Help with making our money work harder for us?

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FIRERite3650
Posts: 2
Joined: Fri Sep 22, 2017 2:05 pm

Help with making our money work harder for us?

Post by FIRERite3650 » Wed Oct 04, 2017 2:54 pm

Hi everyone, I’m a first-time poster and longtime lurker. I’ve read the Boglehead’s Guide to investing, and the Little Book of Common Sense Investing. I love finances and the idea of Financial Independence, but I’m still confused on some of the topics… Hence some of the questions below.

Quick background items:
1) I recently transferred to a new job in September, and am not eligible to contribute to our 401(k) until after two months of service in November.
2) My wife will be eligible for a pension with her work, but we are not “counting” that income in our retirement planning for right now.
3) We are concerned that our MAGI may be getting close to the next bracket (next year?) for Federal Taxes

Edit: My wife found out that her work has a Roth 403(b) plan too when she called about maxing her 403(b) contributions for the year.

Thanks so much for reading through this, and for the help. You all are an awesome community, and I’m glad to be part of it with this post (finally)!


Emergency funds: Yes
Debt: Yes, Mortgage on Primary Residence (30 year fixed @ 3.625%)
Tax Filing Status: Married Filing Jointly
2016 Tax Rate: 28% Federal, 9.3% State
State of Residence: California
Age: ~40
Desired Asset allocation: 75% Stocks, 25% Bonds
Desired International allocation: 20% of Stocks

Current retirement assets

Taxable
16.29% cash (Savings)
1.32% Vanguard Index FDS (VOO) at USAA Brokerage account
0.67% Apple Inc (AAPL) at USAA Brokerage account

His 401k at Transamerica (new job)
0%
Not eligible to contribute until November
No company match for 2 years

His abandoned 401(k) at Fidelity
1.38% Target 2045 Fund (TDLE) (0.07% expense ratio)
19.51% SM/MD CAP EQ INDEX (TDLK) (0.03% expense ratio)
34.10% LARGE CAP EQ FUND (TDMK) (0.30% expense ratio)

His abandoned 401(k) at Transamerica
2.21% Amer Cent Disciplined Growth Ret Opt (0.38% expense ratio)
2.18% SSgA S&P Mid Cap Index Ret Opt (0.43% expense ratio)
2.17% Victory Munder Mid-Cap Core Growth Ret Opt (1.55% expense ratio)
2.18% Prudential Jennison Small Company Ret Opt (1.34% expense ratio)

Her 403b at Transamerica
3.12% MetLife Guaranteed Account
3.05% Vanguard Institutional Index I (VINIX) (0.04% expense ratio)
3.03% JHancock Disciplined Value Mid Cap R6 (JVMRX) (0.77% expense ratio)
3.05% MassMutual Select Mid Cap Growth R5 (MGRFX) (0.83% expense ratio)
3.08% American Funds EuroPacific Gr R5 RERFX (0.54% expense ratio)
No Company Match

Her abandoned 403(b) at TIAA
1.34% CREF Growth Account (R2) (QCGRPX) (0.38% expense ratio)
0.32% CREF Stock R2 (QCSTPX) (0.43% expense ratio)
0.17% TIAA Real Estate (QREARX) (0.85% expense ratio)
0.13% TIAA Traditional Annuity

Their Child’s 529 at USAA
0.13% Target XXX (expense ratio)

Contributions

New annual Contributions
$10,000 to his 401k at previous job (employer matched 3%; number doesn’t include match)
$6,600 her 403b (no employer match)
$40,000 taxable into savings




Available funds for current 401(k) accounts:
Her Transamerica 401(k):
Name Ticker Expense Ratio
iShares US Aggregate Bond Index K WFBIX 0.07
PIMCO Income A PONAX 0.85
JHancock Disciplined Value R6 JDVWX 0.72
Vanguard Institutional Index I VINIX 0.04
Fidelity Contrafund FCNTX 0.68
iShares Russell Mid-Cap Index K BRMKX 0.09
JHancock Disciplined Value Mid Cap R6 JVMRX 0.77
MassMutual Select Mid Cap Growth R5 MGRFX 0.83
American Beacon Small Cp Val Inst AVFIX 0.84
Vanguard Small Cap Index I VSCIX 0.05
Janus Henderson Triton T JATTX 0.93
American Funds Europacific Growth R5 RERFX 0.54
iShares MSCI EAFE Intl Idx K BTMKX 0.06
Oppenheimer Developing Markets Y ODVYX 1.07
American Century One Choice 2020 I ARBSX 0.62
American Century One Choice 2025 I ARWSX 0.65
American Century One Choice 2030 I ARCSX 0.67
American Century One Choice 2035 I ARLIX 0.7
American Century One Choice In Ret I ATTIX 0.59
PIMCO All Asset Instl PAAIX 1.08
American Century One Choice 2060 I ARGNX 0.79

