Portfolio review - Bay area, newly wed, baby on the way, last year before falling off RSU cliff

[FireToBiz]

Hi, I ask for portfolio review once in a while, especially during big life events.
Recently, we got married last year, and we are expecting a baby in January.
We used to be a double-income household, and now we are single-income for ~1.5 years.

We live in Bay area, California. I'm 39, my wife is 34. I work, my wife used to work, but she is not working right now, and no plans to work for the next 1-2 years.
I work in tech. Despite the original compensation of ~400k-500k when I joined, due to yearly RSU refreshers and stock price increase, compensation is closer to 900k this year. However, this is the end of my 3rd year in the company, and I expect to drop off the cliff to a compensation of 600k, possibly lower (assuming the same stock price).

I have been the financially-savvy in the family, and we are on the same page with my wife on it now.

Here is our break-down.
- Total NW: ~3.1M
- No house (we would like to buy one, but bay area SFH prices never made sense, so if we buy one, it will be an emotional decision, not a financial one.)

Annual expenses: 120K
- Breakdown of 10k monthly expenses:

• Rent: 4.2k

• Grocery: 750

• Eating out: 500

• Sink fund for vacations: 1k

• Car registration / insurance / maintenance monthly estimate: 250 (two cars)

• Utilities: 400

• Her expenses: 1.7k

• Other: Remaining from 10k

- With the baby on the way in January, I accounted for additional expenses:

• 1.5k / month => 18k / year. This may end up being higher. I assume the cost will increase as the baby grows.

• My wife will take care of the baby for the first year, which is reducing our expenses for the upcoming year. From my company, I have baby back-up care coverage for one month.

Emergency funds:
~113K total (3.64% of entire portfolio):
- 88K (in Fidelity Government Money Market, SPAXX) (2.8%) (High, because of RSUs sold, see below)
- 25K (cash in bank, him + her) (0.8%)

Debt:
No debt, loans, mortgage. None. (I feel I should leverage debt, but no complaints at all.)

Tax Filing Status:
MFJ

Tax Rate:
37% Federal, 11.3% State
(This is the case last year and this year. A year later, beginning of 2026, I will fall off RSU cliff, and will fall back to 32% or 35% federal rate).

State of Residence:
California (Bay area, Mountain View to be specific)

Age:
39 (him), 34 (her)

Desired Asset allocation:
- 95% stocks / 5% bonds. To be more specific, this is my desired allocation:

• 50% US total stock market fund

• 20% international stock market fund

• 5% bond fund

• 25% small-cap-value fund

- Desired International allocation: 21% of stocks (20% of total).

Current retirement assets

Taxable (his)
I invest in 3-fund portfolio with small-cap value tilt, have RSUs from three companies I worked at, and have some Treasury bonds + I-bonds:
- VTI / VTSAX (Vanguard Total Stock Market Index Fund, ER: 0.03% / 0.04%): 587k (18.93%, of entire portfolio)
- VXUS / VTIAX (Vanguard Total International Stock Index Fund Admiral Shares, ER: 0.08% / 0.12%): 196k (6.3%)
- VTEB / VTEAX (Vanguard Tax-Exempt Bond Index Fund), ER: 0.05% / 0.09%): 42k (1.35%)
- VBR / VSIAX (Vanguard Small Cap Value Index, ER: 0.05% / 0.07%): 218k (7.03%)

RSUs from companies I worked at:
- Meta: 500k (16.12%)
- Microsoft: 165k (5.3%)
- Amazon: 106K (3.4%)

Treasury bonds + I-bonds:
- Treasury bonds: 225K (various durations from 3 months up to 2 years, most of them are in auto-roll) (7.25%)
- I-bonds: 60K (1.93%)

Taxable (her)
We recently started funding her taxable account, and her account is growing faster than mine, due to her choice of going with VTSAX only:
- VTSAX (Vanguard Total Stock Market Index Fund, ER: 0.04%): 40k (1.3%)

His 401k
3-fund portfolio plus small-cap-value tilt, again. FYI, ~50% of this 401k account is MegaBackdoor Roth, meaning, won't be taxed in the future.
- State Street U.S. Total Market Index Securities Lending Series Fund Class II (ER: 0.016%): 357k (11.5%)
- State Street Global All Cap Equity Ex-U.S. Index Securities Lending Series Fund Class II (ER: 0.045%): 128k (4.13%)
- State Street U.S. Bond Index Securities Lending Series Fund Class XIV (ER: 0.02%): 34k (1.09%)
- FISVX: Fidelity Small Cap Value Index Fund (ER: 0.05%): 185k (5.96%)

- Company match: 50% up to IRS 401k limit (half of limit)

