New Here: Portfolio Review & Questions

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Topic Author
Investor1287
Posts: 48
Joined: Mon Jan 03, 2022 2:34 pm

New Here: Portfolio Review & Questions

Post by Investor1287 »

I'm new, but have long been a lurker and am an adopter of some of the investing strategies/theories on here. I have prepared the below in order to seek advice on my portfolio/investing strategy. I've tried to follow the rules and requested format in soliciting this advice and have specific questions at the bottom. Thank you in advance!

Emergency funds: $115k

Debt: mortgage only (current balance of ~$510k at 2.75%); pay credit cards monthly

Tax Filing Status: MFJ

Tax Rate: 24.0% federal (2020 effective rate), 5.0% state

State of Residence: MA

Ages: me 33 / her 33; one 3 y/o

Jobs: me consulting at VeryLargeCorp / her CPA at VerySmallLLC

Income: total $650k (me $400k [$350k + $50k bonus] / her $250k [$200k + $50k bonus])

--

Total Portfolio Size: $1.91M
  • Cash: $210k
  • Taxable: $545k
  • Retirement: $730k
  • 529: $70k
  • Home Equity: $360k (90% of average of Zillow and Redfin)
Cash = $210k
  • Emergency Fund (~10x monthly expenses): $120k in Schwab savings (0.05% APY)
  • Cash: $90k in Schwab checking (0.03% APY)
Taxable = $545k (overall 93% equities/ETFs, 5% bonds/treasuries, 2% cash/crypto)
  • 1% cash
  • 1% BTC/ETH
  • 5% bonds/treasuries (BND and SPDR T-Bills)
  • 25% equities (mostly large dividend-paying household brands bough incrementally over time and ~10% "play w/ it for fun" :D )
  • 38% ETFs (5% ONEQ, 11% DIA, 27% SPDR sector-specific, 57% VO, VOO SPTM, SPY and SPYD)
  • 29% his company stock via ESPP
Note on the below: each account totals to 100%; there was just too much going on to separate out. You'll see in my questions that I'd like to change that!

His 401k at Schwab = $355k (overall 90% equity/10% bonds/treasuries)
Vanguard Institutional Index Instl Pl (VIIIX) 29% (0.2% expense ratio)
American Funds Washington Mutual R6 (RWMGX) 20% (0.27%)
Vanguard Total Intl Stock Index I (VTSNX) 17% (0.15%)
MFS Intl Diversification (MDIZX) 9% (0.73%)
Harbor Capital Appreciation Instl (HACAX) 9% (0.67%)
American Funds Europacific Growth R6 (RERGX) 7% (0.46%)
JPMorgan Mid Cal Value L (FLMVX) 3% (0.75%)
Vanguard Mid Cap Index Institutional (VMCIX) 2% (0.04%)
American Beacon Small Cp Val R5 (AVFIX) 1% (0.83%)
Loomis Sayles Small Cap Growth Fund Institutional Class (LSSIX) 1% (0.94%)
Vanguard Small-Cap Index Fund VSCIX 1% (0.04%)
MassMutual Mid Cap Growth Fund Class I (MEFZX) 1% (0.71%)
Note: weighted expense ratio = 0.52%

Her 401k at Insperity = $90k (overall 90% equity/10% bonds/treasuries)
SSGA Target Retiree 2055 Fund (0.06% expense ratio), comprised of below:
State Street Equity 500 Index II Portfolio 37%
State Street Global All Cap Equity ex-US Index Portfolio 37%
State Street Small/Mid Cap Equity Index Portfolio 16%
SPDR Portfolio Long Term Treasury ETF 7%
SPDR Portfolio Intermediate Treasury ETF 3%
Note: weighted expense ratio = 0.06%

Her 401k at Schwab = $165k (old employer)
Causeway International Value Fund; Institutional (CIVIX) 3% (0.85% expense ratio)
Delaware Emerging Markets Fund Class R6 (DEMZX) 7% (1.20%)
Eaton Vance Atlanta Capital SMID-Cap Fund Class R6 (ERASX) 9% (0.82%)
Harbor Large Cap Value Fund Retirement Class (HNLVX) 10% (0.61%)
Harbor Small Cap Value Fund Retirement Class (HNVRX) 5% (0.80%)
John Hancock Income Fund Class R6 (JSNWX) 9% (0.41%)
JPMorgan Core Bond Fund Class R6 (JCBUX) 3% (0.33%)
Polen Growth Fund Institutional Class (POLIX) 14% (0.98%)
Vanguard Institutional Index Fund Institutional Shares (VINIX) 27% (0.04%)
Vanguard Total International Stock Index Fund Institutional Shares (VTSNX) 5% (0.08%)
Victory Integrity Small-Cap Value Fund Class R6 (MVSSX) 3% (0.96%)
William Blair International Sm Cap Gr R6 (WIISX) 5% (1.45%)
Note: weighted expense ratio = 0.59%

Her Roth IRA at TD Ameritrade = $120k (overall 97% equities, 3% cash)
Cash 3%
iShares Core Growth Allocation ETF (AOR) 9% (0.2%)
Vanguard DFTSE Developed Markets ETF (VEA) 15% (0.05%)
AMG Yacktman Focused Fund (YAFFX) 19% (1.24%)
Chartwell Income Fund (BERIX) 4% (0.68%)
FPA New Income Fund (FPNIX) 5% (0.47%)
FPA Crescent Fund (FPACX) 10% (1.13%)
Guggenheim Floating Rate Strats A (GIFAX) 5% (1.05%)
Touchstone Small Cap Y (TSFYX) 15% (1.03%)
Lyrical US Value Equity Institutional (LYRIX) 16% (0.99%)
Note: weighted expense ratio = 0.81%
Note also: this is professionally managed at 0.20% via a "legacy" arrangement)

