My Retirement "Catch Up" plan. Please help/critique.

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Topic Author
StevenNJ1
Posts: 262
Joined: Fri Apr 04, 2014 12:56 pm

My Retirement "Catch Up" plan. Please help/critique.

Post by StevenNJ1 » Tue Jun 11, 2019 12:15 pm

I wish I did this 10 years ago, but, can't go back in time.

At 37 years old, filing as single and getting taxed to the max due to high salary, I realize that lots of time has been wasted and I should have done this at least at 7 years ago. It is what it is, and I can't go back in time, but I needed a plan to get myself back on track as fast as possible. Currently I have only under 40k in my 401k (my only retirement vehicle right now that I began contributing to 2-3 years ago).

Being that I don't plan to retire for another 30 years or so, my risk tolerance is high. I don't care about drops as I have enough time to weather the storm. My focus is on getting money into 401k, IRA, etc. as much as possible. I am thinking that at this point, dividends should be something to focus on in the Roth IRA for sure.

The Plan:

1) Continue maxing out 401k = Nationwide S&P 500 Index Svc (GRMSX). Learned last week that we have 1.77% fee with that fond and it's the cheapest one available. Yes, very bad.

2) Open up Roth IRA via Backdoor. Investment strategy (by % invested)
60% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
20% High Dividend REITS (VNQ, IYR or SCHH)
20% High Dividend individual stocks .. with their current dividend %s (ED = 3.43%, Disney = 1.33%, ABT = 1.68%, PG = 2.90%, JNJ = 2.90%, JPM = 3.02%, DOV = 2.15%, MSFT = 1.40%).


My questions;
1) What do you think? Based on what I want to achieve, is the above a plan you'd recommend?
2) Should my Roth IRA focus on S&P500 instead of Total Stock due to higher dividends in S&P Large cap?
3) Since I plan to relocate money and contribute to individual stock, should I consider going with Schwab or Fidelity instead of Vanguard for their lower "transaction fees" as these transactions will happen yearly with new money coming in AND re balancing?

cherijoh
Posts: 5754
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: My Retirement "Catch Up" plan. Please help/critique.

Post by cherijoh » Tue Jun 11, 2019 12:40 pm

StevenNJ1 wrote:
Tue Jun 11, 2019 12:15 pm
I wish I did this 10 years ago, but, can't go back in time.

At 37 years old, filing as single and getting taxed to the max due to high salary, I realize that lots of time has been wasted and I should have done this at least at 7 years ago. It is what it is, and I can't go back in time, but I needed a plan to get myself back on track as fast as possible. Currently I have only under 40k in my 401k (my only retirement vehicle right now that I began contributing to 2-3 years ago).

Being that I don't plan to retire for another 30 years or so, my risk tolerance is high. I don't care about drops as I have enough time to weather the storm. My focus is on getting money into 401k, IRA, etc. as much as possible. I am thinking that at this point, dividends should be something to focus on in the Roth IRA for sure.

The Plan:

1) Continue maxing out 401k = Nationwide S&P 500 Index Svc (GRMSX). Learned last week that we have 1.77% fee with that fond and it's the cheapest one available. Yes, very bad.

2) Open up Roth IRA via Backdoor. Investment strategy (by % invested)
60% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
20% High Dividend REITS (VNQ, IYR or SCHH)
20% High Dividend individual stocks .. with their current dividend %s (ED = 3.43%, Disney = 1.33%, ABT = 1.68%, PG = 2.90%, JNJ = 2.90%, JPM = 3.02%, DOV = 2.15%, MSFT = 1.40%).


My questions;
1) What do you think? Based on what I want to achieve, is the above a plan you'd recommend?
2) Should my Roth IRA focus on S&P500 instead of Total Stock due to higher dividends in S&P Large cap?
3) Since I plan to relocate money and contribute to individual stock, should I consider going with Schwab or Fidelity instead of Vanguard for their lower "transaction fees" as these transactions will happen yearly with new money coming in AND re balancing?
If you are starting late and are high enough income to need to do a Back Door Roth, you may need to save more money than you are currently allowed to invest in tax-advantaged plans. Do you have other investments in taxable brokerage or money market accounts?

I would focus on broad index funds rather than high-dividend funds. You need to be concerned with total growth in the fund - not how the growth is achieved. An increasing dividend yield can be because a company is doing well, but it can also be because the share prices are dropping. Then the economy tanks and they cut the dividend. :oops: Lots of former high-dividend darlings are no longer in business.

Large caps funds are doing great now, but they haven't done nearly as well in the past. Chasing market sectors usually means that you end up under-performing the total market in the long term.

NativeTxn
Posts: 48
Joined: Mon May 20, 2019 9:32 pm

Re: My Retirement "Catch Up" plan. Please help/critique.

Post by NativeTxn » Tue Jun 11, 2019 1:09 pm

Per M*, GRMSX has a 0.56% expense ratio (which is high for a simple S&P 500 index fund, but nowhere near 1.77%), so where is the 1.77% coming from?

1) To get the max growth, being 100% in stocks will generally get you higher returns in up markets and lower returns in down markets. So, from a purely theoretical standpoint, sure, the plan could help you achieve high returns over time.

However, theory is one thing, and reality is another, and there are a lot of people who think they're not risk averse and can handle the downs, but when it actually happens, it's not as easy as they envision in their head. Given that it sounds like you didn't have a large stake in the markets during 2007-2009, it seems that you've never really gone through a major bear market with a starting portfolio that was pretty high.

Watching a 57% drop in the S&P on your $40,000 portfolio is a big difference compared to watching a 57% drop hit your $400,000 (or $4M) portfolio.

So, it sounds great in theory, but the key is to make sure you can, and will, stick to your plan the next time markets are down 30-40%+. The majority of investors can't take that kind of downside, which is why you see so many out flows at, or near, bottoms of bear markets, and why there are still some people who haven't gotten back in since 2008 (folks here are generally not in the "majority" when it comes to that aspect of investing and sticking to a plan).

2) Dividends are only one piece of total return. So, given that you plan/need to save a lot and grow it, focusing so heavily on dividends may not be the best approach, especially if you're not planning on pulling any money out for a long time. You need growth, and not just dividends. The large(r) cap companies are going to tend to be more stable in price - that's not to say that they won't fall a lot in a severe bear market, or rise a lot in a strong bull market, but their long-term price will tend to be more stable than small and mid-cap prices.

Additionally, you should probably add at least a little bit of international. It's not done well in comparison to the US over the last 7-10 years (or more, arguably), but that may not always be the case. I'm not personally in the camp that believes the S&P 500 gives you "international" exposure. Sure, a lot of the companies in the S&P 500 get revenues from global sources, but I just don't view that as having "international exposure." Others will disagree and think that you don't need any specific international stocks, but I personally hold 20-25% of my total portfolio in total international stock fund(s).

3) Why do you feel the need/desire to pick individual stocks? And why those particular individual stocks that you listed?

You could buy HDV or VIG and get exposure to dividend paying stocks at a very low ER, and be much more diversified than just holding a handful of 7-10 individual stocks.

Unless you have a pretty substantial portfolio, it probably doesn't make much sense to purchase individual stocks, and I would personally say better to stick to index funds for the time being. And unless you are using a service like M1 where you can buy fractional shares, it doesn't sound like your portfolio is large enough to put 20% into those specific stocks you listed in sizeable chunks.

Especially since you plan on doing it in a Roth IRA, which limits you to $6,000 in contributions each year. You couldn't even buy 100 shares of some of those individual stocks with $6,000.


Ultimately, some of your thought process is on point (about needing to save as much as possible and grow it), but IMO, you're making it too complex. If it was me, I would set my 401k to be pretty aggressive with as low a cost as possible (if you list out the available funds, it may be easier to provide thoughts knowing what else is available - even if they are all "very bad.") But I don't know that I'd stick it only in the S&P 500.

I'd probably go with something like:

70% S&P 500 (maybe split this 70% out like 50% S&P 500, 10% Mid Cap, 10% Small cap if you have some low(er) cost funds that could accomplish that - if not, the S&P 500 is certainly fine)
25% Foreign Equity (index if possible)
5% Bonds (having some bond exposure can actually help produce better returns over time than a 100% stock portfolio - and 5-10% exposure to bonds isn't going to be a serious drag on your long-term return)

Then in the Roth, open it at Fidelity or Vanguard where they have a pretty broad range of low cost mutual funds and go with something like:

50% Total US Market
25% Total Int'l Market
10% Reits Index
10% Small Cap Index
5% Total Bond Index

Something along those lines. You're getting exposure to the REITs that you want, and you're adding some tilt toward small caps, which may (or may not) help produce a higher long-term return.

Then set up a taxable account where you put together a similar, well-diversified portfolio and focus on socking away as much as possible. Let it ride for 10-20 years, at which point, you're portfolio will be large enough that branching out into some individual stocks might make sense.

Ultimately, this is all my opinion, and what I would do. So, I'm not saying your plan is bad, by any stretch. I'm just saying that I think you may be making things more complex than you need to and focusing too much on "high dividends."

Regardless, best of luck to you no matter what path you choose.

Topic Author
StevenNJ1
Posts: 262
Joined: Fri Apr 04, 2014 12:56 pm

Re: My Retirement "Catch Up" plan. Please help/critique.

Post by StevenNJ1 » Tue Jun 11, 2019 3:37 pm

cherijoh wrote:
Tue Jun 11, 2019 12:40 pm
StevenNJ1 wrote:
Tue Jun 11, 2019 12:15 pm
I wish I did this 10 years ago, but, can't go back in time.

At 37 years old, filing as single and getting taxed to the max due to high salary, I realize that lots of time has been wasted and I should have done this at least at 7 years ago. It is what it is, and I can't go back in time, but I needed a plan to get myself back on track as fast as possible. Currently I have only under 40k in my 401k (my only retirement vehicle right now that I began contributing to 2-3 years ago).

Being that I don't plan to retire for another 30 years or so, my risk tolerance is high. I don't care about drops as I have enough time to weather the storm. My focus is on getting money into 401k, IRA, etc. as much as possible. I am thinking that at this point, dividends should be something to focus on in the Roth IRA for sure.

