Where Do I Go From Here - Asset Location [2022 Update]

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4nursebee
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Re: Where Do I Go From Here - Investment Policy Statement - New

Post by 4nursebee »

I have no idea what type of annuity we have. We bought one to cover minimum expenses until maximum SS age. Fidelity helped with this.
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clip651
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Re: Where Do I Go From Here - Investment Policy Statement - New

Post by clip651 »

4nursebee wrote: Sat Oct 16, 2021 3:42 am I have no idea what type of annuity we have. We bought one to cover minimum expenses until maximum SS age. Fidelity helped with this.
If that's working for you, that's great.

To OP - general boglehead advice is to be very careful with annuities and be aware of exactly what you're buying and what the terms fees are, etc. Most are high fee, high restrictions, very complicated, and basically engineered to sound better than they are so that salespeople can push you into them for profit. A single premium immediate annuity (SPIA) is the one "good" annuity that bogleheads generally recommend if one is needed/wanted.

Sounds like you may not need one, due to pension and social security, etc. But that's based on a quick impression on what you've written, I haven't done a deep analysis of your situation. It's an option to keep in mind, though, if you want more income security specifically.

cj
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AnnetteLouisan
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Re: Where Do I Go From Here - Investment Policy Statement - New

Post by AnnetteLouisan »

I‘m quite unlikely to purchase an annuity, given my pension and social security. I warn my parents about them all the time. I can always sell or rent out my $600k micro apartment and move to a lower COLA. Living in a VHCOLA has been good for my income but not for much else, given the polluted air, crowds, very high prices and taxes.

I‘ve learned a lot on here.
-retiring at 57 or 58 potentially was unrealistic, which is good to know at 54. So now I‘ll aim for 60 or 62.
-the Baird core plus bond fund in my 401k is actively managed when I thought it was indexed.
-my healthy income is an asset/income stream worth protecting- it would be too wasteful to retire early and lose thst primary source of financial health, not to mention medical coverage.
-not doing a backdoor Roth IRA during my working years because I was above the income limit was incredibly wasteful.
-I‘m much more dependent on social security and my pension than I thought.
-I left a lot of money on the table by starting investing very late and being so low in equities in my AA.
This is all positive because it informs my next steps.
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AnnetteLouisan
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Re: Where Do I Go From Here - Changing Future Allocations

Post by AnnetteLouisan »

This week I plan to change my 401k *future allocation* from mostly stable value to:

25 percent stable value ER 0.15
25 percent State Street S&P 500 0.01
10 percent State Street US bond ER 0.02
10 percent State Street mid cap idx cl II 0.02
5 percent State Street Gl all cap ex US 0.05

all my other 401k options have much higher ERs.

this account is only 20 percent equity so this way I am adding equity gradually

does this make sense????
also I may put my new Roth IRA into VOO or ITOT, or both.

someone else suggested selling all $110,000 of my Baird fund ER 0.30, and putting half in the lower ER bond fund and half in s&p for a quicker impact- is this a better plan?

see complete IPS above
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bertilak
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Re: Where Do I Go From Here - Changing Future Allocations

Post by bertilak »

AnnetteLouisan wrote: Tue Oct 19, 2021 9:43 pm 25 percent stable value ER 0.15
25 percent State Street S&P 500 0.01
10 percent State Street US bond ER 0.02
10 percent State Street mid cap idx cl II 0.02
5 percent State Street Gl all cap ex US 0.05


...

does this make sense????
Lots of overlap (in blue), adding unneeded complexity. I would limit my equities to all cap (assuming it's an index) or S&P500 since it is a bit cheaper than the all cap.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
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AnnetteLouisan
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Re: Where Do I Go From Here - Changing Future Allocations

Post by AnnetteLouisan »

bertilak wrote: Wed Oct 20, 2021 10:13 am
AnnetteLouisan wrote: Tue Oct 19, 2021 9:43 pm 25 percent stable value ER 0.15
25 percent State Street S&P 500 0.01
10 percent State Street US bond ER 0.02
10 percent State Street mid cap idx cl II 0.02
5 percent State Street Gl all cap ex US 0.05


...

does this make sense????
Lots of overlap (in blue), adding unneeded complexity. I would limit my equities to all cap (assuming it's an index) or S&P500 since it is a bit cheaper than the all cap.
ok- Ill just do the s&p. I agree I want to keep it simple.

