Year 7 as a Boglehead: :sharebeer: emoji

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
WhatsUpB
Posts: 46
Joined: Sun Aug 18, 2013 9:17 pm

Year 7 as a Boglehead: :sharebeer: emoji

Post by WhatsUpB »

In year 8 as a Boglehead and doing my 7th annual retrospective post. I hope it serves to inspire and motivate at-least one member to take up managing their own finances guided by the Boglehead principles. I made my year one post when I was 27 (now 33) - pretty amusing looking back now. Each subsequent year continues to be a humbling, interesting and a powerful reminder of how far one can come across debt, savings, income, and financial knowledge.

In 2019, after a brief stagnation of my income growth at my current job, I earned the opportunity to take on more responsibility at work. I now manage 3 teams (vs 1) with 5 direct reports (vs 1). My responsibilities now span the strategy, direction, and work of 30+ co-workers across my teams. When taking on these new responsibilities I made sure to speak up about my salary and am lucky have an amazing boss who agreed more work equals more money. Thus, my new role came with a nice boost to my income ("Job 4" below) over the last few months as we exited 2019.

My wife (31 at the time) quit her job in 2017 to go to a 2-year nursing school program. She graduated in 2019 and will be starting her first job in nursing next month! It will be an amazing accomplishment based on her hard work and dedication over the last few years. It will also be a nice boost to our income past just mine. This is especially nice as my wife and I will likely be trying to start a family soon!

For this year I thought I would also do a quick walk down memory lane about money....

In the 1990s, we had an encyclopedia in each class room. My 1st grade class would get breaks throughout the week to read on our own. Most of my peers would read books borrowed from the school library. I, however, loved to look through the encyclopedia and specifically at one section…. "money"!

My parents did not raise me at such a young age to be interested in money. In fact, I cannot remember them bringing up money once. But something in my 7 year old brain simply found money fascinating. Maybe it was the fact I got ahold of a Super Nintendo Vegas casino game that peaked my interest. I remember playing one of those as a little kid after renting it from Blockbuster. Somehow I found my way to know about money and I wanted to learn more.

What I uncovered looking over the “money” section of the encyclopedia each week escapes me today. Except one fact that has stood the test of time. Did you know, we used to have a $10,000 dollar bill?

Image

Now to the meat and potatoes of our finances following the Boglehead methodology. I continue to read these boards at least once a week and am thankful for everyone here who shares their knowledge!

Links for those interested in seeing my journey and previous posts.
Year 1 (2013): viewtopic.php?f=1&t=127906&p=1878374
Year 2 (2014): viewtopic.php?f=1&t=153385&p=2301523
Year 3 (2015): viewtopic.php?f=1&t=182856&p=2773872
Year 4 (2016): viewtopic.php?f=1&t=209175&p=3210565
Year 5 (2017): viewtopic.php?f=1&t=240324&p=3761539
Year 6 (2018): viewtopic.php?f=1&t=277360&p=4470629
Year 7 (2019): Below

I am carrying forward the balance progressions from previous years posts so you do not have to click through all the threads tough they are entertaining, in my opinion, especially year one.

I format all accounts below as 2013 ($) -> 2014 ($) -> 2015 ($) -> 2016 ($) -> 2017 ($) -> 2018 ($) -> 2019 ($)

Year 7 (2019)
Emergency Fund (EF): Fully funded (see savings below)
Debt: No credit card debit, car loans or mortgage
Student Loans: $76,491 -> $68,972 -> $45,376 -> $27,262 -> $0
Tax Filing Status: Married with no dependents
Marginal Tax Rates: 24% Federal, 9.3% State
State of Residence: CA (LA area)
Age: 33 (Married)
Desired Asset Allocation: 90% stocks / 10% bonds
Desired International allocation: 25% of stocks

Term Life Insurance: Him $1M, Her $0 (will add when we have first baby)
Income (x equaling annual income at job 1 in 2013):
1x (Job 1 - 3/13)
1.4x (Job 2 -11/13)
1.8x (Job 2 - 10/14)
2.5x (Job 3 - 4/15)
3x (Job 3 - 4/16)
4.4x (Job 4 - 6/17)
4.6x (Job 4 - 1/19)
5x (Job 4 - 9/19)
5.2x (Job 4 - 1/20)

