Portfolio Advice: late to the game

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curtenska
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Portfolio Advice: late to the game

Post by curtenska » Mon Nov 13, 2017 8:42 pm

I've been wanting to post my investment profile for months. Nervous as heck, but here it is.

Tiny backgrounder: I'm currently semi-retired, working on a creative project which if successful will *work up to* generating around 30K annual income over the next couple of years (zero income now). Past fields: Me, 20 yrs in publishing, then owned a small bnb. My wife is on hiatus from her career in healthcare. She hopes *not* to return to her field but would if personal finances require it.

In this 'semi-retirement phase' of our life our goal is to adhere to a 3% withdrawal/spending rule -- with the option of drawing on SS benefits to cover expenses. If taken now, my SS monthly benefit would be $1,650/mo.

Age, noted below, is a significant factor (and one our VPAS advisor may have overlooked in her AA).

Re the 'late to the game' tag: We've had a couple of windfalls (sales of two homes in the past 5 years) but had kept the net proceeds in cash until earlier this year. Tax advantaged monies have been invested longer.

Emergency funds: 1.5 years (4.6% of total assets -- including in AA breakout because it's so darn much), currently in 0% interest checking account.
Debt: No debt (recently sold house and car in prep for travel)
Tax Filing Status: Married Filing Jointly
Tax Rate: 10% Federal, 2% State (tho effective in both cases was 0%, for 2016)
State of Residence: California
Ages: He, 62. She, 49
Desired Asset allocation: 50% stocks / 50% bonds (not married to this and feel like we may be missing opportunities to diverge from this based on our 13 yr age difference)
Desired International allocation: 20% of stocks (not married to this either)

Current and total assets: $1.36m

Current Allocation: (all percentages are of total assets, except for FSNUX breakout)

Taxable and jointly held (59.2%)
21% Vanguard Total Stock Market Index, Admiral (VTSAX) (.04% ER)
14% Vanguard Total International Stock Index, Admiral (VTIAX) (.11% ER)
7% Vanguard LifeStrategy Moderate Growth Fund (VSMGX) (.14% ER)
2% Vanguard Short-Term Investment-Grade Fund, Admiral (VFSUX) (.10% ER)
15% Vanguard Prime Money Market Fund (VMMXX) (.16% ER)

His Retirement Assets (25.7%)
401K: Traditional IRA, SEP IRA (18.44%)
11.5% Vanguard Total Bond Market Index Fund, Admiral (VBTLX) (.05% ER)
6.9.4% Vanguard Total International Bond Index Fund, Admiral (VTABX) (.12% ER)

401K: Roth IRA (7.38%)
0.44% Vanguard Total International Bond Index Fund, Admiral (VTABX) (.12% ER)
6.94% Vanguard Intermediate-Term Investment-Grade Fund, Admiral (VFIDX) (.10% ER)

Her Retirement Assets (10.5%)
401K
3.7% in Betterment (2.2% Roth IRA+ 1.6% Traditional IRA) - (3.2% Stock, 0.49% Bonds, of TOTAL ASSETS)
2.43% Vanguard Short-Term Investment-Grade Fund, Admiral ((Traditional IRA) (VFSUX) (.10% ER) )
2.32% Vanguard Total International Bond Index Fund, Admiral (Roth IRA) (VTABX) (.12% ER)
0.76% Fidelity Freedom 2035K (Traditional IRA) (FSNUX) (.64% ER)

FSNUX Fund Allocation
0.46% Domestic Equity Funds
0.23% International Equity Funds
0.053% Bond Funds
0.0076% Short-Term Funds & Net Other Assets

1.1% In Employer savings plan (Guaranteed flat 3% annual increase, reinvested)

Annual Contributions:
IRA $6500 (His)
IRA $5500 (Hers)

Some questions that (depending on the day) tantalize me, trouble me, or confuse the heck out of me:

1. The allocation was derived by a Vanguard PAS rep. I'm grateful for the push from the rep, which I required to be in the market, but I'm really unsure about the logic behind the AA, especially when I factor in my wife's age, it being 13 years my junior. Why would any of her monies be in bonds given the longer investment timeline she can take advantage of?

