Portfolio check and help with AA

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Topic Author
imflyboy
Posts: 39
Joined: Thu Dec 15, 2011 12:55 pm

Portfolio check and help with AA

Post by imflyboy » Mon Feb 10, 2020 6:21 pm

Hi, I'm hoping I can get some help squaring away our portfolio and help with our AA. Our current info is as follows:

We're a married's couple and we have no kids.I'm 44 and my wife is 39. I expect to retire at 65(although it'd be great to have to option to go early). I'd like my wife to be able to retire with me or even prior to my retirement date.

Total debt: 14K in student loans at just under 2.8%

Tax rate: 24% Federal and 6.27% WI state tax

Desired AA: ???
This is where I'm having trouble. I rode out the 2008/2009 crash and made steady and continual contributions. I still look at market pull backs as buying opportunities as opposed to panic time. However, I realize as we near retirement age we need to adjust our AA in order to avoid a major decline in portfolio value. I'd be interested in what the our current allocation should be and how we should adjust it moving forward. Our current AA is as follows:

Stock 85% with 51.2% in US stock and 33.7% international
Bonds 15% with 9.9% US bonds, .7% international bonds and 4.4% in REIT's

Current Breakdown of each account:

total account value is right at the 1MM mark.

Taxable: 0% we just liquidated our taxable account plus some cash to payoff our mortgage. I know there's lots of opinions on the wisdom of paying off the mortgage but we personally felt the freedom and psychic value of not having the mortgage hanging over our head was worth it. We'll be able to live in the house for ~$720/mo for taxes and insurance. Going forward our #1 goal will be to rebuild our cash and taxable account.

My 401K:
64.8% of total account value. I'll max out the 2020 $57K limit here.
The current investments are a bit of a mess. Our 401K committee used to build our own age based models.

American Funds Target Date 2040 2.5% er.38%
Vanguard Inst. Index- VIIX 17.9% er.02%
Blackrock Fundamental US Large Company SWFTRA10 5.4% er.11%
Schwab US Small Company SFSNX 4.37% er.25%
Vanguard Extended Market Index VEMPX 2.1% er.05%
American Funds Euro/Pacific Growth R6 RERGX 12.74% er.49%
DFA World Ex US Core DFWIX 6.6% er.39%
DFA Global Real Estate Securities DFGEX 4.36% er.25%
Loomis and Sayles Core Plus Bond NERYX 6.73% er.48%
Vanguard Short Term TIPS VTSPX 2.0% er.04%

Available Funds:
RFTTX - American Funds 2010 Trgt Date Retire R6
RFJTX - American Funds 2015 Trgt Date Retire R6
RRCTX - American Funds 2020 Trgt Date Retire R6
RFDTX - American Funds 2025 Trgt Date Retire R6
RFETX - American Funds 2030 Trgt Date Retire R6
RFFTX - American Funds 2035 Trgt Date Retire R6
RFGTX - American Funds 2040 Trgt Date Retire R6
RFHTX - American Funds 2045 Trgt Date Retire R6
RFITX - American Funds 2050 Trgt Date Retire R6
RFKTX - American Funds 2055 Trgt Date Retire R6
RFUTX - American Funds 2060 Trgt Date Retire R6
SWFTRA10 - BlackRock Fundamental US LargeCompany
VIIIX - Vanguard Institutional Index Instl Pl
VSMPX - Vanguard Total Stock Mkt Idx Instl Pls
SFSNX - Schwab Fundamental US Small Company Idx
VEMPX - Vanguard Extended Market Index InstlPlus
RERGX - American Funds Europacific Growth R6
DFWIX - DFA World ex US Core Equity Instl
VTSNX - Vanguard Total Intl Stock Index I
DFGEX - DFA Global Real Estate Securities Port
NERYX - Loomis Sayles Core Plus Bond Y
VTSPX - Vanguard Shrt-Term Infl-Prot Sec Idx Int
VBTIX - Vanguard Total Bond Market Index
VTIFX - Vanguard Total Intl Bd Idx Institutional
Stable Value Fund
VMFXX - Vanguard Federal Money Market Investor

