Help evaluate my investment situation

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NH3930
Posts: 15
Joined: Sun Sep 02, 2018 12:20 pm

Help evaluate my investment situation

Post by NH3930 » Mon Sep 03, 2018 11:36 pm

Hi, I'm a 38 year old male and have never been married. I work full time and contribute to my company's 401k plan, HSA, ESPP. I’m looking for advice since I’m pretty unfamiliar with things. I’ve been reading these blogs for the past couple weeks. I would appreciate some advice.

I gather that a good method to do is:
1. invest at least up to company match into 401k
2. HSA maximum
3. IRA or RIRA maximum
4. max out 401k
5. taxable brokerage account

My questions are about picking the right investments for my 401k, my 401k match amount, my RIRA investment pick, where to hold my emergency funds, what do to excess money outside of my emergency funds.

I do not own a house, but rent. I have property that is paid off that I would like to eventually build a house on. I do not know when that will happen though. I’m pretty content with where I live. I do not spend extravagantly. However, I don’t want to tie money up if I may need it.

State: Texas, no state income tax

Income
$93k/yr

Emergency funds
$100k in local savings acct making little interest plus $25k in cash in brokerage acct from selling ESPP stocks after holding for a year

Approximate annual expenses
$25k

Investments:

1. company 401k
a. company matches 100% up to 5% of my salary.
b. currently contributing 20% into the 401k.
2. ESPP
a. contributing 5%
b. I generally sell after holding for a year to avoid short term gains
3. HSA
a. been contributing for 1.5 years
b. built up cash to my maximum in network out of pocket
c. been investing the rest into FIOFX (2045 target date fund)
4. ROTH IRA
a. recently opened this account and used money from cash holdings in ESPP to invest $5500 maximum into FIOFX (2045 target date fund)


M 401k on Fidelity is squawking at me because of the assest allocation is not in line with what they recommend for my age. Some changes were done earlier this year and believe more was allocated into bonds than stocks.
My current allocations are as follows:

Name Asset Class Category % Invested
FID GNMA (FGMNX) Bond Investments Income 33.19%
FID 500 INDEX IPR (FXAIX) Stock Investments Large Cap 15.89%
DODGE & COX STOCK (DODGX) Stock Investments Large Cap 15.66%
COMPANY STOCK Stock Investments Company Stock 13.85%
FID FREEDOM 2030 K (FSNQX) Blended Fund Investments* N/A 9.72%
FID DIVERSFD INTL K6 (FKIDX) Stock Investments International 8.93%
AF GRTH FUND AMER R6 (RGAGX) Stock Investments Large Cap 1.60%
FID FREEDOM 2045 K (FSNZX) Blended Fund Investments* N/A 1.15%
Account Total 100%

Here are my investment options:


Name Asset Class Category ER

COMPANY STOCK Stock Investments Company Stock 0.01%
AF GRTH FUND AMER R6 (RGAGX) Stock Investments Large Cap 0.33%
DODGE & COX STOCK (DODGX) Stock Investments Large Cap 0.52%
FID 500 INDEX IPR (FXAIX) Stock Investments Large Cap 0.02%
FID MAGELLAN K (FMGKX) Stock Investments Large Cap 0.61%
FID MID CAP IDX INS (FSTPX) Stock Investments Mid-Cap 0.03%
FID SM CAP IDX INS (FSSSX) Stock Investments Small Cap 0.03%
TRP SM CAP STOCK I (OTIIX) Stock Investments Small Cap 0.75%
FID DIVERSFD INTL K6 (FKIDX) Stock Investments International 0.06%
FID GLB XUS IDX INS (FSGSX) Stock Investments International 0.06%
FID BALANCED K (FBAKX) Blended Fund Investments* N/A 0.46%
FID FREEDOM 2005 K (FSNJX) Blended Fund Investments* N/A 0.43%
FID FREEDOM 2010 K (FSNKX) Blended Fund Investments* N/A 0.46%
FID FREEDOM 2015 K (FSNLX) Blended Fund Investments* N/A 0.50%
FID FREEDOM 2020 K (FSNOX) Blended Fund Investments* N/A 0.54%
FID FREEDOM 2025 K (FSNPX) Blended Fund Investments* N/A 0.57%
FID FREEDOM 2030 K (FSNQX) Blended Fund Investments* N/A 0.61%
FID FREEDOM 2035 K (FSNUX) Blended Fund Investments* N/A 0.64%
FID FREEDOM 2040 K (FSNVX) Blended Fund Investments* N/A 0.65%
FID FREEDOM 2045 K (FSNZX) Blended Fund Investments* N/A 0.65%
FID FREEDOM 2050 K (FNSBX) Blended Fund Investments* N/A 0.65%
FID FREEDOM 2055 K (FNSDX) Blended Fund Investments* N/A 0.65%
FID FREEDOM 2060 K (FNSFX) Blended Fund Investments* N/A 0.65%
FID FREEDOM INC K (FNSHX) Blended Fund Investments* N/A 0.42%
MIP II CL 304/20/19937 day yield as of 07/31/2018 2.12% Bond Investments Stable Value 0.32%
BLKRK HIGH YLD BD K (BRHYX) Bond Investments Income 0.54%
DODGE & COX INCOME (DODIX) Bond Investments Income 0.43%
FID GNMA (FGMNX) Bond Investments Income 0.45%
VANG INFL PROT INST (VIPIX) Bond Investments Other 0.07%


I think I am doing good with the percentage of my salary that I am investing. I’m just not sure I have picked the best funds to invest in. I would appreciate some advice on that. Plus is it a bad idea to invest in the same target date index fund for my RIRA and HSA? I feel that I have the ability to stomach the market dips and will not sell at that time. I want to learn more, but like the idea of passive target date funds not taking so much of my time to manage.

I also need advice on what to do with my core money in the brokerage account. I can invest it. I was planning on using it to fund my RIRA yearly at a minimum. I want some funds liquid and want to explore that route as well for my savings account. I’ve read about high yield online savings accounts and also ladder CD’s. Would it be a good idea to put the money in online savings or hold it in fidelity and invest it there in some kind of liquid account?

Also need to understand what is the right mix of stocks/bonds, international versus domestic, etc. And how to maintain that mix. The company match goes into company stock. I do not understand the fees that are incurred by moving things around. Do I just adjust which funds my contributions go to as time goes on to eventually get the right balance? Or do I actively move things around?

I appreciate any insight. Thanks in advance.

PFInterest
Posts: 2252
Joined: Sun Jan 08, 2017 12:25 pm

Re: Help evaluate my investment situation

Post by PFInterest » Tue Sep 04, 2018 7:22 am

NH3930 wrote:
Mon Sep 03, 2018 11:36 pm
Hi, I'm a 38 year old male and have never been married.

