40 Yr Old Asking Advice for Portfolio (retirement and non-retirement)

[NewDawnGlory]

Hello Boggleheads,

I’m looking for some advice on my portfolio. I’ve included both retirement and non-retirement assets and questions, I hope that is ok.

Emergency funds: 3 months expenses

Debt: Car $32k @ 2.3%, House $330k @ 3.125%
Tax Filing Status: Married Filing Jointly, 3 dependents

Tax Rate: 22% Federal, 5% State

State of Residence: Maryland

Age: 40

Desired Asset allocation: I’m looking for opinions about asset allocation. I prefer to think of the money in “buckets” set aside for specific goals (e.g. retirement, car, house down payment). I’m not looking for anything exotic, I’m fine to follow general indexing advice.

Approximate size of total portfolio: $580k total ($400k retirement, $100k non-retirement, $80k college savings).

Current Retirement Assets
Retirement assets – total about $400k

His TSP (about 1/3 in Roth, 2/3 in Traditional)
30% Common Stock Index (C fund) (E.R. 0.06%)
08% Small Cap Index (S fund) (E.R. 0.09%)
21% International Stock Index (I fund) (E.R. 0.06%)
06% Fixed Income (F fund) (E.R. 0.08%)
Company match – up to $7k annually

His Roth IRA at Vanguard
13% Target 2050 Retirement (VFIFX) (0.08%)
03% Target 2060 Retirement (VTTSX) (0.08%)

His pension
1. Estimate approx. 30 % of salary at retirement
2. Social Security benefit

Her Roth IRA at Vanguard
18% Target 2050 Retirement (VFIFX) (0.08%)

Her 403b
02% Target 2050 Retirement (VFIFX) (0.08%)
No company match

Her pension
1. Estimate approx. 40-45 % of salary at retirement
2. Social Security benefit
_______________________________________________________________
Contributions
New annual Contributions
$14k his TSP (employer match up to $7k)
$8k her 403b (no match)

Available funds

Funds available in his TSP
Common Stock Index (C fund) (E.R. 0.06%)
Small Cap Index (S fund) (E.R. 0.09%)
International Stock Index (I fund) (E.R. 0.06%)
Fixed Income (F fund) (E.R. 0.08%)
Government Securities (G fund) (E.R. 0.06%)

Funds available in her 403(b)
Vanguard target retirement funds

Questions:
1. What recommendations do you have about my (His) TSP allocation plan? I’m estimating I’ll retire in 2049, so I’ve been using the Vanguard 2050 target retirement fund as a model to do asset allocation amongst the C,S,I,F, and G funds. For U.S. stocks I match my sum of C-fund and S-fund to equal the Vanguard Total Stock Index. I use a C/(C+S) ratio of 0.8, which, to my understanding is a good representation of the Vanguard Total Stock Index. For International, I match the I-fund with the Vanguard total international index fund. For bonds, I match the F-fund with the total amount of bonds in Vanguard (U.S. and international). For cash, I match the G-fund with the Vanguard short-term reserves.

The breakdown by age will be (with interpolation between years):
Age 40 percentages: C 47, S 12, I 32, F 10, G 00
Age 50 percentages: C 41, S 10, I 28, F 21, G 00
Age 60 percentages: C 34, S 09, I 24, F 34, G 00
Age 65 percentages: C 30, S 07, I 20, F 40, G 03
Age 70 percentages: C 24, S 06, I 16, F 45, G 09
Age 75+ prcentages: C 15, S 04, I 11, F 54, G 17

2. For His TSP, I’ve been doing the traditional contributions. Should I be doing any Roth contributions instead? Some fraction of traditional/Roth?

_______________________________________________________________
_______________________________________________________________

Non-Retirement

College savings assets – total about $80k
Maryland 529
39% Portfolio 2030 (E.R. 0.61%)
35% Portfolio 2033 (E.R. 0.62%)
26% Portfolio 2036 (E.R. 0.64%)

Contributions
New annual Contributions
$2.5k per child ($7.5k total)
$5k per child ($15k total) possible contribution from relative

Available funds
Funds available MD 529
Target date portfolios (E.R. ranges 0.64 % for Portfolio 2042, to 0.36 % for Portfolio for Education Today)
Equity Index 500 portfolio (E.R. 0.13%)
Extended Equity Index portfolio (E.R. 0.22%)
Global Equity Index portfolio (E.R. 0.21%)
Inflation Focused Bond Portfolio (E.R. 0.19 %)
US Bond Index portfolio (E.R. 0.20 %)
US Treasury Money Market Portfolio (E.R. 0.31 %)
There are some other non-index portfolios available, with E.R. approximately 0.5 to 0.6 %. https://maryland529.com/Portals/0/Files ... tement.pdf (see page 1)

Questions:
3. The E.R. seems high for the MD 529 target date portfolios, about 0.6 % or higher. Is there a combination of the index funds I could use to get approximately equal performance as the MD target portfolios? Or is there a Vanguard fund I could track with the options in the MD 529?