The Plan:

1) Continue maxing out 401k = Nationwide S&P 500 Index Svc (GRMSX). Learned last week that we have 1.77% fee with that fond and it's the cheapest one available. Yes, very bad.

2) Open up Roth IRA via Backdoor. Investment strategy (by % invested)
60% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
20% High Dividend REITS (VNQ, IYR or SCHH)
20% High Dividend individual stocks .. with their current dividend %s (ED = 3.43%, Disney = 1.33%, ABT = 1.68%, PG = 2.90%, JNJ = 2.90%, JPM = 3.02%, DOV = 2.15%, MSFT = 1.40%).


My questions;
1) What do you think? Based on what I want to achieve, is the above a plan you'd recommend?
2) Should my Roth IRA focus on S&P500 instead of Total Stock due to higher dividends in S&P Large cap?
3) Since I plan to relocate money and contribute to individual stock, should I consider going with Schwab or Fidelity instead of Vanguard for their lower "transaction fees" as these transactions will happen yearly with new money coming in AND re balancing?
If you are starting late and are high enough income to need to do a Back Door Roth, you may need to save more money than you are currently allowed to invest in tax-advantaged plans. Do you have other investments in taxable brokerage or money market accounts?

I would focus on broad index funds rather than high-dividend funds. You need to be concerned with total growth in the fund - not how the growth is achieved. An increasing dividend yield can be because a company is doing well, but it can also be because the share prices are dropping. Then the economy tanks and they cut the dividend. :oops: Lots of former high-dividend darlings are no longer in business.

Large caps funds are doing great now, but they haven't done nearly as well in the past. Chasing market sectors usually means that you end up under-performing the total market in the long term.
NativeTxn wrote:
Tue Jun 11, 2019 1:09 pm
Per M*, GRMSX has a 0.56% expense ratio (which is high for a simple S&P 500 index fund, but nowhere near 1.77%), so where is the 1.77% coming from?

1) To get the max growth, being 100% in stocks will generally get you higher returns in up markets and lower returns in down markets. So, from a purely theoretical standpoint, sure, the plan could help you achieve high returns over time.

However, theory is one thing, and reality is another, and there are a lot of people who think they're not risk averse and can handle the downs, but when it actually happens, it's not as easy as they envision in their head. Given that it sounds like you didn't have a large stake in the markets during 2007-2009, it seems that you've never really gone through a major bear market with a starting portfolio that was pretty high.

Watching a 57% drop in the S&P on your $40,000 portfolio is a big difference compared to watching a 57% drop hit your $400,000 (or $4M) portfolio.

So, it sounds great in theory, but the key is to make sure you can, and will, stick to your plan the next time markets are down 30-40%+. The majority of investors can't take that kind of downside, which is why you see so many out flows at, or near, bottoms of bear markets, and why there are still some people who haven't gotten back in since 2008 (folks here are generally not in the "majority" when it comes to that aspect of investing and sticking to a plan).

2) Dividends are only one piece of total return. So, given that you plan/need to save a lot and grow it, focusing so heavily on dividends may not be the best approach, especially if you're not planning on pulling any money out for a long time. You need growth, and not just dividends. The large(r) cap companies are going to tend to be more stable in price - that's not to say that they won't fall a lot in a severe bear market, or rise a lot in a strong bull market, but their long-term price will tend to be more stable than small and mid-cap prices.

Additionally, you should probably add at least a little bit of international. It's not done well in comparison to the US over the last 7-10 years (or more, arguably), but that may not always be the case. I'm not personally in the camp that believes the S&P 500 gives you "international" exposure. Sure, a lot of the companies in the S&P 500 get revenues from global sources, but I just don't view that as having "international exposure." Others will disagree and think that you don't need any specific international stocks, but I personally hold 20-25% of my total portfolio in total international stock fund(s).

3) Why do you feel the need/desire to pick individual stocks? And why those particular individual stocks that you listed?

You could buy HDV or VIG and get exposure to dividend paying stocks at a very low ER, and be much more diversified than just holding a handful of 7-10 individual stocks.

Unless you have a pretty substantial portfolio, it probably doesn't make much sense to purchase individual stocks, and I would personally say better to stick to index funds for the time being. And unless you are using a service like M1 where you can buy fractional shares, it doesn't sound like your portfolio is large enough to put 20% into those specific stocks you listed in sizeable chunks.

Especially since you plan on doing it in a Roth IRA, which limits you to $6,000 in contributions each year. You couldn't even buy 100 shares of some of those individual stocks with $6,000.


Ultimately, some of your thought process is on point (about needing to save as much as possible and grow it), but IMO, you're making it too complex. If it was me, I would set my 401k to be pretty aggressive with as low a cost as possible (if you list out the available funds, it may be easier to provide thoughts knowing what else is available - even if they are all "very bad.") But I don't know that I'd stick it only in the S&P 500.

I'd probably go with something like:

70% S&P 500 (maybe split this 70% out like 50% S&P 500, 10% Mid Cap, 10% Small cap if you have some low(er) cost funds that could accomplish that - if not, the S&P 500 is certainly fine)
25% Foreign Equity (index if possible)
5% Bonds (having some bond exposure can actually help produce better returns over time than a 100% stock portfolio - and 5-10% exposure to bonds isn't going to be a serious drag on your long-term return)

Then in the Roth, open it at Fidelity or Vanguard where they have a pretty broad range of low cost mutual funds and go with something like:

50% Total US Market
25% Total Int'l Market
10% Reits Index
10% Small Cap Index
5% Total Bond Index

Something along those lines. You're getting exposure to the REITs that you want, and you're adding some tilt toward small caps, which may (or may not) help produce a higher long-term return.

Then set up a taxable account where you put together a similar, well-diversified portfolio and focus on socking away as much as possible. Let it ride for 10-20 years, at which point, you're portfolio will be large enough that branching out into some individual stocks might make sense.

Ultimately, this is all my opinion, and what I would do. So, I'm not saying your plan is bad, by any stretch. I'm just saying that I think you may be making things more complex than you need to and focusing too much on "high dividends."

Regardless, best of luck to you no matter what path you choose.
Appreciate the info.

The Expense fee on the 401k ... I called Nationwide and learned that fee breakdown is the following.
The offer Vanguard fund that has a cost of 0.20 on top of it they add 1.56% Out of the 1.56, Nationwide takes 38% and our "adviser" takes 62%.

I also learned that Nationwide was sued a few years ago and me simply calling them and asking why fees are so high was enough for them to tell me that they now have a modified "lesser fees" plan available. Same options, but costs less. Our adviser just needs to call them. Such as bad business practice. I laughed when I hear their slogan while on hold "...Nationwide is on your side."

In regards to your comment, "3) Why do you feel the need/desire to pick individual stocks? And why those particular individual stocks that you listed?" ... simply looking at these companies and history going back 10, 20, 30yrs, seems like a stable investment plus the dividends. I know that past performance doesn't guarantee future, but still, Microsoft is not going anywhere.

Rus In Urbe
Posts: 375
Joined: Sat Dec 09, 2017 2:12 pm

Re: My Retirement "Catch Up" plan. Please help/critique.

Post by Rus In Urbe » Tue Jun 11, 2019 4:43 pm

Microsoft is not going anywhere.
Aside from personal experience (which I've told elsewhere on this board), here is why I do not buy individual stocks:

Kodak.....(if you are old enough, you remember that all film came in yellow Kodak boxes, and was processed by Kodak).
Enron.....$11 Billion in sales in 2000. Stock went from $90 to 67 cents.
PanAm....the first international airline I took in 1966. So sexy. So cool. The best airline!
PaineWebber....in 2000 with more than 8,000 stock brokers around the nation...
and.....Borders, Sears, Eastern Airlines, Woolworths, WorldCom....
And tech companies?
....Compaq, Wang, Netscape, Palm (great product!), Minolta, Klout
.....how about Gateway computers? (so cool in the black-and-white Cow Box, surely they would be around forever)

All of these companies were world-class brands, solid companies making a ton of money and "everyone" thought these companies would always be around.....completely snuffed out. Gone. Poof. The insiders got out first (if they could) and all the regular Joes were left holding the bag.

Microsoft may be a world-class brand name solid company making a ton of money....but....who knows?
An Enron-type scandal? A misreading of the tech market (ala Kodak)? Poor leadership? Bad corporate investment? A monopoly case they lose?
Who knows?

Here's a list of America's oldest companies:
Caswell-Massey (1752)
The Hartford Courant (1764)
Baker's Chocolate (1765)
Ames (1774)
King Arthur Flour (1790)
Cigna (1792)
Dixon Ticonderoga (1795)
Jim Beam (1795)
JP Morgan Chase (1799)
Crane and Co. (1799)
DuPont (1802)
Colgate (1806)
Pfaltzgraff (1811)
Citigroup (1812)
Louisville Stoneware (1815)
Remington (1816)
HarperCollins (1817)
Atkins & Pearce (1817)
Brooks Brothers (1818)
Macy's (1843)
Pabst Brewing Company (1844)

Just interesting to see.....

And-----actionable advice to the OP. Don't worry (break the habit of "Shoulda-Woulda-Coulda" and move along). You are 37 and you got the Boglehead bug. Good for you! I didn't get really serious about my investments after I passed 40. It only took us a couple of decades to be way past FI and very content.

You'll do it! Good luck to you! :sharebeer
I'd like to live as a poor man with lots of money. ~Pablo Picasso

NativeTxn
Posts: 48
Joined: Mon May 20, 2019 9:32 pm

Re: My Retirement "Catch Up" plan. Please help/critique.

Post by NativeTxn » Tue Jun 11, 2019 5:29 pm

StevenNJ1 wrote:
Tue Jun 11, 2019 3:37 pm
cherijoh wrote:
Tue Jun 11, 2019 12:40 pm
StevenNJ1 wrote:
Tue Jun 11, 2019 12:15 pm
I wish I did this 10 years ago, but, can't go back in time.

At 37 years old, filing as single and getting taxed to the max due to high salary, I realize that lots of time has been wasted and I should have done this at least at 7 years ago. It is what it is, and I can't go back in time, but I needed a plan to get myself back on track as fast as possible. Currently I have only under 40k in my 401k (my only retirement vehicle right now that I began contributing to 2-3 years ago).

