In need of a strategy update

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
cincyinvestor
Posts: 16
Joined: Sat Apr 28, 2012 2:08 pm

In need of a strategy update

Post by cincyinvestor »

Hello all,

I'm probably well overdue for some sort of review of overall investments. I'll possibly have some additional cash inflows on a larger scale soon so I'm trying to determine a more efficient strategy for my overall portfolio and how to prioritize assumed 'extra' inflows.

I'd appreciate any thoughts or recommendations. I have a number of accounts from legacy situations (ie 'its messy') etc.

1. HSA -maxing with investment in Vanguard VFIAX 500 Index Admiral - currently 10% of total investment
2. Current 401k - 15% contrib (room to max) in Vanguard VFIAX 500 Index Admiral - currently 23.25%
3. Legacy 401k - no current contrib, FXIAX Fidelity 500 Index - currently 37.4%
4. Vanguard Roth - newer acct as I've been wanting to migrate to Vanguard for my accounts - 3% in VOO
5. Legacy Roth - 20% of portfolio (11.3% in VXF, 3.5% in VXUS, 3% VTI, 1% SPY)
6. Legacy taxable account (currently 7.2%) - my early account, bought a few 'upshots' back around March:
SPY-3.8%, VXUS 1.5%, DAL 1.2%, smaller investments in MAR, LVS, USO

If it helps, I'm mid-30s and not concerned at all at this time with being strong stocks...

Other opportunities:
-Looking to get a fully maxing Roth for the wife
-Max 401k
-Max Roth
-Contribute further to taxable

Thanks in advance
User avatar
ruralavalon
Posts: 19463
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: In need of a strategy update

Post by ruralavalon »

cincyinvestor wrote: Fri Sep 18, 2020 8:13 am Hello all,

I'm probably well overdue for some sort of review of overall investments. I'll possibly have some additional cash inflows on a larger scale soon so I'm trying to determine a more efficient strategy for my overall portfolio and how to prioritize assumed 'extra' inflows.

I'd appreciate any thoughts or recommendations. I have a number of accounts from legacy situations (ie 'its messy') etc.

1. HSA -maxing with investment in Vanguard VFIAX 500 Index Admiral - currently 10% of total investment
2. Current 401k - 15% contrib (room to max) in Vanguard VFIAX 500 Index Admiral - currently 23.25%
3. Legacy 401k - no current contrib, FXIAX Fidelity 500 Index - currently 37.4%
4. Vanguard Roth - newer acct as I've been wanting to migrate to Vanguard for my accounts - 3% in VOO
5. Legacy Roth - 20% of portfolio (11.3% in VXF, 3.5% in VXUS, 3% VTI, 1% SPY)
6. Legacy taxable account (currently 7.2%) - my early account, bought a few 'upshots' back around March:
SPY-3.8%, VXUS 1.5%, DAL 1.2%, smaller investments in MAR, LVS, USO

If it helps, I'm mid-30s and not concerned at all at this time with being strong stocks...

Other opportunities:
-Looking to get a fully maxing Roth for the wife
-Max 401k
-Max Roth
-Contribute further to taxable

Thanks in advance
What is the approximate size of your portfolio. What is the approximate size of the "additional cash inflows on a larger scale"?

It's a good idea to make maximum annual contributions to your 401k and Roth IRAs for both yourself and wife.

Does your wife have a tax-advantaged plan at work that she could contribute to?

Do you have any debt? If so what types, amounts and interest rates?

You could simplify by rollover of your old 401k into your current 401k if good funds are offered, and by combining your two Roth IRAs.

You have just 5% in Vanguard Total International Stock ETF (VXUS), for better diversification consider increasing that to around 20-30% of stocks.

Consider a modest fixed income allocation. In my opinion 100% stocks is not a good idea. Morningstar (7/8/2020),
"What's the Best Diversifier for Stocks?"
Last edited by ruralavalon on Fri Sep 18, 2020 8:51 am, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
User avatar
WoodSpinner
Posts: 1667
Joined: Mon Feb 27, 2017 1:15 pm

Re: In need of a strategy update

Post by WoodSpinner »

OP,

Do you have a target Asset Allocation?

What are your key goals for this money?

Is there a reason you haven’t consolidated similar accounts (e.g. 401Ks, Roth’s)?

