Avoided Ameriprise thanks to this forum! Now what??

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jthomas33
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Joined: Fri Jul 06, 2018 10:07 am

Avoided Ameriprise thanks to this forum! Now what??

Post by jthomas33 » Mon Jul 09, 2018 11:18 am

[Thank you everyone - UPDATED again to include 401k fund options and 50k taxable account as % of portfolio]

Hi All,
First off, I just discovered Bogleheads when doing my due diligence on Ameriprise and based on the horror stories I've read I'm already very grateful for your advice and expertise. This is an amazing community -- thank you to all who contribute.

I'm an investing newbie here, so go easy on me! Long story short... I have been meeting with an Ameriprise advisor (referred by a friend) for the past few months. He is doing a great job on the financial planning side - helping my wife and I get our financial goals in order and set a plan for retirement, kids college accts, etc. We are paying a small monthly fee for this service which I am fine with (for now). However, when it came time for him to pitch their portfolio management with a 1.5% fee I was skeptical. I'm glad I found this site and avoided that mistake, but now that I am committed to doing this myself, I could really use some of your excellent advice.

At a basic level, I want to simplify our retirement accounts and I love the concept of the diversified three-fund portfolio. My wife and I each have a Roth IRA at Fidelity, and in addition, I have a Rollover IRA at Fidelity too (some details below). Since we don't know much about investing, the stocks and funds in our accounts are a random combination of some advice from friends or family over the years and some basic research here and there. I don't have a good handle on any of it and need to dumb it down so it can be more "set it and forget it". I am interested in learning more about investing and taking a more active role, but at this point, the simpler the better.

Age: Late 30's
Current Income: ~$120k combined (set to increase soon, as my wife has been working part-time from home but looking to go back full-time this fall)
Current retirement assets: ~$275k
Cash available: $50k (earmarked for Joint taxable acct below)

His Roth IRA at Fidelity (17% of Total portfolio)
His Rollover IRA at Fidelity (18% of Total)
Her Roth IRA at Fidelity (23% of Total)
Joint taxable at Fidelity (15% of Total)

Her 401k at Empower (27% of Total)
--From former employer, no longer funding. Available options:
TSCIX AMG TimesSquare Small Cap Growth Z 0.99
PMEGX T. Rowe Price Instl Mid-Cap Equity Gr 0.61
N/A BlackRock Equity Index Fund M 0.02
DODBX Dodge & Cox Balanced Fund 0.53
HWSIX Hotchkis and Wiley Small Cap Value I 1.04
PTTRX PIMCO Total Return Instl 0.51
RFGTX American Funds 2040 Trgt Date Retire R6 0.41
RFITX American Funds 2050 Trgt Date Retire R6 0.42
DODGX Dodge & Cox Stock Fund 0.52
JGIRX JPMorgan Intrepid Growth R5 0.71
N/A JPMorgan Stable Value 0.50
MIEIX MFS Instl International Equity 0.71

His 401k at TA (0% of Total)
--401k available through my employer but with no match. Available options:
SSgA U.S. Bond Index Ret Acct 0.04
SSgA S&P Mid Cap Index Ret Acct 0.03
SSgA Russell Small Cap Index Ret Acct 0.04
SSgA International Index Ret Acct 0.05
SSgA Emerging Markets Index Ret Acct 0.10
TA Vanguard Instl Trg Re 2045 0.09

Questions:
1. Should we just sell all positions in our various retirement accounts and start fresh with a three fund approach? Update: Will plan to do this, since all funds are currently in tax-advantaged accounts.
2. Which funds would you recommend, and at what asset allocation? I am thinking 65% stocks, 10% int'l stock, 25% bonds?
3. Beyond the retirement accounts, we have roughly $50k in inheritance that we want to invest (likely in a Fidelity account to keep things in one place). Should we take the same approach as the retirement accounts and invest the $50k in the same three funds at the same asset allocation?