2019 Planned Retirement Contributions: $38,600
$19,500 His 401k + 2.5% Salary 1:1 match
? Her 401k (we are not sure what her job will offer yet)
$6,000 His ROTH IRA
$6,000 Her ROTH IRA
$7,100 Family HSA ($500 by employer)

Savings (includes EF): EF Only -> EF -> EF -> EF -> EF -> $51k -> $111k
With student loans 3 years behind us and all retirement accounts maxed each year, we can start to build up a long-term savings balance to be used for a down payment ($250k) on a house. I estimate it will take us at least 2 more years considering we live in LA. HCOL is not fun, but LA is great for my job and it is where my wife's family lives. It is being saved at Vanguard in medium term CA tax exempt bonds. This balance will also be a great absolute measure of any savings done past our retirement accounts each year.

Retirement Assets: $11k -> $46k -> $78k -> $127k -> $203k -> $218k -> $318k
Accounts holistically at 90% stocks (25% International) and 10% bonds with low cost index funds.

His 401k (Fidelity): $0 -> $22k -> $32k -> $64k -> $110k -> $118k -> $175k

His ROTH IRA (Vanguard): $5.5k -> $12k -> $21k -> $28k -> $37k -> $39k -> $56k

Her ROTH IRA (Vanguard): $5.5k -> $11k -> $21k -> $28k -> $40k -> $42k -> $59k

Family HSA (Fidelity): $0 -> $0 -> $3.6k -> $7.6k -> $16k -> $20k -> $28k

Taxable: None

Crypto (fun money): $0 -> $0 -> $0 -> $0 -> $3k -> $16k -> $5k

Any and all questions, feedback, comments about my approach more than welcome! Thank you again to this community.
I'll be back again next year! :sharebeer
Compound
Posts: 838
Joined: Mon May 26, 2014 1:32 pm

Re: Year 7 as a Boglehead: :sharebeer: emoji

Post by Compound »

Has the crypto “fun money” indeed been fun?

Overall, looks like solid progress forward.
Lafder
Posts: 4066
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: Year 7 as a Boglehead: :sharebeer: emoji

Post by Lafder »

It is great to see your progression!

The years go by quickly!

:)
User avatar
JoMoney
Posts: 9873
Joined: Tue Jul 23, 2013 5:31 am

Re: Year 7 as a Boglehead: :sharebeer: emoji

Post by JoMoney »

WhatsUpB wrote: Sat Jan 25, 2020 10:10 am...
What I uncovered looking over the “money” section of the encyclopedia each week escapes me today. Except one fact that has stood the test of time. Did you know, we used to have a $10,000 dollar bill? ...
Although none of the large denominations were in normal public circulation, we even had a $100,000 note
https://en.wikipedia.org/wiki/Large_den ... s_currency
Image
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
ef11
Posts: 302
Joined: Sat Mar 10, 2012 10:39 pm

Re: Year 7 as a Boglehead: :sharebeer: emoji

Post by ef11 »

Great job my fellow annual retrospective poster.

Thanks for sharing the story of your early years, very interesting. Also was not aware we had a $10,000 bill.

I enjoy reading my first year check-in as well, my knowledge has grown tremendously since then and it is so clear from reading that post.

Salary increases are astounding unless job 1 was as a barista :wink: Which I see now from your first year post it was not.

Keep it up in 2020!

My retrospective if anyone wants to do any additional reading :happy viewtopic.php?f=1&t=300495
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%
Topic Author
WhatsUpB
Posts: 46
Joined: Sun Aug 18, 2013 9:17 pm

Re: Year 7 as a Boglehead: :sharebeer: emoji

Post by WhatsUpB »

Compound wrote: Sat Jan 25, 2020 10:20 am Has the crypto “fun money” indeed been fun?
It has been fun to scratch the speculation/fomo itch. I work in tech running app and web teams so I generally find the topic and space interesting. I put in $3k total once in 2017 so less than 1% of our overall net worth. Watching it grow to almost $20K and crash back down was something else thats for sure. It serves as a constant reminder of risks and up and downs in trying to time a market.

