Checking In After Eight Years

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Topic Author
ef11
Posts: 301
Joined: Sat Mar 10, 2012 10:39 pm

Checking In After Eight Years

Post by ef11 »

Hello all,

It has been almost eight years since my first post on this forum and since I started my career fresh out of college.

I'm posting my current status as well as links to my seven (and six, five, four) year status for comparison purposes. I find this exercise really helps me focus and remain disciplined year after year.

See this link for my "Checking In After Seven Years" thread, which also includes a link to "Checking In After Six/Five/Four Years"
viewtopic.php?t=268437

Emergency funds: $5,000 in checking account (adding funds soon)
Debt: None
Tax Filing Status: Single
Tax Rate: 24% Federal, 0% State
State of Residence: Texas
Age: 31
Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: 25% of assets
Desired Detailed Asset Allocation: 45% Large-Cap, 10% Small/Mid-Cap, 25% International, 10% bonds, 10% REIT
Current Asset Allocation:

45% Vang Inst 500 IDX ER 0.01%
10% Vang Inst Ext Mkt ER 0.04%
25% ACWI EX-US ER 0.104%
10% Vang Inst Tot Bd Mkt ER 0.03%
10% Fidelity MSCI Real Estate ER 0.084%

Current retirement assets - Total $920,000 (Four year was $60,000, Five year was $159,000, Six year was $264,000, Seven year was $553,000)

Taxable - $63,000 | 2019 Return 27.8% - Withdrawals $38,000 (Solo 401k Contribution**)
Taxable for Inherited Dollars - $437,000 | 2019 Return 17.9% + Contribution $160,000 (In cash, thinking of DCA over 12 months)
MegaCorp 401k - $205,000 | 2019 Return 24.2% + Contribution = $8,000
New Solo 401k Pre-tax - $72,500 | 2019 Contribution $36,500 + MegaCorp Pension $36,000
New Solo 401k Roth - $35,500 | 2019 Contribution $15,500 + MegaCorp 401k After-tax $20,000
Roth IRA - $100,000 | 2019 Return 30.4% + Contribution $6,000
New HSA - $7,000 | 2019 Contribution $7,000

Image

Total Worth Comparison: Four year - $100,000 Five year - $172,000 Six year - $274,000 Seven year - $557,000 Eight year - $925,000

This represents a total gain in my accounts of $368,000 over a one year period including inherited assets, or $167,000 excluding inherited assets.

New annual Contributions - SE 401K, Roth IRA, HSA - $66,500

SE 401k Traditional Contribution EmployEE/ER $34,000
SE 401k Roth Contirubtion $23,000
Already contributed my 2020 $6,000 to Backdoor Roth so that is in "Current Retirement Assets" section
Already contributed my 2019 & 2020 $3,500 to HSA so that is in "Current Retirement Assets" section

**Moving forward I will not have to pull from Taxable account to make Solo 401k contributions. Just the case this year as I only had 6 months to max out the account whereas in 2020 I will have 12 months.

Biggest Changes Since Seven Year Mark

1. Left my Megacorp midway through the year and went to a stable firm that pays me as a contractor.
2. Opened a Solo 401k with Mega Backdoor Roth feature (had at Megacorp too).
3. Created an LLC filing an S-Election to reduce tax liability.
4. Bought an umbrella policy to help ensure asset protection.
5. Finally able to take advantage of an HSA, so contributed for 2019 and 2020.
6. Moved back home after being in major US city and starting to feel settled down.
7. Have found an amazing girlfriend and have family here.
8. Building a home in LCOL area, $60,000 expense for 20% down payment over next few months will be needed. Most of payment will come from 2020 business revenue.

I know my savings rate has been exceptional and I'm fortunate to have inherited assets (more to come in the future, 25% family LLC ownership not included until dollars are realized).

What else can I do at this point? Is anything missing from my financial plan? Some type of insurance? Some special product I am unaware of? Just want to make sure I'm not missing something while I'm young.


Thank you all for reading and any advice or feedback is appreciated.
Last edited by ef11 on Wed Jan 15, 2020 2:29 pm, edited 2 times in total.
50% S&P 500 IDX ER .01% | 10% Ext Mkt ER .04% | 10% Small Cap Value ER .15% | 20% International TM ER .08% | 10% Vang Total Bond Market ER .03%
rossington
Posts: 773
Joined: Fri Jun 07, 2019 2:00 am
Location: Florida

Re: Checking In After Eight Years

Post by rossington »

What type of self employed business are you in now? Since it is a startup is it generating enough stable revenue to cover operating expenses and your personal expenses?
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
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anon_investor
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Re: Checking In After Eight Years

Post by anon_investor »

#1 great job!