I can also direct up to 95% towards a self directed brokerage



My Profit Sharing Account: 17.4 % of total account value
I'll be unlikely to contribute any more to this since I'm hitting the qualified limit in my 401K
Vanguard Institutional Index 500 10.8% er.01%
American Funds Euro/Pacific Growth R6 5.24% er.49%
Pimco Total Return 1.3% er.37%


Available Funds:
The Vanguard Target Retire 2015 Select
The Vanguard Target Retire 2020 Select
The Vanguard Target Retire 2025 Select
The Vanguard Target Retire 2030 Select
The Vanguard Target Retire 2035 Select
The Vanguard Target Retire 2040 Select
The Vanguard Target Retire 2045 Select
The Vanguard Target Retire 2050 Select
The Vanguard Target Retire 2055 Select
The Vanguard Target Retire 2060 Select
The Vanguard Target Retire 2065 Select
American Funds EuroPacific Gr R6
Vanguard Inst Total Int Stk Mkt Idx Trst
FIAM Small Cap Core Class O
Vanguard Inst Extended Market Idx Trust
Dodge & Cox Stock Fund
Harbor Capital Appreciation Instl
Vanguard Institutional 500 Index Trust
PIMCO Total Return Collective Trust II
Vanguard Inst Total Bond Market Idx Trst
Vanguard Shrt-Term Infl-Prot Sec Idx Adm
Stable Value Fund
Schwab SDB Sweep Program
Schwab SDB Securities


My Vanguard Roth IRA:
Vanguard Target date 2035 3.28% er.14%

Wife's 403B:
She'll contribute 19.5K this year. No matching funds.
Vanguard Target 2045 11.33% er.09%

Wife's Vanguard Roth IRA:
Vanguard Target 2040 3.36% er.14%

Other accounts and options:
My wife also should receive a pension, however, I haven't used it in our retirement planning since we don't know the total dollar amount she'll receive and whether the plan will look anything like it does now when she retires. We figure if it's there, it's added bonus money! :D I also have the option to contribute to several company non-qualified plans. I'm hesitant to do so at this time since any funds in those accounts are subject to creditors in a bankruptcy. Closer to retirement I many look to take advantage of those plans.


Questions: What should our current overall Stock/Bond split be and how should I adjust going for towards retirement?

I'd be interested in cleaning up both my 401K and profit-sharing plans. Any recommendations on specific investments and the breakdown?

From reading other post it seems that our taxable account should be composed of stock funds. We use Vanguard and I'm thinking of splitting the money between a Total Stock Market Index and A Total International Index. What would be a reasonable allocation?

In our Roth accounts and my wife's 403, does it make sense to keep the target date funds for simplicity?

And finally, has anyone used OTM covered calls in their retirement accounts to generate additional income? I'm not sure if it's worth the hassle and risk but it seems it could be a viable strategy.


Thanks in advance for the advice! If there's anything else I need to add for a complete picture please let me know!

financeperchance
Posts: 256
Joined: Thu Nov 02, 2017 11:15 am

Re: Portfolio check and help with AA

Post by financeperchance » Mon Feb 10, 2020 6:48 pm

As a general rule, go for the funds that are the lowest-cost and give you the most diversification. A good-enough asset allocation is 60% stocks/40% bonds. So in your 401k, I'd look at just doing 60% Total Stock Market Index and 40% Total Bond Market Index.

Yes, just keep the target retirement funds in the Roths. Also, make sure you fully fund both of them each year, especially before the 403B, which has no matching and often has extra junk expenses.

Topic Author
imflyboy
Posts: 39
Joined: Thu Dec 15, 2011 12:55 pm

Re: Portfolio check and help with AA

Post by imflyboy » Mon Feb 10, 2020 7:09 pm

Great point about the Roth's vs the 403. Is the backdoor Roth still an option?