4. I’m tempted to go all out on the 529 for a few years to front load it get the maximum growth and tax benefits. I could put all the house savings (about $50k) into the 529, and put all available savings into it until the college expense calculator projects we have enough for full college payment for all 3 children. This would delay my “dream” of upgrading a house for at least a few years. Any sage advice on people who’ve faced a similar decision?

_______________________________________________________________

Car savings assets – total about $43k. Plan to replace a car in 0-5 years
Taxable account
52% Vanguard VSCGX (Lifestrategy Conservative Growth) (E.R. 0.12%)
25% 3-month treasuries (E.R. 0.00%)
23% I-bond (E.R. 0.00%)

Available funds
Anything in Vanguard, Treasury Direct, Ally

Questions:
5. What do you recommend for the asset allocation, considering the unpredictable timeframe? The car is a 16-year-old Toyota with 200k miles, so it could still last a long time. Or not.

_______________________________________________________________

House savings assets – total about $50k. Plan to upgrade house 0-5 years.

Taxable account
44% Vanguard VSCGX (Lifestrategy Conservative Growth) (E.R. 0.12%)
42% Vanguard Federal MM (VMFXX) (E.R. 0.11%)
15% 3-month treasuries (E.R. 0.00%)

Contributions
New annual Contributions
$6.5k, currently all going to VSCGX

Available funds
Anything in Vanguard, Treasury Direct, Ally

Questions:
6. Same as the car, what do you recommend for the asset allocation, considering the unpredictable timeframe?

_______________________________________________________________

Thanks everyone for reading to the end, and I appreciate any advice you have to offer on any of the questions!

[retiredjg]

Welcome to the forum.

1. What recommendations do you have about my (His) TSP allocation plan?

There is nothing wrong with how you are doing this, but why not just use the L fund instead?

2. For His TSP, I’ve been doing the traditional contributions. Should I be doing any Roth contributions instead? Some fraction of traditional/Roth?

I think you should be using Roth - because of the pensions. With 2 pensions and. at least 1 SS income, you will probably need very little from a tax deferred account in retirement. Having a very large tax-deferred account is more likely to become a burden than an asset. I suggest putting at least half of future savings (both of you together) into Roth accounts rather than tax-deferred accounts.

3. The E.R. seems high for the MD 529 target date portfolios, about 0.6 % or higher. Is there a combination of the index funds I could use to get approximately equal performance as the MD target portfolios? Or is there a Vanguard fund I could track with the options in the MD 529?

Lots of ways to beat the high costs. Simplest would be Equity Index 500 portfolio (E.R. 0.13%) plus US Bond Index portfolio (E.R. 0.20 %) but you could add other funds if you wanted.

5. What do you recommend for the asset allocation, considering the unpredictable timeframe? The car is a 16-year-old Toyota with 200k miles, so it could still last a long time. Or not.

What you have is fine. The fact that you have any money saved for a car is a plus.

6. Same as the car, what do you recommend for the asset allocation, considering the unpredictable timeframe?

What you have is fine in my opinion.


You are clearly working hard on getting this right and have put a lot of time and attention into setting it up. I sense that you have a tendency to make things more complex than they need to be. That's OK if you enjoy it.

On the other hand, if it is driving you nuts, I think you could probably relax a little. All you really have to do is save money and avoid doing stupid stuff (which you don't seem prone toward anyway).

Good luck!

[NewDawnGlory]

Welcome to the forum.

Thanks! I see you are really active, thanks for all your contributions to the community!

1. What recommendations do you have about my (His) TSP allocation plan?

There is nothing wrong with how you are doing this, but why not just use the L fund instead?