Non-Taxable Contributions
  • His 401k: $20,500 + $16k match
  • Her 401k: $20,500 + $10k match
Available funds
  • The funds available in both Schwab 401k's are what seems to generally be available
  • Insperity funds are more limited; they are either SSGA Target Date funds or the below, though I don't know the expense ratios for them
Metwest Total Return Bnd Cl C
Pimco Income Instl
Ssga Us Bond Index Fund
American Fds Europac Gr R6
Ssga Global All Cap Ex Us Ind
Dodge & Cox Stock
Pimco All Asset Inst
Ssga S&P 500 Index Fund
Trowe Blue Chip Growth Cl T7
Ssga Russell Sm Md Cap Index
T Rowe Price Mid-Cap Growth I
Victory Sycamore Mid Cap Val
Hartford Small Cap Gr Hls Ia
Nuveen Small Cap Value
Ny Life Anchor Stable Val Fnd

Two Important Notes:
  • Prior to beginning to read Bogleheads several years ago, I had essentially no investment strategy. I knew I wanted to invest my/our "surplus" money, and I'm glad I did, but it was mostly into large cap individual equities. I generally no longer do this (small % of taxable portfolio)
  • Since this time, I have clearly not adopted the full Bogleheads way of investing, but I've been trying to ensure threethings: (1) more $ into the market on a regular (monthly-ish) cadence, (2) ensuring all retirement accounts meet desired asset allocation of 90%/10% and (3) reducing my overall exposure to my company via selling ESPP shares, w/ a goal of ~15% in the short-term and 10% over time (note the shares vest immediately upon grant once/year, and I will be selling ~$30k more w/i the next few weeks, reducing % of taxable from 29% to 23%)
Background & Goals:
  • We don't really have retirement goals per se, and we both like our jobs (for now!), but we do want the "FI" of "FIRE"
  • We plan to move into a larger house w/i the next 18 months; it will likely cost $1.2-$2M (I had another thread on this, so not looking for specific advice on this topic here)
  • We want to fund the full cost of undergraduate/college for our children (via 529 and cash), something I did not have for either degree (boo hoo)
  • We have a high investing risk tolerance at our ages, though we are fairly conservative w/ other risks (e.g., insurance, etc.)
  • Our monthly expenses are ~$12k. We generally feel we are reasonable spenders (though there are some lumpy expenses here and there)
Questions:
1. A broad one: generally speaking, are we on track re: the above goals?

2. Regarding retirement funds, I was frankly overwhelmed trying to consolidate all of this information and that's a bad sign. While our retirement accounts generally meet our desired asset allocation of 90%/10%, they are spread out across 10s of funds w/i each account w/ varying expense ratios. What do I do here, move toward a 3-5-fund portfolio based on what's available, targeting the lowest weighted expense ratio?

3. Regarding the Roth IRA specifically, should this be 100% equities? If so, I will need to be in touch w/ this advisor and get a list of available "options," right? Is it that simple?

4. Regarding Roth IRAs more broadly, we don't do and have never done any backdoor Roths. I really was never aware of this, sadly. Is it worth it at this point? I am curious re: guides to maximizing tax efficiency in our investments. If anything stands out off-the-bat, please let me know.

5. Similarly, I feel our taxable investments are too complicated. Given the taxability, there's not a ton I can do at this point I don't think. Moving forward, my goal is to invest all future taxable $s in VOO (65%),VO (20%) and ONEQ (10%) and BND (5%). I'll sell off some equities (harvesting losses, etc.), but mostly keep this to new $s. Does this make sense?

6. I think our emergency fund is OK, and I'd like to keep it where it is (I know I am sacrificing some ROI) but I am comfortable w/ it. Regarding the $90k in cash in our checking account, I am considering making a lump sum $30k investment into our new child's 529 upon birth/opening an account and putting another $30k into taxable ASAP. My bonus is paid this month, as well. Other ideas?

Thank you in advance! I've lurked over the years. While I wish I adopted more/sooner, I'm glad to be more engaged now!
User avatar
Duckie
Posts: 8557
Joined: Thu Mar 08, 2007 2:55 pm

Re: New Here: Portfolio Review & Questions

Post by Duckie »

