Help with Personal Investments

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
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Topic Author
Timbus
Posts: 2
Joined: Thu Sep 10, 2020 6:21 am

Help with Personal Investments

Post by Timbus »

Hello Bogleheads, I’ve been good about saving money but not about paying attention to my investments. I am looking for advice on investment strategy (questions below). Your comments and suggestions are very much appreciated.

Emergency funds: Six months of expenses.
Debt: None.
Tax Filing Status: Single. I have my own business (LLC) as of 3 years ago and have not been paying myself or taking any distributions. However, starting this September, I am taking a draw of $1,450 per week.
Tax Rate: 22% Federal, 5.25% State
State of Residence: North Carolina
Age: 55

Desired Asset allocation: 60% stocks / 40% bonds
Desired International allocation: 10% of stocks
Current total portfolio size mid -to-high six-figures.

Current portfolio:
Current retirement assets:
Taxable:
0% cash (for investing –not including emergency funds)
3% AMG MANAGERS SPECIAL EQUITY-N (MGSEX) (1.36% expense ratio)
11% Vanguard 500 Index Fund Admiral Shares (VFIAX) (0.04% expense ratio)
20% Vanguard Health Care Fund Admiral Shares (VGHAX) (0.27% expense ratio)
9% McKesson Stock (MCK)

401K Former Company 1 (Charles Schwab Retirement Plan Services):
4% Vanguard Institutional Index Fund Institutional Plus Shares (VIIIX) (0.02% expense ratio)
10% New York Life Anchor Account I (0.65% expense ratio)

401K Former Company 2 (Fidelity Investments PSIP):
16% BNY Mellon Stable Value Portfolio (no ticker symbol) (0.273% expense ratio)
6% State Street S&P 500 Index Fund (no ticker symbol) (0.024% expense ratio)
3% McKesson Employer Stock Fund (no ticker symbol) (0.0205% expense ratio)

401K Former Company 3 (Fifth Third):
4% Fidelity 500 Index Fund (FXAIX) (0.015% expense ratio)
11% Wells Fargo Stable Value Fund C 30 (no ticker symbol) (0.5% expense ratio)

Roth IRA:
2% Vanguard Prime Money Market Fund (VMMXX) (0.16% expense ratio)
1% Vanguard U.S. Growth Fund Investor Shares (VWUSX) (0.39% expense ratio)

_______________________________________________________________

New annual Contributions:
$7,000 per year in Roth IRA (max contribution)
$150 per week taxable (for retirement, not short term goals)

Questions:
1. How should I think about moving money from my safer accounts to stock and bond accounts to match up with my desired allocation - do I just move everything at once or move money over time (e.g. every three months)?

2. Should I consolidate my 401 accounts or keep them where they are? If I should consolidate, how? None of my current 401K accounts will accept additional money since I am no longer working for those companies.
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WoodSpinner
Posts: 1624
Joined: Mon Feb 27, 2017 1:15 pm

Re: Help with Personal Investments

Post by WoodSpinner »

OP,

Have you put together a target plan on what assets you want to own? My suggestion is you simplify down to less than 6 funds (3-4 is certainly doable).

In the meantime, I would strongly advise open8ng a Rollover IRA and rolling over all of the 401K assets to it. Since is all Tax-Deffered, you can then buy/sell to meet your goals without worrying about taxes.

Your Taxable accounts need some planning and to do that we need to know more about your Gains/Losses.

I would be very concerned with your holdings of MCK (Too large a holding in 1 stock) and MGSEX (outrageous ER and too small a holding to move the needle).

If the business is going well, you might consider a Solo-401K which will give you access to a larger tax-differed space.

WoodSpinner
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Duckie
Posts: 7527
Joined: Thu Mar 08, 2007 2:55 pm

Re: Help with Personal Investments

Post by Duckie »

Timbus, welcome to the forum.
Timbus wrote: I have my own business (LLC) as of 3 years ago and have not been paying myself or taking any distributions.
Do you have a retirement plan for your business? Do you have employees? If no employees you should open a solo 401k at E*Trade and roll all three former 401k plans into it.
Age: 55

