Portfolio Questions

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lkp007
Posts: 11
Joined: Tue Sep 16, 2014 6:36 pm

Portfolio Questions

Post by lkp007 »

I feel blessed and know I have a good problem which is making my head spin. Been listening to podcast and audio book "Simple Path to Wealth" by JL Collins. Husband on W2, has not figure when he wants to retire. Wife self employed and working towards retirement in about a year. Would like to eventually retire somewhere in Europe, possibly Portugal. Simplification is what I like to achieve so we can travel and spend time with family in Asia and Europe. Both of us max out on our contributions including the catch up. Now I like to turn my attention to simplifying and optimizing the portfolio for the decumulation phase. Meantime below are 4 things on top of my mind. Any suggestion will be much appreciated.

1. What to do with cash in tax deferred account especially with the current market valuation? Finding it hard to pull the trigger to buy VTSAX, which is what I like to do.
2. Simplify the portfolio to possibly just VTSAX and VBTLX, starting with tax deferred then the taxable.
3. Tax optimization before RMD, especially for her since there is 12 years to work on it. If both continue to work then tax bracket will be between 24-32%.
4. How to plan for decumulation?

Emergency funds: 1 year

Debt:: Only debt is mortgage of about $140,000, 10 year at 2.125%
Home Value:: 2.5m

Tax Filing Status: Married Filing Jointly

Tax Rate: 30% Federal, 8% State (Effective tax rate)

State of Residence: CA

Age: Wife: 60 Husband: 50 (no children)

Desired Asset allocation: 80% stocks / 20% bonds. Willing to go 100% stock on certain accounts if we can figure out which account to tap first for retirement.
Desired International allocation: 0% of stocks

Current retirement assets: 5m excluding equity in home.

Taxable:2.3m = 44% of Retirement Assets in 6 individual stocks
**Brokerage: 1% in 5 stocks
**His ESPP & RSU: 43%

Tax Deferrred:2.7m = 56% of Retirement Assets
**His 401k - 6% of Retirement Assets
1% Vanguard Total Bond Market Index Trust (expense ratio)
2% BHMS Large Cap Value Equity SMA
1% Fidelity Contrafund Commingled Pool
1% Vanguard Extended Market Index Trust
1% Vanguard Total Intl Stock Index Trust
Company match: Yes

**His 401k (with previous employer) - 1% of Retirement Assets
Pretty evenly distributed between the following:
Fidelity Total Market Index (FSKAX)
Fidelity Small Cap Index (FSSNX)
Fidelity Mid Cap Index (FSMDX)
Vanguard Total International Stock (VTIAX)

**His Rollover IRA at Vanguard - 18% of Retirement Assets
6% in 4 individual stocks
3% Vanguard Total Bond (VBTLX)
6% Vanguard Total International (VTIAX)
2% Vanguard Total Stock (VTSAX)
1% Cash

**Her Solo 401K - 8% of Retirement Assets
2% Vanguard Total Stock (VTSAX)
4% Vanguard Wellesley Income (VWINX)
2% Cash

**Her Rollover IRA at Vanguard - 22% of Retirement Assets
8% in 5 individual stocks
10% Vanguard Total Stock (VTSAX)
4% Vanguard Total Bond (VBTLX)

**Her Rollover Roth IRA at Vanguard - 0.5% of Retirement Assets
All in 1 stock
chassis
Posts: 334
Joined: Tue Mar 24, 2020 4:28 pm

Re: Portfolio Questions

Post by chassis »

1. Invest the money now. The market only goes up. And it goes down. Then it goes up again. The net result is the market goes up. Nervous Nellies will say a pullback is imminent, any day now. No one knows for sure. It's unknowable. Invest the money now.

2. Invest as you like. I have a higher than average risk appetite and I hope to grow the portfolio until my time is up. The money then goes to my spouse, then to my heirs. Index funds are fine if it allows your portfolio to deliver your required returns.

3. I have done many calculations and in my view Roth conversions are a waste of time and energy. Too little benefit, or none at all. They are highly hyped on this site, but no one likes to quantify the actual benefit from Roth conversions in terms of dollars or percent of their net worth. Roth conversions require accelerated tax payments, which to me is equivalent to rat poison. Roth conversions are a waste of time and energy that could be spent playing golf, tennis, gardening, travelling, you get the idea.

4. I dont' think it's too difficult. Start withdrawing as you like, when you like, subject to whatever rules exist on your accounts. If you are over 59 1/2 most of the handcuffs have been released from tax advantaged money.
User avatar
ruralavalon
Posts: 20879
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Portfolio Questions

Post by ruralavalon »

Welcome to the forum :) .

1. What to do with cash in tax deferred account especially with the current market valuation? Finding it hard to pull the trigger to buy VTSAX, which is what I like to do.
Go ahead and invest now.


2. Simplify the portfolio to possibly just VTSAX and VBTLX, starting with tax deferred then the taxable.
That's reasonable in my opinion, especially for the tax-advantaged accounts.

I would not do that in the taxable account.
3. Tax optimization before RMD, especially for her since there is 12 years to work on it. If both continue to work then tax bracket will be between 24-32%.
I think Roth IRA conversions are a good idea after retirement and before RMDs begin.

4. How to plan for decumulation?
In early retirement we used Social Security benefits and sales of shares stock index funds from our joint taxable account to cover retirement living expenses.

After age 70.5 when Required Minimum Distributions (RMDs) started we set up monthly automatic RMDs proportionally from all funds in my rollover IRA, paid directly to our joint checking account. Social Security benefits plus the RMDs cover our retirement living expenses.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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