Anyone up for a portfolio analysis?

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Topic Author
UM2009
Posts: 21
Joined: Tue Mar 09, 2021 11:16 am

Anyone up for a portfolio analysis?

Post by UM2009 »

Greetings Bogleheads! I come to shrine seeking guidance.

I've set forth some questions at the end, but I'm open to any advice. Thank you!!!!!

Emergency funds: Three months’ saved.

Debt: Mortgage: $585,000 remaining @ 2.625% (15 yrs left). Student loans: $45,000 remaining @ 3.5%.

Tax Filing Status: Married Filing Jointly

Tax Rate: 32% Federal [Brought this down from 35%; just realized that our heavy tax deferral has in a lower bracket], 0% State

State of Residence: Texas

Age: Husband: 39; Wife: 33

Desired Asset allocation: ??? Need advice
Desired International allocation: ??? Need advice

Portfolio, which is exclusively retirement assets, is currently around $500000

Current retirement assets

His 403b/457b
30% TIAA-CREF S&P 500 Index Fund (Institutional) (TISPX) (0.05%)
30% TIAA-CREF International Equity Index Fund (Institutional) (TCIEX) (0.05%)
Her 401k profit sharing plan
10% Wells Fargo Stable Value Fund C (No ticker?) (0.5%)
10% Dodge & Cox Income (DODIX) (0.43%)
5% Vanguard 500 Index Admiral (VFIAX) (0.04%)
5% Vanguard Interm-Term Investment-Grde Adm (VFIDX) (0.1%)
4% Vanguard Windsor II Admiral (VWNAX) (0.26%)3% T. Rowe Price Blue Chip Growth I (TBCIX) (0.56%)
3% Vanguard International Growth Adm (VWILX) (0.33%)
3% DFA Emerging Markets I (DFEMX) (0.35%)

Both employers also offer Roth options, but we are 100% tax-deferred.

Contributions

New annual Contributions
$19,500 (or max allowable) into his 403b (no match)
$19,500 (or max allowable) into his 457b (no match)
7% of salary (low six figures) into his state-sponsored defined benefit plan (formula for annual benefit: [years of service] * 2.3% * [average salary last five years])
$58,000 (or max allowable) into her 401k profit sharing (no match)