Being that I don't plan to retire for another 30 years or so, my risk tolerance is high. I don't care about drops as I have enough time to weather the storm. My focus is on getting money into 401k, IRA, etc. as much as possible. I am thinking that at this point, dividends should be something to focus on in the Roth IRA for sure.

The Plan:

1) Continue maxing out 401k = Nationwide S&P 500 Index Svc (GRMSX). Learned last week that we have 1.77% fee with that fond and it's the cheapest one available. Yes, very bad.

2) Open up Roth IRA via Backdoor. Investment strategy (by % invested)
60% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
20% High Dividend REITS (VNQ, IYR or SCHH)
20% High Dividend individual stocks .. with their current dividend %s (ED = 3.43%, Disney = 1.33%, ABT = 1.68%, PG = 2.90%, JNJ = 2.90%, JPM = 3.02%, DOV = 2.15%, MSFT = 1.40%).


My questions;
1) What do you think? Based on what I want to achieve, is the above a plan you'd recommend?
2) Should my Roth IRA focus on S&P500 instead of Total Stock due to higher dividends in S&P Large cap?
3) Since I plan to relocate money and contribute to individual stock, should I consider going with Schwab or Fidelity instead of Vanguard for their lower "transaction fees" as these transactions will happen yearly with new money coming in AND re balancing?
If you are starting late and are high enough income to need to do a Back Door Roth, you may need to save more money than you are currently allowed to invest in tax-advantaged plans. Do you have other investments in taxable brokerage or money market accounts?

I would focus on broad index funds rather than high-dividend funds. You need to be concerned with total growth in the fund - not how the growth is achieved. An increasing dividend yield can be because a company is doing well, but it can also be because the share prices are dropping. Then the economy tanks and they cut the dividend. :oops: Lots of former high-dividend darlings are no longer in business.

Large caps funds are doing great now, but they haven't done nearly as well in the past. Chasing market sectors usually means that you end up under-performing the total market in the long term.
NativeTxn wrote:
Tue Jun 11, 2019 1:09 pm
Per M*, GRMSX has a 0.56% expense ratio (which is high for a simple S&P 500 index fund, but nowhere near 1.77%), so where is the 1.77% coming from?

1) To get the max growth, being 100% in stocks will generally get you higher returns in up markets and lower returns in down markets. So, from a purely theoretical standpoint, sure, the plan could help you achieve high returns over time.

However, theory is one thing, and reality is another, and there are a lot of people who think they're not risk averse and can handle the downs, but when it actually happens, it's not as easy as they envision in their head. Given that it sounds like you didn't have a large stake in the markets during 2007-2009, it seems that you've never really gone through a major bear market with a starting portfolio that was pretty high.

Watching a 57% drop in the S&P on your $40,000 portfolio is a big difference compared to watching a 57% drop hit your $400,000 (or $4M) portfolio.

So, it sounds great in theory, but the key is to make sure you can, and will, stick to your plan the next time markets are down 30-40%+. The majority of investors can't take that kind of downside, which is why you see so many out flows at, or near, bottoms of bear markets, and why there are still some people who haven't gotten back in since 2008 (folks here are generally not in the "majority" when it comes to that aspect of investing and sticking to a plan).

2) Dividends are only one piece of total return. So, given that you plan/need to save a lot and grow it, focusing so heavily on dividends may not be the best approach, especially if you're not planning on pulling any money out for a long time. You need growth, and not just dividends. The large(r) cap companies are going to tend to be more stable in price - that's not to say that they won't fall a lot in a severe bear market, or rise a lot in a strong bull market, but their long-term price will tend to be more stable than small and mid-cap prices.

Additionally, you should probably add at least a little bit of international. It's not done well in comparison to the US over the last 7-10 years (or more, arguably), but that may not always be the case. I'm not personally in the camp that believes the S&P 500 gives you "international" exposure. Sure, a lot of the companies in the S&P 500 get revenues from global sources, but I just don't view that as having "international exposure." Others will disagree and think that you don't need any specific international stocks, but I personally hold 20-25% of my total portfolio in total international stock fund(s).

3) Why do you feel the need/desire to pick individual stocks? And why those particular individual stocks that you listed?

You could buy HDV or VIG and get exposure to dividend paying stocks at a very low ER, and be much more diversified than just holding a handful of 7-10 individual stocks.

Unless you have a pretty substantial portfolio, it probably doesn't make much sense to purchase individual stocks, and I would personally say better to stick to index funds for the time being. And unless you are using a service like M1 where you can buy fractional shares, it doesn't sound like your portfolio is large enough to put 20% into those specific stocks you listed in sizeable chunks.

Especially since you plan on doing it in a Roth IRA, which limits you to $6,000 in contributions each year. You couldn't even buy 100 shares of some of those individual stocks with $6,000.


Ultimately, some of your thought process is on point (about needing to save as much as possible and grow it), but IMO, you're making it too complex. If it was me, I would set my 401k to be pretty aggressive with as low a cost as possible (if you list out the available funds, it may be easier to provide thoughts knowing what else is available - even if they are all "very bad.") But I don't know that I'd stick it only in the S&P 500.

I'd probably go with something like:

70% S&P 500 (maybe split this 70% out like 50% S&P 500, 10% Mid Cap, 10% Small cap if you have some low(er) cost funds that could accomplish that - if not, the S&P 500 is certainly fine)
25% Foreign Equity (index if possible)
5% Bonds (having some bond exposure can actually help produce better returns over time than a 100% stock portfolio - and 5-10% exposure to bonds isn't going to be a serious drag on your long-term return)

Then in the Roth, open it at Fidelity or Vanguard where they have a pretty broad range of low cost mutual funds and go with something like:

50% Total US Market
25% Total Int'l Market
10% Reits Index
10% Small Cap Index
5% Total Bond Index

Something along those lines. You're getting exposure to the REITs that you want, and you're adding some tilt toward small caps, which may (or may not) help produce a higher long-term return.

Then set up a taxable account where you put together a similar, well-diversified portfolio and focus on socking away as much as possible. Let it ride for 10-20 years, at which point, you're portfolio will be large enough that branching out into some individual stocks might make sense.

Ultimately, this is all my opinion, and what I would do. So, I'm not saying your plan is bad, by any stretch. I'm just saying that I think you may be making things more complex than you need to and focusing too much on "high dividends."

Regardless, best of luck to you no matter what path you choose.
Appreciate the info.

The Expense fee on the 401k ... I called Nationwide and learned that fee breakdown is the following.
The offer Vanguard fund that has a cost of 0.20 on top of it they add 1.56% Out of the 1.56, Nationwide takes 38% and our "adviser" takes 62%.

I also learned that Nationwide was sued a few years ago and me simply calling them and asking why fees are so high was enough for them to tell me that they now have a modified "lesser fees" plan available. Same options, but costs less. Our adviser just needs to call them. Such as bad business practice. I laughed when I hear their slogan while on hold "...Nationwide is on your side."

In regards to your comment, "3) Why do you feel the need/desire to pick individual stocks? And why those particular individual stocks that you listed?" ... simply looking at these companies and history going back 10, 20, 30yrs, seems like a stable investment plus the dividends. I know that past performance doesn't guarantee future, but still, Microsoft is not going anywhere.
So, it sounds like everything is set up to pass the cost of the plan on to the participants (which is perfectly legal to do, though not necessarily the best approach for the participants of the plan). That's unfortunate. I would talk to your HR and tell them what Nationwide told you and see what they say. Request that they take the plan to market and do an RFP to see what else it out there that may be a better option for the company and the participants. There are certainly cost effective plan options that don't charge so much on fees, though some of that can depend on how big the plan is, etc. But it never hurts to find out from HR - it may have been years since they evaluated the plan, but it seems probable (knowing the very little about your plan that we do) that there may be better options out there.

As to the individual stock thing, I agree with Rus on (a) not assuming anything, and (b) not focusing on individual stocks.

If you really want to focus on dividends, you could buy HDV that has a current 12-month yield of 3.48% (per M*) and has a 0.08% ER. It's holds 75 stocks and top 10 holdings are:

Exxon
JP Morgan
Verizon
Johnson & Johnson
Chevron
Pfizer
Proctor & Gamble
Coca-Cola
Cisco
Pepsi

And the top 25 holdings includes others such as: Merck, TI, 3M, UPS, Lockheed Martin, and Colgate-Palmolive

All companies that likely aren't going anywhere, but if one of them does, 1 out of 75 is going to hurt a lot less than 1 out of 7. And the current yield (3.48%) is about 1.13% higher than the average of the individual stocks you listed (2.35% assuming equal weighting among all 8 on your list).

But again, your focus should be on overall growth and, IMO, not so focused on dividends because that is only one component of growth.

So, if it was me, and I wanted to put a slight tilt toward dividend paying stocks, I'd go for something like HDV rather than trying to pick individual stocks and then buy them in substantial enough quantities to make a difference.

VIG would be another option. Yield is lower, but it holds 183 stocks, so even more diversified than HDV (personally I'd go for the higher yield myself, but the point is that there are options).

k3vb0t
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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by k3vb0t » Tue Jun 11, 2019 6:08 pm

Let me get this right...

You realize you're starting late and are behind the game both in knowledge and in retirement funds saved.

And you want to go about picking individual stocks based on a hunch/prior performance of 10-30 years instead of doing deep financial analysis like an entire team of actively managed mutual fund managers would do?

Ever heard of the phrase -- or seen it in an advertisement for some high cost mutual fund -- "past performance is not indicative of future results"?

And yet you still think you can outperform owning the whole market -- or even those highly paid actively managed mutual fund managers -- by picking individual stocks yourself?

Really?

While focusing on dividend funds/investments instead of owning the whole market and getting return from both capital appreciation and dividends?

This is a bit harsh, but come on. It sounds almost like you're panicking -- realizing you're behind, okay, what can I do to catch up? Okay, let's max out some investments, and okay, let's go with things that sound good. Why would I pick owning the whole market when I can pick this specific stock, heck, this stock even has a high dividend ratio, and despite having done no deep analysis I just know it's a winner.

Stop. Breathe. Do some reading. Start with the Wiki. You're 37. You might be behind some people on this forum but you're right in line with the rest of America.