Thank you in advance!
Last edited by jthomas33 on Tue Jul 10, 2018 2:33 pm, edited 2 times in total.

ExitStageLeft
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Re: Avoided Ameriprise thanks to this forum! Now what??

Post by ExitStageLeft » Mon Jul 09, 2018 5:42 pm

Welcome to the forum and give yourselves a pat on the back for averting a very painful lesson in economics.

Since all your assets are in tax-advantaged accounts you can exchange your shares for other funds with no implications. If you're buying Fidelity mutual funds then you'll be able to do that free of charge. Fidelity offers some extremely attractive index funds that have low expenses, allowing you to keep more of your hard-earned savings working for you.

You're in an excellent position to simplify your portfolio, even as it grows bigger and better. There are a few basic things to keep in mind when creating a three-fund portfolio:
1) How much of your portfolio should be in fixed-income or bond assets?
2) For the remaining equities portfolio, what percentage should be in international stocks?
3) Treat all your assets as a single portfolio, and you can then put the assets where they can do you the most good.

You could set up a clean and simple three-fund portfolio using the rollover IRA, the Roth IRAs, and a taxable brokerage account. It would help us immensely to understand what your options are if we know the relatives amounts in each account. This is why the recommended format has you list each asset as a percentage of the overall portfolio, not the percentage of each account. You need to start looking at the big picture, and the easiest way is to edit your post using the pencil icon at the top and change each percentage to it portion of the entire portfolio. If there is $18,000 worth of AAPL in Her Roth IRA, and the sum of all your accounts is $90,000 then the entry for that asset would be:

20% APPLE INC - AAPL

Do either of you have a 401k or other retirement plan that you are contributing to, or have at one time? It really takes a savings rate of at least 15% of income to make saving for retirement practical. Otherwise you may end up working long into your golden years. A 401k or similar plan allows you to save up to $18,500 per year for each of you.

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Duckie
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Re: Avoided Ameriprise thanks to this forum! Now what??

Post by Duckie » Mon Jul 09, 2018 7:51 pm

jthomas33 wrote:Should we just sell all positions in our various retirement accounts and start fresh with a three fund approach?
Yes.
Which funds would you recommend, and at what asset allocation?
I recommend the Three-fund portfolio. At Fidelity that would be:
  • (FSTVX) Fidelity Total Market Index Fund Premium Class (0.035%)
  • (FTIPX) Fidelity Total International Index Fund Premium Class (0.10%)
  • (FSITX) Fidelity U.S. Bond Index Fund Premium Class (0.045%)
Or depending on assets, you might need the slightly more expensive Investor Class shares. Put all the bonds in the tax-sheltered accounts and preferably pre-tax. In general it's better to put assets with higher expected growth (stocks) in Roth accounts and assets with lower expected growth (bonds) in pre-tax accounts. That's because you've already paid the taxes in the Roth accounts so future growth is tax-free.

The asset allocation is going to depend on your age and personal circumstances.
Beyond the retirement accounts, we have roughly $50k in inheritance that we want to invest (likely in a Fidelity account to keep things in one place). Should we take the same approach as the retirement accounts and invest the $50k in the same three funds at the same asset allocation?
No. You don't want bonds in taxable. So total US stock and/or total international stock in taxable.

jthomas33
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Joined: Fri Jul 06, 2018 10:07 am

Re: Avoided Ameriprise thanks to this forum! Now what??

Post by jthomas33 » Tue Jul 10, 2018 9:38 am

Thank you, ExitStageLeft and Duckie, for your quick replies and thoughtful advice. I updated the post to include more details and % of the total portfolio. I did this at the account level as opposed to the asset level, since I will plan to sell all assets within the accounts to move to the three-fund portfolio. I also added some detail from my wife's 401k. I do not have one as the employer I work for currently does not offer a match.