WoodSpinner
Topic Author
cincyinvestor
Posts: 16
Joined: Sat Apr 28, 2012 2:08 pm

Re: In need of a strategy update

Post by cincyinvestor »

ruralavalon wrote: Fri Sep 18, 2020 8:48 am What is the approximate size of your portfolio. What is the approximate size of the "additional cash inflows on a larger scale"?

It's a good idea to make maximum annual contributions to your 401k and Roth IRAs for both yourself and wife.

Does your wife have a tax-advantaged plan at work that she could contribute to?

Do you have any debt? If so what types, amounts and interest rates?

You could simplify by rollover of your old 401k into your current 401k if good funds are offered, and by combining your two Roth IRAs.

You have just 5% in Vanguard Total International Stock ETF (VXUS), for better diversification consider increasing that to around 20-30% of stocks.

Consider a modest fixed income allocation. In my opinion 100% stocks is not a good idea. Morningstar (7/8/2020),
"What's the Best Diversifier for Stocks?"
Hello,

Approximate size is $280k. Approximate additional cash inflows are $120-150k.

Wife is a teacher and has pension plan and small Roth with $10k and regular contributions - we just opened maybe 3 years ago. I dont think it's that great of a program though as it has some penalty closure-type fees and not the most optimal investment options. I was considering just 'retiring' that one and opening another to transition with Vanguard for better fund choice, then fund that fully.

Only debt is mortgage - $200k @4%.

I'd kept the legacy 401k open because I seem to recall the fund being a bit better, but in retrospect, moving from a Fidelity to a Vanguard 500 Index shouldn't cause any issue. It probably makes sense to consolidate. Good point.

Appreciate the comments on expanding VXUS and fixed. I'm guessing the fixed investment would make the most sense as allocation in my taxable account?
Topic Author
cincyinvestor
Posts: 16
Joined: Sat Apr 28, 2012 2:08 pm

Re: In need of a strategy update

Post by cincyinvestor »

WoodSpinner wrote: Fri Sep 18, 2020 8:50 am OP,

Do you have a target Asset Allocation?

What are your key goals for this money?

Is there a reason you haven’t consolidated similar accounts (e.g. 401Ks, Roth’s)?

WoodSpinner
My focus has just been a simple heavy stock allocation predominantly tied to the index funds. I have tried in the past to diversify a bit with the VXUS fund for some intl exposure, but I'm not a strong believer in overperformance from foreign sources, especially considering that to my understanding, US stocks are already impacted by about 30% foreign activity... Haven't really touched fixed/bond yet.

Goals: Retirement, college funding in 20 years x2. We're 3 years into a home and will likely look to get our 2nd home in 3-7 years. So I'd expect to have some/most of a downpayment available in that short/medium term. Anticipate car acquisition in 1-2 years. So I anticipate keeping some % chunk of 'inflows' in more stable or liquid options.

I agree now that I should be consolidating the 401ks and Roths. Doesn't really make much sense. The 'new' Roth was just opened with Vanguard maybe 4 months ago, so before that I only had the 1.

Thanks
User avatar
ruralavalon
Posts: 19463
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: In need of a strategy update

Post by ruralavalon »

cincyinvestor wrote: Fri Sep 18, 2020 8:56 am
ruralavalon wrote: Fri Sep 18, 2020 8:48 am What is the approximate size of your portfolio. What is the approximate size of the "additional cash inflows on a larger scale"?

It's a good idea to make maximum annual contributions to your 401k and Roth IRAs for both yourself and wife.

Does your wife have a tax-advantaged plan at work that she could contribute to?

Do you have any debt? If so what types, amounts and interest rates?

You could simplify by rollover of your old 401k into your current 401k if good funds are offered, and by combining your two Roth IRAs.

You have just 5% in Vanguard Total International Stock ETF (VXUS), for better diversification consider increasing that to around 20-30% of stocks.

Consider a modest fixed income allocation. In my opinion 100% stocks is not a good idea. Morningstar (7/8/2020),
"What's the Best Diversifier for Stocks?"
Hello,

Approximate size is $280k. Approximate additional cash inflows are $120-150k.

Wife is a teacher and has pension plan and small Roth with $10k and regular contributions - we just opened maybe 3 years ago. I dont think it's that great of a program though as it has some penalty closure-type fees and not the most optimal investment options. I was considering just 'retiring' that one and opening another to transition with Vanguard for better fund choice, then fund that fully.

Only debt is mortgage - $200k @4%.

