ISO - Bogglehead Financial Revamp

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Topic Author
RicoRico
Posts: 7
Joined: Tue Aug 01, 2017 3:56 pm

ISO - Bogglehead Financial Revamp

Post by RicoRico » Fri Jan 11, 2019 1:53 pm

Hello Bogleheads!

Would you mind taking a minute to educate a young man? This community's work is life-changing - thank you!

The original intention with this post was to seek help with 401k Merrill Lynch portfolio, but after reading the forum rules I decided to include the whole sha-bang.

Emergency funds: Yes - currently in State Farm Credit Union (2%/yr)
Debt: No loans, car owned, mortgage of 660k at 3.75%
Savings: 65k cash (for investing – looking for suggestions of how to allocate - currently in 2% savings account)

Tax Filing Status: Married Filing Jointly; first child expected in April 2019
Tax Rate: 32-35% Federal (2019 rates), 5.75% in VA
State of Residence: VA
Age: 32
Desired Asset allocation: at least 85% stocks / 15% bonds
Desired International allocation: ??% of stocks

I'm OK with increased stock exposure in 401k due to my age (at least 85/20). Will not touch the 401k until retirement.

I do not have a non-401k brokerage account - once opened, should I keep the same 85/20 ratio? For the brokerage account, the plan is to use it to save for retirement.

Also in process of opening 529 account, although will split education expenses with brokerage account.




401k #1 - Merril Lynch


Balance - $17.5k
Max Contribution each year
Company match? No

ML automatically changed my original asset location to the following. I am looking forward to shifting the allocation to lower ERs.

Current Allocation:

Fund (Symbol) Allocation Gross ER
AMERICAN EUROPACIFIC GR FD R5 (RERFX) 6.05% 0.53%
AMERICAN NEW PERSPECTIVE R5 (RNPFX) 3.97% 0.49%
COLUMBIA DIVIDEND INCOME INSTL (GSFTX) 2.93% 0.71%
COLUMBIA MIDCAP INDEX FD INSTL (NMPAX) 15.05% 0.32%
COLUMBIA SMALL CAP INDX INSTL2 (CXXRX) 3.98% 0.20%
DREYFUS BOND MARKET INDX BASIC (DBIRX) 2.89% 0.16%
ISHARES MSCI EAFE INTRNL INSTL (MAIIX) 19.22% 0.09%
ISHARES S&P 500 INDEX FD CL K (WFSPX) 20.71% 0.04%
JOHN HANCOCK DISCIPLINED (JVMIX) 4.94% 0.86%
JP MORGAN U.S. EQUITY FD CL R5 (JUSRX) 2.92% 0.60%
LAZARD EMERGING MARKETS OPEN (LZOEX) 7.18% 1.34%
LOOMIS SAYLES ADMIN SMALL CAP (LSVAX) 5.35% 1.48%
PIONEER BOND FD CL Y (PICYX) 0.00% 0.47%
VIRTUS DUFF&PHELPS RL EST (PHRIX) 4.81% 1.11%

Total 100.00%


Below are the available investment options in the ML 401k (* indicates currently owned). I was disappointed when I saw zero Vanguard options.

