Help - investor starting later in life

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z00b
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Joined: Fri Jun 01, 2018 11:16 pm

Help - investor starting later in life

Post by z00b » Fri Jun 01, 2018 11:21 pm

Thank you for this immensely beneficial forum. I am yet another starter investor who is looking for basic guidance on his investment strategy.

Age Late-30s
Household income – ~$250K
Tax Bracket- Federal 33%, State 9.3%
Tax Filing Status - MFJ

Savings and finances:
•Emergency fund in Vanguard Prime Money Market Fund –VMMXX- $20K
•[EDIT] Other cash currently in Vanguard Settlement account : $80K
•Overseas Cash savings - ~$20K
•Overseas Property ~$120K with ~$50K debt left
•Overseas retirement accounts: ~$100K
o Target Date funds: 15%
o Fixed Income : 30%
o Equity : 55% [/list]

401K{EDIT}
• 401K – $30K (EDIT: started maxing out 18.5K a year with a 3K employer match) .
• 401K funds are in a company selected Target 2045 Retirement Plan with
------Vanguard Total Stock Market Index Fund Institutional Plus Shares 53.8% - VITSX - 0.02%
------Vanguard Total International Stock Index Fund Institutional Plus Shares 36.1% - VTSNX - 0.07%
------Total Bond Market II Index Fund Institutional Shares* 7.1% - VTBNX - 0.02%
------Vanguard Total International Bond Index Fund Institutional Shares 3.0% - VTIFX -0.07%


Funds offered in 401K
American Beacon Small Cap Value Fund R6 Class AASRX 7241 - 0.81%
Invesco International Growth Cl I — 6128
Oakmark International Fund Class Institutional OANIX 7131 - 0.82%
PIMCO Total Return Fund Institutional Class PTTRX 3769 - 0.51%
State Street Russell Large Cap Growth® Index Non-Lending Series Fund Class C — 7132 - 0.04%
State Street Russell Large Cap Value® Index Non-Lending Series Fund Class C — 7306 - 0.04%
Vanguard Explorer Fund Admiral Shares VEXRX 5024 - 0.32%
Vanguard FTSE Social Index Fund Institutional Shares VFTNX 0223 - 0.12%

Vanguard Institutional 500 Index Trust -
Vanguard Institutional Total Bond Market Index Trust
Vanguard Institutional Total International Stock Market Index Trust
Vanguard Retirement Savings Trust III
Vanguard Target Retirement 2015 Trust Select
Vanguard Target Retirement 2020 Trust Select
Vanguard Target Retirement 2025 Trust Select
Vanguard Target Retirement 2030 Trust Select
Vanguard Target Retirement 2035 Trust Select
Vanguard Target Retirement 2040 Trust Select
Vanguard Target Retirement 2045 Trust Select
Vanguard Target Retirement 2050 Trust Select
Vanguard Target Retirement 2055 Trust Select
Vanguard Target Retirement 2060 Trust Select
Vanguard Target Retirement 2065 Trust Select
Vanguard Target Retirement Income Trust Select



• No IRAs or other investments
• Started an HSA this year with company annual contribution of 1K

Total NW: ~$320K out of which $80K (EDIT: currently in VMMXX) is available for investing.

Currently renting in a VHCOL area. I do not own any property in the USA, and given the costs here, might probably never own one. I expect my income to be volatile in the coming years as I move around, but expect it to at least index against the cost of living in each area I move to.

I have a 12-15 year horizon, after which I plan to retire. I have basic financial literacy and understand the fundamentals of cost averaging, asset diversification, and index funds, but have not had the stomach to jump into the market in any systematic way. I realize this is later than I would like, and would like to start again in the markets.

Here is how I am planning to allocate the existing $80K. I prefer not to actively manage any investments.

37.50% Vanguard Total Bond Market Index Fund - VBTLX $30,000
50% Vanguard Total Stock Market Index Fund - VTSAX $40,000
12.5% Vanguard Total International Stock Index Fund-VTIAX $10,000

It would be great if the forum with help with the following questions.
1. Does the above allocation make sense for a 3-5 year term ? I am torn between digging roots and saving for a down payment (200K-250K), vs. being mobile and investing this for the long term.
2. Ongoing investments- should I keep the same mix as above (EDIT: 37.5% VBTLX, 50% VTSAX, 12.5% VTIAX) for future investments of $3-$4K /month for the next 2-3 years?
3. Given I am not invested in the US real estate market, should I consider REITs as part of my asset mix?
Last edited by z00b on Thu Jun 07, 2018 5:13 pm, edited 5 times in total.

DaBombCat
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Re: Help - investor starting later in life

Post by DaBombCat » Sat Jun 02, 2018 10:52 am

Is there any reason that you would need to sell your investments in the next couple of years? If not, then the bond fund may simply be a drag to your long-term returns.

REITs are a consideration if you want a little more income, but not if you aren't interested in learning about real estate. Not owning your own home doesn't mean that real estate couldn't be a good investment. However, you mentioned that you prefer not to actively manage your investments, which means that indexing probably the best choice for you. Plus, if you buy and hold until retirement, then you defer a lot of taxes until you are not making a high W2 income.

If you ever do get interested in learning about investing, then there are many different types of real estate that you can get into--REITs in particular are very diverse. Best wishes!

delamer
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Re: Help - investor starting later in life

Post by delamer » Sat Jun 02, 2018 2:00 pm

Do not invest in stocks if you may spend the money within 3-5 years.

Stocks are long-term investments.

The portfolio you proposed is fine if you are investing for the long run, as in your retirement.

dharrythomas
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Re: Help - investor starting later in life

Post by dharrythomas » Sat Jun 02, 2018 2:31 pm

If your net worth is about 1.25X net income, a 12-15 year retirement time horizon is aggressive. You'll really have to ratchet down your spending and ratchet up your savings rate to make retiring about age 50 work. You might want to revise that timeline. There is a trade off between current spending and retirement date.

Good luck.

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ruralavalon
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Location: Illinois

Re: Help - investor starting later in life

Post by ruralavalon » Sat Jun 02, 2018 4:32 pm

Welcome to the forum :) .

The late 30s is indeed a late start, but not too late for investing on a reasonable plan to make a difference for you.

These are my quick suggestions:
1) invest for the long-term, not for a short-term target of 3-5 years;
2) use the 3 very diversified, very low expense total market funds which you listed;
3) reduce your living expenses and contribute more to investing;
4) invest as much as is practical for you every pay period, no matter what the market Is doing;
5) use tax-advantaged accounts if available, make the maximum annual contribution ($18.5k) to your 401k if any funds offered in it are decent; and
6) read the wiki article "Boglehead's Investment Philosophy".

Here is a calculator you can use to assess your prospects of retirement in 12-15 years at various levels of contributions -- www.firecalc.com.

. . . . .

Some additional information would be helpful.

What funds are you currently using in your 401k? What funds are offered in your 401k? Please give fund names, tickers and expense ratios.

Is there an employer match offered in your 401k, and, if so what is it?

How much (in dollars) are you currently contributing annually to your 401k?

What sort of account do you plan on using for your $80k and for your $3-4k per month in new investment?

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place. Please see this for format and content: Please see this for format: viewtopic.php?f=1&t=6212#p76191
Last edited by ruralavalon on Sun Jun 03, 2018 10:06 am, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

megabad
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Re: Help - investor starting later in life

Post by megabad » Sat Jun 02, 2018 6:03 pm

z00b wrote:
Fri Jun 01, 2018 11:21 pm
1. Does the above allocation make sense for a 3-5 year term ? I am torn between digging roots and saving for a down payment (200K-250K), vs. being mobile and investing this for the long term.

