My wife and I are in our mid forties with two children under 10. I work full-time. After selling some real estate we've accumulated some savings but online savings account rates aren't what they used to be. I could really use some guidance for how to restructure our finances for improved future growth. I've done some research on my own and have some ideas but could use more feedback before I start moving money around...
We currently have 3 interest-generating accounts. For simplicity sake let's assume between my wife's pension, my 401K and our savings we have $1M investable assets.
My Wife's Pension: Represents 10% of our total available investable assets. This earns interest at a steady rate of 6%. There's no fund picking or modifying this as far as I know. She's moved on from that job so she's not paying into it anymore but she's fully vested.
My 401K: Represents 17.5% of our total available investable assets. I plan to continue contributing the max % indefinitely, although I typically see an annual overpayment refund because I get dinged as a Highly Compensated Employee. 100% of my 401K is invested in "T. Rowe Price Retirement 2040 Fund - Class R Report Ticker: RRTDX".
Savings: The remainder of our available investable assets are here. I plan to leave a 6 to 12 month cash reserve behind in case of emergency.
Expenses: We've got a 7/1 ARM on our home that is fixed for another 6 years at 4.25%.
Construct a minimum 3 fund portfolio with a 70/30 stock/bond allocation that's as tax efficient as possible between the following accounts:
My existing 401K
Roth IRA in my name (NEW ACCOUNT - likely Vanguard)
Roth IRA in my Wife's name (NEW ACCOUNT - likely Vanguard)
529 account for Child #1 (NEW ACCOUNT - either CA, Utah, or Nevada)
529 account for Child #2 (NEW ACCOUNT - either CA, Utah, or Nevada)
Cash Management Account (NEW ACCOUNT - likely Vanguard)
We're handcuffed a bit with what we can do with my wife's pension but a steady 6% that's not tied directly to the market sounds like a good thing so I'm tempted to leave it alone (rather than do a rollover). This would make account #7.
The funds I'm looking at are VTSAX, VGTSX, and VBTLX, although that is negotiable.
Question #1 - I've read I should target 20% of my equity investments going to the International Stock Index Fund (roughly $140,000). Should all of this go in my CMA for tax purposes?
Question #2 - Vanguard funds aren't an option through my 401K (available funds are listed at the bottom). What kinds of funds does it make most sense to pick for my 401K? Stocks? Bonds? Whatever has the lowest Expense Ratios? Highest Morning-star ratings?
Question #3 - What funds and % should I look to put in the Roth IRA's?
Question #4 - How much $ in total to put into the 529 accounts? What funds and % should go in there? Perhaps one of those funds with a sliding allocation?
Question #5 - Our income has been reduced since we bought our home so we can't refinance without paying down the principal some. My wife may go back to work in 2021 but she'd need 6 months of pay stubs before the banks will let us count her income. Should I just use some of my available cash to pay down the principle so I can refinance now (loan terms provided above; see 'Expenses')? I probably should have led with this question!
Thanks in advance for your advice!
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[b]Funds Available in my 401K[/b] [i](Expense Ratio) Fund Name: 3Y/5Y/10Y[/i] (0.52) State Street S&P 500 Index Securities Lending Series Fund - Class IX: 13.86/13.76/NA (0.56) State Street S&P MidCap Index Non-Lending Series Fund - Class J: 4.73/7.42/NA (0.57) State Street Russell Small Cap Index Securities Lending Series Fund - Class VIII: 4.47/7.01/NA (0.60) State Street International Index Securities Lending Series Fund - Class VIII: 1.96/4.25/NA (0.75) Loomis Sayles Investment Grade Bond Fund - Class A: 5.26/5.37/4.68 (0.93) PIMCO Real Return Fund - Class A: 5.30/4.23/3.23 (0.95) Ivy High Income Fund - Class A: 2.48/4.40/6.26 (0.96) Loomis Sayles Strategic Income Fund - Class A: 1.45/3.46/4.98 (1.00) T. Rowe Price Retirement Balanced Fund - Class R: 5.88/6.15/5.99 (1.00) JPMorgan Equity Income Fund - Class A: 7.60/9.32/12.27 (1.02) T. Rowe Price Retirement 2010 Fund - Class R: 6.16/6.65/7.06 (1.05) Invesco Stable Asset Fund: 1.61/1.34/NA (1.05) T. Rowe Price Retirement 2015 Fund - Class R: 6.49/7.16/7.91 (1.08) T. Rowe Price Retirement 2020 Fund - Class R: 6.98/7.84/8.76 (1.09) T. Rowe Price International Value Equity Fund - Advisor Class: -3.55/0.19/3.55 (1.10) Invesco Oppenheimer International Growth Fund - Class A: 5.13/6.83/8.08 (1.12) T. Rowe Price Retirement 2025 Fund - Class R: 7.48/8.44/9.49 (1.15) T. Rowe Price Retirement 2030 Fund - Class R: 7.90/8.99/10.13 (1.16) Alger Capital Appreciation Institutional Fund - Class I: 23.62/19.58/18.59 (1.16) Janus Henderson Triton Fund - Class S: 10.30/11.43/14.57 (1.17) Eaton Vance Atlanta Capital SMID Cap Fund - Class A: 10.90/11.66/15.04 (1.18) T. Rowe Price Retirement 2035 Fund - Class R: 8.22/9.37/10.59 (1.20) T. Rowe Price Retirement 2040 Fund - Class R: 8.48/9.68/10.85 (1.21) T. Rowe Price Retirement 2045 Fund - Class R: 8.61/9.83/10.92 (1.21) T. Rowe Price Retirement 2050 Fund - Class R: 8.62/9.83/10.93 (1.21) T. Rowe Price Retirement 2055 Fund - Class R: 8.53/9.78/10.90 (1.21) T. Rowe Price Retirement 2060 Fund - Class R: 8.55/9.78/NA (1.22) Goldman Sachs Mid Cap Value Fund - Class A: 4.45/5.18/9.50 (1.50) Victory Integrity Small-Cap Value Fund - Class A: -5.03/0.76/7.94 (1.57) Virtus Vontobel Emerging Markets Opportunities Fund - Class A: 1.63/6.54/4.90