Back after 3 years- lost again

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Topic Author
ridgeline73
Posts: 33
Joined: Tue Dec 05, 2017 3:25 pm

Back after 3 years- lost again

Post by ridgeline73 »

Brief overview-

47. Recently divorced. 3 kids, all teens.

Salary $115k/yr + $6k/yr rent income
Debt: $194k mortgage. $10k on an automobile

Main retirement plan is a defined benefit pension. In 11 years I can retire and receive 60% of the average of my 5 highest years of salary. My ex-wife will receive approx. 1/3 of this. With no pay increases over the next 11 years I would receive ~$4k/month.

I also have a 403b through my employer that they contribute 2% of my annual salary to. It currently has a value of $15k and is manged by Voya. It is all in an American Funds 2030 Target Date fund.

3 years ago my grandmother passed away leaving me some inheritance (a brokerage account w/Edward Jones, life insurance and part of a farm). My share of the farm has a value of ~$300k, but selling isn't in the cards for awhile as it is owned by 4 different people and a little complicated. The rent on the farm account for the $6k/year I receive in rental income.

I invested everything from my grandmother's brokerage in Vanguard. Currently I have ~$187k in a taxable brokerage. 1) $110k in VFIAX, 2) $25k in VEXAX 3) $15k in VBILX 4) $5k in a CD that earns 2%, 5) $31k in Vanguard Money Market Fund.

Questions:
1) Should I be putting money in a Roth IRA?
2) Should I be contributing more money than what my employer contributes to the 403B?
3) I don't have unlimited options for investing within the Voya 403b, but should I be in something else than the 2030 Target Date Fund?
4) I don't want to continuously manage investments, but am reasonably comfortable in doing simple things. Is there a simple formula for what I should be doing holistically with the 403b and Vanguard account?


Information:



Emergency funds: I have $33k. Would like to keep it at $15k-$20k
Debt: 30 year mortgage. 3%. I owe $194k. Original purchase was $216k 5 months ago. Still paying PMI at $68/month. Auto Loan. 2.69%. $10k balance. 4 year loan, have 44 months left
Tax Filing Status: Head of Household

Tax Rate: 24% Federal, 8.53% State

Iowa:

47:

Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 15% of stocks

Current portfolio: $187k in vanguard taxable brokerage. $15k in Voya managed 403b. Main source of retirement income would be a state funded pension. In 11 years (when I plan to retire), I receive 60% of the average of my 5 highest salary years. After paying my ex-wife, I would stand to earn about $48k/year if I didn't receive any pay raise in the next 11 years.


Current retirement assets
* The format below is shown using his/her pronouns. Use whatever pronouns or identifying names you prefer as long as it is clear which assets belong to which person.

Taxable
$190,000
17% cash (for investing – do not include emergency funds)
2.0% Discover Bank CD 2% annual coupon
8% Vanguard Intermediate-Term Bond Index Fund Admiral Shares VBILX .07 ER
14% Vanguard Extended Market Index Fund Admiral Shares VEXAX .10 ER
59% Vanguard 500 Index Fund Admiral Shares VFIAX .14 ER

His 401k
No 401K. State sponsored retirement pension/defined benefit plan.

His Roth IRA at Vanguard
Zero at this point


His 403b
$15,000
100% American Funds 2030 Target Date R4 RDETX .70 ER, .25 12b-1 fee, .45 misc fee



_______________________________________________________________


Contributions

I receive $6k per year in farm rental income, but anticipate that will be applied for children's college tuition over the next 9 years.

