Portfolio analysis

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Topic Author
Cincy_1988
Posts: 8
Joined: Tue Jun 04, 2024 10:21 pm

Portfolio analysis

Post by Cincy_1988 »

Dear experts

I'm planning to retire in almost a year from now and have been trying to get a handle of my finances during retirement. I met a fee-based fiduciary financial planner recently. After paying $2,500, I realized I knew "more" than the planner. So, I've decided to educate myself and take care of my finances. I'm hoping you folks can shed some lights. Please see below; thanks in advance for your help!


Emergency funds: Yes, 6 months of living expenses

Debt: Mortgage ($16.4k will be paid off by April 2025), no credit card balances

Tax Filing Status: Head of Household for 2024 & then Single

Tax Rate: 16.2% Federal, 3% State (both are effective rates based on 2023 return)

State of Residence: Ohio (as of now, I might move to Illinois after retirement)

Age: 65

Retirement date: May 1, 2025

Desired Asset allocation: 30% stocks / 60% bonds (not sure????)
Desired International allocation: 10% of stocks (not sure????)

Approximate size of total portfolio: 1.122M

Current portfolio:

Taxable

2.87% Vanguard cash reserves federal money market admiral (VMRXX) (0.10%)
2.41% Vanguard balanced index admiral CL (VBIAX) (0.09%)
1.62% Vanguard Wellington investor CL (VWELX) (0.09%)
0.49% Series I Savings Bond (Treasury) (N/A) (N/A)

403b @ TIAA (no company match)

1.24% American Century Mid Cap Value R6 (AMDVX) (0.63%)
1.24% CREF Social Choice R4 (QSCCFX) (0.07%)
0.90% Champlain Mid Cap Institutional (CIPIX) (0.84%)
0.94% ClearBridge International Growth IS (LMGNX) (0.79%)
0.94% JPMorgan Equity Income R6 (OIEJX) (0.45%)
1.54% PGIM High Yield R6 (PHYQX) (0.38%)
0.93% Vanguard Inflation-Protected Secs I (VIPSX) (0.20%)
4.33% Vanguard Total Bond Market Index Fund Institutional (VBTIX) (0.04%)
1.24% Vanguard Total Intl Stock Index I (VTIAX) (0.11%)
2.47% Western Asset Core Plus Bond IS (WACPX) (0.45%)
2.49% iShares S&P 500 Index Fund Class K (WFSPX) (0.03%)
11.66% CREF Core Bond R3 (QCBMIX) (0.25%)
9.20% CREF Global Equities R3 (QCGLIX) (0.20%)
3.66% CREF Inflation-Linked Bond R3 (QCILIX) (0.17%)
1.82% CREF Money Market R3 (QCMMIX) (0.19%)
6.15% CREF Social Choice R3 (QCSCIX) (0.22%)
4.29% CREF Stock R3 (QCSTIX) (0.23%)
7.60% TIAA Real Estate (QREARX) (1.02%)
29.2% TIAA guaranteed (N/A) (?)

Roth IRA @ Vanguard

0.72% Vanguard Target Retirement 2030 (VTHRX) (0.08%)


Contributions: No annual Contributions

Pension (it's not clear if there will be COLA, so let's assume there's no COLA): $101,794/year

Social security (to start collecting at age 70.5): $2,676/year

Expected retirement expenses during retirement:

Medical (Medicare premiums, supplemental insurance, copay, etc.): $16,320/year
Travel (until age 85): $14,400/year
Other expenses: $33,600

Length of retirement: until age 95 (wishful thinking!)


Questions:

1. Do I have too many funds?

2. Is my portfolio too conservative for someone who will retire in less than 1 year?

3. My hope is to leave about $500k (in today's dollar) for my children. Is this goal achievable with my current allocations/funds?
livesoft
Posts: 86635
Joined: Thu Mar 01, 2007 7:00 pm

Re: Portfolio analysis

Post by livesoft »

Thank you for putting the percentages at the start of the lines on the left so that they don't have to be hunted for. :thumbsup :thumbsup

Sure, you have too many funds, so the 403(b) can be greatly simplified if you like.

The taxable account is not invested tax-efficiently. I like to have the top half of my Form 1040 Schedule B have less than $20 of interest reported and the bottom half to be mostly qualified dividends.