2. Ongoing investments- should I keep the same mix for future investments of $3-$4K /month for the next 2-3 years?
3. Given I am not invested in the US real estate market, should I consider REITs as part of my asset mix?
Some great pointers above so I would just suggest that with a 12-15 time horizon, a significant portion (maybe the majority) of your potential early retirement nest egg will be your contributions (not investment gains). As such, I think your exact asset allocation is less important than your savings rate/expenses (which will need to be very small in terms of your income). But you have a great income so this is very feasible to me.

To me your suggested allocation appears to reflect a 10 to 15 time horizon. It is similar to what I might expect a 65 or 70 year old retiree to have. To me, 3 to 5 years would look more like short term bonds, bank instruments, stable value.

But as already suggested, I might save toward retirement first since early retirement was your stated goal. You stated you live in a VHCOL area, buying a house in such an area may hinder early retirement because it ties you to this expensive area. I would carefully consider if you see yourself living in such an area into retirement before buying.

AerialWombat
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Re: Help - investor starting later in life

Post by AerialWombat » Sat Jun 02, 2018 6:55 pm

z00b wrote:
Fri Jun 01, 2018 11:21 pm
Age Late-30s
Household income – ~$250K
Similar situation here. I am 40, did not start saving until about four years ago when I returned to US from overseas. I’m self-employed, and thus have the liberty of choosing to live in low cost of living areas, though.

Personally, I chose to start with real estate. Bought a house, moved in for a year, rent it out, repeat. This is the core of my retirement catchup plan, since cumulative returns from leveraged single family homes purchased in low to medium COL areas drastically outpaces the stock market (but it’s active work and has different types of risk).

My point is that, if you can buy right and rent right, real estate can be a rapid equalizer. I could technically retire now to a foreign country and live OK off my rental cashflow, after just three years.

I just opened a solo 401k last month, and am buying a similar portfolio as you, but with an AA of 30/70, since I hold more risk in real estate. I also have a taxable account with a similar AA.

The real secret to your 12-15 year timeline is how much of your income you spend to live. I make about what you do, but live on 20% of it. Rest goes to portfolio. If you can do that, you will catch up quickly.

z00b
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Re: Help - investor starting later in life

Post by z00b » Sun Jun 03, 2018 3:12 pm

ruralavalon wrote:
Sat Jun 02, 2018 4:32 pm

Some additional information would be helpful.

What funds are you currently using in your 401k? What funds are offered in your 401k? Please give fund names, tickers and expense ratios.

Is there an employer match offered in your 401k, and, if so what is it?

How much (in dollars) are you currently contributing annually to your 401k?

What sort of account do you plan on using for your $80k and for your $3-4k per month in new investment?

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place. Please see this for format and content: Please see this for format: viewtopic.php?f=1&t=6212#p76191
Thank you everyone for your inputs. I have made edits to my original post showing my 401K allocation (currently in a 2045 Retirement Fund.

Am I stuck with renting for the long haul and staying out of REITs , while increasing my savings and investments, and eventually moving to a LCOL area where I can buy? Or is there hope to save up for a down payment (200-250K) if I average 35-50K in savings a year?

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ruralavalon
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Location: Illinois

Re: Help - investor starting later in life

Post by ruralavalon » Sun Jun 03, 2018 3:36 pm

z00b wrote:
Sun Jun 03, 2018 3:12 pm
ruralavalon wrote:
Sat Jun 02, 2018 4:32 pm

Some additional information would be helpful.

What funds are you currently using in your 401k? What funds are offered in your 401k? Please give fund names, tickers and expense ratios.

Is there an employer match offered in your 401k, and, if so what is it?

How much (in dollars) are you currently contributing annually to your 401k?

What sort of account do you plan on using for your $80k and for your $3-4k per month in new investment?

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place. Please see this for format and content: Please see this for format: viewtopic.php?f=1&t=6212#p76191
Thank you everyone for your inputs. I have made edits to my original post showing my 401K allocation (currently in a 2045 Retirement Fund.

Am I stuck with renting for the long haul and staying out of REITs , while increasing my savings and investments, and eventually moving to a LCOL area where I can buy? Or is there hope to save up for a down payment (200-250K) if I average 35-50K in savings a year?
It's good to see that you are making the maximum annual contribution to your 401k, and receive a nice employer match.

The target retirement fund is a good choice for the 401k or any other tax-advantaged account. It would not be a very good idea in any taxable account, because not very tax-efficient.

What is your tax bracket, both federal and state?

What is your tax filing status?

Do you have any IRAs?

Is a High Deductible Health Plan (HDHP) offered at work, so that you could use a Health Savings Account (HSA)?

A REIT fund would not be a good idea in a taxable account, because very tax-INefficient.

What index funds are offered in your 401k? Please give fund names, tickers and expense ratios.

I asked for this new information trying to see if there is another tax-advantaged account you could use. Again please simply add the new information to your original post using the edit button.

I will try to address your rent and invest for retirement versus buy a home question after this new information is added. I don't live in a high cost of living area, so may not be able to give a lot of guidance. Have you tried www.firecalc.com to assess the retirement part of that issue?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

megabad
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Re: Help - investor starting later in life

Post by megabad » Sun Jun 03, 2018 7:20 pm

z00b wrote:
Sun Jun 03, 2018 3:12 pm
Am I stuck with renting for the long haul and staying out of REITs , while increasing my savings and investments, and eventually moving to a LCOL area where I can buy? Or is there hope to save up for a down payment (200-250K) if I average 35-50K in savings a year?
No you are not stuck. You have a great income and are faced with many choices and plenty of time. If you really value living where you are long term, then a house is certainly an option. As I said before, I would just carefully consider such a decision. Consider that purchasing a home in a VHCOL area may or may not push your targeted retirement date out, but I think you have flexibility there (most do not retire at 50). All up to you.

DC3509
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Re: Help - investor starting later in life

Post by DC3509 » Sun Jun 03, 2018 7:45 pm

ruralavalon wrote:
Sat Jun 02, 2018 4:32 pm
Welcome to the forum :) .

The late 30s is indeed a late start, but not too late for investing on a reasonable plan to make a difference for you.

These are my quick suggestions:
1) invest for the long-term, not for a short-term target of 3-5 years;
2) use the 3 very diversified, very low expense total market funds which you listed;
3) reduce your living expenses and contribute more to investing;
4) invest as much as is practical for you every pay period, no matter what the market Is doing;
5) use tax-advantaged accounts if available, make the maximum annual contribution ($18.5k) to your 401k if any funds offered in it are decent; and
6) read the wiki article "Boglehead's Investment Philosophy".

Here is a calculator you can use to assess your prospects of retirement in 12-15 years at various levels of contributions -- www.firecalc.com.

. . . . .

Some additional information would be helpful.

What funds are you currently using in your 401k? What funds are offered in your 401k? Please give fund names, tickers and expense ratios.

Is there an employer match offered in your 401k, and, if so what is it?

How much (in dollars) are you currently contributing annually to your 401k?

What sort of account do you plan on using for your $80k and for your $3-4k per month in new investment?

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place. Please see this for format and content: Please see this for format: viewtopic.php?f=1&t=6212#p76191
Only on this Board does someone who has basically $250K of investment assets before the age of 40 qualify as a "late starter"!

I don't think you are a late starter at all, by normal standards anyway. Here's what I suggest -- you need to work backwards. How much do you want at the end? How much do you need? Then after you figure out that number, just divide it by 12-15 years of savings, factoring in the investment growth rate. Start saving that amount in a 3-fund portfolio. What you have today is sort of immaterial if you have a solid plan to get you someplace else tomorrow. As complicated as some people get here, developing that plan is not rocket science, and executing it just depends on discipline and brute force.

z00b
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Re: Help - investor starting later in life

Post by z00b » Mon Jun 04, 2018 12:28 am

Thanks all -I have made edits to my original post. (thanks @ruralavalon)

My expectation is that in retirement I will spend about 3K/month in today's money - and top out around 40K a year after including misc. expenses. I plan to move to a LCOL country at around 60-65,so that may come down even more ($20K a year in today's money).

