Newbie seeking allocation review

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Topic Author
kyfishrman
Posts: 2
Joined: Mon Aug 03, 2020 7:15 pm

Newbie seeking allocation review

Post by kyfishrman »

Newbie here, looking for your advice. I'm 68 and hoping to retire within the next six months. Obviously I'm especially anxious about the social and financial upheavals in our nation right now, because I don't have 30-40 years I can wait before drawing on my investments.

Thanks in advance for your help.




Emergency funds: Have $67k in cash on hand. Also have $91k in precious metals, held as physical Gold and Silver Eagles. Upon retirement, will receive approx. $45k yearly in Social Security and pension payments, which should cover normal expenses.

Debt: Zero debt. Credit cards paid in full monthly.

Tax Filing Status: Married filing jointly

Tax Rate:
17% Federal, 5% State

State of Residence: KY

Age: 68 (him) & 56 (her)

Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 20% of stocks

Please provide a hint as to the size of your current total: Investment portfolio is $430k split as:
Employer-sponsored 401k - $234k – his
Taxable retirement account set up by brokerage - $121k – his
Her IRA set up by brokerage - $40k - hers
Investments within Health Savings Account - $35k - both

Current retirement assets

His taxable at brokerage ($121k)
0.23% cash (for investing – do not include in emergency funds)
1.57% Federated Hermes Kaufmann Small-Cap Fund Class IS (FKAIX) (0.91%)
2.91% First Eagle Overseas FD Class I (SGOIX) (0.86%)
5.82% Franklin Rising Dividends Fund Advisor Class (FRDAX) (0.62%)
1.05% Janus Henderson Small Cap Value Fund Class I (JSCOX) (0.79%)
3.44% John Hancock International Growth Fund Class I (GOGIX) (0.98%)
8.53% JPMorgan Large-Cap Growth Fund Class I (SEEGX) (0.69%)
5.03% Wells Fargo Special Mid Cap Value Fund Class I (WFMIX) (0.82%)

Her IRA at brokerage ($40k)
0.28% cash (for investing – do not include emergency funds)
0.64% Federated Hermes Kaufmann Small-Cap Fund Class IS (FKAIX) (0.91%)
1.09% First Eagle Overseas FD Class I (SGOIX) (0.86%)
1.78% Franklin Rising Dividends Fund Advisor Class (FRDAX) (0.62%)
0.43% Janus Henderson Small Cap Value Fund Class I (JSCOX) (0.79%)
1.28% John Hancock International Growth Fund Class I (GOGIX) (0.98%)
2.56% JPMorgan Large-Cap Growth Fund Class I (SEEGX) (0.69%)
1.42% Wells Fargo Special Mid Cap Value Fund Class I (WFMIX) (0.82%)

His 401k (Schwab Personal Choice Retirement Account) ($234k)
1.75% AT&T (T)
2.00% Verizon (VZ)
7.05% Amazon (AMZN)
14.25% PGIM Jennison Growth Z (PJFZX) (0.71%)
6.64% America Funds American Mutual Funds Class F-1 (AMFFX) (0.65%)
5.40% American Funds New Perspective Fund Class F-1 (NPFFX) (0.80%)
6.30% (Nuance Mid Cap Value (NMAVX) (1.19%)
3.74% American Funds Intl Growth & Income Fund Class F-1 (IGIF) (0.93%)
2.21% Wasatch Micro Cap Value Fund (WAMVX) (1.74%)
1.71% AMG River Road Small Cap Value Fund Class N (ARSVX) (1.38%)
1.42% Vanguard 500 Index Admiral Shares (VFIAX) (0.04%)
0.45% Cash (not included in Emergency Fund
Company match – Employee contributes 6% of salary biweekly and company contributes 7.5%.

Both Health Savings Account Investments ($35k)
3.44% Vanguard 500 Index Admiral (VFIAX) (0.04%)
2.07% Vanguard Mid Cap Index Admiral (VIMAX) (0.05%)
2.00% Vanguard LifeStrat Growth Inv (VASGX) (0.14%)
0.65% Cash (not included in Emergency Fund)


New Contributions
$1k per month to his 401k (includes his contribution plus company match)
$100 per month to her IRA


Available funds


Funds available in his 401(k)
His 401k is a Schwab Personal Ch0ice Retirement Account can invest in virtually any equity, mutual, or bond fund

Funds available in his and her brokerage accounts)
Access to any exchange traded equity or fund.

Questions:
1. Upon retirement, we will have about $45k per month in Social Security and pension income, which will easily cover 2/3 or more of normal expenses. Also have $150k in cash and precious metals available. Given those safety nets, is there any reason not to take more risk with investments since most bear markets should recover in 5-6 years.