Available funds

Funds available in his 403b/457b
American Century Ginnie Mae Fund R5 Class Shares (AGMNX) (.35%)
American Funds EuroPacific Growth Fund - R6 (RERGX) (0.46%)
American Funds Fundamental Investors Fund Class R6 (RFNGX) (0.28%)
BlackRock Global Allocation Institutional (MALOX) (0.83%)
Columbia Acorn International Fund Instl 3 (CCYIX) (0.88%)
Columbia Mid Cap Index Fund Instl (NMPAX) (0.20%)
Credit Suisse Commodity Return Strategy Fund Institutional (CRSOX) (0.78%)
CREF Bond Market Account (R3) (QCBMIX) (0.26%)
CREF Equity Index Account (R3) (QCEQIX) (0.23%)
CREF Global Equities Account (R3) (QCGLIX) (0.30%)
CREF Inflation-Linked Bond Account (R3) (QCILIX) (0.23%)
CREF Money Market Account (R3) (QCMMIX) (0.23%)
CREF Social Choice Account (R3) (QCSCIX) (0.26%)
CREF Stock Account (R3) (QCSTIX) (0.33%)
DFA Emerging Markets Value Portfolio Institutional (DFEVX) (0.46%)
Eaton Vance Large Cap Value Fund Class R6 (ERLVX) (0.72%)
Federated Hermes Clover Small Value Fund Institutional Class (VSFIX) (1.02%)
Harbor International Fund Institutional Class (HAINX) (0.77%)
Lord Abbett Developing Growth Fund Class I (LADYX) (0.68%)
Morgan Stanley Mid Cap Growth Portfolio Class IS (MMCGX) (0.64%)
PGIM Jennison Growth Z (PJFZX) (0.69%)
PGIM Jennison Natural Resources R6 (PJNQX) (0.85%)
PIMCO All Asset Fund - Institutional Class Shares (PAAIX) (1.19%)
PIMCO Total Return Instl (PTTRX) (0.70%)
Royce Pennsylvania Mutual Fund Institutional Class (RPMIX) (0.89%)
T Rowe Price Growth Stock Fund Class I (PRUFX) (0.52%)
Templeton Global Bond Fund Class R6 (FBNRX) (0.56%)
TIAA Real Estate Account (QREARX) (0.78%)
TIAA-CREF High-Yield Fund (Institutional) (TIHYX) (0.36%)
TIAA-CREF International Equity Index Fund (Institutional) (TCIEX) (0.05%)
TIAA-CREF Large-Cap Value Fund (Institutional) (TRLIX) (0.41%)
TIAA-CREF Lifecycle 2010 Fund (Institutional) (TCTIX) (0.37%)
TIAA-CREF Lifecycle 2015 Fund (Institutional) (TCNIX) (0.38%)
TIAA-CREF Lifecycle 2020 Fund (Institutional) (TCWIX) (0.39%)
TIAA-CREF Lifecycle 2025 Fund (Institutional) (TCYIX) (0.41%)
TIAA-CREF Lifecycle 2030 Fund (Institutional) (TCRIX) (0.42%)
TIAA-CREF Lifecycle 2035 Fund (Institutional) (TCIIX) (0.43%)
TIAA-CREF Lifecycle 2040 Fund (Institutional) (TCOIX) (0.44%)
TIAA-CREF Lifecycle 2045 Fund (Institutional) (TTFIX) (0.45%)
TIAA-CREF Lifecycle 2050 Fund (Institutional) (TFTIX) (0.45%)
TIAA-CREF Lifecycle 2055 Fund (Institutional) (TTRIX) (0.45%)
TIAA-CREF Lifecycle 2060 Fund (Institutional) (TLXNX) (0.45%)
TIAA-CREF Lifecycle Retirement Income Fund (Institutional) (TLRIX) (0.37%)
TIAA-CREF Mid-Cap Growth Fund (Institutional) (TRPWX) (0.48%)
TIAA-CREF Mid-Cap Value Fund (Institutional) (TIMVX) (0.46%)
TIAA-CREF Money Market Fund (Institutional) (TCIXX) (0.13%)
TIAA-CREF Quant Small-Cap Equity Fund (Institutional) (TISEX) (0.43%)
TIAA-CREF S&P 500 Index Fund (Institutional) (TISPX) (0.05%)
TIAA-CREF Small-Cap Blend Index Fund (Institutional) (TISBX) (0.06%)
Vanguard Short-Term Bond Index Fund Institutional (VBITX) (0.05%)
Virtus Ceredex Mid Cap Value Equity Fund Class R6 (SMVZX) (0.79%)
Western Asset Core Plus Bond I (WACPX) (0.45%)

Funds available in her 401k profit sharing plan
Wells Fargo Stable Value Fund C (No ticker?) (0.5%)
Dodge & Cox Income (DODIX) (0.43%)
Vanguard Total Bond Market Index Adm (VBTLX) (0.05%)
Vanguard Interm-Term Investment-Grde Adm (VFIDX) (0.1%)
Vanguard Balanced Index Adm (VBIAX) (0.07%)
American Funds Washington Mutual R6 (RWMGX) (0.27%)
Vanguard Windsor II Admiral (VWNAX) (0.26%)
DFA US Large Cap Value I (DFLVX) (0.22%)
Vanguard 500 Index Admiral (VFIAX) (0.04%)
MainStay Winslow Large Cap Growth I (MLAIX) (0.72%)
T. Rowe Price Blue Chip Growth I (TBCIX) (0.56%)
MFS Mid Cap Value R6 (MVCKX) (0.68%)
Vanguard Mid Cap Index Admiral (VIMAX) (0.05%)
JPMorgan Mid Cap Growth R6 (JMGMX) (0.74%)
Janus Henderson Small Cap Value N (JDSNX) (0.86%)
Vanguard Small Cap Index Adm (VSMAX) (0.05%)
Vanguard Small Cap Growth Index Admiral (VSGAX) (0.07%)
Vanguard International Growth Adm (VWILX) (0.33%)
DFA Emerging Markets I (DFEMX) (0.35%)

Questions:
1. What is the best allocation among the funds listed?

