Are we on the right track? -- please review portfolio

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Topic Author
pkay
Posts: 111
Joined: Wed Jan 17, 2018 11:04 am

Are we on the right track? -- please review portfolio

Post by pkay » Tue Aug 13, 2019 9:30 am

DW and I made some changes to our investments a year ago. Since then our portfolio has gotten large in terms of the number of investments we hold due to job change and TLH last year. Our disposable income has increased this year but will decrease again next year so we will not be able to save and invest additional in taxable account. Also, with the markets going up and down lately, we would like your feedback if we’re on the right track. Thank you all!

Emergency funds: $31K (in savings account and also holding money for 2020 Backdoor Roth)

Debt: $78K, 2% interest rate

Tax Filing Status: Married Filing Jointly
Tax Rate: 24% Federal, 5.75% Virginia
State of Residence: VA

Age: 41 and 36

Desired AA: 85% stocks / 15% bonds and cash
Desired International allocation: 15% of portfolio
Portfolio size: mid six-figures

Current retirement assets

Taxable
0.08% cash (for investing)
13.78% Vanguard 500 Index ETF (VOO) (0.04%)
7.55% Vanguard Mid Cap Value ETF (VOE) (0.07%)
6.66% Vanguard Small Cap Value ETF (VBR) (0.07%)
5.94% Vanguard International Dividend Appreciation ETF (VIGI) (0.25%)
7.86% Limited-term tax-exempt bond (VMLUX) (0.09%)
0.51% Vanguard Wellington Fund Investor Share (VWELX) (0.25%)

Her 401k
2.67% Fidelity 500 Index Fund (FXAIX) (0.02%)
5.16% Fidelity International Index (FSPSX) (0.06%)
2.90% DFA US Target Value (DFFVX) (0.37%)
3.25% Vanguard Intermediate Bond Index (VBILX) (0.07%)

His 457 (0.07% annual fee in addition to listed fund exp ratio)
0.21% Vanguard Real Estate Index (VGSLX) (0.12%)

His 401a (100% employer contribution) (0.07% annual fee in addition to listed fund exp ratio)
0.07% DFA International Core Equity (DFIEX) (0.30%)
0.07% Vanguard Real Estate Index (VGSLX) (0.12%)

His former job 457 at T Rowe Price
15.68% Vanguard Institutional Index (VINIX) (0.04%)
2.43% Vanguard Mid Cap Index (VMCIX) (0.05%)
1.66% Vanguard Small Cap Index (VSCIX) (0.05%)
4.51% American Funds Europac (RERGX) (0.50%)

Her Roth IRA at Vanguard
3.18% Vanguard Large Cap Index (VLCAX) (0.05%)
His Roth IRA at Vanguard
5.51% Vanguard Large Cap ETF (VV) (0.05%)

His HSA at Payflex
0.81% Vanguard Emerging Market Stock (VEMAX) (0.14%)
0.04% Vanguard 500 Index Admiral (VFIAX) (0.04%)

Her HSA at Fidelity
0.35% Fidelity Extended Market Index (FSMAX) (0.05%)

6.07% I-Bonds
3.03% 5-year CD


Not included in portfolio: $28K vested in his old job pension system

Contributions

New annual contributions
$19K her 401k
$19k his 457
$7k HSA
$6k her Backdoor Roth
$6k his Backdoor Roth
$4k (mandatory) current pension
$20 taxable account

*Per our AA, all new money in employer sponsored accounts and taxable are going to large cap and real estate. Due to the current situation we’re in, we are only able to put minimum in taxable so we’re mostly rebalancing our portfolio via payroll contributions in 401k, 457 and 401a.