Realistically right now I believe I could contribute a mimimum of $500 to a 403b and/or Roth IRA




Thanks in advance for any advice.
Last edited by ridgeline73 on Sat Jan 09, 2021 2:32 pm, edited 1 time in total.
mhalley
Posts: 8690
Joined: Tue Nov 20, 2007 6:02 am

Re: Back after 3 years- lost again

Post by mhalley »

How much to contribute to retirement accounts depends on your current assets, years till you want to retire and how much money you need at retirement. Mr money mustache has a good post on this simple math
https://www.mrmoneymustache.com/2012/01 ... etirement/
A tr fund is fine if it has a low ER.
You probably are relying heavily on your pension for your retirement plan. Remember that many people have done this in the past only to have their pension be cut. Evaluate the stability and how well funded the pension is and determine the likelihood of it being there in the future.
megabad
Posts: 3359
Joined: Fri Jun 01, 2018 4:00 pm

Re: Back after 3 years- lost again

Post by megabad »

ridgeline73 wrote: Wed Jan 06, 2021 8:28 pm 1) Should I be putting money in a Roth IRA? I would.
2) Should I be contributing more money than what my employer contributes to the 403B? What are the fees? When are you leaving your
current job?

3) I don't have unlimited options for investing within the Voya 403b, but should I be in something else than the 2030 Target Date Fund? I would make my decision based on fees. Usually this results in selecting a Total Market or S&P 500 option for most plans.
4) I don't want to continuously manage investments, but am reasonably comfortable in doing simple things. Is there a simple formula for what I should be doing holistically with the 403b and Vanguard account? Simpler than what you have now? I like your strategy right now other than VBILX in taxable.
Living Free
Posts: 568
Joined: Thu Jul 19, 2018 7:31 pm

Re: Back after 3 years- lost again

Post by Living Free »

ridgeline73 wrote: Wed Jan 06, 2021 8:28 pm

Questions:
1) Should I be putting money in a Roth IRA?
Yes, I would. If you can afford it then you can cash flow it; if not then spend down some of the taxable assets and contribute to the Roth (effectively moving money from taxable to Roth EDIT - if that wasn't clear I don't mean spend down the taxable account just use it for living expenses if needed as you contribute to the Roth IRA).
Topic Author
ridgeline73
Posts: 33
Joined: Tue Dec 05, 2017 3:25 pm

Re: Back after 3 years- lost again

Post by ridgeline73 »

Thank you all so much-

I do plan to retire in 11 years. I may do something part time- but for the most part plan on shutting down

I am trying to figure out holistically how to build something that makes sense in terms of allocation with 1) a taxable brokerage 2) a 403B 3) Roth IRA

Am I correct in assuming I should get the bond fund out of the taxable and into the Roth? Its only $15k, but I can only add $6k per year into the Roth correct? I am just not sure how all these accounts should work for the right balance. I want to be relatively aggressive.

I've thought about turning everything in the 403B to this: https://www.voyaretirementplans.com/fun ... r/2208.pdf
Currently it is in this: https://www.voyaretirementplans.com/fun ... r/9224.pdf

That would put me pretty heavy in stocks, maybe not an issue?

I will be paying for college for 3 boys starting next school year and have that expense for the next 9 years- so, contributing a lot of extra is going to be tough. I figure that is where the $6k/rent payments will start going.

Some thoughts

1) I have 3.5 years left on a car loan. It is $255/month. Start paying $300.
2) Sadly after divorce I purchased a new home and lost the little equity that was in my previous home. I have a 30 year mortgage at 3.0%, with 29.5 years left (LOL). Total payment w/taxes and insurance is $1288. I moved to paying $1388, but still seems like a long time to pay down $194k. Need to pay down to $172,800 to get rid of PMI.
3) Start contributing $200/month to the 403B on top of my employer's contribution
4) Save what ever else I can to put in the Roth/Brokerage- mini


What strategy should I use to get money from the brokerage to the Roth and what should the Roth have for investment? Sell the bond fund (capital gains?), use the cash in the money market?
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LittleGreenSoldiers
Posts: 203
Joined: Fri Nov 14, 2014 6:59 pm

Re: Back after 3 years- lost again

Post by LittleGreenSoldiers »

ridgeline73 wrote: Wed Jan 06, 2021 11:39 pm Thank you all so much-

I do plan to retire in 11 years. I may do something part time- but for the most part plan on shutting down

I am trying to figure out holistically how to build something that makes sense in terms of allocation with 1) a taxable brokerage 2) a 403B 3) Roth IRA

Am I correct in assuming I should get the bond fund out of the taxable and into the Roth? Its only $15k, but I can only add $6k per year into the Roth correct? I am just not sure how all these accounts should work for the right balance. I want to be relatively aggressive.