2. Given the available funds in our tax-deferred accounts and our high federal tax rate, are we correct that it is better to max out our tax-deferred accounts, bypass the Roth options, and attempt backdoor Roths only when extra cash flow allows?

3. Related to question 2, considering the higher contribution amounts our plans allow (independent limits for 457b and 403b and the higher contribution limit for profit sharing plans), is maxing out our tax-deferred accounts for the next 25 or so years enough for a comfortable retirement? Or should we be looking to cut other expenses in order to ensure the funding of backdoor Roths and/or taxable accounts (once the student loans are paid off)?

4. Related to question 3, how, if at all, should we take account of his defined benefit plan when determining how much we need to save for retirement? (Rough, back-of-the-envelope calculation suggests the benefit would likely be worth at least around $75,000/yr in today’s dollars if he stays through retirement, which he plans to do.)
Last edited by UM2009 on Sat Mar 27, 2021 1:18 pm, edited 5 times in total.
Makefile
Posts: 924
Joined: Fri Apr 22, 2016 11:03 pm

Re: Anyone up for a portfolio analysis?

Post by Makefile »

UM2009 wrote: Fri Mar 26, 2021 12:40 pm 1. What is the best allocation among the funds listed?
I would start with what overall allocation you would like--in terms of Vanguard Total Stock Market Index, Vanguard Total International Stock Index, Vanguard Total Bond Index, and Vanguard Total International Bond Index--as if you had access to them, and then work backward with the hodgepodge of funds you have access to.

On the Wiki, there is information about "approximating total stock market" and "approximating total international stock market" that has detailed percentages I haven't given here. For example:

in "his 403b/457b" you could approximate Total Stock Market using the S&P 500 index + Small-Cap Blend index.
in "her 401(k)" you could approximate Total Stock Market using the S&P 500 index + Mid Cap Index + Small Cap index.

in "his 403b/457b" you could approximate Total International Stock Market using International Equity Index + DFA Emerging Markets Value.
in "her 401(k)" you could approximate Total International Stock Market using Vanguard International Growth + DFA Emerging Markets I.

As it stands "his 403b/457b" is missing exposure to mid/small cap (US stocks outside the S&P 500) and is also missing emerging markets. That International Index Fund tracks the MSCI EAFE index which is missing emerging markets.

It's unfortunate that "his 403b/457b" only offers an active emerging fund with a value tilt, while "her 401(k)" only offers an active developed international fund with a growth tilt.

I would probably dump the Dodge & Cox, Vanguard Windsor, and T. Rowe Price fund just for simplification purposes, not because any of those are bad funds.

Are you holding the Stable Value fund as a bond substitute? Do you have what interest rate it pays? Generally you wouldn't hold cash in a 401(k) this far out from retirement.
UM2009 wrote: Fri Mar 26, 2021 12:40 pm 2. Given the available funds in our tax-deferred accounts and our high federal tax rate, are we correct that it is better to fund our tax-deferred accounts before tax-free accounts (backdoor Roths)?
I agree that's what looks best in the short term, but I'll let some of the retired posters join in. You are putting a huge amount in tax-deferred every year not even accounting for the pension. It's not unforeseeable that you might have huge RMDs 40 years from now.
UM2009 wrote: Fri Mar 26, 2021 12:40 pm 3. Related to question 2, considering the higher contribution amounts our plans allow (independent limits for 457b and 403b and the higher contribution limit for profit sharing plans), is maxing out our tax-deferred accounts for the next 25 or so years enough for a comfortable retirement? Or should we be looking to cut other expenses in order to ensure the funding of backdoor Roths and/or taxable accounts (once the student loans are paid off)?

