Combined Retirement Portfolio

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Invest_Wisely
Posts: 7
Joined: Tue Jan 08, 2019 10:15 am

Combined Retirement Portfolio

Post by Invest_Wisely » Wed Jan 09, 2019 3:46 pm

I'm recently married, and my wife and I are in the process of allocating our combined retirement portfolio. I'd love some thoughts from fellow Bogleheads on how we should invest across our accounts.

First, a little about us:
Me - 36 years old
Her - 31 years old
No debt
5 month emergency fund
Rent but saving to own
Both employed full time
Comparable salaries
24% Marginal Tax Bracket
15% yearly employed sponsored 401k/TSP
Both maxing out Roth IRAs
No kids
One dog :)

Our portfolio:
75% TSP (mine)
16% Fidelity 401k (hers)
7% Vanguard rIRA (mine)
2% Vanguard rIRA (hers)

Right now we're mostly 90/10 stocks/bonds, but that feels high. I tend to be more conservative, so perhaps 70/30 stocks/bonds? With recent market performance, is it wise to keep the 90/10 allocation? I want to make sure I'm taking advantage of the G Fund and lower cost TSP and Fidelity 401k options.

My TSP is currently invested in the Lifecycle L 2050 fund (11% G, 7% F, 40% C, 13% S, 29% I).

In terms of my wife's Fidelity options, here is a look at her fund options and expense ratios:
Target Retirement 2035 @ 0.09%
Target Retirement 2040 @ 0.09%
Target Retirement 2045 @ 0.09%
Target Retirement 2050 @ 0.09%
Total Stock Market Index Fund @ 0.02%
Total International Stock Market Index Fund @ 0.07%
Global Real Estate Stock Index Fund @ 0.1%
Inflation Protected Bond Fund @ 0.02%
Interest Income Fund @ 0.36%
Total Bond Market Fund @ 0.04%
High Yield & Emerging Markets Bond Fund @ 0.34%
Large Company Index Fund @ 0.02%
Large-Cap Growth Index Fund @ 0.03%
Large-Cap Value Index Fund @ 0.03%
Small/Mid-Cap Stock Index Fund @ 0.02%
Small-Cap Growth Index Fund @ 0.04%
Small-Cap Value Index Fund @ 0.04%
European Stock Index Fund @ 0.07%
Pacific Stock Index Fund @ 0.07%
Emerging Markets Stock Index Fund @ 0.11%
Real Estate Investment Trust Index Fund @ 0.08%
International Real Estate Index Fund @ 0.16%
Long-Term Corporate Bond Fund @ 0.11%
*Plus an extensive list of expanded-choice mutual funds*

I'm keeping this rather open-ended since we're just now combining our portfolios. Any thoughts/advice would be greatly appreciated.

carmonkie
Posts: 44
Joined: Fri Jun 29, 2018 4:31 pm

Re: Combined Retirement Portfolio

Post by carmonkie » Wed Jan 09, 2019 4:29 pm

Congrats on the wedding.

If you are getting jitters about the existing market and worries you at night, then your 90/10 allocation might be too high. I think getting married made you realized that you might indeed be taking a bit too much risk and that is OK and re-balancing is in order.

I would start with a gradual move to 80/20 and see how you feel at that point. I made a 5% re-balancing into bonds this past December and it took quite a bit of funds to do so, so be prepared to make that 10-20% jump. There is not a bad time to re-balance, it is bad to stay in the wrong allocation longer than you should.

Once you define you Stocks/Bond allocation, look at the Domestic vs International allocation. For example I am 50 US/30 Int /20 Bonds you need to decide what fits your style.
Here is a great article that talks about where to efficiently place funds. https://www.bogleheads.org/wiki/Tax-eff ... _placement

Your portfolio should look at all the accounts and look as one. I think it is a great thing that both of you are in the same page. While she has great funds to construct a nice 3-fund portfolio, you did not provide enough data as to what is in each account. Maybe she can use her 401K contributions or existing funds to execute on the Bond re-balancing.

bloom2708
Posts: 5237
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Combined Retirement Portfolio

Post by bloom2708 » Wed Jan 09, 2019 4:38 pm

Congrats on getting married.

Your wife has good funds. Here is the 3 fund portfolio. Low, low expenses.

Total Stock Market Index Fund @ 0.02%
Total International Stock Market Index Fund @ 0.07% (Or could be in Roths, use 2 funds in 401k)
Total Bond Market Fund @ 0.04%

20% (or your pick) of stocks in International (of your 75% stock allocation). 25% bonds in 401k + TSP.