I really like to use lifecycle funds whenever possible, they are so easy, and would make thing simple for my spouse if I expire early! But...the TSP lifecycle funds seem to put a lot of the portfolio in the "G-fund", especially nearing and in retirement (right now the Target 2050 has 10 % in G-fund, and in retirement is is 70 %). To my amateur understanding, the G-fund is similar to the "short-term" funds offered by Vanguard. Vanguard only starts to add Short Term funds once retirement age is reached, and then it never comprises more than 17 %. The TSP lifecycle funds hardly use the bond fund (F-fund) at all, with maximum of 8 %. I don't understand why TSP chose this asset allocation, but suspect is has to do with the fact that by default people are automatically enrolled in the Target Retirement fund matching their age. To a novice investor, the less volatile (but less rewarding) G-fund is less scary when nearing and in retirement. I'm comfortable with the amount of bonds that Vanguard recommends for lifecycle funds, so I thought I would mimic their portfolio and manually re-balance 1-2 times per year. I've seen people suggest this approach in concept, but I wanted to have an experienced eye look at my particular asset allocation plan and see if it makes sense. And you seem to think it makes sense.

2. For His TSP, I’ve been doing the traditional contributions. Should I be doing any Roth contributions instead? Some fraction of traditional/Roth?

I think you should be using Roth - because of the pensions. With 2 pensions and. at least 1 SS income, you will probably need very little from a tax deferred account in retirement. Having a very large tax-deferred account is more likely to become a burden than an asset. I suggest putting at least half of future savings (both of you together) into Roth accounts rather than tax-deferred accounts.

Thanks for the suggestion. I will look into making that change, I'll need to look some at the tax implications since we currently get nice credits for the three dependents. BTW, we are both expecting Social Security pensions (I updated my original post to include that).

3. The E.R. seems high for the MD 529 target date portfolios, about 0.6 % or higher. Is there a combination of the index funds I could use to get approximately equal performance as the MD target portfolios? Or is there a Vanguard fund I could track with the options in the MD 529?

Lots of ways to beat the high costs. Simplest would be Equity Index 500 portfolio (E.R. 0.13%) plus US Bond Index portfolio (E.R. 0.20 %) but you could add other funds if you wanted.

Good to hear the indexing is a good option to reduce costs. What funds would you suggest to track a Vanguard 529 portfolio? Vanguard gives % of stocks, bonds, and short term reserves. Within that, there are US and international stocks and bonds. For the MD 529, as you suggested, I could use the Equity Index 500 (E.R.0.13%) and US Bond Index portfolio (E.R. 0.21 %) to match the stock & bond ratio from Vanguard. Would you recommend a fraction of Global Equity Index Portfolio (E.R. 0.21 %) for the stock to get some international? And what do you recommend for the short-term reserves? Some fraction of US Treasury Money Market Portfolio (E.R. 0.31 %) and Inflation Focused Bond Portfolio (E.R. 0.19 %)?

5. What do you recommend for the asset allocation, considering the unpredictable timeframe? The car is a 16-year-old Toyota with 200k miles, so it could still last a long time. Or not.

What you have is fine. The fact that you have any money saved for a car is a plus.

Thanks for the feedback. I have discovered that I really do not like having debt payments (thanks Dave Ramsey). Though I have accepted that I will have a mortgage for a while.

6. Same as the car, what do you recommend for the asset allocation, considering the unpredictable timeframe?

What you have is fine in my opinion.

Again, thanks for the feedback.

You are clearly working hard on getting this right and have put a lot of time and attention into setting it up. I sense that you have a tendency to make things more complex than they need to be. That's OK if you enjoy it.

On the other hand, if it is driving you nuts, I think you could probably relax a little. All you really have to do is save money and avoid doing stupid stuff (which you don't seem prone toward anyway).

Good luck!

LOL. Yes, I would like this to be as simple as possible while getting most of the available benefit. It appears I have some room to keep getting simpler. I would be happy with an 20/80 optimization here, to put in 20 % of the effort to get 80 % of the benefit. I have been managing our finances for years based on a few good books, and I was looking for some feedback to make sure I'm on a reasonable track and taking advantage of the major benefits available in my situation.

Thank you for all your thoughtful advice!

[retiredjg]

I really like to use lifecycle funds whenever possible, they are so easy, and would make thing simple for my spouse if I expire early! But...the TSP lifecycle funds seem to put a lot of the portfolio in the "G-fund", especially nearing and in retirement (right now the Target 2050 has 10 % in G-fund, and in retirement is is 70 %). To my amateur understanding, the G-fund is similar to the "short-term" funds offered by Vanguard. Vanguard only starts to add Short Term funds once retirement age is reached, and then it never comprises more than 17 %. The TSP lifecycle funds hardly use the bond fund (F-fund) at all, with maximum of 8 %. I don't understand why TSP chose this asset allocation, but suspect is has to do with the fact that by default people are automatically enrolled in the Target Retirement fund matching their age. To a novice investor, the less volatile (but less rewarding) G-fund is less scary when nearing and in retirement. I'm comfortable with the amount of bonds that Vanguard recommends for lifecycle funds, so I thought I would mimic their portfolio and manually re-balance 1-2 times per year. I've seen people suggest this approach in concept, but I wanted to have an experienced eye look at my particular asset allocation plan and see if it makes sense. And you seem to think it makes sense.