4. Related to question 3, how, if at all, should we take account of his defined benefit plan when determining how much we need to save for retirement? (Rough, back-of-the-envelope calculation suggests the benefit would likely be worth at least around $75,000/yr in today’s dollars if he stays through retirement, which he plans to do.)
Double-max "his" plans plus a pension plus plus a triple-max "her" plan seems more than enough. But of course, it all depends on assets vs. expenses which is hard to project. Why not take some of the tax savings to do a $6,000 backdoor Roth for each spouse though? Even if it means slowing the student loans, because Roth space, left unused, can't be gained back.

I don't see why you wouldn't count the defined benefit plan, just as you wouldn't ignore Social Security either.
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climber2020
Posts: 1956
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Re: Anyone up for a portfolio analysis?

Post by climber2020 »

If this were me, I’d put everything in both accounts in the low cost S&P500 fund and be done with it. Your net worth (excluding house) is currently low compared to your income, so unless you’re very risk averse you probably don’t need to worry about bonds for a while.
tashnewbie
Posts: 1656
Joined: Thu Apr 23, 2020 12:44 pm

Re: Anyone up for a portfolio analysis?

Post by tashnewbie »

UM2009 wrote: Fri Mar 26, 2021 12:40 pm Funds available in his 403b/457b
TIAA-CREF International Equity Index Fund (Institutional) (TCIEX) (0.05%)
TIAA-CREF S&P 500 Index Fund (Institutional) (TISPX) (0.05%)

Funds available in her 401k profit sharing plan
Vanguard Total Bond Market Index Adm (VBTLX) (0.05%)
Vanguard 500 Index Admiral (VFIAX) (0.04%)

Questions:
1. What is the best allocation among the funds listed?

2. Given the available funds in our tax-deferred accounts and our high federal tax rate, are we correct that it is better to fund our tax-deferred accounts before tax-free accounts (backdoor Roths)?

3. Related to question 2, considering the higher contribution amounts our plans allow (independent limits for 457b and 403b and the higher contribution limit for profit sharing plans), is maxing out our tax-deferred accounts for the next 25 or so years enough for a comfortable retirement? Or should we be looking to cut other expenses in order to ensure the funding of backdoor Roths and/or taxable accounts (once the student loans are paid off)?
1. I think the funds listed above are the best across the 3 accounts. I would use VBTLX in her account for any desired bond exposure and TCIEX in his for international. Then you can stick US stocks everywhere; I'd use the 500 index funds and call it a day (personally, I think 500 index is sufficient by itself for US stock exposure, and I don't bother trying to add small cap, but if you want to do that a ratio of 4:1 500 to small roughly approximates total US stock market).

Use Vanguard's investing questionnaire to get a sense of what your asset allocation maybe should be: https://retirementplans.vanguard.com/VG ... -V492-4X7Q

2&3. I'd probably want to get some money in backdoor Roths, at the very least to start the 5-year clock. I'd probably reduce the amount in her profit sharing plan to do so (if you even need to; could you afford to do backdoor Roths with regular cash flow?). Considering your pension and the large amount of contributions, you'll probably have quite sizeable tax-deferred balances in 10 years or so.

4. I'd aggressively pay off those student loans. It looks like they're private, so probably not eligible for any federal protections.
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ruralavalon
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Location: Illinois

Re: Anyone up for a portfolio analysis?

Post by ruralavalon »

Welcome to the forum :) .


Asset allocation.
Age: Husband: 39; Wife: 33

Desired Asset allocation: ??? Need advice
Desired International allocation: ??? Need advice
At ages 33 and 39 I suggest about 20% in bonds or other fixed income investments (like CDs, savings accounts, Stable Value Fund, 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) Morningstar (4/8/2020), "What's the Best Diversifier for Stocks?"
5) White Coat Investor (9/23/2016), "In Defense of Bonds"; and
6) 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.