I'd kept the legacy 401k open because I seem to recall the fund being a bit better, but in retrospect, moving from a Fidelity to a Vanguard 500 Index shouldn't cause any issue. It probably makes sense to consolidate. Good point.

Appreciate the comments on expanding VXUS and fixed. I'm guessing the fixed investment would make the most sense as allocation in my taxable account?
Is that "inflows are $120-150k" a one-time event, or a recurring cash flow?

It's good to see that you are debt free other than the mortgage note. But you can do better than 4%. Bankrate.com "Refinance rates". I suggest refinancing the mortgage, or if that's not possible for some reason then using some of your cash to pay off mortgage principal.

What type of plan is the program at your wife's job? 403b, 457b, 401k, something else? What funds are available in the plan? Please give fund names, tickers and expense ratios. Is she making Roth contributions to that plan? How much does she contribute annually?

In general its usually better to make maximum annual contributions to all available tax-advantaged accounts as a priority ahead of investment in a regular taxable account. Wiki article, "Prioritizing Investments".

What international stock funds are offered in your current employer's 401k plan? Please give fund names, tickers and expense ratios. I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities", available as an archived pdf. Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6). The diversification benefit has varied over time.

What fixed income investments (bond funds or stable value fund) are offered in your current employer's 401k plan? Please give fund names, tickers and expense ratios. For any stable value fund what is the interest rate paid, and is the rate guaranteed?

What is your tax bracket, both federal and state?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
cincyinvestor
Posts: 16
Joined: Sat Apr 28, 2012 2:08 pm

Re: In need of a strategy update

Post by cincyinvestor »

ruralavalon wrote: Fri Sep 18, 2020 9:18 am Is that "inflows are $120-150k" a one-time event, or a recurring cash flow?

It's good to see that you are debt free other than the mortgage note. But you can do better than 4%. Bankrate.com "Refinance rates". I suggest refinancing the mortgage, or if that's not possible for some reason then using some of your cash to pay off mortgage principal.

What type of plan is the program at your wife's job? 403b, 457b, 401k, something else? What funds are available in the plan? Please give fund names, tickers and expense ratios. Is she making Roth contributions to that plan? How much does she contribute annually?

In general its usually better to make maximum annual contributions to all available tax-advantaged accounts as a priority ahead of investment in a regular taxable account. Wiki article, "Prioritizing Investments".

What international stock funds are offered in your current employer's 401k plan? Please give fund names, tickers and expense ratios. I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities", available as an archived pdf. Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6). The diversification benefit has varied over time.

What fixed income investments (bond funds or stable value fund) are offered in your current employer's 401k plan? Please give fund names, tickers and expense ratios. For any stable value fund what is the interest rate paid, and is the rate guaranteed?

What is your tax bracket, both federal and state?
Hello, one time inheritance event...

I've looked several times over the past 6 months at trying to get the mortgage refinanced. There were some options around 3.49% but then it seemed lots of fees were lumped on for a 2-3 year payoff which still didn't seem worthwhile.

Wife...has a pension program that is 5% contribution and there's a payout based on years of service and final salary, by my calculation after 30 years of service she'd be getting about $29k annually on retirement. She also has a Roth. Currently contributing maybe $4k/annually. It's a very inaccessible program so I dont have a lot of details to provide here unfortunately.

Intl stock funds in my 401k (sounds like Vanguard is a clear winner):
VTMGX -0.07%
RNPFX - 0.47%
RERFX - 0.51%
ODMAX - 1.24%

Bonds/Stable value fundsd in my 401k:
LSBDX - 0.67%
MWTNX - 0.78%
VBTLX - 0.05%
FHTIX - 0.73%

Tax (marginal):
Federal 24%
State: 5%

Hope that helps!
User avatar
abuss368
Posts: 21618
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: In need of a strategy update

Post by abuss368 »

You definitely want to focus on consolidating some of the accounts to start. 401ks and IRAs are perfect to consolidate.
John C. Bogle: “Simplicity is the master key to financial success."
User avatar
ruralavalon
Posts: 19463
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: In need of a strategy update

Post by ruralavalon »

cincyinvestor wrote: Fri Sep 18, 2020 10:32 am . . . She also has a Roth. Currently contributing maybe $4k/annually. It's a very inaccessible program so I dont have a lot of details to provide here unfortunately.
Do you mean she is contributing to a Roth IRA? Or is she making Roth contributions to a work-based plan like a 403b, 457b, 401k, or the Thrift Savings Plan (TSP)?