Until you are married probably unnecessary to have life insurance, but when you need it definitely get term life insurance (and not whole life insurance or anything else that mixes "investing" with life insurance, which are all terrible products IMHO). Once you have kids, you can get additional life insurance. If you are in very good health, maybe you can look in slightly lower term life insurance rates now, but only something to think about. Personally, I developed some entirely treatable but chronic health problems that made term life insurance more expensive than if I had locked in a lower rate before those health issues. Just something to think about.

I would normally suggest increasing your emergency fund, but since you have a very large taxable account (your own + inherited amount), you probably can handle just about any emergency.

It sounds like you have run out of all the good tax advantaged investment vehicles. Just invest the rest in your taxable account as tax efficiently as possible (it sure looks like you are already doing that). I can't tell what your asset location is, but tax efficiency may be something to look at (but you may already have this covered, e.g. keep bonds in tax deferred vs. roth). Something you may want to look at are I Bonds (https://www.treasurydirect.gov/indiv/re ... ibonds.htm) and EE Bonds (https://www.treasurydirect.gov/indiv/re ... _bonds.htm), which may help create some additional tax deferred space for you. Personally, I am planning to add some I Bonds to replace expiring CDs that make up my emergency fund, in order to reduce the tax drag of my emergency fund.
Topic Author
ef11
Posts: 301
Joined: Sat Mar 10, 2012 10:39 pm

Re: Checking In After Eight Years

Post by ef11 »

rossington wrote: Mon Jan 13, 2020 12:46 pm What type of self employed business are you in now? Since it is a startup is it generating enough stable revenue to cover operating expenses and your personal expenses?
I edited my initial post, I am not truly self-employed but I work for a firm that pays me for my services as a contractor. Stable company that has been around for 10+ years. Not as stable as MegaCorp, but certainly not a startup and I have a consistent monthly income.
anon_investor wrote: Mon Jan 13, 2020 1:07 pm #1 great job!

Until you are married probably unnecessary to have life insurance, but when you need it definitely get term life insurance (and not whole life insurance or anything else that mixes "investing" with life insurance, which are all terrible products IMHO). Once you have kids, you can get additional life insurance. If you are in very good health, maybe you can look in slightly lower term life insurance rates now, but only something to think about. Personally, I developed some entirely treatable but chronic health problems that made term life insurance more expensive than if I had locked in a lower rate before those health issues. Just something to think about.

I would normally suggest increasing your emergency fund, but since you have a very large taxable account (your own + inherited amount), you probably can handle just about any emergency.

It sounds like you have run out of all the good tax advantaged investment vehicles. Just invest the rest in your taxable account as tax efficiently as possible (it sure looks like you are already doing that). I can't tell what your asset location is, but tax efficiency may be something to look at (but you may already have this covered, e.g. keep bonds in tax deferred vs. roth). Something you may want to look at are I Bonds (https://www.treasurydirect.gov/indiv/re ... ibonds.htm) and EE Bonds (https://www.treasurydirect.gov/indiv/re ... _bonds.htm), which may help create some additional tax deferred space for you. Personally, I am planning to add some I Bonds to replace expiring CDs that make up my emergency fund, in order to reduce the tax drag of my emergency fund.
Thank you! I agree that Term insurance is around the corner for me. I should get the best rating currently, but as you say that can change quicker than we think.

I do need to ensure my allocation is as tax-efficient as possible. Not all of the new cash in my inherited account has been invested yet and some is sitting in cash. I am struggling a bit with dumping it all in at 29,000 if I'm being honest. I plan to leave some in cash in case I need to use a portion for down payment or other potential large expenses this year. Then over time I would "pay back" that account whatever I borrowed from it, to keep my inherited assets separate and traceable long-term.
50% S&P 500 IDX ER .01% | 10% Ext Mkt ER .04% | 10% Small Cap Value ER .15% | 20% International TM ER .08% | 10% Vang Total Bond Market ER .03%
rossington
Posts: 773
Joined: Fri Jun 07, 2019 2:00 am
Location: Florida

Re: Checking In After Eight Years

Post by rossington »

If the "thinking about getting married" issue ever pops up you might want to post again and let us know. :D
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
Topic Author
ef11
Posts: 301
Joined: Sat Mar 10, 2012 10:39 pm