Available funds
Funds available in her 401k
AF New Economy R6 (RNGGX) (0.45%)
Fid 500 Index (FXAIX) (0.015%)
Vanguard Winsor II Adm (VWNAX) (0.25%)
Fid Mid Cap Idx (FSMDX) (0.025%)
Prmcp Ody Aggr Growth (POAGX) (0.64%)
Victory S Estb Val I (VEVIX) (0.59%)
Crln E Sm Cap Gr R6 (HSRUX) (0.65%)
DFA US Target Value (DFFVX) (0.37%)
Vang Sm Cap Idx Adm (VSMAX) (0.05%)
AF Europac Growth R6 (RERGX) (0.49%)
Fid Intl Index (FSPSX) (0.035%)
Fkln Mtl Glb Disc Z (MDISX) (0.98%)
Vang Em Stk Idx Adm (VEMAX) (0.14%)
PIM RE Real Ret Inst (PRRSX) (2.09%)
TRP Health Sciences (PRHSX) (0.77%)
Vang Target Ret 2040 (VFORX) (0.14%)
Vang Target Ret 2045 (VTIVX) (0.15%)
Vang Target Ret 2050 (VFIFX) (0.15%)
Vang Target Ret Inc (VTINX) (0.12%)
Blkrk High Yield Bd K (BRHYX) (0.50%)
Pim Real Return Inst (PRRIX) (0.98%)
Vang Intm bd Idx Adm (VBILX) (0.07%)
Fid Govt Mmkt (SPAXX) (0.42%)

Funds available in his current employer 457/401a
Vang Federal Money Market Fund (VMFXX) (0.11%)
Federated Institutional High Yield Bond Fund (FIHLX) (0.49%)
Vang Inflation-Protected Securities Fund (VAIPX) (0.10%)
Metropolitan West Total Return Bond Fund (MWTSX) (0.37%)
Vang total Bond Market Index Fund (VBTLX) (0.05%)
AB Global bond Fund (ANAZX) (0.51%)
Vang Target Retirement 2045 (VTIVX) (0.15%)
Vang Target Retirement 2055 (VFFVX) (0.15%)
Vang Target Retirement Income Fund (VTINX) (0.12%)
T Rowe Price Capital Appreciation Fund (TRAIX) (0.60%)
Vang FTSE Social Index Fund (VFTSX) (0.18%)
Vang Inst Index Fund (VINIX) (0.04%)
Invesco Diversified Dividend Fund (LCEFX) (0.42%)
T Rowe Price Value Fund (TRPIX) (0.63%)
American Funds Growth Fund of America (RGAGX) (0.33%)
ClearBridge Large Cap Growth Fund (LSITX) (0.68%)
T Rowe Price Blue Chip Growth Fund (TBCIX) (0.57%)
Vang Mid Cap Index (VMCIX) (0.04%)
Janus Henderson Enterprise Fund (JDMNX) (0.67%)
Victory Sycamore Established Value Fund (VEVRX) (0.54%)
Vang Small Cap Index (VSCIX) (0.04%)
Vang Explorer Fund (VEXRX) (0.32%)
Wells Fargo Special Small Cap Value (ESPRX) (0.88%)
Vang Real Estate Index (VGSLX) (0.12%)
American Funds new World Fund (RNWGX) (0.62%)
DFA International Core Equity (DFIEX) (0.30%)
Vang FTSE All world ex-US Index (VFWSX) (0.10%)
American Funds Europac Growth (RERGX) (0.49%)
Victory Trivalent International Small Cap Fund (MSSIX) (1.12%)
American Funds Capital World Growth and Income (RWIGX) (0.45%)