2. I'm eligible to start to taking SS now, which would cover the half our annual living expenses (40K-ish). If I do that and also apply monies for the EF to make up the expense shortfall, EF fuse (barring an, uh, emergency) becomes 3 years, not 1.5. Or I can wait on SS and draw on the EF first, depleting it, and THEN drawing my SS allotment.

3. VPAS. I am on the fence. I admit to having cold feet when it comes to pulling the trigger on investing. In that context, having a VPAS rep who encourages me to commit is invaluable. But I'm not convinced the decision-making chops are worth the cost.

4. Macro goals are to be smarter investors and smarter tax payers. No kids or parents in our life so our legacy needs are pretty much non-existent.

Thanks for your time on this. Reading the bogelheads.org forums has been an incredible education. I have heaps of lessons still to learn.

Caveat: We are beginning investors. And we are all ears for advice (including advice related to the formatting of this post). Again, many thanks.

Caduceus
Posts: 1463
Joined: Mon Sep 17, 2012 1:47 am

Re: Portfolio Advice: late to the game

Post by Caduceus » Tue Nov 14, 2017 4:07 am

Could you clarify your questions?

On the subject of bonds, being 100% invested in equities is usually not recommended if you're already in the withdrawal stage, if I'm understanding your post correctly. Having a bond allocation is not just a function of age, but your stage in your lifecycle and your risk tolerance.

Is your second question about which bucket you should draw down from first, whether your EF or Social Security? I'm confused as to whether you are still in the saving stage (working on a project or some other thing that covers your expenses plus allows you to save), or if you think of your family as retired.

dbr
Posts: 23769
Joined: Sun Mar 04, 2007 9:50 am

Re: Portfolio Advice: late to the game

Post by dbr » Tue Nov 14, 2017 10:07 am

curtenska wrote:
Mon Nov 13, 2017 8:42 pm


1. The allocation was derived by a Vanguard PAS rep. I'm grateful for the push from the rep, which I required to be in the market, but I'm really unsure about the logic behind the AA, especially when I factor in my wife's age, it being 13 years my junior. Why would any of her monies be in bonds given the longer investment timeline she can take advantage of?

Do you really mean that you own your assets and income/expenses separately. If that is true, then you might indeed want different asset allocations managed separately. For a person in retirement 50/50 is reasonable. For a person who wants/needs more return while still saving it might make sense to have a higher allocation to stocks, maybe even 70/30, but not more than that. Certainly if you are getting these numbers from an advisor you should ask them for an explanation.

2. I'm eligible to start to taking SS now, which would cover the half our annual living expenses (40K-ish). If I do that and also apply monies for the EF to make up the expense shortfall, EF fuse (barring an, uh, emergency) becomes 3 years, not 1.5. Or I can wait on SS and draw on the EF first, depleting it, and THEN drawing my SS allotment.

Especially with a younger spouse you should probably wait to age 70 to take SS.

3. VPAS. I am on the fence. I admit to having cold feet when it comes to pulling the trigger on investing. In that context, having a VPAS rep who encourages me to commit is invaluable. But I'm not convinced the decision-making chops are worth the cost.

Some people here would agree with you. I would be one of those people. But the consideration is that you develop enough understanding of investing to make significantly better decisions. I don't think anything coming from PAS is likely to be a big mistake. I do think it should not be necessary to spend even the 0.3% Have they shown you a retirement planning model that indicates how much income you can safely count on in retirement?

4. Macro goals are to be smarter investors and smarter tax payers. No kids or parents in our life so our legacy needs are pretty much non-existent.

It sounds like some serious study is in order. You could start with the "getting started" pages in the Wiki and especially the reading list.


Thanks for your time on this. Reading the bogelheads.org forums has been an incredible education. I have heaps of lessons still to learn.

I think it is far better to take a systematic approach to investment education than attempt a question/answer format in a forum though posting after or while reading would be most helpful.

