)

Post by dbr » Wed May 30, 2018 7:16 am

CalinCal wrote:
Tue May 29, 2018 4:55 pm


QUESTIONS:
Mr. Bogle suggested that high wage earners should move bonds into tax-advantaged accounts, or choose bonds that are tax advantaged (like muni bonds). Does that mean that if I am pursuing a 60/40 stock/bond asset allocation strategy, I should allocate ~$700k in bonds in my 401k and IRA accounts? Or would it be better to simply focus on muni/tax advantaged bonds in my taxable account? I will have plenty of flexibility inside my Vanguard IRA to choose bond funds, but my 401k only has that one option for low-cost bond funds (VAIPX).

As a general rule bonds in tax deferred before buying muni's. See here: https://www.bogleheads.org/wiki/Tax-eff ... _placement

I have read a bit about tax harvesting and while I *think* I understand it, is this something I should be focused on?

This is secondary. Get your asset allocation and asset location lined up and take your time to learn about TLH: https://www.bogleheads.org/wiki/Tax_loss_harvesting

Given the relative inflexibility of the funds inside the Vanguard annuity, should I just switch to the Balanced fund they offer, so that it is automatically set to 60/40?

Maybe, or maybe put it all in bonds. I am not sure how this annuity is taxed. Someone else can comment.


As I make future investments, should I be putting it into the annuity or simply keep it in the investment account?

This may be complex, but I think holding tax efficient equity funds in taxable is a very good option.

Finally, am I an idiot not to have my kids’ college fund in a 529 plan? My main concern for not sticking it there was: What if they don’t end up going to college (or get scholarships, etc.)? But would appreciate any thoughts on this subject.

My thanks to you all for teaching me so much in a short amount of time.

Dawn

DarkHelmetII
Posts: 114
Joined: Mon Jul 24, 2017 12:25 pm

Re: Boglehead Expertise Wanted (& Appreciated!)

Post by DarkHelmetII » Wed May 30, 2018 7:38 am

On the 529, I think you should consider moving some or all into the 529. Rationale being:

Let's assume "worst case", neither child goes to college and you withdraw the money for non-educational expenses. When you withdraw you will pay ordinary income tax + 10% penalty. BUT ... you don't pay any taxes on the money as it's growing. Because your time frame to college is ~6 year you will likely be invested heavily in bonds which are tax inefficient (so the annual tax deferral is worth something to you). Right now in money market / CD account, your money is taxed every single year.

And then obviously if you use the funds for college then you are better off.

Grt2bOutdoors
Posts: 19084
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Boglehead Expertise Wanted (& Appreciated!)

Post by Grt2bOutdoors » Wed May 30, 2018 8:08 am

Welcome to the forum!

529 Plan - My understanding is California offers no tax deduction for contributions to 529 plans. You may want to consider using Vanguard 529 Plan or Utah Plan (my529.org). If you open a 529 plan, open 2 accounts, 1 for each child. Select an age based option which will become more conservative as college approaches. 1.75% is safe, but fully taxable by Fed and State, reducing your overall net interest rate earned by a considerable amount.

Variable Annuity - Vanguard Balanced is the equivalent of Vanguard Wellington fund. Vanguard Growth Fund is equivalent of Morgan Growth fund. Vanguard Capital Growth is run to mimic the Vanguard Primecap fund. You don't have to pick just one fund within variable annuity, you can allocate percentages to different funds say 25% to Capital Growth, 25% to Growth, 25% to Total Stock Market and 25% to Total Bond.

The only reason why you could only select 1 portfolio only would be if you selected the Guaranteed Lifetime Withdrawal Benefit, then you would have to select only 1 of 3 portfolio's listed.

I wouldn't be concerned with distributions in the variable annuity, it's all growing tax deferred, why not go for maximum growth in that account?
Distributions from account I believe are taxed as one part return of capital, the remainder is taxed as ordinary income.

Bonds - If Inflation Protected Securities is your only option in 401K, I'd hold a minimal amount of it - 10 or 20% there, the remainder of bonds I'd hold in tax exempt munis - you can use California only, if you aren't comfortable with California only, then use a 50/50 mix - California Tax Exempt and Intermediate Term Tax Exempt, most income will be tax exempt from CA point of view but you won't have 100% at risk to California economy.

Asset Allocation - If you aren't comfortable with 60/40, it would not be unreasonable to hold a 70/30 or 75/25 portfolio so long as you are comfortable with risk which by your statement it appears you are (set it and forget it, will not cut and run when market tanks). Select your asset allocation, then stay the course.

