25yr. Old With A Somewhat Unique Goal

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Slick8503
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25yr. Old With A Somewhat Unique Goal

Post by Slick8503 » Tue Nov 16, 2010 11:20 am

Emergency Fund - Yes
Debt - 97k on Farmground 17 yrs left on Mortgage @ 5.8%(Possible Refi?)
91K on Recently purchased(May) Home 30 Yrs. @ 4.8%
Tax Filing - Single
Tax Rate - 25%(Around 70K/yr.)
Age - 25
Desired Asset Alloc. - 90/10
Desired International/Domestic Alloc. - 50/50
Portfolio Size - 135k(Excluding Home/Land Equity)
Fidelity 401k - I contribute 10% company matches first 5%. Very low ER index funds.
S&P500 Index~15%
US Equity Lg Cap Value~12.5%
Non US Eq. Blend~13%
US Eq. Sm/Mid Cap~12.5%
There are also quite a number of "target retirement" funds I can choose.

Roth IRA - Contribute 5k per year. In process of transferring to a VG account. Need advice on what to do when transfer is complete... ~20%

Taxable - 37K Currently being liquidated from overpriced local broker, and a seperate Scottrade account. ~ 27.5%
Need advice on what to do here as well... Pay off some debt? Put in index funds with the new VG account?

Questions -
1. As listed above, I would like some advice as to what to do with the newly transferred Roth, and the recently liquidated taxable accounts.

2. My long term goal is to quit/early retire(10-15yrs?) from my job with the utility and begin farming full time either with my family or separately.(My grandpa, dad, and older brother currently farm full time together) I would like to be able to purchase more farm ground when/if it becomes available, or save up capital for when it does. I would like to know if it would be more prudent to pay down my current debt or continue to save in my taxable account for future purchases.

Thank you very much for your time.

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Slick8503
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Post by Slick8503 » Wed Nov 17, 2010 1:32 pm

Little more info... Did some digging into the Fidelity 401k.
ER's for the various funds
SP500 = .04 Investment Manag Fee = .02
Lg Cap Value = .05 IM fee = .04
Sm/Md Cap = .89(Didn't realize it was this high!) IM fee = .88
International(MSCI EAFE Benchmark) = .68 IM fee = .65
Stable Value Bond Fund(Barclays Capital Aggregate Bond Index Benchmark) = .18 IM fee = .22

Also called about the refi on the farm loan. They gave me a few options. I can "restructure" the loan down to 4.8% with a fee of about 1200$(It would be cheaper, but I refied last yr down to current rate from 6.5). Or, I could do a regular refinance 10 yr down to 3.7%. Fees for this would be about 2000$ though... Or I could do a loan that would be fixed 7 yrs for 3.7% then the balance would adjust after for 1200.

Hopefully this helps. I'm really up in the air on what to do. I don't know if it would be best to put the money currently in my taxable accounts on the farm loan and refi, put the money down on the home loan since it will then be a higher interest rate, or open a VG brokerage account and put it in indexes there.

To add even more variables...

I put down 20% on my home mortgage in May, so I may also be able to refi it as well. The home appraised for 132000, so I have well over the 20% level in equity. The farm is also worth around 180K if that would affect the decision at all.

So all in all I would really like some suggestions with what to do with my 401k/Roth as far as getting to my desired AA, and some help deciding what to do with the debt/taxable accounts mess. Thanks.

Edited to add Investment managment fees.

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tom0153
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Post by tom0153 » Wed Nov 17, 2010 2:30 pm

Slick, hello!

Are you working with the financial planning folks at your local extension institute? They have tons of free info, as you know, and access to university folks specialized in these issues.

See, for example http://www.extension.org/pages/Investin ... m_Families

The page is for Cornell in NY but your local extension institute would have someone who can tailor it to local and state conditions and law.

Issues of concern to families with agricultural small businesses are addressed, including the estate planning issues that touch upon intergenerational transfers, and you can search on strategies for family partnerships over the national extension web.

I'd like to underscore that you aren't talking about retiring in 15 years, you are saying you'll want to have access to a pile of capital/cash that is not going to be subject to market whimsy when you want to leave your employment for farm operations.

So, if you are comparing refi options, you want to keep in mind that you'll want to be able to remortgage the farm property, perhaps, around the time that you are entering farming full time, with the issue on the table that you might remortgage at a higher rate than the rates you can get today. Then, you want to compare whatever rate you are carrying, with the cost of capital for additional farm machinery, or, improvements to farm buildings.

I would maintain a goal, though, of having the house paid off. You have a 15 year loan on the home? Sure sounds like a refi would make sense there, but you have to crunch the numbers, and make sure that costs are kept to a minimum (perhaps using the same bank where they are not going to duplicate charges for some of the stuff they already have in their files).

I think it would be worth a sit down with both the extension folks and your local SBA volunteers who are retired from farming.

Thanks for keeping small family farming alive in the US.