Re: Checking In After Eight Years

Post by ef11 »

rossington wrote: Tue Jan 14, 2020 5:29 pm If the "thinking about getting married" issue ever pops up you might want to post again and let us know. :D
Interesting comment, it is certainly a possibility. If you have any thoughts on the matter please let me know! :happy
50% S&P 500 IDX ER .01% | 10% Ext Mkt ER .04% | 10% Small Cap Value ER .15% | 20% International TM ER .08% | 10% Vang Total Bond Market ER .03%
AllMostThere
Posts: 142
Joined: Sat Dec 31, 2016 2:04 pm

Re: Checking In After Eight Years

Post by AllMostThere »

ef11 wrote: Tue Jan 14, 2020 8:46 pm
rossington wrote: Tue Jan 14, 2020 5:29 pm If the "thinking about getting married" issue ever pops up you might want to post again and let us know. :D
Interesting comment, it is certainly a possibility. If you have any thoughts on the matter please let me know! :happy
Many on the forum have stated that their best/most important decision was to their choice in spouse! Someone who has similar financial, family and work ethic values as yourself. I Married Well and it was the best decision of my life!
NoProbLlama
Posts: 36
Joined: Sat Jan 26, 2019 10:40 am

Re: Checking In After Eight Years

Post by NoProbLlama »

I really like the way you’re tracking progress & I can see how doing this every year would help staying the course.

I don’t have any feedback (looks like you’re in great shape), but I’m curious about your plans for future changes to your asset allocations. Do you have a general rule in mind (like stocks =120 - age) or a table by age or something like that?
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calmaniac
Posts: 316
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Re: Checking In After Eight Years

Post by calmaniac »

Wow, amazing job at your age! Well done.

Important to step back and realize that financial independence is just a tool to support personal and spiritual well-being and happiness. We all love the numbers...especially when we add decimal places! But the stickier problem is how to translate that financial success to making the most of your short transit on this planet.

ef11 wrote: Mon Jan 13, 2020 9:55 am
What else can I do at this point? Is anything missing from my financial plan? Some type of insurance? Some special product I am unaware of? Just want to make sure I'm not missing something while I'm young.[/b]
Consider 20% tilt to Small Cap Value
62 yo, 1-3y til retire. AA 70/30: 30% S&P, 16% value, 14% intl, 10% EM, 30% short/int govt bonds. My mil pension + DW's now ≈60% of expenses. Taking SS @age 70--> pension+SS ≈100% of expenses.
student
Posts: 5159
Joined: Fri Apr 03, 2015 6:58 am

Re: Checking In After Eight Years

Post by student »

Wow. From 100k to 925k in an annual ratio of about 1.7. At this rate. Jeff Bezos needs to watch out...
User avatar
Taylor Larimore
Advisory Board
Posts: 29960
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Two Suggestions

Post by Taylor Larimore »

ef11 wrote:Thank you all for reading and any advice or feedback is appreciated.
Two suggestions:

1. You have done a nice job of investing for retirement. When you have "enough" it is very important not to lose it. We are almost certain to have a major bear market during your lifetime when a stock portfolio will lose 50% or more. Consider increasing your 10% bond allocation.

I would simplify by eliminating your REIT fund. Its market weight in stocks is already in your Total Market Index Fund.

Best wishes
Taylor
Jack Bogle's Words of Wisdom: "Choose a balance of stocks and bonds according to your unique circumstances--your investment objective, your time horizon, you level of comfort with risk, and your financial resources."
"Simplicity is the master key to financial success." -- Jack Bogle
Topic Author
ef11
Posts: 301
Joined: Sat Mar 10, 2012 10:39 pm

Re: Checking In After Eight Years

Post by ef11 »

NoProbLlama wrote: Tue Jan 14, 2020 9:06 pm I really like the way you’re tracking progress & I can see how doing this every year would help staying the course.

I don’t have any feedback (looks like you’re in great shape), but I’m curious about your plans for future changes to your asset allocations. Do you have a general rule in mind (like stocks =120 - age) or a table by age or something like that?
Thank you, I like being organized and yes it certainly helps me stay the course. I do not truly have a rule in mind on % of bonds. My general plan is to stay at my current allocation until I am 35-40, but I may consider doing this sooner.
calmaniac wrote: Tue Jan 14, 2020 9:34 pm Wow, amazing job at your age! Well done.

Important to step back and realize that financial independence is just a tool to support personal and spiritual well-being and happiness. We all love the numbers...especially when we add decimal places! But the stickier problem is how to translate that financial success to making the most of your short transit on this planet.

ef11 wrote: Mon Jan 13, 2020 9:55 am
What else can I do at this point? Is anything missing from my financial plan? Some type of insurance? Some special product I am unaware of? Just want to make sure I'm not missing something while I'm young.[/b]
Consider 20% tilt to Small Cap Value
Thanks for the feedback. I do agree with you that it is just a tool, but I can sometimes be too focused on it. Big changes in my life last year have allowed me to focus more on the important things and I'm looking forward to 2020 being even better in that regard.