Investor1287 wrote: Thu Jan 13, 2022 8:51 pm Taxable
Where are these taxable assets held? What brokerage(s)?
29% his company stock via ESPP
That's a big risk. Why are you hanging on to this?
His 401k at Schwab
Of the fund listed the only ones I'd keep are:
  • Vanguard Institutional Index Instl Pl (VIIIX) 29% (0.2% expense ratio)
  • Vanguard Total Intl Stock Index I (VTSNX) 17% (0.15%)
Is there a decent bond option?
Her 401k at Insperity
<snip>
Insperity funds are more limited; they are either SSGA Target Date funds or the below, though I don't know the expense ratios for them
Of the list I'd focus on:
  • Ssga S&P 500 Index -- Large caps, 80% of US stocks
  • Ssga Russell Sm Md Cap Index -- Mid/small caps, 20% of US stocks
  • Ssga Global All Cap Ex Us Index -- Almost complete international stocks
  • Ssga Us Bond Index -- US bonds
  • NY Life Anchor Stable Value Fund -- depending on current interest rate
Find out what the plan expense ratios are for the above. What she chooses here depends on what she chooses elsewhere.
Her 401k at Schwab
If she doesn't roll this into the current 401k I'd only keep the following:
  • Vanguard Institutional Index Fund Institutional Shares (VINIX) 27% (0.04%)
  • Vanguard Total International Stock Index Fund Institutional Shares (VTSNX) 5% (0.08%)
Is there a decent bond fund available?
Her Roth IRA at TD Ameritrade
Note also: this is professionally managed at 0.20% via a "legacy" arrangement)
The expense ratios are ridiculous. Can she get away from the "legacy" arrangement?
Regarding retirement funds, I was frankly overwhelmed trying to consolidate all of this information and that's a bad sign. While our retirement accounts generally meet our desired asset allocation of 90%/10%, they are spread out across 10s of funds w/i each account w/ varying expense ratios. What do I do here, move toward a 3-5-fund portfolio based on what's available, targeting the lowest weighted expense ratio?
In the tax-sheltered accounts you can easily switch to low-cost index funds. You don't have to have the 90/10 allocation in all accounts. You could put all your bonds in his 401k at Schwab if there is a decent bond option. What bond options are available in his 401k?
Regarding the Roth IRA specifically, should this be 100% equities?
In general it's better to put assets with higher expected growth (stocks) in Roth accounts and assets with lower expected growth (bonds) in pre-tax accounts. That's because you've already paid the taxes in the Roth accounts so future growth is tax-free.
If so, I will need to be in touch w/ this advisor and get a list of available "options," right? Is it that simple?
Consider moving away from an advisor and possibly away from TD Ameritrade. You could put a total stock market fund/ETF here.
Regarding Roth IRAs more broadly, we don't do and have never done any backdoor Roths. I really was never aware of this, sadly. Is it worth it at this point?
Assuming the backdoor process continues to exist, yes it is worth it. At your ages you have years to contribute.
Similarly, I feel our taxable investments are too complicated. Given the taxability, there's not a ton I can do at this point I don't think. Moving forward, my goal is to invest all future taxable $s in VOO (65%),VO (20%) and ONEQ (10%) and BND (5%). I'll sell off some equities (harvesting losses, etc.), but mostly keep this to new $s. Does this make sense?
Don't add bonds to taxable. You have plenty of room for bonds in your tax-sheltered accounts. Make sure you turn OFF all automatic dividend reinvestment. You don't want to buy anything in taxable without thinking it through.
I think our emergency fund is OK, and I'd like to keep it where it is (I know I am sacrificing some ROI) but I am comfortable w/ it.
That is reasonable.
Regarding the $90k in cash in our checking account, I am considering making a lump sum $30k investment into our new child's 529 upon birth/opening an account and putting another $30k into taxable ASAP.
That is reasonable.
Topic Author
Investor1287
Posts: 48
Joined: Mon Jan 03, 2022 2:34 pm

Re: New Here: Portfolio Review & Questions

Post by Investor1287 »

Thanks for the reply! I added responses below in blue. Look forward to any other feedback/etc. as well.
Duckie wrote: Thu Jan 13, 2022 10:42 pm
Investor1287 wrote: Thu Jan 13, 2022 8:51 pm Taxable
Where are these taxable assets held? What brokerage(s)?

Answer: about 80% in Schwab and 20% in Fidelity. The 529 is in Fidelity as it is the MA plan, although as of this year there is no longer a tax advantage
29% his company stock via ESPP
That's a big risk. Why are you hanging on to this?

Answer: as I noted in my original post, I am planning to reduce this over time w/ a reduction to ~23% of taxable shortly. Goal is 15% shorter-term and 10% long-term. I understand the risk and am looking to reduce it, but I am OK not running for the exit either. VeryLargeCorp, up 40% 1-year, 250% 5 years
His 401k at Schwab
Of the fund listed the only ones I'd keep are:
  • Vanguard Institutional Index Instl Pl (VIIIX) 29% (0.2% expense ratio)
  • Vanguard Total Intl Stock Index I (VTSNX) 17% (0.15%)
Is there a decent bond option?

Answer: my 401k is in "Aggressive" allocation (not a target date fund), w/ a 100%/0% allocation as best I can tell. The available bond options are below, but I would need to "create my own" portfolio to use these as they are not in the selected "Aggressive" allocation:
Dodge & Cox Income Fund (DODIX) (0.42% expense ratio)
Vanguard Inflation-Protected Secs (VIPIX) (0.07%)
Vanguard Total Bond Market Index I (VBTIX) (0.035%)

Her 401k at Insperity
<snip>
Insperity funds are more limited; they are either SSGA Target Date funds or the below, though I don't know the expense ratios for them
Of the list I'd focus on:
  • Ssga S&P 500 Index -- Large caps, 80% of US stocks
  • Ssga Russell Sm Md Cap Index -- Mid/small caps, 20% of US stocks
  • Ssga Global All Cap Ex Us Index -- Almost complete international stocks
  • Ssga Us Bond Index -- US bonds
  • NY Life Anchor Stable Value Fund -- depending on current interest rate
Find out what the plan expense ratios are for the above. What she chooses here depends on what she chooses elsewhere.

Answer: note that we'd like to achieve the desired asset allocation across all retirement accounts (not just his vs. hers). The expense ratios are as follows:
State Street S&P 500 Index Fund - Class N (0.16% expense ratio)
State Street Small/Mid Cap Equity Index Fund - Class K (0.045%)
State Street Global All Cap Equity ex-U.S. Index - Class K (0.065%)
State Street Aggregate Bond Index Fund - Class K (0.025%)
New York Life Insurance Company Anchor Account Fund (0.47%)

Her 401k at Schwab
If she doesn't roll this into the current 401k I'd only keep the following:
  • Vanguard Institutional Index Fund Institutional Shares (VINIX) 27% (0.04%)
  • Vanguard Total International Stock Index Fund Institutional Shares (VTSNX) 5% (0.08%)
Is there a decent bond fund available?

