New and looking for help simplifying portfolio for FIRE(?)

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SerenityBlue
Posts: 18
Joined: Sat Jul 07, 2018 8:34 pm

New and looking for help simplifying portfolio for FIRE(?)

Post by SerenityBlue » Sun Jul 08, 2018 5:14 pm

Introduction
I came across Bogleheads back in 2016 when I wanted to be more clued into investment choices, but totally got intimidated/overwhelmed with the amount of info available. :oops: In my effort to be somewhat smart, I decided to instead invest with Betterment. Between getting married and a recent strong desire to have an early rat race exit, I'm ready to learn and take control of our investments to see how we can save better by reducing investment expenses as well as simplifying to a 3-fund portfolio for easier management. Full confession that I was a lazy investor and it is reflected in the massive/expensive investment choices below. That being said, I'm here at Bogleheads to learn from your guidance and help! :D I'm trying to be thorough here so this post is so much longer than I would like and I did my best to segment the info to make it a little more palatable. :shock: I appreciate any help/guidance you can give!

Basic Info
  • Emergency funds:6 Months
  • Gross Income:$120k
  • 2018 Annual Expenses:$50k
  • Debt:
    • Home: $107k @ 2.5% (13yrs left)
    • Car: $20k @ 1.9% (3yrs left)
    • Student: $5k @ 4.45% (Loan is subsidized so no interest accummulation. I plan to pay this off in mid-2019 when I'm done with school.)
  • Tax Filing Status: Married Filing Jointly
  • Tax Rate: 12% Federal, 2.5% State
  • State of Residence: NJ
  • Age: 38(Him) / 37(Her - Not currently working)
  • Current Investment Strategy: Reduce taxable income, maximize contributions to tax-advantaged accounts and contribute regularly to taxable account while using dollar-cost averaging
  • Desired Asset allocation:
    • Tax Advtg + Taxable: 90% stocks / 10% bonds
    • Future 2nd Home Downpayment(Taxable): 60% stocks / 40% bonds
  • Desired International allocation: 20% of stocks

Current retirement portfolio
Total Portfolio: $373k
Current AA: 86.5% Stocks / 12.5% Bonds / 1% Cash(HSA)

Vendor: Betterment
  • Joint Taxable(60/40) @ Betterment
    • 2.34% VTI: Vanguard Total Stock Market ETF 0.04
    • 1.52% VTV: Vanguard Value ETF 0.05
    • 0.69% IVE: iShares S&P 500 Value ETF 0.18
    • 0.73% VOE: Vanguard Mid-Cap Value ETF 0.07
    • 0.65% VBR: Vanguard Small-Cap Value ETF 0.07
    • 2.96% VEA: Vanguard FTSE Developed Markets 0.07
    • 1.61% SCHF: Schwab International Equity ETF 0.06
    • 0.65% VWO: Vanguard FTSE Emerging Markets 0.14
    • 0.36% IEMG: iShares Core MSCI Emerging Markets ETF 0.14
    • 3.79% MUB: iShares National AMT-Free Muni Bond ETF 0.07
    • 0.73% TFI: SPDR Nuveen Barclays Municipal Bond ETF 0.23
    • 0.42% LQD: iShares iBoxx $ Investment Grade Corporate Bond ETF 0.15
    • 1.69% BNDX: Vanguard Total International Bond ETF 0.11
    • 0.97% EMB: iShares Emerging Markets USD Bond ETF 0.40
  • His Taxable(90/10) @ Betterment
    • 0.20% VTI: Vanguard Total Stock Market ETF 0.04
    • 0.03% VTV: Vanguard Value ETF 0.05
    • 0.03% VOE: Vanguard Mid-Cap Value ETF 0.07
    • 0.00% IWS: iShares Russell Midcap Value ETF 0.25
    • 0.06% VBR: Vanguard Small-Cap Value ETF 0.07
    • 0.22% VEA: Vanguard FTSE Developed Markets 0.07
    • 0.04% SCHF: Schwab International Equity ETF 0.06
    • 0.10% VWO: Vanguard FTSE Emerging Markets 0.14
    • 0.00% VTIP: Vanguard Short-Term Inflation-Protected Securities ETF 0.06
    • 0.24% MUB: iShares National AMT-Free Muni Bond ETF 0.07
    • 0.09% TFI: SPDR Nuveen Barclays Municipal Bond ETF 0.23
    • 0.09% BNDX: Vanguard Total International Bond ETF 0.11
  • His Roth IRA @ Betterment
    • 2.35% VWO: Vanguard FTSE Emerging Markets 0.14
  • His Rollover IRA @ Betterment
    • 8.28% VTI: Vanguard Total Stock Market ETF 0.04
    • 2.23% VTV: Vanguard Value ETF 0.05
    • 1.80% VOE: Vanguard Mid-Cap Value ETF 0.07
    • 0.01% IJJ: iShares S&P Mid-Cap Value ETF 0.25
    • 1.49% VBR: Vanguard Small-Cap Value ETF 0.07
    • 6.23% VEA: Vanguard FTSE Developed Markets 0.07
    • 0.25% IEFA: iShares Core MSCI EAFE ETF 0.08
    • 1.39% VWO: Vanguard FTSE Emerging Markets 0.14
    • 0.33% VTIP: Vanguard Short-Term Inflation-Protected Securities ETF 0.06
    • 0.10% AGG: iShares Core Total US Bond Market ETF 0.05
    • 0.54% BND: Vanguard US Total Bond Market ETF 0.05
    • 0.87% BNDX: Vanguard Total International Bond ETF 0.11
    • 0.47% EMB: iShares Emerging Markets USD Bond ETF 0.4
  • Her Roth IRA @ Betterment
    • 0.02% VBR: Vanguard Small-Cap Value ETF 0.07
    • 0.26% VEA: Vanguard FTSE Developed Markets 0.07
    • 0.01% IEFA: iShares Core MSCI EAFE ETF 0.08
    • 0.29% VWO: Vanguard FTSE Emerging Markets 0.14
  • Her tIRA @ Betterment
    • 0.65% VTI: Vanguard Total Stock Market ETF 0.04
    • 0.17% VTV: Vanguard Value ETF 0.05
    • 0.14% VOE: Vanguard Mid-Cap Value ETF 0.07
    • 0.00% IJJ: iShares S&P Mid-Cap Value ETF 0.25
    • 0.10% VBR: Vanguard Small-Cap Value ETF 0.07
    • 0.24% VEA: Vanguard FTSE Developed Markets 0.07
    • 0.03% VTIP: Vanguard Short-Term Inflation-Protected Securities ETF 0.06
    • 0.07% AGG: iShares Core Total US Bond Market ETF 0.05
    • 0.07% BNDX: Vanguard Total International Bond ETF 0.11
    • 0.04% EMB: iShares Emerging Markets USD Bond ETF 0.4
Vendor: MFS
  • His Taxable @ MFS
    • 1.57% MIDAX: MFS International New Discovery Fund-A 1.30
  • His Rollover IRA @ MFS
    • 5.53% MFEGX: MFS Growth Fund-A 0.93
  • His Roth IRA @ MFS
    • 1.17% OTCAX: MFS Mid Cap Growth Fund-A 1.2
    • 4.14% MNDAX: MFS New Discovery Fund-A 1.33
Vendor: Fidelity
  • His Taxable @ Fidelity
    • 1.67% BBY: Best Buy
Vendor: CapitalOne(soon to be ETrade)
  • Her Taxable @ CapitalOne
    • 0.05% AMZN: Amazon.com INC
    • 0.09% GOGO: GOGO Inc
    • 1.87% M: Macys Inc
Vendor: Employer
  • His t401k @ Employer(fully vested/employer matches 50% of 6% employee contribution)
    • 5.85% PRFDX: T. Rowe Price Equity Income 0.78
    • 12.47% LEI 549300DV3AHZPECBC250: Wellington SMID Cap Research Equity - Series 3 0.85
    • 11.28% AEPGX: American Funds EuroPacific Growth Fund 0.62
  • His HSA @ Employer
    • 2.74% VSMGX: Vanguard LifeStrategy Moderate Growth Investor 0.13
    • 1.83% VSMGX: Vanguard LifeStrategy Moderate Growth Investor 0.13
    • 1.07% Cash
Annual Contributions
  • His t401k: $18,500+$3,600(Employer)
  • His HSA: $6,900
  • His Roth IRA: $5,500
  • Her Roth IRA: $5,500
  • Taxable: $2,600
Available funds
  • 401k @ Employer
    • BlackRock LifePath Index Retirement Fund 0.21%
    • BlackRock LifePath Index 2020 Fund 0.21%
    • BlackRock LifePath Index 2025 Fund 0.21%
    • BlackRock LifePath Index 2030 Fund 0.21%
    • BlackRock LifePath Index 2035 Fund 0.21%
    • BlackRock LifePath Index 2040 Fund 0.21%
    • BlackRock LifePath Index 2045 Fund 0.21%
    • BlackRock LifePath Index 2050 Fund 0.21%
    • BlackRock LifePath Index 2055 Fund 0.21%
    • BlackRock LifePath Index 2060 Fund 0.21%
    • Stable Value Fund 0.50%
    • Vanguard Total Bond Market Index 0.16%
    • Loomis Sayles Core Plus Fixed Income Trust 0.47%
    • Vanguard Balanced Index Fund 0.18%
    • Vanguard Total Stock Market Index 0.16%
    • Wellington SMID Cap Research Equity 0.83%
    • Vanguard PRIMECAP 0.45%
    • T.Rowe Price Equity Income Fund 0.78%
    • Vanguard Institutional Index Fund 0.16%
    • American Funds EuroPacific Growth Fund 0.62%
    • Dodge & Cox International Stock Fund 0.76%
    • Vanguard Global Equity 0.63%
    • Vanguard Total International Stock Index 0.21%
  • HSA @ Employer
    • Davis New York Venture, Class Y DNVYX 0.63
    • JPMorgan Large Cap Growth Fund, Institutional Class SEEGX 0.69
    • Oppenheimer Main St Mid Cap Fund Class Y MIGYX 0.69
    • Schwab Fundamental US Large Company Index Fund SFLNX 0.25
    • Vanguard 500 Index Fund Admiral Shares VFIAX 0.04
    • Vanguard Dividend Appreciation Fund Investor Class VDAIX 0.17
    • American Century Mid Cap Value Fund Class I AVUAX 0.76
    • Artisan Small Cap Fund Institutional Class APHSX 1.01
    • Parnassus Mid Cap Fund Institutional Shares PFPMX 0.80
    • Vanguard Small-Cap Index Fund Admiral Shares VSMAX 0.06
    • Dodge & Cox International Stock Fund DODFX 0.64
    • Thornburg International Value Fund Class I TGVIX 0.95
    • Vanguard Developed Markets Index Fund Admiral Shares VTMGX 0.07
    • Vanguard Emerging Markets Stock Index Fund Admiral Shares VAMEX 0.14
    • AMG Amundi Intermediate Government Fund Class N MGIDX 0.89
    • Dodge & Cox Income Fund DODIX 0.43
    • Metropolitan West Total Return Bond Fund Class M MWTRX 0.67
    • Vanguard Long-term Bond Index Fund Investor Shares VBLTX 0.15
    • American Funds 2020 Target Date Retirement Fund Class R-6 RRCTX 0.35
    • American Funds 2025 Target Date Retirement Fund Class R-6 RFDTX 0.37
    • American Funds 2030 Target Date Retirement Fund Class R-6 RFETX 0.39
    • American Funds 2035 Target Date Retirement Fund Class R-6 RFFTX 0.40
    • American Funds 2040 Target Date Retirement Fund Class R-6 RFGTX 0.41
    • American Funds 2045 Target Date Retirement Fund Class R-6 RFHTX 0.41
    • American Funds 2050 Target Date Retirement Fund Class R-6 RFITX 0.42
    • American Funds 2055 Target Date Retirement Fund Class R-6 RFKTX 0.42
    • Vanguard LifeStrategy Conservative Growth Fund Investor Shares VSCGX 0.12
    • Vanguard LifeStrategy Moderate Growth Fund Investor Shares VSMGX 0.13
Questions:
  1. Would you agree that my first step is to simplify all my non-employer taxable/tax-advantaged accounts into a 3-fund portfolio so I can efficiently manage it in the future? Am I too aggressive with my desired retirement AA considering our age?
  2. If yes to #1, this seems like a monumental task taking into consideration tax consequences for taxable accounts and starting in-kind transfers between the institutions to the final destination firm. Should I immediately turn off Tax Loss Harvesting and reinvestment of dividends/capital gains on only taxable accounts and wait 12 months to reduce my tax implications? Or should I rip the band-aid and move them all into the 3 funds identified taking into account my 2018 tax bracket because my wife will not most likely not earn any income in 2018?
  3. Would you recommend making changes to my 401k and HSA fund selections that will lend to this 3-fund strategy?
  4. I have the ability to contribute towards a Roth 401k as well, but have not done so to keep us within a lower tax bracket. Does this make sense or am I passing up on an opportunity? My strategy between tax-deferred vs tax free has been to have them both through the investment vehicles I've been using but skewing more heavily towards tax-deferred to reduce our taxable income.
  5. With regards to FIRE, what tools can you recommend I use to project what possible year we could look at living off our investments that might also take into consideration major life events like having a child? I have a good idea of our current annual expenses and we have also considered re-locating within/outside of the country for a lower cost of living.
  6. I'm always tempted to pay down my mortgage and car loan more aggressively but have avoided it because of the low-interest rates and focused instead on investing that money. Can you confirm that this is a sound decision or is there another perspective I should take into consideration?
  7. As I make progress, would I be better off breaking this into multiple-posts for future additional questions while displaying the current state of our portfolio, or should I stick to editing the original post and adding questions as needed while reflecting changes?
Next Steps
  1. **COMPLETED** Research 401k/HSA funds and rebalance allocations based on funds picked for current and future contributions. Thanks to Soup Nazi's recommended fund list. Adjusted allocations to 80/20 and increased my desired international stock allocation to 30%.
    • 401k: 50% Vanguard Total Stock Market Index / 30% Vanguard Total International Stock Index / 20% Vanguard Total Bond Market Index
    • HSA: 40% Vanguard 500 Index / 10% Vanguard Small Cap Index / 20% Vanguard Developed Markets Index / 10% Vanguard Emerging Markets Index / 20% Vanguard Long Term Bond Index
  2. **COMPLETED** Research Vanguard transaction costs for non-VG MF/ETFs/Stocks No VG transaction costs to sell MFS funds. $7cost per ETF/Stock transaction.
  3. **COMPLETED** Determine cost basis for MFS/Betterment/Fidelity/CapitalOne taxable accounts
  4. **IN-PROGRESS** Prepare accounts for Vanguard transfer
    • **COMPLETED** MFS: Based on #1/#2 findings, determine future VG costs associated non-VG MFs and decide between in-kind or sell-before. Performing in-kind transfer and cost-basis is minimal ~$75 due to divident reinvestment.
    • Fidelity/CapitalOne: Based on #1/#2 findings, decide between in-kind or sell-before transfer
    • **COMPLETED** Betterment: Adjust all account allocations to Vanguard-only ETF funds and let Betterment's tax loss harvesting do its work
  5. **COMPLETED** Setup Vanguard retirement/brokerage accounts
  6. **IN-PROGRESS** Initiate in-kind transfers or fund deposits from other vendors
    • **COMPLETED** MFS
    • Fidelity/CapitalOne
    • **COMPLETED** Betterment
  7. **COMPLETED** Setup 3 VG fund portfolio and rebalance AA per plan
Edit 7.10.18 - Updated Next Steps to help prepare for Vanguard transfer and portfolio simplification.
Edit 7.12.18 - Updated Next Steps completed steps - 401k/HSA rebalancing based on funds picked. MFS in-kind transfer process in progress.
Edit 7.12.18 - Updated Next Steps completed steps - MFS and partial Betterment transfer completed and AA reallocation started.
Last edited by SerenityBlue on Fri Sep 21, 2018 9:51 am, edited 6 times in total.