I know I need a lot of help on overall saving/investment strategy, but for now, my focus is on the immediate action: simplifying all investments to "reset" and give me a new starting point to make things more manageable going forward.
ExitStageLeft wrote:
Mon Jul 09, 2018 5:42 pm

You could set up a clean and simple three-fund portfolio using the rollover IRA, the Roth IRAs, and a taxable brokerage account. It would help us immensely to understand what your options are if we know the relatives amounts in each account.
This is exactly what I need, and you are spot on that I need to start thinking big picture. How would you go about treating these multiple accounts (some under my login, some under the wife's) as a single portfolio? I think I understand how to set it up from a pure asset allocation standpoint (once I have my %s), but do you have recommendations for an easy way to view/maintain/rebalance a portfolio consisting of 5+ accounts under different logins?

ExitStageLeft
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Re: Avoided Ameriprise thanks to this forum! Now what??

Post by ExitStageLeft » Tue Jul 10, 2018 12:12 pm

It's fairly common for each person to have three or more retirement accounts. There's not much you can do but consolidate where possible. I don't see that here because each account is unique for its class: traditional IRA, Roth IRA, and 401k. What you can do is allocate your assets strategically so that there is little effort required on your part to monitor and manage the portfolio.

The first thing I would do is decide if a three-fund or a four-fund portfolio is preferred. Some folks even drop down to a two-fund portfolio by eliminating international equities. I'm a three-fund fan myself, so that's what I'll discuss here.

You're approaching a phase in your accumulation career where you should consider a healthy portion of your portfolio be allocated to fixed-income assets such as bonds. You'll need to decide how much based on your need, willingness, and ability to invest in riskier stocks. I'm going to proceed with this analysis with a 25% allocation in bonds. Adjust the ratio from 75/25 to whichever matches your investing plan.

I will further recommend that 33% of your equities assets be invested in international stocks. Then take those ratios and sell off all your existing assets and buy up three total market indexed funds that have low expenses. Thus if you stick with the funds that Duckie identified you would be looking at:

50% Fidelity Total Market Index Fund Premium Class (FSTVX) (0.035%)
25% Fidelity Total International Index Fund Premium Class (FTIPX) (0.10%)
25% Fidelity U.S. Bond Index Fund Premium Class (FSITX) (0.045%)

From this point, you want to start filling up your tax-advantaged space according to the tax-efficiency of the funds. Bonds are generally expected to have a lower return than stocks, so they fit best in a pre-tax account such as a 401k or a traditional IRA. I would assign the bonds to Her 401k, as it has a large enough balance to cover the 25% allocation completely. Because it's a 401k with limited plan options, you may not be able to get FSITX in Her 401k. We'll come back to that in a bit.

For a Roth account, all earnings will be tax-free. This means that you will reduce your future tax obligations by having the highest-earning assets in the Roth accounts. Domestic and international total market stock funds meet that description and are excellent choices. I would place the international stock fund in the Roth IRAs, filling one up 100% with FTIPX and splitting the other with FSTVX.

If you do the above with the allocations I suggest, you would end up with a portfolio that looks like:

His Roth IRA at Fidelity (21% of Total portfolio)
- 21% Fidelity Total Market Index Fund Premium Class (FSTVX) (0.035%)

His Rollover IRA at Fidelity (21% of Total)
- 21% Fidelity Total Market Index Fund Premium Class (FSTVX) (0.035%)

Her Roth IRA at Fidelity (27% of Total)
- 25% Fidelity Total International Index Fund Premium Class (FTIPX) (0.10%)
- 2% Fidelity Total Market Index Fund Premium Class (FSTVX) (0.035%)

Her 401k at Empower (31% of Total)
- 25% Fidelity U.S. Bond Index Fund Premium Class (FSITX) (0.045%)
- 6% Fidelity Total Market Index Fund Premium Class (FSTVX) (0.035%)

Implicit in the above allocation is the assumption that Her 401k has access to those specific Fidelity funds. if not, just about any indexed fund will do as long as it has a diverse collections of holdings and keeps expenses low. If you show us what her options are, or at least the lowest cost bond and stock funds are, then we can hopefully offer informed opinions on what would be a good choice.

