Portfolio review. How’s it look?!

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Topic Author
akaiser
Posts: 13
Joined: Mon Aug 05, 2019 10:28 am

Portfolio review. How’s it look?!

Post by akaiser » Thu Nov 14, 2019 7:43 pm

Hello all!

I’ve posted on this topic before and gotten some great advice! However, my portfolio has changed significantly since my last post and I am also now married, and I’ve taken full control of my portfolio thanks to the Three Fund Guide and the Simple Path to Wealth. I would love any new advice on my strategy and areas for improvement.

Emergency funds: Yes, I have three to six months of expenses in a FDIC savings account. I am currently earning 1.70% APY in this account.

Debt: I do not have any debt, but my wife does. She just graduated from a Docorate of PT program. She will begin working in January. She has roughly 200k in debt and the estimated interest rate is 7.08%. We plan to refinance in 2020 with a goal of lowering our interest rate with a private lender.

Tax Filing Status: MFJ

Tax Rate: 22% Federal, 4.25% State

State of Residence: Michigan

Age: We are both 26

Desired Asset allocation: 90-100% stocks / 0-10% bonds
Desired International allocation: 30-40% of stocks

My portfolio is in the mid/high-five figures.

Current retirement assets

Taxable
55% Vanguard Total Stock Market ETF (VTI) - expense ratio of 0.04%
30% Vanguard Total International Stock Market ETF (VTXUS) - expense ratio of 0.09%
*This is comparably much larger than other investments due a death and distribution from that death.

His Roth 401k
10% Vanguard Total World Stock Market ETF (VT) - expense ratio of 0.09%
3.5% Vanguard Short Term Federal Bond Mutual Fund (VSGDX)
Company contribution of 5%, regardless of employee contribution
*I just gained access to this 401k. I was focused on maxing out my Roth IRA in Vanguard prior to contributing to this. VT and VSGDX are the only funds offered through my 401k that fit a diversified and low fee equity and fixed income.

His Roth IRA at Vanguard
1.25% Vanguard Total Stock Market ETF (VTI) - expense ratio of 0.04%
0.25% Vanguard Total International Stock Market ETF (VTXUS) - expense ratio of 0.09%
*This includes a future rollover from Betterment, which will be distributed as seen above, along with the existing investment in Vanguard.


Her Investments
None at this time, but I plan to set her up with a Roth IRA to compliment any 401k offered at her company.
_______________________________________________________________
Note: Total percentage of all the above accounts together (not each account individually) should equal 100%.

Contributions

New annual Contributions
We are unsure about 2020. Questions below.


Questions:
We are planning to save the entirety of one our incomes after tax. We will have incomes similar to each other in the mid five figures. Maybe it’s wishful thinking...but I am starting to put a plan together to actually accomplish this goal. I would love advice on how to actually achieve this goal while living a life that doesn’t consist of extreme frugality. Also, how should we allocate this “new” money that we will be saving.

Any advice on refinancing loans and when to pay down vs. when to invest. I believe we will be able to refinance at a rate between 4-5%, maybe even lower. I was going to follow the Simple Path to Wealth advice to only worry about aggressively paying down debt with 5%+ interest rates.

Any thoughts on my international exposure? It’s higher than suggested by the books I am reading, but Vanguard suggests a 60% US / 40% International.

I also have a small amount in Lending Club from awhile ago, currently making 7% and locked in for 3-5 years. This is before I read the books. Should I work to liquidate this as the payments come due or is this a good alternative investment? I’m leaning towards liquidating.

HomeStretch
Posts: 2936
Joined: Thu Dec 27, 2018 3:06 pm

Re: Portfolio review. How’s it look?!

Post by HomeStretch » Thu Nov 14, 2019 8:09 pm

Congratulations on your recent marriage!

International allocation is a personal decision so go with what works for you.

Agree with moving away from Lending Club.

Your goal of living on one salary makes sense given the amount of your spouse’s debt. I personally would contribute enough to get 401k matches and contribute the max to Roth IRAs with the rest going towards debt principal. Consider moving to Traditional 401k contributions and use the tax savings to help fund the Roth IRAs.

Your spouse’s debt is high compared to her salary. Focus on getting it paid off in 5 years if possible even if it means wife works paid overtime/extra shifts for awhile. You don’t want the debt to be outstanding if/when you take on debt with a house purchase or perhaps reduce household income after starting a family (if one spouse wants to reduce hours or stay at home).

Topic Author
akaiser
Posts: 13
Joined: Mon Aug 05, 2019 10:28 am

Re: Portfolio review. How’s it look?!

Post by akaiser » Thu Nov 14, 2019 8:57 pm

Thanks for the review! I agree that the biggest factor in all of this is the debt. It is very large compared to her salary and refinancing only helps a little. The five-year plan is a good idea and I will research more on the switch to a traditional 401k for myself. I really like that idea.

Topic Author
akaiser
Posts: 13
Joined: Mon Aug 05, 2019 10:28 am

Re: Portfolio review. How’s it look?!

Post by akaiser » Fri Nov 15, 2019 10:24 am

I would love some additional review or feedback if anyone else is willing to take a look at my allocation and strategy.

stan1
Posts: 7720
Joined: Mon Oct 08, 2007 4:35 pm

Re: Portfolio review. How’s it look?!

Post by stan1 » Fri Nov 15, 2019 10:37 am

You are doing fine.

Manage your expenses. First and foremost to that is communication with your spouse to set your priorities. After that its understanding where the money is going and making sure it is being spent in alignment with your shared priorities.

Contribute enough to both 401Ks to get match.
Then max out Roth IRAs.
Then contribute to 401Ks up to the max.
If you have a shared priority of saving for a home down payment factor that in too.

Then there's the student loan. Get the best rate you can on it but after that its a fact of life and part of the communication you need to establish. She may need to change employers a few times to fully monetize the degree (turn the paper degree into income). Hopefully she enjoys the work and is good at it.

Some of the priorities are going to be personal preferences. Some people want to be debt free and prioritize that ahead of retirement savings. Some people want to pay off the student loans before buying a house and having kids. Personally I would take a longer term view and put together a 15-20 year plan that has you borrowing for the degree and future home while also investing for the future.

Topic Author
akaiser
Posts: 13
Joined: Mon Aug 05, 2019 10:28 am

Re: Portfolio review. How’s it look?!

Post by akaiser » Fri Nov 15, 2019 11:52 am

There are a lot of good insights here. Yes, I agree that communication is key. She is on board with my plan, thankfully. As it stands now, we are planning to extend the student loan out 5-10 years or more through refinancing and going about everything else as planned (i.e. prioritize saving, investing and family planning). Again, this depends on rates for her specific situation, but I am confident we will be ok there. Thoughtful advice, especially "you are doing fine". That is always good to hear, lol.

HomeStretch
Posts: 2936
Joined: Thu Dec 27, 2018 3:06 pm

Re: Portfolio review. How’s it look?!

Post by HomeStretch » Fri Nov 15, 2019 12:15 pm

Agree that communication and shared goals are key. A married family member had a spouse with $200k educational debt. With a mutually-agreed upon plan that both would continue to work, they started a family and purchased a house while debt was outstanding. One spouse decided (non-negotiable) to stay-at-home permanently after arrival of 1st child. Other spouse was very stressed by debt load and paying bills on one income. It was a very rough period in their marriage. A plan can change unexpectedly so be sure that you have a handle on the debt repayment and budget (including a scenario where only one spouse is working due to family, job loss, health issues, etc.) before committing to a mortgage while the education debt is outstanding.

P.S. 25 years later it has all worked out fine for family member and spouse.

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