Have you visited the wiki?, search for examples of Investment Policy Statement.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

DarkHelmetII
Posts: 114
Joined: Mon Jul 24, 2017 12:25 pm

Re: Boglehead Expertise Wanted (& Appreciated!)

Post by DarkHelmetII » Wed May 30, 2018 8:39 am

Grt2bOutdoors wrote:
Wed May 30, 2018 8:08 am
Variable Annuity - Vanguard Balanced is the equivalent of Vanguard Wellington fund.
Is this necessarily the case? My understanding is that Vanguard Variable Annuity Balanced Portfolio uses bonds with long-term average weighted maturity (https://personal.vanguard.com/us/funds/ ... irect=true) whereas for Wellington it is medium maturity (https://personal.vanguard.com/us/funds/ ... true#tab=2).

Not trying to be a stickler but to point out that some of the life insurance / variable annuity investment options that look or sound like the "equivalents" are not necessarily so.

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Watty
Posts: 13863
Joined: Wed Oct 10, 2007 3:55 pm

Re: Boglehead Expertise Wanted (& Appreciated!)

Post by Watty » Wed May 30, 2018 8:47 am

CalinCal wrote:
Tue May 29, 2018 4:55 pm
Mortgage: $845k loan balance (4.125% interest rate). Equity of ~$650k. Just started making an extra $1k per month toward principal and paying bi-weekly to reduce total payments. (This will save ~12 years off the life of the 30-yr loan)
.......
I have $1MM that I just moved to Vanguard to fund… something. So that needs to be part of the asset allocation strategy.
Why not just pay off the mortgage?

Some big advantages of that would be;

1) It would be a risk free 4.125% return before taxes.

2) You could then invest your "mortgage" payment each month and get the benefit of dollar cost averaging. You could also use that freed up "mortgage payment" to pay for college expenses out of your cash flow.

3) It is not exact but a mortgage is in effect a negative bond. When you look at it that way it screws up your asset allocation. I did not try to crunch the numbers but you could effectively have an asset allocation of something like -20% bonds and 120% stocks when you subtract out your mortgage from your bond asset allocation.

4) You would have less invested in a taxable account which can be tricky in a high tax bracket.

Trying to invest the money and earn a higher rate of return is harder than it sounds because you have a sequence of returns risk. Here is an very simplistic example I have posted before.
 If you do not pay it off then you will have more sequence of returns risk. For example in rough numbers if you just kept a $100K mortgage and also put $100K into a separate investing account which you also pay a $500 a month mortgage out of then;

a) If you get unlucky and get a modest 10% decline in the portfolio the first year then it would be down to $90K
b) You would also need to pay the $500 a month mortgage($6,000) so your portfolio would be down to $84K
c) To break even the next year you would need to gain back the $16K and another $6,000 for the next years mortgage payments which is $22K. That would take a 25.6% return on the remaining $84K just to break even.
If you can't bring yourself to pay off the mortgage then one option would be to call your lender and ask if they will "recast your mortgage"(Google this) if you make a large prepayment of 50%, or whatever percentage works for you. They are not required to do this but they usually will for a small processing fee of a couple of hundred dollars. The way this works is if you do a recast then your required mortgage payment will be reduced by the same percentage but the interest rate and length of the loan will stay the same. This can be important if something happens like interest rates go up a lot or you are laid off or disabled.

User avatar
Watty
Posts: 13863
Joined: Wed Oct 10, 2007 3:55 pm

Re: Boglehead Expertise Wanted (& Appreciated!)

Post by Watty » Wed May 30, 2018 9:01 am

CalinCal wrote:
Tue May 29, 2018 4:55 pm
Other Factors To Consider
I have $900k in stock options in my company that I am holding. Any proceeds (post capital gains and taxes) will be reinvested in my retirement account once I sell.
If you can exercise the stock options now it would be good to start exercising them. That is something like a quarter of your net worth and people have gotten burned badly by having too much of their net worth in company stock.

User avatar
CyclingDuo
Posts: 1688
Joined: Fri Jan 06, 2017 9:07 am

Re: Boglehead Expertise Wanted (& Appreciated!)

