So much angst

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billthecat
Posts: 207
Joined: Tue Jan 24, 2017 2:50 pm

So much angst

Post by billthecat » Sun Jun 24, 2018 11:23 am

I'm tired of the angst around this. I'm certainly not alone with the angst. There's topic after topic covering, Why include international? Why include bonds? Are CDs a good alternative to bonds? Should I invest or pay down debt? DIY? Robo? But the fees or minimum cash! Target date? Do bonds go in tax sheltered? Oh, wait, WCI says, no, the opposite! And on and on. So, here's what I'm doing:
  • I took my age (49), subtracted 10, and that's my target for everything except stocks, which I rounded to 60/40. So, 40% bonds, cash, alternatives.
  • I looked up the target date fund for my target (early) retirement, which would be the 2020 fund for my main taxable account.
  • The 2020 fund would put me at 46% stock. So I looked at counter-balancing it by having my tax-advantaged accounts in 2055 or 2060 (the max) funds (~95% stock). It didn't get me to where I wanted to be, so I stepped the main fund up to a 2025 fund, which is 59% stock. Very close! I can juice it by having my tax-advantaged accounts in 2030 funds. That gets me right to 60%. (I realize that 59% and 60% are seriously close enough but my butt says get as close as possible. Stupid butt.)
  • Weighted average ER is .075%.
  • It's simple, it's diversified, it's automatically adjusting.
  • And when I do retire, I'd just keep 12 months of expenses in cash on hand. and sell enough to generate cash, a month, or a quarter, or a year at a time, 12 months in advance (so I always have 12 months on hand).
Does that make sense? Has anyone here just thrown up their hands in disgust and gone simple, simple, simple?

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CyclingDuo
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Re: So much angst

Post by CyclingDuo » Sun Jun 24, 2018 11:41 am

billthecat wrote:
Sun Jun 24, 2018 11:23 am
I'm tired of the angst around this. I'm certainly not alone with the angst. There's topic after topic covering, Why include international? Why include bonds? Are CDs a good alternative to bonds? Should I invest or pay down debt? DIY? Robo? But the fees or minimum cash! Target date? Do bonds go in tax sheltered? Oh, wait, WCI says, no, the opposite! And on and on. So, here's what I'm doing:
  • I took my age (49), subtracted 10, and that's my target for everything except stocks, which I rounded to 60/40. So, 40% bonds, cash, alternatives.
  • I looked up the target date fund for my target (early) retirement, which would be the 2020 fund for my main taxable account.
  • The 2020 fund would put me at 46% stock. So I looked at counter-balancing it by having my tax-advantaged accounts in 2055 or 2060 (the max) funds (~95% stock). It didn't get me to where I wanted to be, so I stepped the main fund up to a 2025 fund, which is 59% stock. Very close! I can juice it by having my tax-advantaged accounts in 2030 funds. That gets me right to 60%. (I realize that 59% and 60% are seriously close enough but my butt says get as close as possible. Stupid butt.)
  • Weighted average ER is .075%.
  • It's simple, it's diversified, it's automatically adjusting.
  • And when I do retire, I'd just keep 12 months of expenses in cash on hand. and sell enough to generate cash, a month, or a quarter, or a year at a time, 12 months in advance (so I always have 12 months on hand).
Does that make sense? Has anyone here just thrown up their hands in disgust and gone simple, simple, simple?
Not I, but simple is effective. That's one of the beauties of the Three Fund Portfolio (or using a target fund which rebalances for you and follows the glide path).

I wouldn't call that throwing up your hands in disgust. I'd call that prudent, effective investing.
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dbr
Posts: 27207
Joined: Sun Mar 04, 2007 9:50 am

Re: So much angst

Post by dbr » Sun Jun 24, 2018 11:41 am

billthecat wrote:
Sun Jun 24, 2018 11:23 am
I'm tired of the angst around this. I'm certainly not alone with the angst. There's topic after topic covering, Why include international? Why include bonds? Are CDs a good alternative to bonds? Should I invest or pay down debt? DIY? Robo? But the fees or minimum cash! Target date? Do bonds go in tax sheltered? Oh, wait, WCI says, no, the opposite! And on and on. So, here's what I'm doing:
  • I took my age (49), subtracted 10, and that's my target for everything except stocks, which I rounded to 60/40. So, 40% bonds, cash, alternatives.
  • I looked up the target date fund for my target (early) retirement, which would be the 2020 fund for my main taxable account.
  • The 2020 fund would put me at 46% stock. So I looked at counter-balancing it by having my tax-advantaged accounts in 2055 or 2060 (the max) funds (~95% stock). It didn't get me to where I wanted to be, so I stepped the main fund up to a 2025 fund, which is 59% stock. Very close! I can juice it by having my tax-advantaged accounts in 2030 funds. That gets me right to 60%. (I realize that 59% and 60% are seriously close enough but my butt says get as close as possible. Stupid butt.)
  • Weighted average ER is .075%.
  • It's simple, it's diversified, it's automatically adjusting.
  • And when I do retire, I'd just keep 12 months of expenses in cash on hand. and sell enough to generate cash, a month, or a quarter, or a year at a time, 12 months in advance (so I always have 12 months on hand).
Does that make sense? Has anyone here just thrown up their hands in disgust and gone simple, simple, simple?
Probably the number of people who read and post on this forum who pay no attention to all the angst outnumber those who do by about 20 to 1, maybe 100 to 1. The fact that people post on threads about this stuff does not mean those people themselves are actually engaged in those investing issues, and then most of the people reading here aren't either. A forum like this can be very bad for the health if you are a person prone to getting upset about "stuff." Also, no one has to throw their hands up in disgust to do things the simple way. It is pretty obvious for the most part.

mpnret
Posts: 23
Joined: Sun May 20, 2018 9:16 am

Re: So much angst

Post by mpnret » Sun Jun 24, 2018 12:16 pm

billthecat wrote:
Sun Jun 24, 2018 11:23 am
I'm tired of the angst around this. I'm certainly not alone with the angst. There's topic after topic covering, Why include international? Why include bonds? Are CDs a good alternative to bonds? Should I invest or pay down debt? DIY? Robo? But the fees or minimum cash! Target date? Do bonds go in tax sheltered? Oh, wait, WCI says, no, the opposite! And on and on. So, here's what I'm doing:
  • I took my age (49), subtracted 10, and that's my target for everything except stocks, which I rounded to 60/40. So, 40% bonds, cash, alternatives.
  • I looked up the target date fund for my target (early) retirement, which would be the 2020 fund for my main taxable account.
  • The 2020 fund would put me at 46% stock. So I looked at counter-balancing it by having my tax-advantaged accounts in 2055 or 2060 (the max) funds (~95% stock). It didn't get me to where I wanted to be, so I stepped the main fund up to a 2025 fund, which is 59% stock. Very close! I can juice it by having my tax-advantaged accounts in 2030 funds. That gets me right to 60%. (I realize that 59% and 60% are seriously close enough but my butt says get as close as possible. Stupid butt.)
  • Weighted average ER is .075%.
  • It's simple, it's diversified, it's automatically adjusting.
  • And when I do retire, I'd just keep 12 months of expenses in cash on hand. and sell enough to generate cash, a month, or a quarter, or a year at a time, 12 months in advance (so I always have 12 months on hand).
Does that make sense? Has anyone here just thrown up their hands in disgust and gone simple, simple, simple?
Could you elaborate a bit on your weighted average ER of .075%. Everytime I try to do something similiar with target date funds I come up with at least double that. So for me I'm saving over 5G a year using admiral index funds and such. Well worth some angst.
Last edited by mpnret on Sun Jun 24, 2018 12:17 pm, edited 1 time in total.

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oldcomputerguy
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Re: So much angst

Post by oldcomputerguy » Sun Jun 24, 2018 12:17 pm

At the risk of adding to the angst....

