New Boglehead looking for advice

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Topic Author
Arahaggz17
Posts: 25
Joined: Tue Nov 17, 2020 3:05 pm

New Boglehead looking for advice

Post by Arahaggz17 »

Ok guys. Spent quite a bit of time putting this together hoping you guys will give me some great insight! What I am thinking of doing:

For Wife:

Moving the balance from my wife’s previous employer’s retirement account into her current employers to have all available $ in one fund for the sake of simplicity. Then, selecting an all new AA & Fund for her (her current ER is way too high) with the list of her available options (below). We’ll be at the very least matching the 5% employer match every year, more if feasible. Finally, I’m leaning towards going all VTSAX with wife’s account (or whatever else is suggested) and balancing out the remainder in my accounts to have a desired combined portfolio AA.

For me:

rIRA & tIRA & 457(b) plan: We will be contributing 6k and maxing out the rIRA every year until we eventually exceed the income limits (this shouldn’t happen anytime soon). Then, I will contribute to the 457(b) Roth plan through my work (no income limits & contributions of 19k a yr). My tIRA will be last priority.

With all that being said, I need your guy’s expertise as to what funds to fund where according to our preferred AA (below). As of right now, we have 3k for our first investment with Vanguard in my Roth account and want to fund it ASAP before end of year.




Emergency Fund: 6 months saved approx. 25k

Debt: house @ 4.75 interest over the next 28 years fixed 30 yr mortgage
Student loans fixed 25 yr payment on 70kcombined (wife & I) at 400/mo

Tax filing: Joint

Tax Rate: 22% Federal & 6% state

Combined Income: 175k combined about 130k AGI (not sure about MAGI equivalent)

State: CA

Age: M 36 & F 32

Desired Asset Allocation: 80/20, 90/10 (maybe even 100% equities for next 8-10 yrs.

Current Retirement Accounts:

HERS: had a 403(b) with Vanguard TR 2055 from previous employer @ $5278.88 ER=.15
now at current employer has 403(b) T. Row Price Retirement 2055 @ $4251.44 ER= .96
Employee match is 5%. SSI income down the line.

HIS: Government pension with an estimated 7k monthly distribution @ 62 y/o with 30 years service credit. Available 457(b) ROTH available with 19k employee only contribution limit annually. ROTH IRA & Traditional IRA just opened with Vanguard with 3k sitting in money market fund until decision is made and first investment is made by end of this year.

Contributions:

HERS: 5% employee match
HIS: Pension, available 457(b) ROTH no employee match. ROTH & traditional IRA with vanguard (no match).


Available Funds:

HERS 403(b): Vanguard Mid-Cap Index Fund Admiral VIMAX ER= .05
Vanguard Selected Value Fund Investor VASVX ER= .33
Vanguard Total Stock Market Index Fund Admiral VTSAX ER= .04

All other funds including fixed assets are between .8 & 1.5% ER & will not be considered by me



HIS: 457(b) Deferred Comp Plan Large-Cap Stock Fund ER=.02
Deferred Comp Plan Mid-Cap Stock Fund ER=.43
Deferred Comp Plan Small-Cap Stock Fund ER=.48
Deferred Comp Plan international Stock Fund ER=.74
Deferred Comp Plan Bond Fund ER=.26

All other funds including fixed assets are between .8 & 1.5% ER & will not be considered by me

Vanguard rIRA & IRA: Too many to list we all know their offerings

Literature: Read Boglehead’s 3 Fund Portfolio & The little book
Last edited by Arahaggz17 on Sat Nov 21, 2020 7:25 pm, edited 1 time in total.
tashnewbie
Posts: 951
Joined: Thu Apr 23, 2020 12:44 pm

Re: New Boglehead looking for advice

Post by tashnewbie »

Welcome to the forum.

I think it would be helpful if you edited your post (using the pencil icon in the upper right corner) to add the information set forth here: Asking Portfolio Questions

I think you should think about your and your wife's accounts as a single portfolio. You don't have to have all of the separate pieces (stocks, bonds, etc) in each account.

Do you have a 401k/TSP/other workplace plan available to you?

The target date fund your wife uses has some allocation to bonds. Do you know how much?
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ruralavalon
Posts: 19726
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: New Boglehead looking for advice

Post by ruralavalon »

Welcome to the forum :) .