Funds available in his former job 457
American Beacon Small Cap Value (AVFIX) (0.81%)
American Funds Europac Grw (RERGX) (0.49%)
TRP Capital Appreciation Fund (PRWCX) (0.71%)
Cohen & Steers Instl Realty (CSRIX) (0.75%)
TRP Equity Income Fund (PRFDX) (0.64%)
Fidelity Contrafund (FCNTX) (0.82%)
Fidelity Diversified International (FDIVX) (0.81%)
Fidelity Low Priced Stock Fund (0.62%)
TRP Growth Stock Fund (PRGFX) (0.66%)
Harbor International Fund (HAINX) (0.77%)
Invesco Oppenheimer Dev Mkts (ODVYX) (1.01%)
JP Morgan Mid Cap Value (FLMVX) (0.75%)
TRP Mid Cap Growth (RPMGX) (0.75%)
TRP Personal Strategy Balanced (TRPBX) (0.73%)
Primecap Odyssey Stock (POSKX) (0.66%)
Ranger Small Cap inst (RFISX) (1.10%)
Vang Inst Index (VINIX) (0.03%)
Vang Mid Cap Index (VMCIX) (0.04%)
Vang Small Cap Index (VSCIX) (0.04%)
Pimco Intl Bond Unhedged (PFUIX) (0.66%)
Pimco Real Return (PRRIX) (0.98%)
Pimco Total Return Intl (PTTRX) (0.71%)
TRP Retirement 2040 (TRRDX) (0.72%)
TRP Retirement 2045 (TRRKX) (0.72%)
TRP Retirement 2050 (TRRMX) (0.72%)
TRP Retire Bal Inv (TRRIX) (0.52%)

Questions:
1. If we could not make any or only minimal contribution to taxable account starting mid-2020, does it change how we should approach our entire portfolio? If so, how? The reason is we are looking at either buying a house or paying a lot more in rent for more space to house parents and possibly arrival of a baby. Even if no baby, we are still looking at spending a lot more on housing costs. If baby in addition to a larger space, there will not be much left in disposable income to invest in taxable.
2. The current 457 account at Voya charges a 0.07% annual fee in addition to the fund’s exp ratio, so I haven’t rolled over my old job’s 457 account. Considering the entire portfolio and what’s available to invest in, should I rollover former job 457 account to current employer 457 account? I was told that there is no fee to keep balance at TRP even though I’ve left job and still able to choose all the investments available in that workplace retirement account. If keeping the account, how can I simplify the investments? If moving to current 457 plan, what should I invest in?
3. Any tips and strategy on simplifying our portfolio? I did some TLH end of last year and ended up with the funds I have in taxable, plus the Wellington Fund which I bought on a whim. All the investments in taxable account would be short term gain if I sold them so I would prefer to leave them as they are. But I also feel that overall, our entire portfolio is getting out of control.
4. I will be rolling over HSA at Payflex (not closing the account as still making payroll contributions to it) to Fidelity. I’m not familiar with Fidelity and was overwhelmed looking at all the options. Any recommendation on what to invest at Fidelity?
5. The old job pension is earning 5% for 5 years after leaving job. If I take out the money, there is a 24% deduction/fee. Should I keep money there to earn 5% for 5 years or try to move it to current job pension (I believe current pension account will take it)? Any other option to rollover the money?
6. Any reason to open a taxable account at Fidelity and invest new money there? We like the smaller still exp ratio at Fidelity but aren’t sure if it’s worth the hassle of having another investment account.
7. If the markets tank and I can sell funds in taxable account for TLH purpose, what should we sell/buy so we can keep things simpler. I used to have Vang TSM but found out its QDI was not as good as the 500 Index Fund. That’s why we gradually moved toward holding separate 500 index, midcap and small cap index.