I think, like many employees, you are underestimating the G Fund. There is some information in the Wiki about the G Fund and you should check it out. The G Fund is highly respected in this community.

Having said that, there is absolutely nothing wrong with using individual funds and using more F Fund if you don't mind something a little more complex.

Good to hear the indexing is a good option to reduce costs. What funds would you suggest to track a Vanguard 529 portfolio? Vanguard gives % of stocks, bonds, and short term reserves. Within that, there are US and international stocks and bonds. For the MD 529, as you suggested, I could use the Equity Index 500 (E.R.0.13%) and US Bond Index portfolio (E.R. 0.21 %) to match the stock & bond ratio from Vanguard. Would you recommend a fraction of Global Equity Index Portfolio (E.R. 0.21 %) for the stock to get some international? And what do you recommend for the short-term reserves? Some fraction of US Treasury Money Market Portfolio (E.R. 0.31 %) and Inflation Focused Bond Portfolio (E.R. 0.19 %)?

The most important thing is to choose a stock to bond ratio that makes sense to you. The rest (international, type of bond, etc) is just details that are not going to matter much in the long run. Pick what makes sense to you. Keep in mind that moderation usually turns out to be a good thing.


Almost all of your portfolio success will boil down to a few things. How much you save and having a stock to bond ratio that you are comfortable with in the good times and bad times. The rest (which incidentally is what most of the conversation here on the forums is about) does not matter all that much.

[tashnewbie]

Almost all of your portfolio success will boil down to a few things. How much you save and having a stock to bond ratio that you are comfortable with in the good times and bad times. The rest (which incidentally is what most of the conversation here on the forums is about) does not matter all that much.

+1000 with emphasis added. That truly is the most important thing, especially early on in your investing journey.

We on BH love to talk about the stuff that really at the end of the day is probably inconsequential.

OP: I would focus on simplicity and making things easy for you to manage. That could mean using an L fund in his TSP and a target date fund (TDF) in her 403b. If you are going to use TDFs in the Roth IRAs, just use one. No need to have multiple.

The biggest thing that stood out to me is that you are contributing money to 529s before you even put any money in your Roth IRAs. I think shifting that $7.5k/year from 529s to Roth IRAs may be a better deal. If you cannot afford to cash flow or pay 100% of college costs, the 529s would disadvantage your children with respect to need-based aid (which be a lot of loans anyway, but money in IRAs would not be considered available for family contribution for financial aid purposes). The Roth IRA contributions can be withdrawn at anytime without tax or penalty. The earnings can be withdrawn penalty-free (if your age is <59.5) for education expenses, but you would owe ordinary income tax on those earnings. Just something to think about.

[lakpr]

You say are in Maryland, and you listed your tax brackets as 22% Federal and 5% state. I am aware that in Maryland, most localities impose their own local taxes. Silver Springs, Baltimore, etc. What's your locality tax rate?

With a $330k mortgage and 3.125% interest rate, you are paying a mortgage interest annually of $10,125. Assuming the max SALT deduction for Married Filing Jointly, the itemized deductions come to only $20,125, less than the standard deduction of $27,500 for 2023. So you will be taking the standard deduction on your Federal tax return.

In other words, you are paying an after-tax interest of 3.125% on your mortgage. If I assume a modest 2% local tax rate (and I am aware that in some cities it's as high as 3.5%), your effective marginal tax rate is 22% + 5% + 2% = 29%. To get an after-tax return of 3.125%, you need to find a CD that pays you 3.125% / (1 - 29%) = 4.4%.

There are CDs available that yield more than 4.4%, Ally is offering a 5% CD for 18 months for example. But the difference in the yield is just 0.6% pre-tax, or 0.4% after-tax, or on a $6,500 investment per year (per your original post that you are directing into taxable account), that's $26 per year, barely above $2 a month.

I suggest to use that $6,500 to pay down the mortgage instead of complicating your life for $26 per year. Let the taxable account be $0.

