Fourth Check-In [Portfolio Review]

[fire_2030]

One more year on the journey completed!

This was my second year doing a full detailed budget. 2023 will be the year I pull back and just use broader categorization while leveraging Credit Card annual summaries (the squeeze was not worth the juice). Im using the budget more to document spend rather then control it but its been a great benefit at drawing insights I might have missed. Its helping build confidence that my quoted yearly desired spend in retirement will be accurate. With year over year increases in actual spend I have to be honest with myself that its not all inflationary, definitely some life style creep worth keeping an eye on. Budget insights and questions further below.

On the retirement portfolio front it was hard to see lower values across the board for 2022 but when you take a step back and compare to my first check-in you really cant complain since most of us had way over average market returns leading up to 2022. On that note, I spent some time cleaning up my personal tracking excel and created a summary and detailed table that I have included below. This was a much cleaner way to track year over year changes then my previous post method of using the "strikeout" text feature! Portfolio insights and questions further below.

First Check-In: viewtopic.php?t=315194
Second Check-In: viewtopic.php?t=350811
Third Check-In: viewtopic.php?t=374468


Key Details:
Emergency funds: 6months (Mature Ibonds & Taxable Basis)
Debt: 104K on rental property (4%)
Tax Filing Status: Married Filing Jointly
Tax Rate: 24% Federal, 7% State
Age: 41/41/11/7
Desired Asset allocation: 75% Stocks / 25% Bonds (International 20% of Stock)
Retirement Portfolio Size: 1.74M
Retirement Targets (Annual Spend, WR, Size): 117K/3.5%/3.34M
Gross Income: 280K + Variable Bonus + Variable RSU

Current retirement assets

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 Account Name                        | Jan 1 2023 ($) | Jan 1 2023 (%) | Notes                                         
-------------------------------------|----------------|----------------|-----------------------------------------------
 Retirement Total                    | $1,741,851.08  | 100.0%         | 73% Stocks (82US/18INT) / 22% Bonds / 5% Cash 
    Tax Exempt Total (Roth)          | $423,335.58    | 24.3%          | Mix of FZROX, FZILD, and individual stocks    
    Tax Deferred Total (Traditional) | $1,012,646.39  | 58.1%          | Mix of FSKAK, FTIHX, FXNAX, and VAN TGT 2040  
    Tax Free Total (HSA)             | $43,100.77     | 2.5%           | VTI                                           
    Tax Advantaged Total (Ibonds)    | $66,272.00     | 3.8%           | I-bonds                                       
    Taxable Total (Brokerage)        | $196,496.34    | 11.3%          | Mix of ITOT and VTI                           

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 Account Name                | Jan 1 2023 ($) | Jan 1 2023 (%) | Notes                                                            
-----------------------------|----------------|----------------|------------------------------------------------------------------
 Roth IRA (his)              | $101,500.54    | 5.8%           | 77% FZROX + 23% FZILX                                            
 Roth IRA(hers)              | $74,524.54     | 4.3%           | 72% FZROX + 28% Individual Stocks                                
 Roth 401K (his)             | $132,956.63    | 7.6%           | 100% FZROX                                                       
 Roth 401K (hers)            | $114,353.87    | 6.6%           | 100% FZROX                                                       
 Traditional IRA (his)       | $0.00          | 0.0%           | NA                                                               
 Traditional IRA (hers)      | $0.00          | 0.0%           | NA                                                               
 Traditional 401K(his)       | $609,429.95    | 35.0%          | 43% FSKAK + 16% FTIHX + 35% FXNAX + 6% VAN TGT 2040 (45/32/20/3) 
 Traditional 401K (hers)     | $403,216.44    | 23.1%          | 73% VAN TGT 2040 (45/32/20/3) + 27% FXNAX                        
 HSA (his)                   | $20,528.55     | 1.2%           | 100% VTI (Minus 1K Cash Reserve)                                 
 HSA (hers)                  | $22,572.22     | 1.3%           | 100% VTI (Minus 1K Cash Reserve)                                 
 I-Bonds (his)               | $33,136.00     | 1.9%           | 100% I-Bonds                                                     
 I-Bonds (hers)              | $33,136.00     | 1.9%           | 100% I-Bonds                                                     
 Individual Brokerage (his)  | $76,628.01     | 4.4%           | 82% ITOT, 18% VTI                                                
 Individual Brokerage (hers) | $119,868.33    | 6.9%           | 93% ITOT, 7% VTI                                                                               

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| Account Name                        | INDEX US ($)  | INDEX INT ($) | INDIV STOCKS ($) | INDEX BOND ($) | CASH ($)   | Notes                                         |
|-------------------------------------|---------------|---------------|------------------|----------------|------------|-----------------------------------------------|
| Retirement Total                    | $1,027,686.78 | $226,746.33   | $20,866.87       | $388,351.68    | $78,199.41 | 73% Stocks (82US/18INT) / 22% Bonds / 5% Cash |
|    Tax Exempt Total (Roth)          | $379,123.58   | $23,345.12    | $20,866.87       | $0.00          | $0.00      |                                               |
|    Tax Deferred Total (Traditional) | $410,966.09   | $203,401.21   | $0.00            | $388,351.68    | $9,927.41  |                                               |
|    Tax Free Total (HSA)             | $41,100.77    | $0.00         | $0.00            | $0.00          | $2,000.00  |                                               |
|    Tax Advantaged Total (Ibonds)    | $0.00         | $0.00         | $0.00            | $0.00          | $66,272.00 |                                               |
|    Taxable Total (Brokerage)        | $196,496.34   | $0.00         | $0.00            | $0.00          | $0.00      |

