Portfolio Review - New to Forum

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Topic Author
RPA59
Posts: 2
Joined: Mon Aug 12, 2019 9:41 am

Portfolio Review - New to Forum

Post by RPA59 » Mon Aug 12, 2019 9:20 pm

Hi everyone - new to the forum but have been browsing for a while. Decided to clean up a few things with regards to my portfolio, looking forward to feedback. Not going to post what I own currently, because I am in the process of moving the pieces around and interested in a more holistic approach

Portfolio:

Emergency funds: Yes

Debt: No debt

Tax Filing Status: Single

Tax Rate: 35% Federal, 10.4% State/City

State of Residence: NY - NYC

Age: 33

Desired Asset allocation: 100% stocks / 0% bonds
Desired International allocation: unclear

Portfolio size: ~575k

I will give balances as a % of overall portfolio:

Current retirement assets

Taxable at Fidelity
8%

His 401k
56%
Company matches 6% of gross pay every period (including bonus)

His Roth IRA at Fidelity
3%

His Rollover IRA at Fidelity
28%

His traditional IRA at Fidelity
5%

_______________________________________________________________


Contributions

New annual Contributions
$19k his 401k (employer matches 6% of gross pay every pay period, 2x month)
$6k his IRA/Roth IRA
$5-10k/year taxable

Available funds

Funds available in his 401(k)
Name / Ticker / ER

BONDS
Pioneer Bond Fund K PBFKX 35
AB High Income Fund Z AGDZX 50
PGIM High Yield Fund R6 PHYQX 42
PGIM Short-Term Corp Bond Fd R6 PIFGX 42
Lord Abbett Bond Debenture Fund R6 LBNVX 52

ASSET ALLOCATION
3205 Voya Index Solution 2035 Portfolio Z VSZDX 44
3206 Voya Index Solution 2040 Portfolio Z VSZEX 43
3207 Voya Index Solution 2045 Portfolio Z VSZFX 41
3208 Voya Index Solution 2050 Portfolio Z VSZGX 42
3209 Voya Index Solution 2055 Portfolio Z VSZHX 42
3214 Voya Index Solution 2060 Portfolio Z VSZIX 48
3215 Voya Index Solution Income Port Z VSZJX 45
6998 Voya Index Solution 2020 Portfolio Z VSZAX 46
6999 Voya Index Solution 2025 Portfolio Z VSZBX 45
7005 Voya Index Solution 2030 Portfolio Z VSZCX 44

BALANCED
MFS Total Return Fund R6 MSFKX 40
LARGE CAP VALUE
Vanguard 500 Index Fund Adm VFIAX 4
Inv Opp Main Street Fd R6 OMSIX 48
MFS Value Fund R6 MEIKX 48
LARGE CAP GROWTH
AB Large Cap Growth Fund Z APGZX 59
Amer Cent Ultra Fund R6 AULGX 62
SMALL/MID/SPECIALTY
Vanguard Mid-Cap Index Fund Adm VIMAX 5
Vanguard Small-Cap Index Fund Adm VSMAX 5
ClrBrg Sm Cp Growth Fnd IS LMOIX 78
Goldman Sachs Sm/Md Cap Growth Fd R6 GTMUX 91
PGIM QMA Mid-Cap Value Fund R6 PMVFX 77
Franklin Small Cap Value Fund R6 FRCSX 68
Inv Opp Main Street Sm Cap Fd R6 OSSIX 78
GLOBAL/INTERNATIONAL
American Funds New World R6 RNWGX 62
Inv Opp Intl Diversified Fd R6 OIDIX 86
MFS Intl Diversification Fnd R6 MDIZX 80

Current Plan
Even though 401k options are not great (only 3 low expense Vanguard Funds) planning to roll-in rollover IRA from past 401ks so can set up backdoor Roth. Second step would be to convert tIRA to Roth IRA. My basis for contributions there is more than the current balance, so there shouldn't be tax implications when converting (terrible investments, I know). Then can set up yearly backdoor Roth IRA contributions fairly easily once the Rollover IRA is back in the 401k.

Questions

1. What would be the best portfolio allocation if I am looking to simplify but only have access to SP 500 / Mid Cap / Small cap in 401k where most of my savings is? I was thinking of putting 65% VFIAX / 10% VIMAX / 10% VSMAX once the IRA is rolled back in to the 401k.

2. Would like 10% allocation to REITs, thinking of buying VNQ in Roth IRA once I roll the tIRA in there (11%). Is that the most tax efficient?

3. What ETF or Fidelity fund would you fill out the balance of the accounts with in taxable? Any suggestions for 1-2 funds to invest in taxable account going forward? IXUS? Debating whether to put international stocks in taxable account or not.

4. Just a sanity check that rolling my Rollover IRA back into the 401k so I can convert tIRA and do backdoor Roth every year with no headaches makes sense as well from a tax perspective. I expect my earnings to keep increasing over time.

Thank you for your responses.

HomeStretch
Posts: 1123
Joined: Thu Dec 27, 2018 3:06 pm

Re: Portfolio Review - New to Forum

Post by HomeStretch » Mon Aug 12, 2019 10:54 pm

RPA59 wrote:
Mon Aug 12, 2019 9:20 pm
Current Plan
Even though 401k options are not great (only 3 low expense Vanguard Funds) planning to roll-in rollover IRA from past 401ks so can set up backdoor Roth. Second step would be to convert tIRA to Roth IRA. My basis for contributions there is more than the current balance, so there shouldn't be tax implications when converting (terrible investments, I know). Then can set up yearly backdoor Roth IRA contributions fairly easily once the Rollover IRA is back in the 401k.