Caveat: We are beginning investors. And we are all ears for advice (including advice related to the formatting of this post). Again, many thanks.

curtenska
Posts: 3
Joined: Sun Jun 12, 2016 4:03 pm
Location: Western USA
Contact:

Re: Portfolio Advice: late to the game

Post by curtenska » Tue Nov 14, 2017 1:08 pm

Caduceus wrote:
Tue Nov 14, 2017 4:07 am
Could you clarify your questions?

On the subject of bonds, being 100% invested in equities is usually not recommended if you're already in the withdrawal stage, if I'm understanding your post correctly. Having a bond allocation is not just a function of age, but your stage in your lifecycle and your risk tolerance.

Is your second question about which bucket you should draw down from first, whether your EF or Social Security? I'm confused as to whether you are still in the saving stage (working on a project or some other thing that covers your expenses plus allows you to save), or if you think of your family as retired.

Thanks, Caduceus. In order:

We are not in the withdrawal stage. We are tapping cash holdings (EF I call it, checking and savings accounts) for all current expenses (which have dropped significantly due to recent sale of our house and car).

We are not generating income now. Instead, focusing on my writing project (which may or may not generate future income). I think of my family (me and the wife) as on hiatus from our most recent careers (me, hospitality; she, healthcare). We both have an opportunity to return to those careers but are spending time now in pursuit of this creative writing project referred to above. Makes us de facto retired as we are not generating income from work or career.

curtenska
Posts: 3
Joined: Sun Jun 12, 2016 4:03 pm
Location: Western USA
Contact:

Re: Portfolio Advice: late to the game

Post by curtenska » Tue Nov 14, 2017 1:39 pm

Good morning, dbr. Thanks for your reply. Answers are inline. Thanks.
dbr wrote:
Tue Nov 14, 2017 10:07 am
curtenska wrote:
Mon Nov 13, 2017 8:42 pm


1. The allocation was derived by a Vanguard PAS rep. I'm grateful for the push from the rep, which I required to be in the market, but I'm really unsure about the logic behind the AA, especially when I factor in my wife's age, it being 13 years my junior. Why would any of her monies be in bonds given the longer investment timeline she can take advantage of?

Do you really mean that you own your assets and income/expenses separately. If that is true, then you might indeed want different asset allocations managed separately. For a person in retirement 50/50 is reasonable. For a person who wants/needs more return while still saving it might make sense to have a higher allocation to stocks, maybe even 70/30, but not more than that. Certainly if you are getting these numbers from an advisor you should ask them for an explanation.

*** Sorry for the confusion. Ownership is jointly owned, co-mingled, etc. We are on different trajectories when it comes to 401k's, IRA's, based on age, but everything we own is in one, giant pile. :happy :wink:

2. I'm eligible to start to taking SS now, which would cover the half our annual living expenses (40K-ish). If I do that and also apply monies for the EF to make up the expense shortfall, EF fuse (barring an, uh, emergency) becomes 3 years, not 1.5. Or I can wait on SS and draw on the EF first, depleting it, and THEN drawing my SS allotment.

Especially with a younger spouse you should probably wait to age 70 to take SS.

*** Thanks, dbr. Is it significant that for the time being, she has opted out of her salary-generating profession? We like the idea of my SS benefits, if taken now, providing about half of our projected annual expenses. I don't want to "like" something that's not wise, however.

3. VPAS. I am on the fence. I admit to having cold feet when it comes to pulling the trigger on investing. In that context, having a VPAS rep who encourages me to commit is invaluable. But I'm not convinced the decision-making chops are worth the cost.

Some people here would agree with you. I would be one of those people. But the consideration is that you develop enough understanding of investing to make significantly better decisions. I don't think anything coming from PAS is likely to be a big mistake. I do think it should not be necessary to spend even the 0.3% Have they shown you a retirement planning model that indicates how much income you can safely count on in retirement?

*** Yes, our PAS rep did provide that projection (which seemed insanely optimistic, but that's another topic).

4. Macro goals are to be smarter investors and smarter tax payers. No kids or parents in our life so our legacy needs are pretty much non-existent.

It sounds like some serious study is in order. You could start with the "getting started" pages in the Wiki and especially the reading list.