2. Upon retirement, I can convert my Schwab 401k to an IRA with Schwab, or I can set up an IRA with my brokerage and move the funds there. What are the pros and cons of having one advisor handling all your investments vs. splitting it up in some fashion?
Last edited by kyfishrman on Tue Aug 04, 2020 8:40 pm, edited 1 time in total.
lakpr
Posts: 6184
Joined: Fri Mar 18, 2011 9:59 am

Re: Newbie seeking allocation review

Post by lakpr »

  • There is no 17% Federal tax bracket. Perhaps you are in the 22% tax bracket
  • If you ARE in the 22% tax bracket, why are you not contributing the maximum to your 401k, $26000, as you are older than 50?
  • Ditto with the IRA, unless your income exceeds $196k for 2020, you could have maximized the Traditional IRA contribution for your wife, not just $100 per month which is just peanuts
  • Your 401k plan selections are all high expense funds and individual stocks. Why do you want to gamble your retirement on Amazon? You could have cut down the overall expenses on your retirements easily by a factor of 10, possibly more. 1.74% ER? that should be criminal!!
  • $430k in total investments will yield only a max of $15k to $16k per year, or should I say 'sustain' a max of $15k to $16k per year. Are you sure you and your wife can sustain indefinitely on $60k? Good news is that it is inflation-adjusted; both SS income and the '4%' withdrawal rate in Bernstein's studies, account for inflation
  • You do NOT need an advisor, what you need a vast simplification of your portfolio and stick everything into a single fund that meets your objectives. If 80:20 is your desired allocation ratio, I would choose Vanguard LifeStrategy Aggressive Growth fund. But at age 68, you SURE you want 80% stocks portfolio?
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geerhardusvos
Posts: 1249
Joined: Wed Oct 23, 2019 10:20 pm
Location: heavenlies

Re: Newbie seeking allocation review

Post by geerhardusvos »

kyfishrman wrote: Mon Aug 03, 2020 7:39 pm Newbie here, looking for your advice. I'm 68 and hoping to retire within the next six months. Obviously I'm especially anxious about the social and financial upheavals in our nation right now, because I don't have 30-40 years I can wait before drawing on my investments.

Thanks in advance for your help.




Emergency funds: Have $67k in cash on hand. Also have $91k in precious metals, held as physical Gold and Silver Eagles. Upon retirement, will receive approx. $45k in Social Security and pension payments, which will more than cover normal expenses.

Debt: Zero debt. Credit cards paid in full monthly.

Tax Filing Status: Married filing jointly

Tax Rate:
17% Federal, 5% State

State of Residence: KY

Age: 68 (him) & 56 (her)

Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 20% of stocks

Please provide a hint as to the size of your current total: Investment portfolio is $430k split as:
Employer-sponsored 401k - $234k – his
Taxable retirement account set up by brokerage - $121k – his
Her IRA set up by brokerage - $40k - hers
Investments within Health Savings Account - $35k - both

Current retirement assets

His taxable at brokerage ($121k)
0.23% cash (for investing – do not include in emergency funds)
1.57% Federated Hermes Kaufmann Small-Cap Fund Class IS (FKAIX) (0.91%)
2.91% First Eagle Overseas FD Class I (SGOIX) (0.86%)
5.82% Franklin Rising Dividends Fund Advisor Class (FRDAX) (0.62%)
1.05% Janus Henderson Small Cap Value Fund Class I (JSCOX) (0.79%)
3.44% John Hancock International Growth Fund Class I (GOGIX) (0.98%)
8.53% JPMorgan Large-Cap Growth Fund Class I (SEEGX) (0.69%)
5.03% Wells Fargo Special Mid Cap Value Fund Class I (WFMIX) (0.82%)

Her IRA at brokerage ($40k)
0.28% cash (for investing – do not include emergency funds)
0.64% Federated Hermes Kaufmann Small-Cap Fund Class IS (FKAIX) (0.91%)
1.09% First Eagle Overseas FD Class I (SGOIX) (0.86%)
1.78% Franklin Rising Dividends Fund Advisor Class (FRDAX) (0.62%)
0.43% Janus Henderson Small Cap Value Fund Class I (JSCOX) (0.79%)
1.28% John Hancock International Growth Fund Class I (GOGIX) (0.98%)
2.56% JPMorgan Large-Cap Growth Fund Class I (SEEGX) (0.69%)
1.42% Wells Fargo Special Mid Cap Value Fund Class I (WFMIX) (0.82%)

