Financial Health - Review

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
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Topic Author
DreamsOfRetiring
Posts: 8
Joined: Sat Nov 23, 2019 9:42 am

Financial Health - Review

Post by DreamsOfRetiring » Mon Dec 02, 2019 10:16 am

I worry about finances. Its almost compulsive. I have been trying to treat finances as auto pilot and see If that ameliorates my anxiety surrounding money.
Would like to hear what you folks thought of my finances.

Emergency funds: 30K

Debt:
560K - Mortgage
15K - Auto

Equity in Home - 450K

Tax Filing Status: MFJ

Tax Rate: 35% federal, ~11% CA

State of Residence: CA

Age: 37 / her -35

Desired Asset allocation: Not sure. Trying to learn
Desired International allocation: Not sure. Trying to learn


Current retirement assets

Spouse will have defined benefit plan.

Taxable (Equity)
110K in VOO/VUG (50/50) - His
12K in Individual TECH stocks - His
72K in Employer Stock - His
33k Wealthfront

95k in Individual stock - Her
45K in VOO/VUG - Her
300K - cash - her - slowly being moved to index funds.

His 401k - 215K
Lifepath Index - 7%
Vanguard Windsor 2 - 30%
Vanguard 500 - 22%
Fidelity Contra - 33%
REIT - 8%

company matches 100% of 6%

His Roth IRA
14K - 50% Wealthfront - rest VOO/VUG

Her 403b - Just started .
2K - No match

Contributions for future - Expected Savings ~ 110-130K/ yr

New annual Contributions
25K his 401k (also specify any employer matching contributions)
3K her 403b (also specify any employer matching contributions)
6K his backdoor Roth IRA
6K her backdoor Roth IRA
60K - Taxable + Cash

10K - Extra principal for home.
10K - Towards 529 - ( 25k balance)

High levels of cash due to preparation for buying home. And spouse is risk averse.

Questions:
1. Should I reorient my 401k to strictly index funds?

2. Any other critique on financial health?
Last edited by DreamsOfRetiring on Tue Dec 03, 2019 4:45 pm, edited 1 time in total.

student
Posts: 4142
Joined: Fri Apr 03, 2015 6:58 am

Re: Financial Health - Review

Post by student » Mon Dec 02, 2019 10:21 am

Many bogleheads would suggest index funds and keep it simple to a few funds. You are doing great. You have about 1.2 m net worth. You are in the top 5% in terms of net worth in your age group. https://dqydj.com/net-worth-by-age-calc ... ed-states/

lakpr
Posts: 3094
Joined: Fri Mar 18, 2011 9:59 am

Re: Financial Health - Review

Post by lakpr » Mon Dec 02, 2019 5:34 pm

With a 35% Federal tax bracket, you are ineligible to contribute to Roth IRA directly. You know that right? You can do the Backdoor Roth IRA process, please confirm that this is what you are doing, and not add money directly to a Roth IRA? If you did the latter, you may have some tax mess on your hands that needs cleanup.

HomeStretch
Posts: 2968
Joined: Thu Dec 27, 2018 3:06 pm

Re: Financial Health - Review

Post by HomeStretch » Mon Dec 02, 2019 5:46 pm

You are doing well financially.

Why a car loan at your income level?

Consider moving away from individual and employer stocks to more diversified funds/ETFs. Also consider moving away from Wealthfront as their portfolios tend to involve lots of holdings. The ones posted here always result in a fair amount of cleanup when the OP wants to move to a simpler 3-fund portfolio.

retired@50
Posts: 680
Joined: Tue Oct 01, 2019 2:36 pm

Re: Financial Health - Review

Post by retired@50 » Mon Dec 02, 2019 6:06 pm

DreamsOfRetiring wrote:
Mon Dec 02, 2019 10:16 am

High levels of cash due to preparation for buying home. And spouse is risk averse.

Questions:
1. Should I reorient my 401k to strictly index funds?

2. Any other critique on financial health?
1. Yes. Your portfolios are skewed toward large cap growth, perhaps this is adding to your anxiety. I'd urge using total market stock funds and stay away from the funds that focus on a particular part or sector of the market. This will likely reduce the overall expense ratio you are paying as an added benefit. Also, get rid of the individual stocks, while considering the capital gains taxes. This process may take several years, but it will reduce your (firm-specific) risk, which is supposedly something your spouse is concerned about.

2. The car loan doesn't make any sense to me. With an income level like yours, you should be in the habit of writing checks to the mechanic, to keep a car on the road, or writing checks in the showroom when buying a new car.

Regards,

LeftCoastIV
Posts: 68
Joined: Wed May 01, 2019 7:19 pm

Re: Financial Health - Review

Post by LeftCoastIV » Mon Dec 02, 2019 6:47 pm

I'm a little nervous that you're planning to buy a presumably more expensive house that will add to your already sizable mortgage debt. What do you anticipate your new monthly mortgage payments will be on your new home? What is that as a % of *after-tax* monthly income?

You state you plan to save over $100K per year going forward, so this may not be a problem. But, if one or both of you lose your job, how long can you handle paying this higher mortgage?

Topic Author
DreamsOfRetiring
Posts: 8
Joined: Sat Nov 23, 2019 9:42 am

Re: Financial Health - Review

Post by DreamsOfRetiring » Mon Dec 02, 2019 7:22 pm

I have made two back door roth conversions. I have no other iRAs , so I assume I will be doing these every year for me and my spouse, right?

I am nervous about a more expensive home . I am thinking hard about those choices.

Will try to cut down my car loan for the next couple years

lakpr
Posts: 3094
Joined: Fri Mar 18, 2011 9:59 am

Re: Financial Health - Review

Post by lakpr » Mon Dec 02, 2019 7:26 pm

DreamsOfRetiring wrote:
Mon Dec 02, 2019 7:22 pm
I have made two back door roth conversions. I have no other iRAs , so I assume I will be doing these every year for me and my spouse, right?
Excellent. If you have had experience doing this for 2 years, then yes you continue to do that every year. Please make sure that you edit your original post to make this clear, for others who might be scanning only your original post to provide feedback.
New annual Contributions
25K his 401k (also specify any employer matching contributions)
3K her 403b (also specify any employer matching contributions)
6K his (Backdoor) Roth IRA
6K her (Backdoor) Roth IRA
60K - Taxable + Cash

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