What asset allocation (stock/bond mix) do you want to aim for?

Arahaggz17 wrote: Thu Nov 19, 2020 3:59 pm Hello all. Newbie here. Looking more into a balanced fund through Vanguard (Vbiax, Vgsax, TR 2045, etc or anything else you guys suggest that may make sense). First time investing. Wife has a 401k and has a Target Retirement fund setup. I have a government pension and just opened a Roth IRA with Vanguard to invest to supplement our income. Wife is 32, I'm 37, Time horizon 25. I'm pretty conservative, in general but I keep hearing/reading that you should be close to 100% stocks in Roth. Not sure I'd be comfortable with that. So are bonds that terrible to have in a Roth account? I want growth for sure but want something to help soften to blow as well. I have 6k for initial investment and will be maxing out every year. So, please, help me narrow down my choices for my Roth considering my risk tolerance. Thanks guys!
In general it's often better to coordinate investments among all accounts, treating all accounts together as a single unified portfolio. It's not necessary to have all elements of the asset allocation in each account.

In general it's preferable to have bonds in a traditional tax-deferred account, and in a Roth IRA use only stock funds.

Or you might for simplicity use balanced funds in all of the accounts. It often depends on what funds are offered in the employer plans.

Do you have a plan at work like a 401k or 403b? What funds do you use in that account? What funds are offered in your employer's plan? Please give fund names, tickers and expense ratios.

What funds does she use in her 401k account? What funds are offered in her employer's 401k plan? Please give fund names, tickers and expense ratios.

You could get more specific suggestions if you provided more complete details. Please see this for information needed and format: Asking Portfolio Questions.

Please simply add new information to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
zorgs10
Posts: 19
Joined: Tue Oct 14, 2014 7:16 pm

Re: New Boglehead looking for advice

Post by zorgs10 »

'Asking Portfolio Questions' is truly valuable. I'll share my experience with you regarding it.

A few months ago, I wanted to ask guidance on my portfolio. I went through the work of collecting all information per 'Asking Portfolio Questions'. This process wasn't easy. But at the end of that process, I had much better sense of what my portfolio looked like. It was a bit of a mess. I managed to simplify it. I also drafted an IPS. In the end, I ended up not asking my portfolio question, but benefited from the process nevertheless.
Topic Author
Arahaggz17
Posts: 25
Joined: Tue Nov 17, 2020 3:05 pm

Trying to find a 401k & Roth balance

Post by Arahaggz17 »

Hey guys. So, just yesterday I realized my wife's 401k contributions are going to T. Rowe Price Target Retirement fund. Problem is, the expense ratio is .96! She doesn't really have other great options aside from VTSAX. So, my thoughts are forget the high expense of the current fund and go all in on VTSAX for her. So to balance her 100% equities I was thinking of the following for my Roth: VBIAX (balanced) , VASGX (growth), VSCGX (conservative growth), or anything else you guys suggest. Wife is 32 I'm 36 and we just started this journey and plan to max out the Roth every year and try our best to max out wife's 401k (5% employer match will be met at minimum). I also have a pension from my local government when I retire. Horizon 25 yrs. thanks guys!
Flyer24
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Re: New Boglehead looking for advice

Post by Flyer24 »

Welcome to the forum. I merged your post into your thread from yesterday. It is best just to continue the same thread with updated information.
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ruralavalon
Posts: 19726
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Trying to find a 401k & Roth balance

Post by ruralavalon »

Arahaggz17 wrote: Fri Nov 20, 2020 9:53 pm Hey guys. So, just yesterday I realized my wife's 401k contributions are going to T. Rowe Price Target Retirement fund. Problem is, the expense ratio is .96! She doesn't really have other great options aside from VTSAX. So, my thoughts are forget the high expense of the current fund and go all in on VTSAX for her. So to balance her 100% equities I was thinking of the following for my Roth: VBIAX (balanced) , VASGX (growth), VSCGX (conservative growth), or anything else you guys suggest. Wife is 32 I'm 36 and we just started this journey and plan to max out the Roth every year and try our best to max out wife's 401k (5% employer match will be met at minimum). I also have a pension from my local government when I retire. Horizon 25 yrs. thanks guys!
There would be a lot of unnecessary redundancy if you used "VBIAX (balanced) , VASGX (growth), VSCGX (conservative growth)" in your Roth IRA . And there may be better funds to use.