Questions
4. Just a sanity check that rolling my Rollover IRA back into the 401k so I can convert tIRA and do backdoor Roth every year with no headaches makes sense as well from a tax perspective. I expect my earnings to keep increasing over time.
Yes, it makes sense to rollover your Rollover IRA balance into your 401k in order to do a back door Roth of your tIRA after tax balance and future nondeductible IRA contributions.

As your basis in your tIRA is higher than the current tIRA balance, I suggest you transfer an amount from your Rollover IRA to your tIRA to make your tIRA balance equal to your basis to maximize the backdoor Roth.

make_a_better_world
Posts: 52
Joined: Mon Mar 18, 2013 11:55 pm

Re: Portfolio Review - New to Forum

Post by make_a_better_world » Mon Aug 12, 2019 11:03 pm

Regarding #4.

The Roll-over IRA and traditional-IRA are equivalent in many ways and both can be reverse rolled to the 401k. You can even consolidate them before doing the reverse rollover but it's just an extra application form if they are two accounts. You'll want to make sure the 401k plan will accept the funds first. This way you will avoid any extra tax liability when starting up the backdoor-Roths.

I do not know what you and the first replier mean by your basis is higher than the balance inside the traditional-IRA. From my understanding, if the contributions already made were deductible, you will be paying income tax on whatever amount is in there upon conversion. If you mean you lost money on what you invested in, that sort of profit/loss is not applicable. If you made non-deductible contributions to the traditional IRA then OK sure. Those can be moved to a Roth without further tax.

I am curious if I am about to learn something myself.

HomeStretch
Posts: 1123
Joined: Thu Dec 27, 2018 3:06 pm

Re: Portfolio Review - New to Forum

Post by HomeStretch » Mon Aug 12, 2019 11:23 pm

make_a_better_world wrote:
Mon Aug 12, 2019 11:03 pm
I do not know what you and the first replier mean by your basis is higher than the balance inside the traditional-IRA.
tIRA basis = nondeductible contributions to the tIRA.

tIRA basis > current account balance of tIRA

Topic Author
RPA59
Posts: 2
Joined: Mon Aug 12, 2019 9:41 am

Re: Portfolio Review - New to Forum

Post by RPA59 » Tue Aug 13, 2019 6:22 am

HomeStretch wrote:
Mon Aug 12, 2019 10:54 pm

Yes, it makes sense to rollover your Rollover IRA balance into your 401k in order to do a back door Roth of your tIRA after tax balance and future nondeductible IRA contributions.

As your basis in your tIRA is higher than the current tIRA balance, I suggest you transfer an amount from your Rollover IRA to your tIRA to make your tIRA balance equal to your basis to maximize the backdoor Roth.

Thanks for your reply. All my contributions to my tIRA were after-tax and nondeductible, and the balance of the investments is currently ~8k less than the cumulative contribution amount. What is the best way to approach converting the rollover account to Roth? Would you convert ~8k of the rollover pre-tax money to the tIRA, roll my Rollover IRA back into my 401k, then convert the tIRA balance with the additional funds? Or would you roll-in the Rollover IRA back to the 401k but leave 8k in the account, then convert each account separately to my current Roth IRA?

And because I have already paid tax on the contributions, the fact that I did not pay tax on the Rollover IRA money is mitigated by the fact that I lost money in the account and that is just bringing the basis back to even on what I contributed?

HomeStretch
Posts: 1123
Joined: Thu Dec 27, 2018 3:06 pm

Re: Portfolio Review - New to Forum

Post by HomeStretch » Tue Aug 13, 2019 6:43 am

RPA59 wrote:
Tue Aug 13, 2019 6:22 am

All my contributions to my tIRA were after-tax and nondeductible, and the balance of the investments is currently ~8k less than the cumulative contribution amount. What is the best way to approach converting the rollover account to Roth? Would you convert ~8k of the rollover pre-tax money to the tIRA, roll my Rollover IRA back into my 401k, then convert the tIRA balance with the additional funds? Or would you roll-in the Rollover IRA back to the 401k but leave 8k in the account, then convert each account separately to my current Roth IRA?
Either way should be fine. Complete the rollover into the 401k first and then do the Roth conversion(s).
RPA59 wrote:
Tue Aug 13, 2019 6:22 am
And because I have already paid tax on the contributions, the fact that I did not pay tax on the Rollover IRA money is mitigated by the fact that I lost money in the account and that is just bringing the basis back to even on what I contributed?
Yes. You can complete a draft Form 8606 prior to executing the transactions just to see how this will be reported.

retiredjg
Posts: 37142
Joined: Thu Jan 10, 2008 12:56 pm

Re: Portfolio Review - New to Forum

Post by retiredjg » Tue Aug 13, 2019 7:07 am

So your tIRA has lost about $8k. This means you can convert $8k of your Rollover IRA to Roth with no tax. That is definitely the way to handle this. Sort of a silver lining.

User avatar
scubadiver
Posts: 995
Joined: Sun May 04, 2008 9:48 pm

Re: Portfolio Review - New to Forum

Post by scubadiver » Tue Aug 13, 2019 3:25 pm

Welcome to the forum!
RPA59 wrote:
Mon Aug 12, 2019 9:20 pm
Even though 401k options are not great (only 3 low expense Vanguard Funds) planning to roll-in rollover IRA from past 401ks so can set up backdoor Roth.
In a world of many bad 401k plans, this is at worst a decent 401k plan.
RPA59 wrote:
Mon Aug 12, 2019 9:20 pm
4. Just a sanity check that rolling my Rollover IRA back into the 401k so I can convert tIRA and do backdoor Roth every year with no headaches makes sense as well from a tax perspective. I expect my earnings to keep increasing over time.
Others have already commented, but I will add another vote supporting this action.

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