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| Account Name                        | INDEX US (%) | INDEX INT (%) | INDIV STOCKS (%) | INDEX BOND (%) | CASH (%) |
|-------------------------------------|--------------|---------------|------------------|----------------|----------|
| Retirement Total                    | 59.0%        | 13.0%         | 1.2%             | 22.3%          | 4.5%     |
|    Tax Exempt Total (Roth)          | 21.8%        | 1.3%          | 1.2%             | 0.0%           | 0.0%     |
|    Tax Deferred Total (Traditional) | 23.6%        | 11.7%         | 0.0%             | 22.3%          | 0.6%     |
|    Tax Free Total (HSA)             | 2.4%         | 0.0%          | 0.0%             | 0.0%           | 0.1%     |
|    Tax Advantaged Total (Ibonds)    | 0.0%         | 0.0%          | 0.0%             | 0.0%           | 3.8%     |
|    Taxable Total (Brokerage)        | 11.3%        | 0.0%          | 0.0%             | 0.0%           | 0.0%     |

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| Account Name                | INDEX US ($) | INDEX INT ($) | INDIV STOCKS ($) | INDEX BOND ($) | CASH ($)   | Notes                                                            |
|-----------------------------|--------------|---------------|------------------|----------------|------------|------------------------------------------------------------------|
| Roth IRA (his)              | $78,155.42   | $23,345.12    | $0.00            | $0.00          | $0.00      | 77% FZROX + 23% FZILX                                            |
| Roth IRA(hers)              | $53,657.67   | $0.00         | $20,866.87       | $0.00          | $0.00      | 72% FZROX + 28% Individual Stocks                                |
| Roth 401K (his)             | $132,956.63  | $0.00         | $0.00            | $0.00          | $0.00      | 100% FZROX                                                       |
| Roth 401K (hers)            | $114,353.87  | $0.00         | $0.00            | $0.00          | $0.00      | 100% FZROX                                                       |
| Traditional IRA (his)       | $0.00        | $0.00         | $0.00            | $0.00          | $0.00      | NA                                                               |
| Traditional IRA (hers)      | $0.00        | $0.00         | $0.00            | $0.00          | $0.00      | NA                                                               |
| Traditional 401K(his)       | $278,509.49  | $109,209.85   | $0.00            | $220,613.64    | $1,096.97  | 43% FSKAK + 16% FTIHX + 35% FXNAX + 6% VAN TGT 2040 (45/32/20/3) |
| Traditional 401K (hers)     | $132,456.60  | $94,191.36    | $0.00            | $167,738.04    | $8,830.44  | 73% VAN TGT 2040 (45/32/20/3) + 27% FXNAX                        |
| HSA (his)                   | $19,528.55   | $0.00         | $0.00            | $0.00          | $1,000.00  | 100% VTI (Minus 1K Cash Reserve)                                 |
| HSA (hers)                  | $21,572.22   | $0.00         | $0.00            | $0.00          | $1,000.00  | 100% VTI (Minus 1K Cash Reserve)                                 |
| I-Bonds (his)               | $0.00        | $0.00         | $0.00            | $0.00          | $33,136.00 | 100% I-Bonds                                                     |
| I-Bonds (hers)              | $0.00        | $0.00         | $0.00            | $0.00          | $33,136.00 | 100% I-Bonds                                                     |
| Individual Brokerage (his)  | $76,628.01   | $0.00         | $0.00            | $0.00          | $0.00      | 82% ITOT, 18% VTI                                                |
| Individual Brokerage (hers) | $119,868.33  | $0.00         | $0.00            | $0.00          | $0.00      | 93% ITOT, 7% VTI                                                 |

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| Account Name                | INDEX US (%) | INDEX INT (%) | INDIV STOCKS (%) | INDEX BOND (%) | CASH (%) | Notes                                                            |
|-----------------------------|--------------|---------------|------------------|----------------|----------|------------------------------------------------------------------|
| Roth IRA (his)              | 4.5%         | 1.3%          | 0.0%             | 0.0%           | 0.0%     | 77% FZROX + 23% FZILX                                            |
| Roth IRA(hers)              | 3.1%         | 0.0%          | 1.2%             | 0.0%           | 0.0%     | 72% FZROX + 28% Individual Stocks                                |
| Roth 401K (his)             | 7.6%         | 0.0%          | 0.0%             | 0.0%           | 0.0%     | 100% FZROX                                                       |
| Roth 401K (hers)            | 6.6%         | 0.0%          | 0.0%             | 0.0%           | 0.0%     | 100% FZROX                                                       |
| Traditional IRA (his)       | 0.0%         | 0.0%          | 0.0%             | 0.0%           | 0.0%     | NA                                                               |
| Traditional IRA (hers)      | 0.0%         | 0.0%          | 0.0%             | 0.0%           | 0.0%     | NA                                                               |
| Traditional 401K(his)       | 16.0%        | 6.3%          | 0.0%             | 12.7%          | 0.1%     | 43% FSKAK + 16% FTIHX + 35% FXNAX + 6% VAN TGT 2040 (45/32/20/3) |
| Traditional 401K (hers)     | 7.6%         | 5.4%          | 0.0%             | 9.6%           | 0.5%     | 73% VAN TGT 2040 (45/32/20/3) + 27% FXNAX                        |
| HSA (his)                   | 1.1%         | 0.0%          | 0.0%             | 0.0%           | 0.1%     | 100% VTI (Minus 1K Cash Reserve)                                 |
| HSA (hers)                  | 1.2%         | 0.0%          | 0.0%             | 0.0%           | 0.1%     | 100% VTI (Minus 1K Cash Reserve)                                 |
| I-Bonds (his)               | 0.0%         | 0.0%          | 0.0%             | 0.0%           | 1.9%     | 100% I-Bonds                                                     |
| I-Bonds (hers)              | 0.0%         | 0.0%          | 0.0%             | 0.0%           | 1.9%     | 100% I-Bonds                                                     |
| Individual Brokerage (his)  | 4.4%         | 0.0%          | 0.0%             | 0.0%           | 0.0%     | 82% ITOT, 18% VTI                                                |
| Individual Brokerage (hers) | 6.9%         | 0.0%          | 0.0%             | 0.0%           | 0.0%     | 93% ITOT, 7% VTI                                                 |