At age 37 and low portfolio balance, two things matter in my opinion:
1. Savings rate
2. Human capital

If you start maxing out your accounts that $40k balance will go up a lot more than if you somehow managed to beat the market's average on a lower balance. I'm not saying you want really poor account performance, but if you trailed the market 3% but maxed out your accounts you are still going to see a big jump in your account balance.

This relates to human capital. What you need right now is to maximize your earning power -- and thus saving power -- through your career. In order to do this you should take the time you would spend focusing on analyzing individual stocks (assuming you would do that) and focus on your career. This is the simplicity of the 3 fund portfolio in the Wiki. It's literally set it and forget it (aside from maybe some annual rebalancing) so you can focus on earning and saving.

It sounds like you are doing well based on saying you're in a high tax bracket, which brings it right back to savings rate. If I were you I'd wonder where all that money I earned went and make adjustments there. Doesn't do you any good to earn lots of money if you save none of it.

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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by Grt2bOutdoors » Tue Jun 11, 2019 7:37 pm

Buying individual equities in a retirement account is a bad move. First, every single one of those equities are in the S&P 500 fund, so all you are doing is increasing the weighing of those companies vs. the index. Second, while the dividend growth may be good to mediocre (PG), ED in 1974 eliminated their dividend completely, the history you don’t know can come back to bite you. Still think Con Ed is safe? Third, in a retirement account you are not able to write off capital losses as you could in a taxable account.

Since you are 37, the good news is you have ample time to catch up. There are three ways of getting there: save more, spend less (lower your retirement expectations), keep your expenses low. And don’t expect to continuously be employed unless your employment is super secure.

These attempts at strategizing really don’t work. In fact, they can blow up on you and leave you in a worse position than if you just picked one or two funds and rebalanced periodically. The key is to avoid underperforming vs. your benchmark.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

7eight9
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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by 7eight9 » Tue Jun 11, 2019 7:50 pm

Grt2bOutdoors wrote:
Tue Jun 11, 2019 7:37 pm
Buying individual equities in a retirement account is a bad move. First, every single one of those equities are in the S&P 500 fund, so all you are doing is increasing the weighing of those companies vs. the index. Second, while the dividend growth may be good to mediocre (PG), ED in 1974 eliminated their dividend completely, the history you don’t know can come back to bite you. Still think Con Ed is safe? Third, in a retirement account you are not able to write off capital losses as you could in a taxable account.

Since you are 37, the good news is you have ample time to catch up. There are three ways of getting there: save more, spend less (lower your retirement expectations), keep your expenses low. And don’t expect to continuously be employed unless your employment is super secure.

These attempts at strategizing really don’t work. In fact, they can blow up on you and leave you in a worse position than if you just picked one or two funds and rebalanced periodically. The key is to avoid underperforming vs. your benchmark.
Consolidated Edison missed one common dividend payment in 1974 --- https://investor.conedison.com/stock-in ... -dividends

That was the first (and last time) that one was missed since the company began paying them in 1885 --- https://www.nytimes.com/1974/05/29/arch ... on-10.html

They are a Dividend Aristocrat that has increased its dividend each year of the past 45 years --- https://www.simplysafedividends.com/int ... -edison-ed

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Taz
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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by Taz » Wed Jun 12, 2019 6:22 am

StevenNJ1 wrote:
Tue Jun 11, 2019 3:37 pm

The Expense fee on the 401k ... I called Nationwide and learned that fee breakdown is the following.
The offer Vanguard fund that has a cost of 0.20 on top of it they add 1.56% Out of the 1.56, Nationwide takes 38% and our "adviser" takes 62%.

I also learned that Nationwide was sued a few years ago and me simply calling them and asking why fees are so high was enough for them to tell me that they now have a modified "lesser fees" plan available. Same options, but costs less. Our adviser just needs to call them. Such as bad business practice. I laughed when I hear their slogan while on hold "...Nationwide is on your side."
StevenNJ1,

It's amazing how quickly less-expensive plans are now suddenly available.

I'd approach your company HR and drop off an article or two about companies and advisers getting sued for high cost 401k)s and their failure to act as fiduciaries. Suggest that there are less expensive plans out there and that the adviser certainly isn't worth 0.62% of your account. I'd also send a copy to the adviser.

Our plan "adviser" called our CEO 30 minutes after receiving an email notifying him that we were switching to Vanguard and not using him. Suddenly he now had ideas about adding other funds. Likewise, ADP told me that we could have Vanguard and other funds if we stayed.
The destination matters.

KingRiggs
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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by KingRiggs » Wed Jun 12, 2019 8:31 am

k3vb0t wrote:
Tue Jun 11, 2019 6:08 pm
Let me get this right...

You realize you're starting late and are behind the game both in knowledge and in retirement funds saved.

And you want to go about picking individual stocks based on a hunch/prior performance of 10-30 years instead of doing deep financial analysis like an entire team of actively managed mutual fund managers would do?

Ever heard of the phrase -- or seen it in an advertisement for some high cost mutual fund -- "past performance is not indicative of future results"?

And yet you still think you can outperform owning the whole market -- or even those highly paid actively managed mutual fund managers -- by picking individual stocks yourself?

Really?

While focusing on dividend funds/investments instead of owning the whole market and getting return from both capital appreciation and dividends?

This is a bit harsh, but come on. It sounds almost like you're panicking -- realizing you're behind, okay, what can I do to catch up? Okay, let's max out some investments, and okay, let's go with things that sound good. Why would I pick owning the whole market when I can pick this specific stock, heck, this stock even has a high dividend ratio, and despite having done no deep analysis I just know it's a winner.

Stop. Breathe. Do some reading. Start with the Wiki. You're 37. You might be behind some people on this forum but you're right in line with the rest of America.

At age 37 and low portfolio balance, two things matter in my opinion:
1. Savings rate
2. Human capital

If you start maxing out your accounts that $40k balance will go up a lot more than if you somehow managed to beat the market's average on a lower balance. I'm not saying you want really poor account performance, but if you trailed the market 3% but maxed out your accounts you are still going to see a big jump in your account balance.

This relates to human capital. What you need right now is to maximize your earning power -- and thus saving power -- through your career. In order to do this you should take the time you would spend focusing on analyzing individual stocks (assuming you would do that) and focus on your career. This is the simplicity of the 3 fund portfolio in the Wiki. It's literally set it and forget it (aside from maybe some annual rebalancing) so you can focus on earning and saving.

It sounds like you are doing well based on saying you're in a high tax bracket, which brings it right back to savings rate. If I were you I'd wonder where all that money I earned went and make adjustments there. Doesn't do you any good to earn lots of money if you save none of it.
Someone please engrave this on a bronze plaque and put it in front of Boglehead HQ immediately...

pkcrafter
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Contact:

Re: My Retirement "Catch Up" plan. Please help/critique.

Post by pkcrafter » Wed Jun 12, 2019 9:25 am

Steven, if you feel like your behind, be sure you are saving/investing at least 15%-18% of income in your long term plan. Don't focus on dividends, it's total return that matters. Also, create an emergency fund if you don't have one now.

Investing in a taxable account

https://www.whitecoatinvestor.com/retir ... account-2/

https://www.bogleheads.org/wiki/Tax-eff ... _placement



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.

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ruralavalon
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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by ruralavalon » Wed Jun 12, 2019 9:36 am

Age 37 is not too late to make a real difference, with a good plan and a reasonable savings rate. You are not very late, I had about $40k in retirement savings when in my mid-30s.

In my opinion It is not a good idea to take extra risk trying to make up for a later start. That can easily backfire and leave you worse off.

StevenNJ1 wrote:
Tue Jun 11, 2019 12:15 pm
I wish I did this 10 years ago, but, can't go back in time.

At 37 years old, filing as single and getting taxed to the max due to high salary, I realize that lots of time has been wasted and I should have done this at least at 7 years ago. It is what it is, and I can't go back in time, but I needed a plan to get myself back on track as fast as possible. Currently I have only under 40k in my 401k (my only retirement vehicle right now that I began contributing to 2-3 years ago).

Being that I don't plan to retire for another 30 years or so, my risk tolerance is high. I don't care about drops as I have enough time to weather the storm. My focus is on getting money into 401k, IRA, etc. as much as possible. I am thinking that at this point, dividends should be something to focus on in the Roth IRA for sure.

The Plan:

1) Continue maxing out 401k = Nationwide S&P 500 Index Svc (GRMSX). Learned last week that we have 1.77% fee with that fond and it's the cheapest one available. Yes, very bad.
About how long do you expect that you might continue with this employer?

Is there an employer match offered in your employer's 401k plan? If so what is it?

You may have a way to avoid having to use the expensive Nationwide S&P 500 index fund.

Does your employer's 401k plan have a brokerage option (sometimes called brokerage window, or BrokerageLink), which allows you to buy other investments thru a designated brokerage for a fee?

If so what are the fees for are the fees for using brokerage option?

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


StevenNJ1 wrote:
Tue Jun 11, 2019 12:15 pm
2) Open up Roth IRA via Backdoor. Investment strategy (by % invested)
60% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
20% High Dividend REITS (VNQ, IYR or SCHH)
20% High Dividend individual stocks .. with their current dividend %s (ED = 3.43%, Disney = 1.33%, ABT = 1.68%, PG = 2.90%, JNJ = 2.90%, JPM = 3.02%, DOV = 2.15%, MSFT = 1.40%).
If using a S&P 500 index fund in your 401k, then for better diversification of your portfolio in your Roth IRA I suggest using funds like:
1) Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
ER 0.11%; and
2) Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05%.

It is often better to coordinate investments across all accounts, in other words treat all accounts together as a single unified portfolio, rather than view each account separately. Select just one or two of the better funds (most diversified + lower expense ratio) in the work-based account (401k, 403b, 457, SIMPLE IRA, TSP etc.), where the choices offered are limited. Then complete the rest of the asset allocation using the nearly unlimited choices available in a taxable account or any IRAs.

For domestic stocks I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund (like Nationwide S&P 500 Index Svc, GRMSX, in your 401k) 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".

In my opinion in a plan that lacks a total stock market index fund, a S&P 500 index fund is good enough by itself for a domestic stock allocation. A 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. In the 27 years since the creation of the first total stock market index fund the performance 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 27 years the total market fund gave a little more return. 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.