[NewDawnGlory]

I really like to use lifecycle funds whenever possible, they are so easy, and would make thing simple for my spouse if I expire early! But...the TSP lifecycle funds seem to put a lot of the portfolio in the "G-fund", especially nearing and in retirement (right now the Target 2050 has 10 % in G-fund, and in retirement is is 70 %). To my amateur understanding, the G-fund is similar to the "short-term" funds offered by Vanguard. Vanguard only starts to add Short Term funds once retirement age is reached, and then it never comprises more than 17 %. The TSP lifecycle funds hardly use the bond fund (F-fund) at all, with maximum of 8 %. I don't understand why TSP chose this asset allocation, but suspect is has to do with the fact that by default people are automatically enrolled in the Target Retirement fund matching their age. To a novice investor, the less volatile (but less rewarding) G-fund is less scary when nearing and in retirement. I'm comfortable with the amount of bonds that Vanguard recommends for lifecycle funds, so I thought I would mimic their portfolio and manually re-balance 1-2 times per year. I've seen people suggest this approach in concept, but I wanted to have an experienced eye look at my particular asset allocation plan and see if it makes sense. And you seem to think it makes sense.

I think, like many employees, you are underestimating the G Fund. There is some information in the Wiki about the G Fund and you should check it out. The G Fund is highly respected in this community.

Having said that, there is absolutely nothing wrong with using individual funds and using more F Fund if you don't mind something a little more complex.

Thanks for the suggestion to re-consider the G-fund (and correspondingly, the ease of a TSP Lifecycle fund). I read through the Wiki and understand more about why people like the G-fund. I had assumed that because the G-fund carried no risk, it's return was correspondingly low. It seems that the return is better than normal for the amount of risk because it is a special fund created by the government. The G-fund ROR since inception is 4.67%, compared to 5.35% for the F-fund. Pre-2022, the F-fund had been beating the G-fund by a percent or more, but with the recent bloodbath in bonds the gap has narrowed.

I also read some more on the "efficient frontier" strategy of the TSP L-funds, and how the G-fund % allocation is based on that (not, as I assumed, to assuage skittish novice investors). The TSP fund managers seem to have a cohesive strategy. I did observe the TSP is more conservative than Vanguard. For example, in the "income" phase of retirement, the TSP equities levels off at 24%, with bonds (F-fund) at 6 % and G-fund at 70 %. But Vanguard uses a more aggressive 29% equities even though the remaining items are also more aggressive, with 54% bonds and 17% short term. I'm tempted to do something similar to feel like I'm maximizing return, but I think what you, and others are trying to say is I'm playing around with the margins and might as well just do the L-2050 fund to keep it simple.

Good to hear the indexing is a good option to reduce costs. What funds would you suggest to track a Vanguard 529 portfolio? Vanguard gives % of stocks, bonds, and short term reserves. Within that, there are US and international stocks and bonds. For the MD 529, as you suggested, I could use the Equity Index 500 (E.R.0.13%) and US Bond Index portfolio (E.R. 0.21 %) to match the stock & bond ratio from Vanguard. Would you recommend a fraction of Global Equity Index Portfolio (E.R. 0.21 %) for the stock to get some international? And what do you recommend for the short-term reserves? Some fraction of US Treasury Money Market Portfolio (E.R. 0.31 %) and Inflation Focused Bond Portfolio (E.R. 0.19 %)?

The most important thing is to choose a stock to bond ratio that makes sense to you. The rest (international, type of bond, etc) is just details that are not going to matter much in the long run. Pick what makes sense to you. Keep in mind that moderation usually turns out to be a good thing.


Almost all of your portfolio success will boil down to a few things. How much you save and having a stock to bond ratio that you are comfortable with in the good times and bad times. The rest (which incidentally is what most of the conversation here on the forums is about) does not matter all that much.

Thanks for the perspective. I will get the right stock/bond mix my matching Vanguard or the MD 529 target date funds, and just pick something for the international equity fraction, something like the 30-40% that seems to be common.

[NewDawnGlory]

Almost all of your portfolio success will boil down to a few things. How much you save and having a stock to bond ratio that you are comfortable with in the good times and bad times. The rest (which incidentally is what most of the conversation here on the forums is about) does not matter all that much.

+1000 with emphasis added. That truly is the most important thing, especially early on in your investing journey.

We on BH love to talk about the stuff that really at the end of the day is probably inconsequential.

OP: I would focus on simplicity and making things easy for you to manage. That could mean using an L fund in his TSP and a target date fund (TDF) in her 403b. If you are going to use TDFs in the Roth IRAs, just use one. No need to have multiple.