Best,
Best, Tom

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Slick8503
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Post by Slick8503 » Wed Nov 17, 2010 2:55 pm

Thanks for the response Tom. :D I talked with the local ASCS office about some young farmer loans when i first purchased the ground. There were some odd criteria that almost no one I know would meet in order to get them however.(Had to do with avg parcel size in the county you were in) The low interest rates would have been nice though!

Calling the local extension office might not be a bad idea, as far as what to do about the farm loan. It is with Farm Credit Services, I would like to shop around but I'm told they are about the only game in town as far as farm loans are concerned. Never hurts to call a few places though.

No, the home mortgage is for 30yrs. One other thing I forgot to add is that my state has a special program for first time home buyers. I'm able to recieve a 20% tax rebate on the interest that I pay for the life of the loan. I would need to make sure this refund would transfer should I refi.

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Post by tom0153 » Wed Nov 17, 2010 6:58 pm

In NY, Cornell is a top rated university, and access to folks in the land grant section is pretty much access to the entire school. So, your state's extension institute is likely a similar great deal. It may also simply link to Cornell's financial planning page, since the national extension institute is trying to avoid duplication of effort.

Your county extension may also offer some more local info if your own land grant college is close by, and may offer some more local expertise than the Farm Services Administration.

There should be someone there who can assist with the whacky math you might encounter when trying to compare the refi savings compared to the tax advantages at your state level and your original loan. Well, not that whacky, but you do have to keep on spitting on the end of the pencil.

It will be a good resource for you to continue to build on your family's experience, which is obvious in what you have already been able to accomplish - you are no ordinary utility worker (smile). Your attention to detail is very good, and the extension institute may offer classes, as well.

Don't overlook the SBA or SCORE if it is a better bet or closer; I doubt they would toss you out of their offices because you are operating a farm as a small business. The SBA has online classes, you can do them in your underwear, and they have no clue if you are a farmer or banker.

Continued good luck.

Best,
Best, Tom

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Slick8503
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Post by Slick8503 » Thu Nov 18, 2010 7:08 am

Thanks again Tom. I'll definitely check out these resources. I'm also going to be calling a few other banks to see if they are willing to refi a farm loan.

Onto the retirement plans... My Roth transfer just went through yesterday, so I currently have ~25K sitting in a VG Money Market account. Anyone have any opinions about what to do with this money? My thinking now is that since I've realized how expensive my International and Small/Mid Cap funds are in my company 401k, that I should maybe transfer these holdings to cheaper funds in the plan, and replace them in my VG account. The problem with this however, is that the only truly "cheap" funds are the SP500 index and the large cap value fund. This would leave me way overweighted in large caps, since my 401k is 70k+ and my Roth is only 25k...

I suppose it would be wise to buy a bond fund in my Roth as well?

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tom0153
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Post by tom0153 » Thu Nov 18, 2010 8:35 am

Hiya.

This is the way I am headed with my allocations:
http://www.bogleheads.org/wiki/Lazy_Por ... Portfolios

I tweak it because I am soon to begin withdrawals, because I'll have a couple of pensions in the mix, and because I have an IRA where I can create bond or CD ladders inexpensively for a portion of my fixed income allocation.

I like the approach because I am a reformed stock picker (smile).

So, I'm assuming you'd do something similar with your own set of target dates. Keeping the ER's down will substantially assist with your own accumulations over the years. Low ER's are what gives indexing its edge.

Best,
Best, Tom

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Slick8503
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Post by Slick8503 » Thu Nov 18, 2010 11:44 am

After looking at your link, it looks like a Rick Ferri's modified "core four"(would actually be "core three" in my case)approach might work for me. Does removing the REIT portion of this approach and adding the balance to the FTSE ex US fund sound like a sound strategy? The reason I say to remove the REIT is that the way I see it, I'm already heavily weighted toward real estate through the farm, so it would seem redundant to have an REIT fund. This would be using the 80/20 split, also.

This would end up being a 20% Bond, 48% total stock, and 32% All world ex us.

Also, more news on the 401k front. I had forgotten about this but Fidelity is now offering no commission trades on 25 Blackrock iShares ETF's. One of the choices is ACWI all world index. This could solve my dilemma about asset allocation. The only downside to using this fund is having to purchase them through the "brokeragelink" part of my 401k account. Which means I would have to do it manually every month. Which isn't a huge deal. Thoughts?

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Post by tom0153 » Thu Nov 18, 2010 12:13 pm

Slick, I don't want to monopolize the conversation, especially since Rick Ferri participates here (smile).

However, two things I'd look into - I believe I would trent to thinking in the same way about real estate, but I'd want to look into whether farm property operates in the same way as the kind of real estate holdings to be found in an REIT. For example, farm property smack in the middle of all those bucolic meadows and dales :D would have one price, whereas property along the highway just where the new exit is going in might get another price if sold to developers.

It's not like you can build on an island in Dubai to draw rents! Or, maybe you can if you put in a mall with a Walmart as an anchor. :lol: Maybe I shouldn't be smiling, maybe it is quite possible for you.