bloom2708
Posts: 4659
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: New and looking for help simplifying portfolio for FIRE(?)

Post by bloom2708 » Mon Jul 09, 2018 9:43 am

Welcome!

Simplification is the word. Taxable accounts will be the most work if you have gains. If not much long/short gains, then it is a great time to move/simplify.

I would settle on Vanguard (Fidelity or Schwab would be next in line).

90/10 is quite risky for approaching 40. I would at least consider moving to 80/20.

I would go with this strategy:

1. 1 or 2 funds max in each account
2. Taxable should be Total US or Total International
3. Roth should be Total US or Total International
4. Think 3 fund (Total US, Total International, Total US Bond
5. Target Date fund (4 fund, adding International Bond) is a great choice in 401k and HSA. Pick the one that is closest to your desired mix of stocks/bonds (2030 to 2040 would seem about right). I use a Blackrock 2035 as the only fund in my 401k. It does the work for me. I fill it up.
6. Bonds in 401k. Based on #5, got a bit more conservative in HSA/401k so all your bonds can be in 401k/HSA.
7. If you get down to a 3/4 fund, let it sit for a bit. If you must tilt, Small Cap Value or REIT in Roth or maybe 401k.

It doesn't have to be complicated, expensive, require dozens of funds. All those small percentages don't move the needle. All the stock funds are buying different flavors of the same stocks. Lots of overlap.

Tax lost harvesting will come up. It is no panacea as it requires losses to "win". It is kind of like a tax break. You take it if it presents itself, but don't make a bet around harvesting losses.

Hopefully others will add their thoughts.

Welcome again!
Where to spend your time: | 1. You completely control <--spend your time here! | 2. You partially control <--spend your time here! | 3. You have no control <--spend no time here!

Soup Nazi
Posts: 29
Joined: Sun Dec 17, 2017 12:15 pm

Re: New and looking for help simplifying portfolio for FIRE(?)

Post by Soup Nazi » Mon Jul 09, 2018 10:25 am

To answer your questions:

1. Yes! Simple is better. That first list of 14 funds in your joint taxable account made my head hurt. You may be too aggressive for someone your age who is planning to retire early. All depends on your risk tolerance.
2. If it's true that you won't earn much income in 2018, you probably have a lot of space under the 22% tax bracket to move funds around in your taxable account. Do the math and switch as much as possible to harvest your capital gains/losses.
3. For 401(k), you can either do the simplest thing and pick a BlackRock LifePath Index Fund or save a little in expenses and do a mixture of Vanguard Total Stock Market Index, Vanguard Total International Stock Index and Vanguard Total Bond Market Index. Looks like doing the three funds will make your expense ratio about 0.17% versus 0.21% for the BlackRock LifePath Index funds. I'd just do the 2040 BlackRock LifePath Index Fund. Your HSA is a little more complicated because there is a greater difference in expense ratios between the index funds and Target Date Retirement Funds. You also don't have any Total Stock Market Index or Total International Stock Market Index funds. If you do 58% Vanguard 500 Index, 14% Vanguard Small Cap Index, 11% Vanguard Developed Markets Index , 7% Vanguard Emerging Markets Index and 10% Vanguard Long Term Bond Index you will approximate the total market at an expense ratio of about 0.05%. Or you can keep it simple and have a 0.41% expense ratio with the American Funds 2040 Target Date Retirement Fund. I'd probably just do the Target Date Retirement Fund since HSA accounts will rarely have six figures in them.
4. Putting more money into your traditional 401(k) this year will allow you to more effectively move to a 3-fund portfolio in your taxable accounts. Use up as much of that 12% bracket as you can.
5. Don't bother worrying about this until you are much closer to your goal. I am currently at about 13-14x annual expenses and don't have a retirement date planned out.
6. I would only pay down the mortgage and car loan after you have already maxed out all possible tax advantaged accounts for the year. It still makes more sense mathematically to just invest the rest in a taxable account though with such low interest rates.
7. Stick to editing the original post. Those of us who have already commented would like to keep track of your progress.

User avatar
CyclingDuo
Posts: 1686
Joined: Fri Jan 06, 2017 9:07 am

Re: New and looking for help simplifying portfolio for FIRE(?)

Post by CyclingDuo » Mon Jul 09, 2018 10:39 am

A quick suggestion would be to pick up a copy of Taylor Larimore's recently released Guide to the Three Fund Portfolio (eBook version is fine). It's a quick read and will - along with this website - help guide you to a much simpler, easier portfolio. The link is above if you click on Amazon, but it is also available at other sources for the eBook version for $11.99.