25 percent stable value
10 percent US bond
65 percent s&p
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Re: Where Do I Go From Here - Changing Future Allocations

Post by placeholder »

bertilak wrote: Wed Oct 20, 2021 10:13 am
AnnetteLouisan wrote: Tue Oct 19, 2021 9:43 pm 5 percent State Street Gl all cap ex US 0.05
I would limit my equities to all cap (assuming it's an index) or S&P500 since it is a bit cheaper than the all cap.
That all cap is ex US so not overlapping the sp 500 much at all.
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bertilak
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Re: Where Do I Go From Here - Changing Future Allocations

Post by bertilak »

placeholder wrote: Wed Oct 20, 2021 5:21 pm
bertilak wrote: Wed Oct 20, 2021 10:13 am
AnnetteLouisan wrote: Tue Oct 19, 2021 9:43 pm 5 percent State Street Gl all cap ex US 0.05
I would limit my equities to all cap (assuming it's an index) or S&P500 since it is a bit cheaper than the all cap.
That all cap is ex US so not overlapping the sp 500 much at all.
Ah. Better.
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AnnetteLouisan
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Re: Where Do I Go From Here - IPS and Proposed Reallocations

Post by AnnetteLouisan »

ok so, for -future- allocation ONLY in my 401k for 54 year old risk averse Annette in high tax earning 290 w 1.2 mil at 10/90 w pension ss, plus a separate TSP, family longevity and a free and clear house, full IPS above, p. 3, no taxable brokerage yet, maybe ever.

dollar cost average into this UP TO 25 percent equities, taking advantage of the price dips, and thats the end, I don’t have to deal w this anymore for a while? and neither do you? 😂

5 percent global all cap ex US
10 percent US bond
25 percent stable value
60 percent s&p

plus 7k in my Fidelity Roth IRA into ITOT, IVV and or VOO

can I get a HEY! if I get five heys I‘m outta here!! 🤞🏻🙏🏻
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AnnetteLouisan
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Re: Where Do I Go From Here - IPS and Proposed Reallocations

Post by AnnetteLouisan »

So what if….in the interest of simplicity and proper tax placement, not to mention conceptual ease:

1. Fixed Income. I did mostly G Fund in my TSP, since the consensus is the G Fund is better than most other fixed income investments. And that, my I bonds and my pension & ss could be my fixed income.

2. Funds. 25 percent stable value, 65 percent s&p and 10 percent state street global all cap ex US in my 401k.

and

3. Risk Money/TLH pairs/ETFs. ITOT or VTI in my Roth IRA, HSA and taxable brokerage.
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AnnetteLouisan
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Re: Where Do I Go From Here - IPS and Proposed Reallocations

Post by AnnetteLouisan »

Newbie mea culpa… Looking at putting my new $7,000 Roth IRA into ITOT or VOO consistent with my new IPS but the five year chart for each stops me. It can’t be true that this is the only asset class where the price doesn’t matter, can it? We saw something similar in 2007 with real estate.

I do understand that no one should time the market and no one can predict the future, and it certainly could continue its upward trajectory, but I don’t want to overpay for fund shares either. I suppose I could put half in. I don’t consider any of this really money that I can afford to lose and my TSP and 401k are already 20 percent stocks. My goal is 25 percent.
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Re: Where Do I Go From Here - IPS and Proposed Reallocations

Post by placeholder »

If it made sense for you to not invest in these because they are higher than before then it would make sense for all of us that already have those type in tax advantaged to sell and wait around but like you say (but seem NOT to believe) no one should time the market.
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Re: Where Do I Go From Here - IPS and Proposed Reallocations

Post by SnowBog »

If you look at any stock chart over time, the vast majority of the time it goes "up and to the right" - meaning with rare exceptions we are always at "all time highs".

So the question is, on your investing time horizon, do you think the economic engine is going to turn off and that companies won't leo innovating, selling, and making profit?

I don't - so I invest. But I'm investing for the long term.

Could there be a huge crash next week - yep. Would it have been "better" to wait and get 2x the shares for the same money - sure. But the problem is you lose more money "waiting" by missing out on growth than you do investing when you have the money available. As you don't know if you need to wait 3 days, months, years, decades for the next big crash... And when that crash eventually happens, I can "sell high, buy low" by rebalancing to keep my AA.
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AnnetteLouisan
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Re: Where Do I Go From Here - IPS and Proposed Reallocations

Post by AnnetteLouisan »

and this stuff gives us dividends anyway, right? the total market indices like ITOT? so the current price doesn’t matter much because we get dividends and the long term trajectory is up anyway? This IRA money is for my 70s and I‘m 54. Are the dividends reinvested or credited with VOO, ITOT and VTI?
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Re: Where Do I Go From Here - IPS and Proposed Reallocations

Post by SnowBog »

Correct, you invest because you believe over the long term the market will continue to improve. If it drops the day after you invest - shrug your shoulders - it could have easily risen for 20 weeks. You just don't know in the short term... But you are investing for the long term...
AnnetteLouisan wrote: Tue Oct 26, 2021 6:26 pm Are the dividends reinvested or credited with VOO, ITOT and VTI?
That's a function of how you have your account/investments setup.

For example, at Fidelity I can mange what to do with dividends/capital gains. I can reinvest them, direct them to a different investment, or deposit them to my "default" cash position.