Additional information needed.
Vanguard Total Stock Market Index Fund (VTSAX) is an excellent fund choice for her. What other funds are offered in her employer's 401k plan? Please give fund, tickers and expense ratios. (It may be that there are other good funds to use in her 401k. Also it may be wise to contribute more than just enough to get the employer match.)

Does your employer also offer a plan at work like a 401k, 403b, 457b, SEP IRA, SIMPLE IRA, TSP? If so what funds are offered in that plan? Please give fund, tickers and expense ratios.

What are the relative sizes of the accounts (except the emergency fund) you and your wife have? In other words what percentage of the total portfolio (excluding the emergency fund) is in each account?

About how much (in dollars) do you feel that you and your wife may be able to contribute annually to investing (total, all accounts)?

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place. Please see this for information needed and format: Asking Portfolio Questions.


Asset allocation.
At ages 32 and 36 I suggest about 20% in bonds or other fixed income investments (like CDs, savings accounts, money market fund). This is expected to substantially reduce portfolio volatility (risk), with only a relatively modest decrease in portfolio return. Graph, "An Efficient Frontier: the power of diversification". Please see:
1) Wiki article Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk";
2) Wiki article, "Asset allocation";
3) Morningstar (8/20/2019), "The Best Diversifiers for Your Equity Portfolio";
4) White Coat Investor (9/23/2016), "In Defense of Bonds"; and
5) Ben Carlson (8/2/2020), "Why Would Anyone Own Bonds Right Now?"

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. (You can find lots of debate here on international allocation, opinions ranging all the way from 00% to 50% of stocks in international stocks. If you want more viewpoints on international stocks please try the Google search box, upper right, this page).

That works out to about 20% bonds, 20% international stocks, and 60% domestic stocks. Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
Arahaggz17
Posts: 25
Joined: Tue Nov 17, 2020 3:05 pm

Re: New Boglehead looking for advice

Post by Arahaggz17 »

Ok. I will work on this and get all the info in. Might take me a couple hours hopefully I get some decent traffic so I can make a decision.
Topic Author
Arahaggz17
Posts: 25
Joined: Tue Nov 17, 2020 3:05 pm

Re: New Boglehead looking for advice

Post by Arahaggz17 »

tashnewbie wrote: Thu Nov 19, 2020 5:12 pm Welcome to the forum.

I think it would be helpful if you edited your post (using the pencil icon in the upper right corner) to add the information set forth here: Asking Portfolio Questions

I think you should think about your and your wife's accounts as a single portfolio. You don't have to have all of the separate pieces (stocks, bonds, etc) in each account.

Do you have a 401k/TSP/other workplace plan available to you?

The target date fund your wife uses has some allocation to bonds. Do you know how much?
just updated my info. Please have a look. Thanks
Topic Author
Arahaggz17
Posts: 25
Joined: Tue Nov 17, 2020 3:05 pm

Re: Trying to find a 401k & Roth balance

Post by Arahaggz17 »

ruralavalon wrote: Sat Nov 21, 2020 11:27 am
Arahaggz17 wrote: Fri Nov 20, 2020 9:53 pm Hey guys. So, just yesterday I realized my wife's 401k contributions are going to T. Rowe Price Target Retirement fund. Problem is, the expense ratio is .96! She doesn't really have other great options aside from VTSAX. So, my thoughts are forget the high expense of the current fund and go all in on VTSAX for her. So to balance her 100% equities I was thinking of the following for my Roth: VBIAX (balanced) , VASGX (growth), VSCGX (conservative growth), or anything else you guys suggest. Wife is 32 I'm 36 and we just started this journey and plan to max out the Roth every year and try our best to max out wife's 401k (5% employer match will be met at minimum). I also have a pension from my local government when I retire. Horizon 25 yrs. thanks guys!
There would be a lot of unnecessary redundancy if you used "VBIAX (balanced) , VASGX (growth), VSCGX (conservative growth)" in your Roth IRA . And there may be better funds to use.