I do not own a house, but rent.
I have property that is paid off that I would like to eventually build a house on.
State: Texas, no state income tax

Income
$93k/yr

Emergency funds
$100k in local savings acct making little interest plus $25k in cash in brokerage acct from selling ESPP stocks after holding for a year
- that is a huge EF. 4 years worth. i think thats a little much. how much of that could be put to work?

Approximate annual expenses
$25k

Investments:

1. company 401k
a. company matches 100% up to 5% of my salary.
b. currently contributing 20% into the 401k.
2. ESPP
a. contributing 5%
b. I generally sell after holding for a year to avoid short term gains
3. HSA
a. been contributing for 1.5 years
b. built up cash to my maximum in network out of pocket
c. been investing the rest into FIOFX (2045 target date fund)
4. ROTH IRA
a. recently opened this account and used money from cash holdings in ESPP to invest $5500 maximum into FIOFX (2045 target date fund)

My current allocations are as follows:

Name Asset Class Category % Invested
FID GNMA (FGMNX) Bond Investments Income 33.19%
FID 500 INDEX IPR (FXAIX) Stock Investments Large Cap 15.89%
DODGE & COX STOCK (DODGX) Stock Investments Large Cap 15.66%
COMPANY STOCK Stock Investments Company Stock 13.85%
FID FREEDOM 2030 K (FSNQX) Blended Fund Investments* N/A 9.72%
FID DIVERSFD INTL K6 (FKIDX) Stock Investments International 8.93%
AF GRTH FUND AMER R6 (RGAGX) Stock Investments Large Cap 1.60%
FID FREEDOM 2045 K (FSNZX) Blended Fund Investments* N/A 1.15%
Account Total 100%

Here are my investment options:
Name Asset Class Category ER
- i left only the options to look at
COMPANY STOCK Stock Investments Company Stock 0.01%
FID 500 INDEX IPR (FXAIX) Stock Investments Large Cap 0.02%
FID MID CAP IDX INS (FSTPX) Stock Investments Mid-Cap 0.03%
FID SM CAP IDX INS (FSSSX) Stock Investments Small Cap 0.03%
FID GLB XUS IDX INS (FSGSX) Stock Investments International 0.06%
MIP II CL 304/20/19937 day yield as of 07/31/2018 2.12% Bond Investments Stable Value 0.32%
DODGE & COX INCOME (DODIX) Bond Investments Income 0.43%
FID GNMA (FGMNX) Bond Investments Income 0.45%
VANG INFL PROT INST (VIPIX) Bond Investments Other 0.07%

Plus is it a bad idea to invest in the same target date index fund for my RIRA and HSA?
no thats fine.

I also need advice on what to do with my core money in the brokerage account. I can invest it. I was planning on using it to fund my RIRA yearly at a minimum. I want some funds liquid and want to explore that route as well for my savings account. I’ve read about high yield online savings accounts and also ladder CD’s. Would it be a good idea to put the money in online savings or hold it in fidelity and invest it there in some kind of liquid account?

Also need to understand what is the right mix of stocks/bonds, international versus domestic, etc. And how to maintain that mix. The company match goes into company stock. I do not understand the fees that are incurred by moving things around. Do I just adjust which funds my contributions go to as time goes on to eventually get the right balance? Or do I actively move things around?

I appreciate any insight. Thanks in advance.
- so you dont say what your AA is. ill pick 80:20 which is plenty aggressive for a 40yo. you also dont give us portoflio values/percentages so youll have to figure that out or update your post.
- goal is 20% for retirement which for you is 20K. so its great you should max out a 401k and fully fund the rIRA if you are able.
- i dont like those Fidelity TDF, they are high fee, and full of too many funds.
- your bond investment choices are a little meh as well, but you could pick something like 50:50 TIPS and Dodge Cox Income (just because the TIPS is so much cheaper, not because you actually need TIPS). so thats 20% of the total value.
- the rIRA i would make 100% stock (either US, Intl depending on the mix you want). then you fill up the 401k with US (s&p + small cap) and intl (FSGSX).
- sounds like its time to start a taxable account for retirement. take whatever amount you want and buy either total US or total intl stock. this means youll have to balance out your 401k with bonds to again equal 20% or whatever.
- otherwise you need a plan. what are you going to buy, build, spend your money on? if the answer is nothing, then you invest away and watch it....

User avatar
Strayshot
Posts: 391
Joined: Thu Mar 05, 2015 8:04 am
Location: New Mexico

Re: Help evaluate my investment situation

Post by Strayshot » Tue Sep 04, 2018 7:26 am

You are doing well living much below your means and have good options in your 401k. You have $125k to invest.

First, determine your asset allocation between stocks and bonds. If you have no pension, generally age in bonds or age-10 in bonds are reasonable positions. When you plan to retire can also modify this split. Let’s say you want a 30/70 bond equity ratio.

Determine international portion of equities. Most will say 20-30%. I use 0 because I assume global exposure through large domestic companies. Let’s say you want 20%, so 14% of your overall portfolio.

This means the asset allocation you want to create across all accounts is 30% bond, 56% us equity, 14% international equity.

Emergency funds should be kept in an FDIC covered high rate savings account with at least 3-4 months of expenses. If you spend around 2k a month, you need at least 8-10k in an emergency fund.

Your choice of a 2045 target date fund is very reasonable and makes things simple. You could get rid of the current mix of things in your 401k and put your entire 401k balance into the same thing FSNZX. Currently FSNZX is at only about a 10% bond component, 60% domestic equities, and 30% international equities so they are much lighter on bonds and heavier on international. The freedom funds don’t start getting into bonds heavily until 5 years or so from the target retirement date.

Alternatively in your 401k you have several good low expense ratio components and could create your own three fund portfolio, but annual rebalancing would need to happen based on your desired asset allocation and the current holdings in FIOFX.

megabad
Posts: 574
Joined: Fri Jun 01, 2018 4:00 pm

Re: Help evaluate my investment situation

Post by megabad » Tue Sep 04, 2018 5:10 pm

NH3930 wrote:
Mon Sep 03, 2018 11:36 pm
My questions are about picking the right investments for my 401k, my 401k match amount, my RIRA investment pick, where to hold my emergency funds, what do to excess money outside of my emergency funds.

I think I am doing good with the percentage of my salary that I am investing. I’m just not sure I have picked the best funds to invest in. I would appreciate some advice on that. Plus is it a bad idea to invest in the same target date index fund for my RIRA and HSA? I feel that I have the ability to stomach the market dips and will not sell at that time. I want to learn more, but like the idea of passive target date funds not taking so much of my time to manage.