Whether or not you use Vanguard funds or ETF versions of the funds, or Schwab, or Fidelity, etc... doesn't really matter. You currently have a lot of overlap with the funds/ETF's you hold which is not needed.
SerenityBlue wrote:
Sun Jul 08, 2018 5:14 pm


Basic Info
  • Emergency funds:6 Months
  • Gross Income:$120k
  • 2018 Annual Expenses:$50k
  • Debt:
    • Home: $107k @ 2.5% (13yrs left)
    • Car: $20k @ 1.9% (3yrs left)
    • Student: $5k @ 4.45% (Loan is subsidized so no interest accummulation. I plan to pay this off in mid-2019 when I'm done with school.)
  • Tax Filing Status: Married Filing Jointly
  • Tax Rate: 12% Federal, 2.5% State
  • State of Residence: NJ
  • Age: 38(Him) / 37(Her - Not currently working)
  • Current Investment Strategy: Reduce taxable income, maximize contributions to tax-advantaged accounts and contribute regularly to taxable account while using dollar-cost averaging
  • Desired Asset allocation:
    • Tax Advtg + Taxable: 90% stocks / 10% bonds
    • Future 2nd Home Downpayment(Taxable): 60% stocks / 40% bonds
  • Desired International allocation: 20% of stocks

Current retirement portfolio
Total Portfolio: $373k
Current AA: 86.5% Stocks / 12.5% Bonds / 1% Cash(HSA)

Vendor: Betterment
  • Joint Taxable(60/40) @ Betterment
    • 2.34% VTI: Vanguard Total Stock Market ETF 0.04
    • 1.52% VTV: Vanguard Value ETF 0.05
    • 0.69% IVE: iShares S&P 500 Value ETF 0.18
    • 0.73% VOE: Vanguard Mid-Cap Value ETF 0.07
    • 0.65% VBR: Vanguard Small-Cap Value ETF 0.07
    • 2.96% VEA: Vanguard FTSE Developed Markets 0.07
    • 1.61% SCHF: Schwab International Equity ETF 0.06
    • 0.65% VWO: Vanguard FTSE Emerging Markets 0.14
    • 0.36% IEMG: iShares Core MSCI Emerging Markets ETF 0.14
    • 3.79% MUB: iShares National AMT-Free Muni Bond ETF 0.07
    • 0.73% TFI: SPDR Nuveen Barclays Municipal Bond ETF 0.23
    • 0.42% LQD: iShares iBoxx $ Investment Grade Corporate Bond ETF 0.15
    • 1.69% BNDX: Vanguard Total International Bond ETF 0.11
    • 0.97% EMB: iShares Emerging Markets USD Bond ETF 0.40
  • His Taxable(90/10) @ Betterment
    • 0.20% VTI: Vanguard Total Stock Market ETF 0.04
    • 0.03% VTV: Vanguard Value ETF 0.05
    • 0.03% VOE: Vanguard Mid-Cap Value ETF 0.07
    • 0.00% IWS: iShares Russell Midcap Value ETF 0.25
    • 0.06% VBR: Vanguard Small-Cap Value ETF 0.07
    • 0.22% VEA: Vanguard FTSE Developed Markets 0.07
    • 0.04% SCHF: Schwab International Equity ETF 0.06
    • 0.10% VWO: Vanguard FTSE Emerging Markets 0.14
    • 0.00% VTIP: Vanguard Short-Term Inflation-Protected Securities ETF 0.06
    • 0.24% MUB: iShares National AMT-Free Muni Bond ETF 0.07
    • 0.09% TFI: SPDR Nuveen Barclays Municipal Bond ETF 0.23
    • 0.09% BNDX: Vanguard Total International Bond ETF 0.11
  • His Roth IRA @ Betterment
    • 2.35% VWO: Vanguard FTSE Emerging Markets 0.14
  • His Rollover IRA @ Betterment
    • 8.28% VTI: Vanguard Total Stock Market ETF 0.04
    • 2.23% VTV: Vanguard Value ETF 0.05
    • 1.80% VOE: Vanguard Mid-Cap Value ETF 0.07
    • 0.01% IJJ: iShares S&P Mid-Cap Value ETF 0.25
    • 1.49% VBR: Vanguard Small-Cap Value ETF 0.07
    • 6.23% VEA: Vanguard FTSE Developed Markets 0.07
    • 0.25% IEFA: iShares Core MSCI EAFE ETF 0.08
    • 1.39% VWO: Vanguard FTSE Emerging Markets 0.14
    • 0.33% VTIP: Vanguard Short-Term Inflation-Protected Securities ETF 0.06
    • 0.10% AGG: iShares Core Total US Bond Market ETF 0.05
    • 0.54% BND: Vanguard US Total Bond Market ETF 0.05
    • 0.87% BNDX: Vanguard Total International Bond ETF 0.11
    • 0.47% EMB: iShares Emerging Markets USD Bond ETF 0.4
  • Her Roth IRA @ Betterment
    • 0.02% VBR: Vanguard Small-Cap Value ETF 0.07
    • 0.26% VEA: Vanguard FTSE Developed Markets 0.07
    • 0.01% IEFA: iShares Core MSCI EAFE ETF 0.08
    • 0.29% VWO: Vanguard FTSE Emerging Markets 0.14
  • Her tIRA @ Betterment
    • 0.65% VTI: Vanguard Total Stock Market ETF 0.04
    • 0.17% VTV: Vanguard Value ETF 0.05
    • 0.14% VOE: Vanguard Mid-Cap Value ETF 0.07
    • 0.00% IJJ: iShares S&P Mid-Cap Value ETF 0.25
    • 0.10% VBR: Vanguard Small-Cap Value ETF 0.07
    • 0.24% VEA: Vanguard FTSE Developed Markets 0.07
    • 0.03% VTIP: Vanguard Short-Term Inflation-Protected Securities ETF 0.06
    • 0.07% AGG: iShares Core Total US Bond Market ETF 0.05
    • 0.07% BNDX: Vanguard Total International Bond ETF 0.11
    • 0.04% EMB: iShares Emerging Markets USD Bond ETF 0.4
Vendor: MFS
  • His Taxable @ MFS
    • 1.57% MIDAX: MFS International New Discovery Fund-A 1.30
  • His Rollover IRA @ MFS
    • 5.53% MFEGX: MFS Growth Fund-A 0.93
  • His Roth IRA @ MFS
    • 1.17% OTCAX: MFS Mid Cap Growth Fund-A 1.2
    • 4.14% MNDAX: MFS New Discovery Fund-A 1.33
Vendor: Fidelity
  • His Taxable @ Fidelity
    • 1.67% BBY: Best Buy
Vendor: CapitalOne(soon to be ETrade)
  • Her Taxable @ CapitalOne
    • 0.05% AMZN: Amazon.com INC
    • 0.09% GOGO: GOGO Inc
    • 1.87% M: Macys Inc
Vendor: Employer
  • His t401k @ Employer(fully vested/employer matches 50% of 6% employee contribution)
    • 5.85% PRFDX: T. Rowe Price Equity Income 0.78
    • 12.47% LEI 549300DV3AHZPECBC250: Wellington SMID Cap Research Equity - Series 3 0.85
    • 11.28% AEPGX: American Funds EuroPacific Growth Fund 0.62
  • His HSA @ Employer
    • 2.74% VSMGX: Vanguard LifeStrategy Moderate Growth Investor 0.13
    • 1.83% VSMGX: Vanguard LifeStrategy Moderate Growth Investor 0.13
    • 1.07% Cash
Annual Contributions
  • His t401k: $18,500+$3,600(Employer)
  • His HSA: $6,900
  • His Roth IRA: $5,500
  • Her Roth IRA: $5,500
  • Taxable: $2,600
Available funds
  • 401k @ Employer
    • BlackRock LifePath Index Retirement Fund 0.21%
    • BlackRock LifePath Index 2020 Fund 0.21%
    • BlackRock LifePath Index 2025 Fund 0.21%
    • BlackRock LifePath Index 2030 Fund 0.21%
    • BlackRock LifePath Index 2035 Fund 0.21%
    • BlackRock LifePath Index 2040 Fund 0.21%
    • BlackRock LifePath Index 2045 Fund 0.21%
    • BlackRock LifePath Index 2050 Fund 0.21%
    • BlackRock LifePath Index 2055 Fund 0.21%
    • BlackRock LifePath Index 2060 Fund 0.21%
    • Stable Value Fund 0.50%
    • Vanguard Total Bond Market Index 0.16%
    • Loomis Sayles Core Plus Fixed Income Trust 0.47%
    • Vanguard Balanced Index Fund 0.18%
    • Vanguard Total Stock Market Index 0.16%
    • Wellington SMID Cap Research Equity 0.83%
    • Vanguard PRIMECAP 0.45%
    • T.Rowe Price Equity Income Fund 0.78%
    • Vanguard Institutional Index Fund 0.16%
    • American Funds EuroPacific Growth Fund 0.62%
    • Dodge & Cox International Stock Fund 0.76%
    • Vanguard Global Equity 0.63%
    • Vanguard Total International Stock Index 0.21%
  • HSA @ Employer
    • Davis New York Venture, Class Y DNVYX 0.63
    • JPMorgan Large Cap Growth Fund, Institutional Class SEEGX 0.69
    • Oppenheimer Main St Mid Cap Fund Class Y MIGYX 0.69
    • Schwab Fundamental US Large Company Index Fund SFLNX 0.25
    • Vanguard 500 Index Fund Admiral Shares VFIAX 0.04
    • Vanguard Dividend Appreciation Fund Investor Class VDAIX 0.17
    • American Century Mid Cap Value Fund Class I AVUAX 0.76
    • Artisan Small Cap Fund Institutional Class APHSX 1.01
    • Parnassus Mid Cap Fund Institutional Shares PFPMX 0.80
    • Vanguard Small-Cap Index Fund Admiral Shares VSMAX 0.06
    • Dodge & Cox International Stock Fund DODFX 0.64
    • Thornburg International Value Fund Class I TGVIX 0.95
    • Vanguard Developed Markets Index Fund Admiral Shares VTMGX 0.07
    • Vanguard Emerging Markets Stock Index Fund Admiral Shares VAMEX 0.14
    • AMG Amundi Intermediate Government Fund Class N MGIDX 0.89
    • Dodge & Cox Income Fund DODIX 0.43
    • Metropolitan West Total Return Bond Fund Class M MWTRX 0.67
    • Vanguard Long-term Bond Index Fund Investor Shares VBLTX 0.15
    • American Funds 2020 Target Date Retirement Fund Class R-6 RRCTX 0.35
    • American Funds 2025 Target Date Retirement Fund Class R-6 RFDTX 0.37
    • American Funds 2030 Target Date Retirement Fund Class R-6 RFETX 0.39
    • American Funds 2035 Target Date Retirement Fund Class R-6 RFFTX 0.40
    • American Funds 2040 Target Date Retirement Fund Class R-6 RFGTX 0.41
    • American Funds 2045 Target Date Retirement Fund Class R-6 RFHTX 0.41
    • American Funds 2050 Target Date Retirement Fund Class R-6 RFITX 0.42
    • American Funds 2055 Target Date Retirement Fund Class R-6 RFKTX 0.42
    • Vanguard LifeStrategy Conservative Growth Fund Investor Shares VSCGX 0.12
    • Vanguard LifeStrategy Moderate Growth Fund Investor Shares VSMGX 0.13
Questions:
  1. Would you agree that my first step is to simplify all my non-employer taxable/tax-advantaged accounts into a 3-fund portfolio so I can efficiently manage it in the future? Yes. Am I too aggressive with my desired retirement AA considering our age? That is an aggressive AA, but if you look at the AA of the appropriate target date fund based on your age (the 2050 fund) to use as a template, it is currently 89.82% stocks/10.18% bonds. The next age group fund (the 2045 target fund) is very similar at 89.79% stock/10.21% bonds. The question is if you are comfortable with that amount of risk and understand the implications of potential loss during a bear market compared to an AA that has a higher percentage in bonds? If you can stomach it and continue to contribute to all of your accounts during the low points, then coming out on the other side you will have a good boost back to where you were and beyond before the bear market. At your age, you have time to weather such a storm, but those of us who lived through the past 18 years have a recency bias of what that feels like with the drops. Good read on bull/bear markets here so you know that these are normal and part of staying the course: https://www.yardeni.com/pub/sp500corrbear.pdf