User avatar
Duckie
Posts: 7050
Joined: Thu Mar 08, 2007 2:55 pm

Re: Portfolio check and help with AA

Post by Duckie » Mon Feb 10, 2020 8:15 pm

imflyboy wrote:My 401K:
The best options appear to be:
  • VSMPX - Vanguard Total Stock Market Index -- Complete US stocks
  • VTSNX - Vanguard Total International Stock Index -- Complete international stocks
  • VBTIX - Vanguard Total Bond Market Index -- US bonds
My Profit Sharing Account:
The best options appear to be:
  • Vanguard Inst 500 Index -- Large caps, 80% of US stocks
  • Vanguard Inst Extended Market Index -- Mid/small caps, 20% of US stocks
  • Vanguard Inst Total International Stock Market Index -- Complete international stocks
  • Vanguard Inst Total Bond Market Index -- US bonds
Wife's 403B:
She'll contribute 19.5K this year. No matching funds.
Vanguard Target 2045 11.33% er.09%
What are her other options?
What should our current overall Stock/Bond split be and how should I adjust going for towards retirement?
I'd be at least 30% bonds at your ages.
I'd be interested in cleaning up both my 401K and profit-sharing plans. Any recommendations on specific investments and the breakdown?
Use just the options above. I'd put just bonds in his Profit Sharing account, just stocks in taxable and Roth accounts, unknown in her 403b, and use his 401k to fill in the remainder of the AA. If you want separate REITs put them in the Roth IRAs.
From reading other post it seems that our taxable account should be composed of stock funds. We use Vanguard and I'm thinking of splitting the money between a Total Stock Market Index and A Total International Index. What would be a reasonable allocation?
Yes.
In our Roth accounts and my wife's 403, does it make sense to keep the target date funds for simplicity?
No. Once you add a taxable account for retirement purposes using a target-date fund anywhere becomes less optimal. And Roth accounts should be all stocks if possible because in general it's better to put assets with higher expected growth (stocks) in Roth accounts and assets with lower expected growth (bonds) in pre-tax accounts. That's because you've already paid the taxes in the Roth accounts so future growth is tax-free.
Is the backdoor Roth still an option?
You list no non-Roth IRAs, so it looks like you can use the backdoor Roth method.

Topic Author
imflyboy
Posts: 39
Joined: Thu Dec 15, 2011 12:55 pm

Re: Portfolio check and help with AA

Post by imflyboy » Mon Feb 10, 2020 8:36 pm

Yes, no other IRA's.

Would Vanguard Total World Stock Market VT be a suitable substitute VTI and VXUS in the Roth accounts?

Thanks again!

User avatar
Duckie
Posts: 7050
Joined: Thu Mar 08, 2007 2:55 pm

Re: Portfolio check and help with AA

Post by Duckie » Mon Feb 10, 2020 9:29 pm

imflyboy wrote:Would Vanguard Total World Stock Market VT be a suitable substitute VTI and VXUS in the Roth accounts?
Yes.

justsomeguy2018
Posts: 334
Joined: Wed Oct 03, 2018 8:11 pm

Re: Portfolio check and help with AA

Post by justsomeguy2018 » Mon Feb 10, 2020 9:41 pm

imflyboy wrote:
Mon Feb 10, 2020 6:21 pm
Hi, I'm hoping I can get some help squaring away our portfolio and help with our AA. Our current info is as follows:

We're a married's couple and we have no kids.I'm 44 and my wife is 39. I expect to retire at 65(although it'd be great to have to option to go early). I'd like my wife to be able to retire with me or even prior to my retirement date.

Total debt: 14K in student loans at just under 2.8%

Tax rate: 24% Federal and 6.27% WI state tax

Desired AA: ???
This is where I'm having trouble. I rode out the 2008/2009 crash and made steady and continual contributions. I still look at market pull backs as buying opportunities as opposed to panic time. However, I realize as we near retirement age we need to adjust our AA in order to avoid a major decline in portfolio value. I'd be interested in what the our current allocation should be and how we should adjust it moving forward. Our current AA is as follows:

Stock 85% with 51.2% in US stock and 33.7% international
Bonds 15% with 9.9% US bonds, .7% international bonds and 4.4% in REIT's

Current Breakdown of each account:

total account value is right at the 1MM mark.

