New portfolio advice

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
dc11
Posts: 3
Joined: Sun Feb 18, 2018 10:45 pm

New portfolio advice

Post by dc11 » Sun Feb 10, 2019 5:26 pm

I am new to the forum and would appreciate any advice on a few things. I apologize in advance for any missing info.

Emergency funds: $75,000 local bank
Debt: home mortgage 3.88% 30 yrs (total payment is $7500/month) 26 years left. (I pay 1-2 extra principal payments per year)
Tax Filing Status: Married Filing Jointly
Tax Rate: 37% Federal, 6.84% State
State of Residence: NE
Age: 45 (plan to work to 15-20 more years)

Desired Asset allocation: 60% stocks / 40% bonds
Desired International allocation: 33% of stocks


Current retirement assets

Taxable:
Vanguard vmsxx V municipal MM ER=0.15 $275,000. (fund for a vacation property. Saving for a down payment)
Vanguard vtsax V tot stock Market ER=0.04 $30,000



His 401k (maxed out with full match)
Principal 401k Prin Large Cap S&P index ER=0.31% $130,000
Principal 401k Holding Prin 2035 fund ER=0.60% $120,000
***the Principal funds are not able to be rolled over/transferred to my Vanguard)


401k profit sharing VBTLX Van Tot BOND, ER= 0.08%. $380,000
401k roll over VTIAX Van Tot INT’L, 0.14. % 43,000
401k roll over VTSAX VAN Tot STOCK 0.06% 150,000

His Roth IRA
Vanguard TIAX. Van Tot INTL .11%. 20,000
Vanguard VTSAX Van Tot Stock, 0.04% 20,000

Her Roth IRA
Vanguard VTIAX Van Tot INT’L, 0.11% 30,000
Vanguard VTSAX Van Tot Stock, 0.04% 25,000

Her (previous job)
Fidelity 401K FSPNX UC 2040 0.06% 20,000
******this Fidelity fund is not able to be rolled over/transferred to my Vanguard)


Market breakdown.
Stock. $355,000
Int'l. $93,000
Bond. $380,000
Target funds. $140,000
Cash. $275,000

% after removing Target funds and cash
Stock .43
Bond. .46 ( a little higher than I want)
Int'l. .11 (a little lower than I want)

529's:
13 year old. Age-Based Aggressive 13-14. $60,000
12 year old. Age-Based Aggressive 11-12. $60,000
11 year old. Age-Based Aggressive 11-12. $60,000


New annual Contributions
Maximum amounts for His 401k and full match
Maximum amount for His and Her Backdoor Roth IRA's each year


HisTerm Life insurance
15 years left
$2,000,000
Whole Life (I got in this roughly 9 years ago before reading Bogleheads)
1,000,000


My next contributions will be for Int'l and Total stock market to lower the bond ratio.
I'm trying to run 3 fund portfolio. Considering a Vanguard target or Life Strategy fund as well.

With regards to the $275,000 in the Vanguard municipal money market, is this where I should have this sitting?
I plan on using the money sometime this year.

I'm also considering more payments to knock down my mortgage.

Other thoughts or comments?

This in advance for your feedback.

User avatar
Misenplace
Moderator
Posts: 1271
Joined: Mon Feb 01, 2016 9:46 pm

Re: New portfolio advice

Post by Misenplace » Sun Feb 10, 2019 6:14 pm

Hi dc11, welcome to the forum.

You seem to have a lot of the bases covered. You have a decent amount of term insurance, although your non-working spouse may have to sell the house(s) and downsize should you pass in the next 10 years (check whether your work also provides life insurance as a benefit- for high earning execs it is common to have twice your base as life insurance). You may want to look into alternatives for getting out of your whole life insurance, but you probably already know that. You are making the most of your match, and funding back door Roths. You are concentrating on your retirement, but also funding some 529s. Your asset allocation seems appropriate, although on the conservative side, and your International allocation also in the realm of reasonable. I think with someone in the highest income bracket, the muni fund you are using for funds you plan to spend in the next year is as good as any. You would need to compare the return on that to the best rate you can get in a safer asset like Fed MMs or short term treasuries or short term CDs, minus your marginal tax rate.

My additional comments:
1) Do not exclude the target date funds from your overall portfolio calculations. They count, and are a substantial proportion. You can do it manually, or plug their ticket symbols into something like Vanguard Portfolio Watch or Morningstar.
2) What else is available in your 401(k)? Your current funds seem mediocre. I suspect you also know that.
3) This is what most struck me. You are house poor. You have a very high income, a very expensive current house, and virtually no taxable investments except for the down payment for buying a vacation home. Why would you want to become even more house poor?
4) Think about the amount of your net worth you are tying up in non-diversified assets- in this case, your home and a potential vacation home. Houses tend to appreciate about with inflation- sometimes more, sometimes less. The stock market tends to return more than inflation- sometimes more, sometimes less. I would feel uncomfortable having more than half my net worth tied up in single home real estate, especially a single earner. Since you appear to be rather conservative with your asset allocation, I am surprised that you are considering this.
5) With 3 minor children, make sure you have your estate planning documents in order.