    Here is an example for a more severe near 50% bear market drop (this from a bear market in the 1970's that had a 47% drop) that illustrates typical losses in that kind of a drop:

    Image
  2. If yes to #1, this seems like a monumental task taking into consideration tax consequences for taxable accounts and starting in-kind transfers between the institutions to the final destination firm. Should I immediately turn off Tax Loss Harvesting and reinvestment of dividends/capital gains on only taxable accounts and wait 12 months to reduce my tax implications? Or should I rip the band-aid and move them all into the 3 funds identified taking into account my 2018 tax bracket because my wife will not most likely not earn any income in 2018? Depending on your tax situation this year and the capital gains, we would recommend taking as much time to do it to mitigate the taxes as you unwind the complexity in the taxable accounts. That might require more than one tax year to accomplish. There are no tax implications for the tax advantaged accounts as that can be done right away.
  3. Would you recommend making changes to my 401k and HSA fund selections that will lend to this 3-fund strategy? I assume you want the overall gestalt of your portfolio to reflect the 3 fund strategy. The target funds can also work in the accounts that don't have the individual three funds available.
  4. I have the ability to contribute towards a Roth 401k as well, but have not done so to keep us within a lower tax bracket. Does this make sense or am I passing up on an opportunity? My strategy between tax-deferred vs tax free has been to have them both through the investment vehicles I've been using but skewing more heavily towards tax-deferred to reduce our taxable income. Skip the 401k Roth and use traditional.
  5. With regards to FIRE, what tools can you recommend I use to project what possible year we could look at living off our investments that might also take into consideration major life events like having a child? I have a good idea of our current annual expenses and we have also considered re-locating within/outside of the country for a lower cost of living. Also investigate i-ORP.
  6. I'm always tempted to pay down my mortgage and car loan more aggressively but have avoided it because of the low-interest rates and focused instead on investing that money. Can you confirm that this is a sound decision or is there another perspective I should take into consideration? Pretty sound (especially the home loan at that rate). We're not fans of taking a loan on a car as we always save up our cash to purchase outright, but a loan at 0% - 2% is not horrible to say the least. As long as the household budget can balance your monthly expenses, taxes, debt servicing and still allow you to be contributing a good 15-20%+ to your retirement plans without it cramping your lifestyle to the detrimental side - you're good. Student loan first, of course.
  7. As I make progress, would I be better off breaking this into multiple-posts for future additional questions while displaying the current state of our portfolio, or should I stick to editing the original post and adding questions as needed while reflecting changes? Nothing wrong with updating your original post as changes are made for your own personal/public record of things you have tweaked. People will probably respond more to new threads that have separate questions than responding to this thread say months or years down the road.
Next Steps
  1. Simplify portfolio and reduce investment expenses
  2. TBD based on advice received from Bogleheads
"Everywhere is within walking distance if you have the time." ~ Steven Wright

pkcrafter
Posts: 13018
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: New and looking for help simplifying portfolio for FIRE(?)

Post by pkcrafter » Mon Jul 09, 2018 10:45 am

Welcome to the forum,

SerenityBlue wrote:
Sun Jul 08, 2018 5:14 pm
Introduction
I came across Bogleheads back in 2016 when I wanted to be more clued into investment choices, but totally got intimidated/overwhelmed with the amount of info available.
You got intimidated/overwhelmed? And look what you have now--a blivit! This really shakes my view of betterment.

The first thing you need to do is truly understand that the Boglehead method is not really difficult, so don't get lost in posts that are focused on details.

Asset allocation - you have selected that, so OK there, but it is a bit higher than I would have suggested, although recommendations can be all over the board.

Accounts and contributions - You are making use of the proper accounts. The big problem is the number of funds with very small holdings. The biggest problem is Betterment.

Basic Info
  • Emergency funds:6 Months
  • Gross Income:$120k
  • 2018 Annual Expenses:$50k
  • Debt:
    • Home: $107k @ 2.5% (13yrs left)
    • Car: $20k @ 1.9% (3yrs left)
    • Student: $5k @ 4.45% (Loan is subsidized so no interest accummulation. I plan to pay this off in mid-2019 when I'm done with school.)
  • Tax Filing Status: Married Filing Jointly
  • Tax Rate: 12% Federal, 2.5% State
  • State of Residence: NJ
  • Age: 38(Him) / 37(Her - Not currently working)
  • Current Investment Strategy: Reduce taxable income, maximize contributions to tax-advantaged accounts and contribute regularly to taxable account while using dollar-cost averaging
  • Desired Asset allocation:
    • Tax Advtg + Taxable: 90% stocks / 10% bonds
    • Future 2nd Home Downpayment(Taxable): 60% stocks / 40% bonds
  • Desired International allocation: 20% of stocks

Current retirement portfolio
Total Portfolio: $373k
Current AA: 86.5% Stocks / 12.5% Bonds / 1% Cash(HSA)

Vendor: Betterment
  • Joint Taxable(60/40) @ Betterment
    • 2.34% VTI: Vanguard Total Stock Market ETF 0.04
    • 1.52% VTV: Vanguard Value ETF 0.05
    • 0.69% IVE: iShares S&P 500 Value ETF 0.18
    • 0.73% VOE: Vanguard Mid-Cap Value ETF 0.07
    • 0.65% VBR: Vanguard Small-Cap Value ETF 0.07
    • 2.96% VEA: Vanguard FTSE Developed Markets 0.07
    • 1.61% SCHF: Schwab International Equity ETF 0.06
    • 0.65% VWO: Vanguard FTSE Emerging Markets 0.14
    • 0.36% IEMG: iShares Core MSCI Emerging Markets ETF 0.14
    • 3.79% MUB: iShares National AMT-Free Muni Bond ETF 0.07
    • 0.73% TFI: SPDR Nuveen Barclays Municipal Bond ETF 0.23
    • 0.42% LQD: iShares iBoxx $ Investment Grade Corporate Bond ETF 0.15
    • 1.69% BNDX: Vanguard Total International Bond ETF 0.11
    • 0.97% EMB: iShares Emerging Markets USD Bond ETF 0.40
  • His Taxable(90/10) @ Betterment
    • 0.20% VTI: Vanguard Total Stock Market ETF 0.04
    • 0.03% VTV: Vanguard Value ETF 0.05
    • 0.03% VOE: Vanguard Mid-Cap Value ETF 0.07
    • 0.00% IWS: iShares Russell Midcap Value ETF 0.25
    • 0.06% VBR: Vanguard Small-Cap Value ETF 0.07
    • 0.22% VEA: Vanguard FTSE Developed Markets 0.07
    • 0.04% SCHF: Schwab International Equity ETF 0.06
    • 0.10% VWO: Vanguard FTSE Emerging Markets 0.14
    • 0.00% VTIP: Vanguard Short-Term Inflation-Protected Securities ETF 0.06
    • 0.24% MUB: iShares National AMT-Free Muni Bond ETF 0.07
    • 0.09% TFI: SPDR Nuveen Barclays Municipal Bond ETF 0.23
    • 0.09% BNDX: Vanguard Total International Bond ETF 0.11
  • His Roth IRA @ Betterment
    • 2.35% VWO: Vanguard FTSE Emerging Markets 0.14
  • His Rollover IRA @ Betterment
    • 8.28% VTI: Vanguard Total Stock Market ETF 0.04
    • 2.23% VTV: Vanguard Value ETF 0.05
    • 1.80% VOE: Vanguard Mid-Cap Value ETF 0.07
    • 0.01% IJJ: iShares S&P Mid-Cap Value ETF 0.25
    • 1.49% VBR: Vanguard Small-Cap Value ETF 0.07
    • 6.23% VEA: Vanguard FTSE Developed Markets 0.07
    • 0.25% IEFA: iShares Core MSCI EAFE ETF 0.08
    • 1.39% VWO: Vanguard FTSE Emerging Markets 0.14
    • 0.33% VTIP: Vanguard Short-Term Inflation-Protected Securities ETF 0.06
    • 0.10% AGG: iShares Core Total US Bond Market ETF 0.05
    • 0.54% BND: Vanguard US Total Bond Market ETF 0.05
    • 0.87% BNDX: Vanguard Total International Bond ETF 0.11
    • 0.47% EMB: iShares Emerging Markets USD Bond ETF 0.4
  • Her Roth IRA @ Betterment
    • 0.02% VBR: Vanguard Small-Cap Value ETF 0.07
    • 0.26% VEA: Vanguard FTSE Developed Markets 0.07
    • 0.01% IEFA: iShares Core MSCI EAFE ETF 0.08
    • 0.29% VWO: Vanguard FTSE Emerging Markets 0.14
  • Her tIRA @ Betterment
    • 0.65% VTI: Vanguard Total Stock Market ETF 0.04
    • 0.17% VTV: Vanguard Value ETF 0.05
    • 0.14% VOE: Vanguard Mid-Cap Value ETF 0.07
    • 0.00% IJJ: iShares S&P Mid-Cap Value ETF 0.25
    • 0.10% VBR: Vanguard Small-Cap Value ETF 0.07
    • 0.24% VEA: Vanguard FTSE Developed Markets 0.07
    • 0.03% VTIP: Vanguard Short-Term Inflation-Protected Securities ETF 0.06
    • 0.07% AGG: iShares Core Total US Bond Market ETF 0.05
    • 0.07% BNDX: Vanguard Total International Bond ETF 0.11
    • 0.04% EMB: iShares Emerging Markets USD Bond ETF 0.4

You can stay at Betterment, but clean up the mess. No problem with the tax-advantaged accounts, but tell Betterment what you want in those accounts, or move them. If you do decide to move them, hold off until you get other things completed.

