Emergency funds: 1 year
Tax filing status: Single
Marginal tax Rate: 35% federal, 10.3% or 11.3% state. I did pay AMT last year.
State of Residence: California
Desired asset allocation:
25% foreign stocks
42% large cap
11% medium cap
6% small cap
I haven't updated my desired asset allocation since I was 26, but I just did 110-age for stocks vs bonds, then 30% of stocks as international, and domestic breakdown the same as the market.
Current retirement assets
Size of portfolio: ~$1.5 Million Dollars
24% Vanguard 500 Index Fund (VFIAX), 0.05% expense
7% Vanguard Extended Market Index Fund (VEXAX) 0.08% expense
25% Vanguard Total Stock Market Index Fund (VTSAX) 0.04% expense
25% Vanguard Total International Stock Index Fund (VTIAX), 0.11% expense
3% Vanguard Total Bond Market Index Fund (VBTLX) 0.05% expense
13% Vanguard Total Bond Market Index Fund (VBTLX) 0.05% expense
Company will match 50% of my contributions up to a total of $1500 in company contributions
3% Vanguard Total Stock Market Index Fund (VTSAX) 0.04% expense
$18.5k 401k, + $1.5k match.
$5.5k Backdoor Roth IRA
$100k - $200k taxable (This can fluctuate a lot based on how well my employer's stock does. I don't differentiate retirement savings vs short term goals)
My company will plan on adding after tax 401k contributions in 6 months which I will look into and likely take advantage of.
Available funds in 401k
Target Retirement Funds
T. Rowe Price Retirement I 2005 Fund I Class TRPFX 7223
T. Rowe Price Retirement I 2010 Fund I Class TRPAX 7183
T. Rowe Price Retirement I 2015 Fund I Class TRFGX 7184
T. Rowe Price Retirement I 2020 Fund I Class TRBRX 6946
T. Rowe Price Retirement I 2025 Fund I Class TRPHX 6947
T. Rowe Price Retirement I 2030 Fund I Class TRPCX 6948
T. Rowe Price Retirement I 2035 Fund I Class TRPJX 6949
T. Rowe Price Retirement I 2040 Fund I Class TRPDX 6950
T. Rowe Price Retirement I 2045 Fund I Class TRPKX 6951
T. Rowe Price Retirement I 2050 Fund I Class TRPMX 6952
T. Rowe Price Retirement I 2055 Fund I Class TRPNX 6953
T. Rowe Price Retirement I 2060 Fund I Class TRPLX 6954
Vanguard Extended Market Index Fund Institutional Shares VIEIX 0856
Vanguard Federal Money Market Fund VMFXX 0033
Vanguard Institutional Index Fund Institutional Shares VINIX 0094
Vanguard Total International Stock Index Fund Institutional Shares VTSNX 1869
Vanguard Total Bond Market Index Fund Admiral Shares VBTLX 0584
Active and Specialty Investments
DFA International Core Equity Portfolio Institutional Class DFIEX 2762
Fidelity® Contrafund® K6 FLCNX 7417
JPMorgan U.S. Small Company Fund Class R6 JUSMX 6780
MFS® Mid Cap Value Fund Class R6 MVCKX 6378
Oppenheimer International Growth Fund Class I OIGIX 5659
PIMCO Income Fund Institutional Class PIMIX 3926
PIMCO Total Return Fund Institutional Class PTTRX 3769
Vanguard Equity Income Fund Admiral Shares VEIRX 0565
- My after tax savings rate is ~70%
- I rent
- I'm likely to move to a different city in a different state sometime in the next few years and currently have no plans to buy a house
- I'm single
- I'm in good health and have good health insurance.
- My savings to annual expenses ratio is 30x-35x.
- I work in tech. A large portion of my total compensation is RSUs which I sell immediately. The stock is very volatile so my annual income can vary.
- I recently sold a bunch of employer stock, so I have cash lying around. I didn't include this in the current asset allocation section since it will be invested shortly.
How does my portfolio look? Many of these questions are more financial planning so if there is a different place for me to ask these questions, let me know.
1. Municpal bonds?
Would holding munipical bonds make sense in my situation? The Finance Buff calculator was confusing to me, but the MorningStar calculator (https://screen.morningstar.com/BondCalc ... Calculator) is simpler.
Do I just type in the SEC yield for:
Vanguard California Intermediate-Term Tax-Exempt Fund Investor Shares (VCAIX) https://investor.vanguard.com/mutual-fu ... view/vcaix
and compare it with this:
Vanguard Intermediate-Term Bond Index Fund Investor Shares (VBIIX) https://investor.vanguard.com/mutual-fu ... file/VBIIX
When I do this it tells me that the municpal is better with a tax equivalent yield of 3.83% compared to the other bond with a yield of 3.28%.