You should make your own investment policy statement based on your own preferences and when you would like to retire. However, my choices for the 401k might be something like the following (in rough numbers):
30% FID 500 INDEX IPR (FXAIX)
5% FID MID CAP IDX INS (FSTPX)
5% FID SM CAP IDX INS (FSSSX)
15% COMPANY STOCK
35% FID DIVERSFD INTL K6 (FKIDX)
10% VANG INFL PROT INST (VIPIX)

If you move funds around in the 401k, I would not sell company stock if you work for a big stable company (Fortune 500). If you sell, you will lose the pathway to NUA which can be a pretty dramatic savings and a way to get money out of retirement accounts early without penalty.

In the Roth IRA and HSA, holding a Target Date 2045 fund is fine (assuming there a low fee index fund options available).


I also need advice on what to do with my core money in the brokerage account. I can invest it. I was planning on using it to fund my RIRA yearly at a minimum. I want some funds liquid and want to explore that route as well for my savings account. I’ve read about high yield online savings accounts and also ladder CD’s. Would it be a good idea to put the money in online savings or hold it in fidelity and invest it there in some kind of liquid account?

What is the money for? My suggestion for where to put it will depend on timeline. Anything less than 5 years I would usually put in a money market fund or a high yield savings account. I only use CDs for planned expenses more than 1 year away (I last used one for a car I knew I was going to buy). Once we get out into 5-10 years, I prefer bonds. Once we get out to 10-15 years I might add in equities.

Also need to understand what is the right mix of stocks/bonds, international versus domestic, etc. And how to maintain that mix. The company match goes into company stock. I do not understand the fees that are incurred by moving things around. Do I just adjust which funds my contributions go to as time goes on to eventually get the right balance? Or do I actively move things around?
Allocation is a personal/individual decision. Based on your comments to the effect that you can stomach market drops, I would lean more aggressive and steer you closer to a 90/10 equity bond allocation and I generally trend close to 60/40 US/ International for equities. This is inline with Vanguard's recommendations as well, but you should make your own decisions there.

Rebalancing in HSAs and retirements accounts (IRAs/401ks) is generally as simple as buying and selling and is generally fee free if you use the common low cost index funds, but every provider has different rules. In retirement accounts and HSAs, I might just log in periodically (annually, quarterly) and buy/sell things to bring it back in to your desired allocation (with the exception of company stock, see above NUA comment). In taxable accounts, you will generally want to do as you say and attempt to rebalance with the newly added funds as this is simplest. If your taxable account becomes large and difficult to rebalance you may wish to look into tax loss harvesting. If you treat your portfolio as one cohesive unit though, remember you can rebalance a taxable account that is overweight in an asset class by buying and selling in your 401k or IRAs.

User avatar
ruralavalon
Posts: 13938
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Help evaluate my investment situation

Post by ruralavalon » Tue Sep 04, 2018 5:24 pm

Welcome to the forum :) .

I think you are doing good with the percentage of your salary that you are investing. You have some excellent funds offered in your 401k, you are fortunate.

You are correct in your understanding of the account funding priority.

NH3930 wrote:
Mon Sep 03, 2018 11:36 pm
Hi, I'm a 38 year old male . . .
. . . . .
My questions are about picking the right investments for my 401k, my 401k match amount, my RIRA investment pick, where to hold my emergency funds, what do to excess money outside of my emergency funds.

I do not own a house, but rent. I have property that is paid off that I would like to eventually build a house on. I do not know when that will happen though. I’m pretty content with where I live. I do not spend extravagantly. However, I don’t want to tie money up if I may need it.

State: Texas, no state income tax

Income
$93k/yr

Emergency funds
$100k in local savings acct making little interest plus $25k in cash in brokerage acct from selling ESPP stocks after holding for a year

Approximate annual expenses
$25k

. . . . .

M 401k on Fidelity is squawking at me because of the assest allocation is not in line with what they recommend for my age. Some changes were done earlier this year and believe more was allocated into bonds than stocks.

. . . . .

I think I am doing good with the percentage of my salary that I am investing. I’m just not sure I have picked the best funds to invest in. I would appreciate some advice on that. Plus is it a bad idea to invest in the same target date index fund for my RIRA and HSA? I feel that I have the ability to stomach the market dips and will not sell at that time. I want to learn more, but like the idea of passive target date funds not taking so much of my time to manage.

I also need advice on what to do with my core money in the brokerage account. I can invest it. I was planning on using it to fund my RIRA yearly at a minimum. I want some funds liquid and want to explore that route as well for my savings account. I’ve read about high yield online savings accounts and also ladder CD’s. Would it be a good idea to put the money in online savings or hold it in fidelity and invest it there in some kind of liquid account?

Also need to understand what is the right mix of stocks/bonds, international versus domestic, etc. And how to maintain that mix. The company match goes into company stock. I do not understand the fees that are incurred by moving things around. Do I just adjust which funds my contributions go to as time goes on to eventually get the right balance? Or do I actively move things around?

I appreciate any insight. Thanks in advance.
Emergency fund/liquid cash
You could consider federally insured savings accounts or short-term CDs. For rates see www.bankrate.com.

You could open an account at Vanguard and use Vanguard Prime Money Market Fund (VMMXX) current SEC Yield = 2.08%. Fidelity money market funds pay less.


Target date funds.
Those actively managed Fidelity Freedom target date funds in your 401k have high expense ratios (0.65%). I would not use them, or advise you to use them.

Low expense ratios are critical to long-term investing performance. Seemingly small annual fees have a large cumulative impact over time. Here is a calculator you could use to estimate the impact of investing expenses. Bankrate.com, "Mutual fund fees calculator".

Also, low expense ratios are the best predictor of future performance. Morningstar, 8/9/10 . “If there's anything in the whole world of mutual funds that you can take to the bank, it's that expense ratios help you make a better decision. In every single time period and data point tested, low-cost funds beat high-cost funds.” “Investors should make expense ratios a primary test in fund selection. They are still the most dependable predictor of performance.”

"The expense ratio is the most proven predictor of future fund returns." "There are many other things to consider, but investors should make expense ratios their first or second screen." Morningstar, 5/5/18.


I think it's fine to use Fidelity Freedom Index Fund 2045 (FIOFX) ER 0.12% in both your HSA and Roth IRA.


Asset allocation.
At age 38 I usually suggest around 25% in bonds. Your current allocation in the 401k (which Fidelity is "squawking" about) is about 35% bonds, which in my opinion is also within the range of what is reasonable at age 38.

I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities". Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6). (You can find lots of debate here on international allocation, opinions ranging all the way from 00% to 50% of stocks in international stocks. If you want more viewpoints on international stocks please try the Google search box (upper right, this page).

Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.



Fund selection in your 401k.
In selecting funds strive for a combination of broad diversification (to reduce risk) and low expense ratios (to increase your net gain). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Wiki article "Three-fund portfolio". Forum discussion, "The Three-Fund Portfolio".

