Portfolio Review: New to VAS + Large Family

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Topic Author
KBREAMK
Posts: 64
Joined: Thu Mar 14, 2019 6:25 pm

Portfolio Review: New to VAS + Large Family

Post by KBREAMK » Mon Jun 10, 2019 4:21 pm

Edited to add percentages as well as a summary of all retirement assets.

Thanks in advance for any and all advice. Please let me know if I missed anything. I have tried to be as detailed as possible.

Emergency funds: 5 months living expenses saved and in money market paying 2.5%
Debt:
  • Mortgage: $295,782 @ 4.25% interest rate
  • HELOC: $20,600 @ 2.99% interest rate
  • Credit Cards: Paid off weekly.
Tax Filing Status: Married Filing Jointly
Tax Rate: Federal: 24%. State: 0%.
State of Residence: Texas
Age: 45
Desired Asset allocation: 75% stocks / 25% bonds
Desired International allocation: 20% of stocks
Approx Total Portfolio Size: $1,086,663

Note: I currently use VAS and pay them 0.30% annually. I eventually plan to go on my own but wanted the support as I transitioned away from Merrill Lynch who had created a big mess with lots of individual stocks.

Current Retirement Assets

Taxable at Vanguard
0.55% Vanguard Total Stock Market Index - VTSAX (0.04%): 5,222.42
0.36% Vanguard Growth ETF - VUG (0.04%): $3,399.06
0.08% Vanguard Small-Cap Growth ETF - VBK (0.07%): 733.16
0.07% Vanguard Small-Cap Value ETF - VBR (0.07%): 643.75
0.36% Vanguard Value ETF - VTV (0.04%): $3,408.76
Note: These ETFs are stragglers from my old Merrill Lynch portfolio so VAS just left them alone
Total: $13,407.59

His Traditional IRA at Vanguard (Formerly a SEP before my company started our own 401k)
35.94% Vanguard Total Stock Market Index Fund - VTSAX (0.04%): $341,100.88
20.41% Vanguard Total International Stock Index Fund - VTIAX (0.11%): $193,726.41
7.19% Vanguard Total Bond Market Index Fund - VBTLX (0.05%): $68,232.77
6.48% Vanguard Total International Bond Index Fund - VTABX (0.11%): $61,502.79
Total: $664,955.41

His Roth IRA at Vanguard
2.40% Vanguard Total International Stock Index Fund - VTIAX (0.11%): $22,755.64
Total: $22,755.64

Her Traditional IRA at Vanguard
7.92% Vanguard Total Bond Market Index Fund - VBTLX (0.05%: $75,128.48
Total: $75,128.48

Her Roth IRA at Vanguard
1.77% Vanguard Total International Stock Index Fund - VTIAX (0.11%): $16,766.07
0.16% Vanguard Extended Market Index Fund - VEXAX (0.07%): $1,474.70
Total: $18,240.87

His 401k at Creative Planning
8.98% Vanguard Total Stock Market Index Fund - VTSAX (0.04%): $85,240
2.45% Vanguard Developed Markets Index Fund - VTMGX (0.04%): $23,247
4.90% Vanguard Intermediate-Term Bond Index Fund - VBILX (0.07%): $46,494
Total: $154,981

Summary of Retirement Assets

Domestic Stocks
45.7% Vanguard Total Stock Market Index Fund - VTSAX (0.04%):$431,563.30
0.16% Vanguard Extended Market Index Fund - VEXAX (0.07%): $1,474.70
0.36% Vanguard Value ETF - VTV (0.04%): $3,408.76
0.36% Vanguard Growth ETF - VUG (0.04%): $3,399.06
0.08% Vanguard Small-Cap Growth ETF - VBK (0.07%): $733.16
0.07% Vanguard Small-Cap Value ETF - VBR (0.07%): $643.75
46.49% Total Domestic Stocks: $441,222.73

International Stocks
24.58% Vanguard Total International Stock Index Fund - VTIAX (0.11%): $233,248.12
2.45% Vanguard Developed Markets Index Fund - VTMGX (0.04%): $23,247.00
27.03% Total International Stocks: $256,495.12

Domestic Bonds
15.11% Vanguard Total Bond Market Index Fund - VBTLX (0.05%): $143,361.25
4.90% Vanguard Intermediate-Term Bond Index Fund - VBILX (0.07%): $46,494.00
20.00% Total Domestic Bonds: $189,855.25