What type of plan is that? Who is the plan provider (e.g. BlackRock, Northern Trust, Vanguard, Fidelity, State Street, etc.)?

What funds is she currently using in that plan? Please give fund names, tickers and expense ratios.

If decent investments are offered, then I think it's important to make more complete use of her work-based plan. Wiki article, "Prioritizing Investments".


cincyinvestor wrote: Fri Sep 18, 2020 10:32 amIntl stock funds in my 401k (sounds like Vanguard is a clear winner):
VTMGX -0.07%
RNPFX - 0.47%
RERFX - 0.51%
ODMAX - 1.24%

Bonds/Stable value fundsd in my 401k:
LSBDX - 0.67%
MWTNX - 0.78%
VBTLX - 0.05%
FHTIX - 0.73%
In your 401k plan I suggest using:
1) Vanguard 500 Index Fund Admiral Shares (VFIAX) ER 0.04%;
2) Vanguard Developed Markets Index Fund Admiral Shares (VTMGX) ER 0.07%; and
3) Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05%.

Since your current employer's 401k plan offers good funds with very low expense ratios I think it's best to rollover your old 401k into the new plan.

Have you thought about what percentage of your portfolio you might want In fixed income?

In your taxable brokerage account instead of buying more SPDR S&P 500 ETF Trust (SPY), for a little better diversification additional purchases of domestic stocks could be in Vanguard Total Stock Market ETF (VTI). What fund firm or brokerage is the taxable account with?
Last edited by ruralavalon on Fri Sep 18, 2020 11:18 am, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
cincyinvestor
Posts: 16
Joined: Sat Apr 28, 2012 2:08 pm

Re: In need of a strategy update

Post by cincyinvestor »

ruralavalon wrote: Fri Sep 18, 2020 11:01 am
cincyinvestor wrote: Fri Sep 18, 2020 10:32 am . . . She also has a Roth. Currently contributing maybe $4k/annually. It's a very inaccessible program so I dont have a lot of details to provide here unfortunately.
Do you mean she is contributing to a Roth IRA? Or is she making Roth contributions to a work-based plan like a 403b, 457b, 401k, or the Thrift Savings Plan (TSP)?

What type of plan is that? Who is the plan provider (e.g. BlackRock, Northern Trust, Vanguard, Fidelity, State Street, etc.)?

What funds is she currently using in that plan? Please give fund names, tickers and expense ratios.

If decent investments are offered, then I think it's important to make more complete use of her work-based plan.
Hello,

It's a defined benefit state retirement plan that she contributes 5% to as a requirement for the state program.

On top of that she has the Roth plan where she's contributing about $4k a year at American Fidelity:
100% -Vanguard Capital Growth Portfolio - expense 0.34% ...I'm not finding a ticket for this...
User avatar
ruralavalon
Posts: 19463
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: In need of a strategy update

Post by ruralavalon »

cincyinvestor wrote: Fri Sep 18, 2020 11:14 am
ruralavalon wrote: Fri Sep 18, 2020 11:01 am
cincyinvestor wrote: Fri Sep 18, 2020 10:32 am . . . She also has a Roth. Currently contributing maybe $4k/annually. It's a very inaccessible program so I dont have a lot of details to provide here unfortunately.
Do you mean she is contributing to a Roth IRA? Or is she making Roth contributions to a work-based plan like a 403b, 457b, 401k, or the Thrift Savings Plan (TSP)?

What type of plan is that? Who is the plan provider (e.g. BlackRock, Northern Trust, Vanguard, Fidelity, State Street, etc.)?

What funds is she currently using in that plan? Please give fund names, tickers and expense ratios.

If decent investments are offered, then I think it's important to make more complete use of her work-based plan.
Hello,

It's a defined benefit state retirement plan that she contributes 5% to as a requirement for the state program.

On top of that she has the Roth plan where she's contributing about $4k a year at American Fidelity:
100% -Vanguard Capital Growth Portfolio - expense 0.34% ...I'm not finding a ticket for this...
Is that "Vanguard Variable Annuity - Capital Growth Portfolio"?