I suggest switching both the existing balance in your 401k and your ongoing contributions in the 401k to these funds. In my opinion in your 401k the better funds to consider using are:
1) Fidelity 500 Index Fund Institutional (FXAIX) ER 0.02%;
2) Fidelity Global Ex-U.S Index Fund Institutional Class (both developed and emerging markets) (FSDSX) ER 0.06%; and
3) Dodge & Cox Income Fund (DODIX) ER 0.43%.


Domestic stocks.
For domestic stocks I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund is good enough by itself for domestic stocks. "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations".

An S&P 500 index fund covers 81% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies, and in the 26 years since the creation of the first total stock market index fund the total return of the two types of funds has been almost identical. Morningstar, "growth of $10k" graph, VTSAX vs VFIAX. In the first 10 years the S&P 500 fund did better, in the last 10 years the total market fund did better, and over the 26 years the total market fund gave a little more return (0.11% per year), but at the cost of a little more volatility (risk): nisiprius post, in the forum discussion "Exchanging the S&P 500 for the TSM". See also Allan Roth, CBS Moneywatch, "John C. Bogle on the S&P 500 vs. the Total Stock Market". So it seems that adding a little in mid/small cap stocks trying to mimic the holdings of a total stock market fund has historically made little difference in performance.

If you want to add the Fidelity® Small Cap Index Institutional (Russell 2000 ® Index) (FSSSX) fund, then an 85/15 mix of S&P 500 and small-cap will approximate the content of a total stock market index fund. Wiki article, "Approximating total stock market". In my opinion this is not necessary, it is optional if you prefer to do this.


International stocks.
The fund you are using, Fidelity® Diversified Intl K6 (FKIDX) ER 0.60%, is an actively managed fund with a higher expense ratio, is less diversified investing primarily in large-cap growth stocks and only about 1/2 market weight in emerging markets.

Fidelity Global Ex-U.S Index Fund Institutional Class (both developed and emerging markets) (FSDSX) ER 0.06% is an index fund with a much lower expense ratio, and is more diversified investing in both value and growth stocks and market weight in emerging markets.


Bonds.
Dodge & Cox Income Fund (DODIX) ER 0.43% is a good actively managed intermediate-term bond fund, average effective duration = 4.4 years, average credit quality = A, is well diversified including about 40% securitized bonds, with a moderate expense ratio. It is the best bond fund offered, in my opinion.

The Fidelity® GNMA Fund (FGMNX) is less diversified, 100% in Mortgage Backed Securities. I don't recommend a TIPS fund at your age, if ever. At your age your inflation protection is your earning potential and a relatively large stock allocation. Target retirement funds often don't add TIPS until in or near retirement. I don't suggest a high yield (junk bond) fund, as too risky.


Rebalancing.
Because the funds will grow at different and unpredictable rates, it may be necessary every few years to rebalance in order to maintain the desired asset allocation. Wiki article, "Rebalancing". You can easily adjust the asset allocation by exchanging between funds inside your 401k.

. . . . .

I suggest that you read one or two books on general investing. Wiki article, "Books: recommendations and reviews". When I first stated managing my own investments, I found this tutorial very helpful in learning investing terminology/jargon and some of the investing basics. Morningstar, "Investing Classroom". Also take a look at the Boglehead’s wiki, the "getting started" link I give below.

If you have any questions just ask.

I hope that this helps.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

NH3930
Posts: 15
Joined: Sun Sep 02, 2018 12:20 pm

Re: Help evaluate my investment situation

Post by NH3930 » Wed Sep 05, 2018 10:59 am

Thanks everyone for taking the time to respond. I will read them over and respond later tonight.

NH3930
Posts: 15
Joined: Sun Sep 02, 2018 12:20 pm

Re: Help evaluate my investment situation

Post by NH3930 » Sat Sep 08, 2018 1:58 pm

Thanks everyone for the suggestions. I really appreciate the feedback.

I made changes to my 401k as follows:

decided to go 80/20 ratio stocks and bonds with 30% in international

56% domestic, 24% international, 20% bonds

I originally had 8 investments (including my company stock) and got this down to 4 (including my company stock).

I left 5% in company stock, 51% FXAIX, 24% FSGSX, 20% DODIX.

I must admit that it was painful on the fidelity website to do this. I couldn't find an easy way to rebalance. I had to do it one at a time. Sell % or $ amount of X to buy Y. I had a note pad where I broke out what to sell of one to put into another or buy another, etc. Maybe there is an easier way than what I had to do?

I think this gets my AA right in just the 401k. I think I will also need to readjust this once my IRA and HSA accrue more money. That will likely be a little more tedious since those are invested in FIOFX target date fund with changing glide path. I guess I can just look every once in awhile and see what the allocations are there and adjust my 401k accordingly. Maybe like twice or once a year to maintain my 80/20 AA?

Now I want to invest the money I have in cash in my brokerage account. I believe it is around $30k as noted previously. Where can I read or does anyone have a suggestion on what to invest in? I'm sure there are tax advantages to take into account. I'm thinking I should do all stocks there, but am not entirely sure. I've read about the below some:

-FSEVX (Fidelity Spartan Extended Market Index Fund)
-FSTVX (Fidelity Spartan Total Market Index Fund)
-FUSVX (Fidelity Spartan 500 Index Fund)

Where FSTVX = 80% FUSVX + 20% FSEVX basically?

I was thinking about investing it all in FSTVX. Thougts?

I know I should also take that into account and rebalance my portfolio by acquiring more bonds in my 401k as a result.

I then need to think about what to do with the $100k in cash in my low yield local savings account. I think I would be comfortable investing $50k of it into the market and holding on to the other $50k for my emergency fund. Perhaps maintain $20k in local savings and put $30k in a high yield savings at Ally?

Thoughts?

NH3930
Posts: 15
Joined: Sun Sep 02, 2018 12:20 pm

Re: Help evaluate my investment situation

Post by NH3930 » Sun Oct 07, 2018 1:30 pm

Ok. I have my 401k allocated as mentioned previously.

51% FXIAX
24% FSFSX
20% DODIX
5% Company Stock

This gives me a 80/20 AA, with 70% domestic and 30% international. I have roughly a $225k in this account.

My HSA has $3,500 cash and $2,500 invested in FIOFX.

My RIRA has $5,500 invested in FIOFX.

I also participate in ESPP to the maximum (10% salary) where I get a 5% discount on FMV of company stock which I plan to sell immediately once it hits my account (twice a year).

I currently have F stock in my brokerage account, about 750 shares worth roughly $7,000 currently. The dividends and captial gains are set to automatically reinvest.