FireCALC says that I need a portfolio of 1.1M that has a 99% chance of lasting me 30 years after I retire.

Silverado
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Re: Help - investor starting later in life

Post by Silverado » Mon Jun 04, 2018 5:25 am

z00b wrote:
Sun Jun 03, 2018 3:12 pm

Thank you everyone for your inputs. I have made edits to my original post showing my 401K allocation (currently in a 2045 Retirement Fund.

Am I stuck with renting for the long haul and staying out of REITs , while increasing my savings and investments, and eventually moving to a LCOL area where I can buy? Or is there hope to save up for a down payment (200-250K) if I average 35-50K in savings a year?
Is that savings in addition to maxing out 401k? At your income level and desired end result in just over a decade, you need to focus on making adjusts to increase your savings rate.

I would not worry about anything but getting retirement savings cranked up for the next five years or so, then revisit. Especially if there is a chance you will be moving into a lower cost area.

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ruralavalon
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Re: Help - investor starting later in life

Post by ruralavalon » Mon Jun 04, 2018 2:02 pm

z00b wrote:
Mon Jun 04, 2018 12:28 am
Thanks all -I have made edits to my original post. (thanks @ruralavalon)

My expectation is that in retirement I will spend about 3K/month in today's money - and top out around 40K a year after including misc. expenses. I plan to move to a LCOL country at around 60-65,so that may come down even more ($20K a year in today's money).

FireCALC says that I need a portfolio of 1.1M that has a 99% chance of lasting me 30 years after I retire.
Net $39k per year in retirement living expense? That makes buying a home look more feasible.

What funds are offered in your 401k? Please give fund names, tickers and expense ratios. (This is important to know, in order to give ideas on how to invest your additional $3-4k per month.)

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place. Please see this for format and content: Please see this for format: viewtopic.php?f=1&t=6212#p76191Please give fund names, tickers and expense ratios.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

z00b
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Re: Help - investor starting later in life

Post by z00b » Mon Jun 04, 2018 10:07 pm

ruralavalon wrote:
Mon Jun 04, 2018 2:02 pm
What funds are offered in your 401k? Please give fund names, tickers and expense ratios. (This is important to know, in order to give ideas on how to invest your additional $3-4k per month.)
@ruralavalon - how do I find this? All I know is that my 401K is entirely in the Vanguard Target Retirement 2045 Trust Select . Is there any way of knowing what individual funds are inside this ? Thanks- and apologies if I am asking the obvious. :oops:

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ruralavalon
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Re: Help - investor starting later in life

Post by ruralavalon » Tue Jun 05, 2018 10:55 am

z00b wrote:
Mon Jun 04, 2018 10:07 pm
ruralavalon wrote:
Mon Jun 04, 2018 2:02 pm
What funds are offered in your 401k? Please give fund names, tickers and expense ratios. (This is important to know, in order to give ideas on how to invest your additional $3-4k per month.)
@ruralavalon - how do I find this? All I know is that my 401K is entirely in the Vanguard Target Retirement 2045 Trust Select . Is there any way of knowing what individual funds are inside this ? Thanks- and apologies if I am asking the obvious. :oops:
In your printed 401k materials or on the 401k website there will be list of funds offered in the 401k plan. The plan is required to furnish this information (fund names, tickers and expense ratios), its mandatory.

A trust will not have a ticker symbol. If the plan uses trusts instead of mutual funds, then there will be a short fact sheet for each trust, stating the index used, investment strategy, performance history versus benchmark, and expense ratio, and identifying the fund firm (like State Street, BlackRock, Vanguard, Northern Trust, etc.) managing the trust.

If you can't locate this, then ask HR at your employer or the plan administrator.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

z00b
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Re: Help - investor starting later in life

Post by z00b » Thu Jun 07, 2018 12:52 pm

ruralavalon wrote:
Tue Jun 05, 2018 10:55 am
z00b wrote:
Mon Jun 04, 2018 10:07 pm
ruralavalon wrote:
Mon Jun 04, 2018 2:02 pm
What funds are offered in your 401k? Please give fund names, tickers and expense ratios. (This is important to know, in order to give ideas on how to invest your additional $3-4k per month.)
@ruralavalon - how do I find this? All I know is that my 401K is entirely in the Vanguard Target Retirement 2045 Trust Select . Is there any way of knowing what individual funds are inside this ? Thanks- and apologies if I am asking the obvious. :oops:
In your printed 401k materials or on the 401k website there will be list of funds offered in the 401k plan. The plan is required to furnish this information (fund names, tickers and expense ratios), its mandatory.

A trust will not have a ticker symbol. If the plan uses trusts instead of mutual funds, then there will be a short fact sheet for each trust, stating the index used, investment strategy, performance history versus benchmark, and expense ratio, and identifying the fund firm (like State Street, BlackRock, Vanguard, Northern Trust, etc.) managing the trust.

If you can't locate this, then ask HR at your employer or the plan administrator.
@ruralavalon I have updated this list in my original post

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ruralavalon
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Re: Help - investor starting later in life

Post by ruralavalon » Thu Jun 07, 2018 4:58 pm

z00b wrote:
Thu Jun 07, 2018 12:52 pm
ruralavalon wrote:
Tue Jun 05, 2018 10:55 am
z00b wrote:
Mon Jun 04, 2018 10:07 pm
ruralavalon wrote:
Mon Jun 04, 2018 2:02 pm
What funds are offered in your 401k? Please give fund names, tickers and expense ratios. (This is important to know, in order to give ideas on how to invest your additional $3-4k per month.)
@ruralavalon - how do I find this? All I know is that my 401K is entirely in the Vanguard Target Retirement 2045 Trust Select . Is there any way of knowing what individual funds are inside this ? Thanks- and apologies if I am asking the obvious. :oops:
In your printed 401k materials or on the 401k website there will be list of funds offered in the 401k plan. The plan is required to furnish this information (fund names, tickers and expense ratios), its mandatory.

A trust will not have a ticker symbol. If the plan uses trusts instead of mutual funds, then there will be a short fact sheet for each trust, stating the index used, investment strategy, performance history versus benchmark, and expense ratio, and identifying the fund firm (like State Street, BlackRock, Vanguard, Northern Trust, etc.) managing the trust.

If you can't locate this, then ask HR at your employer or the plan administrator.
@ruralavalon I have updated this list in my original post
You have described the funds which are inside the target retirement trust which you are currently using in your 401k.

You have not listed the other funds or trusts offered in your 401k. I am trying to find out what other funds or trusts you can use in your 401k.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

z00b
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Re: Help - investor starting later in life

Post by z00b » Thu Jun 07, 2018 5:11 pm

Here are the other funds offered. Thanks for your patience!