Taxable: 0% we just liquidated our taxable account plus some cash to payoff our mortgage. I know there's lots of opinions on the wisdom of paying off the mortgage but we personally felt the freedom and psychic value of not having the mortgage hanging over our head was worth it. We'll be able to live in the house for ~$720/mo for taxes and insurance. Going forward our #1 goal will be to rebuild our cash and taxable account.

My 401K:
64.8% of total account value. I'll max out the 2020 $57K limit here.
The current investments are a bit of a mess. Our 401K committee used to build our own age based models.

American Funds Target Date 2040 2.5% er.38%
Vanguard Inst. Index- VIIX 17.9% er.02%
Blackrock Fundamental US Large Company SWFTRA10 5.4% er.11%
Schwab US Small Company SFSNX 4.37% er.25%
Vanguard Extended Market Index VEMPX 2.1% er.05%
American Funds Euro/Pacific Growth R6 RERGX 12.74% er.49%
DFA World Ex US Core DFWIX 6.6% er.39%
DFA Global Real Estate Securities DFGEX 4.36% er.25%
Loomis and Sayles Core Plus Bond NERYX 6.73% er.48%
Vanguard Short Term TIPS VTSPX 2.0% er.04%

Available Funds:
RFTTX - American Funds 2010 Trgt Date Retire R6
RFJTX - American Funds 2015 Trgt Date Retire R6
RRCTX - American Funds 2020 Trgt Date Retire R6
RFDTX - American Funds 2025 Trgt Date Retire R6
RFETX - American Funds 2030 Trgt Date Retire R6
RFFTX - American Funds 2035 Trgt Date Retire R6
RFGTX - American Funds 2040 Trgt Date Retire R6
RFHTX - American Funds 2045 Trgt Date Retire R6
RFITX - American Funds 2050 Trgt Date Retire R6
RFKTX - American Funds 2055 Trgt Date Retire R6
RFUTX - American Funds 2060 Trgt Date Retire R6
SWFTRA10 - BlackRock Fundamental US LargeCompany
VIIIX - Vanguard Institutional Index Instl Pl
VSMPX - Vanguard Total Stock Mkt Idx Instl Pls
SFSNX - Schwab Fundamental US Small Company Idx
VEMPX - Vanguard Extended Market Index InstlPlus
RERGX - American Funds Europacific Growth R6
DFWIX - DFA World ex US Core Equity Instl
VTSNX - Vanguard Total Intl Stock Index I
DFGEX - DFA Global Real Estate Securities Port
NERYX - Loomis Sayles Core Plus Bond Y
VTSPX - Vanguard Shrt-Term Infl-Prot Sec Idx Int
VBTIX - Vanguard Total Bond Market Index
VTIFX - Vanguard Total Intl Bd Idx Institutional
Stable Value Fund
VMFXX - Vanguard Federal Money Market Investor

I can also direct up to 95% towards a self directed brokerage



My Profit Sharing Account: 17.4 % of total account value
I'll be unlikely to contribute any more to this since I'm hitting the qualified limit in my 401K
Vanguard Institutional Index 500 10.8% er.01%
American Funds Euro/Pacific Growth R6 5.24% er.49%
Pimco Total Return 1.3% er.37%


Available Funds:
The Vanguard Target Retire 2015 Select
The Vanguard Target Retire 2020 Select
The Vanguard Target Retire 2025 Select
The Vanguard Target Retire 2030 Select
The Vanguard Target Retire 2035 Select
The Vanguard Target Retire 2040 Select
The Vanguard Target Retire 2045 Select
The Vanguard Target Retire 2050 Select
The Vanguard Target Retire 2055 Select
The Vanguard Target Retire 2060 Select
The Vanguard Target Retire 2065 Select
American Funds EuroPacific Gr R6
Vanguard Inst Total Int Stk Mkt Idx Trst
FIAM Small Cap Core Class O
Vanguard Inst Extended Market Idx Trust
Dodge & Cox Stock Fund
Harbor Capital Appreciation Instl
Vanguard Institutional 500 Index Trust
PIMCO Total Return Collective Trust II
Vanguard Inst Total Bond Market Idx Trst
Vanguard Shrt-Term Infl-Prot Sec Idx Adm
Stable Value Fund
Schwab SDB Sweep Program
Schwab SDB Securities


