Portfolio review with a couple questions

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ThermoMaster
Posts: 2
Joined: Thu Jun 14, 2018 1:21 pm

Portfolio review with a couple questions

Post by ThermoMaster » Thu Jun 14, 2018 8:29 pm

Thank you for taking the time to help/review my portfolio! This is my first post on Bogleheads, but I read this website daily and have learned so much from everyone who takes time out of their lives to help complete strangers. I have a couple of specific question to ask but if I've learned anything from reading its that a more complete financial picture helps those that reply have a better understanding and give clear advice.

Emergency Funds:
- 1 year of expenses

Debt:
- School loans - $231,000 at 6.63%. I am currently enrolled in an income based repayment plan and have made 72/120 payments needed to fulfill the Public Service Loan Forgiveness requirement. Both my current employer and soon to be employer are both non profits hospitals which will allow me have the remaining balance of my loans forgiven once I reach 120 payments. My current monthly payment is $1300 and will rise to about $2200 in November. This would be the max payment for the remainder of the loan.
-Car - $14,000 at 2.49%
-Credit Cards - Paid off in full monthly
-Mortgage - Paid off in full

Tax Filling Status:
-Married filling jointly with 1 child

Tax Rate:
- 4.25% State and 37% Federal

Age:
-Him: 34 Her: 33

Desired Asset Allocation:
- 90% stock, 10% bonds
- Desired international allocation 25%

Our current portfolio is in the mid 6 figures

Current retirement assets

Taxable
8.7% Fidelity Total Market (FSTVX) ER: 0.035
7.1% Fidelity Total International (FTIPX) ER: 0.1

His 401k
5.3% Fidelity US Bond Index (FSITX) ER: 0.045
6.7% Fidelity International Index (FSIVX) ER: 0.06
15.8% Fidelity 500 Index (FUSVX) ER: 0.035

His 457b
4.6% Fidelity US Bond Index (FSITX) ER: 0.045
4.1% Fidelity International Index (FSIVX) ER: 0.06
6.3% Fidelity 500 Index (FUSVX) ER: 0.035

His Roth
1.5% Berkshire Hathaway (BRKB)
5.5% Fidelity Total Market (FSTVX)

Her 403b #1
6.6% Vanguard Institutional Index (VIIIX) ER: 0.02
3.7% Vanguard Small Cap Index (VSCPX) ER: 0.04
1.4% Vanguard Real Estate Index (VGSNX) ER: 0.1
2.6% American Funds EuroPacific Growth ER: 0.5

Her 403b #2
3.1% Vanguard Retirement Date Fund 2050 (VTRLX) ER: 0.09

Her Roth
6.0% Amazon (AMZN)
1.2% Disney (DIS)
5.3% Fidelity Total Market (FSTVX)
4.5% Fidelity Total International (FTIPX)

Total allocation:
Domestic: 65.1%
Internation: 25%
Bonds: 9.9%

Questions:

1) I will be leaving my current employer soon and must decide what to do with my current 457. I have the option of leaving it in place or selecting any cash out date that I wish. I do not like the idea of leaving the funds with my old employer due to the fact the funds are unsecured and I will have no idea what the financial standing of the hospital will be once I leave. There is a high probability that our income for 2019 will be at its lowest point for the foreseeable future. Should I just cash out at that time and transfer into my taxable account? If I do transfer to taxable, what is the basis for the future taxes? Is it from the time of purchase in the 457 or from the time of transfer? Any advice would be appreciated.

2) My wife is much more conservative in regards to investing than I am but not in a fear of losing principal way. She feels that if we have a pile of money sitting in the bank we will be able to jump quickly at any great opportunity that may arise. She would like to keep our cash on hand at 20% of assets. I have convinced her that this is to high and our new goal is 10%. Going forward, when we have this cash on hand, how should I adjust my bond ratio? Should I just lower it in proportion? Make no change?

3) How does the portfolio look? We have no financial education other than the books we have read over the last couple of years and what I read on this site. For the most part we manage to stick to index funds. Most of the single stocks were purchased prior to us reading any books. I’ve suggested we sell her amazon stock as it has increased significantly since we purchased it but she wants to keep it. Since it’s in her account, we keep it.

Thank you for your help!