Answer: same as his, see above
Similarly, I feel our taxable investments are too complicated. Given the taxability, there's not a ton I can do at this point I don't think. Moving forward, my goal is to invest all future taxable $s in VOO (65%),VO (20%) and ONEQ (10%) and BND (5%). I'll sell off some equities (harvesting losses, etc.), but mostly keep this to new $s. Does this make sense?
Don't add bonds to taxable. You have plenty of room for bonds in your tax-sheltered accounts. Make sure you turn OFF all automatic dividend reinvestment. You don't want to buy anything in taxable without thinking it through.

Answer: should I just sell the BND now and move the $ to other investments?
User avatar
Percyjackcson
Posts: 17
Joined: Tue Dec 21, 2021 10:12 am

Re: New Here: Portfolio Review & Questions

Post by Percyjackcson »

If you're open to it, look into using IBonds for your Emergency Fund. Not that it will really make a splash since your portfolio is so big in general, but it will help prevent that EF from getting slowly eaten by Inflations. Have seen alot of talk about IBonds on the Boggleheads forum lately.

Quick summary though:
IBonds are just Bonds designed to fight inflation. The rate you get is changed each 6 months to match inflation. Idea is to try and protect your capital/purchasing power. I believe the limit is 10k per year. You have to hold it for at least 1 year, with a 30 year maturity data. If you withdraw before 5 years you lose 3 months of interest.
Stress less, Smile more :)
JBTX
Posts: 8911
Joined: Wed Jul 26, 2017 12:46 pm

Re: New Here: Portfolio Review & Questions

Post by JBTX »

Investor1287 wrote: Thu Jan 13, 2022 8:51 pm I'm new, but have long been a lurker and am an adopter of some of the investing strategies/theories on here. I have prepared the below in order to seek advice on my portfolio/investing strategy. I've tried to follow the rules and requested format in soliciting this advice and have specific questions at the bottom. Thank you in advance!

Emergency funds: $115k

Debt: mortgage only (current balance of ~$510k at 2.75%); pay credit cards monthly

Tax Filing Status: MFJ

Tax Rate: 24.0% federal (2020 effective rate), 5.0% state

State of Residence: MA

Ages: me 33 / her 33; one 3 y/o

Jobs: me consulting at VeryLargeCorp / her CPA at VerySmallLLC

Income: total $650k (me $400k [$350k + $50k bonus] / her $250k [$200k + $50k bonus])

--

Total Portfolio Size: $1.91M
  • Cash: $210k
  • Taxable: $545k
  • Retirement: $730k
  • 529: $70k
  • Home Equity: $360k (90% of average of Zillow and Redfin)
Cash = $210k
  • Emergency Fund (~10x monthly expenses): $120k in Schwab savings (0.05% APY)
  • Cash: $90k in Schwab checking (0.03% APY)
Taxable = $545k (overall 93% equities/ETFs, 5% bonds/treasuries, 2% cash/crypto)
  • 1% cash
  • 1% BTC/ETH
  • 5% bonds/treasuries (BND and SPDR T-Bills)
  • 25% equities (mostly large dividend-paying household brands bough incrementally over time and ~10% "play w/ it for fun" :D )
  • 38% ETFs (5% ONEQ, 11% DIA, 27% SPDR sector-specific, 57% VO, VOO SPTM, SPY and SPYD)
  • 29% his company stock via ESPP
Note on the below: each account totals to 100%; there was just too much going on to separate out. You'll see in my questions that I'd like to change that!

His 401k at Schwab = $355k (overall 90% equity/10% bonds/treasuries)
Vanguard Institutional Index Instl Pl (VIIIX) 29% (0.2% expense ratio)
American Funds Washington Mutual R6 (RWMGX) 20% (0.27%)
Vanguard Total Intl Stock Index I (VTSNX) 17% (0.15%)
MFS Intl Diversification (MDIZX) 9% (0.73%)
Harbor Capital Appreciation Instl (HACAX) 9% (0.67%)
American Funds Europacific Growth R6 (RERGX) 7% (0.46%)
JPMorgan Mid Cal Value L (FLMVX) 3% (0.75%)
Vanguard Mid Cap Index Institutional (VMCIX) 2% (0.04%)
American Beacon Small Cp Val R5 (AVFIX) 1% (0.83%)
Loomis Sayles Small Cap Growth Fund Institutional Class (LSSIX) 1% (0.94%)
Vanguard Small-Cap Index Fund VSCIX 1% (0.04%)
MassMutual Mid Cap Growth Fund Class I (MEFZX) 1% (0.71%)
Note: weighted expense ratio = 0.52%

Her 401k at Insperity = $90k (overall 90% equity/10% bonds/treasuries)
SSGA Target Retiree 2055 Fund (0.06% expense ratio), comprised of below:
State Street Equity 500 Index II Portfolio 37%
State Street Global All Cap Equity ex-US Index Portfolio 37%
State Street Small/Mid Cap Equity Index Portfolio 16%
SPDR Portfolio Long Term Treasury ETF 7%
SPDR Portfolio Intermediate Treasury ETF 3%
Note: weighted expense ratio = 0.06%

Her 401k at Schwab = $165k (old employer)
Causeway International Value Fund; Institutional (CIVIX) 3% (0.85% expense ratio)
Delaware Emerging Markets Fund Class R6 (DEMZX) 7% (1.20%)
Eaton Vance Atlanta Capital SMID-Cap Fund Class R6 (ERASX) 9% (0.82%)
Harbor Large Cap Value Fund Retirement Class (HNLVX) 10% (0.61%)
Harbor Small Cap Value Fund Retirement Class (HNVRX) 5% (0.80%)
John Hancock Income Fund Class R6 (JSNWX) 9% (0.41%)
JPMorgan Core Bond Fund Class R6 (JCBUX) 3% (0.33%)
Polen Growth Fund Institutional Class (POLIX) 14% (0.98%)
Vanguard Institutional Index Fund Institutional Shares (VINIX) 27% (0.04%)
Vanguard Total International Stock Index Fund Institutional Shares (VTSNX) 5% (0.08%)
Victory Integrity Small-Cap Value Fund Class R6 (MVSSX) 3% (0.96%)
William Blair International Sm Cap Gr R6 (WIISX) 5% (1.45%)
Note: weighted expense ratio = 0.59%