Fund selection.
Questions:
1. What is the best allocation among the funds listed?
In selecting funds strive for a combination of both broad diversification (to reduce risk) and low expense ratios (to increase your net return). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Please see:
1) Wiki article "Three-fund portfolio";
2) Forum discussion, "The Three-Fund Portfolio"; and
3) Taylor Larimore post, "Articles recommending the three-fund portfolio".

"In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations".

In my opinion in a plan that lacks a total stock market index fund, a S&P 500 index fund is good enough by itself for a domestic stock allocation. A S&P 500 index fund covers over 80% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies. In the 29 years since the creation of the first total stock market index fund the performance of the two types of funds has been almost identical. Portfolio Visualizer, 1993-2021. So it seems that adding a little in mid/small cap stocks trying to mimic the holdings of a total stock market fund has historically made little difference in performance.

See also:
1) Allan Roth, CBS Moneywatch (02/03/2010), "John C. Bogle on the S&P 500 vs. the Total Stock Market"; and
2) Wall Street Physician (01/17/2019), "Should You Invest in the S&P 500 or the Total Stock Market?".





Her 401k.
In my opinion in her 401k the better funds to consider using are:
1) Vanguard 500 Index Admiral (covers over 80% of U.S. stock market) (VFIAX) (0.04%);
2) Vanguard International Growth Adm (both developed and emerging markets) (VWILX) (0.33%);and
3) Vanguard Total Bond Market Index Adm (VBTLX) (0.05%).


His 403b and 457b.
In my opinion in his 403b and 457b the better funds to consider using are:
1) TIAA-CREF S&P 500 Index Fund (Institutional) (covers over 80% of U.S. stock market) (TISPX) (0.05%);
2) TIAA-CREF International Equity Index Fund (Institutional) (developed markets only) (TCIEX) (0.05%);and
3) CREF Bond Market Account (R3) (Intermediate-term, investment-grade bonds, link to pdf fact sheet) (QCBMIX) (0.26%) (This is a total bond market index fund, it tracks the Bloomberg Barclays U.S. Aggregate Bond Index.)



Prioritizing Investments.
Here is a general account funding priority that usually works well for many people (when there is no high interest debt or HSA use):
1) Contribute to the work-based plans (401k, 403b, 457, SIMPLE IRA, TSP, etc.) enough to get the full employer match (the match is like free money, your best possible investment);
2) Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique), depending on eligibility and personal circumstances;
3) Contribute the remainder of the maximum employee contribution to the work-based accounts; and
4) Contribute to a taxable investing account.

Your company plans offer excellent funds with low to very low expense ratios. "If the company plan offers good, low-cost funds, it may be preferable to contribute to the company plan before contributing to an IRA." Please see the wiki article "Prioritizing investments", link .
New annual Contributions
$19,500 (or max allowable) into his 403b (no match)
$19,500 (or max allowable) into his 457b (no match)
7% of salary (low six figures) into his state-sponsored defined benefit plan (formula for annual benefit: [years of service] * 2.3% * [average salary last five years])
$58,000 (or max allowable) into her 401k profit sharing
Available funds
. . . . .
3. Related to question 2, considering the higher contribution amounts our plans allow (independent limits for 457b and 403b and the higher contribution limit for profit sharing plans), is maxing out our tax-deferred accounts for the next 25 or so years enough for a comfortable retirement? Or should we be looking to cut other expenses in order to ensure the funding of backdoor Roths and/or taxable accounts (once the student loans are paid off)?
Yes, maximum annual contributions to the three work-based plans ($97k annually) is enough.

About how much do you believe your annual living expenses in retirement might be?



Traditional versus Roth contributions.
2. Given the available funds in our tax-deferred accounts and our high federal tax rate, are we correct that it is better to fund our tax-deferred accounts before tax-free accounts (backdoor Roths)?
4. Related to question 3, how, if at all, should we take account of his defined benefit plan when determining how much we need to save for retirement? (Rough, back-of-the-envelope calculation suggests the benefit would likely be worth at least around $75,000/yr in today’s dollars if he stays through retirement, which he plans to do.)
Will that pension be in addition to Social Security? What are your profession(s) or occupation(s)? How much do you currently have in traditional tax-deferred accounts? For most people traditional deductible contributions will likely be better.

