Portfolio Advice

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Topic Author
Steg_N
Posts: 3
Joined: Wed Jun 09, 2021 8:35 pm

Portfolio Advice

Post by Steg_N »

Hello Bogleheads,
Just thought I would reach out since I'm a relatively new investor and less than 1 year out from grad school. I have also been attempting to become more finance savvy over the past several months and reading many books or bogle forums. As you already know, every question answered creates even more so here are a few that I would appreciate receiving advice for? I will also offer a bit of context to my current situations. First, I have an employer 403b which I contribute 10% to on a post-tax basis and receive an employer match of 50% on the first 5% of contributions. Additionally, I have a Roth IRA with Fidelity. I also have a high deductible insurance plan with my employer contributing $750.00/year to a Health Equity HSA. Further, I will be making quarterly transfers from my Health Equity to Fidelity HSA for investment freedom.

Emergency Fund = 6 months
Age = 26 (not married; no kids)
State = Iowa
Compensation = $70,000/year (paid hourly not salary) as a Physical Therapist
Pension? = No pension offered
Tax Rate = 22% Federal and 8.53% State
Home = Currently Renting (saving for a house in 1-2 years)
Student Loan Debt = $72,000. No payments due; interest currently set at 0% (estimate 6-8% when interest rates resume)
Saving approximately $1,500.00/month towards student loans (minimum is ~990)
Total Investments: ~ Low 5 Figures

Employer 403b (52%):
52% into Vanguard Target Retirement 2060 Fund (VTTSX) (ER 0.15%). 10% of post-tax (Roth) every paycheck (addition of employer match of 50% on the first 5%).
Note: there are no Roth conversions and I am not currently planning on doing so.

FIdelity Roth IRA (48%):
28% fidelity s&p 500 (FXAIX) (ER 0.015%)
10% fidelity small cap) (FSSNX (ER 0.03%)
10% fidelity total international (FTIHX) (ER 0.06%)

Fidelity HSA:
0% currently. When I first accepted job, didn't opt into any contributions but will change this soon. I will be attempting to max out the HSA contributions in 2022.

Fidelity Taxable Brokerage:
0% into vanguard total stock market ETF (VTI) (ER 0.03%). Basically, planning to dump extra money here after each pay cycle or month for long term savings.

Total Percentage = 100% if not counting taxable account

Questions:
1. First and foremost, anything significantly wrong with my plan/strategy which may need immediate attention?

2. Due to my employer 403b allowing me to choose between contributing on a pre- or post-tax basis, can anyone tell me which contribution style is preferred and why? In other words, should I continue contributing post-tax to my 403b even if I contribute to a roth IRA?

3. Does anyone have any recommendations on how to invest long-term with my HSA (pre-tax + employer contributions)? Additionally, any advice for specific investments while also being conscious of asset allocation and knowing that I have other tax advantaged accounts with a large s&p 500, small cap, and total international stock index fund?

4. I have contemplated investing my HSA into a mid cap (FSMDX) fund but I have also read that a mid cap may not offer any benefit due to the s&p 500 and small cap funds having substantial overlap into mid caps as well. I have also thought about using a total stock market fund, possibly a fidelity zero total market index fund. Could anyone shed some light on this area?

Other Employer 403b Options:
Various Vanguard Target Dates 2020 - 2065.
VTINX (vanguard target retirement income) (ER.12)
Vanguard developed (VTMGX), emerging (VEMAX), and international growth (VWILX) (ER 0.07, 0.14, and 0.33 respectively).
Vanguard Real estate (VGSLX) (ER 0.12)
Tiaa Crf Bond Plus (TIBFX) (0.30)
Vngrd High Yld Corp (VWEAX (ER 0.13)
Vngrd Infl Prtct Secrt (VAIPX) (ER 0.10)
Vngrd Ttl Bond Mrkt Indx (VBTLX) (ER 0.05)
Vngrd Ttl Intl Bond Indx (VTABX) (ER 0.11)
Ab Lrgcp Grwth (APGZX) (ER 0.54)
Schwab S P 500 Indx (SWPPX) (ER 0.02)
Schwab Smcp Indx (SWSSX) (ER 0.04)
Vngrd Grwth Indx (VIGAX) (ER 0.05)
Vngrd Midcp Grwth Indx (VMGMX) (ER 0.07)
Vngrd Value Indx (VVIAX) (ER 0.05)