I generally setup my tax-advantaged accounts to reinvest, and my taxable accounts to deposit to cash (so I can decide where to invest those funds based on my AA and if anything is low).
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AnnetteLouisan
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Re: Where Do I Go From Here - IPS and Proposed Reallocations

Post by AnnetteLouisan »

I get it. I have a pathological amount of „safe“ money already. My IRA is intended for a stock index for my 70s, in accordance with my IPS, and I take it I will reinvest dividends since the earnings are tax free (IF I take them out after five years and after age 59.5). So in 17 years.. yes I buy the idea that it will be higher then than today. But even if not, it will have 17 years of tax free dividends.

ahhh—ahhh! (seeing the light finally!😅) thanks sll.
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AnnetteLouisan
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Re: Where Do I Go From Here - IPS and Proposed Reallocations

Post by AnnetteLouisan »

I received more granular detail on my pension today from HR. The difference between retiring at 57 vs. 62 is about $14k a year (a little more difference if I started collecting it at 57), plus obviously the good salary I would forego. The pension will be pretty modest anyway since I worked elsewhere for 2 decades.

retire at 57… $25k pension
retire at 57 but defer collecting… $33k pension
Retire at 59…$33k pension
Retire at 59 but defer.. $38k pension
Retire at 62… $45k pension

plus ss of $29k at 62, $39k at 67.

$14k/yr doesn’t seem like a big enough difference to make up for those years (although the salary does and maybe the 14k would add up over time and be significant).

I did learn that medical would only be $3300/yr in retirement and that seems low so it was good news.

Retiring at 59 and deferring collecting until 62 seems ok, plus ss at 67.
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

Post by SnowBog »

Out of curiosity, can you defer later than 62? If so, you may want to learn those details.

As I understand my spouse's pension, they can defer as late as 66. Like yours, the payout increases for each year deferred.

At current, we plan to defer as long as possible.
We'll take advantage of those "no income" years for things like Roth conversions, maybe Tax Gain Harvesting, etc.

Similar to social security, we also think of deferring as helping to provide "longevity insurance". In the unlikely event we live to unexpectedly old ages, the extra income will help ensure we don't outlive our money.

But there's obviously a balance there, as we can't spend our entire savings just to defer pensions/SS. But knowing the numbers helps figure out what makes sense for you.
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AnnetteLouisan
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

Post by AnnetteLouisan »

SnowBog wrote: Wed Oct 27, 2021 10:49 pm Out of curiosity, can you defer later than 62? If so, you may want to learn those details.

As I understand my spouse's pension, they can defer as late as 66. Like yours, the payout increases for each year deferred.

At current, we plan to defer as long as possible.
We'll take advantage of those "no income" years for things like Roth conversions, maybe Tax Gain Harvesting, etc.

Similar to social security, we also think of deferring as helping to provide "longevity insurance". In the unlikely event we live to unexpectedly old ages, the extra income will help ensure we don't outlive our money.

But there's obviously a balance there, as we can't spend our entire savings just to defer pensions/SS. But knowing the numbers helps figure out what makes sense for you.
In our case its a haircut if one opts to collect before age 62, so I don’t think the pension increases if I work to 59 and defer past 62, but I can check. And I think the carryover medical starts when the pension annuity starts so there could be a disincentive to defer there, but I will find out.

I do need to consider the order of withdrawals: savings first, then 401, then pension, then SS?

Others asked if there is a lump sum option (to invest it!) but I believe not, and I wouldn’t anyway. I‘m such a bird-in-hand gal, though, that I am not sure I would trust that I‘d actually receive it if I waited too long past employment. I‘ve seen a lot of unwelcome surprises confront people in life. A lot. Too many. I may want to just lock in whatever the deal is when I leave, since everything is subject to apparently arbitrary change.
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

Post by SnowBog »

AnnetteLouisan wrote: Thu Oct 28, 2021 8:44 am I do need to consider the order of withdrawals: savings first, then 401, then pension, then SS?
The answer might be to do some of them in parallel.

For example, if you have no other "taxable income" you'd probably minimally want to withdraw up to at least the standard deduction from your 401k (or do Roth conversions up to same). Some people might even go up to the top of the first or second tax bracket, with the idea of lowering RMDs - and smoothing taxes over retirement (and thus lowering taxes by trying to keep income in lower tax brackets).

Any gaps to your expenses would be filled from savings /taxable accounts /etc.

Once your pensions and SS kick in, both will impact the above as they'll lower the amount of "room" left. Social Security also has unique taxation where not all of it is taxed, the amount depends on your income, which also creates a "cliff" of sorts if you fall between specific ranges.
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AnnetteLouisan
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

Post by AnnetteLouisan »

SnowBog wrote: Thu Oct 28, 2021 8:56 am
AnnetteLouisan wrote: Thu Oct 28, 2021 8:44 am I do need to consider the order of withdrawals: savings first, then 401, then pension, then SS?
The answer might be to do some of them in parallel.