You have additional savings opportunities in His 401k as well as a taxable brokerage account. Even without a match the 401k is an excellent vehicle for tax-deferred savings. If you can provide additional info on who the plan provider is or which plans are available, including expense ratios, then we may also be able to offer helpful suggestions for further savings.

pkcrafter
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Re: Avoided Ameriprise thanks to this forum! Now what??

Post by pkcrafter » Tue Jul 10, 2018 12:38 pm

jthomas33 wrote:
Tue Jul 10, 2018 9:38 am
Thank you, ExitStageLeft and Duckie, for your quick replies and thoughtful advice. I updated the post to include more details and % of the total portfolio. I did this at the account level as opposed to the asset level, since I will plan to sell all assets within the accounts to move to the three-fund portfolio. I also added some detail from my wife's 401k. I do not have one as the employer I work for currently does not offer a match.

I know I need a lot of help on overall saving/investment strategy, but for now, my focus is on the immediate action: simplifying all investments to "reset" and give me a new starting point to make things more manageable going forward.
ExitStageLeft wrote:
Mon Jul 09, 2018 5:42 pm

You could set up a clean and simple three-fund portfolio using the rollover IRA, the Roth IRAs, and a taxable brokerage account. It would help us immensely to understand what your options are if we know the relatives amounts in each account.
This is exactly what I need, and you are spot on that I need to start thinking big picture. How would you go about treating these multiple accounts (some under my login, some under the wife's) as a single portfolio? I think I understand how to set it up from a pure asset allocation standpoint (once I have my %s), but do you have recommendations for an easy way to view/maintain/rebalance a portfolio consisting of 5+ accounts under different logins?
You have a couple of options here - 1. Fidelity index funds, and 2. Fidelity Freedom Index funds in a couple of account so you don't have to keep adjusting. The freedom index funds are all-in-one so you don't need to rebalance.

Freedom INDEX funds: Fidelity makes these very hard to find.

https://www.fidelity.com//fund-screener ... pA=0%2C0.5

Fidelity Total stock market premium - FSTVX
Fidelity Total International - FTIPX
Fidelity Total Bond - FTBFX

All accounts as part of one portfolio. That means you don't have to repeat all funds in each account. Total market and total international are premium class, 10k min, but they also come in investor class, $2500 min.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

jthomas33
Posts: 7
Joined: Fri Jul 06, 2018 10:07 am

Re: Avoided Ameriprise thanks to this forum! Now what??

Post by jthomas33 » Tue Jul 10, 2018 3:20 pm

ExitStageLeft wrote:
Tue Jul 10, 2018 12:12 pm
Implicit in the above allocation is the assumption that Her 401k has access to those specific Fidelity funds. if not, just about any indexed fund will do as long as it has a diverse collections of holdings and keeps expenses low. If you show us what her options are, or at least the lowest cost bond and stock funds are, then we can hopefully offer informed opinions on what would be a good choice.

You have additional savings opportunities in His 401k as well as a taxable brokerage account. Even without a match the 401k is an excellent vehicle for tax-deferred savings. If you can provide additional info on who the plan provider is or which plans are available, including expense ratios, then we may also be able to offer helpful suggestions for further savings.
Thanks again. I edited the post to include the option available in both of our 401k accounts. Also simplified the listing of all accounts to remove the current allocations (since they will all be sold off soon) and added the new Joint taxable brokerage account which now accounts for 15% of the portfolio. I am assuming that this 15% should be allocated to the stock funds, based on your advice to keep all bonds in the 401k?