Any and all advice is welcome. This is definitely an interesting time to start a career and learn about investing/personal finance.
Thanks in Advance.
Last edited by Steg_N on Thu Jun 10, 2021 8:47 pm, edited 1 time in total.
pkcrafter
Posts: 14917
Joined: Sun Mar 04, 2007 12:19 pm
Location: CA
Contact:

Re: Portfolio Advice

Post by pkcrafter »

Welcome to the forum,
Steg_N wrote: Wed Jun 09, 2021 10:44 pm Hello Bogleheads,
Just thought I would reach out since I'm a relatively new investor and less than 1 year out from grad school. I have also been attempting to become more finance savvy over the past several months and reading many books or bogle forums. As you already know, every question answered creates even more so here are a few that I would appreciate receiving advice for? I will also offer a bit of context to my current situations. First, I have an employer 403b which I contribute 10% to on a post-tax basis and receive an employer match of 50% on the first 5% of contributions. Additionally, I have a Roth IRA with Fidelity. I also have a high deductible insurance plan with my employer contributing $750.00/year to a Health Equity HSA. Further, I will be making quarterly transfers from my Health Equity to Fidelity HSA for investment freedom.

Emergency Fund = 6 months
Age = 26 (not married; no kids)
State = Iowa
Compensation = $70,000/year (paid hourly not salary)
Tax Rate = 22%
Home = Currently Renting
Student Loan Debt = $72,000 (no payments due; interest set at 0%)
Saving approximately $1,500.00/month towards loans <--Good that you are doing this.
Total Investments: ~ Low 5 Figures

Employer 403b (52%):
52% into Vanguard Target Retirement 2060 Fund (VTTSX) (ER 0.15%). 10% of post-tax (Roth) every paycheck (addition of employer match of 50% on the first 5%).

Roth 401k vs 401k

https://www.nerdwallet.com/article/investing/roth-401k

FIdelity Roth IRA (48%):
28% fidelity s&p 500 (FXAIX) (ER 0.015%)
10% fidelity small cap) (FSSNX (ER 0.03%)
10% fidelity total international (FTIHX) (ER 0.06%)

Fidelity HSA:
0% currently. When I first accepted job, didn't opt into any contributions but will change this soon. I will be attempting to max out the HSA contributions in 2022.

HSA information

https://www.investopedia.com/terms/h/hsa.asp

Fidelity Taxable Brokerage:
Unknown percentage into vanguard total stock market ETF (VTI) (ER 0.03%). Basically, dumping extra money here after each pay cycle or month for long term savings.

Total Percentage = 100% if not counting taxable account

Questions:
1. First and foremost, anything significantly wrong with my plan/strategy which may need immediate attention?

Looks OK.

2. Due to my employer 403b allowing me to choose between contributing on a pre- or post-tax basis, can anyone tell me which contribution style is preferred and why? In other words, should I continue contributing post-tax to my 403b even if I contribute to a roth IRA?

See link above

3. Does anyone have any recommendations on how to invest long-term with my HSA (pre-tax + employer contributions)? Additionally, any advice for specific investments while also being conscious of asset allocation and knowing that I have other tax advantaged accounts with a large s&p 500, small cap, and total international stock index fund?

See link above


4. I have contemplated investing my HSA into a mid cap (FSMDX) fund but I have also read that a mid cap may not offer any benefit due to the s&p 500 and small cap funds having substantial overlap into mid caps as well. I have also thought about using a total stock market fund, possibly a fidelity zero total market index fund. Could anyone shed some light on this area?

Midcaps (Mel's Unloved Midcaps). Note: Overweighting small and/or mid will cause market tracking error (your portfolio will not behave like or track the market.)

viewtopic.php?t=11153

Any and all advice is welcome. This is definitely an interesting time to start a career and learn about investing/personal finance.

Yes indeed!

Getting Started

https://www.bogleheads.org/wiki/Getting_started

Paul


When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
go2run
Posts: 115
Joined: Wed Mar 08, 2017 1:34 pm

Re: Portfolio Advice

Post by go2run »

Welcome to the forum!

Questions:
1. First and foremost, anything significantly wrong with my plan/strategy which may need immediate attention?
I am confused with what you commented about with your taxable account. Do you have nothing in the account now and are planning future contributions based on money availability? Whatever you do have there, add that into your overall portfolio and adjust your percentages between 403B, Roth IRA, HSA, and Taxable. The combination of these should add to 100%. Also, what is your

2. Due to my employer 403b allowing me to choose between contributing on a pre- or post-tax basis, can anyone tell me which contribution style is preferred and why? In other words, should I continue contributing post-tax to my 403b even if I contribute to a roth IRA?
It maybe better to do pre-tax contributions currently. It really is up the tax situation for the individual and there is a breakeven point when traditional is preferred over Roth. Just know that your employer contributions are going in on a pre-tax basis. Do you have an in-plan Roth conversion? Have you considered converting the contributions to Roth or do you currently do that regularly?

