Retirement Planning - Are we on the right path?

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contimprov
Posts: 6
Joined: Sat Apr 14, 2018 5:16 pm

Retirement Planning - Are we on the right path?

Post by contimprov » Sun Apr 15, 2018 10:47 am

I have been reading this forum for quite some time now and it has been really useful. I am posting for the first time and would like to get some input on how I am doing with our retirement planning.

Emergency funds: 12-18 months
Debt: no loans other than primary home mortgage – balance 180k @ 3.75%. (almost 50% of the original loan paid, so equity at least 150k, if not more in the current market)
Tax Filing Status: Married Filing Jointly
Tax Rate: 28% Federal, 4.3% State
State of Residence: Illinois
Age: 37
Desired Asset allocation: 95% stocks / 5% bonds
Desired International allocation: 0% of stocks (not entirely sure on if this is what we need)

Portfolio size: low 300k - is this too low - didn't really bother about retirement until about 5 years ago - big mistake.

Current retirement assets

Taxable
TD Ameritrade
1.25% Cash
0.96% BP
2.18% Ford
1.53% Verizon
0.96% BankofAmerica
Vanguard (his and her)
1.63% VTIVX - Vanguard Target Retirement 2050 Fund - 0.15%
2.62% VFIFX - Vanguard Target Retirement 2050 Fund - 0.15%

His 401k (current employer)
48.95% Russell 2050 Strategy Fund - 0.45%
His 401k (previous employer)
13.37% Target 2045 retirement fund - 0.2%
2.03% Bond fund - 0.15%
6.94% US large cap equity - 0.3%
His Roth IRA at Vanguard
2.57% VFFVX - Vanguard Target Retirement 2050 Fund - 0.15%
1.16% AT&T
1.73% Delta airlines
1.13% Ford
His traditional IRA at Vanguard
1.79% VASGX - Vanguard LifeStrategy Growth Fund Investor Shares 0.14%

Her Roth IRA at Vanguard
2.62% VASGX - Vanguard LifeStrategy Growth Fund Investor Shares 0.14%
2.63% VFIFX - Vanguard Target Retirement 2050 Fund - 0.15%
0.38% Ford
Her Traditional IRA at Vanguard
3.60% VIGRX Vanguard Growth Index Fund Investor Shares - 0.18%

Contributions:
15% of salary to his 401k with 6% match
$5500 to his roth at the end of the year
$5500 to her traditional at the end of the year
$500 to his taxable every month - Vanguard Target Retirement 2050 Fund
$1000 to her taxable every month - Vanguard Target Retirement 2050 Fund

questions:
1. How are we doing in our plan for the retirement?
2. Any changes that we should make to the current allocation?

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Duckie
Posts: 5795
Joined: Thu Mar 08, 2007 2:55 pm

Re: Retirement Planning - Are we on the right path?

Post by Duckie » Sun Apr 15, 2018 4:03 pm

contimprov, welcome to the forum.
contimprov wrote:Age: 37
Desired Asset allocation: 95% stocks / 5% bonds
Only 5% bonds at your age is aggressive. I'd be at least 20% and maybe 30% bonds.
Desired International allocation: 0% of stocks (not entirely sure on if this is what we need)
If you don't want them, you don't want them. But they do provide diversification.
1.63% VTIVX - Vanguard Target Retirement 2050 Fund - 0.15%
2.62% VFIFX - Vanguard Target Retirement 2050 Fund - 0.15%
These do not belong in a taxable account because of the taxable bond component.
His 401k (current employer)
48.95% Russell 2050 Strategy Fund - 0.45%
His 401k (previous employer)
13.37% Target 2045 retirement fund - 0.2%
2.03% Bond fund - 0.15%
6.94% US large cap equity - 0.3%
What are all the options in these two plans? List the fund names, ticker symbols, and plan expense ratios so we can see the possibilities. Will his current 401k allow an incoming rollover from the old 401k?
Contributions:
15% of salary to his 401k with 6% match
How much is 15% in dollars? Are you contributing the $18.5K maximum (not including the match)?
$500 to his taxable every month - Vanguard Target Retirement 2050 Fund
$1000 to her taxable every month - Vanguard Target Retirement 2050 Fund
Again, these balanced funds do not belong in a taxable account.

Mixing balanced funds with individual funds makes figuring your AA difficult. Depending on the options in the employer plans you would be better off with all individual funds in your accounts.

