Portfolio Review request

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Joined: Mon Aug 19, 2019 10:35 am

Portfolio Review request

Post by bigbadbuff » Wed Aug 21, 2019 1:03 pm

Hi all- I’d like to start by saying how thankful I am that so many folks here take the time to share their knowledge and opinions with those of us who are new to the world of investment and sensible financial planning. I have learned an incredible amount in a very short period here and still have a long, long ways to go- but I find it fascinating!

Me: 90k
Spouse: 150k

Emergency Funds:
12 months currently set aside in a high interest savings account. Strongly considering taking half of that and moving it to a 12/18 month CD.

Mortgage 317k remaining at 3.6%
School loan 97k remaining at 2.5%
No other debt

Tax Filing Status:
Married Filing Jointly

Tax Rate:
24% Federal
5.75% State (Virginia)

Age: early 40s

Desired Asset Allocation:
I think staying in the 30-40% bonds range is appropriate for our ages, so 35% bonds/65% equities, with perhaps 25% of that being international. I don’t currently have international allocated as you’ll see below.

401k investments for me (total 100k; company match is 1:1 up to 4%)
PIMCO Income Fund (PIMIX) 39% (ER .79%)
Vanguard MidCap Index Fund (VMCIX) 20% (ER .09%)
Vanguard Institutional Index Plus Fund (VIIIX) 39% (ER .07%)

Other options available:
Wells Fargo Stable Value Fund (ER .37%)
PIMCO Total Return Fund (PTTRX)(ER .56%)
FIAM Broad Market Duration CIT Fund (ER .37%)
Oakmark Equity & Income Fund (OAKBX)(ER .48%)
Blackrock Global Allocation Fund (MCLOX)(ER .58%)
JPMorgan Smart Retirement- Income (JSRAX)(ER .49%)
JPMorgan Smart Retirement 2020 thru 2055 (ER .55-.65%)
Dodge & Cox Stock Fund (DODGX)(ER .47%)
T Rowe Price Growth Stock Fund (PRGFX)(ER .55%)
Dimensional International Value Fund (DFIVX)(ER .48%)
Vanguard Total International Stock Index Fund (VTSNX)(ER .13%)
QMA Small Cap Equity Fund (TSVAX)(ER .62%)
I also have the option to self direct for additional fees, which I have not explored.

401 investments for my spouse (total 325k; occasional significant employer contributions but no explicit yearly match)
Vanguard Balanced Index Adm (VBIAX) 30% (ER .07%)
Vanguard International Growth Adm (VWILX) 20% (ER .32%)
Vanguard Mid Cap Index Adm (VIMAX) 20% (ER .05%)
Vanguard Wellesley Income Adm (VWIAX) 30% (ER .16%)

Other options available:
BlackRock LifePath Index 2020k – 2055 K (ER .10% on average)
Schwab Bank Savings
Vanguard Emerging Markets Stock Index Adm (VEMAX) (ER .14%)
Vanguard Equity Income Adm (VEIRX) (ER .18%)
Vanguard Growth & Income Adm (VGIAX) (ER .22%)
Vanguard Growth Index Adm (VIGAX) (ER .05%)
Vanguard High Yield Corporate Adm (VWEAX)(ER .13%)
Vanguard Interm-Bond Index Adm (VFIUX)(ER .07%)
Vanguard Interm-Term Treasury Adm (VFIUX)(ER .10%)
Vanguard International Value Inv (VTRIX)(ER .38%)
Vanguard Large Cap Index Adm (VLCAX)(ER .05%)
Vanguard Mid Cap Growth Index Adm (VMGMX)(ER .07%)
Vanguard Mid Cap Value Index Adm (VMVAX)(ER .07%)
Vanguard Short Term Bond Index Adm (VBIRX)(ER .07%)
Vanguard Small Cap Growth Index Adm (VSGAX)(ER .07%)
Vanguard Small Cap Index Adm (VSMAX)(ER .05%)
Vanguard Small Cap Value Index Adm (VSIAX)(ER .07%)
Vanguard Total International Stock Index Adm (VTIAX)(ER .11%)
Vanguard US Growth Adm (VWUAX)(ER .28%)
Vanguard Value Index Adm (VVIAX)(ER .05%)

Current retirement assets
Rollover IRA (14.5k, all in VOO)
Brokerage Account (6.5k, all in ABQUX; this was recently inherited)
Roth IRA (1k, money market)
AT&T stock (current value 10.5k, dividends reinvested)
360k in high interest savings
I am selling ownership in a property that will yield an additional 150k next month.