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nedsaid
Posts: 9691
Joined: Fri Nov 23, 2012 12:33 pm

Re: Portfolio review with a couple questions

Post by nedsaid » Thu Jun 14, 2018 11:43 pm

Hi Thermomaster, welcome to the forum.

I will bump your post in hopes others will comment. If no one else responds, I will make a critique. Just a cursory view but it looks like you are doing a lot of things right. Heading for bed so I might comment later.

Best wishes,

Ned
A fool and his money are good for business.

User avatar
nedsaid
Posts: 9691
Joined: Fri Nov 23, 2012 12:33 pm

Re: Portfolio review with a couple questions

Post by nedsaid » Sat Jun 16, 2018 9:38 am

ThermoMaster wrote:
Thu Jun 14, 2018 8:29 pm
Thank you for taking the time to help/review my portfolio! This is my first post on Bogleheads, but I read this website daily and have learned so much from everyone who takes time out of their lives to help complete strangers. I have a couple of specific question to ask but if I've learned anything from reading its that a more complete financial picture helps those that reply have a better understanding and give clear advice.

Nedsaid: Welcome to the forum. These type of posts help make things interesting. Thanks for sharing financial details about your life.


Emergency Funds:
- 1 year of expenses

Nedsaid: This is vital. Experiencing spotty employment myself in my late 50's, I can't overemphasize the importance of emergency funds. Great job here.


Debt:
- School loans - $231,000 at 6.63%. I am currently enrolled in an income based repayment plan and have made 72/120 payments needed to fulfill the Public Service Loan Forgiveness requirement. Both my current employer and soon to be employer are both non profits hospitals which will allow me have the remaining balance of my loans forgiven once I reach 120 payments. My current monthly payment is $1300 and will rise to about $2200 in November. This would be the max payment for the remainder of the loan.
-Car - $14,000 at 2.49%
-Credit Cards - Paid off in full monthly
-Mortgage - Paid off in full

Nedsaid: Good job. Student loan forgiveness in less than five years. Paid off mortgage. Only consumer debt is your car loan.

Tax Filling Status:
-Married filling jointly with 1 child

Tax Rate:
- 4.25% State and 37% Federal

Age:
-Him: 34 Her: 33

Desired Asset Allocation:
- 90% stock, 10% bonds
- Desired international allocation 25%

Our current portfolio is in the mid 6 figures

Current retirement assets

Taxable
8.7% Fidelity Total Market (FSTVX) ER: 0.035
7.1% Fidelity Total International (FTIPX) ER: 0.1

His 401k
5.3% Fidelity US Bond Index (FSITX) ER: 0.045
6.7% Fidelity International Index (FSIVX) ER: 0.06
15.8% Fidelity 500 Index (FUSVX) ER: 0.035

His 457b
4.6% Fidelity US Bond Index (FSITX) ER: 0.045
4.1% Fidelity International Index (FSIVX) ER: 0.06
6.3% Fidelity 500 Index (FUSVX) ER: 0.035

His Roth
1.5% Berkshire Hathaway (BRKB)
5.5% Fidelity Total Market (FSTVX)

Her 403b #1
6.6% Vanguard Institutional Index (VIIIX) ER: 0.02
3.7% Vanguard Small Cap Index (VSCPX) ER: 0.04
1.4% Vanguard Real Estate Index (VGSNX) ER: 0.1
2.6% American Funds EuroPacific Growth ER: 0.5

Her 403b #2
3.1% Vanguard Retirement Date Fund 2050 (VTRLX) ER: 0.09

Her Roth
6.0% Amazon (AMZN)
1.2% Disney (DIS)
5.3% Fidelity Total Market (FSTVX)
4.5% Fidelity Total International (FTIPX)

Total allocation:
Domestic: 65.1%
International: 25%
Bonds: 9.9%

Nedsaid: Can't argue with your choice of funds or your asset allocation. It seems like the "sweet spot" for US/International is 30% in International Stocks. Anywhere between 20% and 50% of stocks in International is just fine. Age 40 is a good time to start de-risking, I went to 80% stocks/20% bonds and cash at that time. You have a few more years to go, 90/10 good for the time being.