Vendor: MFS
  • His Taxable @ MFS
    • 1.57% MIDAX: MFS International New Discovery Fund-A 1.30
  • His Rollover IRA @ MFS
    • 5.53% MFEGX: MFS Growth Fund-A 0.93
  • His Roth IRA @ MFS
    • 1.17% OTCAX: MFS Mid Cap Growth Fund-A 1.2
    • 4.14% MNDAX: MFS New Discovery Fund-A 1.33
Get out. Use Schwab, Fidelity or Vanguard.
Vendor: Fidelity
  • His Taxable @ Fidelity
    • 1.67% BBY: Best Buy
I don't recommend individual stocks, but OK.

Vendor: CapitalOne(soon to be ETrade)
  • Her Taxable @ CapitalOne
    • 0.05% AMZN: Amazon.com INC
    • 0.09% GOGO: GOGO Inc
    • 1.87% M: Macys Inc
Vendor: Employer
  • His t401k @ Employer(fully vested/employer matches 50% of 6% employee contribution)
    • 5.85% PRFDX: T. Rowe Price Equity Income 0.78
    • 12.47% LEI 549300DV3AHZPECBC250: Wellington SMID Cap Research Equity - Series 3 0.85
    • 11.28% AEPGX: American Funds EuroPacific Growth Fund 0.62
    You have better choices.

  • His HSA @ Employer
    • 2.74% VSMGX: Vanguard LifeStrategy Moderate Growth Investor 0.13
    • 1.83% VSMGX: Vanguard LifeStrategy Moderate Growth Investor 0.13
    • 1.07% Cash
Annual Contributions
  • His t401k: $18,500+$3,600(Employer)
  • His HSA: $6,900
  • His Roth IRA: $5,500
  • Her Roth IRA: $5,500
  • Taxable: $2,600
Your saving/investing rate is excellent.

Available funds
  • 401k @ Employer
    • BlackRock LifePath Index Retirement Fund 0.21%
    • BlackRock LifePath Index 2020 Fund 0.21%
    • BlackRock LifePath Index 2025 Fund 0.21%
    • BlackRock LifePath Index 2030 Fund 0.21%
    • BlackRock LifePath Index 2035 Fund 0.21%
    • BlackRock LifePath Index 2040 Fund 0.21%
    • BlackRock LifePath Index 2045 Fund 0.21%
    • BlackRock LifePath Index 2050 Fund 0.21%
    • BlackRock LifePath Index 2055 Fund 0.21%
    • BlackRock LifePath Index 2060 Fund 0.21%
    • Stable Value Fund 0.50%
    • Vanguard Total Bond Market Index 0.16%
    • Loomis Sayles Core Plus Fixed Income Trust 0.47%
    • Vanguard Balanced Index Fund 0.18%
    • Vanguard Total Stock Market Index 0.16%
    • Wellington SMID Cap Research Equity 0.83%
    • Vanguard PRIMECAP 0.45%
    • T.Rowe Price Equity Income Fund 0.78%
    • Vanguard Institutional Index Fund 0.16%
    • American Funds EuroPacific Growth Fund 0.62%
    • Dodge & Cox International Stock Fund 0.76%
    • Vanguard Global Equity 0.63%
    • Vanguard Total International Stock Index 0.21%
  • HSA @ Employer
    • Davis New York Venture, Class Y DNVYX 0.63
    • JPMorgan Large Cap Growth Fund, Institutional Class SEEGX 0.69
    • Oppenheimer Main St Mid Cap Fund Class Y MIGYX 0.69
    • Schwab Fundamental US Large Company Index Fund SFLNX 0.25
    • Vanguard 500 Index Fund Admiral Shares VFIAX 0.04
    • Vanguard Dividend Appreciation Fund Investor Class VDAIX 0.17
    • American Century Mid Cap Value Fund Class I AVUAX 0.76
    • Artisan Small Cap Fund Institutional Class APHSX 1.01
    • Parnassus Mid Cap Fund Institutional Shares PFPMX 0.80
    • Vanguard Small-Cap Index Fund Admiral Shares VSMAX 0.06
    • Dodge & Cox International Stock Fund DODFX 0.64
    • Thornburg International Value Fund Class I TGVIX 0.95
    • Vanguard Developed Markets Index Fund Admiral Shares VTMGX 0.07
    • Vanguard Emerging Markets Stock Index Fund Admiral Shares VAMEX 0.14
    • AMG Amundi Intermediate Government Fund Class N MGIDX 0.89
    • Dodge & Cox Income Fund DODIX 0.43
    • Metropolitan West Total Return Bond Fund Class M MWTRX 0.67
    • Vanguard Long-term Bond Index Fund Investor Shares VBLTX 0.15
    • American Funds 2020 Target Date Retirement Fund Class R-6 RRCTX 0.35
    • American Funds 2025 Target Date Retirement Fund Class R-6 RFDTX 0.37
    • American Funds 2030 Target Date Retirement Fund Class R-6 RFETX 0.39
    • American Funds 2035 Target Date Retirement Fund Class R-6 RFFTX 0.40
    • American Funds 2040 Target Date Retirement Fund Class R-6 RFGTX 0.41
    • American Funds 2045 Target Date Retirement Fund Class R-6 RFHTX 0.41
    • American Funds 2050 Target Date Retirement Fund Class R-6 RFITX 0.42
    • American Funds 2055 Target Date Retirement Fund Class R-6 RFKTX 0.42
    • Vanguard LifeStrategy Conservative Growth Fund Investor Shares VSCGX 0.12
    • Vanguard LifeStrategy Moderate Growth Fund Investor Shares VSMGX 0.13
Questions:
  1. Would you agree that my first step is to simplify all my non-employer taxable/tax-advantaged accounts into a 3-fund portfolio so I can efficiently manage it in the future?
Uh, yeah, 1000%
Am I too aggressive with my desired retirement AA considering our age?
I think you are too aggressive, but individual situations and opinions vary, so take if for what it's worth.
[*]If yes to #1, this seems like a monumental task taking into consideration tax consequences for taxable accounts and starting in-kind transfers between the institutions to the final destination firm. Should I immediately turn off Tax Loss Harvesting and reinvestment of dividends/capital gains on only taxable accounts and wait 12 months to reduce my tax implications?
Yes, you can do that. Your Betterment taxable accounts are at least tax efficient, so no real hurry on those. You are correct, it would be a monumental task if you tried to do it all at once, so one thing at a time. I suspect you will actually get things done faster than you think if you develop a written plan to get on track.
Or should I rip the band-aid and move them all into the 3 funds identified taking into account my 2018 tax bracket because my wife will not most likely not earn any income in 2018?
That's a consideration, so develop a plan that might include it.
[*]Would you recommend making changes to my 401k and HSA fund selections that will lend to this 3-fund strategy?
Yes on 401k, HSA is OK except you appear to hold the same fund twice.
[*]I have the ability to contribute towards a Roth 401k as well, but have not done so to keep us within a lower tax bracket. Does this make sense or am I passing up on an opportunity? My strategy between tax-deferred vs tax free has been to have them both through the investment vehicles I've been using but skewing more heavily towards tax-deferred to reduce our taxable income.

It appears you are in a low tax bracket, so not a top priority.

[*]With regards to FIRE, what tools can you recommend I use to project what possible year we could look at living off our investments that might also take into consideration major life events like having a child? I have a good idea of our current annual expenses and we have also considered re-locating within/outside of the country for a lower cost of living.
As noted, your saving/investing rate is excellent, so you are on course. Don't bother with detailed plans at this point because life happens when you're making other plans. :happy
[*]I'm always tempted to pay down my mortgage and car loan more aggressively but have avoided it because of the low-interest rates and focused instead on investing that money. Can you confirm that this is a sound decision or is there another perspective I should take into consideration?
Your thinking on those loans is correct.

[*]As I make progress, would I be better off breaking this into multiple-posts for future additional questions while displaying the current state of our portfolio, or should I stick to editing the original post and adding questions as needed while reflecting changes?
[/list]
Maybe better to leave this post as is and ask additional questions as the discussion moves along.

Next Steps
  1. Simplify portfolio and reduce investment expenses
  2. TBD based on advice received from Bogleheads
:thumbsup

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

SerenityBlue
Posts: 18
Joined: Sat Jul 07, 2018 8:34 pm

Re: New and looking for help simplifying portfolio for FIRE(?)

Post by SerenityBlue » Mon Jul 09, 2018 5:03 pm

bloom2708, thank you for taking the time to review my post and giving me advice! :sharebeer I wrote my comments down below.
bloom2708 wrote:
Mon Jul 09, 2018 9:43 am
Welcome!

Simplification is the word. Taxable accounts will be the most work if you have gains. If not much long/short gains, then it is a great time to move/simplify.
SB: I agree! I'm ready to simplify and reduce my investment expenses in turn. With the exception of the Betterment taxable accounts, our other taxable account has been sitting put for over 18 months with no additional controbitions outside of dividend reinvestments. Considering that I'll be in the 12% Fed tax bracket this year, and looking at the 0% long term and 12% short term gain tax rates, I'll sit down to figure out the cost basis associated with those accounts.