His TransAmerica 401(k):
Name Ticker Expense Ratio Notes
Transamerica Stable Value Focus Option
Prudential Total Return Bond A PDBAX 0.04
Federated Instl High Yield Bond Instl FIHBX 0.08
AB Global Bond A ANAGX 0.83
MFS Value R3 MEIHX 0.86
Vanguard 500 Index Admiral VFIAX 0.04
AB Large Cap Growth I ALLIX 0.67
MFS Mid Cap Value R3 MVCHX 1.16
Vanguard Mid-Cap Value Index Admiral VMVAX 0.07
Janus Henderson Enterprise I JMGRX 0.78
JPMorgan Small Cap Value A PSOAX 1.25
Vanguard Small Cap Index Adm VSMAX 0.06
Sentinel Small Company I SIGWX 0.9 2.0% Redemption Fee
Fidelity® Real Estate Investment Port FRESX 0.78
Janus Henderson Global Research I JWWFX 0.69
Oppenheimer International Growth R OIGNX 1.38 0.5% 12b-1 Fee
T. Rowe Price International Eq Index PIEQX 0.45 2.0% Redemption Fee
Vanguard Target Retirement Income Inv VTINX 0.13
Vanguard Target Retirement 2015 Inv VTXVX 0.14
Vanguard Target Retirement 2020 Inv VTWNX 0.14
Vanguard Target Retirement 2025 Inv VTTVX 0.14
Vanguard Target Retirement 2030 Inv VTHRX 0.15
Vanguard Target Retirement 2035 Inv VTTHX 0.15
Vanguard Target Retirement 2040 Inv VFORX 0.16
Vanguard Target Retirement 2045 Inv VTIVX 0.16



Questions:
1. How do we grow our retirement accounts?
a. Should we roll our abandoned accounts into an IRA at Vanguard?
i. Can we both roll into one or do we have to have separate IRAs?
ii. Assuming the answer to question 1 is yes, how can we further contribute to the new IRA account(s)?
b. Could you help us with redistribution/fund selection for “Her 403b at Transamerica”?
c. Could you help with fund selection for “His 401k at Transamerica (new job)”?
d. Given the rough estimate of our income, does it make sense to start any other accounts (Non-deductable IRA, Backdoor Roth accounts, etc)?
e. Do our desired allocations and international allocations look OK given our age?

2. (Not sure if this is the right sub-forum, however…) How do we reduce our taxable income for this year?
a. Given our bracket and general income, would you recommend maxing out both 401(k)s/403(b)s this year (get both to $18k)?
b. Would it make sense (or make a difference) for us to better fund our child’s 529?
c. Are there any other things you’d recommend tax wise for this year?

3. I’ve read many posts from Mr. Larimore and others that reference “keeping it simple” and talk about the benefits of having all your investments in one place. I want to achieve this, but am confused as to how to make that happen? This seems to be hard to achieve with having all of the different account types 401(k), IRA, backdoor Roths, etc.

4. Relating to the above, I routinely hear the hosts of FI podcasts talking about “automated investing using Vanguard.” What does this refer to? Non-deductible IRAs? Brokerage accounts?

Thanks you all for the help!
Last edited by FIRERite3650 on Thu Oct 05, 2017 12:43 pm, edited 1 time in total.

delamer
Posts: 2902
Joined: Tue Feb 08, 2011 6:13 pm

Re: Help with making our money work harder for us?

Post by delamer » Wed Oct 04, 2017 3:51 pm

Focusing on one aspect of this -- keeping it simple.

If your new 401(k) will accept transfers, you can transfer the money from your abandoned 401(k)s into your new 401(k). It has excellent investment options, including the Target Retirement funds. The HR office will tell you if you can do the transfer.