3. Does anyone have any recommendations on how to invest long-term with my HSA (pre-tax + employer contributions)? Additionally, any advice for specific investments while also being conscious of asset allocation and knowing that I have other tax advantaged accounts with a large s&p 500, small cap, and total international stock index fund?
See link from the response above.

4. I have contemplated investing my HSA into a mid cap (FSMDX) fund but I have also read that a mid cap may not offer any benefit due to the s&p 500 and small cap funds having substantial overlap into mid caps as well. I have also thought about using a total stock market fund, possibly a fidelity zero total market index fund. Could anyone shed some light on this area?
See link from the response above. If it were me, I would keep it in total market index fund.

Any and all advice is welcome. This is definitely an interesting time to start a career and learn about investing/personal finance.
Thanks in Advance.
[/quote]
User avatar
ruralavalon
Posts: 21440
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Portfolio Advice

Post by ruralavalon »

Welcome to the forum :D .

It is always an interesting time to start.



Steg_N wrote: Wed Jun 09, 2021 10:44 pm Hello Bogleheads,
Just thought I would reach out since I'm a relatively new investor and less than 1 year out from grad school. I have also been attempting to become more finance savvy over the past several months and reading many books or bogle forums. As you already know, every question answered creates even more so here are a few that I would appreciate receiving advice for? I will also offer a bit of context to my current situations. First, I have an employer 403b which I contribute 10% to on a post-tax basis and receive an employer match of 50% on the first 5% of contributions. Additionally, I have a Roth IRA with Fidelity. I also have a high deductible insurance plan with my employer contributing $750.00/year to a Health Equity HSA. Further, I will be making quarterly transfers from my Health Equity to Fidelity HSA for investment freedom.

Emergency Fund = 6 months
Age = 26 (not married; no kids)
State = Iowa
Compensation = $70,000/year (paid hourly not salary)
Tax Rate = 22%
Home = Currently Renting
Student Loan Debt = $72,000 (no payments due; interest set at 0%)
Saving approximately $1,500.00/month towards loans
Total Investments: ~ Low 5 Figures

Employer 403b (52%):
52% into Vanguard Target Retirement 2060 Fund (VTTSX) (ER 0.15%). 10% of post-tax (Roth) every paycheck (addition of employer match of 50% on the first 5%).

FIdelity Roth IRA (48%):
28% fidelity s&p 500 (FXAIX) (ER 0.015%)
10% fidelity small cap) (FSSNX (ER 0.03%)
10% fidelity total international (FTIHX) (ER 0.06%)

Fidelity HSA:
0% currently. When I first accepted job, didn't opt into any contributions but will change this soon. I will be attempting to max out the HSA contributions in 2022.

Fidelity Taxable Brokerage:
Unknown percentage into vanguard total stock market ETF (VTI) (ER 0.03%). Basically, dumping extra money here after each pay cycle or month for long term savings.

Total Percentage = 100% if not counting taxable account

Questions:
1. First and foremost, anything significantly wrong with my plan/strategy which may need immediate attention?

2. Due to my employer 403b allowing me to choose between contributing on a pre- or post-tax basis, can anyone tell me which contribution style is preferred and why? In other words, should I continue contributing post-tax to my 403b even if I contribute to a roth IRA?

3. Does anyone have any recommendations on how to invest long-term with my HSA (pre-tax + employer contributions)? Additionally, any advice for specific investments while also being conscious of asset allocation and knowing that I have other tax advantaged accounts with a large s&p 500, small cap, and total international stock index fund?

4. I have contemplated investing my HSA into a mid cap (FSMDX) fund but I have also read that a mid cap may not offer any benefit due to the s&p 500 and small cap funds having substantial overlap into mid caps as well. I have also thought about using a total stock market fund, possibly a fidelity zero total market index fund. Could anyone shed some light on this area?

Any and all advice is welcome. This is definitely an interesting time to start a career and learn about investing/personal finance.
Thanks in Advance.
What will the interest rate be on your $72k student debt?


Roth versus traditional contributions.
I see that your current federal tax bracket is 22%. What is your current tax bracket for state taxes?

