Portfolio review - Are we FIRE-ready?

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Topic Author
btakla
Posts: 32
Joined: Mon Dec 18, 2017 2:07 pm

Portfolio review - Are we FIRE-ready?

Post by btakla »

Hello forum,

I am currently reading Boglehead retirement planning book and it made me think to ask for a courtesy review of my current portfolio to examine if my spouse can retire in the next 4-5 years to be a homemaker with our two toddlers.

37 married to 31 in TX - salary is 185k, hers 88k

Debt:
- house mortgage 416k with $75k equity and 2.75% interest
- 3 rental mortgages 1.192M with $475k equity - monthly cash flow $3,267 (after mortgage payments and 15% maintenance, capx)
- her student loan is 200k+ on track for PSLF in 2027 - she has to work full time until then to meet the program requirement
- an emergency fund of $20k in Capital one saving
- live below our means and planning to max out 401ks, roth IRAs, and after-tax in-plan conversion

Taxable
- VFWAX VANGUARD FTSE ALL WORLD EX US INDEX $44k
- VLCAX VANGUARD LARGE CAP INDEX ADMIRAL CL $51k
- VOOG VANGUARD S&P 500 GROWTH ETF $14k
- VTI VANGUARD TOTAL STOCK MARKET ETF $11k
- VIGAX VANGUARD GROWTH INDEX ADMIRAL CL. $4.5
- Wealthfront scale 9 out of 10 risk $47.5k

Roth
- VFIAX VANGUARD 500 INDEX ADMIRAL $75k
- VTIAX VANGUARD TOTAL INTL STOCK INDEX ADMIRAL $35k

Tax-advantage
457B
- FID EXTD MKT IDX (FSMAX) $86k
- FID 500 INDEX (FXAIX) $47k

401k/403B
- FID 500 INDEX (FXAIX) $200k (33k is after-tax in-plan conversion)
- FID FREEDOM 2055 K6 (FCTKX) $8k
- Vanguard Intermediate-Term Treasury Index VIIGX $6k

ESOP
- previous company stock will be rolled to 401k 59k

Total is 1.24M including equity


I have to admit that writing this post, I realized I have a little more funds than I thought I had but I was learning early on and never cleaned up or combined the taxable account.


1- Can my wife retire in 2027 after the PSFL student loan forgiveness program?
2- Can I retire in the next 7-10 years? I would like to expand and focus on the real estate "side hustle"
3- My current employer has their 401k with Vanguard (Wooh hoo) should I rollover the previous plans into the vanguard 401k account or in an IRA or just let them be? money is currently in 2 fidelity plans and 1 schwab
4- I would like to increase my bond allocation to at least 15 to 20%, should I rebalance now or increase future bond allocations?
5- any additional thoughts or general comments?



Thank you for your advices and time!
HomeStretch
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Joined: Thu Dec 27, 2018 3:06 pm

Re: Portfolio review - when can spouse retire?

Post by HomeStretch »

The answers to questions 1 & 2 depend in part on your annual expenses.

If your spouse becomes a stay-at-home parent, is your income sufficient to cover all expenses and continue to save towards retirement?

For you to retire in 7-10 years in your mid to late 40s, will your portfolio at that time be sufficient to cover net expenses for the rest of your lives? I’d suggest no more than a 2% portfolio withdrawal rate as you have a long retirement to support.

Consider doing some annual financial modeling to see if you are on track to meet your/spouse’s retirement goals.
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Watty
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Re: Portfolio review - Are we FIRE-ready?

Post by Watty »

btakla wrote: Tue Jan 24, 2023 11:04 pm 2- Can I retire in the next 7-10 years? I would like to expand and focus on the real estate "side hustle"
More information is needed.

How much do you expect to save each year until then?

What do you expect your expenses to be then, including income taxes and health insurance?

If you retire then how much Social Security to you expect to get and when to you plan on starting it? See;
https://opensocialsecurity.com/

Unless I missed it I did not see any college savings. What are your plans for that?
invest4
Posts: 1324
Joined: Wed Apr 24, 2019 2:19 am

Re: Portfolio review - Are we FIRE-ready?