By trying to mix multiple target-date funds to hit a stock allocation of exactly 60%, you are fixating way, way too much on a 1% difference between your desired asset allocation and your portfolio makeup at the moment. A 1% difference is insignificant. Your described mix of two target-date funds to try to hit exactly 60% stock is not "simple", it's needless complication. Adding to the complication is your plan to put one target-date fund in your tax-advantaged account and the other in taxable. The bond component of the fund makes a target-date fund less tax-efficient than, say, a total-market stock index fund.

Just do a 60/40 three-fund portfolio, with the bond component in tax-advantaged, rebalance once a year to age-10 in bonds, and ignore it the other 364 days a year. That's "simple".
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

PFInterest
Posts: 1460
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Re: So much angst

Post by PFInterest » Sun Jun 24, 2018 12:20 pm

billthecat wrote:
Sun Jun 24, 2018 11:23 am
I'm tired of the angst around this. I'm certainly not alone with the angst. There's topic after topic covering, Why include international? Why include bonds? Are CDs a good alternative to bonds? Should I invest or pay down debt? DIY? Robo? But the fees or minimum cash! Target date? Do bonds go in tax sheltered? Oh, wait, WCI says, no, the opposite! And on and on. So, here's what I'm doing:
  • I took my age (49), subtracted 10, and that's my target for everything except stocks, which I rounded to 60/40. So, 40% bonds, cash, alternatives.
  • I looked up the target date fund for my target (early) retirement, which would be the 2020 fund for my main taxable account.
  • The 2020 fund would put me at 46% stock. So I looked at counter-balancing it by having my tax-advantaged accounts in 2055 or 2060 (the max) funds (~95% stock). It didn't get me to where I wanted to be, so I stepped the main fund up to a 2025 fund, which is 59% stock. Very close! I can juice it by having my tax-advantaged accounts in 2030 funds. That gets me right to 60%. (I realize that 59% and 60% are seriously close enough but my butt says get as close as possible. Stupid butt.)
  • Weighted average ER is .075%.
  • It's simple, it's diversified, it's automatically adjusting.
  • And when I do retire, I'd just keep 12 months of expenses in cash on hand. and sell enough to generate cash, a month, or a quarter, or a year at a time, 12 months in advance (so I always have 12 months on hand).
Does that make sense? Has anyone here just thrown up their hands in disgust and gone simple, simple, simple?
honestly i feel you made it more complicated than it had to be. this whole subtract 10. why not 15, or 13, or 9? then you didnt even listen to your rule and picked a different random number.


thankfully none of that matters. carry on.

dbr
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Re: So much angst

Post by dbr » Sun Jun 24, 2018 12:21 pm

There is a point of view that TD funds are actually more complicated as this case in point seems to show. But angst depends more on state of mind than on facts on the ground.

Karma Skimmer
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Re: So much angst

Post by Karma Skimmer » Sun Jun 24, 2018 12:36 pm

It makes sense to me. I'm ten years older and with a similar allocation: 60:40 Equities:FixedIncome; I hold the up three years of expenses in taxable CDs, the rest of of taxable in VTSAX and VTIAX; and the appropriate Target fund which brings my overall ratio to 60:40 Equities:FixedIncome.

livesoft
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Re: So much angst

Post by livesoft » Sun Jun 24, 2018 12:37 pm

Aren't you worried that the Target Retirement funds will underperform and create more taxes for you? Maybe you will also run out of money?
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averagedude
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Re: So much angst

Post by averagedude » Sun Jun 24, 2018 12:40 pm

There are alot of people who contribute 10 percent or more to their employers plan, get a 3 plus percentage match from their employers, and put it in their target date fund. They no nothing about investing, dont read or watch anything about investing, and dont care about investing. Providing they started early, these people have no anxiety and will have a bright financial future when they retire.

btenny
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Re: So much angst

Post by btenny » Sun Jun 24, 2018 12:51 pm

Yes your approach is simple and easy. But it has issues like lots of other approaches. Those trade offs are what is constantly debated here. Your plan uses two target date funds. Those are not very tax efficient in a taxable account. Plus why not just one target date fund? That it even simpler? Or why not use a three fund approach that is pretty tax efficient and simple and very low cost.

In my case I use a variety of bond funds for better returns and more value tilt in my stock allocations. I also use municipal bond funds in taxable accounts for lower taxes. All this creates complexity but slightly better returns ( I think) . But I am old and can spend the time managing my money. I am worried my wife may have management issues if she has to take over.

So there are lots of trade offs. Everyone needs to choose their own path.

Good Luck.

billthecat
Posts: 207
Joined: Tue Jan 24, 2017 2:50 pm

Re: So much angst

Post by billthecat » Sun Jun 24, 2018 12:53 pm

oldcomputerguy wrote:
Sun Jun 24, 2018 12:17 pm
At the risk of adding to the angst....

By trying to mix multiple target-date funds to hit a stock allocation of exactly 60%, you are fixating way, way too much on a 1% difference between your desired asset allocation and your portfolio makeup at the moment. A 1% difference is insignificant. Your described mix of two target-date funds to try to hit exactly 60% stock is not "simple", it's needless complication. Adding to the complication is your plan to put one target-date fund in your tax-advantaged account and the other in taxable. The bond component of the fund makes a target-date fund less tax-efficient than, say, a total-market stock index fund.

Just do a 60/40 three-fund portfolio, with the bond component in tax-advantaged, rebalance once a year to age-10 in bonds, and ignore it the other 364 days a year. That's "simple".
btenny wrote:
Sun Jun 24, 2018 12:51 pm
Yes your approach is simple and easy. But it has issues like lots of other approaches. Those trade offs are what is constantly debated here. Your plan uses two target date funds. Those are not very tax efficient in a taxable account. Plus why not just one target date fund? That it even simpler? Or why not use a three fund approach that is pretty tax efficient and simple and very low cost.

In my case I use a variety of bond funds for better returns and more value tilt in my stock allocations. I also use municipal bond funds in taxable accounts for lower taxes. All this creates complexity but slightly better returns ( I think) . But I am old and can spend the time managing my money. I am worried my wife may have management issues if she has to take over.

So there are lots of trade offs. Everyone needs to choose their own path.

Good Luck.

Well, they're different accounts. I'm not planning on having more than one target date fund in any one account. And five years later is closer to when I'd be able to access funds without penalty. But yes I could go with 2025 across the board.

As to tax efficiency of bonds, yes, conventional wisdom is to have it in your tax advantaged accounts. But WCI goes through how that isn't really the case when you compare tax-adjusted returns. You want your highest tax-adjusted returns in the tax-advantaged accounts. In the end, it depends on the gap between bond returns and stock returns. WCI concludes that if the nominal returns are within 2-5%, then do what you want, it doesn't really matter. If bonds are closer to stocks (<2% diff), then put bonds in tax advantaged accounts. If bonds are further (>5% diff), put stocks in. I split it by having some bonds in and some out.
livesoft wrote:
Sun Jun 24, 2018 12:37 pm
Aren't you worried that the Target Retirement funds will underperform and create more taxes for you? Maybe you will also run out of money?
Well, isn't the purpose of diversification to accept underperformance in good markets in return for better performance in bad markets?