International Bonds
6.48% Vanguard Total International Bond Index Fund - VTABX (0.11%): $61,502.79
6.48% Total International Bonds: $61,502.79

Education Assets

529s at Vanguard in “Aggressive” Age Based Portfolios
Child 1 (16): $39,704.30
Child 2 (14): $29,489.52
Child 3 (12): $23,015.74
Child 4 (10): $19,961.23
Child 5 (8): $13,265.19
Child 6 (5): $8,018.05
Child 7 (3): $3,740.88
Total in 529s: $137,194.91

Total of All Accounts Together: $1,086,663.90

New Annual Contributions
  • $55,000 to his 401k (includes profit sharing as an owner of the business)
  • $100 per month per child into each 529 plan. So $700 total per month or $8,400 total annually.
Available Funds
Funds available at Vanguard: I think most reading this know the funds Vanguard offers. :-)

Funds available in his 401k at Creative Planning:
TD Ameritrade Money Market
DFA Intermediate Govt Fixed Income DFIGX
Vanguard Intermediate-Term Bond Index Fund (Adm) VBILX
DFA Inflation Protected Securities DIPSX
DFA U.S. Large Cap Value Portfolio (I) DFLVX
BlackRock S&P 500 Index WFSPX
Vanguard Large Cap Growth Index Fund (Adm) VIGAX
Vanguard Mid Cap Value Index Fund (Adm) VMVAX
Vanguard Mid-Cap Index Fund (Adm) VIMAX
Vanguard Mid-Cap Growth Index Fund (Adm) VMGMX
DFA U.S. Small Cap Value Portfolio (I) DFSVX
Vanguard Small-Cap Index Fund (Adm) VSMAX
Vanguard Small-Cap Growth Index Fund (Adm) VSGAX
Vanguard Developed Markets Index Fund (Adm) VTMGX
Vanguard Total Stock Market Index (Adm) VTSAX
Vanguard International Explorer Fund (Inv) VINEX
DFA Emerging Markets Small Cap DEMSX
Vanguard Emerging Mkt. Stock Index Fund (Adm) VEMAX
Vanguard REIT Index Fund (Adm) VGSLX
DFA International Real Estate Securities DFITX
Vanguard Energy Index Fund (Adm) VENAX

Questions:
1. Would you do anything differently investing wise (aside from going on my own which I know I need to do eventually)? As noted in the beginning… I recently transitioned to VAS from Merrill Lynch were I was paying BIG expenses.

2. We plan to use community college for first two years of college before moving our children to a state university. Should I continue to evenly fund these 529s or should I put a little more into the older kid’s plans since they will need the money sooner than the others? Or should I stay the course and continue to fund them evenly at $100 per month per child? We’d love to be able to fully fund college for our kids but am quite confident we will fall short which won’t be the end of the world.

3. Thoughts on my mortgage and HELOC? We are paying the HELOC off as fast as possible and try to make an extra mortgage payment each year. Would you advise staying with this course of action or would you do something else (i.e. pay mortgage off sooner)?
Last edited by KBREAMK on Tue Jun 11, 2019 11:28 am, edited 2 times in total.

ExitStageLeft
Posts: 1412
Joined: Sat Jan 20, 2018 4:02 pm

Re: Portfolio Review: New to VAS + Large Family

Post by ExitStageLeft » Mon Jun 10, 2019 4:59 pm

Your portfolio looks pretty clean. I think you're a little light on bonds - it would be helpful to list each asset's percentage. I suggest you update your post and put the percentage in front of each asset. You should exclude the education accounts from this calculation. Something like this is helpful for us and also helps you better see how everything shakes out.

Example:
Taxable at Vanguard
5% Vanguard Total Stock Market Index - VTSAX (0.04%): 5,222.42
4% Vanguard Growth ETF - VUG (0.04%): $3,399.06
0.2% Vanguard Small-Cap Growth ETF - VBK (0.07%): 733.16
...

The rest of my $.02
KBREAMK wrote:
Mon Jun 10, 2019 4:21 pm
...
Questions:
1. Would you do anything differently investing wise (aside from going on my own which I know I need to do eventually)? As noted in the beginning… I recently transitioned to VAS from Merrill Lynch were I was paying BIG expenses.
Looks great to me, well done!