So, I am comfortable with establishing the three-fund approach, but I still have concerns on how to re-balance and maintain my asset allocation over time as we continue to make the maximum contributions to our IRAs and also look to begin funding a 401k.
pkcrafter wrote:
Tue Jul 10, 2018 12:38 pm
All accounts as part of one portfolio. That means you don't have to repeat all funds in each account.
Maybe I'm missing something here, but if a single account contains only a single fund (in the above example, the Rollover IRA only contains "Fidelity Total Market Index Fund Premium Class"), then won't continued contributions to that account eventually throw off the total portfolio asset mix, and I'll be forced to add a bond fund to that account? Or is there a better way to keep the portfolio balanced while also avoiding repeating all funds in each account?

ExitStageLeft
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Re: Avoided Ameriprise thanks to this forum! Now what??

Post by ExitStageLeft » Tue Jul 10, 2018 4:09 pm

EDIT: I just found some data on the Blackrock Equity Index Fund M. Will add a post that proposes a better balance than is shown below.

You're not missing anything. I missed the fact that Her 401k does not have any new contributions. In light of the available funds, you could consider something like the following:

His Roth IRA at Fidelity (17% of Total portfolio)
- 17% Fidelity Total Market Index Fund Premium Class (FSTVX) (0.035%)

His Rollover IRA at Fidelity (18% of Total)
- 18% Fidelity U.S. Bond Index Fund Premium Class (FSITX) (0.045%)

Her Roth IRA at Fidelity (23% of Total)
- 23% Fidelity Total International Index Fund Premium Class (FTIPX) (0.10%)
- 0% Fidelity Total Market Index Fund Premium Class (FSTVX) (0.035%)

Joint taxable at Fidelity (15% of Total)
- 15% Fidelity Total Market Index Fund Premium Class (FSTVX) (0.035%)
- 0% Fidelity Total International Index Fund Premium Class (FTIPX) (0.10%)

Her 401k at Empower (27% of Total)
- 27% BlackRock Equity Index Fund M 0.02

His 401k at TA (0% of Total)
- 0% SSgA U.S. Bond Index Ret Acct 0.04 (20% of contribution)
- 0% TA Vanguard Instl Trg Re 2045 0.09 (80% of contribution)

This is not an ideal allocation for His 401k, as it combines a target date fund with elements of a three-fund portfolio. But with the very limited funds avalable it gives the broadest diversification. You could alternatively invest in the very affordable mid-cap or small-cap funds and balance that with the S&P 500 index fund in the IRAs.

Ideally the automatic contributions in the 401k are consistent with the target allocation you seek, so that there is little need to re-balance the 401k on a regular basis. For the Roth IRAs and taxable, you balance out by purchasing more of a given fund to boost its percentage.

If you implement something like this, your initial allocation would be 59% US stocks, 23% international stocks, and 18% US bonds.

ExitStageLeft
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Re: Avoided Ameriprise thanks to this forum! Now what??

Post by ExitStageLeft » Tue Jul 10, 2018 4:34 pm

I'm assuming the SsgA International fund is sufficiently diverse that it is a auitable replacement for the FTIPX. If you opt for something like the following portfolio and start saving in the 401k you can slowly build up your bonds and international in the 401k. When you get to 25% of the portfolio in international stocks, start exchanging shares in Her Roth IRA from FTIPX to FSTVX.

His Roth IRA at Fidelity (17% of Total portfolio)
- 17% Fidelity Total Market Index Fund Premium Class (FSTVX) (0.035%)

His Rollover IRA at Fidelity (18% of Total)
- 18% Fidelity U.S. Bond Index Fund Premium Class (FSITX) (0.045%)

Her Roth IRA at Fidelity (23% of Total)
- 23% Fidelity Total International Index Fund Premium Class (FTIPX) (0.10%)
- 0% Fidelity Total Market Index Fund Premium Class (FSTVX) (0.035%)

Joint taxable at Fidelity (15% of Total)
- 15% Fidelity Total Market Index Fund Premium Class (FSTVX) (0.035%)
- 0% Fidelity Total International Index Fund Premium Class (FTIPX) (0.10%)

Her 401k at Empower (27% of Total)
- 27% BlackRock Equity Index Fund M 0.02

His 401k at TA (0% of Total)
- 0% SSgA U.S. Bond Index Ret Acct 0.04 (25% of contribution)
- 0% SSgA International Index Ret Acct 0.05 (75% of contribution)

This keeps your expenses extremely low. For the most part the balance can be maintained simply by buying more of the desired fund.