Her 401k
My wife's 401k is small, and she is not working right now.
- A VTSAX equivalent fund: 2k (0.064% of total portfolio)

His Roth IRA at Vanguard
I have 66k in Roth IRA, did start late here, in 2018, and always maxing out. (Catching up on Roth using my MegaBackdoor Roth contributions, mentioned above in 401k section)
- VTSAX (Vanguard Total Stock Market Index Fund, ER: 0.04%): 28k (0.9%)
- VTIAX (Vanguard Total International Stock Index Fund Admiral Shares, ER: 0.12%): 16k (0.51%)
- VSIAX (Vanguard Small Cap Value Index, ER: 0.07%): 22k (0.71%)

Her Roth IRA at Vanguard
We started funding her Roth IRA in 2022, and always maxing out since.
- VTSAX (Vanguard Total Stock Market Index Fund, ER: 0.04%): 25k (0.8%)
_______________________________________________________________
Contributions

New annual Contributions
For the upcoming year:
$35,250 his 401k (11,750 of it is employer match, 23,500 is my contribution) (maxing out)
$34,750 his Mega Backdoor Roth IRA (maxing out)
$7k his Roth IRA (maxing out)
$7k her Roth IRA (maxing out)
$104k taxable (2k / week, his+her)
$20k I-bonds (while fixed rate is still good until April end next year)
$12k in 529 account (starting in January, for our baby)

- We also expect RSUs of worth 400k (after-tax) next year (based on current stock price).

Questions:
1. Two things stick out: high allocation in former / current company stocks, and high amount of cash equivalent (Treasury bonds, I-bonds). We also want to buy a house, with high downpayment. Two reasons, combined in the next two bullet points:
- I want to be fully in index funds, but the stock of company I work at grows at a faster rate than my index fund contributions in taxable / tax-advantaged accounts. I want to gradually move out of company stocks, and I have put individual stock exit rules for them (not 10b5-1, just my own limit order plan, e.g. if an RSU grows more than 20% YOY between grant time and vest time, I sell). But I also sell only if I need them. Currently, when I sell RSUs, I put them in Treasury-bills, and from there, I gradually invest in index funds or expenses when needed. The long-term need comes in the next bullet point.
- We want to buy a house. To draw the full picture, we want an SFH, and a reasonable one in Bay area is 2M (it was 1.7M-1.8M just a couple of months ago, before the first fed rate reduction). So, I want to use cash equivalent (treasury bills + I-bonds) and company RSUs. Microsoft and Amazon stocks are not restricted anymore, but Meta is, because I work there (selling allowed in trading window of 1 month every quarter).
- Given interest rates, I plan to buy a house with high downpayment. E.g. selling treasury bills + RSUs + some cash will give 1.2M in cash, which I can use for downpayment.
- We couldn't find a good house yet, and baby on the way, we won't be buying one now. We will have to wait for the next good season of October-February next year. And rates and home prices can change until then.
- Ideal case for us is: Buy a home with high downpayment using RSUs + treasury bills, and be fully invested in index funds in stock market.

2. Expenses for the baby on the way: The NW picture above is good and all, but given I expect a drop in total compensation a year later due to RSU cliff, and due to growing expenses for the baby in the upcoming years (daycare / nanny care, schools in the future), I'm unsure if this will be enough in bay area. My wife will work in the future, but the highest she has earned in the past has been 50k / year, due to her profession. My promotion is one way to increase income, but it will take 1-2 years. Moreover, even the promotion won't bring too much additional income. So, now I understand what people mean when they say kids are indeed expensive. Any suggestions here are welcome.

3. My taxable accounts are in multiple brokerage firms: Vanguard, Merrill Edge, Wells Fargo, M1-finance, Schwab (company RSU invested here). It is hard to get a combined big picture when taxable accounts are split like this. I use Empower for aggregated account check, but still, I think I'm holding too many taxable accounts. Each of them has a reason, e.g. Merrill Edge one is for Bofa Platinum Honors status (but only 100k is enough, and I hold >600k there, because I was doing options there (mistake)), or Wells Fargo (for the 2.5k for 250k stock bonus (cheap, I know, but I don't have time for these bonuses anymore)). There is also a risk to holding funds in one firm, single point of failure. So, I want to get your take on consolidating my taxable accounts.

4. Anything that stuck out in this portfolio? I know cash-equivalent (Treasury-bills) and RSUs have high allocation. Anything else? Are fund choices good? Any tips for taxes for a W2 employee? I'm planning to create a business, should I make it official this time and pull the trigger? Anything else you may have in this portfolio?

Thanks in advance.