Post by CyclingDuo » Wed May 30, 2018 10:58 am

CalinCal wrote:
Tue May 29, 2018 4:55 pm
I wasn’t ready to dive I until now (because frankly, I didn’t even understand half the things you guys were talking about!) but I now know enough to be dangerous, so I’m ready for your help. : )

Before I jump into my current financial picture, let me quickly share the steps I’ve taken over the last few months:
1. Fired my broker and moved IRA accounts to Vanguard. I plan to move the $$ into Vanguard ETF or mutual funds – more on that in a minute.
2. Moved my variable annuity (sold to me by the guy I fired, above) to Vanguard. I have some options on where I can invest those funds – more on that in a minute.
3. Moved all of my high-fee funds in my 401k into Vanguard funds – more on that in a minute.

My Current Picture

Emergency Fund
6+ months of expenses saved

College
I have two kids (12) and have $250k in college funds saved. (My ex will be paying the other half of their college). I don’t have it invested in a 529 plan because I was concerned that it locked me in if one of them decided not to go to college or something else befell them, so right now it’s sitting in a money market account, earning $1.75% annually.

Debt:
No credit card debt or student loans
Auto Loan: $7k balance with 0% interest rate
Mortgage: $845k loan balance (4.125% interest rate). Equity of ~$650k. Just started making an extra $1k per month toward principal and paying bi-weekly to reduce total payments. (This will save ~12 years off the life of the 30-yr loan)

Tax Status:
Single
Tax Rate 38.1% Federal Effective Tax Rate; 10.9% State Effective Tax Rate
State of Residence: California
Age: 48

Current Retirement Assets

401k - $450k
I max out my 401k each year and will contribute $18,500 in 2018. My employer matches 50% of the first 6% of my salary I contribute. When I dug into the options available in my 401k plan, it turned out there were only two low-cost funds: Vanguard Total Stock Market (VFIAX) and Vanguard Inflation Protected (VAIPX), so I recently allocated 90% allocated to VFIAX and 10% to VAIPX.

IRA - $140k
I have a rollover traditional IRA that I just moved to Vanguard. Currently its comprised of a bunch of stocks that my broker had picked for me; I plan to move that into Vanguard funds. I will contribute $5,500 into this in 2018; I do not qualify for a Roth IRA due to my income. This will need to be factored into asset allocation.

Annuity - $150k
I have a variable annuity that I just moved to Vanguard. Vanguard has 18 funds where you can park your money, but you can’t allocate investments within the fund. (For example, you can’t choose 60% Total Stock Market and 40% Total Bond Market.) Currently, I have 100% of the annuity set to the Total Stock Market Index, but there is also a balanced fund available that is a combo platter of equities and bonds that also looks good.

Funds Available to Invest
I have $1MM that I just moved to Vanguard to fund… something. So that needs to be part of the asset allocation strategy.

Other Factors To Consider
I have $900k in stock options in my company that I am holding. Any proceeds (post capital gains and taxes) will be reinvested in my retirement account once I sell. I have a pension ($2000/mo) that I can start collecting at age 65; my SS benefits will be $3k/mo starting age 67.

Risk Tolerance
My desire is to have an extremely simple investing strategy. I am a “set-it-and-forget-it” kind of gal. I don’t trade when the markets tank. I have a very long-term view. My knee-jerk reaction is that 60/40 stock/bond allocation is too conservative for me, especially given Mr. Bogle’s thoughts on the idea that this upcoming decade may be a poor performer. But I am willing to be convinced otherwise. : )

Summary:
$590k in Tax Advantaged Accounts
$1,150k in Taxable Accounts
$1,740k in Total Investments

QUESTIONS:
Mr. Bogle suggested that high wage earners should move bonds into tax-advantaged accounts, or choose bonds that are tax advantaged (like muni bonds). Does that mean that if I am pursuing a 60/40 stock/bond asset allocation strategy, I should allocate ~$700k in bonds in my 401k and IRA accounts? Or would it be better to simply focus on muni/tax advantaged bonds in my taxable account? I will have plenty of flexibility inside my Vanguard IRA to choose bond funds, but my 401k only has that one option for low-cost bond funds (VAIPX).

I have read a bit about tax harvesting and while I *think* I understand it, is this something I should be focused on?

Given the relative inflexibility of the funds inside the Vanguard annuity, should I just switch to the Balanced fund they offer, so that it is automatically set to 60/40?

As I make future investments, should I be putting it into the annuity or simply keep it in the investment account?

Finally, am I an idiot not to have my kids’ college fund in a 529 plan? My main concern for not sticking it there was: What if they don’t end up going to college (or get scholarships, etc.)? But would appreciate any thoughts on this subject.

My thanks to you all for teaching me so much in a short amount of time.