User avatar
Duckie
Posts: 6759
Joined: Thu Mar 08, 2007 2:55 pm

Re: Are we on the right track? -- please review portfolio

Post by Duckie » Tue Aug 13, 2019 7:10 pm

pkay wrote:Age: 41 and 36

Desired AA: 85% stocks / 15% bonds and cash
15% bonds is low for your ages. I recommend at least 25% if not 30% bonds.
Funds available in her 401k
The best options are:
  • Fid 500 Index (FXAIX) (0.015%)
  • Fid Mid Cap Idx (FSMDX) (0.025%)
  • Vang Sm Cap Idx Adm (VSMAX) (0.05%)
  • Fid Intl Index (FSPSX) (0.035%) -- Developed markets only
  • Vang Intm bd Idx Adm (VBILX) (0.07%)
Funds available in his current employer 457/401a
The best options are:
  • Vang Inst Index Fund (VINIX) (0.04%)
  • Vang Mid Cap Index (VMCIX) (0.04%)
  • Vang Small Cap Index (VSCIX) (0.04%)
  • Vang Real Estate Index (VGSLX) (0.12%)
  • Vang FTSE All world ex-US Index (VFWSX) (0.10%)
  • Vang total Bond Market Index Fund (VBTLX) (0.05%)
Funds available in his former job 457
The best options are:
  • Vang Inst Index (VINIX) (0.03%)
  • Vang Mid Cap Index (VMCIX) (0.04%)
  • Vang Small Cap Index (VSCIX) (0.04%)
If we could not make any or only minimal contribution to taxable account starting mid-2020, does it change how we should approach our entire portfolio?
No.
The current 457 account at Voya charges a 0.07% annual fee in addition to the fund’s exp ratio, so I haven’t rolled over my old job’s 457 account. Considering the entire portfolio and what’s available to invest in, should I rollover former job 457 account to current employer 457 account?
I would roll over just to reduce your accounts. The additional 0.07% would not be a deal breaker for me.
If keeping the account, how can I simplify the investments?
If you keep the old 457b plan use 100% VINIX in it.
If moving to current 457 plan, what should I invest in?
<snip>
Any tips and strategy on simplifying our portfolio?
See below.
I will be rolling over HSA at Payflex (not closing the account as still making payroll contributions to it) to Fidelity. I’m not familiar with Fidelity and was overwhelmed looking at all the options. Any recommendation on what to invest at Fidelity?
The best funds at Fidelity are:
  • (FSKAX) Fidelity Total Market Index Fund (0.015%)
  • (FTIHX) Fidelity Total International Index Fund (0.06%)
  • (FXNAX) Fidelity U.S. Bond Index Fund (0.025%)
What you choose for the HSA depends on how you are planning to use the HSA. Will you pay current medical costs out of the HSA or will you pay current costs out of pocket and save the HSA until you are retired?
Any reason to open a taxable account at Fidelity and invest new money there? We like the smaller still exp ratio at Fidelity but aren’t sure if it’s worth the hassle of having another investment account.
If the taxable account is at Vanguard I see no reason to open another account at Fidelity.
If the markets tank and I can sell funds in taxable account for TLH purpose, what should we sell/buy so we can keep things simpler.
I would sell everything in taxable except VOO. You have plenty of room in tax-sheltered for bonds so you don't need VMLUX and Wellington is going to make figuring your AA difficult. Consider buying VXF to replace the sold mid/small caps.
________________

The following example has an AA of 85% stocks, 15% bonds, with 15% of stocks in international. That breaks down to 72% US stocks, 13% international stocks, and 15% bonds. You could have:

Taxable at Vanguard -- 42%
42% Various funds/ETFs (roughly 28% US, 6% int, 8% bonds)

Taxable (other) -- 9%
9% I-bonds & cash

His 457b -- 24% <-- Includes rollover from his former 457b.
8% (VINIX) Vanguard Institutional Index Fund Institutional Shares (0.04% + 0.07% = 0.11%)
6% (VSCIX) Vanguard Small-Cap Index Fund Institutional Shares (0.04% + 0.07% = 0.11%)
10% (VGSLX) Vanguard REIT Index Fund Admiral Shares (0.12% + 0.07% = 0.19%)

His 401a -- 1%
1% (VINIX) Vanguard Institutional Index Fund Institutional Shares (0.04%)

Her 401k -- 14%
14% (FXAIX) Fidelity 500 Index Fund (0.015%)

His Roth IRA at Vanguard -- 5%
5% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

Her Roth IRA at Vanguard -- 3%
3% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

His HSA at Payflex/Fidelity -- 1%
1% (FSKAX) Fidelity Total Market Index Fund (0.015%)

Her HSA at Fidelity -- 1%
1% (FSKAX) Fidelity Total Market Index Fund (0.015%)

My comments:
  • When you sell VMLUX in taxable buy VBTLX in his 457b.
  • When you sell VIGI in taxable either buy VTIAX in taxable or VFWSX in his 457b.
Something to think about.