Additional information needed.
Vanguard Total Stock Market Index Fund (VTSAX) is an excellent fund choice for her. What other funds are offered in her employer's 401k plan? Please give fund, tickers and expense ratios. (It may be that there are other good funds to use in her 401k. Also it may be wise to contribute more than just enough to get the employer match.)

Does your employer also offer a plan at work like a 401k, 403b, 457b, SEP IRA, SIMPLE IRA, TSP? If so what funds are offered in that plan? Please give fund, tickers and expense ratios.

What are the relative sizes of the accounts (except the emergency fund) you and your wife have? In other words what percentage of the total portfolio (excluding the emergency fund) is in each account?

About how much (in dollars) do you feel that you and your wife may be able to contribute annually to investing (total, all accounts)?

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place. Please see this for information needed and format: Asking Portfolio Questions.


Asset allocation.
At ages 32 and 36 I suggest about 20% in bonds or other fixed income investments (like CDs, savings accounts, money market fund). This is expected to substantially reduce portfolio volatility (risk), with only a relatively modest decrease in portfolio return. Graph, "An Efficient Frontier: the power of diversification". Please see:
1) Wiki article Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk";
2) Wiki article, "Asset allocation";
3) Morningstar (8/20/2019), "The Best Diversifiers for Your Equity Portfolio";
4) White Coat Investor (9/23/2016), "In Defense of Bonds"; and
5) Ben Carlson (8/2/2020), "Why Would Anyone Own Bonds Right Now?"

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. (You can find lots of debate here on international allocation, opinions ranging all the way from 00% to 50% of stocks in international stocks. If you want more viewpoints on international stocks please try the Google search box, upper right, this page).

That works out to about 20% bonds, 20% international stocks, and 60% domestic stocks. Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.
just updated my info. Please have a look. Thanks
tashnewbie
Posts: 951
Joined: Thu Apr 23, 2020 12:44 pm

Re: New Boglehead looking for advice

Post by tashnewbie »

I would look to refinance the mortgage if possible. People seem to be getting 3% or less for 30 years nowadays, with certain criteria met (good credit and LTV, for example).

What’s the rate on the student loans?

In her 401k, I’d probably just use VTSAX.

Might use the bond fund in his 457b and maybe also the large cap fund if you need more equities.

FYI: you can only make up to a $6k/year contribution total to Roth and/or Traditional IRA. You can do one or the other or a combination. I’d probably do all Roth IRA contributions if I were you. You have until April 15, 2021 to make a contribution for 2020 tax year. So no particular rush to do it by the end of this year.
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ruralavalon
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Location: Illinois

Re: New Boglehead looking for advice

Post by ruralavalon »

. As of right now, we have 3k for our first investment with Vanguard in my Roth account and want to fund it ASAP before end of year.
Go ahead and contribute the rest of the annual maximum. Just use a money market fund temporarily, you can determine later what fund to use long-term.
Available Funds:

HERS 403(b): Vanguard Mid-Cap Index Fund Admiral VIMAX ER= .05
Vanguard Selected Value Fund Investor VASVX ER= .33
Vanguard Total Stock Market Index Fund Admiral VTSAX ER= .04

All other funds including fixed assets are between .8 & 1.5% ER & will not be considered by me
It's odd that no low or moderate expense bond fund is offered in her employer's 403b plan.

In her employer's 403b plan I suggest using only Vanguard Total Stock Market Index Fund Admiral (VTSAX) ER 0.04%.


HIS: 457(b) Deferred Comp Plan Large-Cap Stock Fund ER=.02
Deferred Comp Plan Mid-Cap Stock Fund ER=.43
Deferred Comp Plan Small-Cap Stock Fund ER=.48
Deferred Comp Plan international Stock Fund ER=.74
Deferred Comp Plan Bond Fund ER=.26

All other funds including fixed assets are between .8 & 1.5% ER & will not be considered by me
Can you link the fact sheet for each of those funds offered in his employer's 457b plan?

Is your employer a government or government agency? Or is it a charity or non-profit? (It makes a difference for a 457b plan.)

How much is currently in his 457b account?
ROTH IRA & Traditional IRA just opened with Vanguard with 3k sitting in money market fund until decision is made and first investment is made by end of this year.
Is the $3k in a traditional IRA or a Roth IRA?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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