7-Year Portfolio Checkup

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Topic Author
jornsy
Posts: 20
Joined: Tue Jul 10, 2012 4:21 pm

7-Year Portfolio Checkup

Post by jornsy » Wed Jun 12, 2019 3:57 pm

I had my portfolio last checked by this forum back in 2012. I'm hoping to retire in 5 years, so I need your help making sure I'm on target to retire in 2024 when I turn 60.

Emergency fund: 3-6 months of expenses in money market fund, not listed below.
Debt: No debt (mortgage paid off, cars paid off, pay full balance of credit cards each month).
Tax Filing Status: Married filing jointly with three kids.
Tax Rate: Federal effective rate 9% (22% bracket), 5% State (Illinois).
Age: 55, wife 51
Desired Asset allocation: 60% stocks/ 40% bonds.
Intl allocation: 20% of stocks

Retirement accounts:

(Fund/ticker, expense ratio, balance, yearly contribution)

S.U.R.S. retirement at Fidelity ($502,000 total)
Fidelity - 500 Index Institutional Class (FXAIX) .04, $317,000, 0
PIMCO - Total Return Institutional Class (PTTRX) .55, $134,000, 0
Fidelity - US Bond Index Institutional Class (FXNAX) .04, $43,000, $8,500
Fidelity - Extended Market Index Premium Class (FSMAX) .07, $8,000, $5,500

403b at Vanguard ($582,000 total)
Vanguard - REIT Index Fund (VGSIX) .12, $92,000, 0
Vanguard - Total Bond Market Index Fund (VBMFX) .05, $140,000, 0
Vanguard - Total International Stock Index Fund (VGTSX) .11, $101,000, 0
Vanguard - Total Stock Market Index Fund (VTSMX) .04, $248,000, 0

457b at T. Rowe Price ($94,000 total)
Vanguard - Institutional 500 Index Trust (FXAIX) .01, $15,000, $12,000
Vanguard - Total Bond Market Index Fund (VGTSX) .03, $64,000, $6,000
Northern Trust - All Country World ex-US Index (NTACW) .05, $14,000, $6,000

Roth IRAs ($336,000 total)
Vanguard - Balanced Fund (VBIAX) .07, $168,000, $7,000
Vanguard - Wellington Fund (VWENX) .16, $168,000, $7000


Taxable account: ($295,000)

Vanguard - Intermediate-Term Tax-Exempt Fund (VWIUX), .09, $107,000, 0
Vanguard - Prime Money Market Fund (VMMXX) .16, $7,000, 0
Vanguard - Small-Cap Index Fund (VSMAX) .06, $16,000, 0
Vanguard - Total International Stock Index Fund (VTIAX) .11, $33,000, 0
Vanguard - Total Stock Market Index Fund (VTSAX) .04, $130,000, 0

529 accounts have $150,000 for the last two kids college expenses (ages now 19 and 17). We only plan on helping them for their first four years.

My SURS Retirement (state-IL) has to be annuitized when I retire order to receive state health benefits, so that's why I would like to keep it somewhat balanced and stable on its own with those funds. I can't afford to have it drop significantly when I near retirement. I may roll over the 457b into the SURS account when I retire to boost the payments for both of our lives.

I plan on converting some funds each year from my 403b to my Roth to lower my future RMDs.

Expected Spending: in retirement will be around $75,000.

Expected Balances: (in five years using 6% growth on mutual funds and 3% growth for bonds)
SURS (760,000) + 457b ($268,000) = $1,028,000 (will be annuitized to get free health insurance for me)
403b ($785,000)
Roth IRAs ($534,000)
Taxable ($250,000) - we use some of these funds now for our Roth IRA contributions , so I lowered the 5 year balance.

My SS will be affected by GPO & WEP, so I won't receive much at all. My wife (age 51) will be eligible for SS, but she was a stay at home mom for a long time, so her contributions (part-time) have been at a lower level (W2 income now $24,000).


Questions:

1) Does it look like I will be able to retire in 5 years or maybe sooner?
2) Should I combine the PIMCO Total Return and Fidelity Total Bond (in my SURS account) or just leave them separate? I don't know if the PIMCO Total Return has been doing better than Fidelity's Total Bond.
3) What other adjustments should I make now to my portfolio investments to be better prepared for retiring in 5 years?

Thanks for the reviews and advice.

lakpr
Posts: 1651
Joined: Fri Mar 18, 2011 9:59 am

Re: 7-Year Portfolio Checkup

Post by lakpr » Wed Jun 12, 2019 4:35 pm

If your SURS funds have to be annuitized, why do you want to invest in stock funds in that account, why not use that account In its entirety as bonds allocation repository?
[ I am assuming that annuitizing means any remaining balance in these accounts cannot be passed on to your heirs, except perhaps your spouse, after your death ]

Specifically, sell entire FSMAX and FXAIX in that plan and invest into FXNAX. (That is $325k into bonds)

Compensate by switching your Roth IRAs completely to Vanguard Total Stock Market Index (that will be $132k additional money, 40% of $330k) into stocks

Additionally compensate by exchanging your 403b bond market fund into Total stock market fund, $140k

Additionally exchange the $64k from your 457b plan’s bond market index fund into Total stock market index fund.

