portfolio help

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RustyShackleford
Posts: 1311
Joined: Thu Sep 13, 2007 12:32 pm
Location: NC

portfolio help

Post by RustyShackleford » Thu Oct 18, 2018 2:00 pm

Emergency funds: none specifically earmarked, but plenty available in portfolio (redeemable CDs)
Debt: none
Tax filing status: MFJ (probably, but 2018 will be first married year, so not sure yet)
Tax rate: 12% federal ( I use Roth conversions and basis step-up to exactly fill bracket), 5.5% state
State: North Carolina
Age: almost 66
Desired AA: 40% equity, 40% bond, 10% real estate, 5% commodity, 5% cash
Desired stock allocation: 55% total domestic, 10% domestic small-cap value, 30% total foreign, 5% small foreign
Portfolio size: low 7-figures

I am retired, wife is still working. We keep our investments separately (and she is as "comfortable" as me).

AFTER TAX
22.9% Vanguard Total Stock Mkt Adm (VTSAX)
11.6% Vanguard All-World ex-US ETF (VEU)
2.9% Vanguard Small Cap Value ETF (VBR)
2.5% CDs due 2019
2.8% cash

ROTH
1.7% Vanguard All-World ex-US Small (VSS)
5.3% Vanguard Int-Term Bond ETF (BIV)
1.7% Vanguard Short-Term Bond ETF (BSV)
4.9% CDs due 2019 & 2020
5.7% T-Bills due 2019
5.5% TIPS individual due 2022 & 2025
2.6% PowerShares DB Commodity Idx (DBC)
0.8% cash

TIAA-CREF (tax deferred)
16.7% TIAA Traditional
3.2% Vanguard Short-Term Bond (VBITX)
9.0% TIAA Real Estate


AA vs TARGET TARGET ACTUAL
stock 40% 39.1%
bond 40% 45.6%
real estate 10% 9.0%
commodity 5% 2.6%
cash 5% 3.6%

STOCK AA vs TARGET TARGET ACTUAL
TSM 55.0% 57.9%
small value 10.0% 8.0%
VEU 30.0% 29.7%
VSS 5.0% 4.4%
Last edited by RustyShackleford on Thu Oct 18, 2018 2:06 pm, edited 1 time in total.

RustyShackleford
Posts: 1311
Joined: Thu Sep 13, 2007 12:32 pm
Location: NC

Re: portfolio help

Post by RustyShackleford » Thu Oct 18, 2018 2:05 pm

Putting my thoughts in a separate post ...

I plan to use the 12% federal bracket to do Roth conversions out of the TIAA-CREF account (it's the moral equivalent of a TIRA), and should be able to convert the VBITX and perhaps half of the TIAA Real Estate. Then when I turn 70yo, I will take Social Security and do a lifetime annuity of the remaining TIAA-CREF assets. I will draw down the after-tax and the Roth with annual withdrawals, being able to live very comfortably with a 2.5% inflation-adjusted withdrawal rate.

I believe my enviable situation points towards adopting a conservative AA. It seems to me that the my main risk at this point is high inflation, so I intend to increase my TIPS allocation (as the CDs and T-Bills in the Roth mature). The cash in my after-tax will act as a bridge until a take Social Security and annuitize TIAA-CREF; it will get me about halfway to age 70.

megabad
Posts: 663
Joined: Fri Jun 01, 2018 4:00 pm

Re: portfolio help

Post by megabad » Thu Oct 18, 2018 5:45 pm

RustyShackleford wrote:
Thu Oct 18, 2018 2:05 pm
Putting my thoughts in a separate post ...

I plan to use the 12% federal bracket to do Roth conversions out of the TIAA-CREF account (it's the moral equivalent of a TIRA), and should be able to convert the VBITX and perhaps half of the TIAA Real Estate. Then when I turn 70yo, I will take Social Security and do a lifetime annuity of the remaining TIAA-CREF assets. I will draw down the after-tax and the Roth with annual withdrawals, being able to live very comfortably with a 2.5% inflation-adjusted withdrawal rate.

I believe my enviable situation points towards adopting a conservative AA. It seems to me that the my main risk at this point is high inflation, so I intend to increase my TIPS allocation (as the CDs and T-Bills in the Roth mature). The cash in my after-tax will act as a bridge until a take Social Security and annuitize TIAA-CREF; it will get me about halfway to age 70.
Nothing jumps out at me, looks like a pretty good conservative portfolio. I don't invest in futures, so I can't comment there but that is a small part of your portfolio. I assume with two SS, two RMDs/annuity payments etc you will be over $100k income at 70 so Roth conversions make sense for both of you (make sure you consider her current/future income if MFJ). I would maybe not annuitize TIAA real estate unless there is a surrender fee (like there usually is for Traditional), but that is neither here nor there and is a personal preference.

Not sure what "after-tax" means exactly in this case, but if this means qualified plan than I would definitely move all of that out of your qualified plan before 70 to avoid a bunch of RMDs.

I concur with your assessment of being somewhat exposed to inflation. You have a bit more cash/cash equivalents/short term fixed income than I would feel comfortable with. I would be on board with you increasing your TIPs holdings a bit.

Not a judgement but you use the words I and me a lot. In my experience, marriage quickly turns into a we, especially financially. I would advise planning accordingly and if you want to truly keep "investments separate" consider trusts and other measures especially if you both have specific nonspouse heirs (speak to your lawyers if you haven't already).

RustyShackleford
Posts: 1311
Joined: Thu Sep 13, 2007 12:32 pm
Location: NC

Re: portfolio help

Post by RustyShackleford » Thu Oct 18, 2018 11:29 pm

Thanks for responding.
megabad wrote:
Thu Oct 18, 2018 5:45 pm
I don't invest in futures, so I can't comment ...
You mean the DBC commodity thing ? Yeah, wish I hadn't done that, but gonna wait and see if it recovers at some point, and as you say, it's small.
I assume with two SS, two RMDs/annuity payments etc you will be over $100k income at 70 so Roth conversions make sense for both of you ...
Yes, as a couple, a bit over $100K. Anyhow, I consider Roth conversions a no-brainer as long as they're done in the 12% (formerly 15%) bracket.
Not sure what "after-tax" means exactly in this case ...
Taxable. The way I've always thought of it while working.
You have a bit more cash/cash equivalents/short term fixed income than I would feel comfortable with. I would be on board with you increasing your TIPs holdings a bit.
Yeah, all those CDs are mostly just placeholders not wanting to buy funds when "everyone knows" interest rates will soon rise. And this notion of increasing TIPS results from a recent epiphany, realizing what good shape I'm in and that I should focus on black swans.
In my experience, marriage quickly turns into a we, especially financially. I would advise planning accordingly and if you want to truly keep "investments separate" consider trusts and other measures especially if you both have specific nonspouse heirs (speak to your lawyers if you haven't already).
Yeah, though we've been "together" for a decade, the marriage is quite recent. We do more or less combine day to day expenses, and will do so more or less formally once we're both taking Social Security soon, by putting that money into a joint bank account; we live reasonably simply, and are near the top end of SS, so SS should come pretty close. I have no non-spouse heirs, but she has children. With the gender disparity and her being slightly younger, the likelihood is that I'll pre-decease her, but not by all that much. Not being super close to her kids (nearly adult by my arrival), and realizing she'll leave enough that they'll be fine, I don't want most of my legacy to go to them, while ensuring of course that she'll be fine (though as I say, I don't think she'll need my help). So I need to decide how to thread that needle, and also where my legacy should go. Important considerations.

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