Ask away if you have any more questions.
Best,
Misenplace

LeeMKE
Posts: 1885
Joined: Mon Oct 14, 2013 9:40 pm

Re: New portfolio advice

Post by LeeMKE » Sun Feb 10, 2019 6:33 pm

+1 misenplace

I noticed right away that your mortgage is jumbo sized, and yet you are planning a second home purchase.

1) If you can't afford the payments on a 15 year note, you can't afford the house IMHO.
2) Second homes are NOT investments. They drop like a bomb during downturns, and hardly edge up when inflation is high.

Your first priority needs to be debt reduction and increasing your taxable savings. Great job on maxing out your tax sheltered space, but with your income that can't be hard.

Sorry to be a wet blanket, but I'd hate to see you take so much risk and have something/anything go wrong. Imagine what happens if your income stops for 6 months. (car accident, illness)
The mightiest Oak is just a nut who stayed the course.

21&lewis
Posts: 27
Joined: Sun Nov 06, 2016 8:42 pm

Re: New portfolio advice

Post by 21&lewis » Sun Feb 10, 2019 7:27 pm

Wow, a multi-million dollar house in Nebraska...must be a castle!

Your tax bracket suggests an income of $600,000+. Given your age and assets, I'm guessing you're a doc, though I could be wrong. How long have you been making this $, and what is your annual retirement budget? It will be helpful for suggestions.

If your income is north of $600K and your savings plan is to max deferred retirement and Roth, then you're saving 10-12% max of your salary and will need to work a lot longer than your planned retirement date to support your lifestyle. If I missed any details in your post, apologies, and please clarify.
Last edited by 21&lewis on Sun Feb 10, 2019 7:35 pm, edited 1 time in total.

21&lewis
Posts: 27
Joined: Sun Nov 06, 2016 8:42 pm

Re: New portfolio advice

Post by 21&lewis » Sun Feb 10, 2019 7:34 pm

Also, I agree with LeeMKE

You are 45 years old with 26 years of $7500/month on your mortgage ($2.34MM left to go...). You'll be done paying off when you're 71 yo. I would vote "NO" for the second home for now...

UpFrom100
Posts: 12
Joined: Sat Feb 02, 2019 11:10 am

Re: New portfolio advice

Post by UpFrom100 » Sun Feb 10, 2019 7:36 pm

dc11 wrote:
Sun Feb 10, 2019 5:26 pm
Emergency funds: $75,000 local bank
I'd stick that emergency fund into a high yield savings account rather than having it sit in your local bank.

Topic Author
dc11
Posts: 3
Joined: Sun Feb 18, 2018 10:45 pm

Re: New portfolio advice

Post by dc11 » Sun Feb 10, 2019 8:12 pm

Thanks for your responses.

I failed to mention that the past 8 years I have also invested $1,200,000 in a private ancillary paying 20%. All my excess cash was put there over the past 8 years which is why my taxable account is so low. I am now fully bought in and will have excess income to invest moving forward.

Would you suggest paying off the mortgage quicker vs putting my money in my taxable account?
I plan on paying off the mortgage much quicker than 26 years, possibly within 10 years, depending on the above question.

For a high yield savings account, are you suggesting something like Ally bank?

My income has been fairly steady the past 8 years.

As far as retirement budget, I am still trying to figure that out. Any suggestions on how to determine that?

As far as my locked in 401k options, they are limited and not great. The ER's are high, so I was looking for lower ER's and funds that would help simplify the 3 fund philosophy.

I have met with an attorney for estate planning.

elainet7
Posts: 349
Joined: Sat Dec 08, 2018 1:52 pm

Re: New portfolio advice

Post by elainet7 » Sun Feb 10, 2019 8:14 pm

pay down that mortgage monthly with significant addl principal payments

User avatar
Misenplace
Moderator
Posts: 1271
Joined: Mon Feb 01, 2016 9:46 pm

Re: New portfolio advice

Post by Misenplace » Sun Feb 10, 2019 8:38 pm

I am not familiar with a private ancillary, and when I google it, it seems to be something used in Australia as a charitable trust. Perhaps you are referring to something else, an investment of some sort?

Now that I know you will have excess income to invest, and are wondering whether to pay down the mortgage or not, I would split the difference. Aim for paying down the mortgage in 15 years, and invest the rest. Paying down the mortgage is an immediate 3.88% return on investment. I have no crystal ball as to whether that will be better or worse than how the stock market performs over the next 15 years. No one else one has that crystal ball. Also, shooting for 15 years gives you a paid off mortgage going into retirement. With such a large mortgage, you are probably itemizing even though you are in a low tax state, so that gives you more write-offs at least for the next 6 years until the tax law changes.

Ally Bank has good rates, however, Vanguard Treasury Money Market are close. do a search on these forums- there is a lot of controversy over which is better. Kevin M. is pretty up on this.
viewtopic.php?t=271396&start=100
You could just put it in a CD with a plan to break it should you ever need the cash.

As for retirement budget, what are you asking? I don't recall that in your initial post. If you save more than a third of your income for the next 15-20 years, you should be able to do whatever you want in retirement (within reason). Be warned, college can be shockingly expensive. I dearly wished for more than one child, until we started looking at college.

Good that you are looking at estate planning. Get that locked down and then revisit every 7-10 years (circumstances and laws can change).

Post Reply