Got it, thanks! I will pare down my TDF in the Roth IRA to just one.

The biggest thing that stood out to me is that you are contributing money to 529s before you even put any money in your Roth IRAs. I think shifting that $7.5k/year from 529s to Roth IRAs may be a better deal. If you cannot afford to cash flow or pay 100% of college costs, the 529s would disadvantage your children with respect to need-based aid (which be a lot of loans anyway, but money in IRAs would not be considered available for family contribution for financial aid purposes). The Roth IRA contributions can be withdrawn at anytime without tax or penalty. The earnings can be withdrawn penalty-free (if your age is <59.5) for education expenses, but you would owe ordinary income tax on those earnings. Just something to think about.

Interesting idea. I had been thinking about aggressively filling the 529s, and once that was done we could consider a house upgrade, knowing that college was good to go. Is there some significant mathematical advantage to pulling the funds out of a Roth, rather than a 529? We are projected to have plenty of retirement money, so I hadn't really thought of putting more there. Rather, I was concerned about how am I going to come up with the $400-450k over a 10-year timeframe to pay for 3 kids to go to college (4-year university cost estimate). That is a very tough amount to cash flow. I thought by saving aggressively now in the 529s we could get lots of interest to help pay that big cost. I want to pay for kids college, so they can graduate debt free. Based on our high income, I don't think there will be much aid available, and any aid that comes will be loans (which I don't want to take). It may be feasible to do as you suggest, to cash flow college, if we put money in the Roth and then extracted contributions, and paid cash for the rest. Considering I don't count on any financial aid, and don't want to do loans, is the Roth still a significant mathematical winner?

[NewDawnGlory]

You say are in Maryland, and you listed your tax brackets as 22% Federal and 5% state. I am aware that in Maryland, most localities impose their own local taxes. Silver Springs, Baltimore, etc. What's your locality tax rate?

With a $330k mortgage and 3.125% interest rate, you are paying a mortgage interest annually of $10,125. Assuming the max SALT deduction for Married Filing Jointly, the itemized deductions come to only $20,125, less than the standard deduction of $27,500 for 2023. So you will be taking the standard deduction on your Federal tax return.

In other words, you are paying an after-tax interest of 3.125% on your mortgage. If I assume a modest 2% local tax rate (and I am aware that in some cities it's as high as 3.5%), your effective marginal tax rate is 22% + 5% + 2% = 29%. To get an after-tax return of 3.125%, you need to find a CD that pays you 3.125% / (1 - 29%) = 4.4%.

There are CDs available that yield more than 4.4%, Ally is offering a 5% CD for 18 months for example. But the difference in the yield is just 0.6% pre-tax, or 0.4% after-tax, or on a $6,500 investment per year (per your original post that you are directing into taxable account), that's $26 per year, barely above $2 a month.

I suggest to use that $6,500 to pay down the mortgage instead of complicating your life for $26 per year. Let the taxable account be $0.

Thanks for the post! Yes you right about the taxes, there is a 3.2% locality tax so that puts us at an effective 22% + 5% + 3.2% = 30.2%, with further bolsters your point. And you are right that we take the standard deduction, with no "benefit" from mortgage interest deduction. If I understand you correctly, your suggestion for our "house upgrade" savings is to just pay down our existing mortgage, rather than a CD (or some other safe, short-term investment) or the Vanguard Conservative Growth Fund.

[lakpr]

If I understand you correctly, your suggestion for our "house upgrade" savings is to just pay down our existing mortgage, rather than a CD (or some other safe, short-term investment) or the Vanguard Conservative Growth Fund.

Bingo, yes you understood the point I was trying to make, exactly.

[Parkinglotracer]

I’d go a little more c fund and a little less international in my tsp. Congrats on being so well organized financially. I have had great luck watching often for used, low mile one owner Toyotas and Hondas on Craigslist and FB marketplace. Only search individual sellers. Stay away from anyone who sells cars for a living. I want to see proof they have owned it since new and regular maintenance was done. Over a long period of time I have bought some nice dependable cars. Don’t be in a rush. If I don’t have time (May take months) to find the right car on line I’d just go buy new. Might be something that would work for you or not.

[retiredjg]

You have picked up on the elegance of the G fund quickly.

Thanks for the perspective. I will get the right stock/bond mix my matching Vanguard or the MD 529 target date funds, and just pick something for the international equity fraction, something like the 30-40% that seems to be common.