Dawn
Dawn - congratulations on your move to take on the expense ratio fees, and AUM fees. :sharebeer

To contribute or not contribute more to the annuity? True, Vanguard and Fidelity have low to lowest fees in the annuity industry, but they are still higher than the same funds held outside of that investment vehicle. The investments grow tax free, and once you hit 59 1/2 you can remove funds if needed without any IRS penalty and will be taxed at ordinary income on the gains. The nice thing about it is there are no required RMD's at age 70 1/2, so that money could stay parked there for a long time. I would suggest that you plan on using it for yourself, because passing it on to your children means they would inherit a non-qualified annuity and would pay taxes on all of the gains as ordinary income. No stepped up cost basis allowed compared to other ways to pass money on to them, so it's not the best way or ideal way to pass money on to heirs. We have the Fidelity version of the variable annuity and keep what we have in there in their S&P 500 Index (ER fee of .1%), and they have an annual administrative wrap fee of .25% for balances below $1M, and .1% for balances over $1M on top of the underlying fund fee. It was our only tax deferred investment choice at the time as we lived overseas working for foreign entities, so were not allowed to contribute to any US qualified retirement plan for a dozen years. So, a bit like you in terms of being sold the annuity at your previous firm - we are all "stuck" with the product. Best to utilize it in the most favorable way.

The Vanguard Variable Annuity allows you to put the money in a Three Fund Portfolio or Core 4 (includes real estate fund) as the following listed below are available as choices. You mentioned your understanding is that you are not allowed to choose how much goes into each fund, but you actually can choose the funds you would like within your variable annuity at Vanguard and you can set up automatic rebalancing monthly/quarterly/semi-annually/annually - however you prefer - within the Vanguard Variable Annuity to maintain the allocation - be it 70/30, 65/35, etc... . True, the balanced fund is pre-set at 60/40, but our preference would be to hold it in the Three Fund or Core 4 and determine your own asset allocation.

Total Stock Market (ER .45%) or you could also use the S&P 500 Equity Index (ER .44%)
Total International Stock Market (ER .40%)
Total Bond Fund (ER .44%)
Real Estate (ER .56%)

https://personal.vanguard.com/us/funds/ ... s/variable
https://personal.vanguard.com/us/funds/ ... ble/bytype

As you can see, the annual administrative wrap fee that is added on to the underlying fund fees raises the ER fees to the .40% - .45% ratio for the Three Fund Portfolio, and .56% for Real Estate compared to the same funds you could hold in your taxable or !RA being...

Total Bond Fund ER .05%
Total Stock Market ER .04%
Total International Market ER .11%
Real Estate Index ER .11%

One simply has to compare if these funds were held in taxable vs. the tax deferred of the variable annuity, the ER differences, and think about the withdrawals along with other RMD's, income streams and what that might do to one's taxes in retirement to decide if you should contribute more to the annuity or put that money to work for you in your taxable account. The ER fees alone, would be about $2K a year more on a $500K balance if held in the annuity. That same balance would probably get about a 1.68 - 2.x% yield in taxable, so the tax drag is there, but it is a very efficient one if you are just buying and holding while reinvesting the dividends into more shares of Total Stock Market and Total International Stock Market.

You are currently in a high tax rate holding the majority of your wealth in taxable (not a bad thing, but tax efficiency should be the highest priority goal for you. Total Stock Market and Total International are tax efficient and set it and forget parts of the three fund portfolio. Tax-exempt bonds within your taxable would be key for your fixed income as well.

College 529's: Just put the iron fist down and let the kids know (as often as you can tell them) they only have one option - they are going to college. :mrgreen: It sinks in after a few years and they get comfortable with the track they are on. Have them do some part-time work in their teenage years so they get an appreciation for unskilled labor and to quench their thirst for pursuing a career, as well as the value of a hard earned buck. If your oldest is age 12 - that means that child's senior year will be age 22 meaning you have 9-10 years of growth before that tuition/housing money is needed. That's a long enough time frame away to justify having some money (anything over 7 years away) in equities to grow for the latter years of college. We did keep our children's funds 100% in equities from birth all the way through their college years and even though their accounts experienced the 2000-2002 and 2007-2009 bear markets - everything was covered with plenty leftover. We would suggest trying to get a better return than the money market rate you are getting as that money is losing to inflation right now, and college costs are climbing with inflation.
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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vineviz
Posts: 1332
Joined: Tue May 15, 2018 1:55 pm

Re: Boglehead Expertise Wanted (& Appreciated!)