Her Roth IRA at TD Ameritrade = $120k (overall 97% equities, 3% cash)
Cash 3%
iShares Core Growth Allocation ETF (AOR) 9% (0.2%)
Vanguard DFTSE Developed Markets ETF (VEA) 15% (0.05%)
AMG Yacktman Focused Fund (YAFFX) 19% (1.24%)
Chartwell Income Fund (BERIX) 4% (0.68%)
FPA New Income Fund (FPNIX) 5% (0.47%)
FPA Crescent Fund (FPACX) 10% (1.13%)
Guggenheim Floating Rate Strats A (GIFAX) 5% (1.05%)
Touchstone Small Cap Y (TSFYX) 15% (1.03%)
Lyrical US Value Equity Institutional (LYRIX) 16% (0.99%)
Note: weighted expense ratio = 0.81%
Note also: this is professionally managed at 0.20% via a "legacy" arrangement)

Non-Taxable Contributions
  • His 401k: $20,500 + $16k match
  • Her 401k: $20,500 + $10k match
Available funds
  • The funds available in both Schwab 401k's are what seems to generally be available
  • Insperity funds are more limited; they are either SSGA Target Date funds or the below, though I don't know the expense ratios for them
Metwest Total Return Bnd Cl C
Pimco Income Instl
Ssga Us Bond Index Fund
American Fds Europac Gr R6
Ssga Global All Cap Ex Us Ind
Dodge & Cox Stock
Pimco All Asset Inst
Ssga S&P 500 Index Fund
Trowe Blue Chip Growth Cl T7
Ssga Russell Sm Md Cap Index
T Rowe Price Mid-Cap Growth I
Victory Sycamore Mid Cap Val
Hartford Small Cap Gr Hls Ia
Nuveen Small Cap Value
Ny Life Anchor Stable Val Fnd

Two Important Notes:
  • Prior to beginning to read Bogleheads several years ago, I had essentially no investment strategy. I knew I wanted to invest my/our "surplus" money, and I'm glad I did, but it was mostly into large cap individual equities. I generally no longer do this (small % of taxable portfolio)
  • Since this time, I have clearly not adopted the full Bogleheads way of investing, but I've been trying to ensure threethings: (1) more $ into the market on a regular (monthly-ish) cadence, (2) ensuring all retirement accounts meet desired asset allocation of 90%/10% and (3) reducing my overall exposure to my company via selling ESPP shares, w/ a goal of ~15% in the short-term and 10% over time (note the shares vest immediately upon grant once/year, and I will be selling ~$30k more w/i the next few weeks, reducing % of taxable from 29% to 23%)
Background & Goals:
  • We don't really have retirement goals per se, and we both like our jobs (for now!), but we do want the "FI" of "FIRE"
  • We plan to move into a larger house w/i the next 18 months; it will likely cost $1.2-$2M (I had another thread on this, so not looking for specific advice on this topic here)
  • We want to fund the full cost of undergraduate/college for our children (via 529 and cash), something I did not have for either degree (boo hoo)
  • We have a high investing risk tolerance at our ages, though we are fairly conservative w/ other risks (e.g., insurance, etc.)
  • Our monthly expenses are ~$12k. We generally feel we are reasonable spenders (though there are some lumpy expenses here and there)
Questions:
1. A broad one: generally speaking, are we on track re: the above goals?
Yes you are progressing well for your age. Excellent in fact.


2. Regarding retirement funds, I was frankly overwhelmed trying to consolidate all of this information and that's a bad sign. While our retirement accounts generally meet our desired asset allocation of 90%/10%, they are spread out across 10s of funds w/i each account w/ varying expense ratios. What do I do here, move toward a 3-5-fund portfolio based on what's available, targeting the lowest weighted expense ratio?
The good news is there aren't any tax consequences for making trades in retirement accounts. I'd focus on the high fee funds and swap for either target dates or 3 fund index funds. I'd just swap them all, in whatever order you want to.
3. Regarding the Roth IRA specifically, should this be 100% equities? If so, I will need to be in touch w/ this advisor and get a list of available "options," right? Is it that simple?
100% equities generally makes sense for Roth. I take it you have an advisor and can't make changes yourself. A total market index, total world index or target date fund would all be appropriate. Not knowing anything about this advisor it is highly likely they will prefer you stay in a high fee (commissioned) fund and will tell you it is better

I don't know why you would need an advisor for a Roth. Put it all in a targrt date or a few index funds and thats all you have to do.
4. Regarding Roth IRAs more broadly, we don't do and have never done any backdoor Roths. I really was never aware of this, sadly. Is it worth it at this point? I am curious re: guides to maximizing tax efficiency in our investments. If anything stands out off-the-bat, please let me know.
I haven't done backdoor Roths because I have large rollover IRAS and backdoors would create basis issues. A lot of people here do them. I can't argue if it is "worth it" or not. If I could have easily done them I probably would have.
5. Similarly, I feel our taxable investments are too complicated. Given the taxability, there's not a ton I can do at this point I don't think. Moving forward, my goal is to invest all future taxable $s in VOO (65%),VO (20%) and ONEQ (10%) and BND (5%). I'll sell off some equities (harvesting losses, etc.), but mostly keep this to new $s. Does this make sense?
I don't have ticker symbols memorized. For 5% I'd skip the bond fund. Do ibonds instead. Stick with equity based index funds. Probably not target dates in taxable.
6. I think our emergency fund is OK, and I'd like to keep it where it is (I know I am sacrificing some ROI) but I am comfortable w/ it. Regarding the $90k in cash in our checking account, I am considering making a lump sum $30k investment into our new child's 529 upon birth/opening an account and putting another $30k into taxable ASAP. My bonus is paid this month, as well. Other ideas?