I've done the modeling on cfiresim, Schwab.com, firecalc, my 401K, and everything says I won't run out of money spending double what I spend today.
PFInterest wrote:
Sun Jun 24, 2018 12:20 pm
honestly i feel you made it more complicated than it had to be. this whole subtract 10. why not 15, or 13, or 9? then you didnt even listen to your rule and picked a different random number.


thankfully none of that matters. carry on.
Only because Jack says age, and there seems to be a recurring view that that is too conservative.
Last edited by billthecat on Sun Jun 24, 2018 1:08 pm, edited 4 times in total.

billthecat
Posts: 207
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Re: So much angst

Post by billthecat » Sun Jun 24, 2018 1:00 pm

mpnret wrote:
Sun Jun 24, 2018 12:16 pm
billthecat wrote:
Sun Jun 24, 2018 11:23 am
I'm tired of the angst around this. I'm certainly not alone with the angst. There's topic after topic covering, Why include international? Why include bonds? Are CDs a good alternative to bonds? Should I invest or pay down debt? DIY? Robo? But the fees or minimum cash! Target date? Do bonds go in tax sheltered? Oh, wait, WCI says, no, the opposite! And on and on. So, here's what I'm doing:
  • I took my age (49), subtracted 10, and that's my target for everything except stocks, which I rounded to 60/40. So, 40% bonds, cash, alternatives.
  • I looked up the target date fund for my target (early) retirement, which would be the 2020 fund for my main taxable account.
  • The 2020 fund would put me at 46% stock. So I looked at counter-balancing it by having my tax-advantaged accounts in 2055 or 2060 (the max) funds (~95% stock). It didn't get me to where I wanted to be, so I stepped the main fund up to a 2025 fund, which is 59% stock. Very close! I can juice it by having my tax-advantaged accounts in 2030 funds. That gets me right to 60%. (I realize that 59% and 60% are seriously close enough but my butt says get as close as possible. Stupid butt.)
  • Weighted average ER is .075%.
  • It's simple, it's diversified, it's automatically adjusting.
  • And when I do retire, I'd just keep 12 months of expenses in cash on hand. and sell enough to generate cash, a month, or a quarter, or a year at a time, 12 months in advance (so I always have 12 months on hand).
Does that make sense? Has anyone here just thrown up their hands in disgust and gone simple, simple, simple?
Could you elaborate a bit on your weighted average ER of .075%. Everytime I try to do something similiar with target date funds I come up with at least double that. So for me I'm saving over 5G a year using admiral index funds and such. Well worth some angst.
The 2025 fund is .08, the 2030 fund (which is a different account, and which is smaller, and which has different fund options) is .05. I just calculated the fees the ER translates to, and divided that by the holdings.

dbr
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Re: So much angst

Post by dbr » Sun Jun 24, 2018 1:07 pm

billthecat wrote:
Sun Jun 24, 2018 1:00 pm
mpnret wrote:
Sun Jun 24, 2018 12:16 pm
billthecat wrote:
Sun Jun 24, 2018 11:23 am
I'm tired of the angst around this. I'm certainly not alone with the angst. There's topic after topic covering, Why include international? Why include bonds? Are CDs a good alternative to bonds? Should I invest or pay down debt? DIY? Robo? But the fees or minimum cash! Target date? Do bonds go in tax sheltered? Oh, wait, WCI says, no, the opposite! And on and on. So, here's what I'm doing:
  • I took my age (49), subtracted 10, and that's my target for everything except stocks, which I rounded to 60/40. So, 40% bonds, cash, alternatives.
  • I looked up the target date fund for my target (early) retirement, which would be the 2020 fund for my main taxable account.
  • The 2020 fund would put me at 46% stock. So I looked at counter-balancing it by having my tax-advantaged accounts in 2055 or 2060 (the max) funds (~95% stock). It didn't get me to where I wanted to be, so I stepped the main fund up to a 2025 fund, which is 59% stock. Very close! I can juice it by having my tax-advantaged accounts in 2030 funds. That gets me right to 60%. (I realize that 59% and 60% are seriously close enough but my butt says get as close as possible. Stupid butt.)
  • Weighted average ER is .075%.
  • It's simple, it's diversified, it's automatically adjusting.
  • And when I do retire, I'd just keep 12 months of expenses in cash on hand. and sell enough to generate cash, a month, or a quarter, or a year at a time, 12 months in advance (so I always have 12 months on hand).
Does that make sense? Has anyone here just thrown up their hands in disgust and gone simple, simple, simple?
Could you elaborate a bit on your weighted average ER of .075%. Everytime I try to do something similiar with target date funds I come up with at least double that. So for me I'm saving over 5G a year using admiral index funds and such. Well worth some angst.
The 2025 fund is .08, the 2030 fund (which is a different account, and which is smaller, and which has different fund options) is .05. I just calculated the fees the ER translates to, and divided that by the holdings.
It might help to specify what funds from what mutual fund company. Unstated the implication is Vanguard and their TR funds run at 0.13%-0.15%. An issue at Vanguard is they don't offer Admiral share classes in TR funds.

billthecat
Posts: 207
Joined: Tue Jan 24, 2017 2:50 pm

Re: So much angst

Post by billthecat » Sun Jun 24, 2018 1:10 pm

dbr wrote:
Sun Jun 24, 2018 1:07 pm
billthecat wrote:
Sun Jun 24, 2018 1:00 pm
mpnret wrote:
Sun Jun 24, 2018 12:16 pm
billthecat wrote:
Sun Jun 24, 2018 11:23 am
I'm tired of the angst around this. I'm certainly not alone with the angst. There's topic after topic covering, Why include international? Why include bonds? Are CDs a good alternative to bonds? Should I invest or pay down debt? DIY? Robo? But the fees or minimum cash! Target date? Do bonds go in tax sheltered? Oh, wait, WCI says, no, the opposite! And on and on. So, here's what I'm doing:
  • I took my age (49), subtracted 10, and that's my target for everything except stocks, which I rounded to 60/40. So, 40% bonds, cash, alternatives.
  • I looked up the target date fund for my target (early) retirement, which would be the 2020 fund for my main taxable account.
  • The 2020 fund would put me at 46% stock. So I looked at counter-balancing it by having my tax-advantaged accounts in 2055 or 2060 (the max) funds (~95% stock). It didn't get me to where I wanted to be, so I stepped the main fund up to a 2025 fund, which is 59% stock. Very close! I can juice it by having my tax-advantaged accounts in 2030 funds. That gets me right to 60%. (I realize that 59% and 60% are seriously close enough but my butt says get as close as possible. Stupid butt.)
  • Weighted average ER is .075%.
  • It's simple, it's diversified, it's automatically adjusting.
  • And when I do retire, I'd just keep 12 months of expenses in cash on hand. and sell enough to generate cash, a month, or a quarter, or a year at a time, 12 months in advance (so I always have 12 months on hand).
Does that make sense? Has anyone here just thrown up their hands in disgust and gone simple, simple, simple?
Could you elaborate a bit on your weighted average ER of .075%. Everytime I try to do something similiar with target date funds I come up with at least double that. So for me I'm saving over 5G a year using admiral index funds and such. Well worth some angst.
The 2025 fund is .08, the 2030 fund (which is a different account, and which is smaller, and which has different fund options) is .05. I just calculated the fees the ER translates to, and divided that by the holdings.
It might help to specify what funds from what mutual fund company. Unstated the implication is Vanguard and their TR funds run at 0.13%-0.15%. An issue at Vanguard is they don't offer Admiral share classes in TR funds.
Schwab Target 2025 Index Fund SWYDX in taxable.
Schwab Target 2030 Index Fund SWYEX in IRA.
BlackRock LifePath Index 2030 LINAX in 401K. In my 401k, the ER is .05%. It actually doesn't have its own symbol. Technically, it's not LINAX, but LINAX is a close match.
Last edited by billthecat on Sun Jun 24, 2018 1:28 pm, edited 3 times in total.