Will you be eligible for both a significant pension and Security Security benefits? What is your profession or occupation? Do you currently have anything in traditional tax-deferred accounts?

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 401k 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 a substantial pension in addition to Social Security? A pension 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".




Fund selection.
Your employer's 403b apparently offers good funds with low expense ratios. The fund you have chosen to use, Vanguard Target Retirement 2060 Fund (VTTSX) (ER 0.15%), is an excellent choice.

An allocation fund seems to inoculate the investor against behavioral errors, and so produce higher investor returns. Morningstar (8/15/2019) "Mind the Gap 2019", link.

In your Fidelity HSA you could consider also using an allocation fund such as Fidelity Freedom® Index 2060 Fund - Institutional Premium Class (FFLEX) ER 0.08%.


Prioritizing investments.
I suggest maximum annual employee contributions ($19.5k) to the 403b account as a priority ahead of contributions to a Roth IRA or taxable brokerage account.

Wiki article "Prioritizing Investments", link. "If the company plan offers good, low-cost funds, it may be preferable to contribute to the company plan before contributing to an IRA". The 403b has the added benefit of automatic contributions from payroll, which helps maintain savings discipline.

The employer match does not count toward the annual employee maximum, it is extra.



Adding information.
What other funds are offered in your employer's 401k plan? Please give fund names, tickers and expense ratios.

Please simply add this, and any other 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
rhubarbpie
Posts: 27
Joined: Mon May 03, 2021 9:18 am

Re: Portfolio Advice

Post by rhubarbpie »

It looks like you've got a great foundation in place and are making good choices. All the funds you've chosen have a nice low ER and seem appropriate.

You're already contributing enough to get your full employer match; after that my next priority would be getting rid of the student loans as soon as they start charging you interest again. Then I'd max out the HSA and work up to maxing out the 403b. If you're able to contribute more because of the tax credits if you do a traditional IRA and a traditional 403b rather than a Roth, that's a fine way to go. It just depends on what the rest of your budget looks like.
Topic Author
Steg_N
Posts: 3
Joined: Wed Jun 09, 2021 8:35 pm

Re: Portfolio Advice

Post by Steg_N »

Thank you everyone. I am extremely grateful for the advice and recommendations.
I have edited the original post to better represent my situations as well as answer a few of your questions.

I hope this clarifies any ambiguity. -Thank You
User avatar
ruralavalon
Posts: 21440
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Portfolio Advice

Post by ruralavalon »

Steg_N wrote: Wed Jun 09, 2021 10:44 pmOther Employer 403b Options:
Various Vanguard Target Dates 2020 - 2065.
VTINX (vanguard target retirement income) (ER.12)
Vanguard developed (VTMGX), emerging (VEMAX), and international growth (VWILX) (ER 0.07, 0.14, and 0.33 respectively).
Vanguard Real estate (VGSLX) (ER 0.12)
Tiaa Crf Bond Plus (TIBFX) (0.30)
Vngrd High Yld Corp (VWEAX (ER 0.13)
Vngrd Infl Prtct Secrt (VAIPX) (ER 0.10)
Vngrd Ttl Bond Mrkt Indx (VBTLX) (ER 0.05)
Vngrd Ttl Intl Bond Indx (VTABX) (ER 0.11)
Ab Lrgcp Grwth (APGZX) (ER 0.54)
Schwab S P 500 Indx (SWPPX) (ER 0.02)
Schwab Smcp Indx (SWSSX) (ER 0.04)
Vngrd Grwth Indx (VIGAX) (ER 0.05)
Vngrd Midcp Grwth Indx (VMGMX) (ER 0.07)
Vngrd Value Indx (VVIAX) (ER 0.05)
Your employer's 401k plan offers excellent funds with low expense ratios. So I suggest making maximum annual employee contributions to your 403b account as a priority ahead of contributions to your Roth IRA and your taxable account.

Steg_N wrote: Wed Jun 09, 2021 10:44 pmStudent Loan Debt = $72,000. No payments due; interest currently set at 0% (estimate 6-8% when interest rates resume)
Saving approximately $1,500.00/month towards student loans (minimum is ~990)
Accelerated payoff of your 6-8% student debt should also be a priority ahead of contributions to your Roth IRA and your taxable account.

Steg_N wrote: Wed Jun 09, 2021 10:44 pmAge = 26 (not married; no kids)
State = Iowa
Compensation = $70,000/year (paid hourly not salary) as a Physical Therapist
Pension? = No pension offered
Tax Rate = 22% Federal and 8.53% State
With no pension expected, and a current total marginal tax rate of 30.53%, I suggest that you make traditional tax-deductible contributions to your 403b account.