Is there a defined contribution plan offered by her employer?


cincyinvestor wrote: Fri Sep 18, 2020 9:01 amGoals: Retirement, college funding in 20 years x2. We're 3 years into a home and will likely look to get our 2nd home in 3-7 years. So I'd expect to have some/most of a downpayment available in that short/medium term. Anticipate car acquisition in 1-2 years. So I anticipate keeping some % chunk of 'inflows' in more stable or liquid options.
What are your ages?

About how much do you anticipate needing for purchasing a 2d home in 3-7 years? How certain is it that you will buy a 2d home?

About how much do you expect to need for a car purchase in 1-2 years?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
cincyinvestor
Posts: 16
Joined: Sat Apr 28, 2012 2:08 pm

Re: In need of a strategy update

Post by cincyinvestor »

ruralavalon wrote: Fri Sep 18, 2020 11:26 am Is that "Vanguard Variable Annuity - Capital Growth Portfolio"?

Is there a defined contribution plan offered by her employer?


cincyinvestor wrote: Fri Sep 18, 2020 9:01 amGoals: Retirement, college funding in 20 years x2. We're 3 years into a home and will likely look to get our 2nd home in 3-7 years. So I'd expect to have some/most of a downpayment available in that short/medium term. Anticipate car acquisition in 1-2 years. So I anticipate keeping some % chunk of 'inflows' in more stable or liquid options.
What are your ages?

About how much do you anticipate needing for purchasing a 2d home in 3-7 years? How certain is it that you will buy a 2d home?

About how much do you expect to need for a car purchase in 1-2 years?
Both 35.

Yes - the Capital Growth option is in her Roth. Officially it is A 'Variable Annuity - Roth IRA' plan?

I'd have to get access to see all the available options, but I recall them all being very 'opaque' and none direct index funds, none with good expense ratios. It's a Roth program, but all of the investments are some bizarre 'annuity' type program within. It sounded to me like a provider had sold the school system on a crummy offering that probably gets much higher fee generation.

House: We'd anticipate $50-70k downpayment, ideally rolling some of the current home equity into that downpayment. I understand right now it's a lot harder to find a new home to purchase and a lot easier to sell one. I've seen plenty of people I know throw a house on the market 'to see what happens' then left scrambling and often in temp housing until they find a new purchase down the road. Certainly the market could change in 3-7 years. Its fairly likely as we have a 1 year old, planning for more and the home is a 2bd2bath that would get a bit cramped quickly with two active toddlers.

Car - say $20k max.

We also have a $30k efund that we could dip into for car and some of downpayment.
User avatar
ruralavalon
Posts: 19463
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: In need of a strategy update

Post by ruralavalon »

cincyinvestor wrote: Fri Sep 18, 2020 12:13 pm
ruralavalon wrote: Fri Sep 18, 2020 11:26 am Is that "Vanguard Variable Annuity - Capital Growth Portfolio"?

Is there a defined contribution plan offered by her employer?


cincyinvestor wrote: Fri Sep 18, 2020 9:01 amGoals: Retirement, college funding in 20 years x2. We're 3 years into a home and will likely look to get our 2nd home in 3-7 years. So I'd expect to have some/most of a downpayment available in that short/medium term. Anticipate car acquisition in 1-2 years. So I anticipate keeping some % chunk of 'inflows' in more stable or liquid options.
What are your ages?

About how much do you anticipate needing for purchasing a 2d home in 3-7 years? How certain is it that you will buy a 2d home?

About how much do you expect to need for a car purchase in 1-2 years?
Both 35.

Yes - the Capital Growth option is in her Roth. Officially it is A 'Variable Annuity - Roth IRA' plan?

I'd have to get access to see all the available options, but I recall them all being very 'opaque' and none direct index funds, none with good expense ratios. It's a Roth program, but all of the investments are some bizarre 'annuity' type program within. It sounded to me like a provider had sold the school system on a crummy offering that probably gets much higher fee generation.
"Vanguard Variable Annuity - Capital Growth Portfolio" has a below average expense ratio of 0.34%, invests in domestic large-cap growth stocks, and is managed by PRIMECAP. Although not an index fund it is not a bad way to invest, it is not "crummy" in my opinion. It is much less opaque than most annuities you might see. Although we like to see lower expense ratios and index funds instead of actively managed annuities, the tax advantage is still worth it.

The same might be true for other choices offered in her employer's plan, and other investments offered might be better.

