Portfolio questions: Like to retire in 10 years

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Topic Author
firefox
Posts: 99
Joined: Tue Apr 05, 2022 8:26 pm

Portfolio questions: Like to retire in 10 years

Post by firefox »

Emergency funds: 100k( 10 times monthly expense of 10k)

Debt: Mortgage 1 Primary home 180k at 2.75%(Value 1.3M) Pay off date :8/2026, Rental 1: $120k at 3.0%( Value 475K) Pay off date 8/2031 Rental 2: $224k at 3.25%( Value 500k) Pay off Date 2051

Tax Filing Status: Married Filing Jointly

Tax Rate: Marginal Rate 35% effective rate 19%, state 6%

State of Residence: NC

Age: 50/50

Desired Asset allocation: 70% stock(of which 30% Int)/30% Bonds


Approximate size of our retirement accounts: (1.8M)

Current retirement assets.
Taxable
5% cash (95k in checking account)
1% Vanguard Total International (VTSAX) (0.04)
1% I-Bond(20K)
His 403B/457B
9% Fidelity Low Priced Stock Fund(FLPSX) (0.65)
5% Eaton Van Atlanta (EAASX)(1.14)
2% American Euro-Pacific Growth(EAASX)(0.46)
19% Vanguard Wellington (VWENX) (0.16)
1% Vanguard Windsor(VWNAX)(0.26)
2% Vanguard Target Date 2030(VTHRX)(0.08)
2% T Row Price New America Growth(RERGX)(0.77)
3% Vanguard Institutional Index(VIIIX)(0.02)
10% Fixed Interest
His Roth IRA at Vanguard
1% Vanguard Total Stock Market Index(VTSAX) (0.04)
Her 403b/457b
1%Fidelity Low Priced Stock Fund(FLPSX) (0.65)
1% Eaton Van Atlanta (EAASX)(1.14)
1%American Euro-Pacific Growth(EAASX)(0.46)
28%Vanguard Wellington (VWENX) (0.16)
1% T Rowe Price New America Growth(RERGX)(0.77)
2%Vanguard Institutional Index(VIIIX)(0.02)
4%Fixed Interest
Her Roth IRA at Vanguard
1% Vanguard Total Stock Market Index (VTSAX) (0.04)
—--------------------------------------------------------------
total:100%

Contributions
New annual Contributions:
$65,500 His 403b/457b($18,500 of this employer contribution)
$60,000 Her 403b/457b ($13,000 of this is employer contribution)
$7,000 His backdoor Roth IRA
$7,000 Her backdoor Roth IRA
$40,000 taxable( includes 20K I-bonds each year)

Available funds

Funds available in His/Her 403B/457B
Fidelity Low Priced Stock (FLPSX) (0.65)
Eaton VAN ATL SMID CAP A(EAASX)(1.14)
American Euro-Pacific Growth R6 (EAASX)(0.46)
Vanguard Wellington (VWENX) (0.16)
Vanguard Windsor(VWNAX)(0.26)
T Rowe Price New America Growth(RERGX)(0.77)
Vanguard Institutional Index(VIIIX)(0.02)
Vanguard Total Bond Market Index(VBTIX)(0.04%)
Vanguard Target Retirement 2020(VTWNX)(0.08)
Vanguard Target Date 2030(VTHRX)(0.08)
Vanguard Target Date 2040(VFORX)(0.08)
Vanguard Target Date 2050(VFIFX)(0.08)
Vanguard Target Date 2060(VTTsX)(0.08)
Vanguard Money Market (VMFXX)(0.11)


Questions:
1.How do I simplify my portfolio to achieve my target goal? I would like to retire in the next 10 year with a goal of annual withdrawal of 120k before tax. I will have SS income and rental income which is not factored into these calculations yet. As my wife will have a smaller portion of SSI, we would like to draw that at her age 62 and mine at age 70. Is a target date fund a good option for me? What do you suggest to get my asset allocation without a complicated portfolio and high expense ratio?