His 401k (Schwab Personal Choice Retirement Account) ($234k)
1.75% AT&T (T)
2.00% Verizon (VZ)
7.05% Amazon (AMZN)
14.25% PGIM Jennison Growth Z (PJFZX) (0.71%)
6.64% America Funds American Mutual Funds Class F-1 (AMFFX) (0.65%)
5.40% American Funds New Perspective Fund Class F-1 (NPFFX) (0.80%)
6.30% (Nuance Mid Cap Value (NMAVX) (1.19%)
3.74% American Funds Intl Growth & Income Fund Class F-1 (IGIF) (0.93%)
2.21% Wasatch Micro Cap Value Fund (WAMVX) (1.74%)
1.71% AMG River Road Small Cap Value Fund Class N (ARSVX) (1.38%)
1.42% Vanguard 500 Index Admiral Shares (VFIAX) (0.04%)
0.45% Cash (not included in Emergency Fund
Company match – Employee contributes 6% of salary biweekly and company contributes 7.5%.

Both Health Savings Account Investments ($35k)
3.44% Vanguard 500 Index Admiral (VFIAX) (0.04%)
2.07% Vanguard Mid Cap Index Admiral (VIMAX) (0.05%)
2.00% Vanguard LifeStrat Growth Inv (VASGX) (0.14%)
0.65% Cash (not included in Emergency Fund)


New Contributions
$1k per month to his 401k (includes his contribution plus company match)
$100 per month to her IRA


Available funds


Funds available in his 401(k)
His 401k is a Schwab Personal Ch0ice Retirement Account can invest in virtually any equity, mutual, or bond fund

Funds available in his and her brokerage accounts)
Access to any exchange traded equity or fund.

Questions:
1. Upon retirement, we will have about $45k per month in Social Security and pension income, which will easily cover 2/3 or more of normal expenses. Also have $150k in cash and precious metals available. Given those safety nets, is there any reason not to take more risk with investments since most bear markets should recover in 5-6 years.

2. Upon retirement, I can convert my Schwab 401k to an IRA with Schwab, or I can set up an IRA with my brokerage and move the funds there. What are the pros and cons of having one advisor handling all your investments vs. splitting it up in some fashion?
Yep, consolidate down into a couple funds in the retirement accounts ASAP. Get those expense ratios down quick. 80/20 seems reasonable in your position. You can have an IRA at any institution and roll over 401(k) funds upon retirement. You guys seem like you’ll be fine with your current budget and SS income. Congrats!
VTSAX and chill
User avatar
Duckie
Posts: 7650
Joined: Thu Mar 08, 2007 2:55 pm

Re: Newbie seeking allocation review

Post by Duckie »

kyfishrman, welcome to the forum.
kyfishrman wrote:Age: 68 (him) & 56 (her)