Ticker Information
ITOT S&P500 INDEX ER=0.03%
FZROX US MARKET INDEX ER=0%
FZILX INTL MARKET INDEX ER=0%
VAN TARGET 2040 (45% Vanguard US Index + 32% Vanguard Total Int Index + 20% Vanguard Bond Index + 3% Cash) ER=0.06%
FXNAX US BOND INDEX ER=0.025%
FSKAK US MARKET INDEX ER=0.015%
FTIHX INTL MARKET INDEX ER=0.06%
VFIAX VANGUARD 500 INDEX ADMIRAL ER=0.04%
VTI VANGUARD TOTAL STOCK MARKET ETF ER=0.03%
TGT Growth Fund (45% Vanguard US Index + 30% Vanguard Total Int Index + 25% Vanguard Bond Index) ER=0.49%
TGT Aggressive Growth Fund (60% Vanguard US Index + 40% Vanguard Total Int Index) ER=0.49%

Current non-retirement assets

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 Account Name                | Jan 1 2023 ($) | Jan 1 2023 (%) | Notes                          
-----------------------------|----------------|----------------|--------------------------------
 529 (child1)                | $102,070.12    | 83.6%          | 100% TGT Growth Fund           
 529 (child2)                | $20,077.59     | 16.4%          | 100% TGT Aggressive Growth Fund 
 Primary Home (value - debt) | $831,600.00    | 9.1%           | $0 Debt                        
 Rental Home (value - debt)  | $394,500.00    | 90.9%          | $104,000 Debt                  

Contributions

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 Account Name                        | 2023 Planned 
-------------------------------------|--------------
 Retirement Total                    | $166,650.00  
    Tax Exempt Total (Roth)          | $65,000.00   
    Tax Deferred Total (Traditional) | $57,900.00   
    Tax Free Total (HSA)             | $7,750.00    
    Tax Advantaged Total (Ibonds)    | $20,000.00   
    Taxable Total (Brokerage)        | $16,000.00   
 Education Total                     | $12,000.00   
    Tax Exempt Total (529)           | $12,000.00   

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 Account Name                  | 2023 Planned 
-------------------------------|--------------
 Roth IRA (his) (via backdoor) | $6,500.00    
 Roth IRA(hers) (via backdoor) | $6,500.00    
 Roth 401K (his)               | $26,000.00   
 Roth 401K (hers)              | $26,000.00   
 Traditional IRA (his)         | $0.00        
 Traditional IRA (hers)        | $0.00        
 Traditional 401K(his)         | $31,600.00   
 Traditional 401K (hers)       | $26,300.00   
 HSA (his)                     | $3,875.00    
 HSA (hers)                    | $3,875.00    
 I-Bonds (his)                 | $10,000.00   
 I-Bonds (hers)                | $10,000.00   
 Individual Brokerage (his)    | $16,000.00   
 Individual Brokerage (hers)   | $0.00        
 529 (child1)                  | $0.00        
 529 (child2)                  | $12,000.00   

2023 Portfolio Insights:

• Had no idea my HSA used VTI, could mess up my tax loss harvesting. My note say this was VFIAX last year so must have approved a swap when we changed HSA providers.
• The Traditional 401K accounts require >= 5% to be in target fund, the rest can be in brokerage link
• Traditional 401K (2) has much larger then 5% in target fund, could move a significant amount of it to FSKAK/FTIHX/FXNAX if needed
• Reduced my individual stock exposure significantly over the last several years

2023 Portfolio Questions:

• My 3 fund portfolio is not overly complex in theory but with the vast # of accounts to track it feels that way. Do you see any obvious ways to reduce overall complexity?
• Thoughts on diversifying out of the 73% VAN TGT 2040 fund in traditional 401K(2) account? Would replace with total market/total bond funds?
• Plan to use Roth conversion ladder to move 401K/IRA into RothIRA in early retirement. Will need taxable + ibonds to fund 5 years of expenses as well as conversion tax costs. Trying to ballpark what I should aim for in taxable to achieve this. If we say yearly budget is 117K, and each year we will additionally convert 117K.... also taxable will be growing over these 5 years.... I'm ballparking 600K? 117K after standard deduction is 90K (top of 12% aka 10K in tax due), so each year I would need 117K+10K+any LTCG tax, I figure taxable would still grow ~5% every year? Maybe I should be more conservative since I need the money? Interested in other suggestions on how to model this.
• I could in theory convert less each year and subsidize the delta with roth contribution withdrawals, but feels bad to raid the roth that early. Would really need to see on paper how/if ACA subsidies could make the math justify this method. Would anyone recommend looking at scaling back conversions each year to get more subsidy knowing that I would take from roth to cover the difference?

