Going Solo

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Going Solo

Post by Goose612 » Mon Jan 13, 2020 4:42 pm

Sorry about giving you my life story, but I appreciate anyone's input.

Last summer my wife and I decided to take a look at our investments since we were newly in a position to move some funds. Knowing very little we ended up going with a manged portfolio from Personal Capital. After reading the Boglehead guide, I feel confident that we can manage these ourselves and save the management fees. To this end, I have chosen what I believe to be a good strategy, but would love the opinions of some seasoned investors.

Current Situation:
Married with one child in college / funded by 529
We both work for state government in Texas without state income taxes. I will be eligible to retire with a pension income of 70% in twelve years (age 50). My wife will not have that option as she was not worked as long in the public sector. I suspect we would like to have about $3k / month to supplement the pension.

Debt: 185K Mortgage

Three month emergency fund

Roth IRA: 17k
401K: 37.5k (mostly traditional contributions)

Rollover IRA: 114k
Roth IRA: 7k

$500 / mo. to my IRA
$500 / mo. to her IRA
$150 / mo. to my 401k (Roth Contributions)

Thoughts / Questions
Just let me know if any of these seem crazy or non-nonsensical.

1. General advice given is your age in bonds give or take, but since a large portion of our retirement income will be from pensions I think the risk avoidance is less of an issue. We have not determined that we are definitely going to retire when I am eligible, so working a few years in the case of poor market conditions would not be a terrible burden. This makes me feel like our investments could be more aggressive than we otherwise would be comfortable.

1b. Since the bulk of our current retirement income is tax deferred (pension and rollover IRA), I feel like the best bet is to fund the Roth IRAs as much as possible, and then our remaining excess fund to Roth 401k contributions.

2. Proposed allocation: 60% US Stock, 20% International Stock, 20% bond

3. I am leaning toward Fidelity or Charles Schwab, because they both seem to offer easy to use products with modern websites and minimal or no fees.

4. If I choose Fidelity, is there a reason to not use the Zero Fee Funds for US Total Market (FZROX) and International Stocks (FZILX)?

5. The 401k has limited investing options. They do offer BlackRock LifePath Target Date Funds (.08), and a few Vanguard Indexes, but mostly higher cost options. Would it be a terrible idea to invest all of this in a Target Date fund and ignore it for rebalancing my other accounts?

5b. My though is to invest all of the Roth IRA and forward contributions in US Total Market, finish the balance in the rollover IRA, and then just use the target fund in the 401k.

6. While typing all of this out, I realize there will be a 10 year gap between my first eligible retirement date at 50 and when I can take distributions from most of my retirement accounts at 59.5. ( :oops: I have no idea how I missed this fact.) Perhaps, we should be investing in a taxable account for the 5 year gap. (My wife is 5 years older)... I guess this may answer the question about me retiring at 50. :(
(edit) I do see Roth IRA contributions can be taken out without penalty, so that will get us through a few years. Should additional funds be in the Roth 401k until maxed, early retirement is throwing off my logic lol? Maybe a sizable taxed account would still be appropriate for this period.

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Re: Going Solo

Post by Ostentatious » Mon Jan 13, 2020 7:49 pm

Bump for the more knowledgeable ones to chime in. Good job for going solo!!

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Re: Going Solo

Post by 2pedals » Mon Jan 13, 2020 7:53 pm

I don't see anything crazy. You have a potential for a nice pension but 12 years is a long time from now. Just beware that many folks in the private sector had that option frozen and that door was shut out for many. The public sector may see reductions to promised defined pension plans.

You may want to back off the Roth contribution in a few years if you believe your income has peaked and your retirement income is expected to be less. You may also have an opportunity to do advantageous Roth conversions when income is low in early retirement.

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Re: Going Solo

Post by 2pedals » Mon Jan 13, 2020 8:48 pm


Welcome to Bogleheads.org, hopefully more BHs will chime in.

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Re: Going Solo

Post by Wiggums » Mon Jan 13, 2020 9:16 pm

You plan looks reasonable.

The negative part of Fidelity zero funds is that they only exist at Fidelity. So in a in taxable account, it could be costly in taxes to switch brokers.

If you track your spending, that will help you project your retirement expenses. You’ll stop 401k contributions, but will have increased medical, dental and/or vision costs. There are also things like new roof, hot water heater, new car that you’ll need at some point. Hopefully the mortgage will be gone before you retire.

If you create a spreadsheet from age 50 to 90+, you can roughly plot out where the money is coming from for each year. That would help you verify that you have enough in taxable for the early years. It will also help you verify your retirement savings goal. I assume you will get social security, but not sure when you and DW will start taking it. The higher wage earner will normally draw at 70, while the other starts at FRA.

I hope this helps.

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Re: Going Solo

Post by Church Lady » Mon Jan 13, 2020 9:25 pm

1.Or, you could avoid risk and retire on your schedule, not Mr. Market's. Just saying! :happy

1b. It's not all or nothing. You can divide your contribution between tax deferred and Roth. I presume your plan allows this. Without knowing your tax bracket with and without tax deferred contributions, and your future tax rate, it's hard to say whether this is the best strategy. My personal feeling is that it's good to have tax deferred, taxable, and Roth accounts because we don't know what the future holds.

3. I am happy with Fidelity. I have not used Schwab.

4.https://www.fool.com/investing/2019/01/ ... funds.aspx

5.You need a separate 'how to invest my 401k post'.

- You could start saving in taxable


- Maybe you could do a 'Roth conversion ladder'? Here is one link, but the
web has many: https://www.moneyunder30.com/roth-ira-conversion-ladder
You should read a few articles and make sure the strategy works under current
tax law, and that it makes sense for you. I'd go to IRS publications and not
rely on internet word of mouth when you are fact checking this strategy.


- At my Megacorp 401K, if I 'separate' at or after age 55 (which I did),
I can start distributions penalty free. Does your State of Texas 401K allow this? Retiring at 55 is not as cool as 50, but beats 65 I always say.

I am not a financial professional of any kind. :!: Please do your own due diligence. :!:
He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity.

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Re: Going Solo

Post by Goose612 » Tue Jan 14, 2020 7:57 am

Thanks for all the information! It’s really helpful having some different perspectives.
I’ll have to read up on the conversation ladder, but I’m pretty sure penalty free early 401k distribution is off the table (I’ll be confirming that.)
At this point I enjoy my job, so if all goes well, I may continue working past 50.
We’ll continue to increase our investments, but I’m not convinced that the extended period without income wouldn’t cost too much of the nest egg. It’s something to look at when we get closer.
We will have our home paid off in 6 years, and we have been able to save almost all of a significant pay raise last year, so those are positive developments. We’ve also toyed with the idea of retiring somewhere less expensive, but we do enjoy our house and location.

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