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oldcomputerguy
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Re: So much angst

Post by oldcomputerguy » Sun Jun 24, 2018 1:19 pm

billthecat wrote:
Sun Jun 24, 2018 1:10 pm
Schwab 2025 SWYDX in taxable.
Not bad! Fidelity's Freedom Index 2025 Institutional Premium fund also has a 0.08% ER, but it also has a $10 million minimum initial investment (versus SWYDX's $1 minimum investment). You go, Schwab!
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

livesoft
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Re: So much angst

Post by livesoft » Sun Jun 24, 2018 1:31 pm

billthecat wrote:
Sun Jun 24, 2018 12:53 pm
...
As to tax efficiency of bonds, yes, conventional wisdom is to have it in your tax advantaged accounts. But WCI goes through how that isn't really the case when you compare tax-adjusted returns. You want your highest tax-adjusted returns in the tax-advantaged accounts. In the end, it depends on the gap between bond returns and stock returns. WCI concludes that if the nominal returns are within 2-5%, then do what you want, it doesn't really matter. If bonds are closer to stocks (<2% diff), then put bonds in tax advantaged accounts. If bonds are further (>5% diff), put stocks in. I split it by having some bonds in and some out.
I am very familiar with the WCI articles. He seems to assume that one dies before they start to take RMDs from tax-deferred accounts. Large RMDs can bump taxpayers that pay 0% tax on long-term capital gains and 0% tax on qualified dividends into higher tax brackets which make calculating tax-adjusted returns 10 to 30 years earlier a bit of a punt.
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billthecat
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Re: So much angst

Post by billthecat » Sun Jun 24, 2018 1:40 pm

livesoft wrote:
Sun Jun 24, 2018 1:31 pm
billthecat wrote:
Sun Jun 24, 2018 12:53 pm
...
As to tax efficiency of bonds, yes, conventional wisdom is to have it in your tax advantaged accounts. But WCI goes through how that isn't really the case when you compare tax-adjusted returns. You want your highest tax-adjusted returns in the tax-advantaged accounts. In the end, it depends on the gap between bond returns and stock returns. WCI concludes that if the nominal returns are within 2-5%, then do what you want, it doesn't really matter. If bonds are closer to stocks (<2% diff), then put bonds in tax advantaged accounts. If bonds are further (>5% diff), put stocks in. I split it by having some bonds in and some out.
I am very familiar with the WCI articles. He seems to assume that one dies before they start to take RMDs from tax-deferred accounts. Large RMDs can bump taxpayers that pay 0% tax on long-term capital gains and 0% tax on qualified dividends into higher tax brackets which make calculating tax-adjusted returns 10 to 30 years earlier a bit of a punt.
Which is yet another uncertainty, so that's why I'm thinking having bonds both in taxable and tax sheltered, to cover any scenario, works for me. The entire tax system could be different by the time 70 1/2 rolls around. Plus, I'm going to do annual in-plan Roth conversions up to my tax free income (12,000+3,450) leading up to that point anyway.

JBTX
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Re: So much angst

Post by JBTX » Sun Jun 24, 2018 1:45 pm

Billthecat

BTW love your handle.

Your approach is very reasonable. All those other issues are fine tuning. People can get really wrapped around the axle on fine points here. They are interesting to debate but don't make much difference in the end.

billthecat
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Re: So much angst

Post by billthecat » Sun Jun 24, 2018 1:49 pm

JBTX wrote:
Sun Jun 24, 2018 1:45 pm
Billthecat

BTW love your handle.

Your approach is very reasonable. All those other issues are fine tuning. People can get really wrapped around the axle on fine points here. They are interesting to debate but don't make much difference in the end.
CyclingDuo wrote:
Sun Jun 24, 2018 11:41 am
billthecat wrote:
Sun Jun 24, 2018 11:23 am
...
Does that make sense? Has anyone here just thrown up their hands in disgust and gone simple, simple, simple?
Not I, but simple is effective. That's one of the beauties of the Three Fund Portfolio (or using a target fund which rebalances for you and follows the glide path).

I wouldn't call that throwing up your hands in disgust. I'd call that prudent, effective investing.
Karma Skimmer wrote:
Sun Jun 24, 2018 12:36 pm
It makes sense to me. I'm ten years older and with a similar allocation: 60:40 Equities:FixedIncome; I hold the up three years of expenses in taxable CDs, the rest of of taxable in VTSAX and VTIAX; and the appropriate Target fund which brings my overall ratio to 60:40 Equities:FixedIncome.
:sharebeer

JBTX
Posts: 3395
Joined: Wed Jul 26, 2017 12:46 pm

Re: So much angst

Post by JBTX » Sun Jun 24, 2018 2:06 pm

dbr wrote:
Sun Jun 24, 2018 1:07 pm
billthecat wrote:
Sun Jun 24, 2018 1:00 pm
mpnret wrote:
Sun Jun 24, 2018 12:16 pm
billthecat wrote:
Sun Jun 24, 2018 11:23 am
I'm tired of the angst around this. I'm certainly not alone with the angst. There's topic after topic covering, Why include international? Why include bonds? Are CDs a good alternative to bonds? Should I invest or pay down debt? DIY? Robo? But the fees or minimum cash! Target date? Do bonds go in tax sheltered? Oh, wait, WCI says, no, the opposite! And on and on. So, here's what I'm doing:
  • I took my age (49), subtracted 10, and that's my target for everything except stocks, which I rounded to 60/40. So, 40% bonds, cash, alternatives.
  • I looked up the target date fund for my target (early) retirement, which would be the 2020 fund for my main taxable account.
  • The 2020 fund would put me at 46% stock. So I looked at counter-balancing it by having my tax-advantaged accounts in 2055 or 2060 (the max) funds (~95% stock). It didn't get me to where I wanted to be, so I stepped the main fund up to a 2025 fund, which is 59% stock. Very close! I can juice it by having my tax-advantaged accounts in 2030 funds. That gets me right to 60%. (I realize that 59% and 60% are seriously close enough but my butt says get as close as possible. Stupid butt.)
  • Weighted average ER is .075%.
  • It's simple, it's diversified, it's automatically adjusting.
  • And when I do retire, I'd just keep 12 months of expenses in cash on hand. and sell enough to generate cash, a month, or a quarter, or a year at a time, 12 months in advance (so I always have 12 months on hand).
Does that make sense? Has anyone here just thrown up their hands in disgust and gone simple, simple, simple?
Could you elaborate a bit on your weighted average ER of .075%. Everytime I try to do something similiar with target date funds I come up with at least double that. So for me I'm saving over 5G a year using admiral index funds and such. Well worth some angst.
The 2025 fund is .08, the 2030 fund (which is a different account, and which is smaller, and which has different fund options) is .05. I just calculated the fees the ER translates to, and divided that by the holdings.
It might help to specify what funds from what mutual fund company. Unstated the implication is Vanguard and their TR funds run at 0.13%-0.15%. An issue at Vanguard is they don't offer Admiral share classes in TR funds.
If you have a vanguard 401k you get the institutional fund which is about .08.

2015
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Re: So much angst

Post by 2015 » Sun Jun 24, 2018 2:34 pm

I wouldn't regard taking advantage of the benefits of simplicity as "throwing up your hands" so much as being rational, that is, taking actions aligned with reality (Charlie Munger's thinking on this makes more sense than any theory postulated by "students of investing"). In my experience, as a result of simplicity, investing is not only simple but contrary to the popular myth it's easy as well.

The highest performers succeed not because they add, but because they subtract. Read outside the fields of economics, investing, and personal finance and you will see this is so.

heyyou
Posts: 3039
Joined: Tue Feb 20, 2007 4:58 pm

Re: So much angst

Post by heyyou » Sun Jun 24, 2018 2:54 pm

Patience is fullness. Consider not logging in to the the angst, instead take a walk where there are trees with birds discussing what they had for lunch, but don't eat what they did.