Thank you in advance! I've lurked over the years. While I wish I adopted more/sooner, I'm glad to be more engaged now!
Again ibonds are a good place to park liquid funds. There are lots of threads in here on ibonds. As to 529s make sure you are aware of annual contributions limits.
mikejuss
Posts: 1717
Joined: Tue Jun 23, 2020 1:36 pm

Re: New Here: Portfolio Review & Questions

Post by mikejuss »

Simplify and consolidate all IRA and 401(k) accounts. (Your wife doesn't need two 401[k]s.) Own 2 or 3 funds in each of them. Going forward, purchase only index funds in taxable. Perhaps sell anything in taxable with small gains and use the money to purchase index funds. Why are you participating in an ESPP? You'd be better off investing that money more broadly.
Topic Author
Investor1287
Posts: 48
Joined: Mon Jan 03, 2022 2:34 pm

Re: New Here: Portfolio Review & Questions

Post by Investor1287 »

mikejuss wrote: Fri Jan 14, 2022 11:44 am Simplify and consolidate all IRA and 401(k) accounts. (Your wife doesn't need two 401[k]s.) Own 2 or 3 funds in each of them. Going forward, purchase only index funds in taxable. Perhaps sell anything in taxable with small gains and use the money to purchase index funds. Why are you participating in an ESPP? You'd be better off investing that money more broadly.
Thanks for your input. I am going to try to roll the Roth IRA (TD Ameritrade) into our Schwab brokerage.

Re: the ESPP. It has a 15% discount on lowest price point of year. I can't get a 15% discount on index funds in the market. This is a large company that is gaining well. What I will try to do moving forward, though, is limit my % exposure.
mikejuss
Posts: 1717
Joined: Tue Jun 23, 2020 1:36 pm

Re: New Here: Portfolio Review & Questions

Post by mikejuss »

Investor1287 wrote: Fri Jan 14, 2022 11:59 am
mikejuss wrote: Fri Jan 14, 2022 11:44 am Simplify and consolidate all IRA and 401(k) accounts. (Your wife doesn't need two 401[k]s.) Own 2 or 3 funds in each of them. Going forward, purchase only index funds in taxable. Perhaps sell anything in taxable with small gains and use the money to purchase index funds. Why are you participating in an ESPP? You'd be better off investing that money more broadly.
Thanks for your input. I am going to try to roll the Roth IRA (TD Ameritrade) into our Schwab brokerage.

Re: the ESPP. It has a 15% discount on lowest price point of year. I can't get a 15% discount on index funds in the market. This is a large company that is gaining well. What I will try to do moving forward, though, is limit my % exposure.
Good call--and roll the old 401(k) into the new one. Keep as few accounts as possible.

I wouldn't ever personally invest in ESPP, but it's not the end of the world.
Topic Author
Investor1287
Posts: 48
Joined: Mon Jan 03, 2022 2:34 pm

Re: New Here: Portfolio Review & Questions

Post by Investor1287 »

mikejuss wrote: Fri Jan 14, 2022 12:19 pm
Investor1287 wrote: Fri Jan 14, 2022 11:59 am
mikejuss wrote: Fri Jan 14, 2022 11:44 am Simplify and consolidate all IRA and 401(k) accounts. (Your wife doesn't need two 401[k]s.) Own 2 or 3 funds in each of them. Going forward, purchase only index funds in taxable. Perhaps sell anything in taxable with small gains and use the money to purchase index funds. Why are you participating in an ESPP? You'd be better off investing that money more broadly.
Thanks for your input. I am going to try to roll the Roth IRA (TD Ameritrade) into our Schwab brokerage.

Re: the ESPP. It has a 15% discount on lowest price point of year. I can't get a 15% discount on index funds in the market. This is a large company that is gaining well. What I will try to do moving forward, though, is limit my % exposure.
Good call--and roll the old 401(k) into the new one. Keep as few accounts as possible.

I wouldn't ever personally invest in ESPP, but it's not the end of the world.
Fair enough. Can I ask why?
mikejuss
Posts: 1717
Joined: Tue Jun 23, 2020 1:36 pm

Re: New Here: Portfolio Review & Questions

Post by mikejuss »

Investor1287 wrote: Fri Jan 14, 2022 12:20 pm
mikejuss wrote: Fri Jan 14, 2022 12:19 pm
Investor1287 wrote: Fri Jan 14, 2022 11:59 am
mikejuss wrote: Fri Jan 14, 2022 11:44 am Simplify and consolidate all IRA and 401(k) accounts. (Your wife doesn't need two 401[k]s.) Own 2 or 3 funds in each of them. Going forward, purchase only index funds in taxable. Perhaps sell anything in taxable with small gains and use the money to purchase index funds. Why are you participating in an ESPP? You'd be better off investing that money more broadly.
Thanks for your input. I am going to try to roll the Roth IRA (TD Ameritrade) into our Schwab brokerage.

Re: the ESPP. It has a 15% discount on lowest price point of year. I can't get a 15% discount on index funds in the market. This is a large company that is gaining well. What I will try to do moving forward, though, is limit my % exposure.
Good call--and roll the old 401(k) into the new one. Keep as few accounts as possible.