American Beacon Small Cap Value Fund R6 Class AASRX 7241 - 0.81%
Invesco International Growth Cl I — 6128
Oakmark International Fund Class Institutional OANIX 7131 - 0.82%
PIMCO Total Return Fund Institutional Class PTTRX 3769 - 0.51%
State Street Russell Large Cap Growth® Index Non-Lending Series Fund Class C — 7132 - 0.04%
State Street Russell Large Cap Value® Index Non-Lending Series Fund Class C — 7306 - 0.04%
Vanguard Explorer Fund Admiral Shares VEXRX 5024 - 0.32%
Vanguard FTSE Social Index Fund Institutional Shares VFTNX 0223 - 0.12%

Vanguard Institutional 500 Index Trust -
Vanguard Institutional Total Bond Market Index Trust
Vanguard Institutional Total International Stock Market Index Trust
Vanguard Retirement Savings Trust III
Vanguard Target Retirement 2015 Trust Select
Vanguard Target Retirement 2020 Trust Select
Vanguard Target Retirement 2025 Trust Select
Vanguard Target Retirement 2030 Trust Select
Vanguard Target Retirement 2035 Trust Select
Vanguard Target Retirement 2040 Trust Select
Vanguard Target Retirement 2045 Trust Select
Vanguard Target Retirement 2050 Trust Select
Vanguard Target Retirement 2055 Trust Select
Vanguard Target Retirement 2060 Trust Select
Vanguard Target Retirement 2065 Trust Select
Vanguard Target Retirement Income Trust Select

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ruralavalon
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Re: Help - investor starting later in life

Post by ruralavalon » Thu Jun 07, 2018 5:25 pm

z00b wrote:
Thu Jun 07, 2018 5:11 pm
Here are the other funds offered. Thanks for your patience!

American Beacon Small Cap Value Fund R6 Class AASRX 7241 - 0.81%
Invesco International Growth Cl I — 6128
Oakmark International Fund Class Institutional OANIX 7131 - 0.82%
PIMCO Total Return Fund Institutional Class PTTRX 3769 - 0.51%
State Street Russell Large Cap Growth® Index Non-Lending Series Fund Class C — 7132 - 0.04%
State Street Russell Large Cap Value® Index Non-Lending Series Fund Class C — 7306 - 0.04%
Vanguard Explorer Fund Admiral Shares VEXRX 5024 - 0.32%
Vanguard FTSE Social Index Fund Institutional Shares VFTNX 0223 - 0.12%

Vanguard Institutional 500 Index Trust -
Vanguard Institutional Total Bond Market Index Trust
Vanguard Institutional Total International Stock Market Index Trust
Vanguard Retirement Savings Trust III
Vanguard Target Retirement 2015 Trust Select
Vanguard Target Retirement 2020 Trust Select
Vanguard Target Retirement 2025 Trust Select
Vanguard Target Retirement 2030 Trust Select
Vanguard Target Retirement 2035 Trust Select
Vanguard Target Retirement 2040 Trust Select
Vanguard Target Retirement 2045 Trust Select
Vanguard Target Retirement 2050 Trust Select
Vanguard Target Retirement 2055 Trust Select
Vanguard Target Retirement 2060 Trust Select
Vanguard Target Retirement 2065 Trust Select
Vanguard Target Retirement Income Trust Select
Great. It looks like there are probably many excellent possibilities in your 401k.

What expense ratios are charged on these three trusts?
1) Vanguard Institutional 500 Index Trust
2) Vanguard Institutional Total International Stock Index Trust
3) Vanguard Institutional Total Bond Market Index Trust
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

z00b
Posts: 12
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Re: Help - investor starting later in life

Post by z00b » Mon Jun 11, 2018 9:13 am

ruralavalon wrote:
Thu Jun 07, 2018 5:25 pm
z00b wrote:
Thu Jun 07, 2018 5:11 pm
Here are the other funds offered. Thanks for your patience!

American Beacon Small Cap Value Fund R6 Class AASRX 7241 - 0.81%
Invesco International Growth Cl I — 6128
Oakmark International Fund Class Institutional OANIX 7131 - 0.82%
PIMCO Total Return Fund Institutional Class PTTRX 3769 - 0.51%
State Street Russell Large Cap Growth® Index Non-Lending Series Fund Class C — 7132 - 0.04%
State Street Russell Large Cap Value® Index Non-Lending Series Fund Class C — 7306 - 0.04%
Vanguard Explorer Fund Admiral Shares VEXRX 5024 - 0.32%
Vanguard FTSE Social Index Fund Institutional Shares VFTNX 0223 - 0.12%

Vanguard Institutional 500 Index Trust -
Vanguard Institutional Total Bond Market Index Trust
Vanguard Institutional Total International Stock Market Index Trust
Vanguard Retirement Savings Trust III
Vanguard Target Retirement 2015 Trust Select
Vanguard Target Retirement 2020 Trust Select
Vanguard Target Retirement 2025 Trust Select
Vanguard Target Retirement 2030 Trust Select
Vanguard Target Retirement 2035 Trust Select
Vanguard Target Retirement 2040 Trust Select
Vanguard Target Retirement 2045 Trust Select
Vanguard Target Retirement 2050 Trust Select
Vanguard Target Retirement 2055 Trust Select
Vanguard Target Retirement 2060 Trust Select
Vanguard Target Retirement 2065 Trust Select
Vanguard Target Retirement Income Trust Select
Great. It looks like there are probably many excellent possibilities in your 401k.

What expense ratios are charged on these three trusts?
1) Vanguard Institutional 500 Index Trust
2) Vanguard Institutional Total International Stock Index Trust
3) Vanguard Institutional Total Bond Market Index Trust
@ruralavalon. Here are the expense ratios.

1) Vanguard Institutional 500 Index Trust - 0.016%
2) Vanguard Institutional Total International Stock Index Trust - 0.068%
3) Vanguard Institutional Total Bond Market Index Trust - 0.038%

kmwilson343
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Re: Help - investor starting later in life

Post by kmwilson343 » Mon Jun 11, 2018 9:54 am

z00b wrote:
Fri Jun 01, 2018 11:21 pm
37.50% Vanguard Total Bond Market Index Fund - VBTLX $30,000
50% Vanguard Total Stock Market Index Fund - VTSAX $40,000
12.5% Vanguard Total International Stock Index Fund-VTIAX $10,000
Im 46, will retire in 14 years and have a very similar set up as stated above. Keep it simple, put money in it every month and let it ride.

Good luck,

Kevin

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ruralavalon
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Re: Help - investor starting later in life

Post by ruralavalon » Mon Jun 11, 2018 1:40 pm

z00b wrote:
Mon Jun 11, 2018 9:13 am
@ruralavalon. Here are the expense ratios.

1) Vanguard Institutional 500 Index Trust - 0.016%
2) Vanguard Institutional Total International Stock Index Trust - 0.068%
3) Vanguard Institutional Total Bond Market Index Trust - 0.038%
Those are excellent funds to use in your 401k, you are fortunate to have those as choices. That will make it much easier to set up an investment plan that could work well for you.


Accounts & contributions?
z00b wrote:
Fri Jun 01, 2018 11:21 pm
[EDIT] Other cash currently in Vanguard Settlement account : $80K
. . . . .
$80K (EDIT: currently in VMMXX) is available for investing.

. . . . .
Ongoing investments- should I keep the same mix as above (EDIT: 37.5% VBTLX, 50% VTSAX, 12.5% VTIAX) for future investments of $3-$4K /month for the next 2-3 years?
z00b wrote:
Sun Jun 03, 2018 3:12 pm
I average 35-50K in savings a year?
For that $80k cash you have available to invest I suggest using a taxable account at a low cost fund firm like Vanguard. I suggest using very tax-efficient funds like Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% and Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%.

I am not clear about your total savings/contributions. Does that $3-4k/month or $35-50k/yr average savings include the money you contribute to your 401k, or is that in addition to what you contribute to your 401k?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

z00b
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Re: Help - investor starting later in life

Post by z00b » Tue Jun 12, 2018 8:48 am

@ruralavalon the annual savings is in addition to my 401K contribution. Of course these savings could potentially come down to a third of that if I decide to stop renting and jump into home ownership.

