Asset Allocation 3 fund or TRD

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Topic Author
focused
Posts: 30
Joined: Mon Jan 07, 2019 6:13 pm

Asset Allocation 3 fund or TRD

Post by focused » Tue Jan 08, 2019 6:12 pm

Hello everyone, Thank you in advance. I am in the beginning of what is hopefully a long and prosperous investing experience and hoped to get advice from the more knowledgeable users. I am 38 and my wife is 41. We have no debt and I will have a pension upon retiring that covers our current monthly expenses. I like the set it and forget it accounts that re balance within a fund but also am aware that those funds charge a 10-11 bp premium and am not sure if it makes sense to go with a Target Fund vs going with multiple less expensive index funds.

Current Income $80424
Current Monthly Bills $900-1200 (food, gas, insurance, date nights)
Emergency Fund $24000(savings)
Backup Emergency Fund $24500(money market in taxable)

I tried to simplify everything into current percentages of overall portfolio vs future allocation percentages of the portfolio. Any choice to change future allocations would result in current allocations matching individual accounts 100% (taxable would stay there but will be ignored unless TLH is possible)

HSA will sit unused until retirement and should cover all medical costs outside of assisted living.
Medical coverage will be provided by employer from 60-65 thru sick leave credits.

There are several different funds for each retirement vehicle not listed but I am trying to stay withing vanguard funds when possible and any fund over .2 has been excluded.

Current retirement assets
(Future allocation percentages)

Taxable-15888.77
22.7% Vanguard Total Stock Market Index (VTSAX) (.04)
(0.0% Vanguard Total Stock Market Index (VTSAX) (.04))


My 457-Roth, no employer match-10498.9
15.06% Vanguard Target Retirement 2055 Trust I (VFFVX) (.09)
no match
(36.4% Vanguard Target Retirement 2055 Trust I (VFFVX) (.09))


My Roth IRA at Vanguard-16549.58
23.73% Vanguard Total Stock Market Index (VTSAX) (.04)
(13.4%-
7.3 % Vanguard Total Stock Market Index (VTSAX) (.04)
4.69% Vanguard Total International Stock Index Fund (VTIAX) (.11)
1.34% Vanguard Total Bond Market Index Fund (VBTLX) (.05))

or

(13.4% Vanguard Target Retirement 2060 Fund (VTTSX) (.15))

My 403b-Roth, no employer match-16437.39
23.57% Fidelity Total Market Index (FSKAX) (.015)
(24.7% -
12.96% Fidelity Total Market Index (FSKAX) (.015)
8.2% Fidelity Total International Index (FTIHX) (.06)
2.4% Fidelity U.S. Bond Index (FXNAX) (.025))

or

(24.7% Fidelity Freedom Index 2060 Fund (FDKLX) (.14))

Her Roth IRA at Vanguard-10356.05(waiting to deposit 2019 contribution)
14.85% Vanguard Total Stock Market Index (VTSAX) (.04)
(13.4%-
7.3 % Vanguard Total Stock Market Index (VTSAX) (.04)
4.69% Vanguard Total International Stock Index Fund (VTIAX) (.11)
1.34% Vanguard Total Bond Market Index Fund (VBTLX) (.05))

or

(13.4% Vanguard Target Retirement 2060 Fund (VTTSX) (.15))

My HSA
0% (Started contributing 2019)
(14.1% Vanguard Target Retirement 2060 Fund (VTTSX) (.15))

or

(14.1%-
7.76 Vanguard 500 Index Fund (VFIAX) (.04)
4.94 Vanguard Total International Stock Index Fund (VTIAX) (.11)
1.41 Vanguard Total Bond Market Index Fund (VBTLX) (.05))




Contributions

New annual Contributions
$16250 my 457 (no employer matching contributions)
$11050 my 403b (no employer matching contributions)
$6000 my Roth IRA
$6000 her Roth IRA
$6300 hsa (4800 me, 1500 employer)

Available funds not listed

Funds available in 457
Vanguard Institutional 500 Index Trust (VIIIX) (.01)
Vanguard Wellington (VWENX) (.17)



Questions:
1. Given my choices and a time frame of 21 years before we get ready to retire, would having target date funds make much of a difference? Once retired it would follow the future 3 Funds of the ira's because I will roll both 457 and 403b into my ira.

2. My 457 recently moved to trusts for most of the vanguard funds except wellington (vwenx). I have no experience with these and after several phone calls to representatives for the 457 I am no closer to understanding if these are good retirement vehicles. They do get a lower er but have much less oversight and are not required to give a prospectus.

User avatar
David Jay
Posts: 6832
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Asset Allocation 3 fund or TRD

Post by David Jay » Tue Jan 08, 2019 11:34 pm

Welcome to the forum!

1. Target Date funds are great if you are a “set it and forget it” kind of person, it is better to use a TD fund than to use a 3-fund and forget to rebalance.

2. Vanguard trusts in an employee sponsored plan are no problem.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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travelogue
Posts: 224
Joined: Sat Aug 12, 2017 4:29 pm

Re: Asset Allocation 3 fund or TRD

Post by travelogue » Wed Jan 09, 2019 7:24 am

Emergency Fund $24000(savings)
Backup Emergency Fund $24500(money market in taxable)
Great job saving up the EF. I would tweak this by moving more of the fund out of the savings account, which won’t typically keep up with inflation.

Given the liquidity of most MM accounts, what about keeping only, say, $1.5k in savings and moving the balance to higher yielding investments like a bond ladder, Treasury I Bonds, a municipal bond fund, or the like? Vanguard also has a very good MM mutual fund.

Topic Author
focused
Posts: 30
Joined: Mon Jan 07, 2019 6:13 pm

Re: Asset Allocation 3 fund or TRD

Post by focused » Thu Jan 10, 2019 8:09 am

travelogue wrote:
Wed Jan 09, 2019 7:24 am

Great job saving up the EF. I would tweak this by moving more of the fund out of the savings account, which won’t typically keep up with inflation.

Given the liquidity of most MM accounts, what about keeping only, say, $1.5k in savings and moving the balance to higher yielding investments like a bond ladder, Treasury I Bonds, a municipal bond fund, or the like? Vanguard also has a very good MM mutual fund.
Would I need to place the rest of my EF in a specific MM or is the sweep account sufficient?

User avatar
travelogue
Posts: 224
Joined: Sat Aug 12, 2017 4:29 pm

Re: Asset Allocation 3 fund or TRD

Post by travelogue » Thu Jan 10, 2019 9:31 am

focused wrote:
Thu Jan 10, 2019 8:09 am
Would I need to place the rest of my EF in a specific MM or is the sweep account sufficient?
At Vanguard the sweep is good. Currently over 2% APR, I believe, depending on the type of account you select. Other places less so (Schwab, e.g.). I think Vanguard would be fine or one of the online banks like Ally or Capital One 360.

Given the size of your EF, you could consider a CD ladder for a chunk of it, or even I Savings Bonds.

I have a decent single state municipal bond fund available to me (which has tax free yields at both state and federal level). I'm thinking of allocating a portion of my EF to going forward as I have fairly high state-level income taxes.

Here's an article with some similar ideas: https://www.wealthwelldone.com/emergenc ... -strategy/

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