Thanks for the support Compound, Lafder, and ef11!
mortfree
Posts: 2437
Joined: Mon Sep 12, 2016 7:06 pm

Re: Year 7 as a Boglehead: :sharebeer: emoji

Post by mortfree »

Consider term for your wife before she gets pregnant.
Topic Author
WhatsUpB
Posts: 46
Joined: Sun Aug 18, 2013 9:17 pm

Re: Year 7 as a Boglehead: :sharebeer: emoji

Post by WhatsUpB »

mortfree wrote: Sat Jan 25, 2020 12:28 pm Consider term for your wife before she gets pregnant.
Wow didn't think about that, thanks. Also reminds me I should probably buy more term on myself.

I am unsure how much to buy for us.

Let's say the goal is 2 kids in the next 5 years and a house with a hypothetical mortgage of say $1M - likely lower but its a round number. How long and how much term life insurance would make sense for us?

If bought next month....

Length: Seems a 25 year term would line up nicely with both kids if we are lucky enough to have 2 in the next 5 years and they go through to college.

5 Year: Kids Born-4
10 Year: Kids 5-9
15 Year: Kids 10-14
20 Year: Kids 15-19
25 Year: Kids 20-24

Value: My initial thoughts landed on $2.5M term on each of us. Then I did some forum research, found the concept of laddering, and have been messing with rate and length on term4sale.

Here are the numbers for me and her on a 25 year policy per year:

Me
$2,000,000 $1,103.88
$2,500,000 $1,365.84
$3,000,000 $1,627.80
$4,000,000 $2,151.60
$5,000,000 $2,675.52

Her
$2,000,000 $909.24
$2,500,000 $1,122.60
$3,000,000 $1,335.84
$4,000,000 $1,762.44
$5,000,000 $2,189.04

But then I read about laddering thanks to the forum :P .

For me a $4M, 25 Year Ladder would look like:
25 Year $1M $482.76
20 Year $1M $330.24
15 Year $1M $247.68
10 Year $1M $227.04
Total $1,287.72 (Total 25 year cost factoring expirations $24,350)

This ladder for me would be ~$10k cheaper then $2.5M on me for 25 years and ~$30k cheaper then $4M on me for 25 years.

For her a $3M 20 Year Ladder would look like:
20 Year $1M $330.24
15 Year $1M $247.68
10 Year $1M $185.76
Total $763.68 (Total 25 year cost factoring expirations $12,177)

This ladder for her would be ~$16k cheaper then $2.5M on her for 25 years and ~$21k cheaper then $3M on her for 25 years.

The ladders would start to burn down right around the kids turning 10ish. On me for wife from $4M down $1M when they are in college through to finishing. On her for me from $3M to $1M when they are just about to start college. Said another way:

5 Year: 2 Kids Born-4 (Me: $4M, Her: $3M)
10 Year: 2 Kids 5-9 (Me: $4M, Her: $3M)
15 Year: 2 Kids 10-14 (Me: $3M, Her: $2M)
20 Year: 2 Kids 15-19 (Me: $2M, Her: $1M)
25 Year: 2 Kids 20-24 (Me: $1M, Her: $0)

Thoughts?
Last edited by WhatsUpB on Sat Jan 25, 2020 5:09 pm, edited 8 times in total.
Topic Author
WhatsUpB
Posts: 46
Joined: Sun Aug 18, 2013 9:17 pm

Re: Year 7 as a Boglehead: :sharebeer: emoji

Post by WhatsUpB »

^ Updated my post with a ladder approach after some research on the forum. :D
EnjoyIt
Posts: 4966
Joined: Sun Dec 29, 2013 8:06 pm

Re: Year 7 as a Boglehead: :sharebeer: emoji

Post by EnjoyIt »

First, a congrats is in order for all your success.

Looking at your laddering, it seems like you are trying to get $7 million in life insurance. Which means you feel you will need $7 million to have a reasonable life for your kids if both of you are dead, $4 million if you are dead and $3 million if the wife is dead.

I have no idea how much you make but $3 million for a nursing salary appears a bit much. I suspect $4 million on your salary is a bit much as well but I have no idea what you make and what your expenses are.