The other thought is that the international indices keep on getting revised, and I am not the best one to speak on the changes nor trend, and whether ex-US is needed or not (vs. the plain vanilla international index). Part of the conversation I recall is whether Canada is covered, etc. Best to invite others to chime in or start a new topic on the issue with a distinct title that focuses on your concerns. Don't worry about being 25, you're doing just fine, so you can stick that in the footnotes (smile).

Again, I am shooting towards simplicity in what I am doing, so I tune a lot of that out in favor of the international index which I hold in my taxable account so that the foreign tax credit is not lost.

It sounds like you are thinking that you want to plant it in your 401(k). You might want to look into that tax credit issue to see if it comes into play in maximizing your "tax efficiency." Many folks seem to take a look at www.fairmark.com when considering tax issues.

Best,
Best, Tom

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Slick8503
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Post by Slick8503 » Thu Nov 18, 2010 1:10 pm

No Tom, I appreciate your replies. :D I've thought about what you're saying about real estate, but it so happens that my property is prime for residential development. This is good for your net worth, but not so good for purchasing new property. Land is a hard thing to put a value on for a lot of farmers. The only way that I would ever consider selling my parcel would be to 1031 tax exchange for more acres somewhere else. Now take the ground that my grandpa/dad have put together for an example... It is priceless to me and I would never want to sell it. I guess being able to say that your ground is worth x amount of dollars is great and it makes the balance sheet look better(also helps for collateral for future purchases if need be), but at the end of the day you want to be able to pass it down to the next generation.

How does this look for my AA?:
ACWI - 35000
SP500 Index - 35000
VFWIX - 30000
VBMFX - 20000
This would put me about 41% US, 41% Int'l, 16% Bond, and ~1% cash according to X-ray.

I forgot to add that this would be with me keeping ~10K out of my taxable account to put down on one of my loans.

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Post by Noobvestor » Thu Nov 18, 2010 3:20 pm

RE: FTSE Ex-US vs. Total International - indeed, as of the next few months, TI will be the better pick ... just well-diversified (more if you count small caps) and cheaper ER. So if you have a choice between them, pick TI. As noted below, you are a little 'low' on small caps in general, and one other thing about FTSE Ex-US: it has no small caps, making it more like an 'international S&P 500' (i.e. large cap). In turn, it is likely to be more correlated to the S&P.
This would put me about 41% US, 41% Int'l, 16% Bond, and ~1% cash according to X-ray.
That allocation 'feels' a little equity-heavy given that you are not *too* far off from needing the money (compared to someone your age saving for retirement, for example). Also, according to X-Ray, it gives you quite a bit of a large tilt: http://www.screencast.com/users/deramis ... 377405dd37 - might consider adding some small to balance that out (domestic or international), but up to you. However, I'm nitpicking at what, overall, appears to be a thoughtful, simple but effective portfolio so ... I'll let others chime in as needed ;)
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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tom0153
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Post by tom0153 » Thu Nov 18, 2010 5:24 pm

As I've said, you ain't no ordinary utility worker (grin). You are also a well educated small farm owner. I'd guess you are an FFA college grad!

You have to take a close look at the nature of your land ownership, then. If you intend to keep the land in the family (is that what you are saying, you own land assembled by your grandfather and father?), then it has something quite distinct in terms of land value, as you note. Your state may well have a covenant program intended to keep the land use stable as agricultural, and you may be able to sell those rights to them.

But, if you intend to farm the land, but keep yourself open to development, you need to decide how you are going to determine your valuation over a certain period of time for which you are planning. If you want your next generation down to have an opportunity to own, then I'd not only keep the value at the farm price, but I might not even want to compare it to any investment in real estate at all, but rather as a business asset which produces your family farm income, as if it were not real estate, nor part of your retirement package (on Long Island, the last few farmers find that multiple families can no longer live off the farm income, that valuations almost force them to sell to developers as farmers age and need to pay down debt, or, they convert to agritourism, CSA, or other uses (flower growers, sod farms, etc). They seem to be flexible in how the envision the family business. Only the lucky few are on the main road out to the tip of the north fork of the island where folks are forced to drive past their wineries. Cops out there must know how to position themselves for the dui's.

You'll find that the extension institute web is going to offer you a number of ways to look at these issues.

They do also offer info on investing.

Now, how does that iShare fund compare to the Vanguard international fund in terms of costs, holdings, etc? How are holdings being duplicated? Did you look into holding Admiral shares in the Vanguard account when comparing costs? I think that drives the ER down to .12 on funds of interest in the lazy portfolios. Are both those international funds ex-US? If so, I'm not sure I agree with the %'s you have.

I'm going to dodge the reply on commenting on your actual allocation. As I mentioned, as I near retirement, I'm looking for simplicity and low cost, with moderating risk, and the dummy models are actually pretty smart in what they do. My remaining complication is getting out of the individual stocks to make a short term bond or CD ladder that I can extend in maturity as rates rise, so that I don't have to worry about a bond fund taking a hit later on due to rising rates. Your time frame might suggest that this need not be a worry at all - look into the duration of your bond fund investment and figure out how your holding period might mean you need not worry.