Try to determine what type of defined benefit plan she has at work (sounds like 403b or 457b), and what other investments are offered. Look for the Summary Plan Description.


cincyinvestor wrote: Fri Sep 18, 2020 12:13 pm House: We'd anticipate $50-70k downpayment, ideally rolling some of the current home equity into that downpayment. I understand right now it's a lot harder to find a new home to purchase and a lot easier to sell one. I've seen plenty of people I know throw a house on the market 'to see what happens' then left scrambling and often in temp housing until they find a new purchase down the road. Certainly the market could change in 3-7 years. Its fairly likely as we have a 1 year old, planning for more and the home is a 2bd2bath that would get a bit cramped quickly with two active toddlers.

Car - say $20k max.

We also have a $30k efund that we could dip into for car and some of downpayment.
I suggest that you rollover your old 401k into your current 401k account.

I suggest that you rollover your old Roth IRA into your new Roth IRA at Vanguard.

Which fund firm or brokerage is your taxable account currently with?

In summary these are my ideas for your anticipated infusion of $120k-$150k in cash:

1) $20k set aside for car in 1-2 years, in high yield savings account or a short-term CD, for rates see: www.bankrate.com;

2) $50k-$70k set aside for a new home and in 3-7 years in intermediate-term CDs at a bank or credit union, or instead in a taxable account using a good credit quality short-term or intermediate-term bond fund such as Vanguard Total Bond Market Index Fund (VBTLX) or Vanguard Intermediate-term Bond Index Fund (VBILX);

3) $12k for maximum annual contributions of $6k to your Roth IRA for this year and next. Invest in stock index funds or stock index ETFs like Vanguard Total Stock Market Index Fund (VTSAX) or the ETF share class which is Vanguard Total Stock Market ETF (VTI) and Vanguard Total International Stock Index Fund (VTIAX) or the ETF share class which is Vanguard Total International Stock ETF (VXUS);

4) $12k for maximum annual contributions of $6k to her Roth IRA for this year and next. Invest in stock index funds or stock index ETFs like Vanguard Total Stock Market Index Fund (VTSAX) or the ETF share class which is Vanguard Total Stock Market ETF (VTI) and Vanguard Total International Stock Index Fund (VTIAX) or the ETF share class which is Vanguard Total International Stock ETF (VXUS);

5) increase contributions to your 401k to the annual employee maximum ($19.5k), draw from the inherited cash as necessary to pay monthly living expenses that would be otherwise have been covered from your paycheck. In your 401k use these funds:
a) Vanguard 500 Index Fund Admiral Shares (VFIAX) ER 0.04%;
b) Vanguard Developed Markets Index Fund Admiral Shares (VTMGX) ER 0.07%; and
c) Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05%.

6) increase contributions to her defined contribution plan at work to the annual employee maximum ($19.5k), draw from the inherited cash as necessary to pay monthly living expenses that would be otherwise have been covered from her paycheck. Determine what type of defined benefit plan she has, and what the other investment choices are.

7) use some of the cash to pay off principal of your "mortgage - $200k @4%"; and

8) invest some of the cash in a taxable brokerage account at a low cost provider like Vanguard, investing in very tax-efficient stock index funds or stock index ETFs like Vanguard Total Stock Market Index Fund (VTSAX) or the ETF share class which is Vanguard Total Stock Market ETF (VTI) and Vanguard Total International Stock Index Fund (VTIAX) or the ETF share class which is Vanguard Total International Stock ETF (VXUS).
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
cincyinvestor
Posts: 16
Joined: Sat Apr 28, 2012 2:08 pm

Re: In need of a strategy update

Post by cincyinvestor »

ruralavalon wrote: Sat Sep 19, 2020 11:10 am "Vanguard Variable Annuity - Capital Growth Portfolio" has a below average expense ratio of 0.34%, invests in domestic large-cap growth stocks, and is managed by PRIMECAP. Although not an index fund it is not a bad way to invest, it is not "crummy" in my opinion. It is much less opaque than most annuities you might see. Although we like to see lower expense ratios and index funds instead of actively managed annuities, the tax advantage is still worth it.

The same might be true for other choices offered in her employer's plan, and other investments offered might be better.

Try to determine what type of defined benefit plan she has at work (sounds like 403b or 457b), and what other investments are offered. Look for the Summary Plan Description.



I suggest that you rollover your old 401k into your current 401k account.

I suggest that you rollover your old Roth IRA into your new Roth IRA at Vanguard.

Which fund firm or brokerage is your taxable account currently with?