For example, if you have no other "taxable income" you'd probably minimally want to withdraw up to at least the standard deduction from your 401k (or do Roth conversions up to same). Some people might even go up to the top of the first or second tax bracket, with the idea of lowering RMDs - and smoothing taxes over retirement (and thus lowering taxes by trying to keep income in lower tax brackets).

Any gaps to your expenses would be filled from savings /taxable accounts /etc.

Once your pensions and SS kick in, both will impact the above as they'll lower the amount of "room" left. Social Security also has unique taxation where not all of it is taxed, the amount depends on your income, which also creates a "cliff" of sorts if you fall between specific ranges.
and then add to that possible rental income or proceeds from real estate sales. I‘ll have no time to write that children‘s book I was planning. 🙄 It‘s amazing how complex all this is. I should probably get a CPA at some point. Or at least view these choices more optimistically- as opportunities for tax savings and income maximization rather than just as mind bending oppressive minutia.

Both parents took social security at the latest possible date.
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

Post by AnnetteLouisan »

I’ve been doing some reading and watching the BH recommended investment videos. I especially liked the explanation of why total market is better than s&p. I also have a better understanding of why it doesn’t matter where the market is at any given time, and why we shouldn’t try to market time.

I’m still trying to decide where to put my $7k of Fidelity Roth IRA money this year: VTI, ITOT or a Fidelity fund. Barron’s recommends ITOT “by a nose,” they say, so I’m leaning toward that, but also interested in doing 80 percent total market and 20 percent in a muni or utility fund like VPU just for the experience. Also not sure if DCA-ing in would cost more in fees.

Looking forward to getting my Nov 1 tallies.

After that my next decision is whether to open an HSA/HDHP in open enrollment. And whether to keep maxing the unmatched catch up contribution. Probably will do both.
Last edited by AnnetteLouisan on Sun Oct 31, 2021 1:23 pm, edited 1 time in total.
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

Post by SnowBog »

For the most part there is negligible difference between "total market funds".

Even using an extreme example of VTI which tracks a well known index and Fidelity's proprietary "zero free" FZROX. If you compare them in portfolio visualizer, the diffence is very, very small...

And when you get around to looking at buying them in a taxable account, and if you decide to look at things like Tax Loss Harvesting, you'll realize that you probably will end up owning multiple. In my case, I have 3 different total stock market funds in taxable. I don't stress about it [anymore].

So don't get analysis paralysis. Just pick one and go with it. The gains you miss out on by being on the sidelines are likely far more than the differences between good low cost index funds.
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

Post by Wiggums »

I count cash and bonds as fixed income.

Your pension, social security, etc. are sources of income that reduce the amount you need to take out of your portfolio. I would not count income as bonds.
"I started with nothing and I still have most of it left."
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

Post by SnowBog »

SnowBog wrote: Sun Oct 31, 2021 1:00 pm For the most part there is negligible difference between "total market funds".

Even using an extreme example of VTI which tracks a well known index and Fidelity's proprietary "zero free" FZROX. If you compare them in portfolio visualizer, the diffence is very, very small...

And when you get around to looking at buying them in a taxable account, and if you decide to look at things like Tax Loss Harvesting, you'll realize that you probably will end up owning multiple. In my case, I have 3 different total stock market funds in taxable. I don't stress about it [anymore].

So don't get analysis paralysis. Just pick one and go with it. The gains you miss out on by being on the sidelines are likely far more than the differences between good low cost index funds.
Just to expand on my prior post. Had you gotten the $7000 invested into a total stock market in October, you would have gained roughly $460 for one month. https://www.portfoliovisualizer.com/bac ... ion3_3=100

That's 3.8 times more gain than the difference between these funds since 2010 (which is only $121 over 11+ years). https://www.portfoliovisualizer.com/bac ... ion3_3=100

So this is a case of "don't let perfection be the enemy of good enough".

That said, personally I'm partial to default to the mutual fund of my brokerage for tax-advantaged accounts. You generally don't have any fees, and since it's tax-advantaged aren't concerned with tax-efficiency or portability of ETF. But my primary reason is that you have exactly $7000 to invest - and you can't add more (due to contribution limits). With a mutual fund - you'll get exactly that amount invested. With ETFs, if you're brokerage supports fractional shares, you'll likely get $6999.97 invested - as invariably there's a price change that leaves you with a few cents left. In a taxable account, I'd just move that to my checking account. But having a few cents uninvested in my tax-advantaged accounts is annoying to me personally. Hence why I just use the mutual fund of my brokerage. "Good enough."