If you find one of those calculators that measure risk and reward, and you play with the allocations, you may find that taking on extra risk does not add much in terms of reward over your investing time frame. It is worth the exercise. See a description of the issues at: http://www.fundadvice.com/articles/buy- ... ation.html

Lemme know if I am not talking in a way that meets your level of sophistication on this stuff, but you may well have exceeded mine (smile).

Best,
Best, Tom

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Post by galambosian » Thu Nov 18, 2010 5:58 pm

I'm guessing you are doing something physical at the utility like a linesman, with a potential for physical risk.

Do you climb or work on transmission lines? Distribution lines? Do you have good disability insurance? Probably a good idea.

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Slick8503
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Post by Slick8503 » Thu Nov 18, 2010 8:59 pm

Tom, just to clarify the ground I listed in the first post was purchased by me in 2007. It is not connected to any of the farmground my grandpa/dad own. Sorry if that was confusing. I was just trying to illustrate the sentimental value land can gain when it has been in a family for many years. Even though I don't ever plan on selling my property it doesn't have the sentimental value to me that the families farm has, yet. Maybe 50 years from now my kids will feel the same about my ground...

I haven't gone to college. I was lucky enough to hire on with my current employer right out of highschool. I work on the power generation side, not on the distribution/line crew side. My company has good disability insurance. Also has ADandD ins. So that should be covered.

The iShares all world fund has an ER of .35.

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Post by Slick8503 » Thu Nov 18, 2010 9:06 pm

Noobvester, thanks for the post. That's a great point that the portfolio is too large cap heavy. I will check tomorrow when I'm at my computer(posting from mobiloe now)to see if any of the 25 iShares funds are small/mid cap oriented. I will adjust my xray and post it up. If you or anyone else has some more suggestions about my allocation that would great. Thanks again for the help with this. :D

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Post by bmelikia » Thu Nov 18, 2010 9:14 pm

What do you farm? Just curious. . .

I just finished farming cotton and tomatoes. . .

Tomorrow morning I'm planting my first field of onions. . .wish me luck. . .
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

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Post by Beantown85 » Thu Nov 18, 2010 9:26 pm

Slick8503 wrote:Noobvester, thanks for the post. That's a great point that the portfolio is too large cap heavy. I will check tomorrow when I'm at my computer(posting from mobiloe now)to see if any of the 25 iShares funds are small/mid cap oriented. I will adjust my xray and post it up. If you or anyone else has some more suggestions about my allocation that would great. Thanks again for the help with this. :D
I agree with Noob's thought on you being equity heavy. Someone 10-15 years out from an anticipated retirement should have significantly less equity exposure than you propose, under normal circumstances. Your situation is different, with the likely continued income after that point, and your age would allow for continued work if the need was there. But you should really try to think about how you would feel if another large drop happened in the coming years, your current portfolio would take a very large hit. Are you OK with continuing to work? If not, you should consider a more conservative approach.

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Slick8503
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Post by Slick8503 » Thu Nov 18, 2010 10:28 pm

Bmelikia, we raise corn, soybeans, wheat, and hay. We also run a cow/calf beef operation.

Good luck with the onions! The only way I've ever raised onions and tomatoes is in a garden. :lol: I would imagine its quite a bit different on a large scale. Very cool. :D

Beantown, your concern is definitely noted. However, during the last major downturn I was basically 100% equities and I stomached that fairly well. As you have mentioned, if it were to happen that I may not be able to walk away from my job after 15 years and I have to work a few more it would not be the end of the world for me. I like my job and it allows me to work on the farm quite a bit.

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Post by tom0153 » Thu Nov 18, 2010 11:36 pm

Slick8503 wrote:Tom, just to clarify the ground I listed in the first post was purchased by me in 2007. It is not connected to any of the farmground my grandpa/dad own. Sorry if that was confusing. I was just trying to illustrate the sentimental value land can gain when it has been in a family for many years. Even though I don't ever plan on selling my property it doesn't have the sentimental value to me that the families farm has, yet. Maybe 50 years from now my kids will feel the same about my ground...

I haven't gone to college. I was lucky enough to hire on with my current employer right out of highschool. I work on the power generation side, not on the distribution/line crew side. My company has good disability insurance. Also has ADandD ins. So that should be covered.

The iShares all world fund has an ER of .35.
I hope your utility has an education program you can take advantage of, you are a smart guy; you'd want to use it to serve your "second" career in agriculture. I couldn't tackle what you are doing now, but I did night school into my thirties. Then I got married (smile).

You are cooking with gas, I'd keep on percolating. In NYS, there are two state colleges that one can use that are distance eduction, one is Empire State College and the other is Excelsior College (take a look at the latter at http://en.wikipedia.org/wiki/Excelsior_College). You may have local opportunities or a similar setup with your state university system.

As a counterpoint, of the seven children in my family, the biggest earner is the brother who dropped out of college in the first semester (smile).