Two additional questions:
1) Should I be considering any backdoor Roths? If so how should I allocate these investments?
2) Do I keep this mix of 37.5% VBTLX, 50% VTSAX, 12.5% VTIAX for the future montly investments too?

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ruralavalon
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Re: Help - investor starting later in life

Post by ruralavalon » Tue Jun 12, 2018 9:15 am

z00b wrote:
Tue Jun 12, 2018 8:48 am
@ruralavalon the annual savings is in addition to my 401K contribution. Of course these savings could potentially come down to a third of that if I decide to stop renting and jump into home ownership.

Two additional questions:
1) Should I be considering any backdoor Roths? If so how should I allocate these investments?
2) Do I keep this mix of 37.5% VBTLX, 50% VTSAX, 12.5% VTIAX for the future montly investments too?
1) Yes you should consider backdoor Roth IRAs.

2) In my opinion that asset allocation is within the range of what is reasonable.

For reasons of tax-efficiency it's probably better to coordinate investments among all accounts, treating all accounts together as a single unified portfolio. It's not necessary, or even desirable, to have all three components of the portfolio in each account.

Bond funds are not very tax-efficient so should ordinarily be held in a tax-advantaged account, preferably a tax-deferred account. It's ordinarily better to use only very tax-efficient stock index funds in a taxable account. Wiki article "Tax-efficient fund placement".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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ruralavalon
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Re: Help - investor starting later in life

Post by ruralavalon » Tue Jun 12, 2018 9:35 am

Asset allocation.
z00b wrote:
Fri Jun 01, 2018 11:21 pm
Age Late-30s
Household income – ~$250K
Tax Bracket- Federal 33%, State 9.3%
Tax Filing Status - MFJ
. . . . .
I have a 12-15 year horizon, after which I plan to retire.
In the late 30s, and a 12-15 year horizon to retirement, I suggest about 30-40% in bonds. This is expected to substantially reduce portfolio volatility (risk), with only a relatively slight decrease in portfolio return. Graph, "An Efficient Frontier: the power of diversification". Please see the wiki articles Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk", and "Asset allocation".

I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities". Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6). (You can find lots of debate here on international allocation, opinions ranging all the way from 00% to 50% of stocks in international stocks. If you want more viewpoints on international stocks please try the Google search box (upper right, this page).

That works out to about 35% bonds, 15% international stocks, and 50% domestic stocks (which is almost identical to the 37.5/12.5/50 which you had in mind). In my example portfolio I will use the 35/15/50 simply to avoid using fractions of a percent. Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.


Accounts & contributions?
z00b wrote:
Tue Jun 12, 2018 8:48 am
@ruralavalon the annual savings is in addition to my 401K contribution. Of course these savings could potentially come down to a third of that if I decide to stop renting and jump into home ownership.

Two additional questions:
1) Should I be considering any backdoor Roths? If so how should I allocate these investments?
2) Do I keep this mix of 37.5% VBTLX, 50% VTSAX, 12.5% VTIAX for the future montly investments too?
For that $80k cash you have available to invest I suggest using a taxable account at a low cost fund firm like Vanguard. I suggest using very tax-efficient funds like Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% and Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%.

I suggest starting 2 backdoor Roth IRAs, one for each of you at a low cost provider like Vanguard.


Fund selection & placement.
z00b wrote:
Mon Jun 11, 2018 9:13 am
@ruralavalon. Here are the expense ratios.

1) Vanguard Institutional 500 Index Trust - 0.016%
2) Vanguard Institutional Total International Stock Index Trust - 0.068%
3) Vanguard Institutional Total Bond Market Index Trust - 0.038%
Those are excellent funds to use in your 401k, you are fortunate to have those as choices.

In selecting funds strive for a combination of broad diversification (to reduce risk) and low expense ratios (to increase your net gain). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Wiki article "Three-fund portfolio". Forum discussion, "The Three-Fund Portfolio".

It is often better coordinate investments across all accounts, in other words treat all accounts together as a single unified portfolio, rather than view each account separately. Select just one or two of the better funds (most diversified + lower expense ratio) in the work-based account (401k, 403b, 457, TSP etc.), where the choices offered are limited. Then complete the rest of the asset allocation using the nearly unlimited or choices available in a taxable account or any IRAs. This approach lets you avoid having to use sub-par funds often found in work-based accounts like 401ks.

For domestic stocks I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund (such as Vanguard Institutional 500 Index Trust - 0.016% in your 401k) is good enough by itself for domestic stocks. "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations".

An S&P 500 index fund covers 81% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies, and in the 26 years since the creation of the first total stock market index fund the total return of the two types of funds has been almost identical. Morningstar, "growth of $10k" graph, VTSAX vs VFIAX. In the first 10 years the S&P 500 fund did better, in the last 10 years the total market fund did better, and over the 26 years the total market fund gave a little more return (0.11% per year), but at the cost of a little more volatility (risk): nisiprius post, in the forum discussion "Exchanging the S&P 500 for the TSM". See also Allan Roth, CBS Moneywatch, "John C. Bogle on the S&P 500 vs. the Total Stock Market". So it seems that adding a little in mid/small cap stocks trying to mimic the holdings of a total stock market fund has historically made little difference in performance.

In the taxable account I suggest using very tax-efficient stock index funds. Wiki article "Tax-efficient fund placement". Examples include Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% and Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%. Both are very tax-efficient.. Those funds are also well suited to any type of account. Both are very diversified with very low expense ratios.

To make portfolio management and rebalancing easy it’s usually helpful to have a one or more accounts which contain all three basic asset types (bonds, international stocks, and domestic stocks).



Example portfolio.
Here is an example portfolio that you could consider. This is a three-fund type portfolio, modified as necessary to accommodate the fund offerings in your 401k. Current portfolio size = $120k. New annual contributions = about $32.5k to tax-advantaged accounts + $????? to a taxable account. The target asset allocation is: 35% bonds; 15% international stocks; and 50% domestic stocks. The percentages given are percentages of the total portfolio, not of a given account. The suggestion is to switch both the existing balances and the new contributions to the funds indicated. All percentages are rounded off, so may not add up exactly. Sometimes I state 00% to indicate funds you might want to add in the future

taxable account@ Vanguard (67% of total; $80k; adds $?????/yr)
52%, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%
15%, Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%.

401k (33% of total; $30k; adds $18.5k + $3k employer match = $21.5k/yr total)
00%, Vanguard Institutional 500 Index Trust - 0.016%
00%, Vanguard Institutional Total International Stock Index Trust - 0.068%
33%, Vanguard Institutional Total Bond Market Index Trust - 0.038%

His backdoor Roth IRA @ Vanguard (00%; $00; adds $5.5k/yr)
00%,Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) ER 0.14%

Her backdoor Roth IRA @ Vanguard (00%; $00; adds $5.5k/yr)
00%, Vanguard Total International Stock Index Fund Investor Shares (VGTSX) ER 0.17%.


Rebalancing.
Because the funds will grow at different and unpredictable rates, it may be necessary every few years to rebalance in order to maintain the desired asset allocation. Wiki article, "Rebalancing". You can easily adjust the asset allocation by exchanging between funds inside your 401k.

Avoid exchanging between funds in the taxable account, which can create income tax liability. You can rebalance the stock allocation by the way in which you distribute new contributions in the taxable account.

. . . . .

I suggest that you read one or two books on general investing. Wiki article, "Books: recommendations and reviews". When I first stated managing my own investments, I found this tutorial very helpful in learning investing terminology/jargon and some of the investing basics. Morningstar, "Investing Classroom". Also take a look at the Boglehead’s wiki, the "getting started" link I give below.

If you have any questions just ask.