Fund (Symbol) Gross ER
1 Yr / 3 Yrs / 5 Yrs / 10 Yrs / Since Inception

EQUITY/STOCK

AMERICAN AMCAP FUND CL R5 (RAFFX) 0.41%
-1.66% 9.57% 8.36% 14.35% 8.00%

* AMERICAN EUROPACIFIC GR FD R5 (RERFX) 0.53%
-14.95% 4.04% 1.81% 7.66% 6.78%

*AMERICAN NEW PERSPECTIVE R5 (RNPFX) 0.49%
-5.61% 7.60% 6.37% 11.72% 8.45%

*COLUMBIA DIVIDEND INCOME INSTL 1 (GSFTX) 0.71%
-4.39% 9.42% 8.23% 11.78% 7.63%

*COLUMBIA MIDCAP INDEX FD INSTL 2 (NMPAX) 0.32%
-11.33% 7.39% 5.79% 13.44% 7.90%

COLUMBIA SELIGMAN GLB TECH ADV (CCHRX) 1.08%
-8.54% 12.90% 14.67% N/A 17.17%

*COLUMBIA SMALL CAP INDX INSTL2 (CXXRX) 0.20%
-8.72% 9.23% 6.09% N/A 12.15%

DREYFUS NATURAL RESOURCES I(DLDRX) 1.05%
-17.60% 6.38% -2.04% 5.76% 7.13%

*ISHARES MSCI EAFE INTRNL INSTL (MAIIX) 0.09%
-13.37% 3.10% 0.38% 5.87% 4.39%

*ISHARES S&P 500 INDEX FD CL K (WFSPX) 0.04%
-4.38% 9.23% 8.46% 13.04% 8.95%

JANUS HENDERSON ENTERPRISE A (JDMAX) 1.18%
-1.27% 11.60% 9.85% N/A 15.40%

JANUS HENDERSON TRITON FUND I (JSMGX) 0.77%
-5.13% 10.06% 8.17% N/A 15.81%

*JOHN HANCOCK DISCIPLINED (JVMIX) 0.86%
-14.74% 4.35% 5.61% 14.28% 9.20%

*JP MORGAN U.S. EQUITY FD CL R5 (JUSRX) 0.60%
-5.88% 8.25% 7.83% 13.34% 8.60%

*LOOMIS SAYLES ADMIN SMALL CAP (LSVAX) 1.48%
-16.94% 4.59% 2.90% 10.93% 7.63%

OPPENHEIMER INTL CL Y (OIGYX) 0.85%
-19.36% 0.08% -0.72% 8.14% 5.32%

VICTORY SYCAMORE SMALL COMP I (VSOIX) 0.90%
-8.26% 10.10% 7.26% 13.42% 8.12%

WELLS FARGO SHORT TERM BD INST (SSHIX) 0.50%
1.40% 1.62% 1.40% 2.75% 3.19%

BLACKROCK HL SC OPP INST (SHSSX) 0.89%
8.28% 8.48% 12.92% 16.48% 12.88%

*LAZARD EMERGING MARKETS OPEN (LZOEX) 1.34%
-18.32% 7.83% -0.92% 6.94% 5.88%

*VIRTUS DUFF&PHELPS RL EST (PHRIX) 1.11%
-6.50% 1.99% 7.42% 11.71% 4.00%

BOND/FIXED INCOME

BLACKROCK INFL PROT INST (BPRIX) 0.53%
-1.87% 1.74% 1.14% 3.16% 3.91%

*DREYFUS BOND MARKET INDX BASIC (DBIRX) 0.16%
-0.16% 1.84% 2.31% 3.15% 4.80%

JP MORGAN GOVERNMENT BD CL I (HLGAX) 0.70%
0.84% 1.56% 2.25% 3.04% 4.95%

LORD ABBETT HIGH YIELD FUND (LAHYX) 0.69%
-5.06% 6.24% 4.03% 10.80% 6.53%

*PIONEER BOND FD CL Y (PICYX) 0.47%
-0.55% 2.75% 2.92% 5.61% 5.25%

TEMPLETON GLOBAL BOND FD ADV (TGBAX) 0.78%
1.44% 3.53% 1.64% 5.45% 6.70%


MONEY MARKET/STABLE VALUE

RETIREMENT BANK ACCOUNT 3 (IRSAI) 0.53%
0.30% 0.23% N/A 0.25%


ALLOCATION FUNDS

AMERICAN CENTURY ONE 2025 CL I (ARWFX) 0.65%
-4.77% 4.47% 3.79% 8.01% 6.08%

AMERICAN CENTURY ONE 2035 CL I (ARLIX) 0.70%
-5.91% 4.90% 4.25% 9.05% 6.59%

AMERICAN CENTURY ONE 2045 CL I (AOOIX) 0.75%
-6.97% 5.57% 4.78% 9.89% 7.01%

AMERICAN CENTURY ONE 2055 CL I (ARENX) 0.79%
-7.84% 5.83% 4.97% N/A 7.16%

AMERICAN CENTURY ONE RTMT CL I (ATTIX) 0.62%
-3.97% 3.99% 3.36% 6.82% 5.23%

BLACKROCK GLOBAL ALLOC I (MALOX) 0.91%
-7.37% 3.08% 2.10% 6.19% 9.33%


MONEY MARKET

RETIREMENT RESERVES MONEY FUND (MLIKX) 0.76%
7-Day Yield: 1.54%
1.07% 0.43% 0.26% 0.16% 3.87%

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




401k #2 - Voya

Balance - $82.5k
No Contribution each year (old company - I haven't combined this with 401k #1 b/c 401k #2 has vanguard options)