In summary these are my ideas for your anticipated infusion of $120k-$150k in cash:

1) $20k set aside for car in 1-2 years, in high yield savings account or a short-term CD, for rates see: www.bankrate.com;

2) $50k-$70k set aside for a new home and in 3-7 years in intermediate-term CDs at a bank or credit union, or instead in a taxable account using a good credit quality short-term or intermediate-term bond fund such as Vanguard Total Bond Market Index Fund (VBTLX) or Vanguard Intermediate-term Bond Index Fund (VBILX);

3) $12k for maximum annual contributions of $6k to your Roth IRA for this year and next. Invest in stock index funds or stock index ETFs like Vanguard Total Stock Market Index Fund (VTSAX) or the ETF share class which is Vanguard Total Stock Market ETF (VTI) and Vanguard Total International Stock Index Fund (VTIAX) or the ETF share class which is Vanguard Total International Stock ETF (VXUS);

4) $12k for maximum annual contributions of $6k to her Roth IRA for this year and next. Invest in stock index funds or stock index ETFs like Vanguard Total Stock Market Index Fund (VTSAX) or the ETF share class which is Vanguard Total Stock Market ETF (VTI) and Vanguard Total International Stock Index Fund (VTIAX) or the ETF share class which is Vanguard Total International Stock ETF (VXUS);

5) increase contributions to your 401k to the annual employee maximum ($19.5k), draw from the inherited cash as necessary to pay monthly living expenses that would be otherwise have been covered from your paycheck. In your 401k use these funds:
a) Vanguard 500 Index Fund Admiral Shares (VFIAX) ER 0.04%;
b) Vanguard Developed Markets Index Fund Admiral Shares (VTMGX) ER 0.07%; and
c) Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) ER 0.05%.

6) increase contributions to her defined contribution plan at work to the annual employee maximum ($19.5k), draw from the inherited cash as necessary to pay monthly living expenses that would be otherwise have been covered from her paycheck. Determine what type of defined benefit plan she has, and what the other investment choices are.

7) use some of the cash to pay off principal of your "mortgage - $200k @4%"; and

8) invest some of the cash in a taxable brokerage account at a low cost provider like Vanguard, investing in very tax-efficient stock index funds or stock index ETFs like Vanguard Total Stock Market Index Fund (VTSAX) or the ETF share class which is Vanguard Total Stock Market ETF (VTI) and Vanguard Total International Stock Index Fund (VTIAX) or the ETF share class which is Vanguard Total International Stock ETF (VXUS).
Thank you very much for taking the time to go through each of these items. I really appreciate it.

I've already initiated rollovers for the Roth (x2) and 401k (x2) and adjusted my 401k to max for the year.

Looks like this will cover allocations for the 'inflows' pretty well and it gives me a target template toward getting a more correct Bogle allocation throughout my portfolio.

Still have to dig into the wife's plan when we have some time and I can get access before making a move there.

Thanks again!
GMT-8
Posts: 190
Joined: Fri Mar 26, 2010 5:11 pm

Re: In need of a strategy update

Post by GMT-8 »

When I faced retirement I went through a "Simplification" phase that was well worth the effort. I wish I'd done it many years before. You are wise to undertake this process.

Among other things, I consolidated banks so I now have one no-fee credit union for most of our banking, and one account at a "big bank" that can easily send/receive overseas wires which I need due to some business outside the USA. That too is free of recurring fees.

Both are linked to Vanguard and to each other (but not both directions - an issue I still need to resolve rather than driving across town).

I moved my retirement accounts to Vanguard and over the course of a year I rolled a Trad IRA, SEP IRA, Rollover IRA and company 401(k) into one IRA.

I moved my wife's retirement accounts as well and rolled them into a single IRA for her. [She was an educator too and thankfully we rejected all the bogus annuity offers her school allowed to be pitched to their teachers! :-( :x :x]

Gradually we combined similar investment segments into single funds, keeping our overall asset allocation across our 4 accounts the same. So we are using larger chunks rather than many tiny holdings ... I decided we would hold nothing less than 10% or $100k (choose what suits you) in any one index fund, and eventually we got to the place where we can describe our holdings from memory.

I wish I had done it years before (did I say that already? Yes, I did, and I mean it).

Best of luck to you - you are on the way to a happier, less complicated future. Life has enough surprises in other areas.

Cheers,

GMT
Post Reply