Pretend you are one of the geezers here who has seen so much that you are inured to market fluctuations, knowing that life will still be okay on the far side of the recurring but transient turmoil. Note that the media need drama to sell their products, but that's their problem, choose to not make it part of your life. There is a whole spectrum of good enough allocations, and the seeking of optimal (only known in retrospect!) is a source of trouble, so avoid comparing your returns to whatever was optimal for the most recent period. When driving on the freeway, it isn't safe to be traveling faster than everyone else.

mpnret
Posts: 23
Joined: Sun May 20, 2018 9:16 am

Re: So much angst

Post by mpnret » Sun Jun 24, 2018 3:13 pm

JBTX wrote:
Sun Jun 24, 2018 2:06 pm
dbr wrote:
Sun Jun 24, 2018 1:07 pm
billthecat wrote:
Sun Jun 24, 2018 1:00 pm
mpnret wrote:
Sun Jun 24, 2018 12:16 pm
billthecat wrote:
Sun Jun 24, 2018 11:23 am
I'm tired of the angst around this. I'm certainly not alone with the angst. There's topic after topic covering, Why include international? Why include bonds? Are CDs a good alternative to bonds? Should I invest or pay down debt? DIY? Robo? But the fees or minimum cash! Target date? Do bonds go in tax sheltered? Oh, wait, WCI says, no, the opposite! And on and on. So, here's what I'm doing:
  • I took my age (49), subtracted 10, and that's my target for everything except stocks, which I rounded to 60/40. So, 40% bonds, cash, alternatives.
  • I looked up the target date fund for my target (early) retirement, which would be the 2020 fund for my main taxable account.
  • The 2020 fund would put me at 46% stock. So I looked at counter-balancing it by having my tax-advantaged accounts in 2055 or 2060 (the max) funds (~95% stock). It didn't get me to where I wanted to be, so I stepped the main fund up to a 2025 fund, which is 59% stock. Very close! I can juice it by having my tax-advantaged accounts in 2030 funds. That gets me right to 60%. (I realize that 59% and 60% are seriously close enough but my butt says get as close as possible. Stupid butt.)
  • Weighted average ER is .075%.
  • It's simple, it's diversified, it's automatically adjusting.
  • And when I do retire, I'd just keep 12 months of expenses in cash on hand. and sell enough to generate cash, a month, or a quarter, or a year at a time, 12 months in advance (so I always have 12 months on hand).
Does that make sense? Has anyone here just thrown up their hands in disgust and gone simple, simple, simple?
Could you elaborate a bit on your weighted average ER of .075%. Everytime I try to do something similiar with target date funds I come up with at least double that. So for me I'm saving over 5G a year using admiral index funds and such. Well worth some angst.
The 2025 fund is .08, the 2030 fund (which is a different account, and which is smaller, and which has different fund options) is .05. I just calculated the fees the ER translates to, and divided that by the holdings.

It might help to specify what funds from what mutual fund company. Unstated the implication is Vanguard and their TR funds run at 0.13%-0.15%. An issue at Vanguard is they don't offer Admiral share classes in TR funds.
If you have a vanguard 401k you get the institutional fund which is about .08.
So your telling me that if I open up a 401K at Vanguard using 2030 Target Retirement Fund they are only going to charge me .05% ER. Something doesn't sound right. Can you point me to this info at Vanguard?

User avatar
knpstr
Posts: 1994
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Location: Michigan

Re: So much angst

Post by knpstr » Sun Jun 24, 2018 3:15 pm

billthecat wrote:
Sun Jun 24, 2018 11:23 am
...
Has anyone here just thrown up their hands in disgust and gone simple, simple, simple?
I'm 100% Total Stock Market. So that is pretty simple, simple, simple.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

lostdog
Posts: 993
Joined: Thu Feb 04, 2016 2:15 pm

Re: So much angst

Post by lostdog » Sun Jun 24, 2018 3:43 pm

knpstr wrote:
Sun Jun 24, 2018 3:15 pm
billthecat wrote:
Sun Jun 24, 2018 11:23 am
...
Has anyone here just thrown up their hands in disgust and gone simple, simple, simple?
I'm 100% Total Stock Market. So that is pretty simple, simple, simple.
+1

Vanguard Total World here.
Why world market cap? | https://m.youtube.com/watch?v=LwTHLtuToSY

KlangFool
Posts: 9189
Joined: Sat Oct 11, 2008 12:35 pm

Re: So much angst

Post by KlangFool » Sun Jun 24, 2018 3:49 pm

billthecat wrote:
Sun Jun 24, 2018 12:53 pm

I've done the modeling on cfiresim, Schwab.com, firecalc, my 401K, and everything says I won't run out of money spending double what I spend today.
billthecat,

1) Your modeling is only as good as your assumptions. You are 49 years old now. Are you going to be fully employed until 62/65/67 years old?

2) Any AA between 70/30 and 30/70 will work as long as your saving rate is high enough and your return rate is good enough. So, the bigger picture question is what are your assumptions in term of

A) Fully employed until 62/65/67?

B) Annual saving rate?

C) Average return rate? 5%? 6%? 7%?

KlangFool

User avatar
oldcomputerguy
Posts: 3051
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Location: In the middle of five acres of woods

Re: So much angst

Post by oldcomputerguy » Sun Jun 24, 2018 4:06 pm

KlangFool wrote:
Sun Jun 24, 2018 3:49 pm
billthecat wrote:
Sun Jun 24, 2018 12:53 pm

I've done the modeling on cfiresim, Schwab.com, firecalc, my 401K, and everything says I won't run out of money spending double what I spend today.
billthecat,

1) Your modeling is only as good as your assumptions. You are 49 years old now. Are you going to be fully employed until 62/65/67 years old?

2) Any AA between 70/30 and 30/70 will work as long as your saving rate is high enough and your return rate is good enough. So, the bigger picture question is what are your assumptions in term of

A) Fully employed until 62/65/67?

B) Annual saving rate?

C) Average return rate? 5%? 6%? 7%?

KlangFool
Add to this: OP, did you factor in the effect inflation will have on your expenses? And did you include a healthy (no pun intended) chunk down the road for medical expenses?
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

billthecat
Posts: 207
Joined: Tue Jan 24, 2017 2:50 pm

Re: So much angst

Post by billthecat » Sun Jun 24, 2018 4:53 pm

KlangFool wrote:
Sun Jun 24, 2018 3:49 pm
billthecat wrote:
Sun Jun 24, 2018 12:53 pm

I've done the modeling on cfiresim, Schwab.com, firecalc, my 401K, and everything says I won't run out of money spending double what I spend today.
billthecat,

1) Your modeling is only as good as your assumptions. You are 49 years old now. Are you going to be fully employed until 62/65/67 years old?

2) Any AA between 70/30 and 30/70 will work as long as your saving rate is high enough and your return rate is good enough. So, the bigger picture question is what are your assumptions in term of

A) Fully employed until 62/65/67?

B) Annual saving rate?

C) Average return rate? 5%? 6%? 7%?

KlangFool
oldcomputerguy wrote:
Sun Jun 24, 2018 4:06 pm


Add to this: OP, did you factor in the effect inflation will have on your expenses? And did you include a healthy (no pun intended) chunk down the road for medical expenses?
Of course, expenses are separate from my exasperation with the uncertainty of developing an investing strategy, let alone the uncertainty of outcome. Yes, expenses are in real dollars. As for medical, my 401K has a great modeler that projects expenses and factors in inflation, with the forecast presented in real dollars. The dollar discount and medical expense inflation are even at different rates. But sure there's more uncertainty with medical, and inflation in general. And a disaster could strike. The only way to maximize preparation for every unknown would be to work until the day you die. No thanks. No matter what happens in life, good or bad, you can't take it with you and you won't remember.
“Life should not be a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside in a cloud of smoke, thoroughly used up, totally worn out, and loudly proclaiming "Wow! What a Ride!”

― Hunter S. Thompson, The Proud Highway: Saga of a Desperate Southern Gentleman, 1955-1967
You don't get that experience sitting in an office, or sitting in traffic (except maybe in India :shock:).