For international, suggestions range from 0% to about 50% of your stock. Jack Bogle said that none is needed. Vanguard likes 40%. I think the TSP is a little less. Many say that 20% as low as one should go if you want to hold international. Some make the moderate choice of about 1/3rd.

Obviously, there are a lot of "right answers" in the range between 0% and 50%. The important thing is to pick a number and stick with it rather than go back and forth as the international market goes up and down.

I would definitely use a 529, but I would not put the entire expected college costs for 3 kids into a 529. Putting some money into Roth IRA (where contributions, but not earnings, can always be taken out with no penalty) gives you more flexibility - for college or emergencies, etc.

[NewDawnGlory]

I also read some more on the "efficient frontier" strategy of the TSP L-funds, and how the G-fund % allocation is based on that (not, as I assumed, to assuage skittish novice investors). The TSP fund managers seem to have a cohesive strategy. I did observe the TSP is more conservative than Vanguard. For example, in the "income" phase of retirement, the TSP equities levels off at 24%, with bonds (F-fund) at 6 % and G-fund at 70 %. But Vanguard uses a more aggressive 29% equities even though the remaining items are also more aggressive, with 54% bonds and 17% short term. I'm tempted to do something similar to feel like I'm maximizing return, but I think what you, and others are trying to say is I'm playing around with the margins and might as well just do the L-2050 fund to keep it simple.

I've discovered that the TSP has actually been slowly adjusting the L-income fund equities towards 30 %, over a period of up to 10 years, starting in 2019. The L-income fund used to have 20 % equities. So, the L-income fund is moving towards the 30 % equities which is very close to what Vanguard has.

https://www.tsp.gov/plan-news/2018-09-1 ... e-changes/

[NewDawnGlory]

I’d go a little more c fund and a little less international in my tsp. Congrats on being so well organized financially. I have had great luck watching often for used, low mile one owner Toyotas and Hondas on Craigslist and FB marketplace. Only search individual sellers. Stay away from anyone who sells cars for a living. I want to see proof they have owned it since new and regular maintenance was done. Over a long period of time I have bought some nice dependable cars. Don’t be in a rush. If I don’t have time (May take months) to find the right car on line I’d just go buy new. Might be something that would work for you or not.

Thanks for the suggestion for the TSP tweak. In the end, I've decided to just go all L-2050. Keeping it super simple. If I croak early that will be easy for my spouse to manage, who has absolutely no interest in this stuff. I was really so tempted to do something like 5 % pure C-fund, because...'murica. But then I'm still manually rebalancing, so decided against it .

I like the idea of looking for individual sellers of Toyotas/Hondas. In my area, it can be hard to find individual sellers because the local used dealers flood Craigslist and FB with advertisements.

[NewDawnGlory]

You have picked up on the elegance of the G fund quickly.

Thanks for the perspective. I will get the right stock/bond mix my matching Vanguard or the MD 529 target date funds, and just pick something for the international equity fraction, something like the 30-40% that seems to be common.

For international, suggestions range from 0% to about 50% of your stock. Jack Bogle said that none is needed. Vanguard likes 40%. I think the TSP is a little less. Many say that 20% as low as one should go if you want to hold international. Some make the moderate choice of about 1/3rd.

Obviously, there are a lot of "right answers" in the range between 0% and 50%. The important thing is to pick a number and stick with it rather than go back and forth as the international market goes up and down.

To keep it simple, I've decided for equities to do a 50/50 mix of Global Equity Market Index Portfolio (E.R. 0.24 %) and Equity Index 500 Portfolio (E.R. 0.15 %). That will effectively give me the following equity ratios:
Equity Index 500 Fund—I Class 78%
International Equity Index Fund—Investor Class 15%
Mid-Cap Index Fund—I Class 3.5%
Small-Cap Index Fund—I Class 3.5%

For bonds I'll use the U.S. Bond Index Portfolio (E.R. 0.21 %)

Can you make a suggestion for the "short-term" funds? The options I see are:
Inflation Focused Bond Portfolio (E.R. 0.19 %)
US Treasury Money Market Portfolio (E.R. 0.31 %)

I'm also looking into if I can just roll the 529s into the Vanguard plan. It will depend if there are any penalties, tax clawbacks, or other drawbacks to the rollover. The Vanguard funds have slightly lower E.R. (0.14 %) and I wouldn't need to do manual asset allocation like I need to do to get the low E.R. in the MD 529.

