Where to put long-term savings?

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chomsky81
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Where to put long-term savings?

Post by chomsky81 »

Saved $100k for a down payment on a condo/coop but think i'm going to rent unless i meet a partner who wants to buy. That said, I'd like to invest the money into an index fund assuming i'll rent indefinitely and save this for retirement.

In my taxable brokerage i have:

11% in VTSAX
9% in VUSXX
16% in USFR
10% in VUG

403(b) (public employee w/ a pension):

20% in VTSAX
6% in VTIAX

457 (b)

2% in NYSDCB Equity Index Unitized Account (S&P 500 index fund). https://www.nysdcp.com/factSheets/current/09259A486.pdf

Questions:

1. Where should i put the $100k (all in a single fund, multiply funds?). Should it be put in one of the funds above or in something like VTI?
2. Does it make sense to have both USFR and VUSXX or should I sell one and consolidate into the other?
Last edited by chomsky81 on Tue Jul 09, 2024 9:17 am, edited 1 time in total.
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retired@50
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Re: Where to put long-term savings?

Post by retired@50 »

chomsky81 wrote: Tue Jul 09, 2024 9:03 am Saved $100k for a down payment on a condo/coop but think i'm going to rent unless i meet a partner who wants to buy. That said, I'd like to invest the money into an index fund assuming i'll rent indefinitely and save this for retirement.

In my taxable brokerage i have:

25% in VTSAX
20% in VUSXX
21% in USFR
35% in VUG

403(b) (public employee w/ a pension):

77% in VTSAX
23% in VTIAX

457 (b)

100% in NYSDCB Equity Index Unitized Account (S&P 500 index fund). https://www.nysdcp.com/factSheets/current/09259A486.pdf

Questions:

1. Where should i put the $100k (all in a single fund, multiply funds?). Should it be put in one of the funds above or in something like VTI?
2. Does it make sense to have both USFR and VUSXX or should I sell one and consolidate into the other?
It would be helpful if you'd re-work the percentages so the whole portfolio adds to 100%, instead of 300%. We can't tell how big (or small) each account is relative to the other accounts.

For an example of how to do this see this link: viewtopic.php?t=6212

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
Topic Author
chomsky81
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Re: Where to put long-term savings?

Post by chomsky81 »

*Edited. thanks!
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sailaway
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Re: Where to put long-term savings?

Post by sailaway »

Now is a good time for you to create an Investment Policy statement where you set out your own guidelines for asset allocation and where the next dollar goes.

Personally, I would move my bonds into my tax sheltered account and keep more equities in taxable. I only have I bonds and cash flow needs in taxable.

I would also start contributing to a Roth IRA. Since you do not mention a tIRA, you can use the Backdoor Roth method if you are high income.

Is the 457 low because it is new or you just started contributing? If you can contribute more, you could keep some of your savings as cash to increase paycheck withholding.
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Re: Where to put long-term savings?

Post by retired@50 »

chomsky81 wrote: Tue Jul 09, 2024 9:17 am *Edited. thanks!
Is it just me, or do the new numbers only add to 74%. Is the other 26% the "$100k" in cash you're seeking to deploy?

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
Topic Author
chomsky81
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Re: Where to put long-term savings?

Post by chomsky81 »

retired@50 wrote: Tue Jul 09, 2024 9:20 am
chomsky81 wrote: Tue Jul 09, 2024 9:17 am *Edited. thanks!
Is it just me, or do the new numbers only add to 74%. Is the other 26% the "$100k" in cash you're seeking to deploy?

Regards,
[ quote fixed by admin LadyGeek]

Yes, correct - the last 26% is the money not invested but sitting in my settlement fund.
"Governments that issue their own currency are never in fear of default but only constrained by inflation"
Topic Author
chomsky81
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Re: Where to put long-term savings?

Post by chomsky81 »

sailaway wrote: Tue Jul 09, 2024 9:20 am Now is a good time for you to create an Investment Policy statement where you set out your own guidelines for asset allocation and where the next dollar goes.

Personally, I would move my bonds into my tax sheltered account and keep more equities in taxable. I only have I bonds and cash flow needs in taxable.

I would also start contributing to a Roth IRA. Since you do not mention a tIRA, you can use the Backdoor Roth method if you are high income.

Is the 457 low because it is new or you just started contributing? If you can contribute more, you could keep some of your savings as cash to increase paycheck withholding.

1. Are there negative tax consequences for selling USFR and VUSXX and moving into 403b? Also, does it make sense to have both funds or to consolidate ?

2. I have a little in a Roth IRA I don’t include. I fully fund the 403b but not the 457 yet due to high COLA. The 457b is new.

3. What fund makes most sense for the $100k?
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Re: Where to put long-term savings?

Post by retired@50 »

If the $100k can be deployed into your investment portfolio, then I'd suggest you review the tax efficient fund placement wiki page.

That wiki page would suggest that you should be keeping your cash and fixed income in your 403b plan instead of in your taxable account. Consider the two links below and see if this resonates with you. If you're living in a high tax state, then the tax savings might matter that much more.

Links:
https://www.bogleheads.org/wiki/Tax-eff ... _placement

https://www.bogleheads.org/wiki/Placing ... ed_account

In other words, the taxable account should probably be all stock index funds.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
Onlineid3089
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Re: Where to put long-term savings?

Post by Onlineid3089 »

I'd put into VTSAX if you're confident you won't need it for several years. Add in VUSXX as desired if you don't want to go 100% stock with those down payment dollars.

