New investor looking for feedback on investment plan (Portfolio review)

[Comparator]

Preamble
I'm looking to take investing more seriously. Up until now, I have been contributing a bit north of my company match to my 401k, maxing my HSA, and letting the rest of my money wither away in an (almost) zero interest savings account. I'd like to change that.

Goals

1. Move away from target date funds.
2. Increase my retirement contributions to at least 15% of my gross annual income.
3. Save up to purchase a house in the next 5-10 years.
4. Hold significantly less cash in my bank account.

Background

Emergency funds: Far too much (my savings account balance is ~$160K)

Debt: None

Tax Filing Status: Single

Tax Rate: 22% Federal, 5.3% State

State of Residence: Wisconsin

Age: 23

Desired Asset allocation: 90% stocks / 10% bonds
Desired International allocation: 40% of stocks

Current portfolio size: ~40K

_______________________________________________________________

Current retirement assets

Taxable
None

401k
17.07% Fidelity Freedom® Blend 2065 Fund Class K6 (FFBQX) (0.3%)
Company match of $0.35 per $1.00 up to 6%

403b (non-elective retirement plan)
11.43% Fidelity Freedom® Blend 2065 Fund Class K6 (FFBQX) (0.3%)
Automatic company contributions of 7.15%

Former Employer's 401k
31.74% RetirePilot Moderate 2055 Fund R1 (GRPAPX) (0.15%)
39.77% RetirePilot Moderate 2065 Fund R1 (GRPAQX) (0.15%)

_______________________________________________________________

Contributions

New annual Contributions
$8575.03 401k (employer contributions of $1800.75)
$6131.12 403b (non-elective employer contributions only)
$0.00 taxable

Available funds

Funds available in 401(k) and 403(b)
Fidelity 500 Index Fund (FXAIX) (0.015%)
Fidelity Extended Market Index Fund (FSMAX) (0.035%)
Fidelity Global ex U.S. Index Fund (FSGGX) (0.055%)
Fidelity U.S. Bond Index Fund (FXNAX) (0.025%)

Funds available in HSA (not currently invested)
Vanguard Total Stock Market Index Fund Institutional Shares (VITSX) (0.03%)
Vanguard Developed Markets Index Fund Admiral Shares (VTMGX) (0.08%)
Vanguard Emerging Markets Stock Index Fund Admiral Shares (VEMAX) (0.14%)
Vanguard Total Bond Market Index Fund Institutional Shares (VBTIX) (0.035%)

_______________________________________________________________

My new plan
This is the part where I explain what I'd like to do with my money going forward:

1. Open a HYSA to store my short-term savings/emergency fund.
2. Roll my former employer's 401k into my current 401k.
3. Invest according to my asset allocation:
   1. 100% of my HSA into Total US (VITSX)
   2. 100% of my 403b into S&P 500 (FXAIX)
   3. 100% of my bond allocation, 10% of my portfolio, into my 401k (FXNAX)
   4. The remainder of my 401k into a 60/40 split of US and international (FXAIX, FSMAX, and FSGGX)
      1. I need to mix FXAIX and FSMAX at 80/20 to achieve a total US market equivalent, but I've also got to account for the fact that my 403b is 100% FXAIX. My 401k will need to lean towards FSMAX to offset my 403b. The total combined US stock in my 401k and 403b should be 80% FXAIX and 20% FSMAX.
   5. The remainder of my after-tax dollars into a taxable brokerage account split between total US and total international to bring my entire portfolio to the desired 54/36/10
   6. (OPTIONAL) Open a Roth IRA and put 100% towards total US (increase the international portion of my taxable account to compensate)

Example
Here's an example of what that might look like:

401k
8.13% Fidelity 500 Index Fund (FXAIX) (0.015%)
2.95% Fidelity Extended Market Index Fund (FSMAX) (0.035%)
7.38% Fidelity Global ex U.S. Index Fund (FSGGX) (0.055%)
10.00% Fidelity U.S. Bond Index Fund (FXNAX) (0.025%)

403b
3.67% Fidelity 500 Index Fund (FXAIX) (0.015%)

HSA
1.66% Vanguard Total Stock Market Index Fund Institutional Shares (VITSX) (0.03%)

Taxable
31.94% Total US
28.62% Total International

Roth IRA
5.65% Total US



*This is just an example portfolio assuming I invest $75,000 in a taxable brokerage account. FSKAX and FTIHX are just placeholders for total US and total international.

Questions:

1. Does my new plan make sense? Is there something I've missed?
2. Does my order of operations for tax-advantaged savings make sense, i.e. Traditional 401k (to match) > HSA > Traditional 401k (to max) > Roth IRA?
   1. IRAs are more flexible, but my 401k has good index funds and a fixed participation fee. Is rolling my old 401k into my new 401k acceptable?
   2. My AGI is below the limit for full deductions from a traditional IRA, but my tax rate is low. Does a Roth IRA make sense for me?
   3. There are some tax-diversity benefits to having both traditional and Roth accounts. Should I be putting any money towards a Roth IRA before maxing my traditional 401k?
3. Do you have any tips for balancing taxable investing (e.g. towards a home purchase) with saving for retirement?
4. Assuming my goal is just to automatically invest money every month and leave it, should I be using ETFs or mutual funds in my taxable account?
5. I've chosen my asset allocations to make things easy to rebalance. Do you have any tips for how I should handle rebalancing in my taxable account?