This link has info on the default mutual funds for different brokerages: https://www.bogleheads.org/wiki/Three-fund_portfolio
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

Post by AnnetteLouisan »

SnowBog wrote: Sun Oct 31, 2021 3:28 pm
SnowBog wrote: Sun Oct 31, 2021 1:00 pm For the most part there is negligible difference between "total market funds".

Even using an extreme example of VTI which tracks a well known index and Fidelity's proprietary "zero free" FZROX. If you compare them in portfolio visualizer, the diffence is very, very small...

And when you get around to looking at buying them in a taxable account, and if you decide to look at things like Tax Loss Harvesting, you'll realize that you probably will end up owning multiple. In my case, I have 3 different total stock market funds in taxable. I don't stress about it [anymore].

So don't get analysis paralysis. Just pick one and go with it. The gains you miss out on by being on the sidelines are likely far more than the differences between good low cost index funds.
Just to expand on my prior post. Had you gotten the $7000 invested into a total stock market in October, you would have gained roughly $460 for one month. https://www.portfoliovisualizer.com/bac ... ion3_3=100

That's 3.8 times more gain than the difference between these funds since 2010 (which is only $121 over 11+ years). https://www.portfoliovisualizer.com/bac ... ion3_3=100

So this is a case of "don't let perfection be the enemy of good enough".

That said, personally I'm partial to default to the mutual fund of my brokerage for tax-advantaged accounts. You generally don't have any fees, and since it's tax-advantaged aren't concerned with tax-efficiency or portability of ETF. But my primary reason is that you have exactly $7000 to invest - and you can't add more (due to contribution limits). With a mutual fund - you'll get exactly that amount invested. With ETFs, if you're brokerage supports fractional shares, you'll likely get $6999.97 invested - as invariably there's a price change that leaves you with a few cents left. In a taxable account, I'd just move that to my checking account. But having a few cents uninvested in my tax-advantaged accounts is annoying to me personally. Hence why I just use the mutual fund of my brokerage. "Good enough."

This link has info on the default mutual funds for different brokerages: https://www.bogleheads.org/wiki/Three-fund_portfolio
Thank you! Reading the prospectus for FSKAX (Fidelity total market index fund) now. ER 0.035.
Just read the prospectus for VTSAX (Vanguard Total Stock Admiral Shares).
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

Post by AnnetteLouisan »

Wiggums wrote: Sun Oct 31, 2021 1:08 pm I count cash and bonds as fixed income.

Your pension, social security, etc. are sources of income that reduce the amount you need to take out of your portfolio. I would not count income as bonds.
Can you elaborate? I’m not sure I fully understand your point. are you saying I should have a lower SWR since my anticipated pension and SS theoretically cover my projected expenses?
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

Post by tj »

AnnetteLouisan wrote: Sun Oct 31, 2021 6:13 pm
Wiggums wrote: Sun Oct 31, 2021 1:08 pm I count cash and bonds as fixed income.

Your pension, social security, etc. are sources of income that reduce the amount you need to take out of your portfolio. I would not count income as bonds.
Can you elaborate? I’m not sure I fully understand your point. are you saying I should have a lower SWR since my anticipated pension and SS theoretically cover my projected expenses?
Your total expenses minus pension/social security = the expenses that you need to have covered by your portfolio.

If your pension and SS are anticipated to cover all of your expenses, then the SWR becomes pretty irrelevant.


it certainly doesn't lower your SWR, as a lower SWR requires a larger portfolio, which is the opposite of your reality.
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

Post by SnowBog »

tj wrote: Sun Oct 31, 2021 8:28 pm
AnnetteLouisan wrote: Sun Oct 31, 2021 6:13 pm
Wiggums wrote: Sun Oct 31, 2021 1:08 pm I count cash and bonds as fixed income.

Your pension, social security, etc. are sources of income that reduce the amount you need to take out of your portfolio. I would not count income as bonds.
Can you elaborate? I’m not sure I fully understand your point. are you saying I should have a lower SWR since my anticipated pension and SS theoretically cover my projected expenses?
Your total expenses minus pension/social security = the expenses that you need to have covered by your portfolio.

If your pension and SS are anticipated to cover all of your expenses, then the SWR becomes pretty irrelevant.


it certainly doesn't lower your SWR, as a lower SWR requires a larger portfolio, which is the opposite of your reality.
Umm... Why wouldn't it lower SWR? Or more specifically lower WR? The withdrawal rate is based on expenses as a % of the portfolio. Which means that either lowering expenses or having a larger portfolio would reduce the WR.

If someone has say $10k expenses to cover after pensions/SS - a portfolio of $333k with a 3% SWR could meet the gap. If they need only $5k a $167k portfolio would meet same. But if they need to cover $100k, then they'd need a $3.3M portfolio to cover the 3%.