[FireToBiz]

Any feedback on my portfolio is highly appreciated. If this is too long to digest, I can shorten it as well. Thanks in advance.

[snowday2022]

Sell all your RSUs ASAP. Would plan to not have wife return to work unless she wants, as it will be a money loser for you with childcare and taxes. You are rich. Keep saving, don’t tinker much, and you’ll be FI in no time. Wait a few years until things stabilize with the baby to consider buying a home.

[Frenetic]

RSUs from companies I worked at:
- Meta: 500k (16.12%)
- Microsoft: 165k (5.3%)
- Amazon: 106K (3.4%)

Microsoft and Amazon stocks are not restricted anymore, but Meta is, because I work there (selling allowed in trading window of 1 month every quarter).

Congrats on your wedding and child on the way! But yeah, rip off the band-aid. Sell all of Microsoft and Amazon now and put it in your Treasury bills since you are prioritizing a down payment for a house rather than putting it in the market. Sell as much as you can of Meta during your vesting windows and if it makes you feel better you can earmark 50/50 to your favorite index fund and the other half into your house down payment fund.

2. Expenses for the baby on the way: The NW picture above is good and all, but given I expect a drop in total compensation a year later due to RSU cliff, and due to growing expenses for the baby in the upcoming years (daycare / nanny care, schools in the future), I'm unsure if this will be enough in bay area. My wife will work in the future, but the highest she has earned in the past has been 50k / year, due to her profession.

There's something to be said about your wife by being able to stay at home and experience the joy your incoming child since daycare would be priceless vs. the max 50k salary she'd earn and then you'd pay daycare? Maybe in the future you could say "Hey we'll see when the child is 5 years old and in school" to revisit that way you both have made a final decision and won't have to worry about it until then.

My taxable accounts are in multiple brokerage firms

Pick between Vanguard and Schwab and put everything whichever you choose in one, or if you are nervous about Securities Investor Protection Corporation (SIPC) 500k limit then use them both.

I'm planning to create a business, should I make it official this time and pull the trigger? Anything else you may have in this portfolio?

For your sanity's sake, wait after the baby is born and then revisit this to see your energy levels would allow for the creation of a business.

Hope this helps,
the F-man

[privateer79]

Agree with other posters that you should diversify out of your RSU's... maybe don't sell all, but get yourself a ~20% down payment (400k$) into safe fixed income that you can use at will when home shopping soon... having a baby in the house will definitely motivate you to get more space.

you don't need to always be this conservative, but given 1 income, baby on the way and home shopping soon, you should drop things down a gear or two until life re-stabilizes a bit.


unsolicited advice:
is there a mega-back door Roth option available at Meta? (I thought almost all tech companies were clued into that by now) use it if available to increase your Roth space each year.

given you have RSU's from 3 different tech companies at 40 it seems like you already know.... but its time to start interviewing to get you next big slug of RSU's someplace else.

[FireToBiz]

Agree with other posters that you should diversify out of your RSU's... maybe don't sell all, but get yourself a ~20% down payment (400k$) into safe fixed income that you can use at will when home shopping soon... having a baby in the house will definitely motivate you to get more space.

you don't need to always be this conservative, but given 1 income, baby on the way and home shopping soon, you should drop things down a gear or two until life re-stabilizes a bit.


unsolicited advice:
is there a mega-back door Roth option available at Meta? (I thought almost all tech companies were clued into that by now) use it if available to increase your Roth space each year.

given you have RSU's from 3 different tech companies at 40 it seems like you already know.... but its time to start interviewing to get you next big slug of RSU's someplace else.

Thanks for the tips. Selling RSUs will be a hassle (I already have exit rules via limit orders for them), as they are growing faster than market YOY.

Meta does have MegaBackdoor Roth option, and I do max it. I mentioned it earlier in the post, but forgot to add it in annual contributions, I added it now, I max it out, $34,750 for the upcoming year (= 70k limit - 35,250 for 401k).

Jumping ship after 4th year is an option, but I have stayed in my previous company longer, and for Meta, there is still hope that I may stay after 4th year, either due to fixed refreshers, stock appreciation, or possibly promotion in sight. Or, they may not be offers out there with better compensation, but I may have other criteria by that time, like WLB, scope or other.

[slicendice]

I agree with the others get rid of the RSU's invest the proceeds according to your AA. Consider super-funding a 529 plan with some of the proceeds. Depending on if you want private K-12 for your kid, that will increase the size of the super-funding needs. Planning on more than 1 kid, adjust accordingly.