Post by invest4 »

btakla wrote: Tue Jan 24, 2023 11:04 pm 1- Can my wife retire in 2027 after the PSFL student loan forgiveness program?
2- Can I retire in the next 7-10 years? I would like to expand and focus on the real estate "side hustle"
3- My current employer has their 401k with Vanguard (Wooh hoo) should I rollover the previous plans into the vanguard 401k account or in an IRA or just let them be? money is currently in 2 fidelity plans and 1 schwab
4- I would like to increase my bond allocation to at least 15 to 20%, should I rebalance now or increase future bond allocations?
5- any additional thoughts or general comments?
1. If you can cover all your expenses and potential trade-offs of having less income, sure. I suspect you already have a good idea whether you believe it is possible.

2. Much can happen in 7-10 years...who knows. I think what is more important is to define and execute on your savings goals and enjoy life along the way. As you get closer, the answer will be more apparent.

3. If you like your Vanguard 401, I would be inclined to roll it over for the purpose of simplicity.

4. What does your desired bond allocation look like?

* Simple? BND for example.

* More complex? Nominal bonds, TIPS, I-Bonds, etc.

I have found bonds to be more challenging from a learning standpoint versus stocks. I started with BND/BNDX 80/20 as a start a few years ago (now age 50...was 100% stocks until then). I now struggle with fixed income investments I never even knew about such as TIPS, bond ladders, etc. As inflation reared its head, I did not sell any of my existing investments, but directed new contributions to cash. This worked well as I was happy to increase my contributions to stocks and my AA has drifted from 60/40 to 70/30. I am still trying to figure out how I want it to look in the future before I rebalance the fixed income side.

Overall:

* Know what you would like to have for your long term bond setup. If you are unsure...you should move slower.

* If you are confident in what you want, I'm not sure there is an optimal approach that can be known in advance (no one knows the future). My core assumption is that you want to increase your bond allocation to reduce risk in your portfolio. All at once is as good as any - simple and done. Hopefully, others will have more insights / perspective.

Best wishes.
tashnewbie
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Joined: Thu Apr 23, 2020 12:44 pm

Re: Portfolio review - Are we FIRE-ready?

Post by tashnewbie »

btakla wrote: Tue Jan 24, 2023 11:04 pm 1- Can my wife retire in 2027 after the PSFL student loan forgiveness program?
2- Can I retire in the next 7-10 years? I would like to expand and focus on the real estate "side hustle"
Really depends on expenses and other information you haven't provided.

If your kids are toddlers, they'll be in school in 4-5 years. Will your wife still want to be a SAHM then?
3- My current employer has their 401k with Vanguard (Wooh hoo) should I rollover the previous plans into the vanguard 401k account or in an IRA or just let them be? money is currently in 2 fidelity plans and 1 schwab
For me this would depend solely on fund options and overall fees (funds and plan/admin). If your current 401k is as good as or better than the older ones, I see no reason not to transfer everything into the current plan. Consolidates the # of accounts and thereby simplifies your portfolio.

If one of the older plan includes the after-tax in-plan conversion money, then I would transfer that to your Roth IRA, not the current 401k.
5- any additional thoughts or general comments?
It looks like your taxable account is at Wealthfront? I would get it out of there because I wouldn't want to pay their fees to manage a simple taxable account. I'd move to some low-cost brokerage like Fidelity, Schwab, or Vanguard.
Topic Author
btakla
Posts: 32
Joined: Mon Dec 18, 2017 2:07 pm

Re: Portfolio review - when can spouse retire?

Post by btakla »

HomeStretch wrote: Tue Jan 24, 2023 11:44 pm The answers to questions 1 & 2 depend in part on your annual expenses.


current annual expenses below - daycare expenses will be replaced with healthcare premiums if we both FIRE - I am also confident that the rental income can help cover the mortgage payment.

Image

If your spouse becomes a stay-at-home parent, is your income sufficient to cover all expenses and continue to save towards retirement?
[/quote][/quote]

it will probably be a soft retirement where she goes down to part-time
Last edited by btakla on Wed Jan 25, 2023 12:53 pm, edited 1 time in total.
Topic Author
btakla
Posts: 32
Joined: Mon Dec 18, 2017 2:07 pm

Re: Portfolio review - Are we FIRE-ready?

Post by btakla »

Watty wrote: Tue Jan 24, 2023 11:55 pm
btakla wrote: Tue Jan 24, 2023 11:04 pm 2- Can I retire in the next 7-10 years? I would like to expand and focus on the real estate "side hustle"
Unless I missed it I did not see any college savings. What are your plans for that?
As a first-generation immigrant, I am not fully sold on funding my kid's college.. I want them to have some skin in the game and either pay for or fund college themselves. My plan was to leave them the rental property once it all paid off as an inheritance ... haven't really made a full commitment and can be persuaded either way.
Topic Author
btakla
Posts: 32
Joined: Mon Dec 18, 2017 2:07 pm

Re: Portfolio review - Are we FIRE-ready?