I'd dump the individual stocks, at least those in the tax-sheltered accounts.

contimprov
Posts: 6
Joined: Sat Apr 14, 2018 5:16 pm

Re: Retirement Planning - Are we on the right path?

Post by contimprov » Sun Apr 15, 2018 8:13 pm

Thank you Duckie for your input.

I will try to answer your questions in the same order

1. I am keeping the bonds % lower to be intentionally aggressive since I started late.
2. Point taken on the international stocks.
3. I will have to read up on the taxable bond component to understand a bit further.
4. As far as available funds go in his 401k
a) Russel strategy fund for different years (2020 to 2060)
b) Previous employer - Target retirement fund (2020 to 2060), US large, small and mid cap & international equity - looking through the options, it doesn't give my a ticker for any of them.
5. Although I contribute 15%, towards the end of the year I adjust it to max out 18.5k. I guess I should have mentioned it in my initial post.
6. I have been thinking myself to dump the individual stocks in the tax sheltered accounts when the time is right since some of them are at loss now - so we are on the same page.

Grt2bOutdoors
Posts: 18830
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Retirement Planning - Are we on the right path?

Post by Grt2bOutdoors » Sun Apr 15, 2018 9:00 pm

Take the loss - dump the individual stocks. You don't know anymore about it than the market. Loss aversion is clouding your thinking, you are waiting to break even before liquidating, in the mean time you could be waiting an awful long time missing out on the potential opportunity for more gains in a diversified fund with less risk.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Watty
Posts: 13463
Joined: Wed Oct 10, 2007 3:55 pm

Re: Retirement Planning - Are we on the right path?

Post by Watty » Sun Apr 15, 2018 9:45 pm

Here are some wikis that you should read on setting up a three fund portfolio.

https://www.bogleheads.org/wiki/Three-fund_portfolio

https://www.bogleheads.org/wiki/Tax-eff ... _placement
contimprov wrote:
Sun Apr 15, 2018 10:47 am
Contributions:
15% of salary to his 401k with 6% match
$5500 to his roth at the end of the year
$5500 to her traditional at the end of the year
$500 to his taxable every month - Vanguard Target Retirement 2050 Fund
$1000 to her taxable every month - Vanguard Target Retirement 2050 Fund
In the 32.3% tax bracket contributing to the Roth and taxable before maxing out your 401k is an expensive choice so you should max the 401k out if you are not already doing that. Just FYI, the maximum $18,500 401k contribution is the amount you can contribute without the employers contributions. Occasionally posters think the employer match is part of the $18,500 limit, but it is not.

The target date fund is not real tax efficient so your should put future contributions in a three fund portfolio. See the link above. For money that is already in the target date fund you might not want to move it around because of the capital gains taxes but you should set them to not automatically reinvest the dividends and the capital gains distributions so you are not buying more of them.
contimprov wrote:
Sun Apr 15, 2018 10:47 am
2. Any changes that we should make to the current allocation?
At 37 being 95% in stocks is WAY too aggressive.

For comparison the Vanguard 2040 fund is 15% stocks.
https://personal.vanguard.com/us/funds/ ... irect=true

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Sandtrap
Posts: 5097
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳 Retired.

Re: Retirement Planning - Are we on the right path?

Post by Sandtrap » Sun Apr 15, 2018 10:35 pm

This outstanding write up may be useful to you.
TAYLOR LARIMORE ON “SIMPLICTY”
https://www.bogleheads.org/forum/viewt ... p?t=156505
aloha
j :D

SimplicityNow
Posts: 465
Joined: Fri Aug 05, 2016 10:31 am

Re: Retirement Planning - Are we on the right path?

Post by SimplicityNow » Mon Apr 16, 2018 10:20 am

Duckie gave great advice (as usual). I will just point out that being over aggressive to make up for lost time can be a very grave mistake.

The best method to achieving a larger retirement balance is to save more. It is not fun, nor glamorous but it is effective.

Having a very aggressive stock/bond allocation for your age can cause you to sell during large market downturns.

You asset allocation should be based on your need, willingness and ability to take risk. If you haven't already, I would suggest some reading in that area.
The wiki here contains information on the topic and there are many good books on the subject. One I like is "All About Asset Allocation" by Rick Ferri. There are many others as well.

contimprov
Posts: 6
Joined: Sat Apr 14, 2018 5:16 pm

Re: Retirement Planning - Are we on the right path?