Budget

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 Budget  | 2021        | 2022        | 2023        
---------|-------------|-------------|-------------
 Planned | $105,000.00 | $115,000.00 | $125,000.00 
 Actual  | $126,754.12 | $124,527.78 

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 Category                                    | Annual ($)  
---------------------------------------------|-------------
 Credit Card Annual Fee                      | $200.00     
 Subscription Services                       | $260.00     
 Primary Home HOA                            | $280.00     
 Life Insurance                              | $480.00     
 Coffee                                      | $600.00     
 Primary Home Water                          | $660.00     
 Primary Home Gas                            | $660.00     
 Primary Home Sewer/Trash                    | $720.00     
 Family Hair                                 | $720.00     
 Rental HOA                                  | $720.00     
 Family Medical                              | $860.00     
 Rental Upkeep                               | $960.00     
 Home Internet                               | $960.00     
 Car Insurance                               | $1,000.00   
 Primary Home Power/Electricity              | $1,200.00   
 Cell Phone Plans                            | $1,200.00   
 Rental Property Management                  | $1,400.00   
 Amazon Slush Fund                           | $1,800.00   
 Primary Home Insurance                      | $2,000.00   
 Birthday/Christmas Presents                 | $2,000.00   
 Summer Camps                                | $2,000.00   
 Primary Home Upkeep                         | $2,100.00   
 Auto Upkeep                                 | $2,400.00   
 Auto Gas                                    | $2,400.00   
 Cleaning Services                           | $3,000.00   
 Eating Out (Restaurants)                    | $4,200.00   
 Family Activities (hobbies, sports, ect)    | $4,800.00   
 Auto Upgrade Savings                        | $5,200.00   
 Primary Home Upgrade Savings                | $5,200.00   
 Primary Home Property Tax                   | $5,800.00   
 Family Slush Fund (Clothing, Drinking, ect) | $6,700.00   
 Charity                                     | $7,000.00   
 Federal/State Income Tax (extra)            | $9,000.00   
 Vacation/Trips                              | $15,000.00  
 Groceries/Weekday Lunch                     | $15,600.00  
 Rental Mortgage                             | $15,800.00  
 Total                                       | $124,880.00 

2023 Budget Insights:

• Tax Estimates for 2022 using 2021 numbers were way off due to RSU, important to look forward to large RSU vest years
• Travel Estimates still way off, thought 2022 would be significantly less then 2021, probably worth baselining to this new spend, I would rather over estimate then under
• Groceries estimates continue to be off due to unforeseen inflation
• Easily surpassing the 6K max on AMEX Blue 6% Cash Back ($360), need to see how to get another grocery card that's as competitive with their cashback on this category.
• Run ups in property values have driven property tax up across the board
• Wow we spend a lot on coffee, time to get a grinder and espresso machine
• Over 35K in the 1% cash back credit card category, need to look into a 2% CB card for general purchases
• Took the forums advice last year and moved all CC to autopay, no late fee/interest this year! Need to get better still on canceling one-off subscriptions services like Audible or ESPN+ ect

2023 Budget Questions:

• Lots of room to tighten budget if needed. Other then tax adjustment and ~15K for ACA, what other categories might come into the budget during retirement that I don't already have?
• Aiming for ~117K yearly expense in retirement. Plan to pay off rental before retirement so current mortgage line item will reduce from 15.8K to ~7K (property tax + insurance). I estimate ~15K associated to kids which would/should be freed up once they launch. Need to read more about the ACA subsidies. With a pre deduction 117K budget, are subsidies available? Is there a magic number I should aim to stay below or is it a sliding scale.

[Parkinglotracer]

There is a standard format avail here on forum for portfolio reviews that may help you get more feedback. Congrats on your great savings at such a young age. Keep it up.


https://www.bogleheads.org/wiki/Asking_ ... _questions

[fire_2030]

There is a standard format avail here on forum for portfolio reviews that may help you get more feedback. Congrats on your great savings at such a young age. Keep it up.


https://www.bogleheads.org/wiki/Asking_ ... _questions

Thanks for the suggestion! I stuck with the approved template format for the first several years but this is my first year trying out these trend tables and I forgot to pull over some key info that this template request. I have updated my post above with additional details to fill the gaps.

[Parkinglotracer]

Edited below.

[Parkinglotracer]

I may move to simplify number of funds towards a three fund/etf portfolio Total market index, Total international index fund, and total intermediate index bond fund like vti, vxus, and bnd If you can. You will have to be the judge if the variety of funds helps your diversification / performance any. Maybe Like you I have a few stocks (say 10) in my taxable brokerage that now have sizeable capital gains - in order to simplify those I have to pay the taxes on the Gains. Trying to do a little of that each year as I don’t want to trade ubiquiti, Amazon, google, apple, junior anymore. You may be in that situation someday.

I have a bond ladder instead of bond ETFs. I like individual bonds, I bonds, g fund, CDs, mm funds to reduce interest rate risk or at least the psychological perception of interest rate risk.

I do not have any insight on what’s best for you re your Roth conversions and that relative to ACA subsidies. We are retired and age 62 and we have been trying to do enough roth conversions each year to stay in 22% tax bracket and reduce our age 75 rmd tax consequences. I roughly model my yearly tax returns to estimate what is best.


it appears you are saving a lot each year - what % is that of your income? I see all your budget categories and assume many of those are relatively fix costs / aren’t changing. I assume both spouses have paid jobs and no idea how the division of household duties is done re: whether the 3000 a year in cleaning fees is a must have. We saved the amount I thought we needed / wanted to save and cut the spending items re vacations, etc to fit. That will be a decision you and your sig other have to make.