I hope that this helps.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

z00b
Posts: 12
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Re: Help - investor starting later in life

Post by z00b » Thu Jun 14, 2018 11:22 pm

ruralavalon wrote:
Tue Jun 12, 2018 9:35 am

401k (33% of total; $30k; adds $18.5k + $3k employer match = $21.5k/yr total)
00%, Vanguard Institutional 500 Index Trust - 0.016%
00%, Vanguard Institutional Total International Stock Index Trust - 0.068%
33%, Vanguard Institutional Total Bond Market Index Trust - 0.038%
@ruralavalon and others- thanks so much for helping me with the basics. One follow up question:

On the 401K- do I reallocate my entire balance currently in a 2045 Retirement Account to the Vanguard Institutional Total Bond Market Index Trust right away. Or do I just do this for new contributions into my 401k?

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ruralavalon
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Re: Help - investor starting later in life

Post by ruralavalon » Fri Jun 15, 2018 1:21 pm

z00b wrote:
Thu Jun 14, 2018 11:22 pm
ruralavalon wrote:
Tue Jun 12, 2018 9:35 am

401k (33% of total; $30k; adds $18.5k + $3k employer match = $21.5k/yr total)
00%, Vanguard Institutional 500 Index Trust - 0.016%
00%, Vanguard Institutional Total International Stock Index Trust - 0.068%
33%, Vanguard Institutional Total Bond Market Index Trust - 0.038%
@ruralavalon and others- thanks so much for helping me with the basics. One follow up question:

On the 401K- do I reallocate my entire balance currently in a 2045 Retirement Account to the Vanguard Institutional Total Bond Market Index Trust right away. Or do I just do this for new contributions into my 401k?
Approximately when do you expect that you might be investing that $80k cash in the 2 backdoor Roth IRAs and a taxable account?

Do you have tentative numbers in mind for about how much of the $30-50k annual savings you might want to put in a house fund versus about how much you might want to use for long-term/retirement investing?

I suggest coordinating the change in your 401k with the start of the new investments in the other accounts.

Let me know when the $80k might be invested in the other accounts, and tentative numbers for use of the $30-50k annual savings, then I can suggest how to make the transition and what to do with new contributions.

In the example portfolio I should have indicated $5.5k (5% of total) in each backdoor Roth IRA, $69k (63% of total) in the taxable account, and $30k (27% of total) in your 401k.

What state do you pay state income tax to? (This will help in suggesting how to invest the savings for a house.)
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

z00b
Posts: 12
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Re: Help - investor starting later in life

Post by z00b » Fri Jun 15, 2018 11:21 pm

ruralavalon wrote:
Fri Jun 15, 2018 1:21 pm
Approximately when do you expect that you might be investing that $80k cash in the 2 backdoor Roth IRAs and a taxable account?
Right away! Hoping to do this in the next 2 weeks. I have already started with VTIAX and VTSAX !
Do you have tentative numbers in mind for about how much of the $30-50k annual savings you might want to put in a house fund versus about how much you might want to use for long-term/retirement investing?
I am thinking 60% for a house (2.5k a month) with 40% going towards investments, given that downpayments are a min. of 200K here. Open to advise and suggestions here:(

I suggest coordinating the change in your 401k with the start of the new investments in the other accounts.

Let me know when the $80k might be invested in the other accounts, and tentative numbers for use of the $30-50k annual savings, then I can suggest how to make the transition and what to do with new contributions.
I have already started with a couple of investments in - VTIAX and VTSAX, and hope to invest the rest right away.
In the example portfolio I should have indicated $5.5k (5% of total) in each backdoor Roth IRA, $69k (63% of total) in the taxable account, and $30k (27% of total) in your 401k.
Understood- great idea!
What state do you pay state income tax to? (This will help in suggesting how to invest the savings for a house.)
CA

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ruralavalon
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Re: Help - investor starting later in life

Post by ruralavalon » Tue Jun 19, 2018 6:05 pm

z00b wrote:
Mon Jun 11, 2018 9:13 am
@ruralavalon. Here are the expense ratios.

1) Vanguard Institutional 500 Index Trust - 0.016%
2) Vanguard Institutional Total International Stock Index Trust - 0.068%
3) Vanguard Institutional Total Bond Market Index Trust - 0.038%
Those are excellent funds to use in your 401k, you are fortunate to have those as choices.

z00b wrote:
Fri Jun 15, 2018 11:21 pm
ruralavalon wrote:
Fri Jun 15, 2018 1:21 pm
Approximately when do you expect that you might be investing that $80k cash in the 2 backdoor Roth IRAs and a taxable account?
Right away! Hoping to do this in the next 2 weeks. I have already started with VTIAX and VTSAX !
Do you have tentative numbers in mind for about how much of the $30-50k annual savings you might want to put in a house fund versus about how much you might want to use for long-term/retirement investing?
I am thinking 60% for a house (2.5k a month) with 40% going towards investments, given that downpayments are a min. of 200K here. Open to advise and suggestions here:(

I suggest coordinating the change in your 401k with the start of the new investments in the other accounts.

Let me know when the $80k might be invested in the other accounts, and tentative numbers for use of the $30-50k annual savings, then I can suggest how to make the transition and what to do with new contributions.
I have already started with a couple of investments in - VTIAX and VTSAX, and hope to invest the rest right away.
In the example portfolio I should have indicated $5.5k (5% of total) in each backdoor Roth IRA, $69k (63% of total) in the taxable account, and $30k (27% of total) in your 401k.
Understood- great idea!
What state do you pay state income tax to? (This will help in suggesting how to invest the savings for a house.)
CA
z00b wrote:
Thu Jun 14, 2018 11:22 pm
On the 401K- do I reallocate my entire balance currently in a 2045 Retirement Account to the Vanguard Institutional Total Bond Market Index Trust right away. Or do I just do this for new contributions into my 401k?
Yes, I suggest reallocating your 401k now since you will be investing your $80k savings right away.

I suggest reallocation of your 401k now to Vanguard Institutional Total Bond Market Index Fund in the 401k, adding some Vanguard Institutional 500 Index Trust in your 401k later with some of your ongoing 401k contributions.


Asset allocation.
As mentioned before, I suggest about 35% bonds, 15% international stocks, and 50% domestic stocks (which is almost identical to the 37.5/12.5/50 which you had in mind). In my example portfolio I will use the 35/15/50 simply to avoid using fractions of a percent. Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.



Fund selection & Placement.
As mentioned before, in selecting funds strive for a combination of broad diversification (to reduce risk) and low expense ratios (to increase your net gain). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio".

It is often better coordinate investments across all accounts, in other words treat all accounts together as a single unified portfolio, rather than view each account separately. Select just one or two of the better funds (most diversified + lower expense ratio) in the work-based account (401k, 403b, 457, TSP etc.), where the choices offered are limited. Then complete the rest of the asset allocation using the nearly unlimited or choices available in a taxable account or any IRAs.

For domestic stocks I suggest using a total stock market index fund where available; otherwise an S&P 500 index fund (such as Vanguard Institutional 500 Index Trust - 0.016% in your 401k) is good enough by itself for domestic stocks. "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio."

z00b wrote:
Fri Jun 01, 2018 11:21 pm
Household income – ~$250K
Tax Bracket- Federal 33%, State 9.3%
Tax Filing Status - MFJ
At your tax rate and level of contributions its important to use very tax-efficient funds in your taxable account. That means stock index funds, such as Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04% and Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%, and if a bond fund is used in your taxable account then use a tax-exempt bond fund. Wiki article "Tax-efficient fund placement".

To make portfolio management and rebalancing easy it’s usually helpful to have a one or more accounts which contain all three basic asset types (bonds, international stocks, and domestic stocks).