Stocks to bonds : $325k in SURS
Bonds to Stocks : $132k + $140k + 64k = $336k

The balance will be restored to the current level in about 1 year based on your contributions.


Just a suggestion. All these exchanges are tax free, please let me know if I am incorrect.

ExitStageLeft
Posts: 1416
Joined: Sat Jan 20, 2018 4:02 pm

Re: 7-Year Portfolio Checkup

Post by ExitStageLeft » Wed Jun 12, 2019 8:17 pm

I think you're almost but not quite there. It depends on what your annuitization package delivers, but using CFIRESim.com with your present assets, a 60/40 allocation, and a 35-year retirement the 95% success rate is with an annual spend of $68k. I assumed $20k saved per year before you retire.

Topic Author
jornsy
Posts: 20
Joined: Tue Jul 10, 2012 4:21 pm

Re: 7-Year Portfolio Checkup

Post by jornsy » Wed Jun 12, 2019 8:37 pm

lakpr: Thanks for your suggested exchanges, and yes, they would all be tax free. I like the simplification you have suggested. It just scares me a little having all bonds in one investment vehicle and all stocks in another. I guess I need to get over that fear, since all the vehicles are for retirement.


ExitStageLeft: I am investing $14,000/yr to the SURS retirement and $24,000 to the 457b for a total of $38,000. I plan to increase my contributions a little after our cost of living raise in July. I will check out CFIRESim.com with my numbers. I never heard of that resource, so thank you.

TJ

nix4me
Posts: 231
Joined: Sat Oct 13, 2018 9:32 am

Re: 7-Year Portfolio Checkup

Post by nix4me » Wed Jun 12, 2019 8:59 pm

Very soon. 4% rule says you only need $2M, you are at ~$1.8.

longinvest
Posts: 3512
Joined: Sat Aug 11, 2012 8:44 am

Re: 7-Year Portfolio Checkup

Post by longinvest » Wed Jun 12, 2019 9:04 pm

jornsy wrote:
Wed Jun 12, 2019 3:57 pm
1) Does it look like I will be able to retire in 5 years or maybe sooner?
You could enter your information into the Accumulation sheet of this VPW Worksheet, including your desired retirement age and future pensions (like Social Security, possibly delayed to age 70), and decide if you like the result.
Bogleheads investment philosophy | single-ETF balanced portfolio | VBAL

Topic Author
jornsy
Posts: 20
Joined: Tue Jul 10, 2012 4:21 pm

Re: 7-Year Portfolio Checkup

Post by jornsy » Thu Jun 13, 2019 9:36 am

longinvest wrote:
Wed Jun 12, 2019 9:04 pm

You could enter your information into the Accumulation sheet of this VPW Worksheet, including your desired retirement age and future pensions (like Social Security, possibly delayed to age 70), and decide if you like the result.
Thank you longinvest, I will download the VPW spreadsheet and play around with my numbers.

TJ

ExitStageLeft
Posts: 1416
Joined: Sat Jan 20, 2018 4:02 pm

Re: 7-Year Portfolio Checkup

Post by ExitStageLeft » Thu Jun 13, 2019 2:23 pm

jornsy wrote:
Wed Jun 12, 2019 8:37 pm
...
ExitStageLeft: I am investing $14,000/yr to the SURS retirement and $24,000 to the 457b for a total of $38,000. I plan to increase my contributions a little after our cost of living raise in July. I will check out CFIRESim.com with my numbers. I never heard of that resource, so thank you.

TJ
There is another as well, http://firecalc.com

The methodology is easier to read about than to explain, but in a nutshell it looks at historic market returns and sees how your assets and spending would fare over different time slices. Using the following I get an annual spend of $73,801 per year (real dollars).

CFIRE.com parameters:
Retirement Year: 2024 End Year: 2059
Investigate Max initial Spending with 95% success rate
Portfolio: $1.5M with 60/40 allocation, 0.18% fees, rebalance annually
Spending Plan: Inflation adjusted
Social Security: $6,000 p.a. starting in 2040
Other Income: $38,000 per year, 2019-2023, inflation adjusted

I don't know if that's a realistic estimate of your wife's potential social security benefit. You can see though that you are very close to being able to retire in five years. if you have some flexibility in your spending then you should have no problems.

Another tool is the Rich, Broke or Dead model: https://engaging-data.com/will-money-la ... &flexpct=0

You can see using those numbers there's a large block of red. if you can reduce your spending by up to 10% in down years, it changes the result pretty significantly: https://engaging-data.com/will-money-la ... flexpct=10

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