Your pension is 6-figures, so enough to cover your expenses, but also enough to put you in a non-0% income tax bracket. It probably won't matter what your actual investments are.

I didn't do the math: You have desired asset allocation, but what is the current asset allocation of your portfolio. Since you have a pension I would think that going 60% stocks and 40% bonds (i.e. NOT conservative) would be just fine.
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retired@50
Posts: 13662
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Portfolio analysis

Post by retired@50 »

Cincy_1988 wrote: Mon Jun 10, 2024 3:34 pm 403b @ TIAA (no company match)

1.24% American Century Mid Cap Value R6 (AMDVX) (0.63%)
1.24% CREF Social Choice R4 (QSCCFX) (0.07%)
0.90% Champlain Mid Cap Institutional (CIPIX) (0.84%)
0.94% ClearBridge International Growth IS (LMGNX) (0.79%)
0.94% JPMorgan Equity Income R6 (OIEJX) (0.45%)
1.54% PGIM High Yield R6 (PHYQX) (0.38%)
0.93% Vanguard Inflation-Protected Secs I (VIPSX) (0.20%)
4.33% Vanguard Total Bond Market Index Fund Institutional (VBTIX) (0.04%)
1.24% Vanguard Total Intl Stock Index I (VTIAX) (0.11%)
2.47% Western Asset Core Plus Bond IS (WACPX) (0.45%)
2.49% iShares S&P 500 Index Fund Class K (WFSPX) (0.03%)
11.66% CREF Core Bond R3 (QCBMIX) (0.25%)
9.20% CREF Global Equities R3 (QCGLIX) (0.20%)
3.66% CREF Inflation-Linked Bond R3 (QCILIX) (0.17%)
1.82% CREF Money Market R3 (QCMMIX) (0.19%)
6.15% CREF Social Choice R3 (QCSCIX) (0.22%)
4.29% CREF Stock R3 (QCSTIX) (0.23%)
7.60% TIAA Real Estate (QREARX) (1.02%)
29.2% TIAA guaranteed (N/A) (?)


Questions:

1. Do I have too many funds?

2. Is my portfolio too conservative for someone who will retire in less than 1 year?

3. My hope is to leave about $500k (in today's dollar) for my children. Is this goal achievable with my current allocations/funds?
1. Yes. Less of the red ones above since they have high expense ratios, and more of the green ones above, since they have low expense ratios. Consider simplifying to a 3 fund portfolio. US Stock / International stock / US bonds. You don't need multiple funds for each of those 3 asset classes.

2. You can read about asset allocation or take an online quiz to help you determine your mix. I wouldn't use any thing less than 30% stock.
See links:
https://www.bogleheads.org/wiki/Asset_allocation
Vanguard quiz: https://retirementplans.vanguard.com/VG ... Step=start

3. Hard to say. Nobody knows what future returns will be from the stock and bond markets. I would put more emphasis on teaching them about the Boglehead Investment Philosophy now, while they're still young enough to benefit from this knowledge. Let them become financially independent with or without your help via an inheritance.
See link: https://www.bogleheads.org/wiki/Boglehe ... philosophy

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
Topic Author
Cincy_1988
Posts: 8
Joined: Tue Jun 04, 2024 10:21 pm

Re: Portfolio analysis

Post by Cincy_1988 »

Thank you for evaluating my portfolio and making recommendations. I really appreciate it.
Topic Author
Cincy_1988
Posts: 8
Joined: Tue Jun 04, 2024 10:21 pm

Re: Portfolio analysis

Post by Cincy_1988 »

Thank you for evaluating my portfolio and making recommendations. I really appreciate it.
tibbitts
Posts: 24399
Joined: Tue Feb 27, 2007 5:50 pm

Re: Portfolio analysis

Post by tibbitts »

I'm curious how you concluded you knew more than the fee-only adviser?

I would say that TIAA Real Estate's expense ratio isn't quite directly comparable; that's been discussed here many times. You either believe it's a useful diversifier and are willing to pay the expenses or not. I held it for many years but haven't for a few years now, and don't plan to again, but that's not to say you should or shouldn't.
marlin2023
Posts: 29
Joined: Wed Oct 18, 2023 10:45 pm

Re: Portfolio analysis

Post by marlin2023 »

Asset allocation / risk tolerance is tricky because there are many ways of looking at it.

