Portfolio Review, Age 31, $1.5 million net worth

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investwisely
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Joined: Thu Aug 15, 2013 10:01 pm

Portfolio Review, Age 31, $1.5 million net worth

Post by investwisely » Sun Aug 05, 2018 7:30 pm

Personal Info
Emergency funds: 1 year
Debt: None
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
Age: 31

Desired asset allocation:
16% bonds
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

Taxable
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

401k
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

Roth IRA
3% Vanguard Total Stock Market Index Fund (VTSAX) 0.04% expense

Annual Contributions
$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

Index Investments
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

Miscellaneous
  • 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.
Questions
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!

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permport
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Re: Portfolio Review, Age 31, $1.5 million net worth

Post by permport » Sun Aug 05, 2018 7:31 pm

Age 31 and $1.5 million net worth... all I'm going to say is this: Good for you! Holy crap. :shock: :shock: :shock:
Buy right and hold tight.

HEDGEFUNDIE
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Joined: Sun Oct 22, 2017 2:06 pm

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by HEDGEFUNDIE » Sun Aug 05, 2018 7:33 pm

Consider FIRE-ing

aristotelian
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Re: Portfolio Review, Age 31, $1.5 million net worth

Post by aristotelian » Sun Aug 05, 2018 7:45 pm

Looks great. I will take a stab at a couple of your questions.

Muni Bonds - Generally a great way of getting tax free steady income without too much risk. My only question would be how they play with AMT. Even setting aside AMT, you may want to hold California Intermediate Tax Exempt just for the state tax benefit.

Will - Who are your beneficiaries? I had a wealthy uncle who died intestate with no next of kin. He left several of his accounts TOD to my kids. It was an incredible gift but a major hassle. It would have been so much easier if he had left a will. It really depends on what you would want done with the money, but listing the beneficiaries on the accounts would be a good start, and definitely name an executor if you do not have next of kin.

Charity - It always makes sense to donate appreciated shares. It makes even more sense to group your donations in years that you exceed the standard deduction. A Donor Advised Fund can make this easier.

Tax loss harvesting - It's always worthwhile. The most you can claim in any one year is $3K but unclaimed losses can carry over to future years. $1K would be enough for me. I am sure I have done less.

investwisely
Posts: 8
Joined: Thu Aug 15, 2013 10:01 pm

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by investwisely » Sun Aug 05, 2018 7:49 pm

HEDGEFUNDIE wrote:
Sun Aug 05, 2018 7:33 pm
Consider FIRE-ing
Yeah I'd consider that at some point. If I were to plan to retire at age 40, how should that change my portfolio/investment strategy?

I think any sort of planning around FIRE would be challenging right now since I'm not settled down at all and my life circumstances / living expenses are likely to change a lot. For example I'm single, rent, and am likely to change cities in the next few years. If I were to get married and have children, that would also massively change things.

For the short term, as long as I'm single, I'll plan on living in high cost of living cities with a lot of other young people, so this would preclude FIRE.

I'm not sure if I'd end up retiring early, but I could see my self taking a year off work to travel or hike and do other adventures. I could also see myself downshifting to a lower stress job that only takes 15-30 hours per week.

HEDGEFUNDIE
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Re: Portfolio Review, Age 31, $1.5 million net worth

Post by HEDGEFUNDIE » Sun Aug 05, 2018 7:56 pm

investwisely wrote:
Sun Aug 05, 2018 7:49 pm
HEDGEFUNDIE wrote:
Sun Aug 05, 2018 7:33 pm
Consider FIRE-ing
Yeah I'd consider that at some point. If I were to plan to retire at age 40, how should that change my portfolio/investment strategy?

I think any sort of planning around FIRE would be challenging right now since I'm not settled down at all and my life circumstances / living expenses are likely to change a lot. For example I'm single, rent, and am likely to change cities in the next few years. If I were to get married and have children, that would also massively change things.

For the short term, as long as I'm single, I'll plan on living in high cost of living cities with a lot of other young people, so this would preclude FIRE.

I'm not sure if I'd end up retiring early, but I could see my self taking a year off work to travel or hike and do other adventures. I could also see myself downshifting to a lower stress job that only takes 15-30 hours per week.
The last part is key. Assuming you are a SWE there are plenty of opportunities to code for clients on an ad-hoc basis, and you could easily cover your annual expenses, and keep your skills sharp in the meantime.

And then you would want to shift your portfolio from accumulation mode to preservation mode, perhaps 1/3 to 1/2 bonds.

am
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Joined: Sun Sep 30, 2007 9:55 am

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by am » Sun Aug 05, 2018 8:44 pm

permport wrote:
Sun Aug 05, 2018 7:31 pm
Age 31 and $1.5 million net worth... all I'm going to say is this: Good for you! Holy crap. :shock: :shock: :shock:
Agree with above. Just avoid major mistakes and you’ll be fine.