I like 75/25 for you guys at this point. Stay in that Age -10 range. Being you are just rolling, 70/30 might be fine. 80/20 would also be very reasonable.

Work toward maxing pre-tax 401k/TSP + 2 x Roth IRA. HSA is another pre-tax place to stash funds and defer tax. Once you can fill these up, then taxable investing and/or saving for the house down payment need to fit in there.

401k/TSP - 25% bond allocation here, balance in stock index funds
Roth - US stocks/and or International stocks
Taxable - US Stocks/and or International stocks
HSA - Depends on options

Look at your portfolio as one entity. You don't need all funds in every account. Roths may have International or Taxable may only have Total US. Adjust your bonds to meet your 25% based on your total portfolio balances.

You are off to a great start.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

02nz
Posts: 912
Joined: Wed Feb 21, 2018 3:17 pm

Re: Combined Retirement Portfolio

Post by 02nz » Wed Jan 09, 2019 4:54 pm

Good advice so far. I'd suggest putting all your investments on lifecycle/target retirement funds, or none. Personally I'd slice and dice, and use the TSP G fund for the entire bond allocation of your portfolio, as it's a uniquely good deal (lots of threads on that if you want to read further). I'd also use TSP for international, as the I Fund costs a bit less than Vanguard and Fidelity's equivalents. (Note that it doesn't currently have exposure to emerging markets, but this will be fixed by the end of the year.)

80/20 or 75/25 are sensible allocations if 90/10 has given you heartburn. You should max HSA first (well, right after maxing the employer match in your 401k/TSP), and then max pre-tax 401k/TSP, then Roth IRAs.

You can take a TSP loan up to $50K (if you have at least $100K in your TSP account) for the home purchase. There are some restrictions (notably, the amount must be repaid within a short time if you leave federal employment, otherwise you owe the early distribution penalty and income taxes). The loan accrues interest at the G Fund's rate, paid into your own account, so it's not invested in the market, but you can adjust your allocation to account for this. I note the TSP loan option as it may be better than scaling back TSP contributions and putting money into taxable for the down payment.

Topic Author
Invest_Wisely
Posts: 7
Joined: Tue Jan 08, 2019 10:15 am

Re: Combined Retirement Portfolio

Post by Invest_Wisely » Thu Jan 10, 2019 10:08 am

02nz wrote:
Wed Jan 09, 2019 4:54 pm
Good advice so far. I'd suggest putting all your investments on lifecycle/target retirement funds, or none. Personally I'd slice and dice, and use the TSP G fund for the entire bond allocation of your portfolio, as it's a uniquely good deal (lots of threads on that if you want to read further). I'd also use TSP for international, as the I Fund costs a bit less than Vanguard and Fidelity's equivalents. (Note that it doesn't currently have exposure to emerging markets, but this will be fixed by the end of the year.)

80/20 or 75/25 are sensible allocations if 90/10 has given you heartburn. You should max HSA first (well, right after maxing the employer match in your 401k/TSP), and then max pre-tax 401k/TSP, then Roth IRAs.

You can take a TSP loan up to $50K (if you have at least $100K in your TSP account) for the home purchase. There are some restrictions (notably, the amount must be repaid within a short time if you leave federal employment, otherwise you owe the early distribution penalty and income taxes). The loan accrues interest at the G Fund's rate, paid into your own account, so it's not invested in the market, but you can adjust your allocation to account for this. I note the TSP loan option as it may be better than scaling back TSP contributions and putting money into taxable for the down payment.
So let's say I use 80/20...

I take the TSP G Fund for all 20% of the bond allocation.

Then let's say I take 55/25 for the US/Int stock allocation...

I take the TSP I Fund for the entire 25% international allocation, which leaves me with 55% domestic stocks. How should I divvy that up?

3:1 C Fund/S Fund, Total Stock Market Index Fund for my wife's 401k, then VTSAX for the rIRAs?

This would leave my portfolio looking something like:
20% G Fund (TSP)
25% I Fund (TSP)
23% C Fund (TSP)
7% S Fund (TSP)
16% Fidelity Total Stock Market Index Fund (401k)
9% VTSAX (rIRA)

Thoughts?

Topic Author
Invest_Wisely
Posts: 7
Joined: Tue Jan 08, 2019 10:15 am

Re: Combined Retirement Portfolio

Post by Invest_Wisely » Thu Jan 10, 2019 10:17 am

bloom2708 wrote:
Wed Jan 09, 2019 4:38 pm
Congrats on getting married.