I've thought about turning everything in the 403B to this: https://www.voyaretirementplans.com/fun ... r/2208.pdf
Currently it is in this: https://www.voyaretirementplans.com/fun ... r/9224.pdf

That would put me pretty heavy in stocks, maybe not an issue?

I will be paying for college for 3 boys starting next school year and have that expense for the next 9 years- so, contributing a lot of extra is going to be tough. I figure that is where the $6k/rent payments will start going.

Some thoughts

1) I have 3.5 years left on a car loan. It is $255/month. Start paying $300.
2) Sadly after divorce I purchased a new home and lost the little equity that was in my previous home. I have a 30 year mortgage at 3.0%, with 29.5 years left (LOL). Total payment w/taxes and insurance is $1288. I moved to paying $1388, but still seems like a long time to pay down $194k. Need to pay down to $172,800 to get rid of PMI.
3) Start contributing $200/month to the 403B on top of my employer's contribution
4) Save what ever else I can to put in the Roth/Brokerage- mini


What strategy should I use to get money from the brokerage to the Roth and what should the Roth have for investment? Sell the bond fund (capital gains?), use the cash in the money market?
Another option to consider would be using some of the cash in the money market of the brokerage account to pay down your mortgage.
By my simple math you would need to throw about $16K at the mortgage principle to get out of PMI.
Most mortgages(you'll need to check with your lender) have a recast option. You need to make a specific(I think thenorm is $10K) lump principle reduction and ask your lender to recast the mortgage. If you made a $16K principle reduction on a loan balance of $194K your balance would be $178K. If the lender allows for recasting; your loan would be re-amortorized for 30 years base on the new loan balance of $178K.

This would not only allow you to get out of paying PMI which I guess is about $80/month it would lower your principle+interest by about $165/month. Basically lowering your monthly mortgage payment by about $245/month.
Topic Author
ridgeline73
Posts: 33
Joined: Tue Dec 05, 2017 3:25 pm

Re: Back after 3 years- lost again

Post by ridgeline73 »

I like that idea, but not sure about outlaying that cash-

The original loan was for $197k. The purchase price of the home was $216k.

That means to get to 20% equity would need to get to $172k, correct? If that is the case then I would need to put down $22,565?
ncbill
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Location: Western NC

Re: Back after 3 years- lost again

Post by ncbill »

I would push the others heirs on selling the farm...seems like right now is a great time to be selling any type of real estate.
Topic Author
ridgeline73
Posts: 33
Joined: Tue Dec 05, 2017 3:25 pm

Re: Back after 3 years- lost again

Post by ridgeline73 »

ncbill wrote: Fri Jan 08, 2021 12:58 pm I would push the others heirs on selling the farm...seems like right now is a great time to be selling any type of real estate.
Not really an option right now.

The farm was split between 3 heirs when my grandmother passed 3 years ago. Those heirs are, 2 uncles and my mom. My mom passed quite a few years ago, so my brother and I inherited her share.

My two uncles grew up on the farm, and are not at a place where they will consider selling. They also aren't going to buy me out of my share- nor can we realistically subdivide the farm.

Until they pass it is likely to be a situation where I collect rent every year. They are both in their mid 70's, so it could be 1 year, it could be 25 years.
HomeStretch
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Joined: Thu Dec 27, 2018 3:06 pm

Re: Back after 3 years- lost again

Post by HomeStretch »

Consider using $12k of the $31k in your Taxable money market fund (MMF) to make Roth IRA contributions for tax years 2020 and 2021. Hold 100% equity in your Roth account for highest expected tax-free growth. Your MMF earnings are taxed each year so moving a portion to a Roth IRA makes sense.

Do you have an adequate emergency fund (EF)? If not, the remaining MMF balance can be the start of an EF. You can add to the EF, if needed, to have an EF of 3-6 months of living expenses. One way is to turn off reinvestment of dividends/capital gains distributions in your Taxable account to increase your MMF/EF.