2. We plan to use community college for first two years of college before moving our children to a state university. Should I continue to evenly fund these 529s or should I put a little more into the older kid’s plans since they will need the money sooner than the others? Or should I stay the course and continue to fund them evenly at $100 per month per child? We’d love to be able to fully fund college for our kids but am quite confident we will fall short which won’t be the end of the world.
I would probably shift a few $ from the younger kids' acocunts and put it in the older two.

3. Thoughts on my mortgage and HELOC? We are paying the HELOC off as fast as possible and try to make an extra mortgage payment each year. Would you advise staying with this course of action or would you do something else (i.e. pay mortgage off sooner)?
Whichever works best for you. The mortgage rate is higher so it makes more financial sense to pay it down over the HELOC. But it doesn't always come down to the last dollar. Paying off the smallest loan first has a greater emotional return. Either way is a good choice.

Topic Author
KBREAMK
Posts: 64
Joined: Thu Mar 14, 2019 6:25 pm

Re: Portfolio Review: New to VAS + Large Family

Post by KBREAMK » Mon Jun 10, 2019 5:15 pm

ExitStageLeft wrote:
Mon Jun 10, 2019 4:59 pm
Your portfolio looks pretty clean. I think you're a little light on bonds - it would be helpful to list each asset's percentage. I suggest you update your post and put the percentage in front of each asset. You should exclude the education accounts from this calculation. Something like this is helpful for us and also helps you better see how everything shakes out.

Example:
Taxable at Vanguard
5% Vanguard Total Stock Market Index - VTSAX (0.04%): 5,222.42
4% Vanguard Growth ETF - VUG (0.04%): $3,399.06
0.2% Vanguard Small-Cap Growth ETF - VBK (0.07%): 733.16
...

The rest of my $.02
KBREAMK wrote:
Mon Jun 10, 2019 4:21 pm
...
Questions:
1. Would you do anything differently investing wise (aside from going on my own which I know I need to do eventually)? As noted in the beginning… I recently transitioned to VAS from Merrill Lynch were I was paying BIG expenses.
Looks great to me, well done!

2. We plan to use community college for first two years of college before moving our children to a state university. Should I continue to evenly fund these 529s or should I put a little more into the older kid’s plans since they will need the money sooner than the others? Or should I stay the course and continue to fund them evenly at $100 per month per child? We’d love to be able to fully fund college for our kids but am quite confident we will fall short which won’t be the end of the world.
I would probably shift a few $ from the younger kids' acocunts and put it in the older two.

3. Thoughts on my mortgage and HELOC? We are paying the HELOC off as fast as possible and try to make an extra mortgage payment each year. Would you advise staying with this course of action or would you do something else (i.e. pay mortgage off sooner)?
Whichever works best for you. The mortgage rate is higher so it makes more financial sense to pay it down over the HELOC. But it doesn't always come down to the last dollar. Paying off the smallest loan first has a greater emotional return. Either way is a good choice.
Thanks! So the percentages should be done for each “section” correct? In other words, the taxable section percentages will add up to 100%. Am I correct? If so, I will get to work on the original posting.

chicagoan23
Posts: 336
Joined: Thu Jan 29, 2015 4:34 pm

Re: Portfolio Review: New to VAS + Large Family

Post by chicagoan23 » Mon Jun 10, 2019 5:20 pm

KBREAMK wrote:
Mon Jun 10, 2019 4:21 pm
2. We plan to use community college for first two years of college before moving our children to a state university. Should I continue to evenly fund these 529s or should I put a little more into the older kid’s plans since they will need the money sooner than the others? Or should I stay the course and continue to fund them evenly at $100 per month per child? We’d love to be able to fully fund college for our kids but am quite confident we will fall short which won’t be the end of the world.
I'm pretty anti-529, especially in your situation. With seven children (congrats, by the way!) there may be significant aid packages available that you don't even know about yet. In Texas you presumably don't get any state tax benefit by contributing to the 529. And avoiding a few years worth of capital gains on $1,200 in annual contributions won't make much difference. Even if you earn 10% per year over the next three years on $3,600 in new contributions for your oldest, that's only about $115 total in capital gains tax that you'd avoid by making new contributions to the 529. Not worth it, especially considering that the college will suck up the 529s first without even considering your individual circumstances.