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Duckie
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Re: Avoided Ameriprise thanks to this forum! Now what??

Post by Duckie » Tue Jul 10, 2018 5:47 pm

jthomas33 wrote:Her 401k at Empower
The best options are:
  • BlackRock Equity Index 0.02 -- Large caps, 80% of US stocks
  • PTTRX PIMCO Total Return 0.51 -- US bonds
I'd go with just Equity Index in this account.
His 401k at TA
These are all good options but you don't list a US large cap fund. You must have one. Check again. Also find out if the 401k allows incoming rollovers.
Age: Late 30's
<snip>
I am thinking 65% stocks, 10% int'l stock, 25% bonds
This is reasonable. I'd probably have more international but this will do.

--------------------

The following two examples have an AA of 65% US stocks, 10% international stocks, and 25% bonds. The first has his rollover IRA at Fidelity as is. The second moves the rollover IRA to his new 401k.

Portfolio #1

Joint Taxable at Fidelity -- 15%
15% (FSTVX) Fidelity Total Market Index Fund Premium Class (0.035%)

His 401k at TA -- 0%
0% (N/A) SSgA U.S. Bond Index Ret Acct (0.04%)

Her old 401k at Empower -- 27%
27% (N/A) BlackRock Equity Index Fund Class M (0.02%)

His Rollover IRA at Fidelity -- 18%
18% (FSITX) Fidelity U.S. Bond Index Fund Premium Class (0.045%)

His Roth IRA at Fidelity -- 17%
7% (FSTVX) Fidelity Total Market Index Fund Premium Class (0.035%)
10% (FTIPX) Fidelity Total International Index Fund Premium Class (0.10%)

Her Roth IRA at Fidelity -- 23%
9% (FSTVX) Fidelity Total Market Index Fund Premium Class (0.035%)
7% (FSEVX) Fidelity Extended Market Index Fund Premium Class (0.07%)
7% (FSITX) Fidelity U.S. Bond Index Fund Premium Class (0.045%)

or

Portfolio #2

Joint Taxable at Fidelity -- 15%
15% (FSTVX) Fidelity Total Market Index Fund Premium Class (0.035%)

His 401k at TA -- 18% <-- Includes his rollover IRA.
18% (N/A) SSgA U.S. Bond Index Ret Acct (0.04%)

Her old 401k at Empower -- 27%
27% (N/A) BlackRock Equity Index Fund Class M (0.02%)

His Roth IRA at Fidelity -- 17%
7% (FSTVX) Fidelity Total Market Index Fund Premium Class (0.035%)
10% (FTIPX) Fidelity Total International Index Fund Premium Class (0.10%)

Her Roth IRA at Fidelity -- 23%
9% (FSTVX) Fidelity Total Market Index Fund Premium Class (0.035%)
7% (FSEVX) Fidelity Extended Market Index Fund Premium Class (0.07%)
7% (FSITX) Fidelity U.S. Bond Index Fund Premium Class (0.045%)

My comments:
  • Keep the bonds in the pre-tax accounts, his rollover IRA and his 401k. (I know right now there are bonds in her Roth IRA but that's just temporary until his 401k grows.)
  • The Extended Market in her Roth IRA is to complement the Equity Index in her 401k. Roughly 80% large caps (Equity Index) plus 20% mid/small caps (Extended Market) makes up the total US stock market. You could skip this.
  • The reason for Portfolio #2 is that although you've got plenty of room in your income now, you may need to use the Backdoor Roth IRA method in the future. Moving the rollover IRA to the 401k allows for that method without incurring the dreaded pro-rata rule. Your new 401k options make that move worthwhile.
  • Consider increasing the international AA. Vanguard has found between 20% and 40% of stocks in international to be the "sweet spot". See the Vanguard paper link and the discussion. I usually split the difference and recommend 30% of stocks. With 75% in stocks that would break down to 52% US and 23% international.
Something to think about.
Last edited by Duckie on Wed Jul 11, 2018 7:46 pm, edited 1 time in total.

jthomas33
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Re: Avoided Ameriprise thanks to this forum! Now what??