If you can't do the transfer, then you can rollover the abandoned 401(k)s into an IRA. Vanguard or Schwab will take care of the paperwork.

(You can add money to the IRAs, but the general recommendation is to keep rollover money separate from new IRA money.)

I'd take care of the abandoned 401(k)s first. Use one of the Target Retirement funds (either in the new 401(k) or IRA) initially. After everything is moved, you can take an overview of all the accounts and figure out what is best over the long run. You want to do this across all your retirement accounts. You don't need each account to meet your target allocation; you need to meet it across all of them.

There is an app called TaxCaster that will allow you to estimate your taxes and see if you are about to move up a bracket.

FIRERite3650
Posts: 2
Joined: Fri Sep 22, 2017 2:05 pm

Re: Help with making our money work harder for us?

Post by FIRERite3650 » Thu Oct 05, 2017 12:42 pm

Thanks much for the reply delamer!

I checked with my 401(k) provider at my new job, and they will accept a rollover from both of my abandoned accounts. So I'll get on that.

Then for my Wife's, we can transfer her abandoned account (TIAA) to a new Vanguard IRA.

In order to prepare to max out her 403(b) contribution for this year, my wife called TransAmerica. She got all of the calculations on the necessary percentage that she needs to adjust to. While on the phone with them, they said that she is also eligible to contribute to their Roth 403(b)! :greedy Can she contribute to both a 403(b) and Roth 403(b) in the same year, or is it one or the other?

Olemiss540
Posts: 114
Joined: Fri Aug 18, 2017 8:46 pm

Re: Help with making our money work harder for us?

Post by Olemiss540 » Thu Oct 05, 2017 1:42 pm

FIRERite3650 wrote:
Thu Oct 05, 2017 12:42 pm
Thanks much for the reply delamer!

I checked with my 401(k) provider at my new job, and they will accept a rollover from both of my abandoned accounts. So I'll get on that.

Then for my Wife's, we can transfer her abandoned account (TIAA) to a new Vanguard IRA.

In order to prepare to max out her 403(b) contribution for this year, my wife called TransAmerica. She got all of the calculations on the necessary percentage that she needs to adjust to. While on the phone with them, they said that she is also eligible to contribute to their Roth 403(b)! :greedy Can she contribute to both a 403(b) and Roth 403(b) in the same year, or is it one or the other?
Typically you can contribute to both, but the 18k maximum is TOTAL, so you do not get additional space by contributing to both.

A few things, are you eligible for an HSA at either workplace? That is an additional 6750 in taxable income reduction that can be used for retirement investing.

I would highly suggest maxing all pretax (401k, 403b) workplace retirement accounts, HSA, then Roth IRA or backdoor Roth IRA for both if eligible.

What is your expected MAGI with 36k in pretax contributions? Remember that any pretax IRA's can conflict with the potential for a backdoor Roth IRA contribution due to the pro rata rule. This is one reason to consider not rolling a workplace 401k into an IRA.

Once all of your tax advantaged accounts are maxed, consider investing in tax efficient stock market indexes in a brokerage account for medium and long term goals.

JBTX
Posts: 1257
Joined: Wed Jul 26, 2017 12:46 pm

Re: Help with making our money work harder for us?

Post by JBTX » Thu Oct 05, 2017 3:07 pm

FIRERite3650 wrote:
Wed Oct 04, 2017 2:54 pm
Hi everyone, I’m a first-time poster and longtime lurker. I’ve read the Boglehead’s Guide to investing, and the Little Book of Common Sense Investing. I love finances and the idea of Financial Independence, but I’m still confused on some of the topics… Hence some of the questions below.

Quick background items:
1) I recently transferred to a new job in September, and am not eligible to contribute to our 401(k) until after two months of service in November.
2) My wife will be eligible for a pension with her work, but we are not “counting” that income in our retirement planning for right now.
3) We are concerned that our MAGI may be getting close to the next bracket (next year?) for Federal Taxes

Edit: My wife found out that her work has a Roth 403(b) plan too when she called about maxing her 403(b) contributions for the year.

Thanks so much for reading through this, and for the help. You all are an awesome community, and I’m glad to be part of it with this post (finally)!