Second Example portfolio.
Here is an example portfolio that you could consider. This is a three-fund type portfolio, modified as necessary to accommodate the fund offerings in your 401k. Current portfolio size = $120k. New annual contributions = about $48.5k. The target asset allocation is: 35% bonds; 15% international stocks; and 50% domestic stocks. The percentages given are percentages of the total portfolio, not of a given account. The suggestion is to switch both the existing balances and the new contributions to the funds indicated. All percentages are rounded off, so may not add up exactly. Sometimes I state 00% to indicate funds you might want to add in the future

taxable account @ Vanguard (63% of total; $69k; adds around $16k/yr = 33% of new annual contributions)
40%, Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) ER 0.04%
15%, Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) ER 0.11%
08%, Vanguard California Intermediate-term Tax-exempt Fund Admiral Shares (VCADX) ER 0.09%

401k (27% of total; $30k; adds $18.5k + $3k employer match = $21.5k/yr = 44% of new annual contributions)
00%, Vanguard Institutional 500 Index Trust - 0.016%
00%, Vanguard Institutional Total International Stock Index Trust - 0.068%
27%, Vanguard Institutional Total Bond Market Index Trust - 0.038%

His backdoor Roth IRA @ Vanguard (5% of total; $5.5k; adds $5.5k/yr = 11% of new annual contributions)
05%, Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) ER 0.14%

Her backdoor Roth IRA @ Vanguard (5% of total; $5.5k = 11% of new annual contributions)
05%, Vanguard Total Stock Market Index Fund Investor Shares (VTSMX) ER 0.14%


Retirement planning.
As mentioned before, here is a calculator you can use to assess your prospects of retirement in 12-15 years at this level of contributions -- www.firecalc.com


House savings.
In the next day or two I will try to give you some ideas on what to use for house savings. (About $24k/yr. You said $30-50k savings per year, about 60% to house savings, so I used $40k/yr average x .60 = $24k/yr.)

. . . . .

Rebalancing.
Because the funds will grow at different and unpredictable rates, it may be necessary every few years to rebalance in order to maintain the desired asset allocation. Wiki article, "Rebalancing". You can easily adjust the asset allocation by exchanging between funds inside your 401k.

Avoid exchanging between funds in the taxable account, which can create income tax liability.

. . . . .

I suggest that you read one or two books on general investing. Wiki article, "Books: recommendations and reviews". When I first stated managing my own investments, I found this tutorial very helpful in learning investing terminology/jargon and some of the investing basics. Morningstar, "Investing Classroom". Also take a look at the Boglehead’s wiki, the "getting started" link I give below.

If you have any questions just ask.

I hope that this helps.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

z00b
Posts: 12
Joined: Fri Jun 01, 2018 11:16 pm

Re: Help - investor starting later in life

Post by z00b » Wed Jun 20, 2018 11:10 pm

ruralavalon wrote:
Tue Jun 19, 2018 6:05 pm
08%, Vanguard California Intermediate-term Tax-exempt Fund Admiral Shares (VCADX) ER 0.09%
Thanks @ruralavalon

I notice you suggest an 8% allocation in VCADX (or the poor man's version VCAIX?). Is there a reason you suggest VCAIX over just keeping all domestic stocks in VTSAX?
ruralavalon wrote:
Tue Jun 19, 2018 6:05 pm
House savings.
In the next day or two I will try to give you some ideas on what to use for house savings. (About $24k/yr. You said $30-50k savings per year, about 60% to house savings, so I used $40k/yr average x .60 = $24k/yr.)
Thanks. Looking forward to it!

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Location: Illinois

Re: Help - investor starting later in life

Post by ruralavalon » Thu Jun 21, 2018 8:42 am

z00b wrote:
Wed Jun 20, 2018 11:10 pm
ruralavalon wrote:
Tue Jun 19, 2018 6:05 pm
08%, Vanguard California Intermediate-term Tax-exempt Fund Admiral Shares (VCADX) ER 0.09%
Thanks @ruralavalon

I notice you suggest an 8% allocation in VCADX (or the poor man's version VCAIX?). Is there a reason you suggest VCAIX over just keeping all domestic stocks in VTSAX?
The tax-exempt bond fund in the taxable account is in order to get the bond allocation up to 35%. There is room for 27% in your 401k, and the Roth IRA space is valuable space to use for a for a stock index fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Help - investor starting later in life

Post by ruralavalon » Sat Jun 23, 2018 1:28 pm

z00b wrote:
Fri Jun 01, 2018 11:21 pm
ge Late-30s
Household income – ~$250K
Tax Bracket- Federal 33%, State 9.3%
Tax Filing Status - MFJ

. . . . .

It would be great if the forum with help with the following questions.
1. Does the above allocation make sense for a 3-5 year term ? I am torn between digging roots and saving for a down payment (200K-250K), vs. being mobile and investing this for the long term.
z00b wrote:
Sun Jun 03, 2018 3:12 pm
. . . . .
Am I stuck with renting for the long haul and staying out of REITs , while increasing my savings and investments, and eventually moving to a LCOL area where I can buy? Or is there hope to save up for a down payment (200-250K) if I average 35-50K in savings a year?
Risks, costs and allocation.
Since you are thinking of buying a home in 3-5 years, it's important to use very safe savings type vehicles. It's risky to put that money in the stock market, the market might crash and stay down for several years, and the money might not be available when you want to buy your home. This severely limits what you can use for investing your home savings.

For safety it's important to keep duration of CDs, and bond funds, to less than the time until expected home purchase, 3-5 years.

There is also inflation risk, the Federal Reserve Open Market Committee has a target of 2% .

There is also the tax cost, important given your tax bracket of "Federal 33%, State 9.3".

Using less volatile safe investments (like savings accounts CDs, money market funds and short-term bond funds) it will probably not be possible to get a positive real return net of inflation and taxes.

As with any asset allocation decision, this is a very personal decision. You must decide on a way to deal with these risks/costs that is comfortable for you based on your own ability, willingness and need to take risk. I will give you a list of possible choices, from least volatile to more volatile.


Terminology.
In considering SEC Yield, it's important to note that this is "current" yield. The SEC Yield for a money market fund changes frequently, has changed a lot in the last 2 years, and should continue upward with expected continuing rate changes from the Federal Reserve Open Market Committee.

SEC Yield for money market funds and bond funds are different. "The SEC yield is used to compare bond funds because it captures the effective rate of interest an investor may receive in the future." Investopedia, "SEC Yield'

"U.S. money market funds calculate and report a seven-day SEC yield." Morningstar, "SEC Yield'. "Seven day yield is most often calculated for money market funds. This yield includes distributions paid by the fund plus any appreciation over a seven-day period, minus average fees incurred during seven days." Morningstar,
"7 day yield"
.

SEC Yield for a bond fund is computed differently, "Most funds calculate a 30-day SEC yield on the last day of each month". "This calculation is based on a 30-day period ending on the last day of the previous month. It is computed by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period. The figure listed lags by one month. When a dash appears, the yield available is more than 30 days old. This information is taken from fund surveys." Investopedia, "SEC Yield'.

You can find average effective duration and fund composition for each fund on Morningstar. You can find SEC Yield and fund composition for each fund at Vanguard.


List of possibilities.
Here is a list of possibilities for you to consider, from least volatile to more volatile.

1) Federally insured savings accounts or federally insured short-term CDs (3-5 years). For rates see -- www.bankrate.com. Federally insured CDs of around that duration can currently give around 2.9-3.0% interest. Federally insured savings accounts can currently give around 1.65-1.90% interest.

2) Good quality money market funds. Possibilities include:
Vanguard Prime Money Market Fund (VMMXX) current SEC Yield = 2.00%; or
Vanguard California Muni Money Market Fund (VCTXX) current SEC Yield = 1.18%.
(In your tax bracket, "Federal 33%, State 9.3" , of the 2 money market funds the CA Muni would probably be better.

