Portfolio review - planning AA change

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Topic Author
teerup
Posts: 12
Joined: Fri Dec 21, 2018 9:00 pm

Portfolio review - planning AA change

Post by teerup » Fri Jan 11, 2019 4:57 pm

Hello everyone. Thanks in advance for reviewing our current portfolio. Looking for any suggestions on more efficient fund placement for later tax advantages, as well as easier management & rebalancing if needed. I'm also strongly considering a fairly significant shift in AA as I am re-evaluating our risk tolerance and need.

This is a follow-up to my previous post viewtopic.php?p=4301776 regarding our retirement income plan being 5 years out from anticipated retirement, where I discussed the AA topic given our timeframe & planned need for the funds.

Emergency Fund: Yes
Debt: None
Tax Filing Status: Married Filing Jointly
Age: Him 57 Her 56
Desired Asset Allocation: considering 50% stocks/ 50% bonds or more conservative, per above plan
Current Asset Allocation: ~67% stocks/33% bondss

Total portfolio: ~$940K
Below is a breakdown of current accounts and holdings, showing Fund Name and approx. % of total portfolio value.

His Rollover IRA ($191K, 20% total portfolio):
Vanguard Total Stock Market Index Fund Admiral Shares 8.97% of total portfolio
Vanguard Total International Stock Index Fund Admiral Shares 2.65%
Vanguard Total Bond Market Index Fund Admiral Shares 6.10%
Vanguard Inflation-Protected Securities Fund Investor Shares 2.64%

His 401K ($295K, 31% of total portfolio):
State Street S&P 500 Index Fund; Class A 15.71%
State Street Global All Cap ex US Index Securities Lending Series Fund 6.35%
Intermediate-Term Bond Fund 9.39%

His Roth IRA ($53K, 6% of total portfolio):
Vanguard Total Stock Market Index Fund Admiral Shares 4.06%
Vanguard Total International Stock Index Fund Admiral Shares 1.60%

His HSA ($15K, 1% of total portfolio):
Fidelity Total Market Index Fund
Fidelity Total International Index Fund 0.35%
Fidelity US Bond Index Fund 0.40%

His taxable brokerage ($4K, <1% of total portfolio) (will use for 2019 Roth contribution):
Vanguard Large-Cap Index Fund Admiral Shares <1% of portfolio

Her 401K ($327K, 35% of total portfolio):
S&P 500 Index 17.69%
Vanguard Interm-Term Bond Index Admiral 13.63%
Lazard International Strategic Equity Instl 3.57%

Her Roth IRA ($54K, 6% of total portfolio):
Vanguard Total Stock Market Index Fund Admiral Shares 4.09%
Vanguard Total International Stock Index Fund Admiral Shares 1.63%
Vanguard Total Bond Market Index Fund Admiral Shares 0.01%

Contributions:
Both 401Ks will be maxed at $19K+$6K catchup
Both Rothss will maxed at $6K+$1K catchup
Both HSAs will be maxed at $4450
$0 taxable

Questions:
1. Suggestions on fund placement for easier management & rebalancing?
2. Should I consider other investments that might be available in our 401Ks (didn't list all fund options available) or other accounts?
3. Since all funds are & will continue to be in tax-advantaged accounts what considerations, if any, should I make for fund placement for taxes in retirement?
4. Asset allocation: as I mentioned, I am strongly considering moving to 50/50 or lower stocks. I just don't want or need the risk. Suggestions on where to reallocate funds to achieve this?
5. Anything else I should consider?

Thanks in advance for all of your insights!