Emergency funds: Yes
Debt: Yes, Mortgage on Primary Residence (30 year fixed @ 3.625%)
Tax Filing Status: Married Filing Jointly
2016 Tax Rate: 28% Federal, 9.3% State
State of Residence: California
Age: ~40
Desired Asset allocation: 75% Stocks, 25% Bonds
Desired International allocation: 20% of Stocks

Current retirement assets

Taxable
16.29% cash (Savings)
1.32% Vanguard Index FDS (VOO) at USAA Brokerage account
0.67% Apple Inc (AAPL) at USAA Brokerage account

His 401k at Transamerica (new job)
0%
Not eligible to contribute until November
No company match for 2 years

His abandoned 401(k) at Fidelity
1.38% Target 2045 Fund (TDLE) (0.07% expense ratio)
19.51% SM/MD CAP EQ INDEX (TDLK) (0.03% expense ratio)
34.10% LARGE CAP EQ FUND (TDMK) (0.30% expense ratio)

His abandoned 401(k) at Transamerica
2.21% Amer Cent Disciplined Growth Ret Opt (0.38% expense ratio)
2.18% SSgA S&P Mid Cap Index Ret Opt (0.43% expense ratio)
2.17% Victory Munder Mid-Cap Core Growth Ret Opt (1.55% expense ratio)
2.18% Prudential Jennison Small Company Ret Opt (1.34% expense ratio)

Her 403b at Transamerica
3.12% MetLife Guaranteed Account
3.05% Vanguard Institutional Index I (VINIX) (0.04% expense ratio)
3.03% JHancock Disciplined Value Mid Cap R6 (JVMRX) (0.77% expense ratio)
3.05% MassMutual Select Mid Cap Growth R5 (MGRFX) (0.83% expense ratio)
3.08% American Funds EuroPacific Gr R5 RERFX (0.54% expense ratio)
No Company Match

Her abandoned 403(b) at TIAA
1.34% CREF Growth Account (R2) (QCGRPX) (0.38% expense ratio)
0.32% CREF Stock R2 (QCSTPX) (0.43% expense ratio)
0.17% TIAA Real Estate (QREARX) (0.85% expense ratio)
0.13% TIAA Traditional Annuity

Their Child’s 529 at USAA
0.13% Target XXX (expense ratio)

Contributions

New annual Contributions
$10,000 to his 401k at previous job (employer matched 3%; number doesn’t include match)
$6,600 her 403b (no employer match)
$40,000 taxable into savings

Available funds for current 401(k) accounts:
Her Transamerica 401(k):
Name Ticker Expense Ratio
iShares US Aggregate Bond Index K WFBIX 0.07
PIMCO Income A PONAX 0.85
JHancock Disciplined Value R6 JDVWX 0.72
Vanguard Institutional Index I VINIX 0.04
Fidelity Contrafund FCNTX 0.68
iShares Russell Mid-Cap Index K BRMKX 0.09
JHancock Disciplined Value Mid Cap R6 JVMRX 0.77
MassMutual Select Mid Cap Growth R5 MGRFX 0.83
American Beacon Small Cp Val Inst AVFIX 0.84
Vanguard Small Cap Index I VSCIX 0.05
Janus Henderson Triton T JATTX 0.93
American Funds Europacific Growth R5 RERFX 0.54
iShares MSCI EAFE Intl Idx K BTMKX 0.06
Oppenheimer Developing Markets Y ODVYX 1.07
American Century One Choice 2020 I ARBSX 0.62
American Century One Choice 2025 I ARWSX 0.65
American Century One Choice 2030 I ARCSX 0.67
American Century One Choice 2035 I ARLIX 0.7
American Century One Choice In Ret I ATTIX 0.59
PIMCO All Asset Instl PAAIX 1.08
American Century One Choice 2060 I ARGNX 0.79