Is his employer a government or government body? Or is his employer a charity or non-profit? (It makes a difference in a 457 plan.) Will the 401k, 403b and 457b, or any of them, permit Roth contributions?

The income tax code is progressive, with a lower tax rate for lower income. Retirement usually means that employment income has ended. Therefore, most people are in a lower tax bracket in retirement and for most people traditional deductible contributions will probably be better.

Because the tax code is progressive, when you withdraw from your 401k in retirement the income is not all taxed at the marginal tax rate specified for your tax bracket. TFB blog post, "The case against Roth 401k". Because the tax code is progressive, "Until you know you can generate from your Traditional 401(k) enough income to fill the lower brackets, it doesn’t make sense to contribute to a Roth 401(k). For people without a traditional defined benefit pension plan, it means the majority of the retirement savings should go to a Traditional 401(k), not Roth."

Will you be eligible for both the substantial pension and Social Security? A pension plus Social Security changes that analysis, so that Roth contributions are likely better if you have a significant pension coming in addition to Social Security. TFB blog post, "Most TSP participants should switch to the Roth TSP". That post discussed the effect of a federal pension, but the analysis should hold for other pensions.

Wiki article, "Traditional vs Roth".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
UM2009
Posts: 21
Joined: Tue Mar 09, 2021 11:16 am

Re: Anyone up for a portfolio analysis?

Post by UM2009 »

Thank you all so much for your quick responses. I've answered the questions posed. I'm going to edit the post above as well.
About how much do you believe your annual living expenses in retirement might be?
:confused

This question is one we need to study. I imagine we'll have no mortgage. But we do plan on having at least four kids (2 so far), so they may still be an expense :D . Odds are we won't be in a low-cost-of-living area.
Will that pension be in addition to Social Security?
Yes.
What are your profession(s) or occupation(s)?
Both lawyers.
How much do you currently have in traditional tax-deferred accounts?
~$500k
Is his employer a government or government body?
Yes
Will the 401k, 403b and 457b, or any of them, permit Roth contributions?
Her employer also offers a Roth 401k; his employer offers a Roth 403(b). [Edited above to add this info.]
Are you holding the Stable Value fund as a bond substitute?
Her investments were set automatically. No rhyme or reason on our part.
could you afford to do backdoor Roths with regular cash flow?
Some years, yes; some, no.
Why not take some of the tax savings to do a $6,000 backdoor Roth for each spouse though?
We are open to doing this. Is it better to max out pre-tax and do a backdoor Roth with any extra cash or use some of the contribution space in the employer plans to start a Roth 401k/403b? [Adding this question above.]
HomeStretch
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Re: Anyone up for a portfolio analysis?

Post by HomeStretch »

+1 to exchanging the holdings in Her 401k to use the lower-ER funds.

If you keep contributing ~$100k annually to tax deferred accounts, you may end up with “too much” in tax deferred in 10-20 years. Consider contributing $12k/year into His and Her Roth IRAs via backdoor Roths even if it means reducing tax deferred contributions to Her 401k. In my opinion, it’s good to have a portfolio mix of taxable/Roth/tax deferred. +1 to contributing to your/spouse’s initial Roth IRAs to start the 5-year clock.
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abuss368
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Re: Anyone up for a portfolio analysis?

Post by abuss368 »

I would consider simplicity and reducing the overall number of funds. More funds equals complexity and usually higher costs.

Look for total market index funds.

Tony
John C. Bogle: “Simplicity is the master key to financial success."
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ruralavalon
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Re: Anyone up for a portfolio analysis?

Post by ruralavalon »

What interest rate is currently paid on "Wells Fargo Stable Value Fund C (No ticker?) (0.5%)"? What rate is guaranteed? If the rate is is good that fund can be a reasonable substitute for a bond fund.