It's less the size of the portfolio on its own - and more the ratio of the residual expenses (after pensions/SS/rental income/etc.) to the portfolio.
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

Post by tj »

SnowBog wrote: Sun Oct 31, 2021 8:42 pm
tj wrote: Sun Oct 31, 2021 8:28 pm
AnnetteLouisan wrote: Sun Oct 31, 2021 6:13 pm
Wiggums wrote: Sun Oct 31, 2021 1:08 pm I count cash and bonds as fixed income.

Your pension, social security, etc. are sources of income that reduce the amount you need to take out of your portfolio. I would not count income as bonds.
Can you elaborate? I’m not sure I fully understand your point. are you saying I should have a lower SWR since my anticipated pension and SS theoretically cover my projected expenses?
Your total expenses minus pension/social security = the expenses that you need to have covered by your portfolio.

If your pension and SS are anticipated to cover all of your expenses, then the SWR becomes pretty irrelevant.


it certainly doesn't lower your SWR, as a lower SWR requires a larger portfolio, which is the opposite of your reality.
Umm... Why wouldn't it lower SWR? Or more specifically lower WR? The withdrawal rate is based on expenses as a % of the portfolio. Which means that either lowering expenses or having a larger portfolio would reduce the WR.

If someone has say $10k expenses to cover after pensions/SS - a portfolio of $333k with a 3% SWR could meet the gap. If they need only $5k a $167k portfolio would meet same. But if they need to cover $100k, then they'd need a $3.3M portfolio to cover the 3%.

It's less the size of the portfolio on its own - and more the ratio of the residual expenses (after pensions/SS/rental income/etc.) to the portfolio.
The SAFE withdrawal rate is the percent of your portfolio that you are allowed to extract in order to not run out of money. If you are lowering the proportion of expenses needed to be covered by your portfolio, you can can safely withdraw more from your portfolio than if you didn't have those income streams, so your SAFE withdrawal rate would be higher vs. the person with no pension or social security. Your actual withdrawal rate could certainly be lower if you wanted it to - or your expenses could be higher - obviously, you can safely draw down a lot more if you have guaranteed income streams than if you don't, assuming equivalent portfolio sizes.
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

Post by SnowBog »

Fair point. The "safe" withdrawal rate won't change I guess...

But their individual withdrawal rate to meet lowered expenses would.
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

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Ok, went with total market in my IRA. I’ll report back in my 70s how it went. 😂
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Re: Where Do I Go From Here - IPS, Pension & Medical Info

Post by AnnetteLouisan »

Now considering EE bonds as a backup plan in case my pension and SS don’t cut it in retirement, and sort of an I bond supplement. I could lose the pension and SS could be cut. However the headache of earning nothing for 20 years on just a hope of living to 74 seems too stressful and oppressive. I already have I bonds and I am already too bond heavy but EEs are a fixed rate, tax deferred guaranteed DIY annuity with no insurance company middleman where you keep the money, plus I don’t think you’d have to cash them in before maturity in bankruptcy or to pay creditors so they aren’t entirely without appeal.
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Re: Where Do I Go From Here - Asset LO-cation

Post by AnnetteLouisan »

Last week I considered series EE bonds and decided against them due to the crazy and cruel 20 year wait for the interest credit.

This week I am focusing on asset LO-cation, spurred by a random commenter on this board.

My thought is, since most of my 401k funds are in bonds anyway - which was unbeknownst to me the smart place to put them - why don’t I just keep them there (rather than trying to achieve a 25 percent equity allocation in the 401k) and put some of my bank cash and future paychecks into equities in my Roth IRA and (yet to be opened) taxable brokerage?

I already put $3500 of my Roth IRA into FSKAX (it went up, lol) and I could put the rest in and my 2022 Roth amounts there as well. Plus maybe another 20k or so into taxable this year and next. Then at least I’d have a rational asset location and not have to fiddle more with the 401k money.
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Re: Where Do I Go From Here - Asset LO-cation

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AnnetteLouisan wrote: Sat Nov 06, 2021 10:31 am Last week I considered series EE bonds and decided against them due to the crazy and cruel 20 year wait for the interest credit.

This week I am focusing on asset LO-cation, spurred by a random commenter on this board.

My thought is, since most of my 401k funds are in bonds anyway - which was unbeknownst to me the smart place to put them - why don’t I just keep them there (rather than trying to achieve a 25 percent equity allocation in the 401k) and put some of my bank cash and future paychecks into equities in my Roth IRA and (yet to be opened) taxable brokerage?

I already put $3500 of my Roth IRA into FSKAX (it went up, lol) and I could put the rest in and my 2022 Roth amounts there as well. Plus maybe another 20k or so into taxable this year and next. Then at least I’d have a rational asset location and not have to fiddle more with the 401k money.
Overall, sounds like a good plan aligned with the recommendations here: https://www.bogleheads.org/wiki/Tax-eff ... _placement

That said, I'd recommend thinking about how you plan to maintain your Asset Allocation. Eventually you are likely going to see a massive run up in stock prices that bring them higher than you want in AA or a crash bringing them lower. You need a plan to deal with both scenarios.