A lot of these types on here who are probably in the top half of 1% wealth for their age. I went to the city data retirement forum and it s a different type of crowd. Maybe more typical than here.

Bacchus01
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Joined: Mon Dec 24, 2012 9:35 pm

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by Bacchus01 » Sun Aug 05, 2018 9:23 pm

Just something to consider, but in 2006 at the age of 33, my wife and I had hit a net worth of just over $1M.

When the recession hit, we went down and did not get back to $1M until late 2012. It took 4+ years. Be careful.

Good luck!

jenw930
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Re: Portfolio Review, Age 31, $1.5 million net worth

Post by jenw930 » Sun Aug 05, 2018 9:46 pm

Excellent job OP. I’m new to BH but have been around a few blocks with charitable donations and estate planning.

1. YES do a will. Better yet, get a trust and retitle your assets before it gets more complex. A simple trust costs under $2k and the hassle is SO worth it in the long run. The thought process of where you want things to go when you die will help you clarify the things you are passionate about in life. If you don’t have family to inherit, consider a few favorite causes. ACLU and Southern Poverty Law Center if you are passionate about justice, Sierra Club if you are passionate about environmental issues. I like elephants and have listed the Dame Sheldrick Wildlife Trust in Kenya. Raises Texas is doing amazing work at the borders reuniting families etc. You don’t have to be too specific, 4 charities at 25% each.

2. Give while you are alive to enjoy it. Giving back is an amazing experience. We support a STEM program at my Dad’s high school and scholarships for people wanting to be teachers, food pantries, a local youth center and interfaith justice ministries. There are limitations on giving appreciated stock versus giving cash so keep that in mind If you have low AGI years. Find a cause and support it. They need you!

3. Renters insurance is the cheapest one out there. I would recommend an umbrella as well due to your high net worth. I also recommend that everyone add $25k of medical payments on their auto insurance. It is super cheap and If you are in an accident, it takes a ton of hassle out of your treatments...let your auto insurance company battle with the other insurance companies once they figure out fault.

So many people don’t think about what ifs...in Florida, if you have more than $10k in assets when you die, even with a will, your estate goes to probate aka lawyer fee bonanza. Spend the $ to do a trust.

And find a good CPA (and estate/tax attorney) immediately. The best ones will augment your knowledge and support whatever level of involvement you choose. I am an accountant but still send the CPA numbers about 9 months into the year to make sure my tax planning is on track. There are a crap ton of crappy ones out there so go through recommendations or professional organizations to find them and interview several to find a good fit. You also could use a good insurance broker. Be very wary though of financial planners and other professionals who see you as a ticket to generate fees. Get lump sum pricing to do everything and is something seems too good to be true...it is.

Best of luck on your path!
Jen

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BeBH65
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Re: Portfolio Review, Age 31, $1.5 million net worth

Post by BeBH65 » Mon Aug 06, 2018 4:21 am

Related to emergency fund: our wiki has a page devoted to this that contains a lot of information. Maybe a multi-tier emergency fund would be suitable for you?

The page on donor advised funds has info that could be of use to you on donating shares.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

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car733
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Re: Portfolio Review, Age 31, $1.5 million net worth

Post by car733 » Mon Aug 06, 2018 9:06 am

investwisely wrote:
Sun Aug 05, 2018 7:30 pm
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?
There are no rules for TLH. The best answer I have read so far is: "do it when you feel it makes sense".
I am using a robo-advisor for a big portion of my portfolio and TLHs happen every single day. Sometimes it's just cents.

Some months ago, I opened a Vanguard account and I am manually doing TLH. When? Honestly, every time I see red and I can do the trade without commision.

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BolderBoy
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Re: Portfolio Review, Age 31, $1.5 million net worth

Post by BolderBoy » Mon Aug 06, 2018 10:22 am

aristotelian wrote:
Sun Aug 05, 2018 7:45 pm
I had a wealthy uncle who died intestate with no next of kin. He left several of his accounts TOD to my kids. It was an incredible gift but a major hassle.
Why? TOD/BOD/POD is the preferred, no-hassle method of transferring assets out of an estate.

If the OP can structure his estate such that everything is passed by TOD/BOD/POD then having a Will is largely passe.

IANAL.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

aristotelian
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Re: Portfolio Review, Age 31, $1.5 million net worth

Post by aristotelian » Mon Aug 06, 2018 11:08 am

BolderBoy wrote:
Mon Aug 06, 2018 10:22 am
aristotelian wrote:
Sun Aug 05, 2018 7:45 pm
I had a wealthy uncle who died intestate with no next of kin. He left several of his accounts TOD to my kids. It was an incredible gift but a major hassle.
Why? TOD/BOD/POD is the preferred, no-hassle method of transferring assets out of an estate.

If the OP can structure his estate such that everything is passed by TOD/BOD/POD then having a Will is largely passe.