Inherited assets
I am in the process of having 2 IRA Annuities totaling 200k moved into my name at the current institutions. I then plan on rolling these over to Vanguard. I have to take RMDs and have all $ removed within 5 years.

I have moved 1 Non-Qualified Annuity totaling 125k into my name and that is currently very conservatively invested with a local advisor collecting a 1% fee (inherited). I am considering also moving this to Vanguard.

I am playing obviously catch-up in my retirement accounts. I am addressing this by, as of this year, maxing out my 401k going forward. We have been doing that with my spouse’s every year since they have been in the workforce.

I would love opinions on:

1) Current 401k allocation percentages and fund choices. The options to choose from for me seem ‘eh’ and my spouse’s seem quite good.
2) Like many here I am debating between paying off the 97k 2.5% student loan vs investing. I am leaning towards paying it off, primarily for the peace of mind but also for better monthly cash flow/investment capital over the longer term.
3) How best to handle the draw down in the inherited annuity IRAs in the coming years. These seem to be universally considered a pain to inherit, and moving them to another institution has been very difficult so far. I assume there is little option here but to take RMDs up to the top of my current tax bracket for the next 5 years, assuming no major changes in projected income/tax bracket.
4) I’m sitting on a lot of cash. Some of that will be likely going towards student loan payoff and down payment on another home, but quite a bit will be directed towards investment. I'm debating a lot of scenarios there.
Last edited by bigbadbuff on Thu Aug 22, 2019 10:49 am, edited 2 times in total.

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David Jay
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Re: Portfolio Review request

Post by David Jay » Thu Aug 22, 2019 9:00 am

Welcome to the forum!

At BH we tend to be very expense-conscious, a few tenths of a percent over a 50 year investing horizon makes a significant difference.. We would ask that you add the expense ratio (ER) of each of your choices to provide better feedback. You can do this by editing your head post - use the little “pencil” symbol in the upper right, that re-opens the post for editing.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

Topic Author
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Joined: Mon Aug 19, 2019 10:35 am

Re: Portfolio Review request

Post by bigbadbuff » Thu Aug 22, 2019 10:41 am

Hi David, I added the ER for each fund, thank you!

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Joined: Thu Aug 08, 2019 3:21 pm

Re: Portfolio Review request

Post by misterjohnny » Thu Aug 22, 2019 12:22 pm

I would definitely reduce the amount of cash you have, first by paying off the student loans.
With both of you having good paying jobs, you don't need as much of a Emergency Fund because the odds of both of you being out of work at the same time is slim. Plus you could always tap your inherited IRA since it has to be drained anyhow.
Pay off the student loan with cash on hand.
I would keep max 6 months worth of expenses in laddered CDs.
I'd also sell the AT&T stock, but that's just a personal preference.
Put the available cash in Total Market Index funds and forget about it for 20 years.

I'll let others chime in on the 401k mutual fund choices.

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Joined: Wed Oct 31, 2018 11:14 am

Re: Portfolio Review request

Post by coastalhiker » Thu Aug 22, 2019 6:47 pm

I'm curious to know why you think that you have to drain the inherited IRAs in 5 years. If you are a non-spouse beneficiary, unless it's a Roth IRA you can instead choose to distribute it over your lifetime as an RMD based on your life expectancy.

My husband has received two of them; we've been drawing small RMDs on on the first one for 7 years, and are starting the second one this year. Way better for us tax-wise. We can always take more if we need it, otherwise it's essentially a Vanguard set-and-forget distribution rule.

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Re: Portfolio Review request

Post by bigbadbuff » Fri Aug 23, 2019 2:27 pm

^ There is only a 'Nonqualified-Stretch Provision' in 1 of the annuities. The others don't have that feature so I have to do lump sum or 5 year.