I would stop contributing to the 529s entirely. Do you have HSA contributions? Can you fund a Roth for your spouse? I'd do those first. Then avoid the 529 and save in taxable accounts. See what your financial aid officer has to say.

ExitStageLeft
Posts: 1412
Joined: Sat Jan 20, 2018 4:02 pm

Re: Portfolio Review: New to VAS + Large Family

Post by ExitStageLeft » Mon Jun 10, 2019 6:58 pm

KBREAMK wrote:
Mon Jun 10, 2019 5:15 pm
...
Thanks! So the percentages should be done for each “section” correct? In other words, the taxable section percentages will add up to 100%. Am I correct? If so, I will get to work on the original posting.
No, add up all your retirement assets and that's your denominator. Should be about $950k. For each asset divide it's value by $950k to get its percentage.

Topic Author
KBREAMK
Posts: 64
Joined: Thu Mar 14, 2019 6:25 pm

Re: Portfolio Review: New to VAS + Large Family

Post by KBREAMK » Tue Jun 11, 2019 11:28 am

ExitStageLeft wrote:
Mon Jun 10, 2019 6:58 pm
KBREAMK wrote:
Mon Jun 10, 2019 5:15 pm
...
Thanks! So the percentages should be done for each “section” correct? In other words, the taxable section percentages will add up to 100%. Am I correct? If so, I will get to work on the original posting.
No, add up all your retirement assets and that's your denominator. Should be about $950k. For each asset divide it's value by $950k to get its percentage.
Done. I added percentages and also did an overall summary of all the retirement (non 529) assets.

Summary of Retirement Assets

Domestic Stocks
45.7% Vanguard Total Stock Market Index Fund - VTSAX (0.04%):$431,563.30
0.16% Vanguard Extended Market Index Fund - VEXAX (0.07%): $1,474.70
0.36% Vanguard Value ETF - VTV (0.04%): $3,408.76
0.36% Vanguard Growth ETF - VUG (0.04%): $3,399.06
0.08% Vanguard Small-Cap Growth ETF - VBK (0.07%): $733.16
0.07% Vanguard Small-Cap Value ETF - VBR (0.07%): $643.75
46.49% Total Domestic Stocks: $441,222.73

International Stocks
24.58% Vanguard Total International Stock Index Fund - VTIAX (0.11%): $233,248.12
2.45% Vanguard Developed Markets Index Fund - VTMGX (0.04%): $23,247.00
27.03% Total International Stocks: $256,495.12

Domestic Bonds
15.11% Vanguard Total Bond Market Index Fund - VBTLX (0.05%): $143,361.25
4.90% Vanguard Intermediate-Term Bond Index Fund - VBILX (0.07%): $46,494.00
20.00% Total Domestic Bonds: $189,855.25

International Bonds
6.48% Vanguard Total International Bond Index Fund - VTABX (0.11%): $61,502.79
6.48% Total International Bonds: $61,502.79

lakpr
Posts: 1637
Joined: Fri Mar 18, 2011 9:59 am

Re: Portfolio Review: New to VAS + Large Family

Post by lakpr » Tue Jun 11, 2019 11:58 am

I suggest that you undertake one more step of simplification, dump the international bonds and consolidate into Vanguard Total Bond Index fund. International bonds only add complexity with no corresponding increase in diversification benefit or returns. I also suggest that having Vanguard Intermediate Term Bond Index and Vanguard Total Bond Index Fund are redundant, the average term of bonds held in Total Bond Index is approximately equal (5.6 years last I looked?) to the Intermediate Term Bond Index fund. But I am less rigid on this second part than getting rid of overseas bonds.

Topic Author
KBREAMK
Posts: 64
Joined: Thu Mar 14, 2019 6:25 pm

Re: Portfolio Review: New to VAS + Large Family

Post by KBREAMK » Tue Jun 11, 2019 2:10 pm

lakpr wrote:
Tue Jun 11, 2019 11:58 am
I suggest that you undertake one more step of simplification, dump the international bonds and consolidate into Vanguard Total Bond Index fund. International bonds only add complexity with no corresponding increase in diversification benefit or returns. I also suggest that having Vanguard Intermediate Term Bond Index and Vanguard Total Bond Index Fund are redundant, the average term of bonds held in Total Bond Index is approximately equal (5.6 years last I looked?) to the Intermediate Term Bond Index fund. But I am less rigid on this second part than getting rid of overseas bonds.
Thanks. The Vanguard Intermediate-Term Bond Index Fund - VBILX is from my 401k provider (not Vanguard). They don't offer the total bond index fund although they added the total stock market fund at my request so maybe they will add the total bond index fund if I ask?