How about this rental property? How has the return worked out with regard to money and time you have spent on it? Obviously that is a decision on what you think is best. I have never had one.

Have you thought of 529 plans / college savings for kids?

Congrats again and stay the course! You will be happy you did when you get to our age a quick 20 years from now. Our expenses in retirement (about 100K a year) are the same as when we were younger except the kids expenses / college / retirement savings are not needed in budget. We have a cola pension to help. Paying for an occasional new used car, travel, second home, gifts, a used Boston whaler, and home improvements are still things one may dream of when you retire and that tacked onto daily expenses add up. First world problem I know -lol. You both will be glad you saved now I bet. We are glad we did. It may give you freedom to retire, go part-time, switch jobs and have flexibility others won’t have. It enabled me to retire for a few years at age 50, go back to old job, retire again at age 60.

Good luck

[wetgear]

There is a standard format avail here on forum for portfolio reviews that may help you get more feedback. Congrats on your great savings at such a young age. Keep it up.


https://www.bogleheads.org/wiki/Asking_ ... _questions

Thanks for the suggestion! I stuck with the approved template format for the first several years but this is my first year trying out these trend tables and I forgot to pull over some key info that this template request. I have updated my post above with additional details to fill the gaps.

The trend tables are sort of hard to read and provide unnecesary detail to us while leaving out key information like what percentage of the portfolio each fund represents. We could probably figure it out with all the dollar values but help us help you buy doing that math so that we don't all individually have to.

[fire_2030]

Thanks for your feedback Parkinglottracer!

I may move to simplify number of funds towards a three fund/etf portfolio Total market index, Total international index fund, and total intermediate index bond fund like vti, vxus, and bnd If you can. You will have to be the judge if the variety of funds helps your diversification / performance any. Maybe Like you I have a few stocks (say 10) in my taxable brokerage that now have sizeable capital gains - in order to simplify those I have to pay the taxes on the Gains. Trying to do a little of that each year as I don’t want to trade ubiquiti, Amazon, google, apple, junior anymore. You may be in that situation someday.

I have a bond ladder instead of bond ETFs. I like individual bonds, I bonds, g fund, CDs, mm funds to reduce interest rate risk or at least the psychological perception of interest rate risk.

Only 1% of my total portfolio is in individual stocks today which is a big change from what it was 5+ years ago thanks to this forum. I do subscribe to the 3fund portfolio but the way im doing it is sort of handcuffed by the retirement accounts at work. You can see in the notes column its a mix of target date mutual funds from vanguard (tgt 2040), vanguard etfs (VTI), fidelity mutual funds (FSKAK,FZROX,FTIHX,FZILD,FXNAX), and ishares etfs (ITOT). This was not really be design. I have to keep a % of Target Date Fund per 401K rules, the rest can go into the 401K fidelity brokerage-link which enables me to get fidelity total market, total international, total bund mutual funds but that account does not allow the zero fee versions. Then over to the roth 401K fidelity brokrage-link you have the ability to get truly anything so that's why I loaded up on no fee versions of fidelity total market and total international mutual funds. (there is incentive to stay with fidelity funds in 401K since they charge no fees vs vanguard mutual/etf). My thought with the taxable brokerage was to flip back and forth between ITOT and VTI for any tax loss harvesting but that was before I realized my HSA might be using VTI (new as of this year) so its all getting a little messy to be frank. I was thinking of changing course and using my taxable brokrage account to swap between ITOT and VOO instead but thats just one more ticker in the index swimming pool. I dont mind managing it this way and I dont think there is any added risk im taking since they are all just slight variations on total/broad market indexing but it was worth asking the larger community if anyone saw it differently. (Just got done listening to Rick Ferri live podcast on how these indexes are all slightly different and maybe the biggest risk im introducing is S&P 500 vs Broad vs Total?)

I do not have any insight on what’s best for you re your Roth conversions and that relative to ACA subsidies. We are retired and age 62 and we have been trying to do enough roth conversions each year to stay in 22% tax bracket and reduce our age 75 rmd tax consequences. I roughly model my yearly tax returns to estimate what is best.

Yes the plan right now is to convert up to the top of the 12% and subsidize living and conversion expense with taxable brokerage basis and some LTCG but once I get closer to retirement time I need to see if ACA subsidies vs RMD implications makes me tilt higher into the 22% or even 24% conversion band. I have been concerned for a while that the 401K might continue to grow even after conversion which is dependent really on how big it is once I start the conversion cycle.

it appears you are saving a lot each year - what % is that of your income? I see all your budget categories and assume many of those are relatively fix costs / aren’t changing. I assume both spouses have paid jobs and no idea how the division of household duties is done re: whether the 3000 a year in cleaning fees is a must have. We saved the amount I thought we needed / wanted to save and cut the spending items re vacations, etc to fit. That will be a decision you and your sig other have to make.

Yes will update the post later with these details if its helpful. Both working, gross take-home is 280K base but highly variable bonus 0-40K and semi-variable RSU 20K-70K. So I would put the savings rate as a % of gross income in the 40-50% range. Yeah not so interested at cutting budget at this point just tracking to make sure its not growing without conscious approval. The last 3 years we have increased annual spend from 100K to 125K and some of that is inflation and some of it is choice. I am taking some sage advice and learning to enjoy spend more since I spent that last 20 years focusing solely on the saving side of the equation.

How about this rental property? How has the return worked out with regard to money and time you have spent on it? Obviously that is a decision on what you think is best. I have never had one.

