3 fund portfolio review - married, mid to late 40's

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streamline
Posts: 4
Joined: Mon Sep 25, 2017 10:08 am

3 fund portfolio review - married, mid to late 40's

Post by streamline » Sat Sep 30, 2017 11:56 am

Thanks in advance for this Financial Review!

Emergency Fund, Debt and Income
Emergency funds: 4 months of expenses
Debt:
  • 20yr Mortgage $254k@3.125% on ~$1.25m house in HCOL area ($1,800 monthly until 2032)
  • Auto $29k@0% ($600 monthly until 2021)
Tax Filing Status: Married Filing Jointly, two teenaged kids
Income Tax Rate: 33% Federal, 0% State
Effective Income Tax Rate (2016): 19%
Ages: both mid to late 40’s

Portfolio Review
Desired fund choice strategy: Three fund portfolio
Desired Asset allocation: 60/15/25 (US/INTL/BND)
Size of Portfolio (tax-advantaged and taxable; excluding 529s): between 1 and 2 million dollars.

Tax-advantaged assets (57.2%)
* His 401k (52%) and Roth Ira (1.1%) at Fidelity
19.1% Vanguard S&P 500 Index TR (59515R104) (.01%)
5.4% Vanguard Russell 2000 GR TR (92204W100) (.01%)
5.5% Fidelity International Value Account (TP12) (.57%)
5.6% Fidelity International Growth Account (TPC6) (.57%)
17.6% Pimco Total Return (TPG6) (.27%)

Other Funds available for His 401k (sorted by cost)
VANG RUS 1000 VAL TR (.02%)
VANG RUS 1000 GR TR (.02%)
VANG ST BD IDX IS PL (VBIPX) (.04%)
BTC SHRT-TERM INV (.04%)
BTC LIFEPATH 2020 O (.08%)
BTC LIFEPATH 2030 O (.08%)
BTC LIFEPATH 2040 O (.08%)
BTC LIFEPATH 2050 O (.08%)
BTC LIFEPATH 2060 O (.08%)
BTC LIFEPATH RET O (.08%)
DFA SM/MD CAP VAL (.26%)
FID CONTRA POOL CL 2 (.38%)
FID GR CO POOL CL 2 (.38%)
ARTISAN MID CAP (.50%)
PIM INFL RESP MA IS (PIRMX) (1.06%)
PIM ALL A ALL AUTH I (PAUIX) (1.99%)
BrokerageLink (other funds)

* Her Traditional IRA at Vanguard (3.5%)
3.5% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (.04%)

* His HSA (0.5%)
0.5% Vanguard Balanced Index Inv (VBINX) (.19%)

Other Funds available for His HSA (sorted by cost)
Schwab S&P 500 Index (SWPPX) (.03%)
Schwab Small Cap Index (SWSSX) (.05%)
Schwab International Index (SWISX) (.06%)
Vanguard Dividend Appreciation Index Inv (VDAIX) (.17%)
Vanguard Growth Index Investor (VIGRX) (.18%)
Vanguard Total Intl Stock Index Inv (VGTSX) (.18%)
Vanguard Balanced Index Inv (VBINX) (.19%)
Vanguard Inflation-Protected Secs Inv (VIPSX) (.20%)
Vanguard Extended Market Index Investor (VEXMX) (.21%)
Vanguard Wellesley Income Inv (VWINX) (.22%)
Vanguard Equity-Income Inv (VEIPX) (.26%)
T. Rowe Price Extended Equity Market Idx (PEXMX) (.35%)
Schwab Target 2015 (SWGRX) (.43%)
Schwab Target 2020 (SWCRX) (.45%)
Schwab Target 2010 (SWBRX) (.47%)
BlackRock Total Return K (MPHQX) (.53%)
Schwab Target 2025 (SWHRX) (.54%)
Columbia Mid Cap Index A (NTIAX) (.56%)
Schwab Target 2030 (SWDRX) (.60%)
Schwab Target 2035 (SWIRX) (.66%)
Schwab Target 2040 (SWERX) (.69%)
Loomis Sayles Core Plus Bond A (NEFRX) (.73%)
Goldman Sachs Infl Protected Secs A (GSAPX) (.77%)
Loomis Sayles Ltd Term Govt and Agency A (NEFLX) (.77%)
Russell Inv Short Duration Bond S (RFBSX) (.77%)
Franklin High Income A (FHAIX) (.79%)
MFS Corporate Bond A (MFBFX) (.81%)
Prudential High-Yield A (PBHAX) (.82%)
T. Rowe Price Retirement Balanced Adv (PARIX) (.82%)
Fidelity Select Wireless (FWRLX) (.87%)
PIMCO Total Return A (PTTAX) (.90%)
PIMCO GNMA A (PAGNX) (.91%)
Victory INCORE Fund for Income A (IPFIX) (.91%)
MFS Conservative Allocation A (MACFX) (.94%)
Ivy High Income Y (WHIYX) (.96%)
BlackRock Equity Dividend Inv A (MDDVX) (.97%)
Columbia US Government Mortgage A (AUGAX) (.97%)
MFS Moderate Allocation A (MAMAX) (.99%)
Principal MidCap A (PEMGX) (.99%)
Templeton Global Bond A (TPINX) (.99%)
-- removed the next 30 options with ER of 1% to 2.8% --

Taxable assets (42.8%)
* Vanguard Brokerage (31.4%)
11.8% Vanguard S&P 500 Index ETF (VOO) (.04%)
11.9% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (.04%)
2.9% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (.11%)
4.8% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (.05%)

* Rental properties
11.4% Condo in HCOL area – No mortgage. Annual cash flow: $3,000. (Rent to a relative of ours at less than market rent.)