IANAL.
You still need an executor to be able to do stuff like get a death certificate, dispose of the body, etc. In our case, the deceased had no next of kin in the U.S. It took us 3-4 months to be able to get a death certificate, during which time the accounts were frozen and the body stayed in the mortuary. (His ex-wife, my aunt, was not even authorized to cremate his body or get a death certificate). Once we got the death certificate, the accounts transferred quickly.

OP is single with no kids, so this could become an issue.

investwisely
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Re: Portfolio Review, Age 31, $1.5 million net worth

Post by investwisely » Tue Aug 07, 2018 2:30 am

Thanks everyone for the responses!
jenw930 wrote:
Sun Aug 05, 2018 9:46 pm
1. YES do a will. Better yet, get a trust and retitle your assets before it gets more complex. A simple trust costs under $2k and the hassle is SO worth it in the long run. The thought process of where you want things to go when you die will help you clarify the things you are passionate about in life. If you don’t have family to inherit, consider a few favorite causes. ACLU and Southern Poverty Law Center if you are passionate about justice, Sierra Club if you are passionate about environmental issues. I like elephants and have listed the Dame Sheldrick Wildlife Trust in Kenya. Raises Texas is doing amazing work at the borders reuniting families etc. You don’t have to be too specific, 4 charities at 25% each.
Wow, I had no idea that probate in California was so expensive. Apparently probate attorney fees are defined by law and with a gross value of $1.5 million estate, that would be a required $28k in fees.
BolderBoy wrote:
Mon Aug 06, 2018 10:22 am
TOD/BOD/POD is the preferred, no-hassle method of transferring assets out of an estate.

If the OP can structure his estate such that everything is passed by TOD/BOD/POD then having a Will is largely passe.

IANAL.
It's likely I will move out of California sometime in the next 6 months to a few years. It sounds like a lot of this law is California specific and I don't think it would make sense to spend thousands of dollars if I will move shortly and it becomes worthless.

I will definitely go make sure I have beneficiaries set up on all of my accounts. I'll talk to my parents about how they set up their will. I may go with a LegalZoom or other cheap option unless there are strong reasons not to.

For fun I looked at acturial tables and I have a 0.9% chance of dying in the next 5 years, though its likely less for me since I'm healthy.
car733 wrote:
Mon Aug 06, 2018 9:06 am
There are no rules for TLH. The best answer I have read so far is: "do it when you feel it makes sense".
That's too bad. I was planning to code up a system to automatically tell me when to do it. If I can't automate something, or at least automate sending me reminders it's very unlikely to get done.
jenw930 wrote:
Sun Aug 05, 2018 9:46 pm
And find a good CPA (and estate/tax attorney) immediately. The best ones will augment your knowledge and support whatever level of involvement you choose. I am an accountant but still send the CPA numbers about 9 months into the year to make sure my tax planning is on track. There are a crap ton of crappy ones out there so go through recommendations or professional organizations to find them and interview several to find a good fit. You also could use a good insurance broker. Be very wary though of financial planners and other professionals who see you as a ticket to generate fees. Get lump sum pricing to do everything and is something seems too good to be true...it is.
I agree there are a lot of bad CPAs. My coworker's CPA decided not to worry about declaring wash sales, and so his new CPA had to go and refile years worth of tax returns.

Do I just go and tell the CPA I want him to review my previous tax return and see if there is anything he can do to optimize my situation? Any idea how much this would cost? Although I very much dislike doing my taxes, I feel like it is worthwhile because no one cares more about my money than I do, and learning how tax works is very valuable. I would actually be interested in reading a few books to better understand tax.

I'm just concerned that I'd spend $2k, they wouldn't have any good advice and I'd be out my money. For example I talked with a professional advisor through Vanguard and didn't get much out of the meeting.

I still haven't heard any specific examples from people in my general situation of how a CPA saved them money. I may at some point just do it for the chance that they find something.

mayhapbh
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Re: Portfolio Review, Age 31, $1.5 million net worth

Post by mayhapbh » Tue Aug 07, 2018 2:53 am

investwisely wrote:
Tue Aug 07, 2018 2:30 am
I would actually be interested in reading a few books to better understand tax.
Consider this one.
This post is not advice of any kind -- legal, financial, etc. -- and you should not rely on it.

MrJones
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Re: Portfolio Review, Age 31, $1.5 million net worth

Post by MrJones » Tue Aug 07, 2018 3:27 am

investwisely wrote:
Tue Aug 07, 2018 2:30 am
Thanks everyone for the responses!


Wow, I had no idea that probate in California was so expensive. Apparently probate attorney fees are defined by law and with a gross value of $1.5 million estate, that would be a required $28k in fees.

It's likely I will move out of California sometime in the next 6 months to a few years. It sounds like a lot of this law is California specific and I don't think it would make sense to spend thousands of dollars if I will move shortly and it becomes worthless.