See also:
1) Allan Roth, CBS Moneywatch (02/03/2010), "John C. Bogle on the S&P 500 vs. the Total Stock Market"; and
2) Wall Street Physician (01/17/2019), "Should You Invest in the S&P 500 or the Total Stock Market?".


StevenNJ1 wrote:
Tue Jun 11, 2019 12:15 pm
My questions;
1) What do you think? Based on what I want to achieve, is the above a plan you'd recommend?
First investigate the possibility of a brokerage window, you may have a way to avoid having to use the expensive Nationwide S&P 500 index fund.

StevenNJ1 wrote:
Tue Jun 11, 2019 12:15 pm
2) Should my Roth IRA focus on S&P500 instead of Total Stock due to higher dividends in S&P Large cap?
No.

If using a S&P 500 index fund in your 401k, then for better diversification of your portfolio in your Roth IRA I suggest using funds like:
1) Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%; and
2) Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05%.


StevenNJ1 wrote:
Tue Jun 11, 2019 12:15 pm
3) Since I plan to relocate money and contribute to individual stock, should I consider going with Schwab or Fidelity instead of Vanguard for their lower "transaction fees" as these transactions will happen yearly with new money coming in AND re balancing?
I suggest using accounts at Vanguard, the others do not have lower "transaction fees". The expense ratios at Fidelity and Schwab are slightly lower, but not enough to make a real difference. In my opinion it is likely that differences in the indexes used, tracking error, tax-efficiency, and securities lending policy will probably have more impact and outweigh the tiny differences in expense ratios.

For funds and location of accounts I usually suggest
1) Vanguard,
2) Fidelity, or
3) Schwab
in that order of preference.

I prefer using traditional mutual funds (rather than ETFs), and Vanguard has by far the largest selection of low expense traditional mutual funds offered anywhere. Both Vanguard and Fidelity have a larger selection of low expense index funds than does Schwab. We have all of our investing accounts at Vanguard, and use only Vanguard index funds.

Vanguard has by far the largest array of no transaction fee ETFS. In addition to its own ETFs Vanguard offers roughly 1800 commission free ETFs of other firms including those of Schwab, State Street (SPDR) and BlackRock (iShares). Kiplinger (07/02/2018), "Vanguard to Ditch Commissions on Most ETFs".

Fidelity offers banking services like their Cash Management Account (CMA), Schwab also offers some banking services. Vanguard does not offer banking services. I prefer a bank for banking functions. For banking functions (checking account, debit card, credit cards) we use a bank with a branch near our home.

I like Vanguard's mutual structure, Vanguard is owned by the Vanguard funds, has no other shareholders, and so conflicts of interest with shareholders don't exist.

Both Fidelity and Schwab have local customer service offices in some cities, but Vanguard does not. None have a local office near me, so that was not a factor in my choice.

A local customer service office is important for some, but in my opinion not at all necessary. We have had no problems with the rare phone consultations that were necessary. I call Vanguard once per year at most, some years not at all, and always received prompt, accurate, professional advice and service.

Once a reasonable investing plan is set up, it requires almost no attention. Some people prefer the customer service at Fidelity or Schwab.

Schwab does not offer a total international stock index fund, both Vanguard and Fidelity do. (At Schwab you need to use multiple ETFs to get total international stock coverage.) Vanguard stock index funds are more tax-efficient, which is important if using a taxable account. Vanguard offers a larger selection of tax-exempt bond funds (including state specific funds) than either Schwab or Fidelity, which is important if using a taxable account and in a high tax bracket. Vanguard offers a small-cap value index fund, but Schwab and Fidelity do not, which is important if interested in value investing. Vanguard money market funds (including the sweep fund) pay a better return than funds at Fidelity or Schwab, which is important for investors who desire a significant cash allocation.

Fidelity and Schwab have no initial minimum investment required, which is helpful for a new investor with a small amount to invest. Most Vanguard funds require an initial minimum investment of $3k, or just $1k for target retirement funds or Vanguard STAR Fund (VGSTX).

There is a lot of personal preference involved in selecting a firm for your accounts.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Dottie57
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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by Dottie57 » Wed Jun 12, 2019 1:04 pm

OP,

Use all of your 401k tax deferred space. Back door Roth (max). Open a taxable brokerage account and start buying there. Make sure you have an appropriate emergency fund. Don’t believe you are excellent stock picker. Invest in three fund portfolio and you will do well.

The amount you invest will be a significant determinant of the success of your plan.

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Stinky
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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by Stinky » Wed Jun 12, 2019 3:02 pm

OP,

There are a ton of good ideas posted by others. I'd encourage you to take their collective advice, especially when it comes to investing in individual stocks.

When I was 37, I had far less money in savings than you do, and was not saving anything because I was carrying two houses on one salary. Now, I'm retired and comfortably FI.

You can do it, too. Save, save, save, and invest prudently.
It's a GREAT day to be alive - Travis Tritt

CommitmentDevice
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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by CommitmentDevice » Wed Jun 12, 2019 3:34 pm

Hi OP,
Lots of good advice already posted and congrats on taking ownership over your investing and having great annual earnings!

I think you'd benefit from reading one or two of the Boglehead books. Upgrading a few of your mental models around investing could save you $ and needless hassle/complexity.

In addition to 401K and backdoor Roth, there might be some additional tax-preferential options that would be relevant to you. This isn't my area of expertise, but worth investigating... HSA, Solo 401k, 529.

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ruralavalon
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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by ruralavalon » Thu Jun 13, 2019 2:35 pm

Stinky wrote:
Wed Jun 12, 2019 3:02 pm
OP,

There are a ton of good ideas posted by others. I'd encourage you to take their collective advice, especially when it comes to investing in individual stocks.

When I was 37, I had far less money in savings than you do, and was not saving anything because I was carrying two houses on one salary. Now, I'm retired and comfortably FI.

You can do it, too. Save, save, save, and invest prudently.
.
I agee, a high savings rate is very important. Establish a savings rate as high as you can comfortably sustain.

CommitmentDevice wrote:
Wed Jun 12, 2019 3:34 pm
Hi OP,
Lots of good advice already posted and congrats on taking ownership over your investing and having great annual earnings!

I think you'd benefit from reading one or two of the Boglehead books. Upgrading a few of your mental models around investing could save you $ and needless hassle/complexity.

. . . . .
I suggest reading one or two books on investing. Please see the wiki article "Books: recommendations and reviews".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
StevenNJ1
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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by StevenNJ1 » Fri Jun 14, 2019 11:10 am

Once again ... amazing place to get advice. I appreciate it. After reading all the comments here and other platforms, here is where I am and I hope you still have enough patience to provide further advice.

My updated plan agenda: .... no Individual stocks, Welcome HSA, aggressive contribution and investment, high fees are bad, but since balances low, focusing on high growth ... no bonds. No more dividend heavy investing, for now.

Old company 401k, small balance, under 40k. Right now split 50/50 between these 2 funds. Want to keep PRNHX because of extra dividend growth?
T. Rowe Price New Horizons (PRNHX) = 50% (0.97% expense) ... has dividends
BlackRock Russell 3000 Index = 50% (0.34% expense)

Current company 401k = almost max out.
Nationwide S&P 500 Index Svc (GRMSX) = 100% (1.77% expense) ... we're working on lowering that hideous fee.

Roth IRA via backdoor = will try to max out. Until IRA reaches 50k+ balance, only then do I see a point of looking at REITs, and other options.
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) or VOO or VTI?
Please help me understand the differnece between the 3 and which one makes sense. Some suggested VOO and VTI for tax benefits over VTSAX?

HSA = just found out our company offers HSA ... that's awesome! I am on the low plan, high deductible, it makes sense. I am maxing it out! Here I want to be a bit more conservative though; Maybe 50/50 split between;
Vanguard LifeStrategy Conservative Growth Inv (VSCGX) (0.12% expense)
T. Rowe Price Blue Chip Growth I (TBCIX) (0.57% expense)

All HSA investment funds only have their own fund expense fees, Optum Bank does not add anything, but $3/mo for maintenance. Link to available funds (https://www.optumbank.com/all-products/ ... ineup.html)

This is my strategy until my balances grow to a total of maybe 100k+. Only then do I see a need to diversify more or pay closer attention to things that may not matter right now.

Thoughts?
Thank you.
k3vb0t wrote:
Tue Jun 11, 2019 6:08 pm
Let me get this right...

You realize you're starting late and are behind the game both in knowledge and in retirement funds saved.

And you want to go about picking individual stocks based on a hunch/prior performance of 10-30 years instead of doing deep financial analysis like an entire team of actively managed mutual fund managers would do?

Ever heard of the phrase -- or seen it in an advertisement for some high cost mutual fund -- "past performance is not indicative of future results"?

And yet you still think you can outperform owning the whole market -- or even those highly paid actively managed mutual fund managers -- by picking individual stocks yourself?

Really?

While focusing on dividend funds/investments instead of owning the whole market and getting return from both capital appreciation and dividends?

This is a bit harsh, but come on. It sounds almost like you're panicking -- realizing you're behind, okay, what can I do to catch up? Okay, let's max out some investments, and okay, let's go with things that sound good. Why would I pick owning the whole market when I can pick this specific stock, heck, this stock even has a high dividend ratio, and despite having done no deep analysis I just know it's a winner.

Stop. Breathe. Do some reading. Start with the Wiki. You're 37. You might be behind some people on this forum but you're right in line with the rest of America.

At age 37 and low portfolio balance, two things matter in my opinion:
1. Savings rate
2. Human capital

If you start maxing out your accounts that $40k balance will go up a lot more than if you somehow managed to beat the market's average on a lower balance. I'm not saying you want really poor account performance, but if you trailed the market 3% but maxed out your accounts you are still going to see a big jump in your account balance.

This relates to human capital. What you need right now is to maximize your earning power -- and thus saving power -- through your career. In order to do this you should take the time you would spend focusing on analyzing individual stocks (assuming you would do that) and focus on your career. This is the simplicity of the 3 fund portfolio in the Wiki. It's literally set it and forget it (aside from maybe some annual rebalancing) so you can focus on earning and saving.