I would settle on Vanguard (Fidelity or Schwab would be next in line).
SB: I'm leaning towards Vanguard as I'm an invest-and-wait type of investor. While IT/website/customer-service-access is important to me (which I believe Fidelity/Schwab are stronger based on comments), I believe I'll always have the ability to move to Fidelity/Schwab anytime I want once I've simplified my portfolio to 3 Vanguard funds. Right?

90/10 is quite risky for approaching 40. I would at least consider moving to 80/20.
SB: Thanks, I'll seriously consider this advice.

I would go with this strategy:

1. 1 or 2 funds max in each account
2. Taxable should be Total US or Total International
3. Roth should be Total US or Total International
4. Think 3 fund (Total US, Total International, Total US Bond
5. Target Date fund (4 fund, adding International Bond) is a great choice in 401k and HSA. Pick the one that is closest to your desired mix of stocks/bonds (2030 to 2040 would seem about right). I use a Blackrock 2035 as the only fund in my 401k. It does the work for me. I fill it up.
6. Bonds in 401k. Based on #5, got a bit more conservative in HSA/401k so all your bonds can be in 401k/HSA.
7. If you get down to a 3/4 fund, let it sit for a bit. If you must tilt, Small Cap Value or REIT in Roth or maybe 401k.
SB: Since I'm thinking a 3-fund strategy, should I be picking 3 funds in each 401k, taxable, Roth IRA and Trad/rollover IRA account or were you suggesting picking 1-2 fund types in each account to meet my AA?

It doesn't have to be complicated, expensive, require dozens of funds. All those small percentages don't move the needle. All the stock funds are buying different flavors of the same stocks. Lots of overlap.

Tax lost harvesting will come up. It is no panacea as it requires losses to "win". It is kind of like a tax break. You take it if it presents itself, but don't make a bet around harvesting losses.
SB: I started looking at this but quickly realized I was nowhere close to ready to do this on my own without consolidation and simplification.

Hopefully others will add their thoughts.

Welcome again!
Thank you!

SerenityBlue
Posts: 18
Joined: Sat Jul 07, 2018 8:34 pm

Re: New and looking for help simplifying portfolio for FIRE(?)

Post by SerenityBlue » Mon Jul 09, 2018 5:28 pm

Soup Nazi, I appreciate the answers you gave to each of my questions! My follow-up is below:
Soup Nazi wrote:
Mon Jul 09, 2018 10:25 am
To answer your questions:

1. Yes! Simple is better. That first list of 14 funds in your joint taxable account made my head hurt. You may be too aggressive for someone your age who is planning to retire early. All depends on your risk tolerance.
SB: When I started putting this post together, the sheer number of funds in my portfolios gave me a headache as well. Post the effort, I felt much better cause I know what I have and how it's allocated, but it really solidified the importance to simplify the portfolio if I wanted to personally manage it. I'm reconsidering my desired 90/10 AA to an 80/20 or 70/30 AA instead.

2. If it's true that you won't earn much income in 2018, you probably have a lot of space under the 22% tax bracket to move funds around in your taxable account. Do the math and switch as much as possible to harvest your capital gains/losses.
SB: I realized that with my 12% Fed tax bracket, I'm subject to 0% long-term and 12% short-term gain tax rates! The MFS account has only $80 in short-term gains this year due to dividend reinvestment, while everything else is long-term gains. The Betterment taxable account on the other hand will most likely require me to adjust the portfolio to 3 Vanguard funds first as I have been contributing to it actively. This way I might be able to take advantage of Betterment's tax loss harvesting algorithm before I perform an in-kind transfer to Vanguard so I can reduce my tax implications.

3. For 401(k), you can either do the simplest thing and pick a BlackRock LifePath Index Fund or save a little in expenses and do a mixture of Vanguard Total Stock Market Index, Vanguard Total International Stock Index and Vanguard Total Bond Market Index. Looks like doing the three funds will make your expense ratio about 0.17% versus 0.21% for the BlackRock LifePath Index funds. I'd just do the 2040 BlackRock LifePath Index Fund. Your HSA is a little more complicated because there is a greater difference in expense ratios between the index funds and Target Date Retirement Funds. You also don't have any Total Stock Market Index or Total International Stock Market Index funds. If you do 58% Vanguard 500 Index, 14% Vanguard Small Cap Index, 11% Vanguard Developed Markets Index , 7% Vanguard Emerging Markets Index and 10% Vanguard Long Term Bond Index you will approximate the total market at an expense ratio of about 0.05%. Or you can keep it simple and have a 0.41% expense ratio with the American Funds 2040 Target Date Retirement Fund. I'd probably just do the Target Date Retirement Fund since HSA accounts will rarely have six figures in them.
SB: Thanks for the fund suggestions! Am I reading correctly that it's up to me how much I value the effort I want to put into actively rebalancing the 401k/HSA by not picking a Target Date fund versus the additional expense ratio cost to be in a Target Date fund?

4. Putting more money into your traditional 401(k) this year will allow you to more effectively move to a 3-fund portfolio in your taxable accounts. Use up as much of that 12% bracket as you can.
SB: Thanks for confirming my current approach!

5. Don't bother worrying about this until you are much closer to your goal. I am currently at about 13-14x annual expenses and don't have a retirement date planned out.
SB: Sound advice since I'm a ways off from my goal.

6. I would only pay down the mortgage and car loan after you have already maxed out all possible tax advantaged accounts for the year. It still makes more sense mathematically to just invest the rest in a taxable account though with such low interest rates.
SB: Thanks for re-affirming my approach.

7. Stick to editing the original post. Those of us who have already commented would like to keep track of your progress.
SB: Will do!
Thank you!

megabad
Posts: 507
Joined: Fri Jun 01, 2018 4:00 pm

Re: New and looking for help simplifying portfolio for FIRE(?)

Post by megabad » Mon Jul 09, 2018 5:46 pm

SerenityBlue wrote:
Sun Jul 08, 2018 5:14 pm
I appreciate any help/guidance you can give!
I think there is a lot of good content above, but I would just add that a mega-backdoor roth would be a pretty high priority for me if I was in the 12% tax bracket. Not sure if this is a possibility with your 401k though.

SerenityBlue
Posts: 18
Joined: Sat Jul 07, 2018 8:34 pm

Re: New and looking for help simplifying portfolio for FIRE(?)

Post by SerenityBlue » Mon Jul 09, 2018 5:55 pm

CyclingDuo, thanks for reading my massive post and giving your advice! My comments below:
CyclingDuo wrote:
Mon Jul 09, 2018 10:39 am
A quick suggestion would be to pick up a copy of Taylor Larimore's recently released Guide to the Three Fund Portfolio (eBook version is fine). It's a quick read and will - along with this website - help guide you to a much simpler, easier portfolio. The link is above if you click on Amazon, but it is also available at other sources for the eBook version for $11.99.
SB: I'll get a copy of this. Thanks for the suggestion!

Whether or not you use Vanguard funds or ETF versions of the funds, or Schwab, or Fidelity, etc... doesn't really matter. You currently have a lot of overlap with the funds/ETF's you hold which is not needed.
SerenityBlue wrote:
Sun Jul 08, 2018 5:14 pm
Questions:
  1. Am I too aggressive with my desired retirement AA considering our age? That is an aggressive AA, but if you look at the AA of the appropriate target date fund based on your age (the 2050 fund) to use as a template, it is currently 89.82% stocks/10.18% bonds. The next age group fund (the 2045 target fund) is very similar at 89.79% stock/10.21% bonds. The question is if you are comfortable with that amount of risk and understand the implications of potential loss during a bear market compared to an AA that has a higher percentage in bonds? If you can stomach it and continue to contribute to all of your accounts during the low points, then coming out on the other side you will have a good boost back to where you were and beyond before the bear market. At your age, you have time to weather such a storm, but those of us who lived through the past 18 years have a recency bias of what that feels like with the drops. Good read on bull/bear markets here so you know that these are normal and part of staying the course: https://www.yardeni.com/pub/sp500corrbear.pdf

    Here is an example for a more severe near 50% bear market drop (this from a bear market in the 1970's that had a 47% drop) that illustrates typical losses in that kind of a drop:

    SB: While I have a conservative/risk-averse personality, I've so far been more risk-tolerant when it comes to investments because I understood how powerful and impactful investing when things are not looking good can be. I was heavily pushing for growth while realizing the risk of a 90/10 AA. The visuals you provided are very helpful to put things in perspective, and is something I need to sit down and discuss with my wife if we should be more 80/20 or 70/30 AA while taking into consideration our ages and life goals.
  2. If yes to #1, this seems like a monumental task taking into consideration tax consequences for taxable accounts and starting in-kind transfers between the institutions to the final destination firm. Should I immediately turn off Tax Loss Harvesting and reinvestment of dividends/capital gains on only taxable accounts and wait 12 months to reduce my tax implications? Or should I rip the band-aid and move them all into the 3 funds identified taking into account my 2018 tax bracket because my wife will not most likely not earn any income in 2018? Depending on your tax situation this year and the capital gains, we would recommend taking as much time to do it to mitigate the taxes as you unwind the complexity in the taxable accounts. That might require more than one tax year to accomplish. There are no tax implications for the tax advantaged accounts as that can be done right away.