I will definitely go make sure I have beneficiaries set up on all of my accounts. I'll talk to my parents about how they set up their will. I may go with a LegalZoom or other cheap option unless there are strong reasons not to.
Setting up beneficiaries is the key. As you already seem to know, things left to beneficiaries do not come under the will or probate generally. With beneficiaries, a will is just a backup and document. IANAL.

Luke Duke
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Re: Portfolio Review, Age 31, $1.5 million net worth

Post by Luke Duke » Tue Aug 07, 2018 10:55 am

investwisely wrote:
Tue Aug 07, 2018 2:30 am

For fun I looked at acturial tables and I have a 0.9% chance of dying in the next 5 years, though its likely less for me since I'm healthy.
Someone your age is orders of magnitude more likely to die as a result of an accident than as a result of poor health. Those numbers probably change when you get into your 50's.

megabad
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Re: Portfolio Review, Age 31, $1.5 million net worth

Post by megabad » Tue Aug 07, 2018 5:07 pm

investwisely wrote:
Sun Aug 05, 2018 7:30 pm
Questions
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.
I didn't spend much time looking at your portfolio since it looked great after a quick glance. Only thing that stood out was the Total Bond in taxable and you are clearly considering munis below. If you can get more tax advantaged space, than I would (megabackdoor roth, hsa, marriage!?, etc)

1. Municpal bonds?
Would holding munipical bonds make sense in my situation? {color=red]Probably yes. You are holding bonds in taxable and you are at 46% marginal rate.[/color]

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. You should always consider risks and you have wisely identified this as one. You stated you are planning to move. This inclines me to recommend the non state specific int term muni fund instead of CA.

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. With respect to federal taxes, no it is not harder. It is 3% of your portfolio now, but at your contribution rate, it will grow rapidly if you choose to maintain your current allocations.

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? I am not a huge fan, but if you decide to go this route, I recommend Int Brokers. I would use your argument against you. Why go thru this to net a few thousand each year when you are bringing in $500k a year? Not worth the trouble in my book unless you operate with major sporadic cashflow needs (ie. side business).

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?
My insurer will not provide umbrella without car insurance. I recommend you obtain non-owner auto insurance (really should have this regardless) and then add an umbrella on top. Unless you have a high profile profession, you are extremely low risk, but I like to overinsure a little myself. For various reasons, I will always carry all of my insurance lines with the same provider. Suggest you review AM Best and Consumer Reports ratings for companies.

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.
I am not sure what you want to do here? Vanguard has autoinvest? Or do you mean your RSU transactions?

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?
Always makes sense to donate appreciated shares. Others have addressed but with DAF, you can control the timing as needed. Why pay taxes when you don't have to?

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.
Assuming you are not lucky enough to have everything at the same broker (few are), then I use a spreadsheet. Not a sexy answer, but the truth. Make sure you told Vanguard to track basis in your selected manner or they will report average cost basis to IRS.

7. Get a will?
I don't have a will. I have no children or a spouse. Is one necessary for my situation?
I would recommend getting DPOA/medical directive. The will usually comes with those in my experience.

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.
You sound like you already know more than most CPAs that I have encountered. I wouldn't invest in one unless you had a relatively complicated K-1 or business situation. Just make sure you check your withholding every quarter (not just year), I have seen people get audited over quarterly payment issues and form 2210 issues even when they were fully paid on the annual basis.

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?
No rules per se but everyone has different preferences and concerns. Obviously one of the big pitches of the major robo advisors is TLH and that would automate much of it. However, there are pluses and minuses to using robo-advisors.

Thanks a lot!

dkb140
Posts: 42
Joined: Mon May 21, 2018 3:30 pm

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by dkb140 » Tue Aug 07, 2018 5:32 pm

My company will plan on adding after tax 401k contributions in 6 months which I will look into and likely take advantage of.
Does your 401k plan allow in-service non-hardship distributions? If so, have you considered mega-backdoor roth contributions? That would allow you to add around $35,000/year to your Roth.

Couple more years and I'd be looking at the door!

schrute
Posts: 221
Joined: Wed Nov 05, 2014 2:27 pm

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by schrute » Wed Aug 08, 2018 6:17 pm

investwisely wrote:
Sun Aug 05, 2018 7:30 pm
Personal Info
Emergency funds: 1 year
Debt: None
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
Age: 31

Desired asset allocation:
16% bonds
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

Taxable
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

401k
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

Roth IRA
3% Vanguard Total Stock Market Index Fund (VTSAX) 0.04% expense

Annual Contributions
$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

Index Investments
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

Miscellaneous
  • 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.
Questions
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!
$1.5M is how much pre-tax?

investwisely
Posts: 8
Joined: Thu Aug 15, 2013 10:01 pm

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by investwisely » Thu Aug 09, 2018 2:28 am

mayhapbh wrote:
Tue Aug 07, 2018 2:53 am
investwisely wrote:
Tue Aug 07, 2018 2:30 am
I would actually be interested in reading a few books to better understand tax.
Consider this one.
Thanks I'll check it out.

megabad wrote:
Tue Aug 07, 2018 5:07 pm
2. Margin loan for emergency fund liquidity?
...
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? I am not a huge fan, but if you decide to go this route, I recommend Int Brokers. I would use your argument against you. Why go thru this to net a few thousand each year when you are bringing in $500k a year? Not worth the trouble in my book unless you operate with major sporadic cashflow needs (ie. side business).
Even in good years I don't make $500k. I estimate setting this up would maybe take an average of 1 hour a year. Over 10 years with some reasonable assumptions, I would end up making $3k per hour.