Has had its ups and downs. Over the 7 years of it being a rental (was our first primary residence before we converted it) I have only had 2 tenants so that is a positive. its pulling in 22K a year gross with ~4K in property tax and 1K in insurance and 0-1K in incidentals. Kind of like how I dont include SS in my calculations I tend not to include the rental income or the potential equity of selling the rental although its nice to know its there if needed.

Have you thought of 529 plans / college savings for kids?

Yes, I took it out of the tables since it was not a pure play retirement account but currently ~100K in child1 and ~20K in child2. Stopped contributing to child1, and putting 12K a year into child2. I probably should add a new section above that lists out non-retirement info like primary/rental equity and 529. Does help paint a more holistic picture.

Congrats again and stay the course! You will be happy you did when you get to our age a quick 20 years from now. Our expenses in retirement (about 100K a year) are the same as when we were younger except the kids expenses / college / retirement savings are not needed in budget. We have a cola pension to help. Paying for an occasional new used car, travel, second home, gifts, a used Boston whaler, and home improvements are still things one may dream of when you retire and that tacked onto daily expenses add up. First world problem I know -lol. You both will be glad you saved now I bet. We are glad we did. It may give you freedom to retire, go part-time, switch jobs and have flexibility others won’t have. It enabled me to retire for a few years at age 50, go back to old job, retire again at age 60.

Thanks again for spending time to look it over! My trick has been to make friends with people with Boston whalers and second homes! Although you cant kid yourself, the adage of keeping up with the Joneses is a real thing to keep in check. I figure if it will bring you sustainable happiness you should do it! If its for short lived happiness/vanity, stay away (unless you have >10m then do whatever you want)

[fire_2030]

The trend tables are sort of hard to read and provide unnecesary detail to us while leaving out key information like what percentage of the portfolio each fund represents. We could probably figure it out with all the dollar values but help us help you buy doing that math so that we don't all individually have to.

Thanks for the constructive criticism. The trend tables are of interest to me personally to track year over year change and growth but your 100% right it does not really relate to my post questions and probably just adds more clutter/confusion. I went head and removed them. They will be value add in other threads/questions I might have in the future but not this one. The % of portfolio each fund represents can be found in the current retirement asset tables.

[lakpr]

Couple of comments and questions:

1) Noticed $0 in the budget for Roth IRAs for 2023, but $6,500 max each for Traditional IRAs. Your post doesn't explicitly say this, but I assume you ARE doing the Backdoor Roth, and not presumably leaving the $6,500 in tIRA itself? If so, it may be more helpful to add the $6,500 figure for each against the Roth IRA contribution itself but amend the description to "Roth IRA (Backdoor)"

2) Very curious: Any reason why $0 in 529 contributions to Child-1, but $12,000 to Child-2? Why not reduce your Individual Brokerage contribution and add to 529 plan for Child-1 also instead? Never mind - read the later reply that there is $100k in Child-1 account already. But I do feel $100k may not be sufficient for 4 years of college even now, much less when that kid reaches college age in 7 years. I would budget at least $150k. Given that at your level of income you cannot expect any aid, most in-state colleges are charging $35k per year per kid (and more for out of state students), that's $35k * 4 years + some buffer = $150k in TODAY's money ... after that you just expect the growth to keep pace with tuition inflation.

I would rather accelerate contributions to Child-1's 529 plan to reach the $150k threshold than contributing to Child-2, if I were in your situation. Child-1 has only 7 years, Child-2 has 11 years ...

3) Ditto as above: why $0 to Her Individual Brokerage account contribution?

4) Your comment about HSA messing up your tax-loss harvesting: I am of the opinion that unless IRS explicitly names them in the wash-sale rules, they don't count. Therefore HSA and 401(k) accounts do not come into the purview of wash sale rules, but IRAs and spouse's accounts have been explicitly mentioned and therefore count. I realize this opinion may not be shared by all, just offering it for what it is worth.

5) His 401(k) seems to be a slight mess: both a 3-fund portfolio AND a target date fund. Any reason why not to stick with one or the other?

Sorry I haven't read your previous posts, going strictly by what is posted in this thread alone.

[DIYtrixie]

I do not have any insight on what’s best for you re your Roth conversions and that relative to ACA subsidies. We are retired and age 62 and we have been trying to do enough roth conversions each year to stay in 22% tax bracket and reduce our age 75 rmd tax consequences. I roughly model my yearly tax returns to estimate what is best.

Yes the plan right now is to convert up to the top of the 12% and subsidize living and conversion expense with taxable brokerage basis and some LTCG but once I get closer to retirement time I need to see if ACA subsidies vs RMD implications makes me tilt higher into the 22% or even 24% conversion band. I have been concerned for a while that the 401K might continue to grow even after conversion which is dependent really on how big it is once I start the conversion cycle.

Why are you contributing >$50k/year now to Roth 401k in the 24% bracket if you anticipate being in the 12-22% bracket in retirement? Why not traditional 401k now?

[fire_2030]

1) Noticed $0 in the budget for Roth IRAs for 2023, but $6,500 max each for Traditional IRAs. Your post doesn't explicitly say this, but I assume you ARE doing the Backdoor Roth, and not presumably leaving the $6,500 in tIRA itself? If so, it may be more helpful to add the $6,500 figure for each against the Roth IRA contribution itself but amend the description to "Roth IRA (Backdoor)"

I knew someone would point that out! I was being a bit of a stickler with the word contribution since technically I contributed to the ira and converted it to roth (different ordering rules on roth direct contributions vs roth conversions from backdoor method). Overthinking it, I will change contributions to show it went into roth IRA and simply assume most here know about the backdoor method (or add a footnote).

