Comment on our monthly investment allocation, please.

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
Shaoya
Posts: 65
Joined: Fri Sep 14, 2007 8:51 am

Comment on our monthly investment allocation, please.

Post by Shaoya » Mon Dec 13, 2010 12:18 pm

The arrival of another child (2010) and her entry into daycare (2011) necessitates that we actually adhere to our budget to meet expenses & investment intentions.

After reconfiguring our budget, I've determined we have $2232 to invest each month. Currently, this sum is allocated across several investment buckets (listed right below).

But I'm not sure if this split across our six retirement and 529b accounts for two kids is optimal given our ages/financial situation (described far below). I'd would appreciate either confirmations of these choices or specific suggestions on how this $2232 might be differently allocated across these buckets (or other investment choices) & why.

Thank you! - Shaoya

Monthly investment allocation of $2432 from salaries is currently distributed across six accounts in these proportions:

Pre-tax
457b Plans:

1. $400 to Vanguard Total Bond Market Index Fund – Institutional Shares (VBTIX) (0.07%)
2. $400 to Large Company Value Stock Option (0.39%) [blend of BGI Russell 1000 Value Index, Dodge & Cox Stock, MFS Value, LSV Value Equity]

Post-tax
3. $300 to Child #1's 529 with two funds: US Equity Index (0.44%); International Equity Index (0.67%)
4. $300 to Child #1's 529 with two funds: US Equity Index (0.44%); International Equity Index (0.67%)

5. $416 to Her Roth IRA - Windsor II Inv. (VWNFX) (0.39%)
6. $416 to His Roth IRA - Total Stock Mkt Idx Inv (VTSMX) (0.18%)


Debt
Mortgage –30 year fixed at 3.87% (refi’d Nov 2010)
Credit card debt – none
Student – 1.6% fixed @ $130 a month.
Car – no debt
Emergency Fund – not included below

Tax Filing Status
Married Filing Jointly – 15% Fed in 2009; 9% Oregon (2009) [15% Fed in 2010, too.]
Age
Hers – 36
His – 38
Son (b. 2008), Daughter (b. 2010)

Stable jobs in local/state government with an annual income of ~$110K. Expect this to increase incrementally (not dramatically) relative to inflation later in our careers. Intend to stay in our current house/city indefinitely.

Portfolio with Asset % as of 12-10-10

AA - Current AA - Desired
Equities – 63.1% Equities - 65%
Bonds - 35.3 Bonds - 30%
Cash – 1.6 Cash - 5%

Taxable

43.2% VG Total Stock Mkt Idx - Admiral (VTSAX) (0.08%)
19.2 % VG Total Int'l Stock Index (VGTSX) (0.34%)
1.6% VG Prime Money Market Fund

Tax-advantaged
Roth IRA – All Vanguard
10.6% Inflation-Protect Sec (VIPSX) (0.25%)
7.0% Total Bond Market (VBISX) (0.22%)
2.4% Short-Term Bond Market (VFSTX) (0.24%)
5.8% Windsor II Inv. (VWNFX) (0.39%)
0.3% Total Stock Mkt Idx Inv (VTSMX) (0.18%)

Her 457
6.4% Vanguard Total Bond Market Index Fund – Institutional Shares (VBTIX) (0.07%)

His 457
2.9% Intermediate Bond Option (0.09%)
0.6% Large Company Value Stock Option (0.395%)

~100.0%

User avatar
hand
Posts: 1081
Joined: Sun May 17, 2009 8:42 pm

Post by hand » Mon Dec 13, 2010 4:30 pm

I would question the allocation of any dollars to the 529 funds if you are not maxing out your retirement funds.

User avatar
Shaoya
Posts: 65
Joined: Fri Sep 14, 2007 8:51 am

Post by Shaoya » Mon Dec 13, 2010 4:49 pm

hand wrote:I would question the allocation of any dollars to the 529 funds if you are not maxing out your retirement funds.


Thanks, hand. Why exactly?

Given that we have low six-figures now, albeit in taxable funds (inheritance), wouldn't that make the competing priority of college funds also important?

Please let me know. Shaoya

User avatar
Taylor Larimore
Advisory Board
Posts: 26438
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

A superior portfolio

Post by Taylor Larimore » Mon Dec 13, 2010 4:58 pm

Hi Shaoya:

In my view, you have an excellent portfolio. You have a reasonable allocation based on the information provided. Your portfolio is low-cost, tax-efficient, diversified, and fairly simple to understand and maintain.

Suggestion: Consider exchanging the 0.3% TSM to another fund in the Roth. Also the 2.4% Short Term Bond Fund. They are meaningless and add complexity (and overlap). Continually strive for simplicity.

Happy Holiday!
Last edited by Taylor Larimore on Mon Dec 13, 2010 4:59 pm, edited 1 time in total.
"Simplicity is the master key to financial success." -- Jack Bogle

DSInvestor
Posts: 10625
Joined: Sat Oct 04, 2008 11:42 am

Post by DSInvestor » Mon Dec 13, 2010 4:59 pm

Retirement assets are not included in the needs analysis process for financial aid. I would also suggest that retirement contributions be maxed out before making contributions to 529 plans. Here's a link to a finaid.org page on Maximizing Aid Eligibility:
http://www.finaid.org/fafsa/maximize.phtml

User avatar
hand
Posts: 1081
Joined: Sun May 17, 2009 8:42 pm

Post by hand » Mon Dec 13, 2010 5:45 pm

hand wrote:
I would question the allocation of any dollars to the 529 funds if you are not maxing out your retirement funds.


Thanks, hand. Why exactly?


1) Per DSInvestor's link, 529 assets are penalized in financial aid calculations as compared to retirement assets

2) When the time comes, if needed, it is easier to borrow from college than to borrow for retirement

3) The benefit of tax deferred growth in your retirement accounts will be realized over a much longer period of time than college savings ("only" 18 years)

4) What if your kids receive scholarships?

User avatar
touchdowntodd
Posts: 808
Joined: Sat Oct 31, 2009 9:50 am

Post by touchdowntodd » Mon Dec 13, 2010 6:42 pm

i agree in investing in yourself first..

like they always say... you can borrow for college, but not retirement

User avatar
Shaoya
Posts: 65
Joined: Fri Sep 14, 2007 8:51 am

Post by Shaoya » Tue Dec 14, 2010 9:42 pm

Taylor,touchdowntodd, hand, & DSInvestor: thank you very much for your responses. Food for thought that's very much appreciated. - Shaoya

Post Reply