I'm frugal (maybe overly so) and sometimes take public transit. If I set this up, it will cover me taking an Uber whenever I want and it would save me a lot more time.
megabad wrote:
Tue Aug 07, 2018 5:07 pm
investwisely wrote:
Sun Aug 05, 2018 7:30 pm
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.
I am not sure what you want to do here? Vanguard has autoinvest? Or do you mean your RSU transactions?
Some months after my stock is automatically sold, it ends up being worth $X. Other months it might be worth $2X or $0.5X. The number of shares vesting and stock price vary each month. I can set up auto investments but only for a fixed dollar amount each month which doesn't work here.
dkb140 wrote:
Tue Aug 07, 2018 5:32 pm
My company will plan on adding after tax 401k contributions in 6 months which I will look into and likely take advantage of.
Does your 401k plan allow in-service non-hardship distributions? If so, have you considered mega-backdoor roth contributions? That would allow you to add around $35,000/year to your Roth.
My company is planning on adding after tax 401k contributions in 6 months which I will look into and likely take advantage of.

megabad
Posts: 507
Joined: Fri Jun 01, 2018 4:00 pm

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by megabad » Thu Aug 09, 2018 9:07 am

investwisely wrote:
Thu Aug 09, 2018 2:28 am
megabad wrote:
Tue Aug 07, 2018 5:07 pm
2. Margin loan for emergency fund liquidity?
...
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? I am not a huge fan, but if you decide to go this route, I recommend Int Brokers. I would use your argument against you. Why go thru this to net a few thousand each year when you are bringing in $500k a year? Not worth the trouble in my book unless you operate with major sporadic cashflow needs (ie. side business).
Even in good years I don't make $500k. I estimate setting this up would maybe take an average of 1 hour a year. Over 10 years with some reasonable assumptions, I would end up making $3k per hour.

I'm frugal (maybe overly so) and sometimes take public transit. If I set this up, it will cover me taking an Uber whenever I want and it would save me a lot more time.
I might still argue that it is small drop in the bucket, but to each his/her own. Once again though, while Schwab may be convenient, last I checked their margin rates were very high. So if you actually intend to use margin, I might lean toward a low cost broker instead. In many cases, interest rates for HELOCs, personal loans, and even some credit cards are actually lower than margin rates at the expensive houses.

book lover
Posts: 141
Joined: Thu Aug 23, 2012 4:01 pm

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by book lover » Thu Aug 09, 2018 9:12 am

Definitely get the umbrella insurance, we have coverage through State Farm and have had it for twenty eight years.

schrute
Posts: 221
Joined: Wed Nov 05, 2014 2:27 pm

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by schrute » Fri Aug 10, 2018 8:28 am

book lover wrote:
Thu Aug 09, 2018 9:12 am
Definitely get the umbrella insurance, we have coverage through State Farm and have had it for twenty eight years.
How much is it annually and what does it protect you against?

Lafder
Posts: 3773
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by Lafder » Fri Aug 10, 2018 9:15 am

Lot's of great comments already !

I am commenting on your taxable holdings to be sure you understand the redundancy. You may want to just keep what you have to not have any capital gains taxes to pay to change. You can simplify.

You say you want 80% stocks, at market weight, and 30% International, and 20 % bonds. This is very reasonable. Vanguard increased their recs to 30-50% International. Some people (Bogle and Buffett for example) say International is unnecessary since US companies have international presence. You are solidly in the 0=50% window at 30% so it is fine! Only time will tell what the "best" International % was :)

Your 80/20, 30% of stocks International would be

56% Total stock Market
24% International Stock Market
20% US bond Market

There is no need to hold more than a total stock market fund as your US stock holdings. Sometimes an employer account doesn't give such an option and you have to use a large cap plus mid and small cap. But if there is a total stock market, it is simpler.


Taxable
24% Vanguard 500 Index Fund (VFIAX), 0.05% expense ((This is the biggest of the big companies, the Large cap companies))

7% Vanguard Extended Market Index Fund (VEXAX) 0.08% expense ((This is small and mid cap companies))

25% Vanguard Total Stock Market Index Fund (VTSAX) 0.04% expense ((This is large, mid, small cap. You only need this one and can drop the 50 0index and extended market index. The lower ER is a plus! I understand it may not be worth selling and owing tax, if you do))

25% Vanguard Total International Stock Index Fund (VTIAX), 0.11% expense
3% Vanguard Total Bond Market Index Fund (VBTLX) 0.05% expense

401k
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
((As this account grows you can add some stock here. You will need bonds in your taxable to hit 20% bonds))

Roth IRA
3% Vanguard Total Stock Market Index Fund (VTSAX) 0.04% expense ((This is what I have in my Roth as it is a small account and I won't need to rebalance there))

It is nice to see so many low cost options!! We hit 100,000 in our early 30s and that felt huge. Wow to your balance at your age.