My goal for next year is to immediately fund my RIRA with the maximum which I believe is $5,500. I will also invest via paycheck contributions the maximum to the HSA, which I think is $3,500. I will also have the ESPP that I will sell immediately twice per year. I also plan on maxing out my 401k pretax contribution to get my full company match throughout the year of 5% match at 100%. There is no "true-up", so I have to be careful and not max it out before the end of year. I also plan to contribute the remaining via post-tax and then do a mega backdoor roth. My plan allows for in service withdrawals and I was told there would be no charge to do so. The plan is to roll the post tax every paycheck (2 weeks) into the RIRA to minimize gains that will be taxed. I'm hoping there is no service charge to perform this function. I asked and was told by plan provider via phone call that there would be no charge. I'm currrently limited to entering a percentage of my paycheck on the website to show what goes to pre-tax and post-tax. It's kind of a pain and wish they would allow for just a dollar amount like $18,500 throughout the year. My salary is ~95k/year, with raises coming in around April. 18.5/95=19.47%. I can contribute up to 25% of salary either pre-tax, post-tax, or a combination thereof. I got confirmation that the company match will continue if I fill up pre-tax, but it will always go to pre-tax first. I'm concerned that any after-tax company contributions will not be eligible for rolling to the RIRA. Does it make sense knowing that, to round down my pre-tax contribution to say 19% and forego reaching my full $18,500 pre-tax to ensure the full company match goes to pre-tax dollars? The other option is to round up to 20%, which will cause some money to be matched post-tax. Bascially options are: 19% pretax/6% post-tax or 20% pretax/5% post-tax. I will get the same company match, but rounding up will cause some of it to be post-tax and may not be allowed to rollover and less money I'm contributing post-tax to go in RIRA, but I will get the full tax advantage of 18,500 this year. Rounding down I will not get the full tax advantage of 18,500, but I will ensure all company match is pre-tax. I will not get as much in post tax to be rolled in RIRA. Raises are typically 2%-5% per year, so if I got the max 5% this year, I would make 95000(1.05)=99,750. 18,500/99,750= 18.55%. My gut is telling me to round down to ensure I don't go over my 18,500 and cause the company match to be some post-tax which might cause problems rolling over to RIRA. Since raises occur around April and it takes one to two paycycles for percent 401k contributions to take effect and I want to set percent at beginning of year and forget it; rounding down at current salary which will increase with raise, kind of makes sense to me. I can never hit the 18,500 mark on the nose because of having to input an integer in the website. It's kind of irritating to be honest. If I could just specify a dollar amount, things would be simpler. However, I also want the remainder to go post tax, so I think a percentage works best in this scenario, so I have not brought it to the attention of my HR group.

My basic question now is what best to invest in with my RIRA and taxable account. I will need something in my taxable account to buy once I sell my company stock every 6 months. Per previous comments, I feel like FSTVX would be a good choice. I don't currently do automatic investing, but I understand that mutual funds are better for this. I also understand that ITOT is more tax efficient? Or would someone recommend the Fidelity zero ER total market fund?

For my HSA and RIRA, should I also invest total market with same fund like FSTV?

I want to get this right, so that I don't have to make too many changes in the future once the accounts start to grow.



Thanks in advance for any insight. I've learned a lot and am still learning!

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Re: Help evaluate my investment situation

Post by ruralavalon » Sun Oct 07, 2018 2:54 pm

For a taxable account use very tax-efficient stock index funds. . Wiki article "Tax-efficient fund placement".

At Fidelity examples would include:
(1) Fidelity Total Stock Market Index Fund; and
(2) Fidelity Total International Stock Index Fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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ruralavalon
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Re: Help evaluate my investment situation

Post by ruralavalon » Sun Oct 07, 2018 2:57 pm

NH3930 wrote:
Sun Oct 07, 2018 1:30 pm
My basic question now is what best to invest in with my RIRA and taxable account. I will need something in my taxable account to buy once I sell my company stock every 6 months. Per previous comments, I feel like FSTVX would be a good choice. I don't currently do automatic investing, but I understand that mutual funds are better for this. I also understand that ITOT is more tax efficient? Or would someone recommend the Fidelity zero ER total market fund?
For a taxable account use very tax-efficient stock index funds. Wiki article "Tax-efficient fund placement".

At Fidelity examples would include:
(1) Fidelity Total Stock Market Index Fund Premium Class (FSTVX); and
(2) Fidelity Total International Stock Index Fund Premium Class (FSIVX).

I do not suggest the new ZERO funds in taxable account at this point, no one knows if they are more tax efficient that the regular total market funds.

In a Roth IRA I also suggest stock index funds, like:
(1) Fidelity Total Stock Market Index Fund Premium Class (FSTVX); and
(2) Fidelity Total International Stock Index Fund Premium Class (FSIVX).

I think its best to have all of your bond allocation in your 401k.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

NH3930
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Re: Help evaluate my investment situation

Post by NH3930 » Sun Oct 07, 2018 5:18 pm

Thank you for the response. I still have lots to learn, but am trying to get there. Feel like I am behind the curve as far as wish I would have focused on investing versus just savings years ago. I do feel much better that I have learned a decent amount these past two months. I plan to do as I have learned on here and consider my entire retirement portfolio when making the allocations. My current balance is somewhere close to $230k across 401k, RIRA, HSA.

I think I want to eventually get out of the target date funds in my RIRA and HSA so I can more easily track my AA across all accounts and to lower my costs. I noticed FIOFX is currently 90/10 stocks to bonds. My thought was to track this fund and just manually control my AA throughout the years to mirror it. That means I am rethinking my current 80/20 and thinking more like 90/10.

In my situation, trying to figure out what to invest in first. My RIRA and HSA are not big enough to allocate across multiple investments currently. Based on ER and different aspects of my funds I'm using in my 401k, does it makes sense to say allocate it's funds to a lower ER bond fund? I don't think I would ever get there as far as AA goes now that I think about it. Plus I've read that bonds should go into pre-tax 401k since their growth is lower and would create less tax when removed. However, I think an HSA has that same characteristic. Same goes for the RIRA, but you want growth since it grows tax free. That means to me to put equities in it. That makes me wonder if I should just go with say FSTVX in there until I get a certain level of worth. Or do I concentrate on international FSIVX there. I know it depends on which one is better/worse in my 401k. That's what I need help with also. Deciding on what to pick for the HSA and RIRA. I know you gave two great options, and I want to use them, but not sure if I should use one or both at this point. Ideally, I think I would grow them while reducing what's in the 401k to allocate to the better option there.

This is all before I even try to think too much about the taxable account. I do know I need to do something there too for my company stock that I will sell.

I did put my emergency fund into a high yield savings account, qty (2) 12 month cds, and qty (2) no fault cds at Ally. So I can also invest some of this money once I get a solid game plan together.

Guess I'm looking for help to decide a game plan on what to invest in where to get ready for this upcoming year for sure.

Thanks again. I really appreciate the thoughts! Sorry for all the questions!