Buying a house is a tougher decision. Financially you can afford it, but how long do you plan on working? What are your networth goals? Are you committed to living in the Bay Area for a long time (i.e. > 18 years)? Do either you or your spouse have ties besides a job that would keep you here? It's possible that 5 years from now, you may value the flexibility that renting gives you, your kid(s) will still be young and if you choose you could likely move anywhere without adverse consequences on the kid. If you are currently renting an apartment-style dwelling, you may find renting a SFH (close to work) will be a nice compromise at least for a couple of years until you survive the newborn/toddler phase and know what your family needs a little clearer.

[FireToBiz]

Sell all your RSUs ASAP. Would plan to not have wife return to work unless she wants, as it will be a money loser for you with childcare and taxes. You are rich. Keep saving, don’t tinker much, and you’ll be FI in no time. Wait a few years until things stabilize with the baby to consider buying a home.

Thanks. Selling RSUs would be easier if they weren't growing much faster than the market YOY. But yes, I do have individual stock exit rules (limit orders) to sell them. I guess you are still recommending selling them ASAP.

My wife returning to work will add cost indeed, childcare is expense. For the 1st year of the baby, she is not working for sure. In the future, if she changes line of work and moves to a higher income, she can go back to work, totally up to her.

Regarding "Wait a few years until things stabilize with the baby to consider buying a home." => Yes, I think multiple big life events around the same time is hard. We tried to buy a home last couple of months, but low inventory plus not having a good SFH with good schools within our budget blocked it. We will have to push buying a home to next couple of years.

[FireToBiz]

Congrats on your wedding and child on the way! But yeah, rip off the band-aid. Sell all of Microsoft and Amazon now and put it in your Treasury bills since you are prioritizing a down payment for a house rather than putting it in the market. Sell as much as you can of Meta during your vesting windows and if it makes you feel better you can earmark 50/50 to your favorite index fund and the other half into your house down payment fund.

Will try selling RSUs. They are growing faster than the market YOY, and I'm selling them with limit orders gradually.

There's something to be said about your wife by being able to stay at home and experience the joy your incoming child since daycare would be priceless vs. the max 50k salary she'd earn and then you'd pay daycare? Maybe in the future you could say "Hey we'll see when the child is 5 years old and in school" to revisit that way you both have made a final decision and won't have to worry about it until then.

Yes, this is something to consider for sure. My wife is staying with baby for the 1st year for sure (her decision), and we are planning for the second, and given daycare costs, her decision to take care of kids may be good for everyone, home, my wife, and kids.

Pick between Vanguard and Schwab and put everything whichever you choose in one, or if you are nervous about Securities Investor Protection Corporation (SIPC) 500k limit then use them both.

Never thought of Schwab as reliable, but yes, I can keep them. I also have Fidelity accounts, which I find more reliable, I can move some there.

For your sanity's sake, wait after the baby is born and then revisit this to see your energy levels would allow for the creation of a business.

Fair point. Running a business does take energy and is stressful, it can wait.

[Watty]

- 95% stocks / 5% bonds. To be more specific, this is my desired allocation:

You are 39. I am not sure where the official line is but you are on the cusp of being middle age so being less agressive would make sense.

A lot of your money will also be needed if you decide to buy a house so you may want to consider it as being in two portfolios, maybe something like;
1) $1 million(?) in a house fund which would be invested less aggressively.
2) Long term money which would be invested a more aggressively.

RSUs from companies I worked at:
- Meta: 500k (16.12%)
- Microsoft: 165k (5.3%)
- Amazon: 106K (3.4%)

Keep in mind that your index funds also own a lot of those stocks so I would guess that you may have something like another 5 to 10 percent exposure to these three stocks. If you also look at other similar large high tech stock which are in the index funds you could have close to 50% of your investments in about a half dozen similar companies.

1) Sell any new RSUs as soon you can. There is an old saying, "When you find that you have dug yourself into a hole the first thing to do is to stop digging."

2) Look at how much you will pay in taxes if you sell them. Then look at how much you will pay in taxes if you hold them for various periods of time then sell them. I would suspect that there will not be a way to substantially reduce the tax percentage in any reasonable scenario. If you cannot come up with a reasonable plan to pay less in taxes at some point in the not too distant future then it just a question of when you will pay the taxes not if you will pay the taxes some day. Paying taxes is never fun but deferring a tax bill is not the same as avoiding it.