Post by btakla »

I have found bonds to be more challenging from a learning standpoint versus stocks. I started with BND/BNDX 80/20 as a start a few years ago (now age 50...was 100% stocks until then). I now struggle with fixed income investments I never even knew about such as TIPS, bond ladders, etc. As inflation reared its head, I did not sell any of my existing investments, but directed new contributions to cash. This worked well as I was happy to increase my contributions to stocks and my AA has drifted from 60/40 to 70/30. I am still trying to figure out how I want it to look in the future before I rebalance the fixed income side.

Overall:

* Know what you would like to have for your long term bond setup. If you are unsure...you should move slower.

* If you are confident in what you want, I'm not sure there is an optimal approach that can be known in advance (no one knows the future). My core assumption is that you want to increase your bond allocation to reduce risk in your portfolio. All at once is as good as any - simple and done. Hopefully, others will have more insights / perspective.
Best wishes.

I will have to learn more about that but I will start with the 10k Ibond limit this year .. it is good to know that some people stay 100% stocks as this is my desire for the short term and ramp up some bond solwely.
Topic Author
btakla
Posts: 32
Joined: Mon Dec 18, 2017 2:07 pm

Re: Portfolio review - Are we FIRE-ready?

Post by btakla »

If your kids are toddlers, they'll be in school in 4-5 years. Will your wife still want to be a SAHM then?
most likely it will be a part time soft retirement for a long period

It looks like your taxable account is at Wealthfront? I would get it out of there because I wouldn't want to pay their fees to manage a simple taxable account. I'd move to some low-cost brokerage like Fidelity, Schwab, or Vanguard.
the only reason I use Wealthfront is their automatic TLH, I am not sure if the vanguard robo services does that.
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luminous
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Re: Portfolio review - when can spouse retire?

Post by luminous »

btakla wrote: Wed Jan 25, 2023 12:39 pm
HomeStretch wrote: Tue Jan 24, 2023 11:44 pm The answers to questions 1 & 2 depend in part on your annual expenses.


current annual expenses below - daycare expenses will be replaced with healthcare premiums if we both FIRE - I am also confident that the rental income can help cover the mortgage payment.

Image
This looks like a budget, not actuals. How confident are you in these numbers representing reality?
55/15/30 US stock/international stock/bonds. Semi-retired as of 2022.
BernardShakey
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Re: Portfolio review - Are we FIRE-ready?

Post by BernardShakey »

btakla wrote: Wed Jan 25, 2023 12:43 pm
Watty wrote: Tue Jan 24, 2023 11:55 pm
btakla wrote: Tue Jan 24, 2023 11:04 pm 2- Can I retire in the next 7-10 years? I would like to expand and focus on the real estate "side hustle"
Unless I missed it I did not see any college savings. What are your plans for that?
As a first-generation immigrant, I am not fully sold on funding my kid's college.. I want them to have some skin in the game and either pay for or fund college themselves. My plan was to leave them the rental property once it all paid off as an inheritance ... haven't really made a full commitment and can be persuaded either way.
I'd keep working and pay for some / all of the kids' college or trade school. It's a competitive world out there and giving your kids an outstanding education with little or no debt will serve as a greater gift long-term than your rental property.
An important key to investing is having a well-calibrated sense of your future regret.
MattB
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Re: Portfolio review - Are we FIRE-ready?

Post by MattB »

BernardShakey wrote: Wed Jan 25, 2023 1:44 pm
btakla wrote: Wed Jan 25, 2023 12:43 pm
Watty wrote: Tue Jan 24, 2023 11:55 pm
btakla wrote: Tue Jan 24, 2023 11:04 pm 2- Can I retire in the next 7-10 years? I would like to expand and focus on the real estate "side hustle"
Unless I missed it I did not see any college savings. What are your plans for that?
As a first-generation immigrant, I am not fully sold on funding my kid's college.. I want them to have some skin in the game and either pay for or fund college themselves. My plan was to leave them the rental property once it all paid off as an inheritance ... haven't really made a full commitment and can be persuaded either way.
I'd keep working and pay for some / all of the kids' college or trade school. It's a competitive world out there and giving your kids an outstanding education with little or no debt will serve as a greater gift long-term than your rental property.
This is my inclination as well. I believe we could FIRE now if we wanted. But I think working sets a good example for the kids (as I'm asking them to "work" hard in school). And I'd rather work a few more years to pay for their education than leave them to struggle with that challenge on their own.