My mom is in her 70s and has done her own taxes all of these years. She says why would she gather the info then pay an accountant to enter the numbers ? I tried my own taxes but it was too intimidating for me even with turbo tax. It may be worth a few 100 to have an accountant look over your tax returns and see if they can spot anything. If not, keep doing it. If yes, consider if you can use their suggestions and keep doing it on your own. I know you will understand the forms better if you are the one doing them!

I agree that you can simplify your estate planning with POD/TOD holdings when allowed as well as by designating beneficiaries on accounts where allowed. But even a very simple will (my state allows handwritten with non beneficiary witnesses signing) will make it much easier to settle your estate if you die. Because no will could mean there is a will and they just can not find it yet.....

lafder

User avatar
BolderBoy
Posts: 4024
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Location: Colorado

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by BolderBoy » Sun Aug 12, 2018 9:56 am

aristotelian wrote:
Mon Aug 06, 2018 11:08 am
You still need an executor to be able to do stuff like get a death certificate, dispose of the body, etc.
The "appointment" of an executor is a judicial act. If a Will is not presented and accepted for probate, there is no executor appointed. This does not mean that someone (personal representative, not judicially appointed) cannot wind up the decedents affairs.

My mother's Will was not presented for probate, no executor was appointed and her estate was completely settled with BOD/TOD/POD designations on all assets.

Some states may make this route impossible.

IANAL.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

student
Posts: 2524
Joined: Fri Apr 03, 2015 6:58 am

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by student » Sun Aug 12, 2018 10:06 am

Congratulations. You are in the top 1% of your age group (net worth not including home equity).

aristotelian
Posts: 4611
Joined: Wed Jan 11, 2017 8:05 pm

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by aristotelian » Sun Aug 12, 2018 11:49 am

BolderBoy wrote:
Sun Aug 12, 2018 9:56 am
aristotelian wrote:
Mon Aug 06, 2018 11:08 am
You still need an executor to be able to do stuff like get a death certificate, dispose of the body, etc.
The "appointment" of an executor is a judicial act. If a Will is not presented and accepted for probate, there is no executor appointed. This does not mean that someone (personal representative, not judicially appointed) cannot wind up the decedents affairs.

My mother's Will was not presented for probate, no executor was appointed and her estate was completely settled with BOD/TOD/POD designations on all assets.

Some states may make this route impossible.

IANAL.
I may be confusing PR and executor. In my case, the decedent did not have obvious next of kin so we could not get a death certificate in order to transfer the TOD accounts until a PR was appointed. That was a 3-4 month process. Since OP is single and no kids, this could be a concern.

dkb140
Posts: 42
Joined: Mon May 21, 2018 3:30 pm

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by dkb140 » Mon Sep 17, 2018 5:51 pm

1. Municpal bonds?
2. Margin loan for emergency fund liquidity?
3. Renters insurance? Umbrella policy?
4. Reminders / Automate investments with variable monthly amounts?
5. Donate appreciated shares?
6. Tracking tax lots?
7. Get a will?
8. Hire a CPA?
9. Tax loss harvesting?
1. Yes, in your tax bracket with your taxable holdings I think a tax-exempt bond fund might make sense.
3. Yes, get renter's & an umbrella policy. You have a lot of assets for people to come after.
4. My first thought is to do it regularly, like once a month at the beginning, end, or whenever you will remember. If it's less frequent then maybe set calendar reminders.
5. For me charity starts close to home. I'd be thinking $15k/year (or whatever the gift tax limit goes up to) to my parents & siblings. Maybe 529 accounts for my nieces and nephews.
7. Yes, get a will. If you have anyone you care about & don't want the state deciding for you, get a will.
8. Yes, in your tax bracket a CPA could likely save you much more than they cost.

It sounds like you're in great shape. I'd be trying to stuff as much as possible into tax-advantaged accounts, maxing out everything I could: HSA, 401k (or Roth 401k if allowed) backdoor roth, mega backdoor roth, Simple/SEP if you have any self-employment income, any other tax-advantaged accounts you can find.

Only other thought, maybe up your bond allocation a little since you haven't adjusted it in 5 years.