Post by contimprov » Tue Apr 17, 2018 8:44 pm

Grt2bOutdoors wrote:
Sun Apr 15, 2018 9:00 pm
Take the loss - dump the individual stocks. You don't know anymore about it than the market. Loss aversion is clouding your thinking, you are waiting to break even before liquidating, in the mean time you could be waiting an awful long time missing out on the potential opportunity for more gains in a diversified fund with less risk.
Ok, I will definitely consider that. The fact that they are also paying dividend makes me think twice, but I agree with you that some point I need to simplify and could potentially get more out of a diversified fund.

contimprov
Posts: 6
Joined: Sat Apr 14, 2018 5:16 pm

Re: Retirement Planning - Are we on the right path?

Post by contimprov » Tue Apr 17, 2018 8:53 pm

Watty wrote:
Sun Apr 15, 2018 9:45 pm
Here are some wikis that you should read on setting up a three fund portfolio.

https://www.bogleheads.org/wiki/Three-fund_portfolio

https://www.bogleheads.org/wiki/Tax-eff ... _placement
contimprov wrote:
Sun Apr 15, 2018 10:47 am
Contributions:
15% of salary to his 401k with 6% match
$5500 to his roth at the end of the year
$5500 to her traditional at the end of the year
$500 to his taxable every month - Vanguard Target Retirement 2050 Fund
$1000 to her taxable every month - Vanguard Target Retirement 2050 Fund
In the 32.3% tax bracket contributing to the Roth and taxable before maxing out your 401k is an expensive choice so you should max the 401k out if you are not already doing that. Just FYI, the maximum $18,500 401k contribution is the amount you can contribute without the employers contributions. Occasionally posters think the employer match is part of the $18,500 limit, but it is not.

Thanks for pointing it out, but I am aware of this and I am maxing out my 401k with 18.5k before employer match.

The target date fund is not real tax efficient so your should put future contributions in a three fund portfolio. See the link above. For money that is already in the target date fund you might not want to move it around because of the capital gains taxes but you should set them to not automatically reinvest the dividends and the capital gains distributions so you are not buying more of them.

Understood, I will change it moving forward to the three fund portfolio and leave the current as it is.
contimprov wrote:
Sun Apr 15, 2018 10:47 am
2. Any changes that we should make to the current allocation?
At 37 being 95% in stocks is WAY too aggressive.

You are the second person to point this out. I will reallocate to match my age in bonds.

For comparison the Vanguard 2040 fund is 15% stocks.
https://personal.vanguard.com/us/funds/ ... irect=true

contimprov
Posts: 6
Joined: Sat Apr 14, 2018 5:16 pm

Re: Retirement Planning - Are we on the right path?

Post by contimprov » Tue Apr 17, 2018 9:02 pm

Sandtrap wrote:
Sun Apr 15, 2018 10:35 pm
This outstanding write up may be useful to you.
TAYLOR LARIMORE ON “SIMPLICTY”
https://www.bogleheads.org/forum/viewt ... p?t=156505
aloha
j :D
Thank you for the link. I didn't know that its that simple!

contimprov
Posts: 6
Joined: Sat Apr 14, 2018 5:16 pm

Re: Retirement Planning - Are we on the right path?

Post by contimprov » Tue Apr 17, 2018 9:08 pm

SimplicityNow wrote:
Mon Apr 16, 2018 10:20 am
Duckie gave great advice (as usual). I will just point out that being over aggressive to make up for lost time can be a very grave mistake.

The best method to achieving a larger retirement balance is to save more. It is not fun, nor glamorous but it is effective.

Having a very aggressive stock/bond allocation for your age can cause you to sell during large market downturns.

You asset allocation should be based on your need, willingness and ability to take risk. If you haven't already, I would suggest some reading in that area.
The wiki here contains information on the topic and there are many good books on the subject. One I like is "All About Asset Allocation" by Rick Ferri. There are many others as well.
I am saving more to the max I can the last few years.

I am being aggressive and I wont sell at loss even it takes several years as long as I know it has value and going to bounce back with the market. But I do understand based on the feedback so far that I need to dial back a little on stocks %.

Thanks for the input. I am already starting to devise a plan based on the all the replies I have received so far.

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