Edited on 1/10/2025: Fixed some formatting and improved my questions.

I know I deviated from the template slightly, so I hopefully the way I've laid out my plan isn't too confusing. Please let me know if you have any questions, or if there's something I've missed.

Ethan

[mike_in_ny]

I think that all of the things you propose are the right ones. I like consolidating your
401ks, especially since its moving them to Fidelity.

The only thing that you should think about is if you could/should do a Roth 401k, if available,
since you are early in your career. This would be especially true if you expect your salary
to increase over time.

Depending on your ability to fund it, I would also consider funding a backdoor Roth.

[dogagility]

Questions:
1. Does my new plan make sense? Is there something I've missed?

2. Does my order of operations for tax-advantaged savings make sense, i.e. HSA > Traditional 401k > Roth IRA? Should I be putting money towards a Roth IRA before maxing my 401k?

I think your plan is sound overall. Here's the wiki on prioritizing investments. https://www.bogleheads.org/wiki/Priorit ... nvestments

3. Do you have any tips for balancing taxable investing (e.g. towards a home purchase) with saving for retirement?

Just consider your timeline for purchasing a home, how much down payment you will want (20% of purchase price avoids mortgage insurance), and saving sufficiently for retirement. There is no right answer (except you absolutely should be investing in your employer plan to receive the match).

For the money you are saving for the mortgage, I would probably invest this money in a money market fund or in a Treasury bond with a maturity date that matches your house buying timeline.

4. Assuming my goal is just to automatically invest money every month and leave it, should I be using ETFs or mutual funds in my taxable account?

Either is fine. Just select the lowest cost, broadest market funds available.

[Comparator]

I think your plan is sound overall. Here's the wiki on prioritizing investments. https://www.bogleheads.org/wiki/Priorit ... nvestments

I have reviewed the wiki, and I think my plan is fairly well aligned with the advice therein. I know that IRA's are more flexible than 401k's, but my 401k plan has good low-expense indexes for the 3 types of assets I want to hold. The cost of participating in the plan is a fixed amount each quarter (not based on the size of my account), so it doesn't cost me anything more to max my 401k than it would to pay in 6% for my full company match.

I also know that some people swear by Roth. Having looked at the math myself, I'm not really sure if Roth is worth it to me given that I'm below the income limit for full deductions from a traditional IRA. That being said, I like the idea of having diversity when it comes to tax treatments, and as soon as I'm above the income limit for deductions, a Roth IRA will obviously become the superior choice.

My current plan is to focus on my 401k first, then if I still want to save more for retirement, put that into a Roth IRA. After reading my post again, I think I'll reword my question to make that clearer.

Just consider your timeline for purchasing a home, how much down payment you will want (20% of purchase price avoids mortgage insurance), and saving sufficiently for retirement. There is no right answer (except you absolutely should be investing in your employer plan to receive the match).

For the money you are saving for the mortgage, I would probably invest this money in a money market fund or in a Treasury bond with a maturity date that matches your house buying timeline.

Yeah, this part of my plan is definitely a little underdeveloped. I'll need to sit with it a while and determine what I'm trying to accomplish. In the meantime, I can get started on increasing my retirement contributions and investing my hoard of cash.

Thanks for taking the time to read through my post and for the advice about purchasing a home. (I also want to thank mike_in_ny, but I felt weird about quoting somebody's reply just to say "Thanks!")

Ethan

[dogagility]

I think your plan is sound overall. Here's the wiki on prioritizing investments. https://www.bogleheads.org/wiki/Priorit ... nvestments

I have reviewed the wiki, and I think my plan is fairly well aligned with the advice therein. I know that IRA's are more flexible than 401k's, but my 401k plan has good low-expense indexes for the 3 types of assets I want to hold. The cost of participating in the plan is a fixed amount each quarter (not based on the size of my account), so it doesn't cost me anything more to max my 401k than it would to pay in 6% for my full company match.

I also know that some people swear by Roth. Having looked at the math myself, I'm not really sure if Roth is worth it to me given that I'm below the income limit for full deductions from a traditional IRA. That being said, I like the idea of having diversity when it comes to tax treatments, and as soon as I'm above the income limit for deductions, a Roth IRA will obviously become the superior choice.

My current plan is to focus on my 401k first, then if I still want to save more for retirement, put that into a Roth IRA. After reading my post again, I think I'll reword my question to make that clearer.

I agree with your plan to fully fund your 401k prior to investing in an IRA. If you need to use the backdoor method to fund a Roth IRA in the future, you won't want to have "traditional money" in an IRA. This would trigger the pro-rata rule on the backdoor contribution.

[Comparator]

Bumping for more advice/different perspectives.

(Please banish me if this is against the rules.)