But I do feel $100k may not be sufficient for 4 years of college even now, much less when that kid reaches college age in 7 years. I would budget at least $150k. Given that at your level of income you cannot expect any aid, most in-state colleges are charging $35k per year per kid (and more for out of state students), that's $35k * 4 years + some buffer = $150k in TODAY's money ... after that you just expect the growth to keep pace with tuition inflation.

I would rather accelerate contributions to Child-1's 529 plan to reach the $150k threshold than contributing to Child-2, if I were in your situation. Child-1 has only 7 years, Child-2 has 11 years ...

Its a fair argument but I have committed to not funding more then 12K a year to max out state tax deduction regardless of who's account it goes to. In theory, if I ran out of child1 account while child1 was still in college could I not simply rename child2 account to child1 to spend more of the funds then revert that account back to child2? Isn't this the benefit of having both children +4years apart? Having two accounts seems more phycological at this point, honestly I only created the second account because of a sign up bonus a couple years back. Once it was created I realized it did give me more flexibility/visibility on account aggressiveness (child2 further out - more aggressive, child1 closer to needing it - less aggressive)

3) Ditto as above: why $0 to Her Individual Brokerage account contribution?

Thanks for bringing this up! We each had our own brokerage accounts originally so we have been flip flopping every year on who's account we contribute into. It was 12K last year in hers, 12K this year in his and so on. Maybe an efficiency opportunity here to just reduce to one joint brokerage account for the both of us rather then maintain two separate accounts? For sure it was annoying to have to tax loss harvest two accounts last year. I think this is a good action to look into.

4) Your comment about HSA messing up your tax-loss harvesting: I am of the opinion that unless IRS explicitly names them in the wash-sale rules, they don't count. Therefore HSA and 401(k) accounts do not come into the purview of wash sale rules, but IRAs and spouse's accounts have been explicitly mentioned and therefore count. I realize this opinion may not be shared by all, just offering it for what it is worth.

will ponder this more for sure

5) His 401(k) seems to be a slight mess: both a 3-fund portfolio AND a target date fund. Any reason why not to stick with one or the other?

Yes this is a constraint on the 401K rules. They updated the accounts to have the ability to divest out of their fixed fund selection into a fidelity brokragelink account which allows you to buy individual stocks (or indexes in my case). The rules state you have to keep 5% min of your total traditional 401K in the fixed mutual fund side of the house. I have not looked at the company mutual fund selection list in a while though, if they happen to have a total market index with low ER it might be simpler to use that then have to factor in the us/int/bond allocation changes of the target 2040 fund every year. I will amend my post later with 401k fund selection list and make that determination later this weekend.

Thanks so much for engaging and getting me thinking more on this!

[fire_2030]

Why are you contributing >$50k/year now to Roth 401k in the 24% bracket if you anticipate being in the 12-22% bracket in retirement? Why not traditional 401k now?

Its not one or the other, we are both already maxing out our traditional 401k contributions so the extra money either goes into a taxable brokerage or into my mega backdoor roth. I prefer the latter

[Wannaretireearly]

Impressive OP & savings rate. I’m a few years ahead (adults and kids). What are your current expenses? Roughly?
I ask cos our expenses have gone up (travel mostly) even after paying off the mortgage! I’m trying to reign it in a bit this year, after plenty of excess last year.

[Parkinglotracer]

Thanks for your feedback Parkinglottracer!

I may move to simplify number of funds towards a three fund/etf portfolio Total market index, Total international index fund, and total intermediate index bond fund like vti, vxus, and bnd If you can. You will have to be the judge if the variety of funds helps your diversification / performance any. Maybe Like you I have a few stocks (say 10) in my taxable brokerage that now have sizeable capital gains - in order to simplify those I have to pay the taxes on the Gains. Trying to do a little of that each year as I don’t want to trade ubiquiti, Amazon, google, apple, junior anymore. You may be in that situation someday.

I have a bond ladder instead of bond ETFs. I like individual bonds, I bonds, g fund, CDs, mm funds to reduce interest rate risk or at least the psychological perception of interest rate risk.

Only 1% of my total portfolio is in individual stocks today which is a big change from what it was 5+ years ago thanks to this forum. I do subscribe to the 3fund portfolio but the way im doing it is sort of handcuffed by the retirement accounts at work. You can see in the notes column its a mix of target date mutual funds from vanguard (tgt 2040), vanguard etfs (VTI), fidelity mutual funds (FSKAK,FZROX,FTIHX,FZILD,FXNAX), and ishares etfs (ITOT). This was not really be design. I have to keep a % of Target Date Fund per 401K rules, the rest can go into the 401K fidelity brokerage-link which enables me to get fidelity total market, total international, total bund mutual funds but that account does not allow the zero fee versions. Then over to the roth 401K fidelity brokrage-link you have the ability to get truly anything so that's why I loaded up on no fee versions of fidelity total market and total international mutual funds. (there is incentive to stay with fidelity funds in 401K since they charge no fees vs vanguard mutual/etf). My thought with the taxable brokerage was to flip back and forth between ITOT and VTI for any tax loss harvesting but that was before I realized my HSA might be using VTI (new as of this year) so its all getting a little messy to be frank. I was thinking of changing course and using my taxable brokrage account to swap between ITOT and VOO instead but thats just one more ticker in the index swimming pool. I dont mind managing it this way and I dont think there is any added risk im taking since they are all just slight variations on total/broad market indexing but it was worth asking the larger community if anyone saw it differently. (Just got done listening to Rick Ferri live podcast on how these indexes are all slightly different and maybe the biggest risk im introducing is S&P 500 vs Broad vs Total?)

