Rebalancing Help

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Topic Author
CTDuncan
Posts: 4
Joined: Thu Feb 09, 2012 4:58 pm
Location: NJ

Rebalancing Help

Post by CTDuncan » Tue Jan 14, 2020 12:26 pm

Hi everyone,

It's been awhile since I have posted on here and I find myself having some questions about re-balancing my portfolio.

Background:

I'm 35 and work part time earning about $10k/ year, am trying to go back to work full time this year.
Spouse is 39 and earns about $75k year.
We reside in NJ and would like to retire early in the next 10-15 years or earlier outside of NJ.

Vanguard Portfolio: 246k total over 3 accounts ( 1 taxable (brokerage) and 2 IRAs (1 Roth & 1 Traditional Rollover)

1.) Brokerage: 214k total
Breakdown: VTSAX 55% account/ 48% overall portfolio
VTIAX 35/ 30%
VBTLX 9.8/ 8.5%

2.) Rollover IRA Traditional = 22k total
VBTLX 5.8% overall
VTABX 2.9%

3.) Roth IRA = 10k total
VBTLX 2.4%
VTABX 1.7%

My spouse has 401(a) through employer with TIAA-CREF balance $130k

Questions/Concerns:
1.) Is my portfolio too international? If so, how would you rebalance or what would you add?
2.) Is my portfolio too bond heavy?
3.) Am I being as tax efficient as possible by keeping stocks in my brokerage and most bonds in my retirement accounts?
4.) How would you rebalance my portfolio?
5.) Is it smart to be taking $ from my brokerage and max out my Roth each year?

Please let me know if you have any more questions or any other information that would prove helpful. Thank you!

ExitStageLeft
Posts: 1799
Joined: Sat Jan 20, 2018 4:02 pm

Re: Rebalancing Help

Post by ExitStageLeft » Tue Jan 14, 2020 4:17 pm

Welcome back to the forum!

You should be looking at one single portfolio composed of you and your wife's retirement savings accounts in aggregate.

Total portfolio: $376k
Bonds: $46k in TIAA-CREF Balanced, $10k in Roth IRA, $22k in tIRA, $20k in taxable = $97k in bonds. That is 26%, and I was going to recommend a 75/25 portfolio for someone of your age. So your bond allocation looks to be the right amount.

I am not a fan of international bonds. It may not be rational but I only have US bonds.

Your portfolio is hideously tax inefficient. You should coordinate with your wife and see if she has good options in her 401a plan for a low cost bond fund or stable value fund. Get bonds out of taxable and the Roth IRA.

Sell VBTLX in taxable tomorrow and buy VTSAX in both of your Roth IRA accounts.

Assuming she has good bond options, I would go with the following:

His Taxable 202k
38.7% Vanguard Total Stock Index VTSAX
15% Vanguard Total International VTIAX

His Traditional IRA $22k
5.8% VBTLX

His Roth IRA $16k
4.2% Vanguard Total Stock Index VTSAX

Her 401(a) $130k
19.1% Bond fund ($72k)
15.4% TIAA-CREF balance

Her Roth IRA $6k
1.6% Vanguard Total Stock Index VTSAX

That's a 75/25 portfolio with 20% of stocks in international markets. That's where I was last year, although this year we are going to 70/30.

Topic Author
CTDuncan
Posts: 4
Joined: Thu Feb 09, 2012 4:58 pm
Location: NJ

Re: Rebalancing Help

Post by CTDuncan » Tue Jan 14, 2020 4:55 pm

Thanks so much ExitStageLeft!

You're correct to have 1 total portfolio to look at for both of us, that totals $377k

However, I am the wife! My husband could care less about this investing stuff (although he cares about retiring early)

Failed to mention we have no debt besides our mortgage ($210k, 24 years left at 4.125% fixed) and are working on building our $10k emergency fund by May 2020.