Since money is fungible, you have lots of options, again just need to figure out what works for you. Personally, I try to keep it simple, and ensure I have a decent amount of both stocks and bonds in my 401k - so I can do the entire rebalance in one transaction. (This ended up meaning that I needed to move some bonds into my taxable account to maintain my AA - so I use I Bonds, EE Bonds, and muni bonds [maybe non-muni would have been better, but that ship has sailed).
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Re: Where Do I Go From Here - Asset LO-cation

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I can just keep my 401s at 20 percent equity indexes and do the rest equity (Roth IRA and taxable).

In a further run up scenario I’d be ok, since I need my equity allocation to increase anyway, since I’m at 10 percent now. If my equity percentage got too far out of whack I could either sell or use my 401 to rebalance.

In a crash, well, I’m mostly in bonds and I’d just stick with my plan and buy cheaper equities.

More likely to me is a quick or gradual bond crash. But I’m mostly in the G Fund and this Baird Core Plus Institutional Bond Fund, which is allegedly so well managed…
Last edited by AnnetteLouisan on Sat Nov 06, 2021 11:48 am, edited 1 time in total.
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Re: Where Do I Go From Here - Asset LO-cation

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Sounds like you got it covered!
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Re: Where Do I Go From Here - Asset LO-cation

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SnowBog wrote: Sat Nov 06, 2021 10:59 am Sounds like you got it covered!
Who knows? But I’ve made a lot of progress in a short time thanks to all of you.

I don’t think it has to be perfectly right as long as it’s mostly right. I can tweak and set up some TLH pairs along the way.
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Re: Where Do I Go From Here - Asset Location

Post by HomeStretch »

Your latest asset placement makes sense. It will help minimize your annual taxable income while accumulating plus help slow the growth in tax deferred accounts which, in turn, should minimize RMDs and reduce Roth conversions needed.

Tax-efficient fund placement was one of the best tips I received on this board. I also found livesoft’s suggestion to review Form 1040 Schedule B helpful.
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Re: Where Do I Go From Here - Asset Location

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HomeStretch wrote: Sat Nov 06, 2021 11:37 am Your latest asset placement makes sense. It will help minimize your annual taxable income while accumulating plus help slow the growth in tax deferred accounts which, in turn, should minimize RMDs and reduce Roth conversions needed.

Tax-efficient fund placement was one of the best tips I received on this board. I also found livesoft’s suggestion to review Form 1040 Schedule B helpful.
Thanks- what should we look for in Schedule B?
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Re: Where Do I Go From Here - Asset Location

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AnnetteLouisan wrote: Sat Nov 06, 2021 11:50 am Thanks- what should we look for in Schedule B?
Schedule B includes ordinary income from interest and ordinary (non-qualified) dividends. So I reviewed my most recent Schedule B to see if there were ways to minimize it. For example, in my Taxable account I:
- exchanged (by tax loss harvesting*) balanced/target date funds for equity mutual funds to reduce income and shift remaining income to (mostly) qualified dividends.
- bought Federal tax deferred/state tax exempt I-Bonds before buying US Treasuries in a Taxable account.

* another best BH tip :happy
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Re: Where Do I Go From Here - Asset Location

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Yep, tax loss harvesting is high on my list of next things to learn about. I suppose I need a tax loss harvest pair for my FSKAX at some point.

My tasks now are:

-invest my remaining $3500 in my Fidelity Roth IRA in FSKAX or some other equity index (by year end). Currently 3500 is in FSKAX and the other 3500 in a default core treasury fund.

-grow up, address my fear and finally open and fund a small (20k?) taxable brokerage account at Fidelity (by early 2022).

-next week, attend my jobs presentation on open enrollment next week specifically to determine if the HDHP/HSA makes sense for me (35 percent federal bracket plus 14 percent state and local BUT with a history of health problems and in my 50s) - want the triple tax free HSA, of course, but don’t want to be disincentivized to get needed preventative or other medical care. Will likely depend on the terms of the HDHP and to what extent the employer subsidizes.

-by early December, make my open enrollment selections, including utilizing the new higher 401k deferral for a total of $27k with the catch up.

-decide whether to front end load my catch up or DCA in over the year.

-January: buy another 10k in I bonds
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Re: Where Do I Go From Here

Post by beyou »

AnnetteLouisan wrote: Sun Sep 19, 2021 7:48 am
ShowMeTheER wrote: Sun Sep 19, 2021 1:23 am Great expense control. You are racking up the cash with a good job.

Start a taxable account if you are comfortable, investing in equity index fund(s).