*** Thanks dbr. Feel like I'm the kid who just cannonballed into the pool. :oops:

Thanks for your time on this. Reading the bogelheads.org forums has been an incredible education. I have heaps of lessons still to learn.

I think it is far better to take a systematic approach to investment education than attempt a question/answer format in a forum though posting after or while reading would be most helpful.

*** See above cannonball reference. Is it crass to dial back the post and ask forum members only to assess holdings and AA, given ages, target AA and retired status? Thank you.

Caveat: We are beginning investors. And we are all ears for advice (including advice related to the formatting of this post). Again, many thanks.

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LadyGeek
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Re: Portfolio Advice: late to the game

Post by LadyGeek » Sun Nov 19, 2017 8:08 pm

The OP has requested assistance to understand why no one has responded to his questions for a few days. I recommend answering questions as separate posts, or just combine a few answers to a post. It gets hard to read after a while and discourages members from replying.

I broke the previous combined responses into separate questions, which should help.

===========
1. The allocation was derived by a Vanguard PAS rep. I'm grateful for the push from the rep, which I required to be in the market, but I'm really unsure about the logic behind the AA, especially when I factor in my wife's age, it being 13 years my junior. Why would any of her monies be in bonds given the longer investment timeline she can take advantage of?
dbr wrote: Do you really mean that you own your assets and income/expenses separately. If that is true, then you might indeed want different asset allocations managed separately. For a person in retirement 50/50 is reasonable. For a person who wants/needs more return while still saving it might make sense to have a higher allocation to stocks, maybe even 70/30, but not more than that. Certainly if you are getting these numbers from an advisor you should ask them for an explanation.
*** Sorry for the confusion. Ownership is jointly owned, co-mingled, etc. We are on different trajectories when it comes to 401k's, IRA's, based on age, but everything we own is in one, giant pile. :happy :wink:

===========
2. I'm eligible to start to taking SS now, which would cover the half our annual living expenses (40K-ish). If I do that and also apply monies for the EF to make up the expense shortfall, EF fuse (barring an, uh, emergency) becomes 3 years, not 1.5. Or I can wait on SS and draw on the EF first, depleting it, and THEN drawing my SS allotment.
dbr wrote: Especially with a younger spouse you should probably wait to age 70 to take SS.
*** Thanks, dbr. Is it significant that for the time being, she has opted out of her salary-generating profession? We like the idea of my SS benefits, if taken now, providing about half of our projected annual expenses. I don't want to "like" something that's not wise, however.

===========
3. VPAS. I am on the fence. I admit to having cold feet when it comes to pulling the trigger on investing. In that context, having a VPAS rep who encourages me to commit is invaluable. But I'm not convinced the decision-making chops are worth the cost.
dbr wrote: Some people here would agree with you. I would be one of those people. But the consideration is that you develop enough understanding of investing to make significantly better decisions. I don't think anything coming from PAS is likely to be a big mistake. I do think it should not be necessary to spend even the 0.3% Have they shown you a retirement planning model that indicates how much income you can safely count on in retirement?
*** Yes, our PAS rep did provide that projection (which seemed insanely optimistic, but that's another topic).

===========
4. Macro goals are to be smarter investors and smarter tax payers. No kids or parents in our life so our legacy needs are pretty much non-existent.
dbr wrote:
It sounds like some serious study is in order. You could start with the "getting started" pages in the Wiki and especially the reading list.
*** Thanks dbr. Feel like I'm the kid who just cannonballed into the pool. :oops:

===========
Thanks for your time on this. Reading the bogelheads.org forums has been an incredible education. I have heaps of lessons still to learn.
dbr wrote: I think it is far better to take a systematic approach to investment education than attempt a question/answer format in a forum though posting after or while reading would be most helpful.
*** See above cannonball reference. Is it crass to dial back the post and ask forum members only to assess holdings and AA, given ages, target AA and retired status? Thank you.

Caveat: We are beginning investors. And we are all ears for advice (including advice related to the formatting of this post). Again, many thanks.
To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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