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Re: Help evaluate my investment situation

Post by ruralavalon » Mon Oct 08, 2018 10:58 am

Please do not just use ticker symbols when referring to mutual funds, that makes it hard to quickly understand what you are referring to. Please use both the fund name and ticker symbol.

NH3930 wrote:
Sun Oct 07, 2018 5:18 pm
Thank you for the response. I still have lots to learn, but am trying to get there. Feel like I am behind the curve as far as wish I would have focused on investing versus just savings years ago. I do feel much better that I have learned a decent amount these past two months. I plan to do as I have learned on here and consider my entire retirement portfolio when making the allocations. My current balance is somewhere close to $230k across 401k, RIRA, HSA.
About how much money is in each account?

What fund firm or brokerage is each account with?

How much (in dollars) have you been contributing to each account annually? How much (in dollars) is the employer match in your 401k?

About how much (in dollars) do you believe you might be able to contribute annually to investing (total, all accounts)?

At which fund firm would you want your taxable brokerage account?

With that information we could give you ideas on how to allocate across all accounts.

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.


NH3930 wrote:I think I want to eventually get out of the target date funds in my RIRA and HSA so I can more easily track my AA across all accounts and to lower my costs. I noticed FIOFX is currently 90/10 stocks to bonds. My thought was to track this fund and just manually control my AA throughout the years to mirror it. That means I am rethinking my current 80/20 and thinking more like 90/10.

As mentioned before I suggest an asset allocation with around 25% bonds.

You said that you feel like you "are behind the curve" and wish you had focused on investing "years earlier". I believe it's a mistake to take on extra risk trying to play catch up. That can backfire and leave you worse off. With $230k in investments at age 38 you are ahead of most people your age.

The better plan in my opinion is to increase contributions to investing as much as practical.

Asset allocation is a very personal decision. You.must pick an allocation that is comfortable for you based on your own ability, willingness and need to take risk.

NH3930 wrote:In my situation, trying to figure out what to invest in first. My RIRA and HSA are not big enough to allocate across multiple investments currently. Based on ER and different aspects of my funds I'm using in my 401k, does it makes sense to say allocate it's funds to a lower ER bond fund? I don't think I would ever get there as far as AA goes now that I think about it. Plus I've read that bonds should go into pre-tax 401k since their growth is lower and would create less tax when removed. However, I think an HSA has that same characteristic. Same goes for the RIRA, but you want growth since it grows tax free. That means to me to put equities in it. That makes me wonder if I should just go with say FSTVX in there until I get a certain level of worth. Or do I concentrate on international FSIVX there. I know it depends on which one is better/worse in my 401k. That's what I need help with also. Deciding on what to pick for the HSA and RIRA. I know you gave two great options, and I want to use them, but not sure if I should use one or both at this point. Ideally, I think I would grow them while reducing what's in the 401k to allocate to the better option there.
In general bond funds are not very tax-efficient, and ordinarily should be in a tax-advantaged account preferably a tax-deferred account like a traditional 401k.

In general in a taxable account use very tax-efficient stock index funds. Examples include total stock market index funds and total international stock index funds. Stock index funds are also suitable for any type of account.

NH3930 wrote:This is all before I even try to think too much about the taxable account. I do know I need to do something there too for my company stock that I will sell.
How much (in dollars) do you currently have in company stock? How much of that (In dollars) do you expect that you might want to sell in the near future, and reinvest in mutual funds.


NH3930 wrote:I did put my emergency fund into a high yield savings account, qty (2) 12 month cds, and qty (2) no fault cds at Ally. So I can also invest some of this money once I get a solid game plan together.
About how much of that money (in dollars) do you expect that you might want to add to.long-term/retirement investing?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

NH3930
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Re: Help evaluate my investment situation

Post by NH3930 » Mon Oct 08, 2018 3:55 pm

Here is a breakdown of each account. I’m not sure how to get tables to post.

All accounts are at Fidelity:

401k:
FUND, PERCENT, DOLLAR
FXAIX ( FID 500 INDEX IPR, ER .015%), 51.18%, $113,994.58
FSGSX (FID GLB XUS IDX INS, ER .06%), 24.05%, $53,582.95
DODIX (DODGE & COX INCOME, ER .43%), $43, 959.00
COMPANY STOCK, 5.04%, $11, 217.30

TOTAL, 100%, $222,753.83

RIRA:
FUND, PERCENT, DOLLAR
FIOFX (Fidelity Freedom® Index 2045 Fund Investor Class, ER (GROSS) .19% ER (net) .14%), 100%, $5,398.45

TOTAL, 100%, $5,398.45

HSA:
FUND, PERCENT, DOLLAR
FIOFX (Fidelity Freedom® Index 2045 Fund Investor Class, ER (GROSS) .19% ER (net) .14%), 42%, $2,548.48
CASH, 58%, $3,500

TOTAL, 100%, $6,048.48

TAXABLE

FUND, PERCENT, DOLLAR
Stock (), 19.1%, $1,652.76
F (FORD MTR CO), 80.8%, $6,991.30
CASH, .12%, $10.58

TOTAL, 100%, $8,654.65

Ally:

Online savings, 1.90% APY, $69.39
11 month no penalty CD, 2.10% APY, $25,000 matures ~Aug 2019
11 month no penalty CD, 2.10% APY, $31,661.25 matures ~Aug 2019
12 month High Yield CD, 2.50% APY, $25,000 matures ~Sept 2019
12 month High Yield CD, 2.50% APY, $25,000 matures ~Sept 2019

Total: $106, 730.64

Local Credit Union

Checking, .14% APY, ~$2k
Savings, .45% APY, ~$20k

I maintain ~$2k in checking, and only write a few check per month from this acct. Paycheck is automatically deposited here. I use a Citi card with 2% cash back for everything else. I pay this off every month and maintain the $2k balance by shifting money back and forth from savings account. Any excess, I divert to Ally currently along with my cash back rewards.


My salary is currently ~$93k/year. I contribute currently enough to hit close to the $18,500 mark pre-tax for my 401k. Company matches 5% at 100% as long as I’ actively contributing with no “true-up”.

2019, going forward this could be one plan:

401k: max out pre-tax amount to get me at $19,000 pre-tax level. This will be 19/93=20% of income. The remaining 25-20=5%, $4,650 will be post-tax. I plan to do mega back door roth this year for the first time. Pre-tax 401k will be 19+4.65=$23, 650 by me and company. These numbers are approximate since I can’t hit the numbers on the nose due to rounding errors and being forced to use integers instead of dollar amounts on website.

RIRA: I set this up this year. I funded it with $5,500. Next year I will fund it early with max of $6,000. Plus roll via mega back door up to $4,650 into it. For a yearly contribution of 6+4.65=$10,650.