His TransAmerica 401(k):
Name Ticker Expense Ratio Notes
Transamerica Stable Value Focus Option
Prudential Total Return Bond A PDBAX 0.04
Federated Instl High Yield Bond Instl FIHBX 0.08
AB Global Bond A ANAGX 0.83
MFS Value R3 MEIHX 0.86
Vanguard 500 Index Admiral VFIAX 0.04
AB Large Cap Growth I ALLIX 0.67
MFS Mid Cap Value R3 MVCHX 1.16
Vanguard Mid-Cap Value Index Admiral VMVAX 0.07
Janus Henderson Enterprise I JMGRX 0.78
JPMorgan Small Cap Value A PSOAX 1.25
Vanguard Small Cap Index Adm VSMAX 0.06
Sentinel Small Company I SIGWX 0.9 2.0% Redemption Fee
Fidelity® Real Estate Investment Port FRESX 0.78
Janus Henderson Global Research I JWWFX 0.69
Oppenheimer International Growth R OIGNX 1.38 0.5% 12b-1 Fee
T. Rowe Price International Eq Index PIEQX 0.45 2.0% Redemption Fee
Vanguard Target Retirement Income Inv VTINX 0.13
Vanguard Target Retirement 2015 Inv VTXVX 0.14
Vanguard Target Retirement 2020 Inv VTWNX 0.14
Vanguard Target Retirement 2025 Inv VTTVX 0.14
Vanguard Target Retirement 2030 Inv VTHRX 0.15
Vanguard Target Retirement 2035 Inv VTTHX 0.15
Vanguard Target Retirement 2040 Inv VFORX 0.16
Vanguard Target Retirement 2045 Inv VTIVX 0.16



Questions:
1. How do we grow our retirement accounts?
a. Should we roll our abandoned accounts into an IRA at Vanguard?

Complicated question. Advantage to rolling over would be better fund choices and lower fees. However 401ks do have better creditor protection, such as in a lawsuit , especially in a state like CA. Also if you ever want to do backdoor Roths or mega back door Roths it is best not to have any money in traditional IRAs. Look up those topics in the wiki to see what they are and guage if they would ever interest you.

Given you are contemplating back door Roths probably best to wait and not rollover.

Or roll it into new 401k.
i. Can we both roll into one or do we have to have separate IRAs?
I dont know if you can. I am guessing it is better to keep them separate in case at some point in the future you wish to roll them back into another employers 401k. And also we never like to think about it but in a divorce scenario if they are separate they may be easier to untangle even though CA is a community property state.

ii. Assuming the answer to question 1 is yes, how can we further contribute to the new IRA account(s)?
Probably better to set up new indivual or Roth IRA accounts if your income levels allow you to contribute.
b. Could you help us with redistribution/fund selection for “Her 403b at Transamerica”?

c. Could you help with fund selection for “His 401k at Transamerica (new job)”?
I'd figure out what your preferred asset allocation is and try to target that across you entire portfolio as simply as possible for her 403b transA I'd probably put it all in the institutional index given the low fee and try to get international and bonds in other accounts.

d. Given the rough estimate of our income, does it make sense to start any other accounts (Non-deductable IRA, Backdoor Roth accounts, etc)?
I assume this means you have too much income to qualify for Roth IRA? If so definitely look into backdoor Roth, but only if you have no other IRAs and did NOT rollover a 401k to a rollover IRA as discussed above.
e. Do our desired allocations and international allocations look OK given our age?

Yes
2. (Not sure if this is the right sub-forum, however…) How do we reduce our taxable income for this year?
a. Given our bracket and general income, would you recommend maxing out both 401(k)s/403(b)s this year (get both to $18k)?
Yes absolutely. (Not sure what you mean here, you can only put $18k in tax deferred employer retirement accounts per person per year. )
b. Would it make sense (or make a difference) for us to better fund our child’s 529?
If you have taken care of all of the retirement options above and have the liquidity to, sure.
c. Are there any other things you’d recommend tax wise for this year?
Are you eligible for HSA with a high deductible health plan?
3. I’ve read many posts from Mr. Larimore and others that reference “keeping it simple” and talk about the benefits of having all your investments in one place. I want to achieve this, but am confused as to how to make that happen? This seems to be hard to achieve with having all of the different account types 401(k), IRA, backdoor Roths, etc.
I agree it is harder when you have multiple accounts. What helps is if you have some sort of mechanism that tracks your asset allocation at a top level like Quicken or Morningstar.
4. Relating to the above, I routinely hear the hosts of FI podcasts talking about “automated investing using Vanguard.” What does this refer to? Non-deductible IRAs? Brokerage accounts?

Thanks you all for the help!
I assume it means automated payroll deductions or monthly pulls from your savings account. I'm not totally sure.

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