That said, that decision is ultimately a personal one, whether to work to help your kids with educational costs, or to sit back and let them fight that battle on their own. As such, I wouldn't (and won't) suggest how other people should approach it.
secondopinion
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Re: Portfolio review - Are we FIRE-ready?

Post by secondopinion »

BernardShakey wrote: Wed Jan 25, 2023 1:44 pm
btakla wrote: Wed Jan 25, 2023 12:43 pm
Watty wrote: Tue Jan 24, 2023 11:55 pm
btakla wrote: Tue Jan 24, 2023 11:04 pm 2- Can I retire in the next 7-10 years? I would like to expand and focus on the real estate "side hustle"
Unless I missed it I did not see any college savings. What are your plans for that?
As a first-generation immigrant, I am not fully sold on funding my kid's college.. I want them to have some skin in the game and either pay for or fund college themselves. My plan was to leave them the rental property once it all paid off as an inheritance ... haven't really made a full commitment and can be persuaded either way.
I'd keep working and pay for some / all of the kids' college or trade school. It's a competitive world out there and giving your kids an outstanding education with little or no debt will serve as a greater gift long-term than your rental property.
I got scholarships for a good amount of my costs, I worked a little, and my parents paid the rest (which was not that much). I got a surprise gift from someone else that covered my Master’s, which got me a head start as I started working as well full-time. Receiving capital for a useful education is well worth the gift and investment. But I agree with the other poster that there should be real effort on the part of the kid to try at least reducing the cost; the point is to transition one from having everything paid for to partly paid for to nothing paid for.
Last edited by secondopinion on Wed Jan 25, 2023 2:07 pm, edited 1 time in total.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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drgenefish
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Re: Portfolio review - Are we FIRE-ready?

Post by drgenefish »

I think you're missing some details.

you're not counting your rental mortgage as an expense. (you're going to need to cover it if rent isn't paid). also you might (will) have repairs in the next 7 years.

there will be more expenses in the next 7-10 years...new car? house repair? move? bigger than expected health expense? children will begin sports, travel will cost more with 4 people, clothes might cost more, what if she doesn't qualify for forgiveness, etc..

sounds like you're killing it and will be close but I think you are underestimating your true expenses.

maybe you'll make more in 7-10 years? maybe your real estate side gig turns into making a bigger than $185k salary?

I love planning ahead and looking forward to things but for now I would keep plugging away and you need a bit more clarity on a few things to plan for sure.

maybe run your budget for 6-12 months with just your salary and save 100% of hers and see if you're over / under (obv don't go into debt...use her money if needed and just keep record of it).
tashnewbie
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Re: Portfolio review - Are we FIRE-ready?

Post by tashnewbie »

btakla wrote: Wed Jan 25, 2023 12:50 pm
It looks like your taxable account is at Wealthfront? I would get it out of there because I wouldn't want to pay their fees to manage a simple taxable account. I'd move to some low-cost brokerage like Fidelity, Schwab, or Vanguard.
the only reason I use Wealthfront is their automatic TLH, I am not sure if the vanguard robo services does that.
Honestly, TLH isn't hard or time-consuming. When there are opportunities, you'll more than likely know about it because market condition information will be in the news. Last year, for example. If you continue using Wealthfront, just make sure you don't use any of the ETFs/funds they use in your other accounts, because then you could have wash sale issues.
financiallycurious
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Re: Portfolio review - Are we FIRE-ready?

Post by financiallycurious »

drgenefish wrote: Wed Jan 25, 2023 2:07 pm I think you're missing some details.

you're not counting your rental mortgage as an expense. (you're going to need to cover it if rent isn't paid). also you might (will) have repairs in the next 7 years.
I agree - this is a potential red flag. I have several rentals. Some years the cash flow is great and other years the rental properties feel more like a money pit (most recently, one tenant completely trashed one unit and it took 6 months to get it back into rent ready condition). I think you need a hefty cash reserve for vacancies and repairs before you can consider the cash flow from rental properties available to support your current lifestyle.
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