HRA: I will fund it to maximum of $3,500.

ESPP: I will fund it with 10% of my paycheck. This will be ~$9,300. I plan to sell immediately and realize the gain while minimizing risks. I get 5% discount from FMV and it buys twice a year.

To add a wrinkle into it, I have reason to believe that my company will increase our 401k contribution limit sometime next year. If this happens, one option could be for me to max out my contribution post-tax so I can mega back door more money into RIRA. This wil not be sustainable long term, but would force me to live off my nest egg which I think is more than I need currently.

The other option is to invest in taxable account some of my nest egg. I would feel comfortable getting it down to around $75k. I currently have $106,730.64+$2,000+$20,000=$128,730.64 in all my savings and credit union. I write around $1,000 in checks a month, and charge up to $1,500/month on card. With insurance and things, I feel like my expenses are roughly $3,000 per month as a very conservative average. So getting my nest egg down to $75k would give me 25 months emergency fund. That may still be too extreme, but even so, I have 128,730.64-75,000=$53,730.64 to invest. Either by living off it while maximizing contributions to 401k and then RIRA via mega back door, or immediately in tax. I certainly want an investment in my taxable account to handle the ESPP shares when they come.

I think I want to stay Fidelity for ease of having all accounts there. Unless it is very easy to handle at Vanguard and very seemless to get my sold company stock shares over there. I’m not sure how much the tax efficiency of their funds will come into play verus say FSTVX.

I think I have answered most questions. Thanks very much for your time.

NH3930
Posts: 15
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Re: Help evaluate my investment situation

Post by NH3930 » Thu Oct 11, 2018 6:44 pm

Checking in

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ruralavalon
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Re: Help evaluate my investment situation

Post by ruralavalon » Thu Oct 11, 2018 7:17 pm

What is your tax bracket?

What is the capital gain/loss status of the two stocks you hold in your taxable account?

I'm trying to determine if it's practical to sell those stocks , and, invest the proceeds in very tax-efficient stock index funds.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Help evaluate my investment situation

Post by NH3930 » Thu Oct 11, 2018 11:43 pm

No state income tax. Based on $93k salary puts me in 24% Federal income tax bracket. With my pre-tax 401k and HSA, I’m in 22% Federal income tax bracket.

I’ve read about tax loss harvesting some, but am not knowledgeable enough to implement it yet.

I’m not sure how to tell the capital gain/loss status of the two stocks. I know I’ve held one for years and the F stock for only a few months. The long term one says % gain is 91.35%. The F stock has done nothing but decrease since purchase and is at -6.97% gain (loss).

Thanks!

Miriam2
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Re: Help evaluate my investment situation

Post by Miriam2 » Fri Oct 12, 2018 3:23 am

NH3930 wrote: In my situation, trying to figure out what to invest in first. My RIRA and HSA are not big enough to allocate across multiple investments currently. Based on ER and different aspects of my funds I'm using in my 401k, does it makes sense to say allocate it's funds to a lower ER bond fund? I don't think I would ever get there as far as AA goes now that I think about it. Plus I've read that bonds should go into pre-tax 401k since their growth is lower and would create less tax when removed. However, I think an HSA has that same characteristic. Same goes for the RIRA, but you want growth since it grows tax free. That means to me to put equities in it. That makes me wonder if I should just go with say FSTVX in there until I get a certain level of worth. Or do I concentrate on international FSIVX there. I know it depends on which one is better/worse in my 401k. That's what I need help with also. Deciding on what to pick for the HSA and RIRA. I know you gave two great options, and I want to use them, but not sure if I should use one or both at this point. Ideally, I think I would grow them while reducing what's in the 401k to allocate to the better option there.
No, the HSA does not have the same characteristic. There is no tax on the funds invested in an HSA. The funds are contributed pre-tax, grow tax free, and are distributed (withdrawn) tax free so long as used for qualified medical expenses.
https://www.bogleheads.org/wiki/Health_savings_account

The exception is state taxes if you live in Alabama, California or New Jersey.

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Re: Help evaluate my investment situation

Post by ruralavalon » Fri Oct 12, 2018 8:56 am

NH3930 wrote:
Mon Oct 08, 2018 3:55 pm
My salary is currently ~$93k/year. I contribute currently enough to hit close to the $18,500 mark pre-tax for my 401k. Company matches 5% at 100% as long as I’ actively contributing with no “true-up”.

2019, going forward this could be one plan:

401k: max out pre-tax amount to get me at $19,000 pre-tax level [emphasis added]. This will be 19/93=20% of income. The remaining 25-20=5%, $4,650 will be post-tax. I plan to do mega back door roth this year for the first time. Pre-tax 401k will be 19+4.65=$23, 650 by me and company. These numbers are approximate since I can’t hit the numbers on the nose due to rounding errors and being forced to use integers instead of dollar amounts on website.

RIRA: I set this up this year. I funded it with $5,500. Next year I will fund it early with max of $6,000 [emphasis added]. Plus roll via mega back door up to $4,650 into it. For a yearly contribution of 6+4.65=$10,650.

HRA: I will fund it to maximum of $3,500 [emphasis added].

ESPP: I will fund it with 10% of my paycheck. This will be ~$9,300. I plan to sell immediately [emphasis added] and realize the gain while minimizing risks. I get 5% discount from FMV and it buys twice a year.

To add a wrinkle into it, I have reason to believe that my company will increase our 401k contribution limit from 25% to at least 50% sometime in the 2nd quarter at the earliest. If this happens, one option could be for me to max out my contribution post-tax so I can mega back door more money into RIRA. This wil not be sustainable long term, but would force me to live off my nest egg which I think is more than I need currently.

The other option is to invest in taxable account some of my nest egg. I would feel comfortable getting it down to around $75k. I currently have $106,730.64+$2,000+$20,000=$128,730.64 in all my savings and credit union. I write around $1,000 in checks a month, and charge up to $1,500/month on card. With insurance and things, I feel like my expenses are roughly $3,000 per month as a very conservative average. So getting my nest egg down to $75k would give me 25 months emergency fund. That may still be too extreme, but even so, I have 128,730.64-75,000=$53,730.64 to invest [emphasis added]. Either by living off it while maximizing contributions to 401k and then RIRA via mega back door, or immediately in tax. I certainly want an investment in my taxable account to handle the ESPP shares when they come.

I think I want to stay Fidelity for ease of having all accounts there. Unless it is very easy to handle at Vanguard and very seemless to get my sold company stock shares over there. I’m not sure how much the tax efficiency of their funds will come into play verus say FSTVX.

I think I have answered most questions. Thanks very much for your time.
I understand the desire to have all accounts at Fidelity for convenience. Even though I am a huge Vanguard fan, I think it is very reasonable to keep all of your accounts at Fidelity.