lakpr
Posts: 1637
Joined: Fri Mar 18, 2011 9:59 am

Re: Portfolio Review: New to VAS + Large Family

Post by lakpr » Tue Jun 11, 2019 3:25 pm

KBREAMK wrote:
Tue Jun 11, 2019 2:10 pm
The Vanguard Intermediate-Term Bond Index Fund - VBILX is from my 401k provider (not Vanguard). They don't offer the total bond index fund although they added the total stock market fund at my request so maybe they will add the total bond index fund if I ask?
Oh I didn’t realize that one is in your Traditional IRA and one within your 401k plan. The intermediate term bond fund is a very fine fund, nothing wrong with it. You can ask for the total bond index fund, but the value addition of such efforts is really not that high. I tend to treat both of them as fully substitutable funds for each other.

Why not pick one or the other (401k or Traditional IRA), and have ALL your bonds in one plan? Both are tax free vehicles, so try exchanging from one of these bond funds into a stock fund (I suggest this in your 401k) and do the reverse in another to buy more bonds (I suggest this in your IRA), lets you consolidate all bonds in one account.

Actually, thinking this even more, why not roll the IRA over completely into your 401k? Are the choices in your 401k worse compared to IRA?

Topic Author
KBREAMK
Posts: 64
Joined: Thu Mar 14, 2019 6:25 pm

Re: Portfolio Review: New to VAS + Large Family

Post by KBREAMK » Tue Jun 11, 2019 4:09 pm

lakpr wrote:
Tue Jun 11, 2019 3:25 pm
KBREAMK wrote:
Tue Jun 11, 2019 2:10 pm
The Vanguard Intermediate-Term Bond Index Fund - VBILX is from my 401k provider (not Vanguard). They don't offer the total bond index fund although they added the total stock market fund at my request so maybe they will add the total bond index fund if I ask?
Oh I didn’t realize that one is in your Traditional IRA and one within your 401k plan. The intermediate term bond fund is a very fine fund, nothing wrong with it. You can ask for the total bond index fund, but the value addition of such efforts is really not that high. I tend to treat both of them as fully substitutable funds for each other.

Why not pick one or the other (401k or Traditional IRA), and have ALL your bonds in one plan? Both are tax free vehicles, so try exchanging from one of these bond funds into a stock fund (I suggest this in your 401k) and do the reverse in another to buy more bonds (I suggest this in your IRA), lets you consolidate all bonds in one account.

Actually, thinking this even more, why not roll the IRA over completely into your 401k? Are the choices in your 401k worse compared to IRA?
The IRA is with Vanguard so full Vanguard fund options... the 401k is with Creative Planning and the fund selection is shown above. It's a nice selection. So I could definitely do this. What do you see as the main advantage of this strategy (moving from Vanguard IRA to this 401k)?

lakpr
Posts: 1637
Joined: Fri Mar 18, 2011 9:59 am

Re: Portfolio Review: New to VAS + Large Family

Post by lakpr » Tue Jun 11, 2019 4:25 pm

Moving IRA to 401k gets you two distinct advantages.

1. Clears the decks for Backdoor Roth IRAs. Though, this is only useful if your adjusted gross income ( reported in Box 1 of your year end W2) exceeds $193k per year for married filing jointly / $96.5k for single
[Looks like you are in 24% bracket, and can use backdoor Roth, over and above your $55k into 401k if you have the appetite and funds for it]

2. Asset protection. 401k plan creditor protections are more or less absolute; meaning a judgment holder / creditor cannot touch your money in the 401k account. ITSs also provide the asset protection in SOME states, not all, and even then it depends on you to go into court and make an affirmative defense that your IRA funds should not be garnished.

Google “IRA asset protection <your state>” to learn about asset protection implications for IRA in your state.

For you, neither of these points could be applicable / not very relevant. It is just a nice perk to have for free (like having the free car rental coverage on your credit card), not of much value until you need it and get to use it.

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