Current Allocation:

Fund (Symbol) Allocation Net ER
Vanguard Total Bond Market Index Fund (VBTLX) 2.29% 0.05%
Vanguard Value Index (VVIAX) 15.61% 0.05%
Vanguard Institutional Index Fund Shares (VINIX) 13.95% 0.04%
Vanguard Growth Index (VIGAX) 49.85% 0.05% Vanguard Small Cap Index (VSMAX) 10.81% 0.05%
Vanguard Developed Markets Index Fund (VTMNX) 5.02% 0.06%
Vanguard Target 2050 (VFIFX) 2.48% 0.15%


Below are the available investment options in the Voya 401k (* indicates currently owned).

Fund (Symbol) ER
3mo 1yr 3yr 5yr 10yr Inception

MCM Stable Value (Class 50 - I) 0.76% (Total Operating)
0.43% 1.56% 1.34% 1.16% 1.43% 2.57%

Invesco Premier US Govt Money Portfolio (IUGXX) 0.18% (Prospectus Net)
0.50% 1.64% 0.86% 0.52% 0.31% 1.04%

Western Asset Core Plus Bond (WACPX) 0.45% (Prospectus Net)
-1.66% -2.90% 2.45% 3.25% 7.36% 5.72%

*Vanguard Total Bond Market Index Fund (VBTLX) 0.05%
-0.72% -1.36% 1.30% 1.96% 3.58% 3.86%

Janus Balanced I (JBALX) 0.65%
-2.47% 6.59% 9.03% 7.81% 10.74% 10.11%

*Vanguard Value Index (VVIAX) 0.05%
-1.20% 5.86% 12.23% 10.33% 13.21% 6.56%

*Vanguard Institutional Index Fund Shares (VINIX) 0.04%
-4.40% 6.23% 12.13% 11.09% 14.30% 9.78%

Prudential Jennison Growth (PJFZX) 0.68%
-8.76% 7.99% 12.63% 12.91% 16.47% 8.90%

*Vanguard Growth Index (VIGAX) 0.05%
-8.02% 6.53% 11.87% 11.72% 15.70% 5.92%

JP Morgan Value Advantage (JVAIX) 0.85%
-3.52% 2.80% 9.52% 8.58% 15.05% 9.30%

Vanguard Mid-Cap Index Admiral Fund (VIMAX) 0.05%
-16.80% -23.68% 1.12% 7.65% 6.12% 1.24%

Northern Trust Small Cap Value (NOSGX) 1.13%
-9.99% -4.58% 7.87% 6.64% 12.49% 9.79%

Neuberger Berman Genesis Institutional (NBGIX) 0.85%
-7.40% 4.80% 10.83% 7.95% 13.19% 12.05%

*Vanguard Small Cap Index (VSMAX) 0.05%
-9.54% 2.41% 10.36% 8.31% 15.54% 9.03%

Baron Small Cap Instl (BSFIX) 1.05%
-11.84% 6.84% 13.02% 8.34% 15.20% 14.33%

PIMCO International Bond Fund (PFUIX) 0.59%
-1.37% -3.25% 3.39% 0.75% 5.42% 4.24%

Eaton Vance Floating Rate I Fund (EIBLX) 0.79%
-0.34% 3.60% 5.85% 3.57% 7.81% 4.11%

*Vanguard Developed Markets Index Fund (VTMNX) 0.06%
-7.52% -8.13% 4.76% 2.30% 7.75% 4.00%

MFS International Value R5 Fd (MINJX) 0.63%
-6.87% -3.25% 7.95% 6.83% 11.35% 6.45%

Wells Fargo Emerg Mkt 1 Fd (EMGNX) 1.23%
-5.04% -10.17% 8.43% 1.46% 9.06% 2.57%

Vanguard REIT Index Fund (VGSLX) 0.12%
-1.05% 1.93% 5.80% 9.25% 14.80% 10.25%

Vanguard Target Retire Income (VTINX) 0.13%
-2.08% -0.09% 3.97% 3.68% 6.42% 5.00%