It sounds like you are doing well based on saying you're in a high tax bracket, which brings it right back to savings rate. If I were you I'd wonder where all that money I earned went and make adjustments there. Doesn't do you any good to earn lots of money if you save none of it.
cherijoh wrote:
Tue Jun 11, 2019 12:40 pm

If you are starting late and are high enough income to need to do a Back Door Roth, you may need to save more money than you are currently allowed to invest in tax-advantaged plans. Do you have other investments in taxable brokerage or money market accounts?

I would focus on broad index funds rather than high-dividend funds. You need to be concerned with total growth in the fund - not how the growth is achieved. An increasing dividend yield can be because a company is doing well, but it can also be because the share prices are dropping. Then the economy tanks and they cut the dividend. :oops: Lots of former high-dividend darlings are no longer in business.

Large caps funds are doing great now, but they haven't done nearly as well in the past. Chasing market sectors usually means that you end up under-performing the total market in the long term.
NativeTxn wrote:
Tue Jun 11, 2019 1:09 pm
Per M*, GRMSX has a 0.56% expense ratio (which is high for a simple S&P 500 index fund, but nowhere near 1.77%), so where is the 1.77% coming from?

1) To get the max growth, being 100% in stocks will generally get you higher returns in up markets and lower returns in down markets. So, from a purely theoretical standpoint, sure, the plan could help you achieve high returns over time.

However, theory is one thing, and reality is another, and there are a lot of people who think they're not risk averse and can handle the downs, but when it actually happens, it's not as easy as they envision in their head. Given that it sounds like you didn't have a large stake in the markets during 2007-2009, it seems that you've never really gone through a major bear market with a starting portfolio that was pretty high.

Watching a 57% drop in the S&P on your $40,000 portfolio is a big difference compared to watching a 57% drop hit your $400,000 (or $4M) portfolio.

So, it sounds great in theory, but the key is to make sure you can, and will, stick to your plan the next time markets are down 30-40%+. The majority of investors can't take that kind of downside, which is why you see so many out flows at, or near, bottoms of bear markets, and why there are still some people who haven't gotten back in since 2008 (folks here are generally not in the "majority" when it comes to that aspect of investing and sticking to a plan).

2) Dividends are only one piece of total return. So, given that you plan/need to save a lot and grow it, focusing so heavily on dividends may not be the best approach, especially if you're not planning on pulling any money out for a long time. You need growth, and not just dividends. The large(r) cap companies are going to tend to be more stable in price - that's not to say that they won't fall a lot in a severe bear market, or rise a lot in a strong bull market, but their long-term price will tend to be more stable than small and mid-cap prices.

Additionally, you should probably add at least a little bit of international. It's not done well in comparison to the US over the last 7-10 years (or more, arguably), but that may not always be the case. I'm not personally in the camp that believes the S&P 500 gives you "international" exposure. Sure, a lot of the companies in the S&P 500 get revenues from global sources, but I just don't view that as having "international exposure." Others will disagree and think that you don't need any specific international stocks, but I personally hold 20-25% of my total portfolio in total international stock fund(s).

3) Why do you feel the need/desire to pick individual stocks? And why those particular individual stocks that you listed?

You could buy HDV or VIG and get exposure to dividend paying stocks at a very low ER, and be much more diversified than just holding a handful of 7-10 individual stocks.

Unless you have a pretty substantial portfolio, it probably doesn't make much sense to purchase individual stocks, and I would personally say better to stick to index funds for the time being. And unless you are using a service like M1 where you can buy fractional shares, it doesn't sound like your portfolio is large enough to put 20% into those specific stocks you listed in sizeable chunks.

Especially since you plan on doing it in a Roth IRA, which limits you to $6,000 in contributions each year. You couldn't even buy 100 shares of some of those individual stocks with $6,000.


Ultimately, some of your thought process is on point (about needing to save as much as possible and grow it), but IMO, you're making it too complex. If it was me, I would set my 401k to be pretty aggressive with as low a cost as possible (if you list out the available funds, it may be easier to provide thoughts knowing what else is available - even if they are all "very bad.") But I don't know that I'd stick it only in the S&P 500.

I'd probably go with something like:

70% S&P 500 (maybe split this 70% out like 50% S&P 500, 10% Mid Cap, 10% Small cap if you have some low(er) cost funds that could accomplish that - if not, the S&P 500 is certainly fine)
25% Foreign Equity (index if possible)
5% Bonds (having some bond exposure can actually help produce better returns over time than a 100% stock portfolio - and 5-10% exposure to bonds isn't going to be a serious drag on your long-term return)

Then in the Roth, open it at Fidelity or Vanguard where they have a pretty broad range of low cost mutual funds and go with something like:

50% Total US Market
25% Total Int'l Market
10% Reits Index
10% Small Cap Index
5% Total Bond Index

Something along those lines. You're getting exposure to the REITs that you want, and you're adding some tilt toward small caps, which may (or may not) help produce a higher long-term return.

Then set up a taxable account where you put together a similar, well-diversified portfolio and focus on socking away as much as possible. Let it ride for 10-20 years, at which point, you're portfolio will be large enough that branching out into some individual stocks might make sense.

Ultimately, this is all my opinion, and what I would do. So, I'm not saying your plan is bad, by any stretch. I'm just saying that I think you may be making things more complex than you need to and focusing too much on "high dividends."

Regardless, best of luck to you no matter what path you choose.
Rus In Urbe wrote:
Tue Jun 11, 2019 4:43 pm
Microsoft is not going anywhere.
Aside from personal experience (which I've told elsewhere on this board), here is why I do not buy individual stocks:

Kodak.....(if you are old enough, you remember that all film came in yellow Kodak boxes, and was processed by Kodak).
Enron.....$11 Billion in sales in 2000. Stock went from $90 to 67 cents.
PanAm....the first international airline I took in 1966. So sexy. So cool. The best airline!
PaineWebber....in 2000 with more than 8,000 stock brokers around the nation...
and.....Borders, Sears, Eastern Airlines, Woolworths, WorldCom....
And tech companies?
....Compaq, Wang, Netscape, Palm (great product!), Minolta, Klout
.....how about Gateway computers? (so cool in the black-and-white Cow Box, surely they would be around forever)

All of these companies were world-class brands, solid companies making a ton of money and "everyone" thought these companies would always be around.....completely snuffed out. Gone. Poof. The insiders got out first (if they could) and all the regular Joes were left holding the bag.

Microsoft may be a world-class brand name solid company making a ton of money....but....who knows?
An Enron-type scandal? A misreading of the tech market (ala Kodak)? Poor leadership? Bad corporate investment? A monopoly case they lose?
Who knows?

Here's a list of America's oldest companies:
Caswell-Massey (1752)
The Hartford Courant (1764)
Baker's Chocolate (1765)
Ames (1774)
King Arthur Flour (1790)
Cigna (1792)
Dixon Ticonderoga (1795)
Jim Beam (1795)
JP Morgan Chase (1799)
Crane and Co. (1799)
DuPont (1802)
Colgate (1806)
Pfaltzgraff (1811)
Citigroup (1812)
Louisville Stoneware (1815)
Remington (1816)
HarperCollins (1817)
Atkins & Pearce (1817)
Brooks Brothers (1818)
Macy's (1843)
Pabst Brewing Company (1844)

Just interesting to see.....

And-----actionable advice to the OP. Don't worry (break the habit of "Shoulda-Woulda-Coulda" and move along). You are 37 and you got the Boglehead bug. Good for you! I didn't get really serious about my investments after I passed 40. It only took us a couple of decades to be way past FI and very content.

You'll do it! Good luck to you! :sharebeer
NativeTxn wrote:
Tue Jun 11, 2019 5:29 pm
StevenNJ1 wrote:
Tue Jun 11, 2019 3:37 pm
cherijoh wrote:
Tue Jun 11, 2019 12:40 pm
NativeTxn wrote:
Tue Jun 11, 2019 1:09 pm
Per M*, GRMSX has a 0.56% expense ratio (which is high for a simple S&P 500 index fund, but nowhere near 1.77%), so where is the 1.77% coming from?

1) To get the max growth, being 100% in stocks will generally get you higher returns in up markets and lower returns in down markets. So, from a purely theoretical standpoint, sure, the plan could help you achieve high returns over time.

However, theory is one thing, and reality is another, and there are a lot of people who think they're not risk averse and can handle the downs, but when it actually happens, it's not as easy as they envision in their head. Given that it sounds like you didn't have a large stake in the markets during 2007-2009, it seems that you've never really gone through a major bear market with a starting portfolio that was pretty high.

Watching a 57% drop in the S&P on your $40,000 portfolio is a big difference compared to watching a 57% drop hit your $400,000 (or $4M) portfolio.

So, it sounds great in theory, but the key is to make sure you can, and will, stick to your plan the next time markets are down 30-40%+. The majority of investors can't take that kind of downside, which is why you see so many out flows at, or near, bottoms of bear markets, and why there are still some people who haven't gotten back in since 2008 (folks here are generally not in the "majority" when it comes to that aspect of investing and sticking to a plan).

2) Dividends are only one piece of total return. So, given that you plan/need to save a lot and grow it, focusing so heavily on dividends may not be the best approach, especially if you're not planning on pulling any money out for a long time. You need growth, and not just dividends. The large(r) cap companies are going to tend to be more stable in price - that's not to say that they won't fall a lot in a severe bear market, or rise a lot in a strong bull market, but their long-term price will tend to be more stable than small and mid-cap prices.

Additionally, you should probably add at least a little bit of international. It's not done well in comparison to the US over the last 7-10 years (or more, arguably), but that may not always be the case. I'm not personally in the camp that believes the S&P 500 gives you "international" exposure. Sure, a lot of the companies in the S&P 500 get revenues from global sources, but I just don't view that as having "international exposure." Others will disagree and think that you don't need any specific international stocks, but I personally hold 20-25% of my total portfolio in total international stock fund(s).

3) Why do you feel the need/desire to pick individual stocks? And why those particular individual stocks that you listed?

You could buy HDV or VIG and get exposure to dividend paying stocks at a very low ER, and be much more diversified than just holding a handful of 7-10 individual stocks.