We want to buy a house....Mountain View

I would hold off on buying a house until your kid is about ready to start kindergarten. A lot can change by then with your situation and schools can change too so you might buy a house in a good school district only to find that the school your kid will go to in five years has changed a lot by then. I have seen situations where a school got new administration which caused the better teachers to transfer so they can quickly change. You could even have 2 or 3 kids by then so going back to two incomes may not be an attractive option. If you have a kid with even minor and temporary health issues then day care may not be a good or even possible option.
If you are not happy with your current place then you could rent a better place,

It was almost 40 years ago but I once lived near you in an apartment off of El Camino when I was right out of college. When I was looking at buying my first house there and I researched the earthquake risk and my best guess was that if I bought a house there it might have significant earthquake damage maybe once in 200 years.(Do your own research.) That does not sound that bad but you need to keep in mind that if you live there for 20 years then there is about a 10% change that your house will have significant earthquake damage while you own it. The San Andreas fault pretty much goes right through Mountain View and if you know where to look you can see it.

https://www.usgs.gov/media/images/map-k ... bay-region

There were multiple reasons but the earthquake risk was one reason that I decided to move out of the Bay Area.

39 (him), 34 (her)

A huge question is when you expect to retire and if you have strong family ties to the Bay Area. One scenario to consider would be to work in the Bay Area for another 5 to 10 years then retire elsewhere. If you do not expect to retire in the Bay Area I would be cautious about buying a house there.

I was only in my 20s when I lived there but even then one thing I saw was that some of my older coworkers had gown up kids who were in their 20s who were still living with them and that was not always a good situation. The problem was that the kids did not have high paying jobs so they could not afford an apartment even with roommates and them buying a house there was not even a remote possibility. If you know people who have kids in their 20s who do not have high paying jobs ask them what it is like for their kids there.

I have moved around a couple of times and I ended up in Atlanta where housing is not super expensive out in the suburbs. In contrast my grown up son is doing well in his career and was easily able to afford to buy a nice house about ten minutes from us. This is especially nice since he is married with kids so we frequently get to see our grandkids. Virtually all of his high school and college classmates who stayed in the area were able to afford to buy houses when they were in their 20s. We know someone who has a son who is severely dyslexic and barely graduated from high school. At one point he was working in a chain muffler shop which was a good honest job but it likely did not pay a lot. Even he was able to afford to buy a small older house in a marginal but not terrible area.

Once your kid was born you might want to check out other parts of the country to see if you can find an area which you would be excited about moving to where your kid(s) could afford to live near you when they grow up.

[FireToBiz]

I agree with the others get rid of the RSU's invest the proceeds according to your AA. Consider super-funding a 529 plan with some of the proceeds. Depending on if you want private K-12 for your kid, that will increase the size of the super-funding needs. Planning on more than 1 kid, adjust accordingly.

Buying a house is a tougher decision. Financially you can afford it, but how long do you plan on working? What are your networth goals? Are you committed to living in the Bay Area for a long time (i.e. > 18 years)? Do either you or your spouse have ties besides a job that would keep you here? It's possible that 5 years from now, you may value the flexibility that renting gives you, your kid(s) will still be young and if you choose you could likely move anywhere without adverse consequences on the kid. If you are currently renting an apartment-style dwelling, you may find renting a SFH (close to work) will be a nice compromise at least for a couple of years until you survive the newborn/toddler phase and know what your family needs a little clearer.

RSU selling will take time for me, given much higher YOY growth of them compared to the market.

Super-funding 529 plan => I have considered this. Super-funding limit is 18k / year (if I don't want to hit gift tax). I did the math, if I invest 18k / year for 18 years (before the kid goes to college), with 10% YOY growth assumption, it will significantly surpass the estimate the kid needs for college. (California state does't allow 529 plans to fund pre-K12). So, working backwards from the estimated cost of 4-year college, I came down to 12k / year for each kid, which is written in my annual contribution plan.

Regarding "planning on more than 1 kid, adjust accordingly" => I will start funding 529 for the second baby, when we have the second baby.

Regarding the questions on buying a house:

=> "How long do you plan on working?" 10 more years, after which I plan to run my own businesses.

=> "What are your net worth goals?" This is a moving target, but given we are planning 2 kids, expenses can go up to 200k / year, and given 4% rule, 5M is a lower bound. This is unfortunately not high in Bay area, so, 7M-8M would be safer.

=> "Are you committed to living in the Bay Area for a long time (i.e. > 18 years)?" We will be here, until the kids go to college. This is our hope. On the other hand, I know some families who moved to other states after their kids elementary school age is over, because they were priced out of buying a house when they had kids.

=> "Do either you or your spouse have ties besides a job that would keep you here?" My wife's brother is in Bay, we have friends here. We have been in Bay for 10+ years.

