Reasonable Asset Allocation / Financial Picture

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dvd7e
Posts: 66
Joined: Sat Dec 06, 2014 2:49 pm

Reasonable Asset Allocation / Financial Picture

Post by dvd7e » Fri Sep 14, 2018 3:32 pm

Hi,

I'm specifically wondering if the following is a reasonable Asset Allocation, but also more generally wondering if there's anything in our financial picture that looks like it could use some attention:

52% Vanguard Total Stock (VTSAX/VSMPX) 0.02%
18% Vanguard Total International Stock (VTIAX/VTSNX) 0.09%
15% Vanguard Total Bond Market (VBTLX/VBTIX) 0.04%
8% Vanguard Small-Cap Value (VSIAX/VSIIX) 0.06%
7% Vanguard FTSE All-World ex-US Small Cap (VFSVX) 0.25%

which has the following Morningstar 3x3 box:
Value Core Growth
Large 22 21 19
Mid 8 8 8
Small 6 5 3

I am intentionally tilting a little bit towards Small Cap and towards Value, but I also don't want to be unintentionally over-tilting. Not sure if this is doing more harm than good

85% Stocks, 15% Bonds
75% Domestic, 25% International
Cyclical: 39% Sensitive: 38% Defensive: 23%

Future Stock/Bond Allocation plan moving forward:
Last 10+ years: 85/15
@ 35: 80/20
@ 40: 70/30
@ 45: 60/40
@ 50: 50/50
@ 55: 40/60 *I'm hoping to retire here*
@ 60: 40/60 *Maybe my wife retires here?*
@ 65: 45/55
@ 70: 50/50

Info:
* Age: 33
* Tax Status: 24% Federal + 4-6% in State taxes, MFJ
* Gross W2 Income: ~220k/yr
* Other Gross Income: 80k/yr in gross (not net) rental income across a small handful of farms and rental properties. A good chunk of this is currently offset by mortgages on those properties
* I hope to retire by 55, maybe work part time from 50 to 55. My wife will probably work a few years beyond that (maybe 60?). Currently in good health
* Current Retirement Savings: 750k
* Planned Future Retirement Savings: Max out both 401ks + 2x Backdoor Roth IRA every year for the foreseeable future. Over the next 5-7 years some of those properties will be paid off and the kids will start to transition from 10+ k per year per kid day care to free public school which will free up another 20k-40k/year for MEGA Backdoor Roth conversions.
* Taxable Savings: 100k
* 529 Savings: 30k
* Emergency Fund: 40k
* HSA: 10k (I need to get on this)
* Debt: $650k (40% of this is personal residence, rest is for rental properties. Essentially 0 consumer debt, pay it off every month. No student loans)
* Life Insurance: 1.8 million on me, 1.4 on my wife
* Personal Liability Umbrella Policy: 1 million
* Long Term Disability Insurance: Both have 2/3 of current income benefit for long term disability
* 2 kids under 3 yrs old, maybe another one in a few years?
Last edited by dvd7e on Fri Sep 14, 2018 3:58 pm, edited 1 time in total.

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ruralavalon
Posts: 13710
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Reasonable Asset Allocation / Financial Picture

Post by ruralavalon » Fri Sep 14, 2018 3:55 pm

In my opinion your asset allocation is within the range of what is reasonable.

What I see as missing is own occupation disability insurance.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

dvd7e
Posts: 66
Joined: Sat Dec 06, 2014 2:49 pm

Re: Reasonable Asset Allocation / Financial Picture

Post by dvd7e » Fri Sep 14, 2018 3:57 pm

ruralavalon wrote:
Fri Sep 14, 2018 3:55 pm
In my opinion your asset allocation is within the range of what is reasonable.

What I see as missing is own occupation disability insurance.
Ahhh, yes, forgot that. The wife and I both have disability insurance at 2/3 of our current income, offered through our employers. The life insurance is from the private market. I'll edit the original post to include that

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ruralavalon
Posts: 13710
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Reasonable Asset Allocation / Financial Picture

Post by ruralavalon » Fri Sep 14, 2018 4:02 pm

dvd7e wrote:
Fri Sep 14, 2018 3:57 pm
ruralavalon wrote:
Fri Sep 14, 2018 3:55 pm
In my opinion your asset allocation is within the range of what is reasonable.

What I see as missing is own occupation disability insurance.
Ahhh, yes, forgot that. The wife and I both have disability insurance at 2/3 of our current income, offered through our employers. The life insurance is from the private market. I'll edit the original post to include that
That's an excellent benefit, you are fortunate.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

HEDGEFUNDIE
Posts: 617
Joined: Sun Oct 22, 2017 2:06 pm

Re: Reasonable Asset Allocation / Financial Picture

Post by HEDGEFUNDIE » Fri Sep 14, 2018 4:04 pm

Adding an 8% “tilt” to small value is not really a tilt at all. You’re probably better off putting that money in Total Market if you’re not willing to go at least 20-30% small value.

dvd7e
Posts: 66
Joined: Sat Dec 06, 2014 2:49 pm

Re: Reasonable Asset Allocation / Financial Picture

Post by dvd7e » Fri Sep 14, 2018 4:10 pm

ruralavalon wrote:
Fri Sep 14, 2018 4:02 pm
dvd7e wrote:
Fri Sep 14, 2018 3:57 pm
ruralavalon wrote:
Fri Sep 14, 2018 3:55 pm
In my opinion your asset allocation is within the range of what is reasonable.

What I see as missing is own occupation disability insurance.
Ahhh, yes, forgot that. The wife and I both have disability insurance at 2/3 of our current income, offered through our employers. The life insurance is from the private market. I'll edit the original post to include that
That's an excellent benefit, you are fortunate.
Well, we are paying for it, it's not free. But either way, yes it is nice.

dvd7e
Posts: 66
Joined: Sat Dec 06, 2014 2:49 pm

Re: Reasonable Asset Allocation / Financial Picture

Post by dvd7e » Fri Sep 14, 2018 4:19 pm

HEDGEFUNDIE wrote:
Fri Sep 14, 2018 4:04 pm
Adding an 8% “tilt” to small value is not really a tilt at all. You’re probably better off putting that money in Total Market if you’re not willing to go at least 20-30% small value.
If I were to reduce the portfolio down to the closest 3 fund equivalent by getting rid of the small caps, then the result would be:

64% Total US Stock
21% Total International
15% Total Bond

25 25 27
6 6 6
2 2 2

as opposed to the original:
22 21 19
8 8 8
6 5 3

I don't really know what I'm talking about, but on the face of it that seems like a non-trivial (but hopefully moderate) tilt towards small caps. Are you saying that's not the case? The original idea was to include a little bit more small caps, under the assumption (hope?) that I would have enough assets to be able to meet my needs over a 10-20 year horizon, and that I could think just a slight bit more on a 30-50 year horizon and for my heirs by having a nudge towards small caps, under the expectation that in the long run they would provide a little more return than large caps. But I'm also paying the 0.25% ER on the small caps

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