I do not plan on additional $ to my retirement accounts until I go back to work full time then I will max out company match, Roth, then a 403(b). But if we want to retire early, I need to ensure I can access that $ before 59 1/2.

As for my husband's 401(a) total $130k:

CREF Equity Index R3 Equities $1,081.25
TIAA Access Bond Index T1 Fixed Income $13,250.
TIAA Access International Equity Index Fund T1 Equities $27,160
TIAA Access S&P 500 Index Fund T1 Equities $47,108
TIAA Real Estate Real Estate $1,435
TIAA Stable Value Guaranteed $114
TIAA Traditional Guaranteed $39,535.91
30.57% GUARANTEED
58.10% EQUITIES
1.11% REAL ESTATE
10.22% FIXED INCOME

Not a lot of low fee options here.
$8k/ year added to this 401(a).

If I understand you correctly:
Taxable= VTSAX & VTIAX only, get bonds out ASAP
IRA = VBTLX only
Roth = VTSAX only

Is this enough diversification?

What are your thoughts on moving $6k a year from my taxable to max a Roth?

Thanks again for all the helpful advice, I really appreciate it!

ExitStageLeft
Posts: 1799
Joined: Sat Jan 20, 2018 4:02 pm

Re: Rebalancing Help

Post by ExitStageLeft » Tue Jan 14, 2020 5:07 pm

My apologies for the confusion!

I would at the very least sell $12k of VBTLX in the taxable brokerage account and put the cash into his and hers Roth IRAs, invested in VTSAX or equivalent US total stock market index fund.

Beyond that, it really depends on what the expenses are for the funds in his 401(a) plan. Any chance you can get your hands on a list of all the funds offered and what are their expense ratios? For the guaranteed funds, what rate are they guaranteeing?

Considering you have a long investing horizon, you'll want to put the assets with the most growth potential into the Roth accounts since that growth will never be taxed. Conversely, for the funds in traditional accounts such as the tIRA and the 401a you want to have your assets with the least potential growth in those accounts. Thus the advice to have all bonds go into tax-deferred accounts.

If you can shift a bunch of bonds into his 401a account then it makes sense to shift towards the portfolio I outlined earlier.

Topic Author
CTDuncan
Posts: 4
Joined: Thu Feb 09, 2012 4:58 pm
Location: NJ

Re: Rebalancing Help

Post by CTDuncan » Tue Jan 14, 2020 5:21 pm

Sounds great, will do tomorrow! Thanks again for all your help and time :)

Topic Author
CTDuncan
Posts: 4
Joined: Thu Feb 09, 2012 4:58 pm
Location: NJ

Re: Rebalancing Help

Post by CTDuncan » Tue Jan 14, 2020 6:35 pm

As requested, here are the bond options in my husband's 401(a) with TIAA:

CREF Bond Market Account (R3) (QCBMIX) ER= .27 Intermediate Core Bond

CREF Inflation-Linked Bond Account (R3) (QCILIX) ER=.22 Inflation Protected Bond

TIAA Access TIAA-CREF Bond Index T1 (Level 1) ER= 0.21% Intermediate Core Bond

Not too many options here but the Cref Bond Market seems to get the best Morningstar rating for what that's worth.

Looks like he has to keep some amount of $ in Guaranteed which is 3% with an added .942 average added = 3.942% not sure how much we have to keep in there

Same with TIAA Traditional, there is some % or amount we need to keep in there, have to figure out what the minimum is.

Thanks again for all your help and insight!

ExitStageLeft
Posts: 1799
Joined: Sat Jan 20, 2018 4:02 pm

Re: Rebalancing Help

Post by ExitStageLeft » Tue Jan 14, 2020 8:38 pm

Don't forget that IRA contributions can be made up to tax filing day, typically April 15 of the following year. So if either of you did not make a Roth IRA contribution in 2019 you can still do that up until April 15 of 2020. Plus make your 2020 contributions.

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