=> "It's possible that 5 years from now, you may value the flexibility that renting gives you, your kid(s) will still be young and if you choose you could likely move anywhere without adverse consequences on the kid. If you are currently renting an apartment-style dwelling, you may find renting a SFH (close to work) will be a nice compromise at least for a couple of years until you survive the newborn/toddler phase and know what your family needs a little clearer." => This is a fair point, flexibility of renting is great. We are already renting in an SFH close to work. By the way, I'm hearing this common suggestion: Until the baby's first couple of years, observe the changes and needs, and then decide to buy a home. Will do, thanks for the tip.

[Frenetic]

RSU selling will take time for me, given much higher YOY growth of them compared to the market.

Is this because there is a limit on selling or is it because of your personal reluctance because YOY growth has been greater than compared to the market? Again, reversion to the mean is definitely a thing and with your total comp of 900k and in the future 600k, concentrate gains that you can make in your job/lifestyle choices rather than the 771k in RSUs which are a fraction of a year's comp.

Prioritize the down payment of your house, so when you are ready to buy, you'll have that money already to go. Also, it's nice not having to keep track of individual stocks. If anything, you can just track Meta and that'll be fine until you sell out of your position of Meta as you vest. Leave your past jobs in the past by selling the stock and leave that mental and emotional space to looking forward to your baby on the way and buying that home for your family.

[Wannaretireearly]

Congrats on all fronts!
Buying a house is hard in the bay. Perhaps look at renting until the kid enters grade school. But once.

[slicendice]

Super-funding 529 plan => I have considered this. Super-funding limit is 18k / year (if I don't want to hit gift tax). I did the math, if I invest 18k / year for 18 years (before the kid goes to college), with 10% YOY growth assumption, it will significantly surpass the estimate the kid needs for college. (California state does't allow 529 plans to fund pre-K12). So, working backwards from the estimated cost of 4-year college, I came down to 12k / year for each kid, which is written in my annual contribution plan.

Im not a tax professional, but I think if you file a joint tax return with your spouse, as a couple you can put up to $36k a year per beneficiary into 529 plans without having to notify the irs.

[fi-me-to-the-moon]

Super-funding 529 plan => I have considered this. Super-funding limit is 18k / year (if I don't want to hit gift tax).

For 529s an individual may elect to treat up to $90,000 (5x the annual gift tax exclusion) as if it were made ratably over a 5-year period. You'll have to file form 709, which is straightforward.

[123]

...Wait a few years until things stabilize with the baby to consider buying a home.

+1 One of the big factors in deciding on a house is family size. You won't know how big a family you want until the arrivals start. The education needs of the kid(s) are often the deciding factor on home location and what public/private school options you want to have available. So with the arrival of kids your planning horizon can easily extend out 10+ years. Don't rush to buy your first home, if you do you'll no doubt be buying and selling more than one in relatively rapid succession.

Another consideration is life insurance aside from that provided through work (you want portability). You're doing very well financially but, depending on lifestyle expectations for your family, it may be practical to get significant 20 - 30 year term coverage while you're young.

(Some employment-related life insurance is presented as "portable" if you leave the firm for any reason. While the insurance is portable the premium amount may not be. It is not unusual to have employment-related life insurance premiums to increase 5X - 10X upon separation from the group. The premium factors on employment-related life insurance can vary widely depending on how the product is priced.)

[FireToBiz]

These are all great points, thank you for sharing your experience and wisdom.

- 95% stocks / 5% bonds. To be more specific, this is my desired allocation:

You are 39. I am not sure where the official line is but you are on the cusp of being middle age so being less agressive would make sense.

A lot of your money will also be needed if you decide to buy a house so you may want to consider it as being in two portfolios, maybe something like;
1) $1 million(?) in a house fund which would be invested less aggressively.
2) Long term money which would be invested a more aggressively.

I'm aware 95/5 is risky, and I'm ok with it. The catch is, my portfolio is not 95/5 right now, given too much cash equivalent (T-bills, I-bonds, MMFs), due to selling some company RSUs (although unsold company RSUs still take a huge portion of the portfolio).

Bucketing investments into house fund vs long-term money makes sense. I wanted house fund to be in cash-equivalent (T-bills, I-bonds, MMFs) and company stocks, so that I don't sell index funds when buying a house.

RSUs from companies I worked at:
- Meta: 500k (16.12%)
- Microsoft: 165k (5.3%)
- Amazon: 106K (3.4%)

Keep in mind that your index funds also own a lot of those stocks so I would guess that you may have something like another 5 to 10 percent exposure to these three stocks. If you also look at other similar large high tech stock which are in the index funds you could have close to 50% of your investments in about a half dozen similar companies.

1) Sell any new RSUs as soon you can. There is an old saying, "When you find that you have dug yourself into a hole the first thing to do is to stop digging."