KlangFool
Posts: 9189
Joined: Sat Oct 11, 2008 12:35 pm

Re: So much angst

Post by KlangFool » Sun Jun 24, 2018 5:02 pm

billthecat wrote:
Sun Jun 24, 2018 4:53 pm
KlangFool wrote:
Sun Jun 24, 2018 3:49 pm
billthecat wrote:
Sun Jun 24, 2018 12:53 pm

I've done the modeling on cfiresim, Schwab.com, firecalc, my 401K, and everything says I won't run out of money spending double what I spend today.
billthecat,

1) Your modeling is only as good as your assumptions. You are 49 years old now. Are you going to be fully employed until 62/65/67 years old?

2) Any AA between 70/30 and 30/70 will work as long as your saving rate is high enough and your return rate is good enough. So, the bigger picture question is what are your assumptions in term of

A) Fully employed until 62/65/67?

B) Annual saving rate?

C) Average return rate? 5%? 6%? 7%?

KlangFool
oldcomputerguy wrote:
Sun Jun 24, 2018 4:06 pm


Add to this: OP, did you factor in the effect inflation will have on your expenses? And did you include a healthy (no pun intended) chunk down the road for medical expenses?
Of course, expenses are separate from my exasperation with the uncertainty of developing an investing strategy, let alone the uncertainty of outcome. Yes, expenses are in real dollars. As for medical, my 401K has a great modeler that projects expenses and factors in inflation, with the forecast presented in real dollars. The dollar discount and medical expense inflation are even at different rates. But sure there's more uncertainty with medical, and inflation in general. And a disaster could strike. The only way to maximize preparation for every unknown would be to work until the day you die. No thanks. No matter what happens in life, good or bad, you can't take it with you and you won't remember.
billthecat,

<<The only way to maximize preparation for every unknown would be to work until the day you die. No thanks. >>

Yes, that is true. But, there is a middle ground.

There is a difference between assuming everything goes well.

1A) Fully employed between now (49) and 67 years old -> 18 years.

1B) Average nominal return of 10+% over the next 18 years

Versus

2 A) Fully employed over the 5 to 10 years.

2 B) Average nominal return of 5+% over the next 10 years.

Assumption set (1) has no safety margin. It assumes that everything will go well. Assumption set (2) has a safety margin.

KlangFool

billthecat
Posts: 207
Joined: Tue Jan 24, 2017 2:50 pm

Re: So much angst

Post by billthecat » Sun Jun 24, 2018 5:03 pm

knpstr wrote:
Sun Jun 24, 2018 3:15 pm
billthecat wrote:
Sun Jun 24, 2018 11:23 am
...
Has anyone here just thrown up their hands in disgust and gone simple, simple, simple?
I'm 100% Total Stock Market. So that is pretty simple, simple, simple.
Yes, yes, yes it is! But maybe that makes sense because of your age, risk tolerance, and other such factors.

billthecat
Posts: 207
Joined: Tue Jan 24, 2017 2:50 pm

Re: So much angst

Post by billthecat » Sun Jun 24, 2018 5:04 pm

KlangFool wrote:
Sun Jun 24, 2018 5:02 pm

billthecat,

<<The only way to maximize preparation for every unknown would be to work until the day you die. No thanks. >>

Yes, that is true. But, there is a middle ground.

There is a difference between assuming everything goes well.

1A) Fully employed between now (49) and 67 years old -> 18 years.

1B) Average nominal return of 10+% over the next 18 years

Versus

2 A) Fully employed over the 5 to 10 years.

2 B) Average nominal return of 5+% over the next 10 years.

Assumption set (1) has no safety margin. It assumes that everything will go well. Assumption set (2) has a safety margin.

KlangFool
OK. So how does that tie into using target date funds?

JBTX
Posts: 3395
Joined: Wed Jul 26, 2017 12:46 pm

Re: So much angst

Post by JBTX » Sun Jun 24, 2018 5:08 pm

mpnret wrote:
Sun Jun 24, 2018 3:13 pm
JBTX wrote:
Sun Jun 24, 2018 2:06 pm
dbr wrote:
Sun Jun 24, 2018 1:07 pm
billthecat wrote:
Sun Jun 24, 2018 1:00 pm
mpnret wrote:
Sun Jun 24, 2018 12:16 pm

Could you elaborate a bit on your weighted average ER of .075%. Everytime I try to do something similiar with target date funds I come up with at least double that. So for me I'm saving over 5G a year using admiral index funds and such. Well worth some angst.
The 2025 fund is .08, the 2030 fund (which is a different account, and which is smaller, and which has different fund options) is .05. I just calculated the fees the ER translates to, and divided that by the holdings.

It might help to specify what funds from what mutual fund company. Unstated the implication is Vanguard and their TR funds run at 0.13%-0.15%. An issue at Vanguard is they don't offer Admiral share classes in TR funds.
If you have a vanguard 401k you get the institutional fund which is about .08.
So your telling me that if I open up a 401K at Vanguard using 2030 Target Retirement Fund they are only going to charge me .05% ER. Something doesn't sound right. Can you point me to this info at Vanguard?
Not the self employed 401k, but a company 401k, such as a Vanguard Acensus small biz plan. Not something you can do yourself.

KlangFool
Posts: 9189
Joined: Sat Oct 11, 2008 12:35 pm

Re: So much angst

Post by KlangFool » Sun Jun 24, 2018 5:39 pm

billthecat wrote:
Sun Jun 24, 2018 5:04 pm
KlangFool wrote:
Sun Jun 24, 2018 5:02 pm

billthecat,

<<The only way to maximize preparation for every unknown would be to work until the day you die. No thanks. >>

Yes, that is true. But, there is a middle ground.

There is a difference between assuming everything goes well.

1A) Fully employed between now (49) and 67 years old -> 18 years.

1B) Average nominal return of 10+% over the next 18 years

Versus

2 A) Fully employed over the 5 to 10 years.

2 B) Average nominal return of 5+% over the next 10 years.

Assumption set (1) has no safety margin. It assumes that everything will go well. Assumption set (2) has a safety margin.

KlangFool
OK. So how does that tie into using target date funds?
billthecat,

My point is this.

Those questions and answers are more important than the AA and/or target date funds. If you are satisfied with those answers, any target date funds with AA between 70/30 and 30/70 will work. If not, your AA would not matter anyhow.

For my own personal planning:

A) I assume that I will be fully employed over the next 2 to 3 years.

B) My annual saving rate is zero. Aka, I save nothing since I am paying for my kids' college education.

C) The average nominal return rate is 5% over the next 2 to 3 years.

My AA really does not matter. But, I pick 61/39 now and transition to 60/40 over the next 2 to 3 years.

KlangFool

billthecat
Posts: 207
Joined: Tue Jan 24, 2017 2:50 pm

Re: So much angst

Post by billthecat » Sun Jun 24, 2018 5:53 pm

KlangFool wrote:
Sun Jun 24, 2018 5:39 pm
billthecat,

My point is this.

Those questions and answers are more important than the AA and/or target date funds. If you are satisfied with those answers, any target date funds with AA between 70/30 and 30/70 will work. If not, your AA would not matter anyhow.

For my own personal planning:

A) I assume that I will be fully employed over the next 2 to 3 years.

B) My annual saving rate is zero. Aka, I save nothing since I am paying for my kids' college education.

C) The average nominal return rate is 5% over the next 2 to 3 years.

My AA really does not matter. But, I pick 61/39 now and transition to 60/40 over the next 2 to 3 years.