Thesaints
Posts: 1619
Joined: Tue Jun 20, 2017 12:25 am

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by Thesaints » Mon Sep 17, 2018 6:13 pm

1. Municipal bonds?
2. Margin loan for emergency fund liquidity?
3. Renters insurance? Umbrella policy?
4. Reminders / Automate investments with variable monthly amounts?
5. Donate appreciated shares?
6. Tracking tax lots?
7. Get a will?
8. Hire a CPA?
9. Tax loss harvesting?
1. Those two funds have similar duration, but very different credit risk profiles. However, their average risk is pretty much the same, for what it is worth (when risk is involved, averages are a lot less meaningful than extremes).
The short answer would be to go with the highest after-tax YTM, in any case.

2. A margin loans ? How much money do you anticipate you could need from one day to the next ? How much reduced could your portfolio performance be if you kept 1% of it in cash (which can mean a Savings Bond, for instance) ?

3. If you hit the wrong person while cycling, yes some sort of coverage could be good. Covering 1 million is more than enough, IMO. Before getting to your money, claimants first have to exhaust the insured capital and those insurance company lawyers are a tough bunch.

4. Setting a reminder is a lot simpler than devising some automated investment contraption. It takes the same effort to reinvest dividends on the next day, or 4 months later.

5. Why would you want to donate 100k at your age ???

6. I bet you can put together an excel sheet yourself. Manually enter your purchases and when you need to sell list in order of appreciation and date.
Believe it or not, you are not transacting that much.

7. If you like, sure. Who do you think it would advantage ?

8. That depends. You can try it for one year and see how much you save.

9. There is no fixed amount. It usually depends on your net worth and greed. If you have 10k, a $100 tax savings sound a lot more relevant than if you have 10M.

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car733
Posts: 100
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Location: Chicago, IL

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by car733 » Mon Sep 17, 2018 7:07 pm

investwisely wrote:
Tue Aug 07, 2018 2:30 am
car733 wrote:
Mon Aug 06, 2018 9:06 am
There are no rules for TLH. The best answer I have read so far is: "do it when you feel it makes sense".
That's too bad. I was planning to code up a system to automatically tell me when to do it. If I can't automate something, or at least automate sending me reminders it's very unlikely to get done.
You can automate and send a reminder. I am in the process of writing it myself. The issue is Vanguard's API :(

software
Posts: 110
Joined: Tue Apr 18, 2017 2:02 pm

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by software » Mon Sep 17, 2018 8:22 pm

investwisely wrote:
Thu Aug 09, 2018 2:28 am
My company is planning on adding after tax 401k contributions in 6 months which I will look into and likely take advantage of.
Surprised no one has brought this up yet, but after tax 401k contributions are usually only a good idea if your plan also allows in service rollovers, allowing you to take advantage of the “mega backdoor Roth”.

Otherwise you have to pay full tax on gains instead of the more favorable LTCG tax on a taxable account.

I’m not sure what your situation is, but thought I’d mention it as some food for thought.

DrivingFun
Posts: 194
Joined: Wed Sep 19, 2007 6:12 pm

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by DrivingFun » Tue Sep 18, 2018 8:24 am

software wrote:
Mon Sep 17, 2018 8:22 pm
investwisely wrote:
Thu Aug 09, 2018 2:28 am
My company is planning on adding after tax 401k contributions in 6 months which I will look into and likely take advantage of.
Surprised no one has brought this up yet, but after tax 401k contributions are usually only a good idea if your plan also allows in service rollovers, allowing you to take advantage of the “mega backdoor Roth”.

Otherwise you have to pay full tax on gains instead of the more favorable LTCG tax on a taxable account.

I’m not sure what your situation is, but thought I’d mention it as some food for thought.
I don't understand what in-service rollovers have to do with Roth 401ks. My understanding is that at the end of employment you can rollover your Roth 401k to a Roth IRA, penalty free. From Trustee to Trustee, without ever holding any check in hand.

Tamalak
Posts: 540
Joined: Fri May 06, 2016 2:29 pm

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by Tamalak » Tue Sep 18, 2018 12:58 pm

Stay single and don't cultivate a drug addiction, and you're set for life :beer

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JoMoney
Posts: 5584
Joined: Tue Jul 23, 2013 5:31 am

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by JoMoney » Tue Sep 18, 2018 1:05 pm

DrivingFun wrote:
Tue Sep 18, 2018 8:24 am
software wrote:
Mon Sep 17, 2018 8:22 pm
investwisely wrote:
Thu Aug 09, 2018 2:28 am
My company is planning on adding after tax 401k contributions in 6 months which I will look into and likely take advantage of.
Surprised no one has brought this up yet, but after tax 401k contributions are usually only a good idea if your plan also allows in service rollovers, allowing you to take advantage of the “mega backdoor Roth”.

Otherwise you have to pay full tax on gains instead of the more favorable LTCG tax on a taxable account.