My Vanguard Roth IRA:
Vanguard Target date 2035 3.28% er.14%

Wife's 403B:
She'll contribute 19.5K this year. No matching funds.
Vanguard Target 2045 11.33% er.09%

Wife's Vanguard Roth IRA:
Vanguard Target 2040 3.36% er.14%

Other accounts and options:
My wife also should receive a pension, however, I haven't used it in our retirement planning since we don't know the total dollar amount she'll receive and whether the plan will look anything like it does now when she retires. We figure if it's there, it's added bonus money! :D I also have the option to contribute to several company non-qualified plans. I'm hesitant to do so at this time since any funds in those accounts are subject to creditors in a bankruptcy. Closer to retirement I many look to take advantage of those plans.


Questions: What should our current overall Stock/Bond split be and how should I adjust going for towards retirement?

I'd be interested in cleaning up both my 401K and profit-sharing plans. Any recommendations on specific investments and the breakdown?

From reading other post it seems that our taxable account should be composed of stock funds. We use Vanguard and I'm thinking of splitting the money between a Total Stock Market Index and A Total International Index. What would be a reasonable allocation?

In our Roth accounts and my wife's 403, does it make sense to keep the target date funds for simplicity?

And finally, has anyone used OTM covered calls in their retirement accounts to generate additional income? I'm not sure if it's worth the hassle and risk but it seems it could be a viable strategy.


Thanks in advance for the advice! If there's anything else I need to add for a complete picture please let me know!

I am 38, I've recently switched from 85/15 to 75/25 and at the moment I don't really regret it.

If the market collapses I've got some dry powder to buy up at a discount and if it doesn't, so be it. I can live with the lower expected return. Too many unknowns over the next 20 years in my book.

Topic Author
imflyboy
Posts: 39
Joined: Thu Dec 15, 2011 12:55 pm

Re: Portfolio check and help with AA

Post by imflyboy » Wed Feb 12, 2020 12:29 pm

OK,I think I've come up with a plan based on the responses here, reading the wiki and a bunch of other posts.

I'm going to set my allocation at 70/30 stock/bond funds for now with a 60/40 domestic/international stock split.

I'm going to leave the wife's 403 in the Vanguard TD fund. In order to replicate our AA I'd have to use multiple funds(S&P 500 + small/mid cap funds along with a bond fund) due to what's available in her plan. The er of the TD is .09%, which seems reasonable and it's one less thing to think about. I'll just check it's allocation each year when it's time to rebalance the rest of our accounts.

I'm going to reinvest out Roth IRA's in VTSAX and VTIAX at the 60/40 split. it appears there's a slight benefit to the er compared to VTWAX alone.

My profit-sharing account will be invested 100% in the Vanguard Total Bond Mkt Index which is about 17% of our total balance.

I'll use Vanguard Total Stock Mkt, Total International and total Bond Mkt in my 401 to reach the overall target allocation.

As we rebuild our taxable account I'll rebalance the 401K to get back to our target allocation.

I think this seems to make sense but I wanted to double check before making any changes. Also...is there any benefit from having some of the Vanguard International Bond fund? We'll get some exposure thru my wife's 403 TD fund(it has 3% invested in international bonds). I just don't know if it's even worth bothering with within my 401K.

Thanks!

User avatar
Wiggums
Posts: 2734
Joined: Thu Jan 31, 2019 8:02 am

Re: Portfolio check and help with AA

Post by Wiggums » Wed Feb 12, 2020 12:46 pm

Sounds good. Good luck to you.

Topic Author
imflyboy
Posts: 39
Joined: Thu Dec 15, 2011 12:55 pm

Re: Portfolio check and help with AA

Post by imflyboy » Thu Feb 13, 2020 11:10 am

Thanks! :happy

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