It's good to see that he is in a governmental 457b, so his account is protected from any employer's creditors. Wiki article 457(b).

Try to develop a rough estimate of your retirement living expenses. That is difficult so far in advance, but is helpful in planning. That's needed to give a real answer to your "enough" question .

It's good to see that her 401k and his 403b permit Roth contributions. You could make 1/2 of future contributions traditional and 1/2 Roth.

Because the pension is in addition to Social Security, because both of you are in a high earning profession, because of your $97k annual contributions, and because you currently have $500k in traditional tax-deferred accounts some Roth contributions are probably a good idea.

Because of your "Tax Rate: 35% Federal, 0% State" some traditional tax-deductible contributions are a good idea.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
UM2009
Posts: 21
Joined: Tue Mar 09, 2021 11:16 am

Re: Anyone up for a portfolio analysis?

Post by UM2009 »

Gosh, y'all are helpful. What an awesome resource.
What interest rate is currently paid on "Wells Fargo Stable Value Fund C (No ticker?) (0.5%)"? What rate is guaranteed?
Hmm... Not sure I'm answering this correctly... but... this fund has a "Blended Yield (after fees)" of 2.09%. I don't see anything about guarantees.
Try to develop a rough estimate of your retirement living expenses.
Gun to our head: $100000/yr in today's dollars.
You could make 1/2 of future contributions traditional and 1/2 Roth.

Because the pension is in addition to Social Security, because both of you are in a high earning profession, because of your $97k annual contributions, and because you currently have $500k in traditional tax-deferred accounts some Roth contributions are probably a good idea.
This and the other comments about too much tax deferral have my head spinning. I've now been doing a lot of researching into the proper mix of tax-deferred, Roth, and taxable. Simplified, the ~100k we tax-defer is currently our max savings rate for retirement (remainder is eaten up by mortgage, heavy child care expenses, student loans, high property taxes, saving for home improvements, etc.). So anything into a Roth (or taxable) would be reduced by our tax rate in order to maintain take-home. Does this affect the analysis? To complicate things, I realized that our current tax rate is 32%, not 35%. :oops:

(I've seen a few bogle posts asking about how much is too much tax deferral, but nothing sufficiently close to our situation to sate my curiosity. Maybe this is worth it's own post.)
tomsense76
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Re: Anyone up for a portfolio analysis?

Post by tomsense76 »

Your 403b/457b looks good. May consider some small cap with "TIAA-CREF Small-Cap Blend Index Fund (Institutional) (TISBX) (0.06%)". Usually 85% large cap/15% small cap approximates total market. This fluctuates year to year, but is a good rule of thumb. The international fund that you hold in 403b/457b looks good and would stick with that for the full international allocation for both of you.

In spouse's 401k would use a similar mix these for US stock:

Vanguard 500 Index Admiral (VFIAX) (0.04%)
Vanguard Small Cap Index Adm (VSMAX) (0.05%)

Any of these in your spouse's 401k would be fine for bonds (if you hold any). Would use this for the full bond allocation for both of you. Would just pick one:

Dodge & Cox Income (DODIX) (0.43%)
Vanguard Total Bond Market Index Adm (VBTLX) (0.05%)
Vanguard Interm-Term Investment-Grde Adm (VFIDX) (0.1%)

Dodge & Cox Income was a favorite of Bogle's and was explored in a blogpost by one of the members here. Also hold that one personally. Total bond is popular here. Can't go wrong with that. Investment grade is taking more credit risk. So higher returns, but higher risk. Most people don't like taking risk on the bond side and do that with higher stock allocations instead, but that doesn't mean there are not exceptions

Also this wiki page on approximating total stock market is quite handy.
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
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ruralavalon
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Location: Illinois

Re: Anyone up for a portfolio analysis?