My son attended the local high school with an agricultural program here in New York City; he was in the FFA. He became a vet tech at the local community college and then finished up at an upstate school studying animal science. He gets some kind of pleasure in taking care of cows, but I don't want to get into the details of some stuff, suffice it to say, long arms can be useful (grin).

He still proudly displays his showmanship ribbons won at the upstate county fair when he was interning.

Does your father and grandfather have a buyout plan in place?

I hope I haven't truly hijacked your thread!

Best,
Best, Tom

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Post by wingnutty » Fri Nov 19, 2010 12:25 am

First off, congrats and thank you for working towards providing our nation with our abundant, safe and under-appreciated food supply!

"Never before have so few fed so many"

If I were you, I'd look hard at the current options available through beginning farmer loan and conservation programs available through the USDA (namely the NRCS). I know you said you checked with the ASCS (the old name for the NRCS), and I'd certainly think hard about the options available. One can only speculate that in the near future, budgets will be cut considerably and much of what is currently available with dry up. This is going to be the peak of funding, certainly for the foreseeable future, so if you see something that might provide assistance, strike NOW.

Good luck to you and just remember that although the US public (namely the media and ill-educated elite) may constantly ridicule production agriculture, it is both our troops and agricultural producers whom are most responsible for our national security and standard of living.

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Slick8503
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Post by Slick8503 » Fri Nov 19, 2010 7:25 am

Let me first say that it is terrific being on a board with such knowledgeable/helpful people. :D I really appreciate the nice comments. Its a great change of pace compared to what you usually hear about agriculture these days.

I've taken a few classes(just pre-req stuff) at the local college. I would like to have a degree... the problem is that for the semester that I was attending we were also busy in the field. Its not an easy thing to tell your dad you have english class after work when he could use me in a tractor. Another thing is that the state ag. college(Purdue) is about a 3 hour drive from here. I should check to see if they offer online classes. One thing they do offer that I take advantage of is a TON of literature available online.

Wingnutty, I agree 100% about now being the peak time for govt farm programs. I wish there were some things I could take advantage of, but last time I talked with them, there wasn't anything that worked for me. I should call again I guess, it has been a year or two since I've talked with them.

Tom, say no more about the "long arms". :lol: My cousin has an animal science degree.

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Slick8503
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Post by Slick8503 » Fri Nov 19, 2010 8:02 am

How does this look?

ACWI - 35000
SP500 Index - 12500
IJH(mid) - 12500
IJR(sm) - 12500
VGTSX - 30000
VBTLX - 20000

X-Ray shows average ER to be .25

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Post by bmelikia » Fri Nov 19, 2010 8:45 am

Anyone have a good link regarding these govt farm programs?
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

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Slick8503
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Post by Slick8503 » Fri Nov 19, 2010 9:12 am

It won't allow me to post links as I am new to the site. Just google USDA farm loans. The FSA site should be the first link. Its also a good idea to just call your local office as the criteria varies from county to county based on average farm size for your area, among other things.(as I found out) Good luck. :)

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Post by Shireman28 » Fri Nov 19, 2010 11:05 am

My advice would be to take the taxable investments and pay down 37K on the mortgage on the house or farm, as long as you have an emergency fund of 6 months of expenses outside of this account.

Bonds are so cheap so that risk-free 3-4% post tax credit or whatever seems good to me.

Then:

Roth (25K):
Vanguard Extended Market (SP Completion Index): 8K
Vanguard Total International: 15K

401K (70K):
SP500: 32K
International Fund: 25K
Bond Index: 15K

Going forward:

In the 401K, you'd buy mostly SP500, with some International and Bond Index and rebalance to your desired asset allocation.

In the Roth, each year you'd buy enough completion index to keep the Ratio of roughly 4:1 SP500 to completion index to make the equivalent of the entire US stock market. The remainder of the 5K would go to Total International.

In my opinion, any extra savings left after maxing out these accounts should go to debt reduction on your home and farm before taxable investing.

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Post by Slick8503 » Fri Nov 19, 2010 11:17 am

That sounds like a sound strategy. I'll admit I don't know as much as I should about bonds(I need to change that), but I would think that the returns would be low right now. It was my understanding that the best place to hold a bond fund would be in a Roth as compared to a 401k... Is this not so? Thanks for the suggestion.

On edit: After some investigation, it appears I had that backwards, and it is better to hold taxable bonds in a 401k vs. a Roth.

What does everyone think of this? Still too light on Sm/Mid Caps?
401k:
ACWI - 40k (MSCI All Country World Index)
SP500 - 22k
AGG - 10K (Barclays Capital U.S. Aggregate Bond Index)
Roth:
VEXMX - 10k
VGTSX - 15k
X-Ray shows this to be 50%U.S., 40% Int'l, 10% Bonds, and use the remaining 35K to pay down debt.

X-Ray shows the ER to be .27

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Post by tom0153 » Fri Nov 19, 2010 2:00 pm

Slick, you should be able to post links by now.