Ride your current situation for another 5 years (or more) and retire in style.
Thank you! I’ve a black belt in expense control, lol. But a lot of it is due to having no dependents and very self sufficient kinfolk.
Black Belt +
Almost seems impossible in NYC.
Clearly not living in Manhattan.
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Re: Where Do I Go From Here

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beyou wrote: Sat Nov 06, 2021 12:29 pm
AnnetteLouisan wrote: Sun Sep 19, 2021 7:48 am
ShowMeTheER wrote: Sun Sep 19, 2021 1:23 am Great expense control. You are racking up the cash with a good job.

Start a taxable account if you are comfortable, investing in equity index fund(s).

Ride your current situation for another 5 years (or more) and retire in style.
Thank you! I’ve a black belt in expense control, lol. But a lot of it is due to having no dependents and very self sufficient kinfolk.
Black Belt +
Almost seems impossible in NYC.
Clearly not living in Manhattan.
I’m definitely in Manhattan. We could argue about whether I’m living. 😂 Happy to share my tips if you want to PM me, but I’m unusual since I don’t have kids, I had a lot of advantages and travel in the past, get satisfaction from my job and hobbies and have no debt. Plus I have that samurai edge - grew up semi poor so I am used to low spend.
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Re: Where Do I Go From Here - Asset Location

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HomeStretch wrote: Sat Nov 06, 2021 12:00 pm
AnnetteLouisan wrote: Sat Nov 06, 2021 11:50 am Thanks- what should we look for in Schedule B?
Schedule B includes ordinary income from interest and ordinary (non-qualified) dividends. So I reviewed my most recent Schedule B to see if there were ways to minimize it. For example, in my Taxable account I:
- exchanged (by tax loss harvesting*) balanced/target date funds for equity mutual funds to reduce income and shift remaining income to (mostly) qualified dividends.
AnnetteLouisan wrote: Sat Nov 06, 2021 12:17 pm Yep, tax loss harvesting is high on my list of next things to learn about.
OP I think you got sidetracked by TLH.

The more relevant part was about the type of dividends, with the least tax efficient showing up on Schedule B.

Things like bank interest (which itself is already losing to inflation) and bond dividends show up on Schedule B, and are taxed at your marginal rate. For simple math let's use 50% (which may not be off too much if you are high income in NYC as I believe you have both high state +local taxes), you lost half of that already small interest and dividends.

By constrast, if you had qualified dividends instead (such as from a stock fund after owning it for a year), those are taxed at long term capital gains rates. Not sure what those are in NYC, but federal taxes would potentially be 15% - likely less than half of what federal taxes were before. Over many years, that adds up.
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Re: Where Do I Go From Here - Asset Location

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Ah yes, understood. Thanks SnowBog!!
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Re: Where Do I Go From Here - Asset Location

Post by LadyGeek »

SnowBog wrote: Sat Nov 06, 2021 3:46 pm OP I think you got sidetracked by TLH.
Help with the acronym: Tax loss harvesting
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Re: Where Do I Go From Here - Asset LO-cation

Post by clip651 »

AnnetteLouisan wrote: Sat Nov 06, 2021 10:53 am
In a further run up scenario I’d be ok,
Just a note - the further run up is the stock scenario we hope for. If you don't think stocks will ever go higher, there's not much point in investing in them. We don't know how much they'll go up, or when, or when they'll drop, and by how much, etc. Volatility is normal with stocks. But over the long term, the expectation (not guarantee) is that they will increase in time.

So it's good you think you'd be OK if they did that. :wink: :D

Your plans look like they are coming together!
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Re: Where Do I Go From Here - Asset Location

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:D Thanks!

I was responding to SnowBog’s comment above about what if a run up increased my AA higher in equities than I wanted?

I may not be a quick study but I sure dig in and hang on until I mostly get it!! And such gallant, erudite company! I can’t say enough about it!

I’m expecting the 2021 Most Annoying and Prolix, Hopefully Not A Troll Newbie award when they are handed out in December. I’m a shoo-in averaging 16 comments a day.

Lurk? Who, me? Never!
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Re: Where Do I Go From Here - Asset Location

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AnnetteLouisan wrote: Sat Nov 06, 2021 8:27 pm :D Thanks!

I was responding to SnowBog’s comment above about what if a run up increased my AA higher in equities than I wanted?

I may not be a quick study but I sure dig in and hang on until I mostly get it!! And such gallant, erudite company! I can’t say enough about it!

I’m expecting the 2021 Most Annoying and Prolix, Hopefully Not A Troll Newbie award when they are handed out in December. I’m a shoo-in averaging 16 comments a day.

Lurk? Who me? Never!
Nah, you'll get the "dedicated, paying attention, and very willing to learn and make adjustments as you go, and asks questions to learn more Newbie." Or something more eloquent than that. You're doing great!
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