The goal of life insurance is to insure one's income and contribution to the family. So if you die and the wife gets $4 million on top of what SS pays out (not much) plus all the savings you already have, plus any income the surviving spouse will generate, is that enough money to cover your wife and kids expenses? $4 million should produce $160k/yr at a 4% withdraws rate and $120k/yr if you want to be very very conservative at a 3% rate. Same calculation can be made for the spouses $3 million policy.

It is your money, and your risk, I just think you are buying way more insurance than you may need.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
sport
Posts: 9653
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: Year 7 as a Boglehead: :sharebeer: emoji

Post by sport »

You may want to refine your ladder approach to life insurance. Over the years, the accumulative inflation will erode the value of your policies. In that way, the policies "automatically" decrease the value of their coverage. So, your planned decreases in coverage may reduce your insurance too much. Of course, if inflation increases from its presently tame levels, the effect is multiplied.
EnjoyIt
Posts: 4966
Joined: Sun Dec 29, 2013 8:06 pm

Re: Year 7 as a Boglehead: :sharebeer: emoji

Post by EnjoyIt »

Log in to SSA.gov and check your disability and death benefits. You may be surprised how much your spouse and children may get every month upon one of your deaths. It won't be enough to cover all expenses, but it is worth quite a bit.
Last edited by EnjoyIt on Sat Jan 25, 2020 9:37 pm, edited 1 time in total.
A time to EVALUATE your jitters: | https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
JasonA1987
Posts: 25
Joined: Tue Dec 06, 2016 5:56 pm

Re: Year 7 as a Boglehead: :sharebeer: emoji

Post by JasonA1987 »

I will second looking at term life before your wife is pregnant. We had to shop pretty hard to get coverage because my wife got gestational diabetes with our second as well as it aggravated a benign thyroid condition. Apparently insurances don’t understand that pregnancy isn’t a permanent condition.
Topic Author
WhatsUpB
Posts: 46
Joined: Sun Aug 18, 2013 9:17 pm

Re: Year 7 as a Boglehead: :sharebeer: emoji

Post by WhatsUpB »

EnjoyIt wrote: Sat Jan 25, 2020 5:26 pm Log in to SSA.gov and check your disability and death benefits. You may be surprised how much your spouse and children may get every month upon one of your deaths. It won't be enough to cover all expenses, but it is worth quite a bit.
Survivors
You have enough credits for your family to qualify for survivor benefits. If you die this year, certain members of your family may be eligible for these benefits:
Your child: $2,309 a month (on me) or $1,432 a month (on her)
Your spouse who is caring for your child: $2,309 a month (on me) or $1,432 a month (on her)
Your spouse (starting at full retirement age): $3,079 a month (on me) or $1,909 a month (on her)
Your total family benefits cannot be more than $5,389 a month.
Your spouse or minor child may be eligible for a special one-time death benefit of $255.

If I died with kids 16 or under, family would get $55,416 a year. If wife died with kids under 16, family would get $34,368 a year. And if we both died kids would get $89,734 until 18/19.

Is that correct? The child (until 18/19) and the spouse (until child is 16) both get survivor payments? That is a lot of money to factor in.
sport wrote: Sat Jan 25, 2020 5:17 pm You may want to refine your ladder approach to life insurance. Over the years, the accumulative inflation will erode the value of your policies. In that way, the policies "automatically" decrease the value of their coverage. So, your planned decreases in coverage may reduce your insurance too much. Of course, if inflation increases from its presently tame levels, the effect is multiplied.
Good point. The ladder would be worth the following if I claimed the benefit at last day before each tier expires using a 3% inflation rate.

Ladder on me inflation adjusted:
Year 25 $481,417
Year 20 $1,121,225
Year 15 $1,958,508
Year 10 $3,040,924

Ladder on her inflation adjusted:
$560,612
$1,305,672
$2,280,693


....Man this insurance stuff is hard. Going to think about these factors now. Also considering we live in a HCOL area (LA) where a house we buy in next 5 years will likely be $1M+. Also, I make 3x my wife. Hmmmm.
Post Reply