Post by ruralavalon »

UM2009 wrote: Sat Mar 27, 2021 1:43 pm Gosh, y'all are helpful. What an awesome resource.
What interest rate is currently paid on "Wells Fargo Stable Value Fund C (No ticker?) (0.5%)"? What rate is guaranteed?
Hmm... Not sure I'm answering this correctly... but... this fund has a "Blended Yield (after fees)" of 2.09%. I don't see anything about guarantees.
In my opinion that yield is high enough that you can consider using that Stable Value Fund for part of the fixed income allocation, in conjunction with the bond funds mentioned.


UM2009 wrote: Sat Mar 27, 2021 1:43 pm
Try to develop a rough estimate of your retirement living expenses.
Gun to our head: $100000/yr in today's dollars.
Using a 4% initial withdrawal rate that means a $2,500,000 portfolio is required at the start of retirement even if your pension Social Security completely disappear, less if Social Security is available as is most likely. Please see the wiki article "Safe withdrawal rates", link.

You can almost certainly achieve that at your level of contributions. You already have about $500k at ages 33 and 39.

What is your net annual retirement income required, after considering your pension income and Social Security benefits?

Here are two calculators you can use to assess the range of possible outcomes:
1) www.firecalc.com; and
2) www.i-orp.com.



UM2009 wrote: Sat Mar 27, 2021 1:43 pm
You could make 1/2 of future contributions traditional and 1/2 Roth.

Because the pension is in addition to Social Security, because both of you are in a high earning profession, because of your $97k annual contributions, and because you currently have $500k in traditional tax-deferred accounts some Roth contributions are probably a good idea.
This and the other comments about too much tax deferral have my head spinning. I've now been doing a lot of researching into the proper mix of tax-deferred, Roth, and taxable. Simplified, the ~100k we tax-defer is currently our max savings rate for retirement (remainder is eaten up by mortgage, heavy child care expenses, student loans, high property taxes, saving for home improvements, etc.). So anything into a Roth (or taxable) would be reduced by our tax rate in order to maintain take-home. Does this affect the analysis? To complicate things, I realized that our current tax rate is 32%, not 35%. :oops:

(I've seen a few bogle posts asking about how much is too much tax deferral, but nothing sufficiently close to our situation to sate my curiosity. Maybe this is worth it's own post.)
This is a hard concept to grasp. Lots of heads spin over this issue.

There are lots of important variables that cannot be known several decades in advance like: inflation rates; rates of return on stocks and bonds; what your health will be; whether you will both work without interruption; your tax bracket in retirement; or even what the brackets will be several decades from now.

Please read the information and links previously provided, and ask any questions you might have.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
UM2009
Posts: 21
Joined: Tue Mar 09, 2021 11:16 am

Re: Anyone up for a portfolio analysis?

Post by UM2009 »

Thanks again so much. We've made progress--even if it's resulted in even more questions! This is the allocation we've settled on for future contributions:

30% TIAA-CREF S&P 500 Index Fund (Institutional) (TISPX) (0.05%)
20% Vanguard International Growth Adm (VWILX) (0.33%)
20% Vanguard 500 Index Admiral (VFIAX) (0.04%)
20% Vanguard Total Bond Market Index Adm (VBTLX) (0.05%)
5% TIAA-CREF Mid-Cap Growth Fund (Institutional) (TRPWX) (0.48%)
5% TIAA-CREF Small-Cap Blend Index Fund (Institutional) (TISBX) (0.06%)

One thing down.
There are lots of important variables that cannot be known several decades in advance like: inflation rates; rates of return on stocks and bonds; what your health will be; whether you will both work without interruption; your tax bracket in retirement; or even what the brackets will be several decades from now.
Not only that, but this exercise forces us to consider things that we have so far purposely ignored for retirement planning purposes. For example, her portfolio also includes a GST set up by her father that currently consists of raw land but will most likely be generating moderate to significant income in 25 years. Because that income is not guaranteed, we have not planned around it when considering how much to save, but now we see that it affects where we save. The likelihood of that income (plus pension, ss, RMDs) means that it is most likely that we are currently in the lowest tax bracket that will we see for the rest of our lives. Now we need to figure out how best to accommodate that fact.
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