This is my understanding and I hope it's right.

Topic Author
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Re: Portfolio Review request

Post by bigbadbuff » Mon Aug 26, 2019 12:55 pm

Any opinions on the 401k offerings in our plans?

Topic Author
Posts: 6
Joined: Mon Aug 19, 2019 10:35 am

Re: Portfolio Review request

Post by bigbadbuff » Wed Sep 11, 2019 12:32 pm

bumping. I am mostly interested in feedback on our 401k offerings.

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Joined: Wed Feb 21, 2007 4:57 am

Re: Portfolio Review request

Post by Chip » Wed Sep 11, 2019 12:53 pm

bigbadbuff wrote:
Mon Aug 26, 2019 12:55 pm
Any opinions on the 401k offerings in our plans?
As mentioned earlier, low expenses are key. You have a few good choices in your plan, while your wife has many. So build your portfolio by picking the lowest cost options in your plan, then fill out the rest of your portfolio allocation with choices from your wife's plan and your IRAs. You don't have to have your entire portfolio allocation recreated in each account. As long as the totals line up with what you want that is all that matters.

Specifically, sell the expensive PIMCO bond fund in your 401k and buy more of the Vanguard stock funds you already own. The sell some of the stock funds in her 401k and buy the Vanguard Intermediate Bond index fund. Put together a spreadsheet that totals everything up so that you know when you are on or off target on the portfolio as a whole.

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Re: Portfolio Review request

Post by HomeStretch » Wed Sep 11, 2019 1:37 pm

IMO it is best to view your/spouse’s portfolio in total when investing according to your desired asset allocation (AA) in the least complex, lowest cost, most tax-efficient manner. Here is a link to the wiki page on tax efficient fund placement:
https://www.bogleheads.org/wiki/Tax-eff ... _placement

Here are some suggestions to consider for your accounts:

$6.5k - Taxable Account - sell ABQUX and reinvest in a total US stock market (TSM) fund like Vanguard’s VTSAX for tax efficiency. Taxable gains should be minimal as it is a recently inherited bond fund.

$10.5k - AT&T Stock - sell, reinvest proceeds in your Taxable Account in a US TSM Fund like VTSAX for diversification.

$360k - Savings Account - repay whatever debt you plan to and then move amount in excess of your short-term needs (emergency fund, house savings) into your Taxable Account and invest in a US TSM Fund like VTSAX and/or International TSM Fund like VTIAX according to your desired AA.

$150k - Property Sale - if you intend to invest this, add to your Taxable Account and invest in a US TSM Fund like VTSAX and/or International TSM Fund like VTIAX according to your desired AA.

$1k - Roth IRA - move balance from money market fund to a S&P 500 Fund like Vanguard’s VFINX for higher expected growth. When the account balances reaches $3k you can switch to the lower cost admiral fund VFIAX. I suggest the S&P 500 if you hold a TSM Fund in your Taxable Account to avoid accidental wash sales.

$14.5k - Rollover IRA - if this is Her IRA, rollover into the 401k plan (which has good low cost funds) if it accepts rollovers in. This will allow Her to do backdoor Roths now or in future if income exceeds the direct contribution limits. If it’s His IRA, rollover into His 401k for one less account or keep account as is in VOO as His Inherited IRAs will make a back door Roth by Him subject to the pro rata rule.

$200k - His Inherited IRA - invest in bonds like Vanguard’s VBTLX Total US Bond Fund (lower expected growth) to keep RMDs low.

$125k - His Annuity Inherited - transfer to Vanguard to keep accounts together and possibly lower fees. Vanguard has annuity specialists that can assist in evaluating the annuity.

$100k - His 401k - invest in VIIIX (simplify / lower ER than current funds).

$325k - Her 401k - invest in VLCAX and VFIUX (simplify/lower ER than current funds).

Agree with Chip’s suggestion to create a spreadsheet so you can play around with the $ to invest by account/by fund to get to your desired AA.

Update your 401k contributions so they are directed into the appropriate fund to maintain your AA.

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