Questions:

1) I will be leaving my current employer soon and must decide what to do with my current 457. I have the option of leaving it in place or selecting any cash out date that I wish. I do not like the idea of leaving the funds with my old employer due to the fact the funds are unsecured and I will have no idea what the financial standing of the hospital will be once I leave. There is a high probability that our income for 2019 will be at its lowest point for the foreseeable future. Should I just cash out at that time and transfer into my taxable account? If I do transfer to taxable, what is the basis for the future taxes? Is it from the time of purchase in the 457 or from the time of transfer? Any advice would be appreciated.

Nedsaid: 457's are pre-tax money. Your basis is probably zero. It sounds like rollover into an IRA is not an option here. If this is the case, I would not add any more to it. If you cash out, that will generate a tax bill. I found that Government 457's can be rolled over but I couldn't find anything on this for non-profit 457's. I would contact Human Resources.

2) My wife is much more conservative in regards to investing than I am but not in a fear of losing principal way. She feels that if we have a pile of money sitting in the bank we will be able to jump quickly at any great opportunity that may arise. She would like to keep our cash on hand at 20% of assets. I have convinced her that this is to high and our new goal is 10%. Going forward, when we have this cash on hand, how should I adjust my bond ratio? Should I just lower it in proportion? Make no change?

Nedsaid: As the great T-Shirt philosopher once said, "Stuff Happens." Not quite what he said but you get the idea. With a family, you almost can't have too much cash reserves. For one thing, your house will require a lot of maintenance. Kids need expensive stuff like braces and such. Stuff wears out and needs to be replaced.

My retirement accounts are considered separately from my emergency funds. So your asset allocation for retirement should be 90/10 working towards 80/20. Your emergency funds would not be part of that 10% allocation to bonds and cash. At least that is the way I see it.


3) How does the portfolio look? We have no financial education other than the books we have read over the last couple of years and what I read on this site. For the most part we manage to stick to index funds. Most of the single stocks were purchased prior to us reading any books. I’ve suggested we sell her amazon stock as it has increased significantly since we purchased it but she wants to keep it. Since it’s in her account, we keep it.

Nedsaid: Your "sins" with individual stocks are venial and not mortal. They are not a big part of your portfolio. I think you are okay. I hold individual stocks myself but have de-emphasized these since the 2000-2002 bear market. Broad index funds are far better as you avoid the single stock risk. Portfolio looks good. I would work towards an 80/20 split as you reach age 40 and would increase my percentage of International stocks a bit. You are off to a great start.

Thank you for your help!
A fool and his money are good for business.

User avatar
nedsaid
Posts: 9691
Joined: Fri Nov 23, 2012 12:33 pm

Re: Portfolio review with a couple questions

Post by nedsaid » Sun Jun 17, 2018 12:13 am

I will bump this one more time in hopes that others will comment.
A fool and his money are good for business.

TwstdSista
Posts: 852
Joined: Thu Nov 16, 2017 4:03 am

Re: Portfolio review with a couple questions

Post by TwstdSista » Sun Jun 17, 2018 3:20 am

I agree with Nedsaid completely -- you're doing a lot of things right. The individual stock holdings are small, and you even have a small Small Cap tilt to offset them. The REIT tilt I'm not a fan of, mostly because it's too small. Less than 5% of your total portfolio isn't worth it to me. You already own your home and those total stock market funds include real estate. No need for a REIT fund, you have plenty of exposure already. Consider switching the REIT for your Small Cap fund.

I don't know anything about 457s, so can't speak specifically about them.

As for cash -- don't include your emergency funds in your AA. However, if you have a lot of cash above and beyond your emergency fund, then do include that amount (as part of your bond allocation or as a separate cash allocation).

Regardless of my suggestions, well done!

ThermoMaster
Posts: 2
Joined: Thu Jun 14, 2018 1:21 pm

Re: Portfolio review with a couple questions

Post by ThermoMaster » Sun Jun 17, 2018 7:48 am

Thank you both for taking the time to reply!

Natsdoc
Posts: 59
Joined: Sun Jun 15, 2014 8:53 pm

Re: Portfolio review with a couple questions

Post by Natsdoc » Sun Jun 17, 2018 9:10 am

Do you have term life and disability in place for each of you? If not would look into that ASAP.

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