Post by vineviz » Wed May 30, 2018 11:01 am

CalinCal wrote:
Tue May 29, 2018 4:55 pm
College
I have two kids (12) and have $250k in college funds saved. (My ex will be paying the other half of their college). I don’t have it invested in a 529 plan because I was concerned that it locked me in if one of them decided not to go to college or something else befell them, so right now it’s sitting in a money market account, earning $1.75% annually.
In my opinion, moving at least a portion of the college savings into a 529 plan would be wise. Even if one of the two kids chooses not to attend college, my experience is that the odds are good that the other one will pursue a master's degree (the masters is the new bachelors, after all). Even then, there are plenty of schools where $250k barely covers half the cost of a bachelor's degree.

In any case, please consider whether a money market is the best place for these college funds. The college liability is 6 to 10 years off, which is a long time, and inflation is making that $250k worth less every year.

Moving 25% to 50% of that money from the MM to a diversified bond fund (e.g. VBTLX = Vanguard Total Bond Market Index Fund) would give you a fighting chance at keeping up with general inflation - though probably not tuition inflation - without taking on very much risk.

A 67/33 mix of money market and VBTLX is unlikely to ever lose more than 2% of its value in a market crash: the worst loss such a portfolio would have had over the past 30 years was 1.3%. And the 67/33 portfolio invested in 1987 would be worth $127k more today than a 100% money market fund would be.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Grt2bOutdoors
Posts: 19084
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Boglehead Expertise Wanted (& Appreciated!)

Post by Grt2bOutdoors » Wed May 30, 2018 11:09 am

DarkHelmetII wrote:
Wed May 30, 2018 8:39 am
Grt2bOutdoors wrote:
Wed May 30, 2018 8:08 am
Variable Annuity - Vanguard Balanced is the equivalent of Vanguard Wellington fund.
Is this necessarily the case? My understanding is that Vanguard Variable Annuity Balanced Portfolio uses bonds with long-term average weighted maturity (https://personal.vanguard.com/us/funds/ ... irect=true) whereas for Wellington it is medium maturity (https://personal.vanguard.com/us/funds/ ... true#tab=2).

Not trying to be a stickler but to point out that some of the life insurance / variable annuity investment options that look or sound like the "equivalents" are not necessarily so.
Strategy and policy
Investment strategy
The portfolio invests 60% to 70% of its assets in dividend-paying, and, to a lesser extent, non-dividend-paying common stocks of established medium-size and large companies. In choosing these companies, the advisor seeks those that appear to be undervalued but to have prospects for improvement. These stocks are commonly referred to as value stocks. The remaining 30% to 40% of portfolio assets are invested mainly in investment-grade corporate bonds, with some exposure to U.S. Treasury and government agency bonds, as well as mortgage-backed securities.

The portfolio may temporarily depart from its normal investment policies and strategies when doing so is believed to be in the portfolio’s best interest, so long as the alternative is consistent with the fund’s investment objective. For instance, the fund may invest beyond the normal limits in derivatives or ETFs that are consistent with the fund’s objective when those instruments are more favorably priced or provide needed liquidity, as might be the case when the fund is transitioning assets from one advisor to another or receives large cash flows that it cannot prudently invest immediately.


^^ The portfolio is managed by Wellington Management, the manager of the equity slice is Edward Bousa, the same portfolio manager that manages the Wellington Fund. The Balanced Fund focuses on Large Cap Value equity, it's actively managed. The strategy listed above is consistent with which one many conclude is close to, if not, the same strategy that is followed by Wellington Fund. Wellington Fund is an actively managed balanced fund, same management company, same investment manager. Interestingly enough, it's not sufficient to rely on a screen snapshot of a fund to determine just exactly the type of cooking involved in creating the dish, one needs to do a deeper dive into the actual reports to get a better understanding of the different ingredients that make the recipe. Please read the notes below from the most recent annual report:

From the annual report dated 12/31/2017:

Vanguard Balanced Portfolio returned
14.72% for the 12 months ended
December 31, 2017. The portfolio
trailed the 15.76% return of its blended
benchmark (a mix of 65% large-capitalization
stocks and 35% high-quality corporate
bonds) and the 15.70% average return of
peer funds.

Going into 2018, we maintained our
slightly short duration posture in the
bond portfolio.
We anticipate a flatter
yield curve as inflation expectations
remain muted. Our overall positioning
remains fairly unchanged from this time
a year ago, though we have added more
to corporate credit, reallocating from U.S.
governments, agency mortgage-backed
securities, and securitized names.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

CalinCal
Posts: 5
Joined: Tue May 29, 2018 4:50 pm

Re: Boglehead Expertise Wanted (& Appreciated!)