I do not have any insight on what’s best for you re your Roth conversions and that relative to ACA subsidies. We are retired and age 62 and we have been trying to do enough roth conversions each year to stay in 22% tax bracket and reduce our age 75 rmd tax consequences. I roughly model my yearly tax returns to estimate what is best.

Yes the plan right now is to convert up to the top of the 12% and subsidize living and conversion expense with taxable brokerage basis and some LTCG but once I get closer to retirement time I need to see if ACA subsidies vs RMD implications makes me tilt higher into the 22% or even 24% conversion band. I have been concerned for a while that the 401K might continue to grow even after conversion which is dependent really on how big it is once I start the conversion cycle.

it appears you are saving a lot each year - what % is that of your income? I see all your budget categories and assume many of those are relatively fix costs / aren’t changing. I assume both spouses have paid jobs and no idea how the division of household duties is done re: whether the 3000 a year in cleaning fees is a must have. We saved the amount I thought we needed / wanted to save and cut the spending items re vacations, etc to fit. That will be a decision you and your sig other have to make.

Yes will update the post later with these details if its helpful. Both working, gross take-home is 280K base but highly variable bonus 0-40K and semi-variable RSU 20K-70K. So I would put the savings rate as a % of gross income in the 40-50% range. Yeah not so interested at cutting budget at this point just tracking to make sure its not growing without conscious approval. The last 3 years we have increased annual spend from 100K to 125K and some of that is inflation and some of it is choice. I am taking some sage advice and learning to enjoy spend more since I spent that last 20 years focusing solely on the saving side of the equation.

How about this rental property? How has the return worked out with regard to money and time you have spent on it? Obviously that is a decision on what you think is best. I have never had one.

Has had its ups and downs. Over the 7 years of it being a rental (was our first primary residence before we converted it) I have only had 2 tenants so that is a positive. its pulling in 22K a year gross with ~4K in property tax and 1K in insurance and 0-1K in incidentals. Kind of like how I dont include SS in my calculations I tend not to include the rental income or the potential equity of selling the rental although its nice to know its there if needed.

Have you thought of 529 plans / college savings for kids?

Yes, I took it out of the tables since it was not a pure play retirement account but currently ~100K in child1 and ~20K in child2. Stopped contributing to child1, and putting 12K a year into child2. I probably should add a new section above that lists out non-retirement info like primary/rental equity and 529. Does help paint a more holistic picture.

Congrats again and stay the course! You will be happy you did when you get to our age a quick 20 years from now. Our expenses in retirement (about 100K a year) are the same as when we were younger except the kids expenses / college / retirement savings are not needed in budget. We have a cola pension to help. Paying for an occasional new used car, travel, second home, gifts, a used Boston whaler, and home improvements are still things one may dream of when you retire and that tacked onto daily expenses add up. First world problem I know -lol. You both will be glad you saved now I bet. We are glad we did. It may give you freedom to retire, go part-time, switch jobs and have flexibility others won’t have. It enabled me to retire for a few years at age 50, go back to old job, retire again at age 60.

Thanks again for spending time to look it over! My trick has been to make friends with people with Boston whalers and second homes! Although you cant kid yourself, the adage of keeping up with the Joneses is a real thing to keep in check. I figure if it will bring you sustainable happiness you should do it! If its for short lived happiness/vanity, stay away (unless you have >10m then do whatever you want)

You are doing great - enjoy the journey !

[fire_2030]

Impressive OP & savings rate. I’m a few years ahead (adults and kids). What are your current expenses? Roughly?
I ask cos our expenses have gone up (travel mostly) even after paying off the mortgage! I’m trying to reign it in a bit this year, after plenty of excess last year.

Yes I think we have experience similar budget growth. Currently predicting 125K in todays budget w/ kids budget. Planning more like 115K in early retirement (rough swag swapping kids expenses with healthcare costs). We were running 100K a year budget with primary house mortgage for a while but since eliminating that we still have seen rather large spend growth but its mostly discretionary (travel). Going from a frugal super saver mentality to being ok with spend increase has not been 100% easy but I feel like I'm making good strides. I know it sounds silly to say that out loud when savings rate as a % of gross is >40% but its a common theme on this board that rings true to me at least. It really is amazing to see the change in mindset though as I get closer to FI. A lot has changed in the last 5 years so trying to stay flexible and be aware that it can change further in the next 5 years.

[Wannaretireearly]

Impressive OP & savings rate. I’m a few years ahead (adults and kids). What are your current expenses? Roughly?
I ask cos our expenses have gone up (travel mostly) even after paying off the mortgage! I’m trying to reign it in a bit this year, after plenty of excess last year.

Yes I think we have experience similar budget growth. Currently predicting 125K in todays budget w/ kids budget. Planning more like 115K in early retirement (rough swag swapping kids expenses with healthcare costs). We were running 100K a year budget with primary house mortgage for a while but since eliminating that we still have seen rather large spend growth but its mostly discretionary (travel). Going from a frugal super saver mentality to being ok with spend increase has not been 100% easy but I feel like I'm making good strides. I know it sounds silly to say that out loud when savings rate as a % of gross is >40% but its a common theme on this board that rings true to me at least. It really is amazing to see the change in mindset though as I get closer to FI. A lot has changed in the last 5 years so trying to stay flexible and be aware that it can change further in the next 5 years.

Yep, 5 year increments! Being near FI is exciting for us too. Hopefully we’re on the last full 5 year cycle before we own 100% of our time. Every week, anticipation of 7am Monday morning meetings, reaffirms my RE goals and beliefs