Purdue Extension posts this on its publications pages for savings and investments:
https://mdc.itap.purdue.edu/item.asp?itemID=18876

Indiana e-learning for college courses is here:
http://www.icn.org/

However, you can use the extension institute over a lifetime and learn as much as a PhD.

Your county extension people should know or should be able to access practical info (or, push them to call Purdue):
http://www.extension.purdue.edu/extbusi ... sonnel.htm

Oddly enough, this resource is called "Who will get Grandpa's Farm" but it is richer than the title, in terms of intergenerational transfer:
http://www.extension.purdue.edu/farmtransfer/

The topic has to sit within this kind of planning:
http://www.extension.purdue.edu/farmriskmgt/

Phone numbers for Indiana FSA are listed here:
http://www.fsa.usda.gov/FSA/stateoffapp ... ic=landing

Bmelikia, for growing onions, you can back up on the FSA web site to your own state (and don't forget to use your own extenstion institute).

Now, I'm going to be honest, the thread drifted well into financial planning for the farmer, and that is my fault. I hope that the OP can continue to get his hoped for comments with his allocations.

Best to all,
Best, Tom

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Post by tom0153 » Fri Nov 19, 2010 2:16 pm

Sorry, to be complete I should have posted this site on Purdue University pages:
http://www.cfs.purdue.edu/extension/hom ... goals.html

And pointed out this site they have as a link, which is to the national web extenstion institute, on Cornell's pages. It is an AWESOME course:

http://www.extension.org/pages/Investin ... our_Future

I'm getting in the way of the OP's request for some commentary on his proposed allocations (if it isn't in the format that other's would need, somebody might be kind enough to point that out).

Best,
Best, Tom

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Slick8503
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Post by Slick8503 » Fri Nov 19, 2010 3:34 pm

Thanks for all the links, Tom. I'll have to check them out as I get time.

Anyone have any feedback on this portfolio? I've got a 25k Roth sitting in a money market, burning a hole in my pocket.lol

Still too light on Sm/Mid Caps?
401k:
ACWI - 40k (MSCI All Country World Index)
SP500 - 22k
AGG - 10K (Barclays Capital U.S. Aggregate Bond Index)
Roth:
VEXMX - 10k
VGTSX - 15k
X-Ray shows this to be 50%U.S., 40% Int'l, 10% Bonds, and use the remaining 35K to pay down debt.

X-Ray shows the ER to be .27

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Post by Mazz » Fri Nov 19, 2010 3:48 pm

Slick,

You may want to checkout some of the model portfolios on www.FinancialPlanning.com

I think they have some great concepts for recommended international portfolios.

Some of the models require that you go through them (Like the ones that use DFA funds). But you can do the ETF and Wisdom tree portfolios on you own.

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Post by Noobvestor » Fri Nov 19, 2010 3:53 pm

Slick8503 wrote:Thanks for all the links, Tom. I'll have to check them out as I get time.

Anyone have any feedback on this portfolio? I've got a 25k Roth sitting in a money market, burning a hole in my pocket.lol

Still too light on Sm/Mid Caps?
401k:
ACWI - 40k (MSCI All Country World Index)
SP500 - 22k
AGG - 10K (Barclays Capital U.S. Aggregate Bond Index)
Roth:
VEXMX - 10k
VGTSX - 15k
X-Ray shows this to be 50%U.S., 40% Int'l, 10% Bonds, and use the remaining 35K to pay down debt.

X-Ray shows the ER to be .27
That's a great ER, and to answer your question: it looks like you are pretty close to approximating the small/mid/large balance of the market with your allocation, too, which is a good place to be. I still think it is worth looking at an increased bond allocation *down the line* if not now, but that is neither here nor there - all up to personal circumstances.

By the way, I found the rest of this conversation very fascinating as well to watch unfold - my grandparents were essentially all farmers, or at least lived in farm-driven communities, and today everyone I know lives in a city ... so strange how times change, and worrisome how much we have stopped relying on ourselves to produce our own food.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe

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Post by retiredjg » Sun Nov 21, 2010 10:56 am

Slick8503 wrote: Anyone have any feedback on this portfolio? I've got a 25k Roth sitting in a money market, burning a hole in my pocket.lol

Still too light on Sm/Mid Caps?
401k:
ACWI - 40k (MSCI All Country World Index)
SP500 - 22k
AGG - 10K (Barclays Capital U.S. Aggregate Bond Index)
Roth:
VEXMX - 10k
VGTSX - 15k
X-Ray shows this to be 50%U.S., 40% Int'l, 10% Bonds, and use the remaining 35K to pay down debt.

X-Ray shows the ER to be .27
Slick, welcome to the forum!

Something is way wrong with what you have above. It could be a typo. It is 90% stock, 10% bonds. So far so good. But you have shown $55k in international and only $32K in US stocks....this is quite different from 50% US and 40% international.

This thread has gone all over and back and it is difficult to know what decisions have been made and which are still on the table. We cannot help you much with the information all over the place.

Have you decided what to do with your money in taxable?