I guess I'd also probably stick 10,000 per year into ibonds while they have a good fixed rate as a replacement for some of your VUSXX.
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chomsky81
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Re: Where to put long-term savings?

Post by chomsky81 »

Hmm, good points and articles. Makes me think I shouldn’t be holding VUSXX or USFR in either taxable or 403b. I have a pension which will serve as a bond fund.

What if I sell both VUSXX and USFR and use that plus the $100k from savings and put them into VTSAX in taxable account? I can leave some money in the settlement account if I needed or wanted cash swept into my checking for purchase or emergency.

Does this make sense? Or is there another way to move VUSXX and USFR to VTSAX.

Is there any benefit foregoing VTSAX or VUG and buying VTI instead ?
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Re: Where to put long-term savings?

Post by retired@50 »

chomsky81 wrote: Tue Jul 09, 2024 10:45 am Hmm, good points and articles. Makes me think I shouldn’t be holding VUSXX or USFR in either taxable or 403b. I have a pension which will serve as a bond fund.

What if I sell both VUSXX and USFR and use that plus the $100k from savings and put them into VTSAX in taxable account? I can leave some money in the settlement account if I needed or wanted cash swept into my checking for purchase or emergency.

Does this make sense? Or is there another way to move VUSXX and USFR to VTSAX.

Is there any benefit foregoing VTSAX or VUG and buying VTI instead ?
VTSAX and VTI are the same thing. It's just a matter of preference between ETFs versus mutual funds. Since you already own VTSAX, I'd just continue with that.

VUG is a subset of the holdings of VTI/VTSAX so it's just a concentrated position in around 200 of the large cap growth companies.

The agnostic / Boglehead approach would just use a total market fund like VTI/VTSAX.

As for bond funds, what bond funds / or "cash type" investments are available inside your 403b plan?

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
Topic Author
chomsky81
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Re: Where to put long-term savings?

Post by chomsky81 »

retired@50 wrote: Tue Jul 09, 2024 11:12 am The agnostic / Boglehead approach would just use a total market fund like VTI/VTSAX.

As for bond funds, what bond funds / or "cash type" investments are available inside your 403b plan?
Makes sense! I'm sure VUSXX is available in my 403(b), though i'd have to check. That said, I believe I read that pensions can count as your bond portfolio and therefore I can dump the rest of my savings into equities. Does this make sense? If so, then I'd keep my 403 (b) as is (plus I don't think I can transfer any money into it since it's capped at $23k/year and i'm already funding that level.

Finally, It seems that I should keep emergency cash in my money market settlement in the taxable account and do the following:

1. Take the $100k and put $50k it into VTSAX and $50k into VUG
2. internally move VUSXX and USFR into VTSAX
3. This will leave me with VTSAX and VUG only in the Taxable brokerage account and keep 403(b) funds and allocation the same


How does this square up?
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Re: Where to put long-term savings?

Post by retired@50 »

chomsky81 wrote: Tue Jul 09, 2024 11:22 am
retired@50 wrote: Tue Jul 09, 2024 11:12 am The agnostic / Boglehead approach would just use a total market fund like VTI/VTSAX.

As for bond funds, what bond funds / or "cash type" investments are available inside your 403b plan?
Makes sense! I'm sure VUSXX is available in my 403(b), though i'd have to check. That said, I believe I read that pensions can count as your bond portfolio and therefore I can dump the rest of my savings into equities. Does this make sense? If so, then I'd keep my 403 (b) as is (plus I don't think I can transfer any money into it since it's capped at $23k/year and i'm already funding that level.

Finally, It seems that I should keep emergency cash in my money market settlement in the taxable account and do the following:

1. Take the $100k and put $50k it into VTSAX and $50k into VUG
2. internally move VUSXX and USFR into VTSAX
3. This will leave me with VTSAX and VUG only in the Taxable brokerage account and keep 403(b) funds and allocation the same


How does this square up?
Whether or not it makes sense depends on your age and risk tolerance.

Is the pension you mention actually vested at this point?

I wouldn't treat VUG and VTSAX equally in the portfolio. Emphasizing the Large Cap growth sector (as VUG does) is considered a "bet" that may or may not pay off.

If you're over 40 years old, then being all equity is way too risky in my opinion. Using a low cost intermediate term bond index fund can add some stability to your portfolio. The 403b choices might include one. To get the bonds or cash inside your 403b, you'd sell the existing stock funds and use the proceeds to buy the bond / cash fund.

If you're on the younger side, then being all equity isn't nearly as aggressive since you will still have many years of work in front of you.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
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chomsky81
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Re: Where to put long-term savings?

Post by chomsky81 »

Thanks! Is there a reason to include bond funds in 403b if I have a pension? I have 15-20 before retirement
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Re: Where to put long-term savings?

Post by retired@50 »

chomsky81 wrote: Tue Jul 09, 2024 12:52 pm Thanks! Is there a reason to include bond funds in 403b if I have a pension? I have 15-20 before retirement
Bond funds are inefficient from a tax perspective.

So, putting them in the 403b shields you from that inefficiency in your taxable investment account.

This little tidbit only tends to show itself at income tax time.

Bond interest and bank interest is treated like wages (or ordinary income) and will be taxed at your marginal rate, on the 10%,12%,22%,24%,32%... income tax bracket schedule.

Qualified stock dividends are treated like long term capital gains on the 0%,15%,20% capital gain schedule. This is typically why people use their taxable investment accounts for stock holdings.

I wouldn't be relying on a pension that is 15-20 years into the future as my "bonds". Too many things can change between now and then. Pension plans can get under-funded, or be discontinued for some portion of the affected workforce.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
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