2.Shall I consider the cash flow from rental property towards my retirement income? I will expect a net cash flow of $30K/year from my rentals.
Last edited by firefox on Mon Aug 08, 2022 8:55 pm, edited 2 times in total.
User avatar
Wiggums
Posts: 7050
Joined: Thu Jan 31, 2019 7:02 am

Re: Portfolio questions: Like to retire in 10 years

Post by Wiggums »

You have too many funds in taxable. I would consider closing the funds that are less that 5% of the portfolio. Also those funds with a higher ER — greater than 0.45 for example.

Your expense are $120k a year. Yes, I would subtract any sources of income from your annual expenses to see what kind of gap that you have to fill from the portfolio. This would include: pensions, Social Security, rental income, etc.
"I started with nothing and I still have most of it left."
Topic Author
firefox
Posts: 99
Joined: Tue Apr 05, 2022 8:26 pm

Re: Portfolio questions: Like to retire in 10 years

Post by firefox »

Wiggums wrote: Mon Aug 08, 2022 8:52 pm You have too many funds in taxable. I would consider closing the funds that are less that 5% of the portfolio. Also those funds with a higher ER — greater than 0.45 for example.
We don't have too many funds in taxable. My only holding in taxable is VTSAX and I-bonds. Our taxable account is very small portion of our retirement portfolio as we started it this year.
SuzBanyan
Posts: 2015
Joined: Thu Jun 02, 2016 11:20 am

Re: Portfolio questions: Like to retire in 10 years

Post by SuzBanyan »

How old do you expect to be when you retire? Is your spouse retiring at the same time? Have you considered how you will obtain and pay for health insurance, especially before you are both 65? How much social security do you expect?

I’m guess from your numbers that you have only had a high income for only a few years. If you can save your expected $180,000 per year for the next 10 years it will obviously substantially improve your situation.
HomeStretch
Posts: 11415
Joined: Thu Dec 27, 2018 2:06 pm

Re: Portfolio questions: Like to retire in 10 years

Post by HomeStretch »

A portfolio such as the one below is simple. There are no tax consequences to making the changes shown to your tax deferred and Roth accounts.

Desired Asset allocation: 49% US Equity / 21% International Equity / 30% Bonds

Portfolio

7% Taxable
5% cash (95k in checking account)
1% Vanguard Total US Stock Market (VTSAX) (0.04)
1% I-Bond(20K)

53% His 403B/457B
21% American Euro-Pacific Growth (RERGX)(0.46)
8% Vanguard Institutional Index(VIIIX)(0.02)
24% Vanguard Total Bond Market Index(VBTIX)(0.04%)

1% His Roth IRA at Vanguard
1% Vanguard S&P 500 (VFIAX) (0.04)

38% Her 403b/457b
38% Vanguard Institutional Index(VIIIX) (0.02)

1% Her Roth IRA at Vanguard
1% Vanguard S&P 500 (VFIAX) (0.04)

Edit: although you showed the 403b and 457b plans combined, they are separate plans likely with different planned distributions. You don’t have to use the same equity/bond allocation in both His 403b and His 457b as my example showed. Consider putting more/all bonds in the plan you want the least growth in.
Last edited by HomeStretch on Tue Aug 09, 2022 2:25 pm, edited 1 time in total.
staustin
Posts: 456
Joined: Mon Mar 14, 2011 9:36 am

Re: Portfolio questions: Like to retire in 10 years

Post by staustin »

HomeStretch wrote: Mon Aug 08, 2022 9:37 pm A portfolio such as the one below is simple. There are no tax consequences to making the changes shown to your tax deferred and Roth accounts.

Desired Asset allocation: 49% US Equity / 21% International Equity / 30% Bonds

Portfolio

7% Taxable
5% cash (95k in checking account)
1% Vanguard Total US Stock Market (VTSAX) (0.04)
1% I-Bond(20K)

53% His 403B/457B
21% American Euro-Pacific Growth (RERGX)(0.46)
8% Vanguard Institutional Index(VIIIX)(0.02)
24% Vanguard Total Bond Market Index(VBTIX)(0.04%)

1% His Roth IRA at Vanguard
1% Vanguard S&P 500 (VFIAX) (0.04)

38% Her 403b/457b
38% Vanguard Institutional Index(VIIIX) (0.02)

1% Her Roth IRA at Vanguard
1% Vanguard S&P 500 (VFIAX) (0.04)
fantastic advice.. :sharebeer
Topic Author
firefox
Posts: 99
Joined: Tue Apr 05, 2022 8:26 pm