I wouldn't ever personally invest in ESPP, but it's not the end of the world.
Fair enough. Can I ask why?
I don't like individual stocks--and, heaven forfend, if your company should experience a reversal, you'll be both out of a job and out of the money you invested in the stock. To push you a little further: why don't you engage in other kinds of stock picking?
Topic Author
Investor1287
Posts: 48
Joined: Mon Jan 03, 2022 2:34 pm

Re: New Here: Portfolio Review & Questions

Post by Investor1287 »

mikejuss wrote: Fri Jan 14, 2022 12:24 pm
Investor1287 wrote: Fri Jan 14, 2022 12:20 pm
mikejuss wrote: Fri Jan 14, 2022 12:19 pm
Investor1287 wrote: Fri Jan 14, 2022 11:59 am
mikejuss wrote: Fri Jan 14, 2022 11:44 am Simplify and consolidate all IRA and 401(k) accounts. (Your wife doesn't need two 401[k]s.) Own 2 or 3 funds in each of them. Going forward, purchase only index funds in taxable. Perhaps sell anything in taxable with small gains and use the money to purchase index funds. Why are you participating in an ESPP? You'd be better off investing that money more broadly.
Thanks for your input. I am going to try to roll the Roth IRA (TD Ameritrade) into our Schwab brokerage.

Re: the ESPP. It has a 15% discount on lowest price point of year. I can't get a 15% discount on index funds in the market. This is a large company that is gaining well. What I will try to do moving forward, though, is limit my % exposure.
Good call--and roll the old 401(k) into the new one. Keep as few accounts as possible.

I wouldn't ever personally invest in ESPP, but it's not the end of the world.
Fair enough. Can I ask why?
I don't like individual stocks--and, heaven forfend, if your company should experience a reversal, you'll be both out of a job and out of the money you invested in the stock. To push you a little further: why don't you engage in other kinds of stock picking?
I get that and I think it's a very valid concern, hence my desire to reduce my % position in my company's ESPP.

But the main reason I participate is that it's a 15% discount off the lowest of two price points (day plan year starts and day plan year ends). The tradeoff is I have post-tax $ withheld from my paycheck each paycheck throughout the course of that year. I simply can't get a 15% discount anywhere else; and if the stock price increases, it's 15%+whatever the increase is. It vests immediately. That's why, just to answer your question.
mikejuss
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Joined: Tue Jun 23, 2020 1:36 pm

Re: New Here: Portfolio Review & Questions

Post by mikejuss »

Investor1287 wrote: Fri Jan 14, 2022 12:45 pm
mikejuss wrote: Fri Jan 14, 2022 12:24 pm
Investor1287 wrote: Fri Jan 14, 2022 12:20 pm
mikejuss wrote: Fri Jan 14, 2022 12:19 pm
Investor1287 wrote: Fri Jan 14, 2022 11:59 am

Thanks for your input. I am going to try to roll the Roth IRA (TD Ameritrade) into our Schwab brokerage.

Re: the ESPP. It has a 15% discount on lowest price point of year. I can't get a 15% discount on index funds in the market. This is a large company that is gaining well. What I will try to do moving forward, though, is limit my % exposure.
Good call--and roll the old 401(k) into the new one. Keep as few accounts as possible.

I wouldn't ever personally invest in ESPP, but it's not the end of the world.
Fair enough. Can I ask why?
I don't like individual stocks--and, heaven forfend, if your company should experience a reversal, you'll be both out of a job and out of the money you invested in the stock. To push you a little further: why don't you engage in other kinds of stock picking?
I get that and I think it's a very valid concern, hence my desire to reduce my % position in my company's ESPP.

But the main reason I participate is that it's a 15% discount off the lowest of two price points (day plan year starts and day plan year ends). The tradeoff is I have post-tax $ withheld from my paycheck each paycheck throughout the course of that year. I simply can't get a 15% discount anywhere else; and if the stock price increases, it's 15%+whatever the increase is. It vests immediately. That's why, just to answer your question.
I guess you've got to weigh the 15% discount (which might not make a big difference to your portfolio unless you buy a lot of the stock) against the concentrated risk of holding a single stock. Someone much smarter than me could probably come up with a mathematical formula for you to evaluate this. :happy
zie
Posts: 364
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Re: New Here: Portfolio Review & Questions

Post by zie »

The ESPP is ~ 8% of the overall portfolio(according to my lazy, unchecked math), and the OP already said they are planning on reducing it further, so even if it went to zero(for a very large company, it's doubtful), it would unlikely affect their net worth materially over the long run.

Overall the OP seems to be mostly fine. Sure the OP could lower some fund expenses(ER) and consolidate some accounts(merge old 401k's, etc).

Taxable goal: "in VOO (65%),VO (20%) and ONEQ (10%) and BND (5%)"

That's still pretty complicated. The lazy one-fund answer: VOO, VO and ONEQ could be roughly replaced with VTI (Total US market). If you want International, one could just own VT(Total global market) instead.

Like (I think Duckie mentioned) you have loads of space in your pre-tax accounts, so you can just hold your overall 10% bond allocation there(~ 200k) then you don't need to own bonds anywhere else. That keeps you with 10% bonds overall, but optimizes the location and gets the dividends from bonds out from under taxes every year.

You have a lot of cash sitting around losing money, certainly I bonds and/or TIPS would help lower the inflation loss. Could you lower your risk tolerance in your overall portfolio to say 80/20 and then have basically no cash, other than for monthly cashflow needs? 20% of 1.9M is about 380K of bonds, giving you roughly 32 months of expenses in bonds alone.