Post by CalinCal » Wed May 30, 2018 7:43 pm

Holy cow! You guys are amazeballs.

It's going to take me a few days to digest all this, but I'll be back in a few with comments (and likely follow-up questions).

Thank you for the ideas and feedback; it's truly invaluable. I can hardly believe there is a community of smart, selfless folks out there so willing to lend their insight. THANK YOU.

CalinCal
Posts: 5
Joined: Tue May 29, 2018 4:50 pm

Re: Boglehead Expertise Wanted (& Appreciated!)

Post by CalinCal » Tue Jun 05, 2018 10:11 pm

Just circling back to say thanks again for all the help.

Thanks to @grt2boutdoors and @CyclingDuo for sharing that I have some flexibility within the Vanguard annuity in terms of allocations within the funds. I'd completely missed that when talking to the advisor.

You've all convinced me I'm being an idiot for not putting the college fund into a 529 plan. Granted, California does not give any tax benefit for the 529 plan but you've given me permission to stick it in the market to at least beat inflation (and for pointing out that since they are only 12, I've got 10 years before they are done so definitely some time horizon to work with.

@Watty, Yep, exercising my options is definitely on the roadmap for 2018. I am fortunate to be granted RSU's annually as well but these options are almost 10 years old so need to get them exercised and invested in the broader market, My RSU's will allow me to have some continued concentration in my company, which is doing well. Your idea of paying off the mortgage and then just investing my "mortgage payment" is an interesting one.

You guys are awesome.

CalinCal
Posts: 5
Joined: Tue May 29, 2018 4:50 pm

Re: Boglehead Expertise Wanted (& Appreciated!)

Post by CalinCal » Tue Jun 05, 2018 10:15 pm

CyclingDuo wrote:
Wed May 30, 2018 10:58 am

You are currently in a high tax rate holding the majority of your wealth in taxable (not a bad thing, but tax efficiency should be the highest priority goal for you. Total Stock Market and Total International are tax efficient and set it and forget parts of the three fund portfolio. Tax-exempt bonds within your taxable would be key for your fixed income as well.
I'm not too proud to say that as a neophyte Boglehead, I don't quite follow what you mean. I understand taxable accounts (that's my investment accounts, NOT 401k, IRA, etc.). But I don't follow what you mean when you say that TSM and TI are "tax efficient." Can you elaborate?

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luminous
Posts: 93
Joined: Sat Dec 30, 2017 10:28 pm

Re: Boglehead Expertise Wanted (& Appreciated!)

Post by luminous » Tue Jun 05, 2018 11:01 pm

CalinCal wrote:
Tue May 29, 2018 4:55 pm
IRA - $140k
I have a rollover traditional IRA that I just moved to Vanguard. Currently its comprised of a bunch of stocks that my broker had picked for me; I plan to move that into Vanguard funds. I will contribute $5,500 into this in 2018; I do not qualify for a Roth IRA due to my income. This will need to be factored into asset allocation.
Welcome! Folks have given you lots of great info on a lot of topics, but nobody has mentioned the Backdoor Roth IRA yet. Wlthough you do not qualify for a Roth IRA due to your income, you can still do a Backdoor Roth. To do so you'd have to move your traditional IRA into your current 401k, which usually isn't hard. https://www.bogleheads.org/wiki/Backdoor_Roth_IRA
50/20/30 US stock/international stock/bonds. Hope to semi-retire in 2026.

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CyclingDuo
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Re: Boglehead Expertise Wanted (& Appreciated!)

Post by CyclingDuo » Wed Jun 06, 2018 5:04 am

CalinCal wrote:
Tue Jun 05, 2018 10:15 pm
I'm not too proud to say that as a neophyte Boglehead, I don't quite follow what you mean. I understand taxable accounts (that's my investment accounts, NOT 401k, IRA, etc.). But I don't follow what you mean when you say that TSM and TI are "tax efficient." Can you elaborate?
The Boglehead Wiki on tax-efficient fund placement is the best elaboration:

https://www.bogleheads.org/wiki/Tax-eff ... _placement
"Everywhere is within walking distance if you have the time." ~ Steven Wright

CalinCal
Posts: 5
Joined: Tue May 29, 2018 4:50 pm

Re: Boglehead Expertise Wanted (& Appreciated!)

Post by CalinCal » Wed Jun 06, 2018 11:56 pm

Thank you! Good lord I still have a lot to learn but so appreciate the insight.

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