If you can live on your pension and SS, if any, benefits, you likely won’t need a high retirement portfolio balance. But your pension vesting is 11 years away so it may be prudent to save at least 10-15% of your annual income for retirement.
Topic Author
ridgeline73
Posts: 33
Joined: Tue Dec 05, 2017 3:25 pm

Re: Back after 3 years- lost again

Post by ridgeline73 »

HomeStretch wrote: Fri Jan 08, 2021 4:10 pm Consider using $12k of the $31k in your Taxable money market fund (MMF) to make Roth IRA contributions for tax years 2020 and 2021. Hold 100% equity in your Roth account for highest expected tax-free growth. Your MMF earnings are taxed each year so moving a portion to a Roth IRA makes sense.

Do you have an adequate emergency fund (EF)? If not, the remaining MMF balance can be the start of an EF. You can add to the EF, if needed, to have an EF of 3-6 months of living expenses. One way is to turn off reinvestment of dividends/capital gains distributions in your Taxable account to increase your MMF/EF.

If you can live on your pension and SS, if any, benefits, you likely won’t need a high retirement portfolio balance. But your pension vesting is 11 years away so it may be prudent to save at least 10-15% of your annual income for retirement.
Thank you!

I am allowed to put in for last year as well as this year?

When you say 100% equity, what does that mean?

I think saving 15% of my income is reasonable from here on out. Just having trouble discerning where it should be going? Roth, 403b? What kind of investments in each? Thanks.
HomeStretch
Posts: 5411
Joined: Thu Dec 27, 2018 3:06 pm

Re: Back after 3 years- lost again

Post by HomeStretch »

ridgeline73 wrote: Sat Jan 09, 2021 10:04 am I am allowed to put in for last year as well as this year?
For tax year 2020 the IRA contribution deadline is 4/15/21 (2020 Federal income taxes filing deadline). For tax year 2021, the IRA contribution deadline is 4/15/22.
When you say 100% equity, what does that mean?
It means to consider investing your Roth IRA in an equity fund or ETF, such as a total stock market fund (VTSAX for U.S., VTIAX for international) which is diversified.
I think saving 15% of my income is reasonable from here on out. Just having trouble discerning where it should be going? Roth, 403b? What kind of investments in each?
It would be helpful to know your marginal Federal/state income tax rates, desired asset allocation, investment choices (including expense ratios/administrative fees charged to participants) in your 403b, interest rate on your car loan, etc. To get the best feedback, edit your original post using the pencil icon to include the information/format found in “Asking Portfolio Questions”:
https://www.bogleheads.org/wiki/Asking_ ... _questions
Topic Author
ridgeline73
Posts: 33
Joined: Tue Dec 05, 2017 3:25 pm

Re: Back after 3 years- lost again

Post by ridgeline73 »

HomeStretch wrote: Sat Jan 09, 2021 10:38 am
ridgeline73 wrote: Sat Jan 09, 2021 10:04 am I am allowed to put in for last year as well as this year?
For tax year 2020 the IRA contribution deadline is 4/15/21 (2020 Federal income taxes filing deadline). For tax year 2021, the IRA contribution deadline is 4/15/22.
When you say 100% equity, what does that mean?
It means to consider investing your Roth IRA in an equity fund or ETF, such as a total stock market fund (VTSAX for U.S., VTIAX for international) which is diversified.
I think saving 15% of my income is reasonable from here on out. Just having trouble discerning where it should be going? Roth, 403b? What kind of investments in each?
It would be helpful to know your marginal Federal/state income tax rates, desired asset allocation, investment choices (including expense ratios/administrative fees charged to participants) in your 403b, interest rate on your car loan, etc. To get the best feedback, edit your original post using the pencil icon to include the information/format found in “Asking Portfolio Questions”:
https://www.bogleheads.org/wiki/Asking_ ... _questions
I updated as best I could understand. Thank you so much.
Topic Author
ridgeline73
Posts: 33
Joined: Tue Dec 05, 2017 3:25 pm

Re: Back after 3 years- lost again

Post by ridgeline73 »

Any other suggestions would be greatly appreciated.

Thank you.
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