With about 2M invested at a 3% basically perpetual withdrawal rate, you could have almost 5k/month to live off of forever, so you are almost half way to FI, given your current 12k/mo expenses. If you both lost your jobs tomorrow and your luck ran out, could you cut your costs in 1/2 and still be OK? If the answer is yes, then the EF and all that cash is probably not needed and could just be invested at your AA.
Whether rich or poor, a young woman should know how a bank account works, understand the composition of mortgages and bonds, and know the value of interest and how it accumulates. -Hetty Green
Topic Author
Investor1287
Posts: 48
Joined: Mon Jan 03, 2022 2:34 pm

Re: New Here: Portfolio Review & Questions

Post by Investor1287 »

zie wrote: Fri Jan 14, 2022 3:51 pm The ESPP is ~ 8% of the overall portfolio(according to my lazy, unchecked math), and the OP already said they are planning on reducing it further, so even if it went to zero(for a very large company, it's doubtful), it would unlikely affect their net worth materially over the long run.

Overall the OP seems to be mostly fine. Sure the OP could lower some fund expenses(ER) and consolidate some accounts(merge old 401k's, etc).

Taxable goal: "in VOO (65%),VO (20%) and ONEQ (10%) and BND (5%)"

That's still pretty complicated. The lazy one-fund answer: VOO, VO and ONEQ could be roughly replaced with VTI (Total US market). If you want International, one could just own VT(Total global market) instead.

Like (I think Duckie mentioned) you have loads of space in your pre-tax accounts, so you can just hold your overall 10% bond allocation there(~ 200k) then you don't need to own bonds anywhere else. That keeps you with 10% bonds overall, but optimizes the location and gets the dividends from bonds out from under taxes every year.

You have a lot of cash sitting around losing money, certainly I bonds and/or TIPS would help lower the inflation loss. Could you lower your risk tolerance in your overall portfolio to say 80/20 and then have basically no cash, other than for monthly cashflow needs? 20% of 1.9M is about 380K of bonds, giving you roughly 32 months of expenses in bonds alone.

With about 2M invested at a 3% basically perpetual withdrawal rate, you could have almost 5k/month to live off of forever, so you are almost half way to FI, given your current 12k/mo expenses. If you both lost your jobs tomorrow and your luck ran out, could you cut your costs in 1/2 and still be OK? If the answer is yes, then the EF and all that cash is probably not needed and could just be invested at your AA.
Yes, the ESPP is a much smaller % of OVERALL (including retirement and cash/emergency fund); still want it to be reduced. Will never be 0%.

Seems like you otherwise agree w/ my proposed path forward, suggesting to even further simplify. I agree w/ this, will just want to review these options in more detail/etc. This combined w/ unloading of individual securities, where appropriate, should be good. Some of my individual securities will simply need to be kept I think (and I like having some).

Is a 90%/10% allocation unreasonable for people our age? Asking since you suggested 80%/20%.

Finally, iBonds can be removed, if needed, w/o any tax/penalty, correct? I know you forgo some interest (a few months' worth?) if removed prior to 1 year. This does seem like a good alternative (no-brainer, even?), but w/ the $10k/person cap, it doesn't get us too far.

Thanks!
Parkinglotracer
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Location: Upstate NY

Re: New Here: Portfolio Review & Questions

Post by Parkinglotracer »

You could move your emer fund to Marcus or even better t Mobile checking and get 1% fdic insured. Congrats on your success to date.
zie
Posts: 364
Joined: Sun Mar 22, 2020 4:35 pm

Re: New Here: Portfolio Review & Questions

Post by zie »

Investor1287 wrote: Fri Jan 14, 2022 4:28 pm
zie wrote: Fri Jan 14, 2022 3:51 pm You have a lot of cash sitting around losing money, certainly I bonds and/or TIPS would help lower the inflation loss. Could you lower your risk tolerance in your overall portfolio to say 80/20 and then have basically no cash, other than for monthly cashflow needs? 20% of 1.9M is about 380K of bonds, giving you roughly 32 months of expenses in bonds alone.

With about 2M invested at a 3% basically perpetual withdrawal rate, you could have almost 5k/month to live off of forever, so you are almost half way to FI, given your current 12k/mo expenses. If you both lost your jobs tomorrow and your luck ran out, could you cut your costs in 1/2 and still be OK? If the answer is yes, then the EF and all that cash is probably not needed and could just be invested at your AA.
Yes, the ESPP is a much smaller % of OVERALL (including retirement and cash/emergency fund); still want it to be reduced. Will never be 0%.

Seems like you otherwise agree w/ my proposed path forward, suggesting to even further simplify. I agree w/ this, will just want to review these options in more detail/etc. This combined w/ unloading of individual securities, where appropriate, should be good. Some of my individual securities will simply need to be kept I think (and I like having some).

Is a 90%/10% allocation unreasonable for people our age? Asking since you suggested 80%/20%.

Finally, iBonds can be removed, if needed, w/o any tax/penalty, correct? I know you forgo some interest (a few months' worth?) if removed prior to 1 year. This does seem like a good alternative (no-brainer, even?), but w/ the $10k/person cap, it doesn't get us too far.

Thanks!
I'm not an I bonds expert, I don't own any, but it seems it is taxable fromtreasurydirect.gov

As for the Asset Allocation, I don't think age really has anything to do with it, but 90/10 is reasonable. My goal wasn't to get you to 80/20, it was to get you to re-think all of your cash(Emergency fund, etc). I mean if you want to hold all of that cash, it's not terrible or anything, it's just a lot of cash compared to your net worth, and I just wanted you to re-think if you really need all of it.
Whether rich or poor, a young woman should know how a bank account works, understand the composition of mortgages and bonds, and know the value of interest and how it accumulates. -Hetty Green
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