KlangFool
Wait, a shift of 1%? Now I don't feel so bad about tweaking the stock to get from 59% to 60%! :happy
Last edited by billthecat on Sun Jun 24, 2018 6:10 pm, edited 1 time in total.

mpnret
Posts: 23
Joined: Sun May 20, 2018 9:16 am

Re: So much angst

Post by mpnret » Sun Jun 24, 2018 6:02 pm

JBTX wrote:
Sun Jun 24, 2018 5:08 pm
mpnret wrote:
Sun Jun 24, 2018 3:13 pm
JBTX wrote:
Sun Jun 24, 2018 2:06 pm
dbr wrote:
Sun Jun 24, 2018 1:07 pm
billthecat wrote:
Sun Jun 24, 2018 1:00 pm


The 2025 fund is .08, the 2030 fund (which is a different account, and which is smaller, and which has different fund options) is .05. I just calculated the fees the ER translates to, and divided that by the holdings.

It might help to specify what funds from what mutual fund company. Unstated the implication is Vanguard and their TR funds run at 0.13%-0.15%. An issue at Vanguard is they don't offer Admiral share classes in TR funds.
If you have a vanguard 401k you get the institutional fund which is about .08.
So your telling me that if I open up a 401K at Vanguard using 2030 Target Retirement Fund they are only going to charge me .05% ER. Something doesn't sound right. Can you point me to this info at Vanguard?
Not the self employed 401k, but a company 401k, such as a Vanguard Acensus small biz plan. Not something you can do yourself.
Exactly. Are you sure you are only paying .05% ER total? It's been a while but my last conversation with Vanguard on this is that institutional rates are exactly that rates for institutions. The reason being that an institution (employer) gets a discount on a vanguard fund because the institution charges a small amount for a record keeping, statements, etc. which shows up as their own ER. With most major corporations when you add the vanguard institutional rate with the institutions own ER it comes out about the same as Vanguards investor rate. Sometimes you have to look to find this.

User avatar
knpstr
Posts: 1994
Joined: Thu Nov 20, 2014 8:57 pm
Location: Michigan

Re: So much angst

Post by knpstr » Sun Jun 24, 2018 6:12 pm

billthecat wrote:
Sun Jun 24, 2018 5:03 pm
knpstr wrote:
Sun Jun 24, 2018 3:15 pm
billthecat wrote:
Sun Jun 24, 2018 11:23 am
...
Has anyone here just thrown up their hands in disgust and gone simple, simple, simple?
I'm 100% Total Stock Market. So that is pretty simple, simple, simple.
Yes, yes, yes it is! But maybe that makes sense because of your age, risk tolerance, and other such factors.
Yes, I am (relatively) young and admittedly have a low tolerance for risk.
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

KlangFool
Posts: 9189
Joined: Sat Oct 11, 2008 12:35 pm

Re: So much angst

Post by KlangFool » Sun Jun 24, 2018 6:25 pm

billthecat wrote:
Sun Jun 24, 2018 5:53 pm
KlangFool wrote:
Sun Jun 24, 2018 5:39 pm
billthecat,

My point is this.

Those questions and answers are more important than the AA and/or target date funds. If you are satisfied with those answers, any target date funds with AA between 70/30 and 30/70 will work. If not, your AA would not matter anyhow.

For my own personal planning:

A) I assume that I will be fully employed over the next 2 to 3 years.

B) My annual saving rate is zero. Aka, I save nothing since I am paying for my kids' college education.

C) The average nominal return rate is 5% over the next 2 to 3 years.

My AA really does not matter. But, I pick 61/39 now and transition to 60/40 over the next 2 to 3 years.

KlangFool
Wait, a shift of 1%? Now I don't feel so bad about tweaking the stock to get from 59% to 60%! :happy
billthecat,

Yes, but the portfolio size is moving from 20X current annual expense to 23X current annual expense over the next 2 to 3 years.

KlangFool

stan1
Posts: 5629
Joined: Mon Oct 08, 2007 4:35 pm

Re: So much angst

Post by stan1 » Sun Jun 24, 2018 6:35 pm

These debates and angst are over perfection vs. good enough. In general what you propose is good enough for many situations. If you have taxable accounts and have high income separating out equities and bonds into different locations might defer taxes owed.

User avatar
StevieG72
Posts: 770
Joined: Wed Feb 05, 2014 9:00 pm

Re: So much angst

Post by StevieG72 » Sun Jun 24, 2018 6:50 pm

Your plan makes sense.

I did something similar, so maybe it is confirmation bias.

At 46 I have a 70/30 portfolio, target is to retire near 55.

60/40 is the sweet spot along the efficient frontier, it will serve you just fine.
Fools think their own way is right, but the wise listen to others.

JBTX
Posts: 3395
Joined: Wed Jul 26, 2017 12:46 pm

Re: So much angst

Post by JBTX » Sun Jun 24, 2018 9:46 pm

mpnret wrote:
Sun Jun 24, 2018 6:02 pm
JBTX wrote:
Sun Jun 24, 2018 5:08 pm
mpnret wrote:
Sun Jun 24, 2018 3:13 pm
JBTX wrote:
Sun Jun 24, 2018 2:06 pm
dbr wrote:
Sun Jun 24, 2018 1:07 pm



It might help to specify what funds from what mutual fund company. Unstated the implication is Vanguard and their TR funds run at 0.13%-0.15%. An issue at Vanguard is they don't offer Admiral share classes in TR funds.
If you have a vanguard 401k you get the institutional fund which is about .08.
So your telling me that if I open up a 401K at Vanguard using 2030 Target Retirement Fund they are only going to charge me .05% ER. Something doesn't sound right. Can you point me to this info at Vanguard?
Not the self employed 401k, but a company 401k, such as a Vanguard Acensus small biz plan. Not something you can do yourself.
Exactly. Are you sure you are only paying .05% ER total? It's been a while but my last conversation with Vanguard on this is that institutional rates are exactly that rates for institutions. The reason being that an institution (employer) gets a discount on a vanguard fund because the institution charges a small amount for a record keeping, statements, etc. which shows up as their own ER. With most major corporations when you add the vanguard institutional rate with the institutions own ER it comes out about the same as Vanguards investor rate. Sometimes you have to look to find this.
First I never said.05. I think it is around.07-.08.

Second, I only know this because I was evaluating small company business plans for a small employer and I talked to vanguard/acencus. The lower fees on target date funds was one of their selling points vs other small biz plans. They said the small biz plan gets institutional rates. Yes they do charge the employer a fairly modest fee for administrative services. But so do all other small biz plans. It's a few thousand dollars. Maybe 1/2 percent of plan resources. But I think those fees are really more to cover the incremental costs of administering a 401k plan vs reallocating standard fund fees back to the employer.

mpnret
Posts: 23
Joined: Sun May 20, 2018 9:16 am

Re: So much angst

Post by mpnret » Mon Jun 25, 2018 5:13 am

JBTX wrote:
Sun Jun 24, 2018 9:46 pm
mpnret wrote:
Sun Jun 24, 2018 6:02 pm
JBTX wrote:
Sun Jun 24, 2018 5:08 pm
mpnret wrote:
Sun Jun 24, 2018 3:13 pm
JBTX wrote:
Sun Jun 24, 2018 2:06 pm


If you have a vanguard 401k you get the institutional fund which is about .08.
So your telling me that if I open up a 401K at Vanguard using 2030 Target Retirement Fund they are only going to charge me .05% ER. Something doesn't sound right. Can you point me to this info at Vanguard?
Not the self employed 401k, but a company 401k, such as a Vanguard Acensus small biz plan. Not something you can do yourself.
Exactly. Are you sure you are only paying .05% ER total? It's been a while but my last conversation with Vanguard on this is that institutional rates are exactly that rates for institutions. The reason being that an institution (employer) gets a discount on a vanguard fund because the institution charges a small amount for a record keeping, statements, etc. which shows up as their own ER. With most major corporations when you add the vanguard institutional rate with the institutions own ER it comes out about the same as Vanguards investor rate. Sometimes you have to look to find this.
First I never said.05. I think it is around.07-.08.