I felt the Small Value tilt was typically not supported from a pure Boglehead mindset, but I will look into it a bit more.

It seems now may be a good time to add it to my AA due to under performance vs the overall market during the past couple of years.
student wrote: Tue Jan 14, 2020 10:08 pm Wow. From 100k to 925k in an annual ratio of about 1.7. At this rate. Jeff Bezos needs to watch out...
Thank you. Can you clarify what you mean "in an annual ratio of about 1.7"? I do not follow.
Taylor Larimore wrote: Tue Jan 14, 2020 10:16 pm
ef11 wrote:Thank you all for reading and any advice or feedback is appreciated.
Two suggestions:

1. You have done a nice job of investing for retirement. When you have "enough" it is very important not to lose it. We are almost certain to have a major bear market during your lifetime when a stock portfolio will lose 50% or more. Consider increasing your 10% bond allocation.

I would simplify by eliminating your REIT fund. Its market weight in stocks is already in your Total Market Index Fund.

Best wishes
Taylor
Jack Bogle's Words of Wisdom: "Choose a balance of stocks and bonds according to your unique circumstances--your investment objective, your time horizon, you level of comfort with risk, and your financial resources."
It is an honor to have you comment on my post Mr. Larimore, thank you for your feedback.

Now may be a good time to increase my bond % as I opened several new accounts at the end of 2019 and had a large influx of cash in my taxable account, so I need to rebalance. I have enjoyed a fantastic run-up, so taking a little risk out of the picture probably makes sense. I would, however, want the flexibility of adjusting back to 90/10 IF the market dropped significantly (hard to define) in the next few years. I know this isn't following the rules exactly as they are written, but my original move from 90/10 to 80/20 was NOT due to age or risk tolerance, it was due to significant asset accumulation at an early age. If my portfolio went from $920,000 to $600,000 that accumulation would be greatly reduced and I think my true 90/10 tolerance should be utilized again as my timeline to retirement is still 25-30 years away.

I felt the 10% allocation to REIT was a acceptable due to the fact that I did not own a home and I wanted a bit more exposure to the real estate market. Now that I am planning to buy a $300,000 home, your logic is probably right that I do not need more exposure to that market than I already have in my home.
50% S&P 500 IDX ER .01% | 10% Ext Mkt ER .04% | 10% Small Cap Value ER .15% | 20% International TM ER .08% | 10% Vang Total Bond Market ER .03%
student
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Re: Checking In After Eight Years

Post by student »

ef11 wrote: Wed Jan 15, 2020 2:24 pm
student wrote: Tue Jan 14, 2020 10:08 pm Wow. From 100k to 925k in an annual ratio of about 1.7. At this rate. Jeff Bezos needs to watch out...
Thank you. Can you clarify what you mean "in an annual ratio of about 1.7"? I do not follow.
Using a ratio of 1.7 as the multiplicative factor. Then
Year 0: 100k
Year 1: 170k
Year 2: 289k
Year 3: 491k
Year 4: 835k

It is somewhat similar to the progress of your last few years. If you keep this up, in Year 20, you have
100k*(1.7)^20 which is about 4 billions and in Year 30, it will be 819 billions. Hence the joke.
Topic Author
ef11
Posts: 301
Joined: Sat Mar 10, 2012 10:39 pm

Re: Checking In After Eight Years

Post by ef11 »

student wrote: Wed Jan 15, 2020 5:07 pm
ef11 wrote: Wed Jan 15, 2020 2:24 pm
student wrote: Tue Jan 14, 2020 10:08 pm Wow. From 100k to 925k in an annual ratio of about 1.7. At this rate. Jeff Bezos needs to watch out...
Thank you. Can you clarify what you mean "in an annual ratio of about 1.7"? I do not follow.
Using a ratio of 1.7 as the multiplicative factor. Then
Year 0: 100k
Year 1: 170k
Year 2: 289k
Year 3: 491k
Year 4: 835k

It is somewhat similar to the progress of your last few years. If you keep this up, in Year 20, you have
100k*(1.7)^20 which is about 4 billions and in Year 30, it will be 819 billions. Hence the joke.
Ah ok, makes sense. Yes I wish I could keep that growth rate up!
50% S&P 500 IDX ER .01% | 10% Ext Mkt ER .04% | 10% Small Cap Value ER .15% | 20% International TM ER .08% | 10% Vang Total Bond Market ER .03%
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