Desired Asset allocation: 60% stocks / 40% bonds
40% bonds is reasonable at your age.
Desired International allocation: 10% of stocks
10% of 60% is only 6% international stocks. That is low.
Taxable:
0% cash (for investing –not including emergency funds)
3% AMG MANAGERS SPECIAL EQUITY-N (MGSEX) (1.36% expense ratio)
11% Vanguard 500 Index Fund Admiral Shares (VFIAX) (0.04% expense ratio)
20% Vanguard Health Care Fund Admiral Shares (VGHAX) (0.27% expense ratio)
9% McKesson Stock (MCK)
Absolutely get out of MGSEX. That expense ratio is horrid. You're holding McKesson in taxable and in an old 401k adding up to 12% of your portfolio. That is way too much in one company.
Roth IRA:
2% Vanguard Prime Money Market Fund (VMMXX) (0.16% expense ratio)
1% Vanguard U.S. Growth Fund Investor Shares (VWUSX) (0.39% expense ratio)
In general it's better to put assets with higher expected growth (stocks) in Roth accounts and assets with lower expected growth (bonds) in pre-tax accounts. That's because you've already paid the taxes in the Roth accounts so future growth is tax-free.

VWUSX with a 0.39% expense ratios is unnecessary and VMMXX is a waste of space. VTSAX would be good here.
How should I think about moving money from my safer accounts to stock and bond accounts to match up with my desired allocation
Put all your 40% bond AA in pre-tax accounts, either a solo 401k or a Rollover IRA. Put just stocks in the Roth IRA and taxable accounts. Put the remaining stock allocation in the solo 401k or Rollover IRA.
do I just move everything at once or move money over time (e.g. every three months)?
Once you know what you want and where, just shift it. Right now you have 39% in bonds/cash so you're not changing your AA, just changing the location.
Should I consolidate my 401 accounts or keep them where they are? If I should consolidate, how? None of my current 401K accounts will accept additional money since I am no longer working for those companies.
Since you are in the 22% bracket you could without issue roll all three former 401k plans into a Rollover IRA at Vanguard or Fidelity. Or you could open an employer plan for your business.
_________________________

The following example has an AA of 54% US stocks, 6% international stocks, and 40% bonds. Right now you could have something like:

Taxable at Vanguard -- 43%
23% (VFIAX) Vanguard 500 Index Fund Admiral Shares (0.04%)
20% (VGHAX) Vanguard Health Care Fund Admiral Shares (0.27%)

Rollover IRA at Vanguard -- 54% <-- From all three old 401k plans.
8% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)
6% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)
40% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.05%)

Roth IRA at Vanguard -- 3%
3% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)

My comments:
  • This ignores the tax cost of selling in taxable.
  • I'm not a fan of sector funds like VGHAX but left it in because the example already has you selling a chunk of your taxable account.
  • The 3% McKesson Employer Stock Fund in Former 401k #2 may have special NUA (Net Unrealized Appreciation) rules when selling so check.
Just some possibilities.
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BolderBoy
Posts: 4983
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Help with Personal Investments

Post by BolderBoy »

Timbus wrote: Mon Sep 14, 2020 7:05 amTax Filing Status: Single. I have my own business (LLC) as of 3 years ago...
If I were you (and your LLC doesn't have employees besides yourself), I'd open a solo401k at Fidelity and transfer in all your "former 401k" accounts.

That is where I would start.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
Topic Author
Timbus
Posts: 2
Joined: Thu Sep 10, 2020 6:21 am

Re: Help with Personal Investments

Post by Timbus »

Thanks to everyone for responding.

Agree with the comments on MGSEX and McKesson stock.
Do you have a retirement plan for your business? Do you have employees? If no employees you should open a solo 401k at E*Trade and roll all three former 401k plans into it.
I have about 40 part time employees. I believe that means the solo 401K is not an option and I need to do a Rollover IRA if I am understanding correctly?

10% of 60% is only 6% international stocks. That is low.
What is reasonable for International Stocks?

Have you put together a target plan on what assets you want to own? My suggestion is you simplify down to less than 6 funds (3-4 is certainly doable).
Planning to go with VFIAX, VTIAX and VBTLX.

Your Taxable accounts need some planning and to do that we need to know more about your Gains/Losses.
Gains in the low six figures with about 40% from VFIAX, 30% from VGHAX, 25% from MCK and 5% from MGSEX. I agree with selling MGSEX and MCK shares. I think I should hold VFIAX. How should I think about tax consequences if I sell VGHAX as well - am I better off keeping the money invested in VGHAX or selling and reinvesting the after tax dollars?
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