Second, I only know this because I was evaluating small company business plans for a small employer and I talked to vanguard/acencus. The lower fees on target date funds was one of their selling points vs other small biz plans. They said the small biz plan gets institutional rates. Yes they do charge the employer a fairly modest fee for administrative services. But so do all other small biz plans. It's a few thousand dollars. Maybe 1/2 percent of plan resources. But I think those fees are really more to cover the incremental costs of administering a 401k plan vs reallocating standard fund fees back to the employer.
The .05% was in reference to the 2030 fund. Here is your exact quote: "The 2025 fund is .08, the 2030 fund (which is a different account, and which is smaller, and which has different fund options) is .05."
The more important issue is you are quoting institutional rates which are only available to institutions and not individuals. Your total ER will be higher. Your plan without "angst" comes at a cost.

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oldcomputerguy
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Re: So much angst

Post by oldcomputerguy » Mon Jun 25, 2018 5:39 am

mpnret wrote:
Mon Jun 25, 2018 5:13 am
The .05% was in reference to the 2030 fund. Here is your exact quote: "The 2025 fund is .08, the 2030 fund (which is a different account, and which is smaller, and which has different fund options) is .05."
mpnret, you're confused. The quote you cite came from billthecat (the OP) referring to the funds he was contemplating, not from JBTX.
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Re: So much angst

Post by mpnret » Mon Jun 25, 2018 5:47 am

oldcomputerguy wrote:
Mon Jun 25, 2018 5:39 am
mpnret wrote:
Mon Jun 25, 2018 5:13 am
The .05% was in reference to the 2030 fund. Here is your exact quote: "The 2025 fund is .08, the 2030 fund (which is a different account, and which is smaller, and which has different fund options) is .05."
mpnret, you're confused. The quote you cite came from billthecat (the OP) referring to the funds he was contemplating, not from JBTX.
Yes, sorry about that. So many multiple quotes I got it wrong. Still the concept remains the same, if it's a fund with an institutional rate of .08 or .05 the total ER is higher when it gets to the individual.

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Re: So much angst

Post by oldcomputerguy » Mon Jun 25, 2018 6:07 am

mpnret wrote:
Mon Jun 25, 2018 5:47 am
oldcomputerguy wrote:
Mon Jun 25, 2018 5:39 am
mpnret wrote:
Mon Jun 25, 2018 5:13 am
The .05% was in reference to the 2030 fund. Here is your exact quote: "The 2025 fund is .08, the 2030 fund (which is a different account, and which is smaller, and which has different fund options) is .05."
mpnret, you're confused. The quote you cite came from billthecat (the OP) referring to the funds he was contemplating, not from JBTX.
Yes, sorry about that. So many multiple quotes I got it wrong. Still the concept remains the same, if it's a fund with an institutional rate of .08 or .05 the total ER is higher when it gets to the individual.
In fact, the OP gave the ticker for the 2030 fund he was referencing. The fund is SWYEX, Schwab lists this as a retail target-date fund with an ER of 0.08 and a minimum investment of $1.
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Re: So much angst

Post by Dazed&Confused » Mon Jun 25, 2018 9:57 am

oldcomputerguy wrote:
Sun Jun 24, 2018 12:17 pm
At the risk of adding to the angst....

By trying to mix multiple target-date funds to hit a stock allocation of exactly 60%, you are fixating way, way too much on a 1% difference between your desired asset allocation and your portfolio makeup at the moment. A 1% difference is insignificant. Your described mix of two target-date funds to try to hit exactly 60% stock is not "simple", it's needless complication. Adding to the complication is your plan to put one target-date fund in your tax-advantaged account and the other in taxable. The bond component of the fund makes a target-date fund less tax-efficient than, say, a total-market stock index fund.

Just do a 60/40 three-fund portfolio, with the bond component in tax-advantaged, rebalance once a year to age-10 in bonds, and ignore it the other 364 days a year. That's "simple".
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Re: So much angst

Post by JBTX » Mon Jun 25, 2018 1:19 pm

mpnret wrote:
Mon Jun 25, 2018 5:13 am
JBTX wrote:
Sun Jun 24, 2018 9:46 pm
mpnret wrote:
Sun Jun 24, 2018 6:02 pm
JBTX wrote:
Sun Jun 24, 2018 5:08 pm
mpnret wrote:
Sun Jun 24, 2018 3:13 pm


So your telling me that if I open up a 401K at Vanguard using 2030 Target Retirement Fund they are only going to charge me .05% ER. Something doesn't sound right. Can you point me to this info at Vanguard?
Not the self employed 401k, but a company 401k, such as a Vanguard Acensus small biz plan. Not something you can do yourself.
Exactly. Are you sure you are only paying .05% ER total? It's been a while but my last conversation with Vanguard on this is that institutional rates are exactly that rates for institutions. The reason being that an institution (employer) gets a discount on a vanguard fund because the institution charges a small amount for a record keeping, statements, etc. which shows up as their own ER. With most major corporations when you add the vanguard institutional rate with the institutions own ER it comes out about the same as Vanguards investor rate. Sometimes you have to look to find this.
First I never said.05. I think it is around.07-.08.

Second, I only know this because I was evaluating small company business plans for a small employer and I talked to vanguard/acencus. The lower fees on target date funds was one of their selling points vs other small biz plans. They said the small biz plan gets institutional rates. Yes they do charge the employer a fairly modest fee for administrative services. But so do all other small biz plans. It's a few thousand dollars. Maybe 1/2 percent of plan resources. But I think those fees are really more to cover the incremental costs of administering a 401k plan vs reallocating standard fund fees back to the employer.
The .05% was in reference to the 2030 fund. Here is your exact quote: "The 2025 fund is .08, the 2030 fund (which is a different account, and which is smaller, and which has different fund options) is .05."
The more important issue is you are quoting institutional rates which are only available to institutions and not individuals. Your total ER will be higher. Your plan without "angst" comes at a cost.
You are confusing me with OP. I didn't say that.

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Re: So much angst

Post by mpnret » Mon Jun 25, 2018 2:10 pm

I noticed Schwab SWYEX is holding more in cash than the equivalent VG TR 2030 fund. Could that possibly be where they are making up for the low expense ratio?

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Re: So much angst

Post by billthecat » Mon Jun 25, 2018 5:38 pm

mpnret wrote:
Mon Jun 25, 2018 5:47 am
oldcomputerguy wrote:
Mon Jun 25, 2018 5:39 am
mpnret wrote:
Mon Jun 25, 2018 5:13 am
The .05% was in reference to the 2030 fund. Here is your exact quote: "The 2025 fund is .08, the 2030 fund (which is a different account, and which is smaller, and which has different fund options) is .05."
mpnret, you're confused. The quote you cite came from billthecat (the OP) referring to the funds he was contemplating, not from JBTX.
Yes, sorry about that. So many multiple quotes I got it wrong. Still the concept remains the same, if it's a fund with an institutional rate of .08 or .05 the total ER is higher when it gets to the individual.
Not sure where you got the institutional reference. My fees are .08 for the Schwab funds, and .05 for BlackRock in my 401K.
mpnret wrote:
Mon Jun 25, 2018 2:10 pm
I noticed Schwab SWYEX is holding more in cash than the equivalent VG TR 2030 fund. Could that possibly be where they are making up for the low expense ratio?
That may be the case. It certainly would be in line with their robo, which has a high cash balance and no fees.

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Re: So much angst

Post by mpnret » Mon Jun 25, 2018 6:31 pm

I just checked and Schwab SWYEX is holding 2.21% more in cash than the equivalent VG TR 2030 fund. So just for a comparision I assumed I could get 4% more on average over time for that 2.21% if it was invested (YMMV). Then adding that loss to the .08% ER, I come up with .164% equivalent ER. So I'm back to the 3 fund until I can find a way to auto balance without hidden fees.

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