Vanguard Target 2015 (VTXVX) 0.13%
-2.69% 0.02% 5.09% 4.67% 8.42% 5.90%

Vanguard Target 2020 (VTWNX) 0.13%
-3.36% -0.03% 6.02% 5.39% 9.24% 5.96%

Vanguard Target 2025 (VTTVX) 0.13%
-3.89% -0.10% 6.66% 5.82% 9.85% 6.52%

Vanguard Target 2030 (VTHRX) 0.14%
-4.26% -0.03% 7.23% 6.18% 10.45% 6.31%

Vanguard Target 2035 (VTTHX) 0.14%
-4.66% -0.01% 7.79% 6.54% 11.00% 7.15%

Vanguard Target 2040 (VFORX) 0.15%
-5.11% -0.03% 8.34% 6.85% 11.31% 6.72%

Vanguard Target 2045 (VTIVX) 0.15%
-5.42% -0.13% 8.54% 6.98% 11.36% 7.59%

*Vanguard Target 2050 (2050) 0.15%
-5.41% -0.10% 8.55% 6.98% 11.37% 6.81%

Vanguard Target 2055 (VFFVX) 0.13%
-5.40% -0.11% 8.54% 6.95% 10.09%

Vanguard Target 2060 (VTTSX) 0.13%
-5.37% -0.08% 8.54% 6.96% 9.71%



Questions:

1. Allocation for 401k #1?

2. Should I continue to keep the 401k's separate?

3. Where should I open a brokerage account? Any recommended allocations?

4. How do I set up a back-door Roth?

5. I have always been a saver, but what am I missing?

User avatar
Duckie
Posts: 6759
Joined: Thu Mar 08, 2007 2:55 pm

Re: ISO - Bogglehead Financial Revamp

Post by Duckie » Fri Jan 11, 2019 7:45 pm

RicoRico wrote:Age: 32
Desired Asset allocation: at least 85% stocks / 15% bonds
An AA of 15% bonds is a little aggressive for your age but reasonable.
Desired International allocation: ??% of stocks
Vanguard has found between 20% and 40% of stocks in international to be the "sweet spot". See the Vanguard paper link and the discussion. I usually split the difference and recommend 30% of stocks. That would break down to 60% US stocks and 25% international stocks.
I do not have a non-401k brokerage account - once opened, should I keep the same 85/20 ratio? For the brokerage account, the plan is to use it to save for retirement.
If you mean a standard taxable account, no, do not put bonds in it. You look at your entire portfolio when deciding what to put where. (See below.) You should open Roth IRAs for you and your wife before contributing to a taxable account for retirement purposes.
401k #1 - Merrill Lynch
The best options are:
  • ISHARES S&P 500 INDEX (WFSPX) 0.04% -- Large caps, 80% of US stocks
  • COLUMBIA SMALL CAP INDEX (CXXRX) 0.20% -- Small caps, 14% of US stocks
  • ISHARES MSCI EAFE INTRNL (MAIIX) 0.09% -- Developed markets, 75% of international stocks
  • DREYFUS BOND MARKET INDEX (DBIRX) 0.16% -- US bonds
401k #2 - Voya
The best options are:
  • Vanguard Institutional Index (VINIX) 0.04% -- Large caps, 80% of US stocks
  • Vanguard Mid-Cap Index (VIMAX) 0.05% -- Mid caps, 6% of US stocks
  • Vanguard Small Cap Index (VSMAX) 0.05% -- Small caps, 14% of US stocks
  • Vanguard Developed Markets Index (VTMNX) 0.06% -- Developed markets, 80% of US stocks
  • Vanguard Total Bond Market Index (VBTLX) 0.05% -- US bonds
  • or the Target fund that comes closest to your 85/15 AA
Allocation for 401k #1?
See below.
Should I continue to keep the 401k's separate?
Yes as long as you're not being charged extra fees. The Voya 401k has slightly cheaper options.
Where should I open a brokerage account? Any recommended allocations?
Vanguard, Fidelity or Schwab. I personally prefer Vanguard, others differ.
How do I set up a back-door Roth?
You pick one of the above to be the custodian. For simplicity hold both the taxable (brokerage) account and the IRAs at the same place. Then it's a series of steps:
  1. Open two Traditional IRAs (you and spouse) and two Roth IRAs at the same custodian.
    .
  2. Make your contributions to the TIRAs. These will be non-deductible contributions, but the IRA custodian doesn't need that information. If contributing for 2018 make sure you choose the correct year. To avoid market swings you may want the TIRA to hold a money market fund or just leave it in the settlement fund. That way you'll have no losses and minimal gains.
    .
  3. Once the contributions post and as soon as you're allowed, convert 100% of the assets to your Roth IRAs. Don't use dollar amounts because account values shift, use 100%. If the custodian asks to withhold taxes, say NO. If, in a few weeks, a tiny amount from some dividends shows up in the TIRAs, just convert that, too.
    .
  4. If contributing for 2018, when you file your taxes for 2018 add two IRS Form 8606s, one for each of you. Fill out Part I for the non-deductible contributions. When you file your taxes for 2019 add two Form 8606s. Fill out Part I for the non-deductible contributions and Part II for the conversions.
    .
  5. Do it again the next year. The TIRAs should stay open for a while even though empty so you should be able to use the same TIRAs the next time. If not, just open another TIRA.
This will only work properly if you have no other non-Roth IRAs (Traditional IRA, Rollover IRA, SEP IRA, SIMPLE IRA) because of the pro-rata rule. All non-Roth IRA accounts must have a $0 balance as of December 31st in the year of the conversion or you'll be paying a chunk of taxes.
_____________________