In selecting funds to use strive for a combination of both broad diversification (to reduce risk) and low expense ratios (to increase your net returns).

For utmost simplicity I still suggest using target date funds, in both your 403b account and your HSA.

If you want separate index funds instead, my suggestion for your 403b account would be:
1) Schwab S&P 500 Index Fund (over 80% of the U.S. stock market) (SWPPX) (ER 0.02);
2) Vanguard Developed Markets Index Fund (VTMGX) ER 0.07%; and
3) Vanguard Total Bond Market Index Fund (VBTLX) (ER 0.05).

If you want to use individual index funds, then in your HSA at Fidelity you could use Fidelity® 500 Index Fund (over 80% of the U.S. stock market) (FXAIX) ER 0.015%.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
Steg_N
Posts: 3
Joined: Wed Jun 09, 2021 8:35 pm

Re: Portfolio Advice

Post by Steg_N »

ruralavalon wrote: Fri Jun 11, 2021 10:46 am
Steg_N wrote: Wed Jun 09, 2021 10:44 pmOther Employer 403b Options:
Various Vanguard Target Dates 2020 - 2065.
VTINX (vanguard target retirement income) (ER.12)
Vanguard developed (VTMGX), emerging (VEMAX), and international growth (VWILX) (ER 0.07, 0.14, and 0.33 respectively).
Vanguard Real estate (VGSLX) (ER 0.12)
Tiaa Crf Bond Plus (TIBFX) (0.30)
Vngrd High Yld Corp (VWEAX (ER 0.13)
Vngrd Infl Prtct Secrt (VAIPX) (ER 0.10)
Vngrd Ttl Bond Mrkt Indx (VBTLX) (ER 0.05)
Vngrd Ttl Intl Bond Indx (VTABX) (ER 0.11)
Ab Lrgcp Grwth (APGZX) (ER 0.54)
Schwab S P 500 Indx (SWPPX) (ER 0.02)
Schwab Smcp Indx (SWSSX) (ER 0.04)
Vngrd Grwth Indx (VIGAX) (ER 0.05)
Vngrd Midcp Grwth Indx (VMGMX) (ER 0.07)
Vngrd Value Indx (VVIAX) (ER 0.05)
Your employer's 401k plan offers excellent funds with low expense ratios. So I suggest making maximum annual employee contributions to your 403b account as a priority ahead of contributions to your Roth IRA and your taxable account.

Steg_N wrote: Wed Jun 09, 2021 10:44 pmStudent Loan Debt = $72,000. No payments due; interest currently set at 0% (estimate 6-8% when interest rates resume)
Saving approximately $1,500.00/month towards student loans (minimum is ~990)
Accelerated payoff of your 6-8% student debt should also be a priority ahead of contributions to your Roth IRA and your taxable account.

Steg_N wrote: Wed Jun 09, 2021 10:44 pmAge = 26 (not married; no kids)
State = Iowa
Compensation = $70,000/year (paid hourly not salary) as a Physical Therapist
Pension? = No pension offered
Tax Rate = 22% Federal and 8.53% State
With no pension expected, and a current total marginal tax rate of 30.53%, I suggest that you make traditional tax-deductible contributions to your 403b account.


In selecting funds to use strive for a combination of both broad diversification (to reduce risk) and low expense ratios (to increase your net returns).

For utmost simplicity I still suggest using target date funds, in both your 403b account and your HSA.

If you want separate index funds instead, my suggestion for your 403b account would be:
1) Schwab S&P 500 Index Fund (over 80% of the U.S. stock market) (SWPPX) (ER 0.02);
2) Vanguard Developed Markets Index Fund (VTMGX) ER 0.07%; and
3) Vanguard Total Bond Market Index Fund (VBTLX) (ER 0.05).

If you want to use individual index funds, then in your HSA at Fidelity you could use Fidelity® 500 Index Fund (over 80% of the U.S. stock market) (FXAIX) ER 0.015%.

Thank you, I can't tell you how much I appreciate all the clarifications and recommendations. I do think that I will be keeping the my target date fund in my 403b for simplicity purposes, but switching to pre-tax contributions (traditional) thanks to your advice. The marginal tax rate is something I haven't really considered so thank you for pointing this out. As far as the HSA fund investment strategy, I will consider Fidelity's 500 Index Fund. I already have this fund in my Roth IRA and really like its performance and expense ratio.

Thanks Again
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