Desired Asset allocation: 80% stocks / 20% bonds
20% bonds is way too risky at your age. 40% bonds would be better. 50% bonds would be even better.
Desired International allocation: 20% of stocks
That is reasonable.
His taxable at brokerage ($121k)
0.23% cash (for investing – do not include in emergency funds)
1.57% Federated Hermes Kaufmann Small-Cap Fund Class IS (FKAIX) (0.91%)
2.91% First Eagle Overseas FD Class I (SGOIX) (0.86%)
5.82% Franklin Rising Dividends Fund Advisor Class (FRDAX) (0.62%)
1.05% Janus Henderson Small Cap Value Fund Class I (JSCOX) (0.79%)
3.44% John Hancock International Growth Fund Class I (GOGIX) (0.98%)
8.53% JPMorgan Large-Cap Growth Fund Class I (SEEGX) (0.69%)
5.03% Wells Fargo Special Mid Cap Value Fund Class I (WFMIX) (0.82%)
These mutual funds have very high expense ratios. Turn OFF all automatic dividend reinvestment. Don't buy more of these funds. Find out what the cost basis is for each asset and figure the current gain or loss for each. What brokerage is this?
Her IRA at brokerage ($40k)
0.28% cash (for investing – do not include emergency funds)
0.64% Federated Hermes Kaufmann Small-Cap Fund Class IS (FKAIX) (0.91%)
1.09% First Eagle Overseas FD Class I (SGOIX) (0.86%)
1.78% Franklin Rising Dividends Fund Advisor Class (FRDAX) (0.62%)
0.43% Janus Henderson Small Cap Value Fund Class I (JSCOX) (0.79%)
1.28% John Hancock International Growth Fund Class I (GOGIX) (0.98%)
2.56% JPMorgan Large-Cap Growth Fund Class I (SEEGX) (0.69%)
1.42% Wells Fargo Special Mid Cap Value Fund Class I (WFMIX) (0.82%)
Again, these funds have very high expense ratios. Since this is an IRA she can sell without taxes. What brokerage is this? This is a small account. Only one fund would be best here.
His 401k (Schwab Personal Choice Retirement Account) ($234k)
1.75% AT&T (T)
2.00% Verizon (VZ)
7.05% Amazon (AMZN)
14.25% PGIM Jennison Growth Z (PJFZX) (0.71%)
6.64% America Funds American Mutual Funds Class F-1 (AMFFX) (0.65%)
5.40% American Funds New Perspective Fund Class F-1 (NPFFX) (0.80%)
6.30% (Nuance Mid Cap Value (NMAVX) (1.19%)
3.74% American Funds Intl Growth & Income Fund Class F-1 (IGIF) (0.93%)
2.21% Wasatch Micro Cap Value Fund (WAMVX) (1.74%)
1.71% AMG River Road Small Cap Value Fund Class N (ARSVX) (1.38%)
1.42% Vanguard 500 Index Admiral Shares (VFIAX) (0.04%)
0.45% Cash (not included in Emergency Fund
Company match – Employee contributes 6% of salary biweekly and company contributes 7.5%.
<snip>
His 401k is a Schwab Personal Ch0ice Retirement Account can invest in virtually any equity, mutual, or bond fund
Since you can buy practically anything in this account, buy low-cost index funds/ETFs. Vanguard, Fidelity, and Schwab have good options.
Both Health Savings Account Investments ($35k)
3.44% Vanguard 500 Index Admiral (VFIAX) (0.04%)
2.07% Vanguard Mid Cap Index Admiral (VIMAX) (0.05%)
2.00% Vanguard LifeStrat Growth Inv (VASGX) (0.14%)
0.65% Cash (not included in Emergency Fund)
Which custodian holds these HSA assets? Since these are small accounts, put just one fund in each. Are you planning to use these accounts for current medical expenses, or will you pay current expenses out of pocket and think of these as IRAs?
New Contributions
$1k per month to his 401k (includes his contribution plus company match)
$100 per month to her IRA
Why such small amounts?
Emergency funds: Have $67k in cash on hand. Also have $91k in precious metals, held as physical Gold and Silver Eagles. Upon retirement, will receive approx. $45k in Social Security and pension payments, which will more than cover normal expenses.
<snip>
Questions:
1. Upon retirement, we will have about $45k per month in Social Security and pension income, which will easily cover 2/3 or more of normal expenses.
So which is it, cover all normal expenses, or cover 2/3 normal expenses?
Also have $150k in cash and precious metals available. Given those safety nets, is there any reason not to take more risk with investments since most bear markets should recover in 5-6 years.
You will soon retire and and have a portfolio of $430K. This is not the time to take risks.
2. Upon retirement, I can convert my Schwab 401k to an IRA with Schwab, or I can set up an IRA with my brokerage and move the funds there. What are the pros and cons of having one advisor handling all your investments vs. splitting it up in some fashion?
Putting most of your assets in one place makes things easier to track. Separating your assets means if there is a temporary glitch one place the other will probably be fine.

Schwab has a good reputation. What is your other brokerage, because you're holding expensive funds? Who picked them, you or an advisor?
GMT-8
Posts: 190
Joined: Fri Mar 26, 2010 5:11 pm

Re: Newbie seeking allocation review

Post by GMT-8 »

kyfishrman,

Do you really have pension income of $45k a month as you stated? If so you don't really need our input.

But if it's $45k a year then we should help you cut some of those Expense Ratios and simplify your complex accounts. When you retire you won't want to spend all your time figuring out what your employer or financial advisor had in mind (their own good).

Please edit your original post to correct or clarify the pension / SS income.

Thanks

GMT
retired@50
Posts: 3605
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Newbie seeking allocation review

Post by retired@50 »

Welcome to the forum.

You're getting creamed on expenses (high expense ratios).
I'll bet you could easily add $2,000 to $3,000 per year to your returns by finding a few suitable low-expense ratio stock and bond index funds.

See link: https://www.bogleheads.org/wiki/Expense_ratios

Regards,
This is one person's opinion. Nothing more.
Topic Author
kyfishrman
Posts: 2
Joined: Mon Aug 03, 2020 7:15 pm

Re: Newbie seeking allocation review

Post by kyfishrman »

GMT-8 wrote: Tue Aug 04, 2020 4:55 pm kyfishrman,

Do you really have pension income of $45k a month as you stated? If so you don't really need our input.

But if it's $45k a year then we should help you cut some of those Expense Ratios and simplify your complex accounts. When you retire you won't want to spend all your time figuring out what your employer or financial advisor had in mind (their own good).

Please edit your original post to correct or clarify the pension / SS income.

Thanks

GMT
The guesstimate of $45k is what I should have coming in annually through Social Security and a couple of small pensions from previous employers. Original post clarified. Thaniks!
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