The following retirement portfolio example has an AA of 60/25/15. It includes the taxable account and the backdoor Roths for 2018 and 2019.

Taxable at Vanguard -- $65K -- 35%
22% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)
13% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

401k #1 at Merrill Lynch -- $17.5K -- 9%
9% (WFSPX) iShares S&P 500 Index Fund K Class (0.04%)

Old 401k #2 at Voya -- $82.5K -- 44%
22% (VINIX) Vanguard Institutional Index Fund Institutional Shares (0.04%)
7% (VSMAX) Vanguard Small-Cap Index Fund Admiral Shares (0.05%)
15% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.05%)

His Roth IRA at Vanguard (via backdoor) -- $11.5K -- 6%
6% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

Her Roth IRA at Vanguard (via backdoor) -- $11.5K -- 6%
6% (VTIAX) Vanguard Total International Stock Index Fund Admiral Shares (0.11%)

Something to think about.

delamer
Posts: 8725
Joined: Tue Feb 08, 2011 6:13 pm

Re: ISO - Bogglehead Financial Revamp

Post by delamer » Fri Jan 11, 2019 10:55 pm

Good advice from Duckie above.

Topic Author
RicoRico
Posts: 7
Joined: Tue Aug 01, 2017 3:56 pm

Re: ISO - Bogglehead Financial Revamp

Post by RicoRico » Wed Jan 16, 2019 7:45 am

Thank you @Duckie for taking the time to respond! I'll digest and get back with any questions. Have a great rest of your week!

Topic Author
RicoRico
Posts: 7
Joined: Tue Aug 01, 2017 3:56 pm

Re: ISO - Bogglehead Financial Revamp

Post by RicoRico » Wed May 29, 2019 5:09 pm

Sorry for excessive delay...

For the Old 401k #2 at Voya, I am being charged an admin fee of $12 per quarter. Would you consider this negligible?

delamer
Posts: 8725
Joined: Tue Feb 08, 2011 6:13 pm

Re: ISO - Bogglehead Financial Revamp

Post by delamer » Wed May 29, 2019 5:11 pm

RicoRico wrote:
Wed May 29, 2019 5:09 pm
Sorry for excessive delay...

For the Old 401k #2 at Voya, I am being charged an admin fee of $12 per quarter. Would you consider this negligible?
Yes, I would.

lakpr
Posts: 2216
Joined: Fri Mar 18, 2011 9:59 am

Re: ISO - Bogglehead Financial Revamp

Post by lakpr » Wed May 29, 2019 5:23 pm

RicoRico wrote:
Wed May 29, 2019 5:09 pm
For the Old 401k #2 at Voya, I am being charged an admin fee of $12 per quarter. Would you consider this negligible?
That is $48 per year on a $82k balance. Works out approximately 0.05%, 5 basis points on your balance, that will go down as your balance in the fund increases.

Agree with delamer.

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