    SB: Thanks. I need to remind myself that this is portfolio simplification effort is just as much a journey as much as investing is so patience is key. I realized that with my 12% Fed tax bracket, I'm subject to 0% long-term and 12% short-term gain tax rates! The MFS account has only $80 in short-term gains this year due to dividend reinvestment, while everything else is long-term gains. The Betterment taxable account on the other hand will most likely require me to adjust the portfolio to 3 Vanguard funds first as I have been contributing to it actively. This way I might be able to take advantage of Betterment's tax loss harvesting algorithm before I perform an in-kind transfer to Vanguard so I can reduce my tax implications. Or I can just stop investing in Betterment and wait 12+ months before moving it over to Vanguard.
  3. Would you recommend making changes to my 401k and HSA fund selections that will lend to this 3-fund strategy? I assume you want the overall gestalt of your portfolio to reflect the 3 fund strategy. The target funds can also work in the accounts that don't have the individual three funds available.
    SB: Learned a new word today 'gestalt'! Thanks for the advice!
  4. I have the ability to contribute towards a Roth 401k as well, but have not done so to keep us within a lower tax bracket. Does this make sense or am I passing up on an opportunity? My strategy between tax-deferred vs tax free has been to have them both through the investment vehicles I've been using but skewing more heavily towards tax-deferred to reduce our taxable income. Skip the 401k Roth and use traditional.
    SB: Thanks for confirming my current choice!
  5. With regards to FIRE, what tools can you recommend I use to project what possible year we could look at living off our investments that might also take into consideration major life events like having a child? I have a good idea of our current annual expenses and we have also considered re-locating within/outside of the country for a lower cost of living. Also investigate i-ORP.
    SB: That tool looks great! I've bookmarked it so I can give it a run once I have all this portfolio effort on track.
  6. I'm always tempted to pay down my mortgage and car loan more aggressively but have avoided it because of the low-interest rates and focused instead on investing that money. Can you confirm that this is a sound decision or is there another perspective I should take into consideration? Pretty sound (especially the home loan at that rate). We're not fans of taking a loan on a car as we always save up our cash to purchase outright, but a loan at 0% - 2% is not horrible to say the least. As long as the household budget can balance your monthly expenses, taxes, debt servicing and still allow you to be contributing a good 15-20%+ to your retirement plans without it cramping your lifestyle to the detrimental side - you're good. Student loan first, of course.
    SB: Awesome! If and when the wife goes back to work, we may then decide to tackle the loans while still maximizing our tax-advantaged investment opportunities.
  7. As I make progress, would I be better off breaking this into multiple-posts for future additional questions while displaying the current state of our portfolio, or should I stick to editing the original post and adding questions as needed while reflecting changes? Nothing wrong with updating your original post as changes are made for your own personal/public record of things you have tweaked. People will probably respond more to new threads that have separate questions than responding to this thread say months or years down the road.
    SB: I'll stick to keeping updating this one thread so I can track my journey and start other new threads as needed on specific investment topics.

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CyclingDuo
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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by CyclingDuo » Mon Jul 09, 2018 6:13 pm

SerenityBlue wrote:
Mon Jul 09, 2018 5:55 pm
CyclingDuo, thanks for reading my massive post and giving your advice!
No problems. Let me just say that your current savings rate of $39K is to be commended. You and your wife are well on your way to financial independence. I wouldn't lose sleep over the current complexity of your portfolio, nor the use of Betterment. The most important portion (and factor) of the equation is how much you are saving each year.

One of the excellent things about Taylor's books is reading about his own journey through his life of investing. He too, had plenty of complexity until he finally ended up in the Three Fund Portfolio for the past 18-19 years of his long life. We use the Three Fund in our retirement accounts, and I have schooled my two children on using it for their IRA's. Beyond that, we have a level of complexity in our taxable account that is taking years to unwind after three decades of primarily investing in individual stocks. :mrgreen:
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by SerenityBlue » Mon Jul 09, 2018 6:26 pm

pkcrafter, thanks for taking the time to review and reply to my giant post! My comments below:
pkcrafter wrote:
Mon Jul 09, 2018 10:45 am
Welcome to the forum,
SerenityBlue wrote:
Sun Jul 08, 2018 5:14 pm
Introduction
I came across Bogleheads back in 2016 when I wanted to be more clued into investment choices, but totally got intimidated/overwhelmed with the amount of info available.
You got intimidated/overwhelmed? And look what you have now--a blivit! This really shakes my view of betterment.
SB: My second new word of the day "blivit" from one thread! And you're absolutely right. When I compiled this together, I was shocked at how overly complex it is on the backend while Betterment makes it look extremely managed/simple on the front-end.

The first thing you need to do is truly understand that the Boglehead method is not really difficult, so don't get lost in posts that are focused on details.
SB: I keep catching myself doing this because those other posts are interesting and unknown to me... :oops:

Asset allocation - you have selected that, so OK there, but it is a bit higher than I would have suggested, although recommendations can be all over the board.
SB: Thanks, I'm seriously considering an 80/20 or 70/30 but will talk it over with my wife.

Accounts and contributions - You are making use of the proper accounts. The big problem is the number of funds with very small holdings. The biggest problem is Betterment.

Current retirement portfolio
Total Portfolio: $373k
Current AA: 86.5% Stocks / 12.5% Bonds / 1% Cash(HSA)

Vendor: Betterment

You can stay at Betterment, but clean up the mess. No problem with the tax-advantaged accounts, but tell Betterment what you want in those accounts, or move them. If you do decide to move them, hold off until you get other things completed.

SB: Thanks for the advice and Betterment is the last thing I plan to move over. Though I realized that I do have the ability to be more specific about my Betterment portfolio allocation, so I may look into adjusting it to 3 Vanguard funds first, take advantage of Betterment's tax loss harvesting algorithm and then perform an in-kind transfer to Vanguard so I can reduce my tax implications. Or I can just stop investing in Betterment and wait 12+ months before moving it over to Vanguard.

Vendor: MFS
Get out. Use Schwab, Fidelity or Vanguard.
SB: This is #1 on my list to move because I realized after compiling all this info that it had a 1.14% avg portfolio ER in addition to the annual per fund trustee fee I've been paying out.

Vendor: Fidelity

I don't recommend individual stocks, but OK.
SB: This was a leftover from a previous employer ESPP program and I didn't spend any money acquiring it so I never got rid of it either. This is probably #2 to move over along with the other stocks my wife procured herself.

Vendor: Employer
His t401k @ Employer(fully vested/employer matches 50% of 6% employee contribution)
You have better choices.
SB: Thanks, I'll start putting a mix of funds with low ER that match the 3-fund strat and my desired AA.
Annual Contributions
  • His t401k: $18,500+$3,600(Employer)
  • His HSA: $6,900
  • His Roth IRA: $5,500
  • Her Roth IRA: $5,500
  • Taxable: $2,600
Your saving/investing rate is excellent.
SB: Thank you! I can honestly say that I really upped my savings/investing game 3-4 years ago.

Questions:
  1. If yes to #1, this seems like a monumental task taking into consideration tax consequences for taxable accounts and starting in-kind transfers between the institutions to the final destination firm. Should I immediately turn off Tax Loss Harvesting and reinvestment of dividends/capital gains on only taxable accounts and wait 12 months to reduce my tax implications?

    Yes, you can do that. Your Betterment taxable accounts are at least tax efficient, so no real hurry on those. You are correct, it would be a monumental task if you tried to do it all at once, so one thing at a time. I suspect you will actually get things done faster than you think if you develop a written plan to get on track.
    SB: You're right. After reading all the replies and making a couple calls to determine fees/costs, this is not as bad as I thought it was going to be. It will take time but it's doable!
  2. Would you recommend making changes to my 401k and HSA fund selections that will lend to this 3-fund strategy?

    Yes on 401k, HSA is OK except you appear to hold the same fund twice.
    SB: Thank you! I forgot to represent it here, but the HSA is actually supposed to be just 1 VSMGX fund investment, but in my spreadsheet I was trying to get the 60/40 AA so I could properly calculate my current AA hence the duplication.
  3. With regards to FIRE, what tools can you recommend I use to project what possible year we could look at living off our investments that might also take into consideration major life events like having a child? I have a good idea of our current annual expenses and we have also considered re-locating within/outside of the country for a lower cost of living.

    As noted, your saving/investing rate is excellent, so you are on course. Don't bother with detailed plans at this point because life happens when you're making other plans. :happy
    SB: Sorry, it's the planner in me that tends to come out sometimes.. :oops:
  4. As I make progress, would I be better off breaking this into multiple-posts for future additional questions while displaying the current state of our portfolio, or should I stick to editing the original post and adding questions as needed while reflecting changes?
    Maybe better to leave this post as is and ask additional questions as the discussion moves along.
    SB: Thanks and will do!
:thumbsup

Paul
SB: Thank you, Paul! :sharebeer

SerenityBlue
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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by SerenityBlue » Mon Jul 09, 2018 6:30 pm

megabad wrote:
Mon Jul 09, 2018 5:46 pm
SerenityBlue wrote:
Sun Jul 08, 2018 5:14 pm
I appreciate any help/guidance you can give!
I think there is a lot of good content above, but I would just add that a mega-backdoor roth would be a pretty high priority for me if I was in the 12% tax bracket. Not sure if this is a possibility with your 401k though.
Thanks megabad! If I'm understanding you correctly and assuming the 401k->mega-backdoor Roth is possible, you're saying the ~$14k in taxes is worth the long-term tax-free growth? I'm confused cause all of these are pre-tax contributions and whether I can transfer those into a Roth if that option was available.

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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by megabad » Mon Jul 09, 2018 7:18 pm

SerenityBlue wrote:
Mon Jul 09, 2018 6:30 pm
Thanks megabad! If I'm understanding you correctly and assuming the 401k->mega-backdoor Roth is possible, you're saying the ~$14k in taxes is worth the long-term tax-free growth? I'm confused cause all of these are pre-tax contributions and whether I can transfer those into a Roth if that option was available.
It sounds like you are discussing a Roth conversion which is a different matter altogether. I simply meant to continue contributing pre-tax money to your 401k up to the $18,500 limit and then contribute additional funds over and above that as after tax 401k contributions. Then I would roll over only these after tax contributions (and a small amount of associated gains) to a Roth IRA. The tax impact should be minimal (assuming small amount of gains). See https://www.bogleheads.org/wiki/After-tax_401(k).

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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by SerenityBlue » Mon Jul 09, 2018 7:53 pm

megabad wrote:
Mon Jul 09, 2018 7:18 pm
It sounds like you are discussing a Roth conversion which is a different matter altogether. I simply meant to continue contributing pre-tax money to your 401k up to the $18,500 limit and then contribute additional funds over and above that as after tax 401k contributions. Then I would roll over only these after tax contributions (and a small amount of associated gains) to a Roth IRA. The tax impact should be minimal (assuming small amount of gains). See https://www.bogleheads.org/wiki/After-tax_401(k).
Ah, that makes sense. I just checked my 401k and doesn't look like it even gives me the option to contribute additional post-tax funds. It may require a call to the 401k provider. :confused I'll keep this option in my mind as I work through this process.

rgs92
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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by rgs92 » Mon Jul 09, 2018 8:00 pm

I also suggest, if you do retire early, moving out of New Jersey. The property tax savings will help out then.
Meanwhile, in a nutshell, consolidating into a typical 2-or-3-funder w/o any other expenses (like Betterment's) is the way to go.
Following the Boglehead path is really not complicated (just the opposite). It's all about perseverance and patience.