Your capacity to take risk is quite large because you don't need your retirement funds at all. So in theory 100% stocks would be appropriate.

But your risk tolerance is how you feel about the ups and downs with the stock market. Obviously this is quite low because of your current asset allocation.


You can practically do whatever you want. your pension covers all your expenses by a lot. I think you need to define your goals a bit more clearly. if you want to give more than $500k that is very doable, or would you like to give $500k and spend the rest?
James.534
Posts: 326
Joined: Thu Feb 04, 2021 1:34 pm

Re: Portfolio analysis

Post by James.534 »

You could estimate your pension to be worth around 2.5m as a bond, which leaves 360k of stocks which is 14% of the total. Everyone , needs to pick their AA by their tolerance to take risk, but like previously mentioned your ability to take risk in the equity market is much greater than some on else with out a pension that covers all their expenses.
Topic Author
Cincy_1988
Posts: 8
Joined: Tue Jun 04, 2024 10:21 pm

Re: Portfolio analysis

Post by Cincy_1988 »

Thank you all for providing very useful and helpful information, I really appreciate it!

1) I'm curious how you concluded you knew more than the fee-only adviser?

There were a few examples that led me to stop going to the financial planner, e.g., (a) I had already run windfall elimination provision (WEP) calculations and knew how much I would get (very little) but the planner didn't know (actually was amazed) that I could get some social security until I showed her the numbers from WEP online calculator, (b) I had used "Flexible Retirement Planner", my own spreadsheet (that has Monte Carlo Simulation), and AARP online calculator to have an idea that (fingers crossed) I'll be ok to fund my retirement expenses but she was convinced my retirement funds won't be even enough, (c) I asked her to provide some suggestions about asset allocation but she didn't respond, (d) she was trying to convince me that my pension (from Ohio STRS) will have COLA but it's unlikely to have COLA based on what I've been reading, (e) she hadn't taken the time to really understand my portfolio and expenses, (f) she couldn't explain the results of her program's simulation results, etc. etc.

2) I would say that TIAA Real Estate's expense ratio isn't quite directly comparable; that's been discussed here many times. You either believe it's a useful diversifier and are willing to pay the expenses or not. I held it for many years but haven't for a few years now, and don't plan to again, but that's not to say you should or shouldn't.

I agree, I didn't have this fund until very recently. I used TIAA's tool (offered by MorningStar) to revise my portfolio a few weeks ago. In retrospect, my portfolio is now bloated with some funds that have high expense ratios. I'm in the process of simplifying my portfolio by transferring everything to Vanguard and use 3 broad index funds (total US, total international, & total bond funds).


3) Your capacity to take risk is quite large because you don't need your retirement funds at all. So in theory 100% stocks would be appropriate.

Please realize my pension doesn't have COLA (at least it's uncertain; there was no COLA for almost 10 years until very recently and I don't hold my breath for COLA in the future), so I'm not sure if my pension will cover my expenses when I account for inflation.

But your risk tolerance is how you feel about the ups and downs with the stock market. Obviously this is quite low because of your current asset allocation.

I think my current asset allocation is "too conservative" and won't keep up with inflation for the next 25+ years.


4) You can practically do whatever you want. Your pension covers all your expenses by a lot. I think you need to define your goals a bit more clearly. if you want to give more than $500k that is very doable, or would you like to give $500k and spend the rest?

Please realize my pension doesn't have COLA (at least it's uncertain; there was no COLA for almost 10 years until very recently and I don't hold my breath for COLA in the future), so I'm not sure if my pension will cover my expenses by a lot when I account for inflation.

5) You could estimate your pension to be worth around 2.5m as a bond, which leaves 360k of stocks which is 14% of the total. Everyone , needs to pick their AA by their tolerance to take risk, but like previously mentioned your ability to take risk in the equity market is much greater than some on else with out a pension that covers all their expenses.

I don't quite understand your comment. What do you mean by "your pension to be worth around 2.5m as a bond, which leaves 360k of stocks which is 14% of the total"?