It would be helpful to know the choices in your 401k. You don't have to list all of them. How about the 3 cheapest US stock funds, international stock funds, and bond funds? We need a name, a ticker if available, and the total cost. For example, if the cost of the international fund you are looking at is 1.33%, it is not likely to be a one of your best choices.

The other thing I'd like you to consider is raising your bond allocation to 20%. This thread explains why.

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Post by Slick8503 » Sun Nov 21, 2010 6:40 pm

Noobvester, thanks for the feedback on my portfolio. :) Some trivia: I believe I've read that only 2% of the population are involved in farming today.

Retiredjg,

I apologize for the thread being all over the place. I'll check the X-Ray again to make sure that I have the tickers entered correctly. The ACWI(All World) index fund includes both domestic and international stocks. I'm sure that's where the confusion is.

The funds in my company's 401k don't have ticker symbols. I can get the ticker symbols for the index funds that the company funds invest in, however. The funds that I have posted are basically all that are available. They do have target retirement funds, but I would rather stay away from those choices. So I didn't go to the trouble of listing them. As I said earlier, we do have the brokerage link option that allows us to take advantage of the 25 free iShares ETF's that Fidelity is now offering. I'll post a link to those funds, for those that aren't familiar with them.

As far as deciding what to do with the taxable money... I think I've decided to put it on one of my loans. I would, however, like some additional input on this, if others have differing opinions about what would be best.
Last edited by Slick8503 on Sun Nov 21, 2010 6:56 pm, edited 3 times in total.

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Post by Slick8503 » Sun Nov 21, 2010 6:46 pm

Here is a link to the commission free ETF's:

http://seekingalpha.com/article/187578- ... azard-list

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Post by retiredjg » Sun Nov 21, 2010 7:56 pm

Slick8503 wrote:The ACWI(All World) index fund includes both domestic and international stocks. I'm sure that's where the confusion is.
Yes, that is likely the problem. I assumed, incorrectly, you meant ACWI except US.
As far as deciding what to do with the taxable money... I think I've decided to put it on one of my loans. I would, however, like some additional input on this, if others have differing opinions about what would be best.
I don't think we know enough. Are you struggling to pay both notes or can you handle them easily? If you are struggling, you'd best keep some cash on the side. Do you want to buy more farmground in the next 10 years? If so, I would keep some money handy to buy it with. What would you do if acreage next to yours suddenly became available? I'm guessing you'd want to buy it, but if you have no money saved, you might miss that opportunity.

I'm all for paying extra on a mortgage, but not if it interferes with another important goal. Remember, paying extra now does not mean you can ever miss a payment later. It would mean you have less debt and might get a loan easier, but not if you don't have a down-payment to start with, right?

On the other hand, if that money enabled you to refi down from a high interest rate, it might be a good idea. I was not really able to follow that part of the discussion.

I see the list of commission free ETFs. Do you know if there is an admin fee to open this brokerage option?

So you're saying you have 5 funds and some target retirement funds and the commission free ETFs. That's it?

I would not pay 1.33% for a world fund when you can get 500 index for 0.06% and total international for .32% or less if your investment is big enough.

Consider just using the 500 index at .06% and the total bond fund at .4% in your 401k. Pick up Vanguard's Total International in your Roth IRA. When your portfolio gets bigger, add an extended market fund or a small cap fund to cover the smaller stuff. Or maybe you could get that in the brokerage option. But if the annual fee is $50 and you only hold $5k there, that would be a huge expense to pay in my opinion. Just an example.

I'm assuming the expenses you listed in your second post are supposed to be added together. That's not really clear though.

What is the "Non US Eq. Blend"? Is it an index fund?

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Post by Slick8503 » Sun Nov 21, 2010 8:36 pm

Posting from mobile now, hopefully I can answer all your questions. I don't believe there are any fees for the brokeragelink. Yes u add together both the ER and other management fee. Yes only those funds plus the target funds. There is a MM fund but I don't need that. I only plan on using the funds listed in my x-ray that I posted but yes the non u.s. equity fund I currently have in my 401k is an index fund.

Maybe just putting down enough money to keep my payment close to the same on a ten year note for the farm might be the way to go? That way I can take advantage of the lower rate, pay off the loan 7 yrs sooner and still have some cash for a downpayment.(I would have to add to it some I'm sure)I can pay both notes with no problem now, but I should keep a "cushion" should I be able to purchase more ground.
I need to run the numbers to see how much I would need to put down to do this. Thanks for helping.

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Post by retiredjg » Sun Nov 21, 2010 9:05 pm

Here's my suggestion.

401k $72k
$53k S&P 500 Index
maybe some in the non-US equity blend if it is low cost (I don't think you ever gave us the cost on this one)
$19k Total Bond Market

Roth $25k
$25k Vanguard's Total International

If you find there is no cost to using the ETFs (seems very unlikely) and if the ETFs have low expenses (likely), you could add on some small cap and/or value from there.

This is not what you asked for, but it is a reasonable and efficient use of what you have available. You are trying to build a great portfolio without considering the costs. That means it will not be a great portfolio.