Unless you have a pretty substantial portfolio, it probably doesn't make much sense to purchase individual stocks, and I would personally say better to stick to index funds for the time being. And unless you are using a service like M1 where you can buy fractional shares, it doesn't sound like your portfolio is large enough to put 20% into those specific stocks you listed in sizeable chunks.

Especially since you plan on doing it in a Roth IRA, which limits you to $6,000 in contributions each year. You couldn't even buy 100 shares of some of those individual stocks with $6,000.


Ultimately, some of your thought process is on point (about needing to save as much as possible and grow it), but IMO, you're making it too complex. If it was me, I would set my 401k to be pretty aggressive with as low a cost as possible (if you list out the available funds, it may be easier to provide thoughts knowing what else is available - even if they are all "very bad.") But I don't know that I'd stick it only in the S&P 500.

I'd probably go with something like:

70% S&P 500 (maybe split this 70% out like 50% S&P 500, 10% Mid Cap, 10% Small cap if you have some low(er) cost funds that could accomplish that - if not, the S&P 500 is certainly fine)
25% Foreign Equity (index if possible)
5% Bonds (having some bond exposure can actually help produce better returns over time than a 100% stock portfolio - and 5-10% exposure to bonds isn't going to be a serious drag on your long-term return)

Then in the Roth, open it at Fidelity or Vanguard where they have a pretty broad range of low cost mutual funds and go with something like:

50% Total US Market
25% Total Int'l Market
10% Reits Index
10% Small Cap Index
5% Total Bond Index

Something along those lines. You're getting exposure to the REITs that you want, and you're adding some tilt toward small caps, which may (or may not) help produce a higher long-term return.

Then set up a taxable account where you put together a similar, well-diversified portfolio and focus on socking away as much as possible. Let it ride for 10-20 years, at which point, you're portfolio will be large enough that branching out into some individual stocks might make sense.

Ultimately, this is all my opinion, and what I would do. So, I'm not saying your plan is bad, by any stretch. I'm just saying that I think you may be making things more complex than you need to and focusing too much on "high dividends."

Regardless, best of luck to you no matter what path you choose.
Appreciate the info.

The Expense fee on the 401k ... I called Nationwide and learned that fee breakdown is the following.
The offer Vanguard fund that has a cost of 0.20 on top of it they add 1.56% Out of the 1.56, Nationwide takes 38% and our "adviser" takes 62%.

I also learned that Nationwide was sued a few years ago and me simply calling them and asking why fees are so high was enough for them to tell me that they now have a modified "lesser fees" plan available. Same options, but costs less. Our adviser just needs to call them. Such as bad business practice. I laughed when I hear their slogan while on hold "...Nationwide is on your side."

In regards to your comment, "3) Why do you feel the need/desire to pick individual stocks? And why those particular individual stocks that you listed?" ... simply looking at these companies and history going back 10, 20, 30yrs, seems like a stable investment plus the dividends. I know that past performance doesn't guarantee future, but still, Microsoft is not going anywhere.
So, it sounds like everything is set up to pass the cost of the plan on to the participants (which is perfectly legal to do, though not necessarily the best approach for the participants of the plan). That's unfortunate. I would talk to your HR and tell them what Nationwide told you and see what they say. Request that they take the plan to market and do an RFP to see what else it out there that may be a better option for the company and the participants. There are certainly cost effective plan options that don't charge so much on fees, though some of that can depend on how big the plan is, etc. But it never hurts to find out from HR - it may have been years since they evaluated the plan, but it seems probable (knowing the very little about your plan that we do) that there may be better options out there.

As to the individual stock thing, I agree with Rus on (a) not assuming anything, and (b) not focusing on individual stocks.

If you really want to focus on dividends, you could buy HDV that has a current 12-month yield of 3.48% (per M*) and has a 0.08% ER. It's holds 75 stocks and top 10 holdings are:

Exxon
JP Morgan
Verizon
Johnson & Johnson
Chevron
Pfizer
Proctor & Gamble
Coca-Cola
Cisco
Pepsi

And the top 25 holdings includes others such as: Merck, TI, 3M, UPS, Lockheed Martin, and Colgate-Palmolive

All companies that likely aren't going anywhere, but if one of them does, 1 out of 75 is going to hurt a lot less than 1 out of 7. And the current yield (3.48%) is about 1.13% higher than the average of the individual stocks you listed (2.35% assuming equal weighting among all 8 on your list).

But again, your focus should be on overall growth and, IMO, not so focused on dividends because that is only one component of growth.

So, if it was me, and I wanted to put a slight tilt toward dividend paying stocks, I'd go for something like HDV rather than trying to pick individual stocks and then buy them in substantial enough quantities to make a difference.

VIG would be another option. Yield is lower, but it holds 183 stocks, so even more diversified than HDV (personally I'd go for the higher yield myself, but the point is that there are options).
Grt2bOutdoors wrote:
Tue Jun 11, 2019 7:37 pm
Buying individual equities in a retirement account is a bad move. First, every single one of those equities are in the S&P 500 fund, so all you are doing is increasing the weighing of those companies vs. the index. Second, while the dividend growth may be good to mediocre (PG), ED in 1974 eliminated their dividend completely, the history you don’t know can come back to bite you. Still think Con Ed is safe? Third, in a retirement account you are not able to write off capital losses as you could in a taxable account.

Since you are 37, the good news is you have ample time to catch up. There are three ways of getting there: save more, spend less (lower your retirement expectations), keep your expenses low. And don’t expect to continuously be employed unless your employment is super secure.

These attempts at strategizing really don’t work. In fact, they can blow up on you and leave you in a worse position than if you just picked one or two funds and rebalanced periodically. The key is to avoid underperforming vs. your benchmark.
Taz wrote:
Wed Jun 12, 2019 6:22 am
StevenNJ1 wrote:
Tue Jun 11, 2019 3:37 pm

The Expense fee on the 401k ... I called Nationwide and learned that fee breakdown is the following.
The offer Vanguard fund that has a cost of 0.20 on top of it they add 1.56% Out of the 1.56, Nationwide takes 38% and our "adviser" takes 62%.

I also learned that Nationwide was sued a few years ago and me simply calling them and asking why fees are so high was enough for them to tell me that they now have a modified "lesser fees" plan available. Same options, but costs less. Our adviser just needs to call them. Such as bad business practice. I laughed when I hear their slogan while on hold "...Nationwide is on your side."
StevenNJ1,

It's amazing how quickly less-expensive plans are now suddenly available.

I'd approach your company HR and drop off an article or two about companies and advisers getting sued for high cost 401k)s and their failure to act as fiduciaries. Suggest that there are less expensive plans out there and that the adviser certainly isn't worth 0.62% of your account. I'd also send a copy to the adviser.

Our plan "adviser" called our CEO 30 minutes after receiving an email notifying him that we were switching to Vanguard and not using him. Suddenly he now had ideas about adding other funds. Likewise, ADP told me that we could have Vanguard and other funds if we stayed.
pkcrafter wrote:
Wed Jun 12, 2019 9:25 am
Steven, if you feel like your behind, be sure you are saving/investing at least 15%-18% of income in your long term plan. Don't focus on dividends, it's total return that matters. Also, create an emergency fund if you don't have one now.

Investing in a taxable account

https://www.whitecoatinvestor.com/retir ... account-2/

https://www.bogleheads.org/wiki/Tax-eff ... _placement



Paul
ruralavalon wrote:
Wed Jun 12, 2019 9:36 am
Age 37 is not too late to make a real difference, with a good plan and a reasonable savings rate. You are not very late, I had about $40k in retirement savings when in my mid-30s.

In my opinion It is not a good idea to take extra risk trying to make up for a later start. That can easily backfire and leave you worse off.

StevenNJ1 wrote:
Tue Jun 11, 2019 12:15 pm
I wish I did this 10 years ago, but, can't go back in time.

At 37 years old, filing as single and getting taxed to the max due to high salary, I realize that lots of time has been wasted and I should have done this at least at 7 years ago. It is what it is, and I can't go back in time, but I needed a plan to get myself back on track as fast as possible. Currently I have only under 40k in my 401k (my only retirement vehicle right now that I began contributing to 2-3 years ago).

Being that I don't plan to retire for another 30 years or so, my risk tolerance is high. I don't care about drops as I have enough time to weather the storm. My focus is on getting money into 401k, IRA, etc. as much as possible. I am thinking that at this point, dividends should be something to focus on in the Roth IRA for sure.

The Plan:

1) Continue maxing out 401k = Nationwide S&P 500 Index Svc (GRMSX). Learned last week that we have 1.77% fee with that fond and it's the cheapest one available. Yes, very bad.
About how long do you expect that you might continue with this employer?

Is there an employer match offered in your employer's 401k plan? If so what is it?

You may have a way to avoid having to use the expensive Nationwide S&P 500 index fund.

Does your employer's 401k plan have a brokerage option (sometimes called brokerage window, or BrokerageLink), which allows you to buy other investments thru a designated brokerage for a fee?

If so what are the fees for are the fees for using brokerage option?

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


StevenNJ1 wrote:
Tue Jun 11, 2019 12:15 pm
2) Open up Roth IRA via Backdoor. Investment strategy (by % invested)
60% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
20% High Dividend REITS (VNQ, IYR or SCHH)
20% High Dividend individual stocks .. with their current dividend %s (ED = 3.43%, Disney = 1.33%, ABT = 1.68%, PG = 2.90%, JNJ = 2.90%, JPM = 3.02%, DOV = 2.15%, MSFT = 1.40%).
If using a S&P 500 index fund in your 401k, then for better diversification of your portfolio in your Roth IRA I suggest using funds like:
1) Vanguard Total International Stock Index Fund Admiral Shares (VTIAX)
ER 0.11%; and
2) Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05%.

It is often better to coordinate investments across all accounts, in other words treat all accounts together as a single unified portfolio, rather than view each account separately. Select just one or two of the better funds (most diversified + lower expense ratio) in the work-based account (401k, 403b, 457, SIMPLE IRA, TSP etc.), where the choices offered are limited. Then complete the rest of the asset allocation using the nearly unlimited choices available in a taxable account or any IRAs.

For domestic stocks I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund (like Nationwide S&P 500 Index Svc, GRMSX, in your 401k) 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".