2) Look at how much you will pay in taxes if you sell them. Then look at how much you will pay in taxes if you hold them for various periods of time then sell them. I would suspect that there will not be a way to substantially reduce the tax percentage in any reasonable scenario. If you cannot come up with a reasonable plan to pay less in taxes at some point in the not too distant future then it just a question of when you will pay the taxes not if you will pay the taxes some day. Paying taxes is never fun but deferring a tax bill is not the same as avoiding it.

Yes, index funds have these individual stocks. I would like to sell, but gradually from RSU to cash first, then to index funds.

We want to buy a house....Mountain View

I would hold off on buying a house until your kid is about ready to start kindergarten. A lot can change by then with your situation and schools can change too so you might buy a house in a good school district only to find that the school your kid will go to in five years has changed a lot by then. I have seen situations where a school got new administration which caused the better teachers to transfer so they can quickly change. You could even have 2 or 3 kids by then so going back to two incomes may not be an attractive option. If you have a kid with even minor and temporary health issues then day care may not be a good or even possible option.
If you are not happy with your current place then you could rent a better place,

It was almost 40 years ago but I once lived near you in an apartment off of El Camino when I was right out of college. When I was looking at buying my first house there and I researched the earthquake risk and my best guess was that if I bought a house there it might have significant earthquake damage maybe once in 200 years.(Do your own research.) That does not sound that bad but you need to keep in mind that if you live there for 20 years then there is about a 10% change that your house will have significant earthquake damage while you own it. The San Andreas fault pretty much goes right through Mountain View and if you know where to look you can see it.

https://www.usgs.gov/media/images/map-k ... bay-region

There were multiple reasons but the earthquake risk was one reason that I decided to move out of the Bay Area.

Thanks for sharing this. Holding off on buying house makes sense. I'm learning something new, school ratings can change over time, thanks for this.

Our current place we are renting is fine, enough sized, 3 bed 2 bath, SFH. But school ratings aren't great (elementary is 4, middle / high are 6/7). So, we would either want to rent or buy in another location with high school ratings, or we will send the kids to private elementary school.

A huge question is when you expect to retire and if you have strong family ties to the Bay Area. One scenario to consider would be to work in the Bay Area for another 5 to 10 years then retire elsewhere. If you do not expect to retire in the Bay Area I would be cautious about buying a house there.

I expect to retire at 50 and run my own businesses. But with kids, plans may change.
"if you have strong family ties to the Bay Area" => We only have my wife's brother here in Bay, and some close friends in Bay. No strong connections. But when kids are born and their school starts here, I believe we will have stronger connections to Bay Area.
Our plan is to live and work here in Bay until 50. After 50, we will see if other locations / states make sense. I know buying a house makes sense in Bay area only if you plan to stay for 5-7 years, after which you even out.

I was only in my 20s when I lived there but even then one thing I saw was that some of my older coworkers had gown up kids who were in their 20s who were still living with them and that was not always a good situation. The problem was that the kids did not have high paying jobs so they could not afford an apartment even with roommates and them buying a house there was not even a remote possibility. If you know people who have kids in their 20s who do not have high paying jobs ask them what it is like for their kids there.

I have moved around a couple of times and I ended up in Atlanta where housing is not super expensive out in the suburbs. In contrast my grown up son is doing well in his career and was easily able to afford to buy a nice house about ten minutes from us. This is especially nice since he is married with kids so we frequently get to see our grandkids. Virtually all of his high school and college classmates who stayed in the area were able to afford to buy houses when they were in their 20s. We know someone who has a son who is severely dyslexic and barely graduated from high school. At one point he was working in a chain muffler shop which was a good honest job but it likely did not pay a lot. Even he was able to afford to buy a small older house in a marginal but not terrible area.

This is definitely something we should consider as well. Buying a house for young generations is hard in Bay area. I would also like to be close to our kids in the future.

[FireToBiz]

Super-funding 529 plan => I have considered this. Super-funding limit is 18k / year (if I don't want to hit gift tax). I did the math, if I invest 18k / year for 18 years (before the kid goes to college), with 10% YOY growth assumption, it will significantly surpass the estimate the kid needs for college. (California state does't allow 529 plans to fund pre-K12). So, working backwards from the estimated cost of 4-year college, I came down to 12k / year for each kid, which is written in my annual contribution plan.

Im not a tax professional, but I think if you file a joint tax return with your spouse, as a couple you can put up to $36k a year per beneficiary into 529 plans without having to notify the irs.

Good to know, today I learned something new. 36k / year is already plenty, I will be investing 12k/year, as California 529 plans only cover college costs, not anything below. But if I want to superfund earlier, good to know I can max up to 36k/year.

[FireToBiz]

Super-funding 529 plan => I have considered this. Super-funding limit is 18k / year (if I don't want to hit gift tax).