SerenityBlue
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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by SerenityBlue » Mon Jul 09, 2018 8:18 pm

rgs92 wrote:
Mon Jul 09, 2018 8:00 pm
I also suggest, if you do retire early, moving out of New Jersey. The property tax savings will help out then.
Meanwhile, in a nutshell, consolidating into a typical 2-or-3-funder w/o any other expenses (like Betterment's) is the way to go.
Following the Boglehead path is really not complicated (just the opposite). It's all about perseverance and patience.
Thanks rgs92. We are thinking of moving into PA in the next couple years due to proximity+work. Eventually are actually considering becoming expats as we both grew up outside of USA and love traveling. Outside of Googling this up, do you have a goto resource for property tax rates by state/region?

chevca
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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by chevca » Mon Jul 09, 2018 8:30 pm

Wow, props to you for doing all the math to figure out the minimal percentages of some of those holdings. Yes, simplify. I'm not even sure how to go about it with that many funds. But, some of them can only be a thousand or few thousand dollars. There can't be that much of a tax worry? Although, I guess it could add up with that many to sell.

rgs92
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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by rgs92 » Mon Jul 09, 2018 8:36 pm

Offhand, Delaware, Tennessee, and Georgia are on my radar for the great combination of reasonable real estate prices and low property taxes.
States like Washington have low property taxes, but the housing prices (in the good areas) are sky high.

Pennsylvania's better areas (like the Great Northeast, Bucks County, the Newtown area, the New Hope area, and the good Philly suburbs and King of Prussia) actually have fairly high housing prices and not-so-low property taxes. So be a little careful about PA.
It is low cost (and OK to live) in the Scranton/Wilkes-Barre area and the Poconos (although it's a little isolated).

Check out this active thread:
viewtopic.php?f=2&t=252902

SerenityBlue
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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by SerenityBlue » Tue Jul 10, 2018 11:05 am

chevca wrote:
Mon Jul 09, 2018 8:30 pm
Wow, props to you for doing all the math to figure out the minimal percentages of some of those holdings. Yes, simplify. I'm not even sure how to go about it with that many funds. But, some of them can only be a thousand or few thousand dollars. There can't be that much of a tax worry? Although, I guess it could add up with that many to sell.
Thanks! Between in-kind transfers, Betterment's tax loss harvesting and small dividend-reinvested short-term gains, I should be able reduce my tax implications. But only time will tell as I continue to chart this out and start taking action while determining my cost-basis.

SerenityBlue
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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by SerenityBlue » Tue Jul 10, 2018 11:06 am

rgs92 wrote:
Mon Jul 09, 2018 8:36 pm
Offhand, Delaware, Tennessee, and Georgia are on my radar for the great combination of reasonable real estate prices and low property taxes.
States like Washington have low property taxes, but the housing prices (in the good areas) are sky high.

Pennsylvania's better areas (like the Great Northeast, Bucks County, the Newtown area, the New Hope area, and the good Philly suburbs and King of Prussia) actually have fairly high housing prices and not-so-low property taxes. So be a little careful about PA.
It is low cost (and OK to live) in the Scranton/Wilkes-Barre area and the Poconos (although it's a little isolated).

Check out this active thread:
viewtopic.php?f=2&t=252902
Funny that all the areas you listed in PA are the ones I was considering as potential destinations.....back to the drawing board. :oops:

SerenityBlue
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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by SerenityBlue » Tue Jul 10, 2018 2:11 pm

Updated my original post's Next Steps to help prepare for Vanguard transfer and portfolio simplification. I think I've captured the initial steps on a high-level but would welcome any feedback.

Next Steps
  1. Research Vanguard transaction costs for non-VG MF/ETFs/Stocks
  2. Determine cost basis for MFS/Betterment/Fidelity/CapitalOne taxable accounts
  3. Prepare accounts for Vanguard transfer
    • MFS Portfolio: Based on #1/#2 findings, determine future VG costs associated non-VG MFs and decide between in-kind or sell-before
    • Fidelity/CapitalOne: Based on #1/#2 findings, decide between in-kind or sell-before transfer
    • Betterment: Adjust all account allocations to Vanguard-only ETF funds and let Betterment's tax loss harvesting do its work
  4. Setup Vanguard retirement/brokerage accounts, pick 3 VG fund and setup AA per plan
  5. Initiate in-kind transfers or fund deposits from other vendors

Charon
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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by Charon » Wed Jul 11, 2018 11:36 pm

rgs92 wrote:
Mon Jul 09, 2018 8:36 pm
States like Washington have low property taxes, but the housing prices (in the good areas) are sky high.
Spoken like someone not very familiar with Washington ;) (Yes, prices in Seattle are mostly very high... there are other good areas.)

Soup Nazi
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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by Soup Nazi » Thu Jul 12, 2018 10:01 am

SerenityBlue wrote:
Mon Jul 09, 2018 5:28 pm
SB: Thanks for the fund suggestions! Am I reading correctly that it's up to me how much I value the effort I want to put into actively rebalancing the 401k/HSA by not picking a Target Date fund versus the additional expense ratio cost to be in a Target Date fund?
Yes. That decision is up to you. For some people, simplicity is worth 36 basis points (.41-.05). Others are trying to squeeze every possible tenth of a percent out of their gains. 36 basis points would be quite a lot of money for a 401(k) account with $500K, but for an HSA account with $20K in it, that's an extra $72 in costs per year for having one fund versus five. Your overall savings rate will affect your final portfolio value and FIRE date way more than paying for an extra 36 basis points in an HSA account, and right now you have a fantastic savings rate!

SerenityBlue
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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by SerenityBlue » Thu Jul 12, 2018 11:52 am

Soup Nazi wrote:
Thu Jul 12, 2018 10:01 am
Yes. That decision is up to you. For some people, simplicity is worth 36 basis points (.41-.05). Others are trying to squeeze every possible tenth of a percent out of their gains. 36 basis points would be quite a lot of money for a 401(k) account with $500K, but for an HSA account with $20K in it, that's an extra $72 in costs per year for having one fund versus five. Your overall savings rate will affect your final portfolio value and FIRE date way more than paying for an extra 36 basis points in an HSA account, and right now you have a fantastic savings rate!
Thanks, I revisited my HSA and 401K available funds and realized that the ERs I documented were actually off by a few bps because the administrative fees were not captured originally. I updated my next steps and actually completed a couple already:

Next Steps
  1. **COMPLETED** Research 401k/HSA funds and rebalance allocations based on funds picked for current and future contributions. Thanks to Soup Nazi's recommended fund list. Adjusted allocations to 80/20 and increased my desired international stock allocation to 30%.
    • 401k: 50% Vanguard Total Stock Market Index / 30% Vanguard Total International Stock Index / 20% Vanguard Total Bond Market Index
    • HSA: 40% Vanguard 500 Index / 10% Vanguard Small Cap Index / 20% Vanguard Developed Markets Index / 20% Vanguard Emerging Markets Index / 20% Vanguard Long Term Bond Index
  2. **COMPLETED** Research Vanguard transaction costs for non-VG MF/ETFs/Stocks No VG transaction costs to sell MFS funds. $7cost per ETF/Stock transaction.
  3. **IN-PROGRESS** Determine cost basis for MFS/Betterment/Fidelity/CapitalOne taxable accounts
  4. **IN-PROGRESS** Prepare accounts for Vanguard transfer
    • **COMPLETED** MFS: Based on #1/#2 findings, determine future VG costs associated non-VG MFs and decide between in-kind or sell-before. Performing in-kind transfer and cost-basis is minimal ~$75 due to divident reinvestment.
    • Fidelity/CapitalOne: Based on #1/#2 findings, decide between in-kind or sell-before transfer
    • **IN-PROGRESS** Betterment: Adjust all account allocations to Vanguard-only ETF funds and let Betterment's tax loss harvesting do its work
  5. **IN-PROGRESS** Setup Vanguard retirement/brokerage accounts, pick 3 VG fund and setup AA per plan
  6. **IN-PROGRESS** Initiate in-kind transfers or fund deposits from other vendors
    • **IN-PROGRESS**MFS
    • Fidelity/CapitalOne
    • Betterment

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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by Soup Nazi » Sat Jul 14, 2018 7:43 pm

SerenityBlue wrote:
Thu Jul 12, 2018 11:52 am
Next Steps
  1. **COMPLETED** Research 401k/HSA funds and rebalance allocations based on funds picked for current and future contributions. Thanks to Soup Nazi's recommended fund list. Adjusted allocations to 80/20 and increased my desired international stock allocation to 30%.
    • 401k: 50% Vanguard Total Stock Market Index / 30% Vanguard Total International Stock Index / 20% Vanguard Total Bond Market Index
    • HSA: 40% Vanguard 500 Index / 10% Vanguard Small Cap Index / 20% Vanguard Developed Markets Index / 20% Vanguard Emerging Markets Index / 20% Vanguard Long Term Bond Index
Your HSA funds add up to 110%. I'm assuming you will put only 10% into Vanguard Emerging Markets instead of 20%, correct?

SerenityBlue
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Re: New and looking for help simplifying portfolio for FIRE(?)

Post by SerenityBlue » Sun Jul 15, 2018 2:18 pm

Soup Nazi wrote:
Sat Jul 14, 2018 7:43 pm
SerenityBlue wrote:
Thu Jul 12, 2018 11:52 am
Next Steps
  1. **COMPLETED** Research 401k/HSA funds and rebalance allocations based on funds picked for current and future contributions. Thanks to Soup Nazi's recommended fund list. Adjusted allocations to 80/20 and increased my desired international stock allocation to 30%.
    • 401k: 50% Vanguard Total Stock Market Index / 30% Vanguard Total International Stock Index / 20% Vanguard Total Bond Market Index
    • HSA: 40% Vanguard 500 Index / 10% Vanguard Small Cap Index / 20% Vanguard Developed Markets Index / 20% Vanguard Emerging Markets Index / 20% Vanguard Long Term Bond Index
Your HSA funds add up to 110%. I'm assuming you will put only 10% into Vanguard Emerging Markets instead of 20%, correct?
Yup, that was a typo. It's supposed to be 10%.

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