Annual Contributions: $75k (Stretch goal: $100k)
[Fully funded (got 100% serious this year) from salaries, bonus, and quarterly sales of RSUs.]

Tax-advantaged contributions ($67,050 – including matching)
  • $27,000 his 401k ($9k of that via matching)
  • $20,000 his 401k taxable – quarterly sweep into Roth IRA
  • $5,500 her IRA - non-deductible
  • $6,750 his HSA in 2017 ($2,500 of that via company contribution)
  • $7,800 kids 529s
Taxable contributions
  • $8,000 - $33,000 (depending on frugality rate)
College Funding Plan
Have total of 239k in 2 Utah 529s for 2 teenaged kids. (funded each $325 monthly). In addition to 529 funds, plan to cash flow for up to ~$50k (2018 dollars) yearly for 4yrs per kid.
Since the kids have been teenagers, we’ve done a three-fund portfolio approach for the 529s with the following age-based custom allocation:

While aged 13-15
  • 36% Vanguard Total Stock Market Index (VITPX) (0.02% + .20% admin fee)
  • 9% Vanguard Total International Stock Index (VTPSX) (0.02% + .20% admin fee)
  • 55% Vanguard Total Bond Market Index (VBMPX) (0.03% + .20% admin fee)
While aged 16-18
  • 28% Vanguard Total Stock Market Index (VITPX) (0.02% + .20% admin fee)
  • 7% Vanguard Total International Stock Index (VTPSX) (0.02% + .20% admin fee)
  • 65% Vanguard Total Bond Market Index (VBMPX) (0.03% + .20% admin fee)
While aged 19+
  • 20% Vanguard Total Stock Market Index (VITPX) (0.02% + .20% admin fee)
  • 5% Vanguard Total International Stock Index (VTPSX) (0.02% + .20% admin fee)
  • 75% Vanguard Total Bond Market Index (VBMPX) (0.03% + .20% admin fee)
Questions
  • Assuming goal of 3 fund portfolio, have we chosen good funds, considering our choices? Don't love the ER for Bond and International coverage in His 401k. Would brokerage link in 401k make choices better?
  • Any tweaks you’d do to annual contributions?
  • Any feedback on college funding plan?
  • Any other recommendations?
Thanks!

crit
Posts: 348
Joined: Mon Jan 05, 2015 12:54 pm

Re: 3 fund portfolio review - married, mid to late 40's

Post by crit » Sat Sep 30, 2017 1:25 pm

Why do you have total bond in your taxable, but hold total stock market in her IRA? Unless the gains on the bond funds are prohibitive, you could almost evenly swap those positions.

retiredjg
Posts: 30322
Joined: Thu Jan 10, 2008 12:56 pm

Re: 3 fund portfolio review - married, mid to late 40's

Post by retiredjg » Sat Sep 30, 2017 1:45 pm

You seem to be doing well and your portfolio is pretty good. A few changes you could consider:

You could move the international out of the 401k all together and hold your entire allocation in the taxable account at a lower cost. Might take a few years to transition though.

The PIMCO total return is at rock bottom cost for an actively managed "core plus" fund. If you prefer, you could hold a Total Bond if you used the brokerage link.

Holding TSM in Her Traditional IRA while you have the exact same fund in taxable is a potential wash sale conflict if you decide to tax loss harvest.

Total Bond in taxable in your tax bracket is not tax-efficient. If you want bonds in your taxable account they should be tax-exempt bonds.

It appears you have included rental properties in your investment portfolio. Do you count that as stocks or bonds? I'd remove it from the investment portfolio entirely.

streamline
Posts: 4
Joined: Mon Sep 25, 2017 10:08 am

Re: 3 fund portfolio review - married, mid to late 40's

Post by streamline » Thu Oct 05, 2017 10:40 am

Thanks very much for the suggestions. I have taken action on those:

Portfolio adjustments
Tax consequences were very minimal, so I went ahead and adjusted based on those suggestions:
• Her IRA.. Liquidated VTSAX, bought VBTLX
• His 401k.. Liquidated both international funds, bought into the remaining 3 funds in 401k: sp500, Pimco total return and Russell 2000
• Their taxable.. Liquidated VBTLX, bought VTIAX
Next rebalancing may do more shifts.

Rental property
Listed it with taxable assets, but do not count in Asset Allocation calculations. Current plan is to sell rental property in the future, when family member no longer needs it. The money should be available in taxable when I am retired.

Any more suggestions?

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