For 529s an individual may elect to treat up to $90,000 (5x the annual gift tax exclusion) as if it were made ratably over a 5-year period. You'll have to file form 709, which is straightforward.

Good to know. This 90k contribution, does it have to happen in 1 year, to be qualified as super-funding 529?

[FireToBiz]

...Wait a few years until things stabilize with the baby to consider buying a home.

+1 One of the big factors in deciding on a house is family size. You won't know how big a family you want until the arrivals start. The education needs of the kid(s) are often the deciding factor on home location and what public/private school options you want to have available. So with the arrival of kids your planning horizon can easily extend out 10+ years. Don't rush to buy your first home, if you do you'll no doubt be buying and selling more than one in relatively rapid succession.

Another consideration is life insurance aside from that provided through work (you want portability). You're doing very well financially but, depending on lifestyle expectations for your family, it may be practical to get significant 20 - 30 year term coverage while you're young.

(Some employment-related life insurance is presented as "portable" if you leave the firm for any reason. While the insurance is portable the premium amount may not be. It is not unusual to have employment-related life insurance premiums to increase 5X - 10X upon separation from the group. The premium factors on employment-related life insurance can vary widely depending on how the product is priced.)

This is a fair point I was reminded throughout the thread, thanks for your feedback. We had plenty of baby shopping last couple of weeks, and even now, our 3 bed 2 bath SFH we rent right now started getting smaller, given the space left from baby furniture / stuff / room. 3 bed 2 bath, but 1200 sq ft in total, may not be enough after our kid grows.

Regarding school rating, current SFH we rent doesn't have great school ratings (4/5/7), and we knew this when we moved in two years ago. We decided that we can move again later, when it is time for the kids to go to school. So, we will take our time, and won't rush. That being said, this is bay area, and house prices almost never decrease, and with interest rates trending lower, taking mortgage rates down with them, house prices will unfortunately go up significantly by the time our kid is ready for school ("significantly" part is a guess). Otherwise, we will send the kid to private elementary school, and buy some more time to find a good house.

Also, given we are planning two kids, 3 bed 2 bath may not be enough.

Life insurance revision is something I have in mind (and in my calendar, after the baby is born), which I plan to do after baby's arrival.

[msh01]

Thanks. Selling RSUs would be easier if they weren't growing much faster than the market YOY. But yes, I do have individual stock exit rules (limit orders) to sell them. I guess you are still recommending selling them ASAP.

I think you're missing the logic for selling the RSU's immediately.

If you received a cash bonus on the vest date for the vested amount... would you immediately take the cash and buy the stock at the vest date price?

If not -- then you're inconsistent. Holding the RSU's is the same decision as taking a cash bonus and buying at the current market price.

[Rose]

For 529s an individual may elect to treat up to $90,000 (5x the annual gift tax exclusion) as if it were made ratably over a 5-year period. You'll have to file form 709, which is straightforward.

Good to know. This 90k contribution, does it have to happen in 1 year, to be qualified as super-funding 529?

Yes it does. See more here:
https://www.financialsamurai.com/superf ... -and-cons/

2. Expenses for the baby on the way:

Two things jumped to me at this point:
a. Will your wife find enough stimulation / engaging conversations with other adults? With the size of your net worth, even if it financially does not make sense, your family can afford to have her to work full-time or part time for other purpose other than money. Sense of achievement, interaction with other adults, passion fulfillment, etc.
b. You may be able to cut some baby expenses by joining a Buy Nothing group near you. The group near me has a lot of baby and toddler stuff. The additional benefit is saving the environment.

Another thing, I understand parents in California/Silicon Valley need to fund many activities in public school due to lack of funding. So you might want to plan time to dedicate to PTO/PTA/active in school.

My taxable accounts are in multiple brokerage firms

You are hitting the nail on the head. In particular babies (kids) have a way to take up time (guess how I know!). Consolidate as much as you can now.
Besides, if something happens to you, it will be easier for your wife to deal with a smaller number of institutions.

Lastly, I will add HSA and fund it to the max so you can shelter gains in post-tax account.

[dogagility]

RSU selling will take time for me, given much higher YOY growth of them compared to the market.

How does the higher growth compared to the market make it difficult to sell your RSUs? Is this a psychological impediment?

As you know, Boglehead investment philosophy is to diversify investments. You pay income tax on RSUs at the time of vesting, so the recommendation is to sell RSUs immediately at vesting.

The other comment I have on your portfolio is that it could be simpler. You seem to be mirroring your desired asset allocation in each of his account types. There is no need to do this, since your overall asset allocation across all accounts is what matters.