The maximum annual employee contribution to a 401k is $18.5k, not $19k. I looks like your employer match is $4.65k ($93k x -05 = $4.65k).

The maximum annual contribution to a Roth IRA is $5.5k, not $6k.

If I understand you correctly there will be an investing portfolio totalling $296.6k, with new annual contributions of about $41.4k, with accounts as follows:

1) Taxable account @ Fidelity, including extra cash $53.7k for investing (18% of total; $62.4k; adds $9.3k/year from sale of ESPP shares);

2) 401k (75% of total; $222.8k; adds $18.5k + employer match $4.6k = $23.1k total/year);

3) Roth IRA @ Fidelity (2% of total; $5.4k; adds $5.5k/year); and

4) HSA @ Fidelity (2% of total; $6k; adds $3.5k/year)

Do I have that right?


Mega backdoor Roth??
Does your employer's 401k allow after tax (not Roth) contributions, in addition to the $18.5k in employee contributions?

Does your employer's 401k allow in-service non-hardship withdrawals?


NH3930 wrote:
Mon Oct 08, 2018 3:55 pm
TAXABLE

FUND, PERCENT, DOLLAR
EGL (ENGILITY HLDGS), 19.1%, $1,652.76
F (FORD MTR CO), 80.8%, $6,991.30
CASH, .12%, $10.58

TOTAL, 100%, $8,654.65
NH3930 wrote:
Thu Oct 11, 2018 11:43 pm
No state income tax. Based on $93k salary puts me in 24% Federal income tax bracket. With my pre-tax 401k and HSA, I’m in 22% Federal income tax bracket.
. . . . .
I’m not sure how to tell the capital gain/loss status of the two stocks. I know I’ve held one for years and the F stock for only a few months. The long term one says % gain is 91.35%. The F stock has done nothing but decrease since purchase and is at -6.97% gain (loss).
I suggest selling both stocks. It looks like that will create little if any income tax liability for you, and you can reinvest the proceeds in stock index funds.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

NH3930
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Re: Help evaluate my investment situation

Post by NH3930 » Fri Oct 12, 2018 11:10 am

I think you have it right. I was using the new contribution limits for 2019. I will post back a follow up this evening to clarify. Thanks!

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ruralavalon
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Re: Help evaluate my investment situation

Post by ruralavalon » Fri Oct 12, 2018 1:25 pm

NH3930 wrote:
Fri Oct 12, 2018 11:10 am
I think you have it right. I was using the new contribution limits for 2019. I will post back a follow up this evening to clarify. Thanks!
I had not realized that the contribution limits will be higher in 2019. You are right to use the higher limits for planning purposes.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Miriam2
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Re: Help evaluate my investment situation

Post by Miriam2 » Fri Oct 12, 2018 5:02 pm

Here are the contribution limits for the various plans from The Finance Buff

2018 2019 401k 403b IRA Contribution Limits
2017 2018 2019 HSA Contribution Limits

NH3930
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Re: Help evaluate my investment situation

Post by NH3930 » Sat Oct 13, 2018 10:33 pm

You are right about my contributions going fwd.

I plan to invest maximum to my 401k.

.25*93,000=$23,250.

$19,000 pre-tax and $4,250 post-tax

Employer match is 5%, so .05*93,000=$4,650

Total contribution = $27,900

I’ve read the 401k plan and post-tax is allowed as are in service rollovers. I plan on doing the MBDR next year every paycheck.

That means my RIRA will see $5500+4250=$9750.

If the company ups the limit from 25% to say 50% on 401k contribution percentage of pay, I would then be able to hit closer to the annual limit of $56,000 for 2019. I would then contribute .5*93,000=$46,500.
$19,000 pretax and $27,500 post-tax.

That means my RIRA will see $5500+27,500=$33,000.

HSA: $3500

ESPP: .1*93,000=$9,300

So total contribution will be:
At 25% 401k contribution:
$23,650 me and employer match ($19,000+$4,650)
RIRA:$9,750 ($5,500+$4,250 MBDR)
HRA: $3500
ESPP: $9,300
Total: $46,200

At 50% 401k contribution:
$23,650 me and employer match ($19,000+$4,650)
RIRA:$33,000 ($5,500+$27,500 MBDR)
HRA: $3500
ESPP: $9,300
Total: $69,450

Hope this makes sense.

I can do this but it won’t be sustainable. It would force me to use my nest egg. I’m on a mobile phone, but believe I said earlier I have around $55,000 I can afford to invest.

Is it better to do this or to contribute less to post-tax and invest the $55,000 taxable account now?

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Re: Help evaluate my investment situation

Post by ruralavalon » Sun Oct 14, 2018 10:20 am

NH3930 wrote:
Sat Oct 13, 2018 10:33 pm
You are right about my contributions going fwd.

I plan to invest maximum to my 401k.

.25*93,000=$23,250.

$19,000 pre-tax and $4,250 post-tax

Employer match is 5%, so .05*93,000=$4,650

Total contribution = $27,900

I’ve read the 401k plan and post-tax is allowed as are in service rollovers. I plan on doing the MBDR next year every paycheck.

That means my RIRA will see $5500+4250=$9750.

If the company ups the limit from 25% to say 50% on 401k contribution percentage of pay, I would then be able to hit closer to the annual limit of $56,000 for 2019. I would then contribute .5*93,000=$46,500.
$19,000 pretax and $27,500 post-tax.

That means my RIRA will see $5500+27,500=$33,000.

HSA: $3500

ESPP: .1*93,000=$9,300

So total contribution will be:
At 25% 401k contribution:
$23,650 me and employer match ($19,000+$4,650)
RIRA:$9,750 ($5,500+$4,250 MBDR)
HRA: $3500
ESPP: $9,300
Total: $46,200

At 50% 401k contribution:
$23,650 me and employer match ($19,000+$4,650)
RIRA:$33,000 ($5,500+$27,500 MBDR)
HRA: $3500
ESPP: $9,300
Total: $69,450

Hope this makes sense.

I can do this but it won’t be sustainable. It would force me to use my nest egg. I’m on a mobile phone, but believe I said earlier I have around $55,000 I can afford to invest.

Is it better to do this or to contribute less to post-tax and invest the $55,000 taxable account now?
That's a difficult call, not knowing what the stock market will do over the next couple of years.

I guess my personal preference has always been for getting money invested, rather than waiting. That would mean investing the $55k now in a taxable account. Use very tax-efficient stock index funds.
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NH3930
Posts: 15
Joined: Sun Sep 02, 2018 12:20 pm

Re: Help evaluate my investment situation

Post by NH3930 » Mon Oct 15, 2018 7:05 pm

Roger. Thanks. I will look into investing into tax efficient funds in my taxable like you say.

FSTVX and FSIVX.

I need to learn about tax loss harvesting for the future.

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