Also, I don't quite understand how 2.5m is calculated. Please realize my pension won't likely have COLA.
Topic Author
Cincy_1988
Posts: 8
Joined: Tue Jun 04, 2024 10:21 pm

Re: Portfolio analysis

Post by Cincy_1988 »

Thank you for putting the percentages at the start of the lines on the left so that they don't have to be hunted for. :thumbsup :thumbsup
:sharebeer

Sure, you have too many funds, so the 403(b) can be greatly simplified if you like.


I agree, I really need to simplify my portfolio.

The taxable account is not invested tax-efficiently. I like to have the top half of my Form 1040 Schedule B have less than $20 of interest reported and the bottom half to be mostly qualified dividends.

A great idea, how do you manage to reach this goal?

Your pension is 6-figures, so enough to cover your expenses, but also enough to put you in a non-0% income tax bracket. It probably won't matter what your actual investments are.

Please realize that my pension doesn't have COLA (at least it's very questionable), so I'm not sure if I'll be ok when account for inflation.

I didn't do the math: You have desired asset allocation, but what is the current asset allocation of your portfolio. Since you have a pension I would think that going 60% stocks and 40% bonds (i.e. NOT conservative) would be just fine.

Again, please realize that my pension doesn't COLA. Is it still ok to have 60%-40%?
livesoft
Posts: 86635
Joined: Thu Mar 01, 2007 7:00 pm

Re: Portfolio analysis

Post by livesoft »

Cincy_1988 wrote: Tue Jun 11, 2024 9:17 am The taxable account is not invested tax-efficiently. I like to have the top half of my Form 1040 Schedule B have less than $20 of interest reported and the bottom half to be mostly qualified dividends.

A great idea, how do you manage to reach this goal?
In your taxable account have NO fixed income. That is, none of the things I have crossed out below:
Taxable

2.87% Vanguard cash reserves federal money market admiral (VMRXX) (0.10%)
2.41% Vanguard balanced index admiral CL (VBIAX) (0.09%)
1.62% Vanguard Wellington investor CL (VWELX) (0.09%)


Instead, sell all of those and buy VTSAX (Vanguard Total Stock Market Index Fund). See also:
https://www.bogleheads.org/wiki/Placing ... ed_account
Again, please realize that my pension doesn't COLA. Is it still ok to have 60%-40%?
We are retired. We have 60/40 and will not change it going forward. So yes, I think it is still OK to have 60/40.
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dbr
Posts: 46665
Joined: Sun Mar 04, 2007 8:50 am

Re: Portfolio analysis

Post by dbr »

Cincy_1988 wrote: Tue Jun 11, 2024 9:17 am
Again, please realize that my pension doesn't COLA. Is it still ok to have 60%-40%?
Why would it not be "OK"?

But keep in mind there are retirement models, even an old warhorse like FireCalc, that enter spending, assets, and income streams, fixed or COLAd, and show a statistical range of possible outcome. All real world retirement is a complicated combination of a lot of stuff. Also spending is not fixed and one should be able to test variable spending.
steadyosmosis
Posts: 1229
Joined: Mon Dec 26, 2022 11:45 am

Re: Portfolio analysis

Post by steadyosmosis »

My simple, self-managed, low-cost, tax-efficient, basically-3-fund portfolio is held mainly at Schwab.
Maximum expense ratio for any single fund/ETF in the portfolio is 0.07% (SGOV).

Taxable brokerage account (Schwab): 100% VTI (Vanguard Total Stock Market ETF).
Roth IRA (Schwab): 58% SCHB (Schwab US Broad Market ETF), 38% SCHF (Schwab International Index ETF) and 4% SGOV.
Traditional (rollover) IRA (Schwab): 61% 30-yr TIPS ladder and 39% SGOV (iShares 0-3 Month Treasury Bond ETF).
HSA (Optum Bank): 94% VITSX (Vanguard Total Stock Market Index Fund) and 6% cash (required to avoid fees).
Checking account (large national bank): few hundred dollars to pay monthly bills.
Summary below.
Age<59.5 | Early-retired | AA 52/48 | Taxable=100% VTI | Roth IRA=94% equities | HSA=94% equities | Traditional IRA=100% fixed income | I spend from the taxable account |
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