3) A good quality ultra short-term bond fund. A possibility is Vanguard UltraShort Bond Fund (VUBFX), current SEC Yield = 2.32%, average effective duration = 0.98 years. (In your tax bracket, "Federal 33%, State 9.3" , probably better than a money market fund.)


4) A good quality short-term bond fund. Vanguard has several, about 6. Two of those possibilities are:
Vanguard Short-term Investment-Grade Admiral Shares (VFSUX), current SEC Yield = 3.01%, average effective duration = 2.58 years; or
Vanguard Short-term Corporate Bond Index Fund Admiral Shares (VSCSX), current SEC Yield = 3.30%, average effective duration = 2.79 years.
(Because of longer duration probably riskier than a money market or ultrashort-term bond fund, but because of yield probably more likely to give a positive real return.)

5) Vanguard California Intermediate-term Tax-exempt Admiral Shares (VCAIX), current SEC Yield = 2.16%, average effective duration = 5.18 years. (Because of longer duration probably riskier, but because of your tax bracket probably more likely to give a positive real return.)

6) A conservative balanced fund even though containing some stocks, such as:
Vanguard LifeStrategy Income Fund (VASIX) 20% stocks;
Vanguard Target Retirement Income Fund (VTINX) 30% stocks;
Vanguard Wellesley Income Fund Admiral Shares (VWIAX) 37% stocks; or
Vanguard LifeStrategy Conservative Growth Fund (VSCGX) 40% stocks.



An idea for you to consider.
I am reluctant to give any type of suggestion. I have no knowledge of the California real estate market, or the real estate market in your particular area. Also there is the possibility that you will be moving (either before or after retirement, or both), and I have no way to assess those possibilities, Continuing to rent may be the better idea.

To combine possible positive real return and safety, you could consider some combination of;
1) one of the four balanced funds I listed, to include some stocks for a possible positive real return;
plus one or two of the less volatile choices, being;
2) a short-term bond fund, current SEC Yield = around 3.30% ;
3) Vanguard California Intermediate-term Tax-exempt Admiral Shares (VCAIX), current SEC Yield = 2.16%, average effective duration = 5.18 years.
4) Vanguard UltraShort Bond Fund (VUBFX), current SEC Yield = 2.32%, average effective duration = 0.98 years;
5) Vanguard California Muni Money Market Fund (VCTXX) current SEC Yield = 1.18%; and
6) Federally insured savings accounts or federally insured short-term CDs (3-5 years), currently give around 1.65-1.90% interest.
.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Hawaiishrimp
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Re: Help - investor starting later in life

Post by Hawaiishrimp » Sat Jun 23, 2018 10:08 pm

As Dave Ramsey said, and I agree, the #1 determining factor to building wealth is Saving Rate. You have not been saving enough to allow you to retire in 12-15 years.

Two things you have to do to address that:
1. Save significantly more
2. Spend less, live below your means

All the SWR, AA, funds to pick, expense ratio are relatively insignificant if you don't save enough for it to make a difference.
I save and invest my money, so money can make money for me, so I don't have to make money eventually.

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ruralavalon
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Re: Help - investor starting later in life

Post by ruralavalon » Sun Jun 24, 2018 7:31 am

Hawaiishrimp wrote:
Sat Jun 23, 2018 10:08 pm
As Dave Ramsey said, and I agree, the #1 determining factor to building wealth is Saving Rate. You have not been saving enough to allow you to retire in 12-15 years.

Two things you have to do to address that:
1. Save significantly more
2. Spend less, live below your means

All the SWR, AA, funds to pick, expense ratio are relatively insignificant if you don't save enough for it to make a difference.
I agree that the savings rate is more important than the fine points of asset allocation, expense ratios, or the exact funds used.

Household earnings are $250k per year, federal and state income taxes total 42%, so net household earnings are $145k per year. Savings for retirement are about $48.5k plus about $24k for a home, for a total of about $72.5k per year. That's a savings rate of about 50%, which is very good in my opinion. (Even if the $250k income is net after taxes that's a savings rate of about 30%, which is still very good in my opinion.)

z00b has estimated $3k per month in retirement spending, or $36k per year.

Current retirement portfolio size is $120k. Saving a total of $72.5k/yr over 12-15 years = around $979k additional over the next 13.5 years. That's around $1,100,000 total retirement savings and home value by retirement time (not even considering any return on retirement investments, or appreciation of the home).

By itself at a 4% withdrawal rate that yields a withdrawal of $44k per year, $8k per year (22%) above their estimated retirement spending. Then add whatever Social Security benefit will received, which is likely to be substantial.

It appears to me that z00b will likely be in good shape to retire in 12-15 years at the spending rate and the savings rate which they indicated.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Hawaiishrimp
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Re: Help - investor starting later in life

Post by Hawaiishrimp » Sun Jun 24, 2018 11:28 pm

ruralavalon wrote:
Sun Jun 24, 2018 7:31 am
Hawaiishrimp wrote:
Sat Jun 23, 2018 10:08 pm
As Dave Ramsey said, and I agree, the #1 determining factor to building wealth is Saving Rate. You have not been saving enough to allow you to retire in 12-15 years.

Two things you have to do to address that:
1. Save significantly more
2. Spend less, live below your means

All the SWR, AA, funds to pick, expense ratio are relatively insignificant if you don't save enough for it to make a difference.
I agree that the savings rate is more important than the fine points of asset allocation, expense ratios, or the exact funds used.

Household earnings are $250k per year, federal and state income taxes total 42%, so net household earnings are $145k per year. Savings for retirement are about $48.5k plus about $24k for a home, for a total of about $72.5k per year. That's a savings rate of about 50%, which is very good in my opinion. (Even if the $250k income is net after taxes that's a savings rate of about 30%, which is still very good in my opinion.)

z00b has estimated $3k per month in retirement spending, or $36k per year.

Current retirement portfolio size is $120k. Saving a total of $72.5k/yr over 12-15 years = around $979k additional over the next 13.5 years. That's around $1,100,000 total retirement savings and home value by retirement time (not even considering any return on retirement investments, or appreciation of the home).

By itself at a 4% withdrawal rate that yields a withdrawal of $44k per year, $8k per year (22%) above their estimated retirement spending. Then add whatever Social Security benefit will received, which is likely to be substantial.

It appears to me that z00b will likely be in good shape to retire in 12-15 years at the spending rate and the savings rate which they indicated.
I agree the plan is feasible if OP only need ~$36k - $40k per year expense.
I save and invest my money, so money can make money for me, so I don't have to make money eventually.

z00b
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Re: Help - investor starting later in life

Post by z00b » Sun Jul 08, 2018 9:29 pm

ruralavalon wrote:
Thu Jun 21, 2018 8:42 am
The tax-exempt bond fund in the taxable account is in order to get the bond allocation up to 35%. There is room for 27% in your 401k, and the Roth IRA space is valuable space to use for a for a stock index fund.
Thanks @
Hi Ruralavalon, basic question. Will moving all my 401K to bonds result in any sort of taxable event?

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ruralavalon
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Re: Help - investor starting later in life

Post by ruralavalon » Mon Jul 09, 2018 9:13 am

z00b wrote:
Sun Jul 08, 2018 9:29 pm
ruralavalon wrote:
Thu Jun 21, 2018 8:42 am
The tax-exempt bond fund in the taxable account is in order to get the bond allocation up to 35%. There is room for 27% in your 401k, and the Roth IRA space is valuable space to use for a for a stock index fund.
Thanks @
Hi Ruralavalon, basic question. Will moving all my 401K to bonds result in any sort of taxable event?
No.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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