A great portfolio is not built on just what you want. A great portfolio makes the best use of what you have available. You could consider the above idea a core to start from and build from there.
Maybe just putting down enough money to keep my payment close to the same on a ten year note for the farm might be the way to go? Thoughts?
If you mean a refi with the same monthly payment and fewer years, that makes sense to me. Just paying down a mortgage does not make sense to me in your case.

While I'm typing your last message is a moving target. It has already changed twice. I better post this quickly so your message won't change again. :wink:

I see you plan to use the ALL World fund at 1.33% instead of a combo of the 500 index and Total International and the Non-US Equity Index. I think that's nuts! What are you thinking?

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Post by Slick8503 » Sun Nov 21, 2010 9:07 pm

I ran the numbers and at the 3.8 rate they quoted me the other day I would need to pay the loan down to 75k. to keep the payment exactly the same. This would leave me with 13k in a taxable account after fees. I think this may be the way to go.

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Post by retiredjg » Sun Nov 21, 2010 9:11 pm

Makes sense to me too.

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Post by Slick8503 » Sun Nov 21, 2010 10:14 pm

Sorry for so much editing. This phone isn't ideal to post from. I'm not sure why you are saying I'm not concerned with cost?? I think the x-ray I posted shows an average ER of .27, that seems very low cost to me. Like I said in the OP I didn't realize the non us equity fund I'm currently using was that high cost. I don't intend to use it in the future. You'll notice I don't include it in the xray.

As far as brokerage link not having a fee...I don't recall anything about a fee when they announced it was available. Ill doublecheck tomorrow to be sure. There are commission charges for all other investments except for the 25 etfs and maybe some fidelity funds.

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Post by retiredjg » Sun Nov 21, 2010 10:55 pm

Slick8503 wrote:I'm not sure why you are saying I'm not concerned with cost?? I think the x-ray I posted shows an average ER of .27, that seems very low cost to me. Like I said in the OP I didn't realize the non us equity fund I'm currently using was that high cost.
Maybe I just have the funds mixed up. Like I said earlier, I found this thread pretty confusing and fund names seemed to change sometimes. So what you are saying is that the All World fund is cheaper? Good!
As far as brokerage link not having a fee...I don't recall anything about a fee when they announced it was available. Ill doublecheck tomorrow to be sure. There are commission charges for all other investments except for the 25 etfs and maybe some fidelity funds.
I suppose it is possible, but extra fees have been reported here in the past. I'm not talking about a commission. I'm talking about the administrative cost of doing something outside the regular plan.

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Post by Slick8503 » Mon Nov 22, 2010 9:03 am

I checked this morning and there are no other fees associated with the brokerage link portion of my 401k.

I apologize to everyone for this thread bein all over the place. I think I'm finally settling on what to do now.

How does this look?(I know retired will want more bond exposure, lol. I may adjust this higher...)

401k:
ACWI - 36k
SP500 - 22k
AGG - 14k
Roth:
VEXMX - 12k
VGTSX - 13k
Taxable:
VGTSX - 13k

X-Ray shows this to be 45% U.S., 42% Int'l., 11% Bonds, 2% Cash
ER still at .27

This is with putting down enough money to refi my farm loan to 10 years and keep the payment the exact amount it is today. The remaining 13k is shown in the taxable account.

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Post by retiredjg » Mon Nov 22, 2010 2:47 pm

Slick8503 wrote:I apologize to everyone for this thread bein all over the place. I think I'm finally settling on what to do now.
Not to worry. It happens when there are so many questions being discussed.
How does this look?(I know retired will want more bond exposure, lol. I may adjust this higher...)
Yeah. You didn't read that link, did you? :wink:
401k:
ACWI - 36k
SP500 - 22k
AGG - 14k
Roth:
VEXMX - 12k
VGTSX - 13k
Taxable:
VGTSX - 13k

X-Ray shows this to be 45% U.S., 42% Int'l., 11% Bonds, 2% Cash
ER still at .27

This is with putting down enough money to refi my farm loan to 10 years and keep the payment the exact amount it is today. The remaining 13k is shown in the taxable account.
I think this is fine IF the $13k is intended for your retirement nest egg. If you plan to use it to buy new land, the money may or may not be there when you need it. If you really need that money at a certain time, it should be in something more conservative than stock, especially international stock.

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Post by Slick8503 » Mon Nov 22, 2010 3:36 pm

I really do appreciate your feedback on this retired. I promise I'll add more bond holdings with future 401k contributions.

I just completed the transfer of my Roth from the MM account to VEXAX, and VGTSX. I liquidated my holdings in the 401k(except for the SP500 fund), so I should be able to purchase the ETF's through the brokerage link after the transfers settle at the close today. I've got the check to deposit from the local broker to deposit. All I have left is to liquidate the Scottrade acct. After this is complete I'll send the amount I want to keep in taxable to VG, and the rest will go on the farm.

If anyone has any other advice or something I've missed please let me know. Thanks for all the help!!

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