Topic Author
pkay
Posts: 111
Joined: Wed Jan 17, 2018 11:04 am

Re: Are we on the right track? -- please review portfolio

Post by pkay » Tue Aug 13, 2019 9:24 pm

Thank you Duckie for your feedback. I have some questions and answers to your response.
Duckie wrote:15% bonds is low for your ages. I recommend at least 25% if not 30% bonds.
Understood. It's at 15% bond because we only started paying attention to our retirement accounts 3 years ago so wanted to be aggressive for a bit. We still have 25 years of working life. I'm thinking about increasing to 20% bond when we have 20 years of work left. Then 25% bond when there is 15 years left. Then 30% bond when there are 10 years of work left. Is our plan a common approach?

pkay wrote:The current 457 account at Voya charges a 0.07% annual fee in addition to the fund’s exp ratio, so I haven’t rolled over my old job’s 457 account. Considering the entire portfolio and what’s available to invest in, should I rollover former job 457 account to current employer 457 account?
Duckie wrote:I would roll over just to reduce your accounts. The additional 0.07% would not be a deal breaker for me.
The balance in old job 457 is over $150K. 0.07% x $150K is $105 of annual fee in addition fund fee. You are probably right...I've been paying a lot more fee keeping the American Europac fund in that account.

Duckie wrote:What you choose for the HSA depends on how you are planning to use the HSA. Will you pay current medical costs out of the HSA or will you pay current costs out of pocket and save the HSA until you are retired?
We plan to pay out of pocket for future medical costs and leave the HSA untouched until retirement.

The example portfolio allocation you suggested looks good and is a lot to think about in terms of execution. Here are my questions:
  • where/which account would you start selling/buying?
  • Would you recommend I do anything in taxable or just wait until I can harvest losses and begin to simplify that particular account?
  • Any reason you suggested international fund in the Roth IRA and Total Stock Market in the HSA?
  • Any particular reason on throwing out the DFA funds?
Thanks again for your very insightful feedback.
-pkay

Topic Author
pkay
Posts: 111
Joined: Wed Jan 17, 2018 11:04 am

Re: Are we on the right track? -- please review portfolio

Post by pkay » Wed Aug 14, 2019 8:04 am

I recognize the post is long but would like feedback from more Bogleheads. Thanks!

User avatar
Duckie
Posts: 6759
Joined: Thu Mar 08, 2007 2:55 pm

Re: Are we on the right track? -- please review portfolio

Post by Duckie » Wed Aug 14, 2019 4:13 pm

pkay wrote:We still have 25 years of working life. I'm thinking about increasing to 20% bond when we have 20 years of work left. Then 25% bond when there is 15 years left. Then 30% bond when there are 10 years of work left. Is our plan a common approach?
There is no common approach. Everyone seems to do it differently. Can you stomach the drop if 85% of your retirement portfolio drops 40% to 50% and takes a while to climb back up?
We plan to pay out of pocket for future medical costs and leave the HSA untouched until retirement.
In that case keep your entire deductible in bonds/cash and put the remainder in stock funds.
Where/which account would you start selling/buying?
Any of the tax-sheltered accounts. Why not start with the HSAs because they're the smallest and work your way up. Do it one account at a time. The more moving parts, the more chance of a screwup.
Would you recommend I do anything in taxable or just wait until I can harvest losses and begin to simplify that particular account?
I would wait at least until the short-term gains turn long-term. Make sure you turn OFF automatic dividend reinvestment for all funds. Don't buy more of something you're going to sell. Funnel any dividends to the settlement fund.
Any reason you suggested international fund in the Roth IRA and Total Stock Market in the HSA?
Right now you have more room in your Roth IRAs so I put international there, but eventually either would work.
Any particular reason on throwing out the DFA funds?
Expense ratios. I am not a fan of value tilting so I see no need to pay extra for that.

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