Re: Portfolio questions: Like to retire in 10 years

Post by firefox »

SuzBanyan wrote: Mon Aug 08, 2022 9:08 pm How old do you expect to be when you retire? Is your spouse retiring at the same time? Have you considered how you will obtain and pay for health insurance, especially before you are both 65? How much social security do you expect?
We would like to retire when 60. We both retire at same age. We will get health insurance through working 0.5 FTE( which is stay home work for me ). The health insurance will cost about $500 in todays dollar as it is partially paid by the employer. If I would not want to do the 0,5FTE work, health insurance will be a a major cost ( around 20k in premium) which is factored in to our annual budget. Wife will draw SSI at age 62 which will be around 30k/ year.

I’m guess from your numbers that you have only had a high income for only a few years. If you can save your expected $180,000 per year for the next 10 years it will obviously substantially improve your situation.
Our income varied from 200-400k( gross) for last 12 years. We have been saving in retirement since last 12 year at maximum allowed level.
homebuyer6426
Posts: 1830
Joined: Tue Feb 07, 2017 8:08 am

Re: Portfolio questions: Like to retire in 10 years

Post by homebuyer6426 »

You could retire this year if you sold the house, bought a cheaper one and cut down the expenses. Just an idea, may not be appealing to you.
45% Total Stock Market | 52% Consumer Staples | 3% Short Term Reserves
Topic Author
firefox
Posts: 99
Joined: Tue Apr 05, 2022 8:26 pm

Re: Portfolio questions: Like to retire in 10 years

Post by firefox »

homebuyer6426 wrote: Tue Aug 09, 2022 1:53 pm You could retire this year if you sold the house, bought a cheaper one and cut down the expenses. Just an idea, may not be appealing to you.
I get your point. If I cut my expense to 40k/year, I can actually retire today. But the whole point is I will have expenses when I retire which is travel related as I plan to travel when I retire which is one of my life goal.
Topic Author
firefox
Posts: 99
Joined: Tue Apr 05, 2022 8:26 pm

Re: Portfolio questions: Like to retire in 10 years

Post by firefox »

HomeStretch wrote: Mon Aug 08, 2022 9:37 pm A portfolio such as the one below is simple. There are no tax consequences to making the changes shown to your tax deferred and Roth accounts.

Desired Asset allocation: 49% US Equity / 21% International Equity / 30% Bonds

Portfolio

7% Taxable
5% cash (95k in checking account)
1% Vanguard Total US Stock Market (VTSAX) (0.04)
1% I-Bond(20K)

53% His 403B/457B
21% American Euro-Pacific Growth (RERGX)(0.46)
8% Vanguard Institutional Index(VIIIX)(0.02)
24% Vanguard Total Bond Market Index(VBTIX)(0.04%)

1% His Roth IRA at Vanguard
1% Vanguard S&P 500 (VFIAX) (0.04)

38% Her 403b/457b
38% Vanguard Institutional Index(VIIIX) (0.02)

1% Her Roth IRA at Vanguard
1% Vanguard S&P 500 (VFIAX) (0.04)

Edit: although you showed the 403b and 457b plans combined, they are separate plans likely with different planned distributions. You don’t have to use the same equity/bond allocation in both His 403b and His 457b as my example showed. Consider putting more/all bonds in the plan you want the least growth in.
This is a fantastic idea. I never thought about it. One another thought, do I just hold VBTIX and VIIIX in my tax differed account and build up my international stock portfolio in my taxable? This will give me likely some foreign tax credit too. I know that it might take 5-7 years to build the required international stocks in taxable due to the fact that I can buy only what I have left after filling all other buckets. The reason I am thinking about this option as ER of RERGX in my retirement account seems little high at 0.46. What is your thought on that?
HomeStretch
Posts: 11415
Joined: Thu Dec 27, 2018 2:06 pm

Re: Portfolio questions: Like to retire in 10 years

Post by HomeStretch »

I think it’s fine to buy international equity in your Taxable account over time.

Consider immediately holding your desired international equity % in your tax deferred account and reducing that holding as you buy a lower-ER international equity fund such as VTIAX in the Taxable account.
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