Post by jthomas33 » Wed Jul 11, 2018 3:19 pm

ExitStageLeft wrote:
Tue Jul 10, 2018 4:34 pm
I'm assuming the SsgA International fund is sufficiently diverse that it is a auitable replacement for the FTIPX. If you opt for something like the following portfolio and start saving in the 401k you can slowly build up your bonds and international in the 401k. When you get to 25% of the portfolio in international stocks, start exchanging shares in Her Roth IRA from FTIPX to FSTVX.

His Roth IRA at Fidelity (17% of Total portfolio)
- 17% Fidelity Total Market Index Fund Premium Class (FSTVX) (0.035%)

His Rollover IRA at Fidelity (18% of Total)
- 18% Fidelity U.S. Bond Index Fund Premium Class (FSITX) (0.045%)

Her Roth IRA at Fidelity (23% of Total)
- 23% Fidelity Total International Index Fund Premium Class (FTIPX) (0.10%)
- 0% Fidelity Total Market Index Fund Premium Class (FSTVX) (0.035%)

Joint taxable at Fidelity (15% of Total)
- 15% Fidelity Total Market Index Fund Premium Class (FSTVX) (0.035%)
- 0% Fidelity Total International Index Fund Premium Class (FTIPX) (0.10%)

Her 401k at Empower (27% of Total)
- 27% BlackRock Equity Index Fund M 0.02

His 401k at TA (0% of Total)
- 0% SSgA U.S. Bond Index Ret Acct 0.04 (25% of contribution)
- 0% SSgA International Index Ret Acct 0.05 (75% of contribution)

This keeps your expenses extremely low. For the most part, the balance can be maintained simply by buying more of the desired fund.
This looks nice and clean, which is a big plus for someone like myself. I am probably just over-thinking the rebalancing (and I assume you put the 0% allocations in there to help me visualize where I could add to my overall positions when balancing. thank you!).

I'm going to also take the good advice from you and Duckie and increase the allocation to international stocks up to 25%.
Duckie wrote:
Tue Jul 10, 2018 5:47 pm
[*]The reason for Portfolio #2 is that although you've got plenty of room in your income now, you may need to use the Backdoor Roth IRA method in the future. Moving the rollover IRA to the 401k allows for that method without incurring the dreaded pro-rata rule. Your new 401k options make that move worthwhile.
I looked into the Backdoor Roth IRA and Pro Rata Rule, but am still not sure as to how moving my funds from the Rollover IRA to the 401k would help me with this in the future. Could you please explain it to me as if you're talking to a 6-year-old? :oops:

ExitStageLeft
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Re: Avoided Ameriprise thanks to this forum! Now what??

Post by ExitStageLeft » Wed Jul 11, 2018 3:33 pm

jthomas33 wrote:
Wed Jul 11, 2018 3:19 pm
...
I looked into the Backdoor Roth IRA and Pro Rata Rule, but am still not sure as to how moving my funds from the Rollover IRA to the 401k would help me with this in the future. Could you please explain it to me as if you're talking to a 6-year-old? :oops:
Michael Kitces covers it pretty well at https://www.kitces.com/blog/the-impact- ... -payments/

Scroll down to the the RothConversion Strategies section.

Because of the aggregation rule and the pro-rata rule, doing a backdoor Roth contribution when you have a traditional IRA results in additional taxes at the time of the conversion and leaves you with a lingering after-tax contribution in the tIRA. If the tIRA is instead rolled into a 401k or 403b account, there is no extra tax and all of the $5,500 is converted into a Roth IRA.

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