Your wife has good funds. Here is the 3 fund portfolio. Low, low expenses.

Total Stock Market Index Fund @ 0.02%
Total International Stock Market Index Fund @ 0.07% (Or could be in Roths, use 2 funds in 401k)
Total Bond Market Fund @ 0.04%

20% (or your pick) of stocks in International (of your 75% stock allocation). 25% bonds in 401k + TSP.

I like 75/25 for you guys at this point. Stay in that Age -10 range. Being you are just rolling, 70/30 might be fine. 80/20 would also be very reasonable.

Work toward maxing pre-tax 401k/TSP + 2 x Roth IRA. HSA is another pre-tax place to stash funds and defer tax. Once you can fill these up, then taxable investing and/or saving for the house down payment need to fit in there.

401k/TSP - 25% bond allocation here, balance in stock index funds
Roth - US stocks/and or International stocks
Taxable - US Stocks/and or International stocks
HSA - Depends on options

Look at your portfolio as one entity. You don't need all funds in every account. Roths may have International or Taxable may only have Total US. Adjust your bonds to meet your 25% based on your total portfolio balances.

You are off to a great start.
Great suggestions, thank you.

Something (perhaps for another discussion topic) worth discussing is where our home savings falls into this? Would you keep the house savings in a taxable account? Should we pull back any of our retirement contributions to expedite our home savings (right now, we're targeting December 2020 for a home). Currently our rent is roughly 25% of our take home (after our retirement contributions).

bloom2708
Posts: 5237
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Combined Retirement Portfolio

Post by bloom2708 » Thu Jan 10, 2019 10:31 am

Invest_Wisely wrote:
Thu Jan 10, 2019 10:17 am
Something (perhaps for another discussion topic) worth discussing is where our home savings falls into this? Would you keep the house savings in a taxable account? Should we pull back any of our retirement contributions to expedite our home savings (right now, we're targeting December 2020 for a home). Currently our rent is roughly 25% of our take home (after our retirement contributions).
If you can max 401k/TSP + Roth IRA each year, that is your baseline. I would want to be able to do that with the house payment and all additional expenses. It may be to get to the 20% down, you have to reduce one 401k down a bit. I would be ok with that for the short term. There are a lot of good discussions about achieving financial goals with/without home ownership. It kind of ends up being a lifestyle decision.

If you can't maintain the baseline, then you may want to consider the price range of the house or saving more for a down payment.

You could use the Prime Money Market for the house down payment. Or a 2% Ally Savings. Something like short/intermediate Treasury index could work. A bit more risk there with interest rates moving. Still relatively safe. I wouldn't do any stock investing with the house down payment. Over 1-2 years, the interest gained is minimal, so preserving principle is the key.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

02nz
Posts: 912
Joined: Wed Feb 21, 2018 3:17 pm

Re: Combined Retirement Portfolio

Post by 02nz » Thu Jan 10, 2019 10:40 am

Invest_Wisely wrote:
Thu Jan 10, 2019 10:08 am
So let's say I use 80/20...

I take the TSP G Fund for all 20% of the bond allocation.

Then let's say I take 55/25 for the US/Int stock allocation...

I take the TSP I Fund for the entire 25% international allocation, which leaves me with 55% domestic stocks. How should I divvy that up?

3:1 C Fund/S Fund, Total Stock Market Index Fund for my wife's 401k, then VTSAX for the rIRAs?

This would leave my portfolio looking something like:
20% G Fund (TSP)
25% I Fund (TSP)
23% C Fund (TSP)
7% S Fund (TSP)
16% Fidelity Total Stock Market Index Fund (401k)
9% VTSAX (rIRA)

Thoughts?
A very sensible allocation (and location).

02nz
Posts: 912
Joined: Wed Feb 21, 2018 3:17 pm

Re: Combined Retirement Portfolio

Post by 02nz » Thu Jan 10, 2019 10:42 am

bloom2708 wrote:
Thu Jan 10, 2019 10:31 am
You could use the Prime Money Market for the house down payment. Or a 2% Ally Savings. Something like short/intermediate Treasury index could work. A bit more risk there with interest rates moving. Still relatively safe. I wouldn't do any stock investing with the house down payment. Over 1-2 years, the interest gained is minimal, so preserving principle is the key.
CDs are another option. Ally 1-year is 2.75%. They also have a no-penalty 11-month CD at 2.3% for $25K+.

Post Reply