It seems like I need to enter in bonds with similar profiles into the calculator. Both funds have somewhat similar duration/maturity. How do I make sure both funds have similar credit risks?
I read a lot about how California's credit rating is bad. Is this something I should be worried about? Since all of the bonds are in California it seems like it wouldn't be very diversified and could have drastic drops in case there were concerns.
Does owning municipal bonds make filing taxes any harder? It may not be worth even worrying optimizing this at all since only 3% of my portfolio is bonds in taxable accounts.
2. Margin loan for emergency fund liquidity?
My friend is in a similar high income / high savings situation. He has a large amount of invested savings but keeps a much smaller emergency fund of probably a few months worth of expenses. He has money invested in Schwab, and his checking account is set up so that if he overdraws, it gets turned into a margin loan. If this happens he just sells some stock or waits for the next payday, and repays the loan which costs him ~$20 in interest.
He tells me that if I were to keep a smaller emergency fund (maybe $15k or 20k instead of $50k) and invest the extra, then on average, over the course of a decade, I'd make tens of thousands of dollars more and would likely end up paying less than $100 in interest. I already have years worth of expenses in bond funds, so even if the market falls, I could sell those and repay the loan in a few days. I have some money I need to invest so I was thinking of putting it in index funds in Schwab and doing this. How does this sound?
3. Renters insurance? Umbrella policy?
I rent a house with roommates and have no car. The only potentially dangerous thing I do is cycling. I currently don't have renters insurance and was planning on getting some. I've heard that you can typically get liability insurance with a limit of up to $1m for your renters insurance. Should I do that?
Is that much liaibility insurance enough since it is less than my net worth? Does it make sense to get an umbrella policy? How much coverage should I get? Does it typically have to be with the same company you have a different insurance product with? Are there any popular companies in this space I should check out?
4. Reminders / Automate investments with variable monthly amounts?
I have many RSU stock grants and they vest most months. Some grants automatically sell, others I need to sell during an open trading window. Probably the best thing I could do to improve my investment return is to invest it immediately instead of keeping it in cash for a few months until I get around to investing it. It gets tricky since it is a multi-step process of going from brokerage account to checking account to external investment account. Any ideas on how to be better with this other than setting up a monthly calendar reminder?
Ideally there would be a setting where every month any amounts greater than $Xk would be transfered to Vanguard, and Vanguard would then automatically split investment into different funds according to rule I set.
5. Donate appreciated shares?
When does it make sense to donate appreciated shares instead of dollars? Since I've been investing for 10+ years I have plenty of unrealized capital gains. I imagine that if you donate $1000 a year it isn't worth the added hassle, but at $100k it probably is.
Is it better to donate the appreciated shares, or just invest $X less and donate that money instead?
I guess the way to do it would be to use a donor advised fund at a place like Vanguard? I assume that if you are donating securities, it has to be at the same place you hold the securities?
6. Tracking tax lots?
I've been investing for over 10 years, have had over 500 buy and dividend transactions, and haven't sold any non-employer shares yet. I'm under the impression that using specific identification of shares as the cost basis method would save me a lot of money. It seems like it would be a huge hassle but would be worth it.
Is there any recommended way to keep track of the tax lots? I've used GainsKeeper in the past but the annual price is a bit steep.
7. Get a will?
I don't have a will. I have no children or a spouse. Is one necessary for my situation?
8. Hire a CPA?
A lot of my coworkers work with CPA or tax advisors. Would it be worthwhile for me?
I'm comfortible doing it through TurboTax. I have a W2, RSUs, ESPP, 1099-DIV, 1099-INT, 1099-B, Backdoor Roth IRA, AMT. I use GainsKeeper to track wash sales. I frequently use the forms view and make sure I understand how all the numbers are affecting what I owe and I read IRS instructions and guidance. One of my coworkers used H&R Block and I helped him save more than a thousand dollars when I helped him discover that he didn't adjust the cost basis on the ESPP and he was double taxed.
I'm not great about planning and would have had a large tax bill due to having capital gains without withholding, but "luckily" I had capital loss carryovers to offset it. This year I'll make sure to review my taxes late in the year and bump up any paycheck withholding to cover it.
9. Tax loss harvesting?
Given that the market has been going up a lot recently, I don't think I currently have any tax loss harvesting opportunities. Are there any rules of thumb on when it makes sense to tax loss harvest? For example: Only do it if the price has fallen 10% and you harvest at least $5k in losses?
Thanks a lot!