User avatar
Duckie
Posts: 6763
Joined: Thu Mar 08, 2007 2:55 pm

Re: Portfolio review - planning AA change

Post by Duckie » Fri Jan 11, 2019 9:42 pm

teerup wrote:Contributions:
Both 401Ks will be maxed at $19K+$6K catchup
Both Rothss will maxed at $6K+$1K catchup
Both HSAs will be maxed at $4450
$0 taxable
You only list one HSA. What's the amount in the other?
Suggestions on fund placement for easier management & rebalancing?
See below.
Should I consider other investments that might be available in our 401Ks (didn't list all fund options available) or other accounts?
Since you covered the main three in each account I don't see a need for more options. Knowing the plan expense ratios would be useful.
Since all funds are & will continue to be in tax-advantaged accounts what considerations, if any, should I make for fund placement for taxes in retirement?
In general it's better to put assets with higher expected growth (stocks) in Roth accounts and assets with lower expected growth (bonds) in pre-tax accounts. That's because you've already paid the taxes in the Roth accounts so future growth is tax-free. So put bonds in the pre-tax accounts and use the Roth accounts for just stocks.
Asset allocation: as I mentioned, I am strongly considering moving to 50/50 or lower stocks. I just don't want or need the risk. Suggestions on where to reallocate funds to achieve this?
You are mirroring your accounts, trying to put the same assets in each. Don't. Bonds belong in pre-tax, Roths should only hold stocks, and small accounts should only hold one fund. The following two examples have an AA of 67/33 and 50/50 with 30% of stocks in international. That breaks down to 47/20/33 and 35/15/50. The taxable account was removed because you're using it to fund your Roth IRAs, not to save for retirement. I also did not include the second HSA because I have no information about it. GIven that, you could have:

Portfolio #1 -- 47/20/33 AA

His 401k -- $295K -- 31%
31% State Street S&P 500 Index

Her 401k -- $327K -- 35%
2% S&P 500 Index
33% Vanguard Interm-Term Bond Index

His Rollover IRA at Vanguard -- $191K -- 20%
20% Vanguard Total International Stock Index

His HSA -- $15K -- 2%
2% Fidelity Total Market Index

His Roth IRA at Vanguard -- $53K -- 6%
6% Vanguard Total Stock Market Index

Her Roth IRA at Vanguard -- $54K -- 6%
6% Vanguard Total Stock Market Index

or

Portfolio #2 -- 35/15/50 AA

His 401k -- $295K -- 31%
16% State Street S&P 500 Index
15% Intermediate-Term Bond (Is this an index fund?)

Her 401k -- $327K -- 35%
35% Vanguard Interm-Term Bond Index

His Rollover IRA at Vanguard -- $191K -- 20%
5% Vanguard Total Stock Market Index
15% Vanguard Total International Stock Index

His HSA -- $15K -- 2%
2% Fidelity Total Market Index

His Roth IRA at Vanguard -- $53K -- 6%
6% Vanguard Total Stock Market Index

Her Roth IRA at Vanguard -- $54K -- 6%
6% Vanguard Total Stock Market Index

Just some possibilities.

Topic Author
teerup
Posts: 12
Joined: Fri Dec 21, 2018 9:00 pm

Re: Portfolio review - planning AA change

Post by teerup » Sat Jan 12, 2019 11:54 am

Thank you very much for your comments.
Duckie wrote:
Fri Jan 11, 2019 9:42 pm
teerup wrote:Contributions:
Both 401Ks will be maxed at $19K+$6K catchup
Both Rothss will maxed at $6K+$1K catchup
Both HSAs will be maxed at $4450
$0 taxable
You only list one HSA. What's the amount in the other?
$0. My wife’s employer just made An HSA option available for 2019. We plan to start funding it fully.
Since you covered the main three in each account I don't see a need for more options. Knowing the plan expense ratios would be useful.
Will add other fund options available thru our 401Ks.
You are mirroring your accounts, trying to put the same assets in each. Don't. Bonds belong in pre-tax, Roths should only hold stocks, and small accounts should only hold one fund.
You’re right. When I first went to more of a 3 fund portfolio type several months ago it felt like it made sense to mirror in each account. I’ve since started to learn more about more efficient fund placement but wasn’t sure yet how to reallocate. Your suggestions there were very helpful.

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