I’m not sure what your situation is, but thought I’d mention it as some food for thought.
I don't understand what in-service rollovers have to do with Roth 401ks. My understanding is that at the end of employment you can rollover your Roth 401k to a Roth IRA, penalty free. From Trustee to Trustee, without ever holding any check in hand.
"After tax 401k contribution" and "Roth 401k" can be distinctly different situations.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

DrivingFun
Posts: 194
Joined: Wed Sep 19, 2007 6:12 pm

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by DrivingFun » Tue Sep 18, 2018 2:23 pm

JoMoney wrote:
Tue Sep 18, 2018 1:05 pm
DrivingFun wrote:
Tue Sep 18, 2018 8:24 am
software wrote:
Mon Sep 17, 2018 8:22 pm
investwisely wrote:
Thu Aug 09, 2018 2:28 am
My company is planning on adding after tax 401k contributions in 6 months which I will look into and likely take advantage of.
Surprised no one has brought this up yet, but after tax 401k contributions are usually only a good idea if your plan also allows in service rollovers, allowing you to take advantage of the “mega backdoor Roth”.

Otherwise you have to pay full tax on gains instead of the more favorable LTCG tax on a taxable account.

I’m not sure what your situation is, but thought I’d mention it as some food for thought.
I don't understand what in-service rollovers have to do with Roth 401ks. My understanding is that at the end of employment you can rollover your Roth 401k to a Roth IRA, penalty free. From Trustee to Trustee, without ever holding any check in hand.
"After tax 401k contribution" and "Roth 401k" can be distinctly different situations.
Can you give an example? I'm only aware of Roth 401k.

KyleAAA
Posts: 6680
Joined: Wed Jul 01, 2009 5:35 pm
Contact:

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by KyleAAA » Tue Sep 18, 2018 2:32 pm

With a savings rate like that, you might be in a place where you could conceivably retire comfortably in 5 years. Not that I would in your case, but it basically means you could follow pretty much any reasonable strategy and still end up fine, so don't sweat the small stuff. Your portfolio is fine. I would probably get an umbrella policy in your case since you have a lot to lose but would only bother with a will if you have a strong preference for where your money goes after you die.

It's a good time to be in tech and I'd ride that wave a bit longer so long as you can still save in CA and/or get married and decide to settle down into a house.

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bigROI
Posts: 203
Joined: Tue Jun 15, 2010 9:08 am

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by bigROI » Tue Sep 18, 2018 2:56 pm

I would optimize and put all bond funds into retirement accounts and keep the stocks in the taxable. Careful with who you find as a spouse with this kind of net worth. Insist on a prenup or find someone with similar fiscal stability as there could be potential for abuse.

1. Municpal bonds?
I would be very careful to trust the solvency of some cities to hold up under some budget stress that they have.

2. Margin loan for emergency fund liquidity?
I would keep the 6 months of emergency funds in a high yield savings account so you have near instant access as needed

3. Renters insurance? Umbrella policy?
Yes get renters and 2 million umbrella policy.

4. Reminders / Automate investments with variable monthly amounts?
You could setup the reminders but its going to be a lot of work.

5. Donate appreciated shares?
I would save donation till your end game unless you were really compelled. You can give tax from directly from your IRA in some cases and also meet RMD

6. Tracking tax lots?
This is going to be hell and a boon for a CPA unless you are up to getting it all done yourself.

7. Get a will?
Yes, even if its a quicken or cheap package put it in writing with intentions ASAP.

8. Hire a CPA?
Yes one that has real prowise, do some deep interviews and make sure they have the aptitude to do the job.

9. Tax loss harvesting?
A penny saved is much more then a penny earned when you consider the tax/SS/medicare cut.

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JoMoney
Posts: 5584
Joined: Tue Jul 23, 2013 5:31 am

Re: Portfolio Review, Age 31, $1.5 million net worth

Post by JoMoney » Tue Sep 18, 2018 3:01 pm

DrivingFun wrote:
Tue Sep 18, 2018 2:23 pm
JoMoney wrote:
Tue Sep 18, 2018 1:05 pm
DrivingFun wrote:
Tue Sep 18, 2018 8:24 am
software wrote:
Mon Sep 17, 2018 8:22 pm
investwisely wrote:
Thu Aug 09, 2018 2:28 am
My company is planning on adding after tax 401k contributions in 6 months which I will look into and likely take advantage of.
Surprised no one has brought this up yet, but after tax 401k contributions are usually only a good idea if your plan also allows in service rollovers, allowing you to take advantage of the “mega backdoor Roth”.

Otherwise you have to pay full tax on gains instead of the more favorable LTCG tax on a taxable account.

I’m not sure what your situation is, but thought I’d mention it as some food for thought.
I don't understand what in-service rollovers have to do with Roth 401ks. My understanding is that at the end of employment you can rollover your Roth 401k to a Roth IRA, penalty free. From Trustee to Trustee, without ever holding any check in hand.
"After tax 401k contribution" and "Roth 401k" can be distinctly different situations.
Can you give an example? I'm only aware of Roth 401k.
Some 401k's allow after-tax contributions beyond the pre-tax or roth 401k $18k annual limits. It's frequently discussed here, especially with regard to "mega backdoor Roth" if you search on that.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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