In my opinion in a plan that lacks a total stock market index fund, a S&P 500 index fund is good enough by itself for a domestic stock allocation. A 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. In the 27 years since the creation of the first total stock market index fund the performance 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 27 years the total market fund gave a little more return. 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.

See also:
1) Allan Roth, CBS Moneywatch (02/03/2010), "John C. Bogle on the S&P 500 vs. the Total Stock Market"; and
2) Wall Street Physician (01/17/2019), "Should You Invest in the S&P 500 or the Total Stock Market?".


StevenNJ1 wrote:
Tue Jun 11, 2019 12:15 pm
My questions;
1) What do you think? Based on what I want to achieve, is the above a plan you'd recommend?
First investigate the possibility of a brokerage window, you may have a way to avoid having to use the expensive Nationwide S&P 500 index fund.

StevenNJ1 wrote:
Tue Jun 11, 2019 12:15 pm
2) Should my Roth IRA focus on S&P500 instead of Total Stock due to higher dividends in S&P Large cap?
No.

If using a S&P 500 index fund in your 401k, then for better diversification of your portfolio in your Roth IRA I suggest using funds like:
1) Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%; and
2) Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05%.


StevenNJ1 wrote:
Tue Jun 11, 2019 12:15 pm
3) Since I plan to relocate money and contribute to individual stock, should I consider going with Schwab or Fidelity instead of Vanguard for their lower "transaction fees" as these transactions will happen yearly with new money coming in AND re balancing?
I suggest using accounts at Vanguard, the others do not have lower "transaction fees". The expense ratios at Fidelity and Schwab are slightly lower, but not enough to make a real difference. In my opinion it is likely that differences in the indexes used, tracking error, tax-efficiency, and securities lending policy will probably have more impact and outweigh the tiny differences in expense ratios.

For funds and location of accounts I usually suggest
1) Vanguard,
2) Fidelity, or
3) Schwab
in that order of preference.

I prefer using traditional mutual funds (rather than ETFs), and Vanguard has by far the largest selection of low expense traditional mutual funds offered anywhere. Both Vanguard and Fidelity have a larger selection of low expense index funds than does Schwab. We have all of our investing accounts at Vanguard, and use only Vanguard index funds.

Vanguard has by far the largest array of no transaction fee ETFS. In addition to its own ETFs Vanguard offers roughly 1800 commission free ETFs of other firms including those of Schwab, State Street (SPDR) and BlackRock (iShares). Kiplinger (07/02/2018), "Vanguard to Ditch Commissions on Most ETFs".

Fidelity offers banking services like their Cash Management Account (CMA), Schwab also offers some banking services. Vanguard does not offer banking services. I prefer a bank for banking functions. For banking functions (checking account, debit card, credit cards) we use a bank with a branch near our home.

I like Vanguard's mutual structure, Vanguard is owned by the Vanguard funds, has no other shareholders, and so conflicts of interest with shareholders don't exist.

Both Fidelity and Schwab have local customer service offices in some cities, but Vanguard does not. None have a local office near me, so that was not a factor in my choice.

A local customer service office is important for some, but in my opinion not at all necessary. We have had no problems with the rare phone consultations that were necessary. I call Vanguard once per year at most, some years not at all, and always received prompt, accurate, professional advice and service.

Once a reasonable investing plan is set up, it requires almost no attention. Some people prefer the customer service at Fidelity or Schwab.

Schwab does not offer a total international stock index fund, both Vanguard and Fidelity do. (At Schwab you need to use multiple ETFs to get total international stock coverage.) Vanguard stock index funds are more tax-efficient, which is important if using a taxable account. Vanguard offers a larger selection of tax-exempt bond funds (including state specific funds) than either Schwab or Fidelity, which is important if using a taxable account and in a high tax bracket. Vanguard offers a small-cap value index fund, but Schwab and Fidelity do not, which is important if interested in value investing. Vanguard money market funds (including the sweep fund) pay a better return than funds at Fidelity or Schwab, which is important for investors who desire a significant cash allocation.

Fidelity and Schwab have no initial minimum investment required, which is helpful for a new investor with a small amount to invest. Most Vanguard funds require an initial minimum investment of $3k, or just $1k for target retirement funds or Vanguard STAR Fund (VGSTX).

There is a lot of personal preference involved in selecting a firm for your accounts.
Dottie57 wrote:
Wed Jun 12, 2019 1:04 pm
OP,

Use all of your 401k tax deferred space. Back door Roth (max). Open a taxable brokerage account and start buying there. Make sure you have an appropriate emergency fund. Don’t believe you are excellent stock picker. Invest in three fund portfolio and you will do well.

The amount you invest will be a significant determinant of the success of your plan.
CommitmentDevice wrote:
Wed Jun 12, 2019 3:34 pm
Hi OP,
Lots of good advice already posted and congrats on taking ownership over your investing and having great annual earnings!

I think you'd benefit from reading one or two of the Boglehead books. Upgrading a few of your mental models around investing could save you $ and needless hassle/complexity.

In addition to 401K and backdoor Roth, there might be some additional tax-preferential options that would be relevant to you. This isn't my area of expertise, but worth investigating... HSA, Solo 401k, 529.

User avatar
ruralavalon
Posts: 15735
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: My Retirement "Catch Up" plan. Please help/critique.

Post by ruralavalon » Fri Jun 14, 2019 11:37 am

StevenNJ1 wrote:
Fri Jun 14, 2019 11:10 am
Current company 401k = almost max out.
Nationwide S&P 500 Index Svc (GRMSX) = 100% (1.77% expense) ... we're working on lowering that hideous fee.
Good idea, best of luck. That is indeed a hideous expense, the actual cost of administration and record keeping is not nearly as much as what Nationwide added.

StevenNJ1 wrote:
Fri Jun 14, 2019 11:10 am
. . . . . .
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) or VOO or VTI?
Please help me understand the differnece between the 3 and which one makes sense. Some suggested VOO and VTI for tax benefits over VTSAX?
Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% is a traditional mutual fund.

Vanguard Total Stock Market ETF (VTI) ER 0.03% is a share class of that mutual fund, invested in exactly the same stocks of the same companies.

VTSAX and VTI will have the same tax-efficiency, being different share classes of the same fund.

Vanguard S&P 500 ETF (VOO) ER 0.03% covers about 81% of the U.S. stock market, investing in stocks of selected mid-cap and small-cap U.S. companies. In the 27 years since the inception of the first total stock market index fund, the performance of the types of funds has been almost identical.

Al! three are very tax efficient. VOO will probably be very close to the other two.


StevenNJ1 wrote:
Fri Jun 14, 2019 11:10 am
HSA = just found out our company offers HSA ... that's awesome! I am on the low plan, high deductible, it makes sense. I am maxing it out! Here I want to be a bit more conservative though; Maybe 50/50 split between;
Vanguard LifeStrategy Conservative Growth Inv (VSCGX) (0.12% expense)
T. Rowe Price Blue Chip Growth I (TBCIX) (0.57% expense)
I suggest simply using a Vanguard LifeStrategy fund, either moderate growth or conservative growth.
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cherijoh
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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by cherijoh » Fri Jun 14, 2019 1:08 pm

StevenNJ1 wrote:
Fri Jun 14, 2019 11:10 am
My updated plan agenda: .... no Individual stocks, Welcome HSA, aggressive contribution and investment, high fees are bad, but since balances low, focusing on high growth ... no bonds. No more dividend heavy investing, for now.

Old company 401k, small balance, under 40k. Right now split 50/50 between these 2 funds. Want to keep PRNHX because of extra dividend growth?
T. Rowe Price New Horizons (PRNHX) = 50% (0.97% expense) ... has dividends
BlackRock Russell 3000 Index = 50% (0.34% expense)
Come on, Steven.

I think you need to repeat after me: "Past Performance is not a predictor of what will happen in the future". Keep saying it until it sinks in and then sell PRNHX for a lowest cost diversified fund that your plan offers. ASAP.

NativeTxn
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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by NativeTxn » Fri Jun 14, 2019 1:17 pm

Overall, sounds like a better plan, with the caveats of some of the subsequent posts.

Also, since you're debating VTSAX, VTI, etc. in terms of a Roth, tax efficiency is a moot point, so no need to really worry about it. Given that, probably easiest to go with the mutual fund since you can put all of the money to work in the fund from the beginning (unless you're going to put the account at a firm that allows you to buy partial shares, in which case that becomes a moot point between the mutual fund and the ETFs).

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Wiggums
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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by Wiggums » Fri Jun 14, 2019 2:11 pm

Stinky wrote:
Wed Jun 12, 2019 3:02 pm
OP,

There are a ton of good ideas posted by others. I'd encourage you to take their collective advice, especially when it comes to investing in individual stocks.

When I was 37, I had far less money in savings than you do, and was not saving anything because I was carrying two houses on one salary. Now, I'm retired and comfortably FI.

You can do it, too. Save, save, save, and invest prudently.
+1

Great advice

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StevenNJ1
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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by StevenNJ1 » Mon Jun 17, 2019 8:07 am

Thank you for the suggestions. And so now, here is my latest breakdown.

Old 401k = BlackRock Russell 3000 Index = 50% (0.34% expense)
New 401k = Nationwide S&P 500 Index Svc (GRMSX) (1.77% expense)
Roth IRA = Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
HSA = Vanguard Wellington Admiral (VWENX)

Review again when total portfolio reaches at least 100k.

Thanks to all for your suggestions.

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Tamarind
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Re: My Retirement "Catch Up" plan. Please help/critique.

Post by Tamarind » Mon Jun 17, 2019 8:31 am

StevenNJ1 wrote:
Mon Jun 17, 2019 8:07 am
Thank you for the suggestions. And so now, here is my latest breakdown.

Old 401k = BlackRock Russell 3000 Index = 50% (0.34% expense)
New 401k = Nationwide S&P 500 Index Svc (GRMSX) (1.77% expense)
Roth IRA = Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
HSA = Vanguard Wellington Admiral (VWENX)

Review again when total portfolio reaches at least 100k.

Thanks to all for your suggestions.
You are also going to need to save in a taxable account, I think. Remember, retirement account limits are based on the interests of the average earner, not high income folks like you.

If you took your plan above and then said you were going to save 30% of your gross income for retirement in total, how much more would you need to save in a taxable account? What would you have to change in your budget to save that much?

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