I would definitely use a 529, but I would not put the entire expected college costs for 3 kids into a 529. Putting some money into Roth IRA (where contributions, but not earnings, can always be taken out with no penalty) gives you more flexibility - for college or emergencies, etc.

Thanks for the suggestion (a few others have suggested this as well). The college calculator says I'm currently at about 30-40% for each of 3 children. If the relative is able to contribute the pledged $15k/yr, then each kid will be at 90%. I can certainly cash flow the last 10 %. So, I'm going to shift the 529 contribution to the Roth IRAs. (I also realized that I won't be getting any tax deduction for my contributions above $15k, in MD that is the maximum for a married couple with 3 dependents, and I wouldn't get much of the carry forward benefit since it expires after 10 years). If for some reason the relative is not able to contribute, I will start back with the 529 contributions. Do you have a suggested % the 529s should be upon graduating high school?

[NewDawnGlory]

Welcome to the forum.

1. What recommendations do you have about my (His) TSP allocation plan?

There is nothing wrong with how you are doing this, but why not just use the L fund instead?

Suggestion taken! Just switched everything to the L-2050 target fund.

2. For His TSP, I’ve been doing the traditional contributions. Should I be doing any Roth contributions instead? Some fraction of traditional/Roth?

I think you should be using Roth - because of the pensions. With 2 pensions and. at least 1 SS income, you will probably need very little from a tax deferred account in retirement. Having a very large tax-deferred account is more likely to become a burden than an asset. I suggest putting at least half of future savings (both of you together) into Roth accounts rather than tax-deferred accounts.

Suggestion taken! Just switched my TSP contribution to entirely Roth. That makes our total joint contribution about 50/50 Roth/Traditional. There is no real adverse tax implication (other than, of course, the loss of income deduction from the Traditional TSP contribution). We still qualify for all the dependent credits. We will get pretty much nothing for dependent care expense deduction anyways. Our top tax bracket will still likely be 22 %, but may creep just a little into 24 %. Our MAGI is still low enough to make Roth IRA contributions.

[NewDawnGlory]

If I understand you correctly, your suggestion for our "house upgrade" savings is to just pay down our existing mortgage, rather than a CD (or some other safe, short-term investment) or the Vanguard Conservative Growth Fund (VSCGX).

Bingo, yes you understood the point I was trying to make, exactly.

In the end, I've decided to keep the money liquid, since we are considering upgrading houses in 0-5 years. Keeping 1/2 in 3-month Treasuries & I-bonds, which are nice because they are only federally taxed, and right now the rates are very good. The other half I'll keep in the VSCGX.

[NewDawnGlory]

I'm also looking into if I can just roll the 529s into the Vanguard plan. It will depend if there are any penalties, tax clawbacks, or other drawbacks to the rollover. The Vanguard funds have slightly lower E.R. (0.14 %) and I wouldn't need to do manual asset allocation like I need to do to get the low E.R. in the MD 529.

I emailed the 529 administrators to get more details. They said there are no tax clawbacks for funds rolled over to another 529. There is, however, a $75 fee. So, rather than pay that fee for 3 dependants (3 x $75), I've decided to keep the funds in the MD 529, and do the asset allocation myself to lower the expense ratio.

[NewDawnGlory]

To keep it simple, I've decided for equities to do a 50/50 mix of Global Equity Market Index Portfolio (E.R. 0.24 %) and Equity Index 500 Portfolio (E.R. 0.15 %). That will effectively give me the following equity ratios:
Equity Index 500 Fund—I Class 78%
International Equity Index Fund—Investor Class 15%
Mid-Cap Index Fund—I Class 3.5%
Small-Cap Index Fund—I Class 3.5%

Update. After reading the disclosure more closely, I've found that the Target Year portfolios use a US/International mix that is almost identical to the Global Equity Market Index Portfolio. So, I'm just going to use that for all my equities.

For bonds I'll use the U.S. Bond Index Portfolio (E.R. 0.21 %)

Here, I will follow the % in the Target Year portfolio for "Spectrum Income Fund", which has very similar bond mix and duration.

Can you make a suggestion for the "short-term" funds? The options I see are:
Inflation Focused Bond Portfolio (E.R. 0.19 %)
US Treasury Money Market Portfolio (E.R. 0.31 %)

For inflation Focused Bond Portfolio, I will follow the % in the Target Year portfolio for "U.S. Limited Duration TIPS Index Fund". For US Treasury Money Market Portfolio, I will follow the % for "Short-term Bond Fund"; it's not quite the same thing, but the yields are very similar.