Retirement and Investment planning help

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Topic Author
new2investingcm79
Posts: 3
Joined: Sun Oct 27, 2024 3:20 pm

Retirement and Investment planning help

Post by new2investingcm79 »

Hello, I am here to seek this community's feedback as far as retirement and financial planning advice.

I have two retirement accounts from my two previous jobs that I dont contribute to since I left these two jobs
A) TIAA-approximately have $140,000-departed in 2014, grew from $50,000 to 150,000 for last 10 years
B) TSP -approx-$240,000- recently departed

In my current employment, I have 401K with a 2% company automatic contribution and up to 4% once I match 4%, this is through fidelity, what would you recommend for us to invest here through Fidelity?

My spouse also has TSP-approx $200,000 is currently employed at the federal job-upto 5% match.

Please advise me how I should go forward with my TIAA and TSP accounts and what sort of investment we should do for my spouse's TSP -we plan to do for my spouse 60% C and 40% S funds, and keep my TSP in similar funds? any advice on this?

With my current employer-I get option to Roth and traditional IRA-What sort of % contributions should I do for my current employer.

We have a Vanguard Investment account-what is the best portfolio that we should select- We had initially for 3 years -, VTSAX, I was told I should change to VOO? advisable or what would you recommend. Not a lot in this account $50,000.

I have a Schwab account for stocks, not actively looking into it, worth 35k mainly apple and goodle, and cruise stocks.
We are late in the investment area. I had some other commitments, so a lot of my earnings went to paying off a commitment for the first 5-8 years from 2009 to 2017. Then, I started saving for a house downpayment—I have an SFH. I still owe $380K, and I have a low 2.5% 15-year payment (10 years remaining), equity of around $350k. I am really not financially savvy; we are both 45 years old and have two kids below 10. I have set up 529 plan for the 1st kid, I was discouraged from getting one for the second one by multiple people and yet some people advised to have one-so I am in dilemma there too.

We have emergency fund of 50k

Overall, I am looking forward to feedback regarding
1) how to go about with my previous two retirement funds
2) current employment strategy
3) spouse TSP strategy
4) vanguard portfolio advice
5) what is the best college retirement fund for the two kids, is it better to have a vanguard or similar fund/investment
6) should I continue to do 529 and add another one for second child?

Sincerely,
Thanks,
New2investment
Grt2bOutdoors
Posts: 25863
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Retirement and Investment planning help

Post by Grt2bOutdoors »

new2investingcm79 wrote: Mon Oct 28, 2024 7:01 pm Hello, I am here to seek this community's feedback as far as retirement and financial planning advice.

I have two retirement accounts from my two previous jobs that I dont contribute to since I left these two jobs
A) TIAA-approximately have $140,000-departed in 2014, grew from $50,000 to 150,000 for last 10 years
B) TSP -approx-$240,000- recently departed

In my current employment, I have 401K with a 2% company automatic contribution and up to 4% once I match 4%, this is through fidelity, what would you recommend for us to invest here through Fidelity?

My spouse also has TSP-approx $200,000 is currently employed at the federal job-upto 5% match.

Please advise me how I should go forward with my TIAA and TSP accounts and what sort of investment we should do for my spouse's TSP -we plan to do for my spouse 60% C and 40% S funds, and keep my TSP in similar funds? any advice on this?

With my current employer-I get option to Roth and traditional IRA-What sort of % contributions should I do for my current employer.

We have a Vanguard Investment account-what is the best portfolio that we should select- We had initially for 3 years -, VTSAX, I was told I should change to VOO? advisable or what would you recommend. Not a lot in this account $50,000.

I have a Schwab account for stocks, not actively looking into it, worth 35k mainly apple and goodle, and cruise stocks.
We are late in the investment area. I had some other commitments, so a lot of my earnings went to paying off a commitment for the first 5-8 years from 2009 to 2017. Then, I started saving for a house downpayment—I have an SFH. I still owe $380K, and I have a low 2.5% 15-year payment (10 years remaining), equity of around $350k. I am really not financially savvy; we are both 45 years old and have two kids below 10. I have set up 529 plan for the 1st kid, I was discouraged from getting one for the second one by multiple people and yet some people advised to have one-so I am in dilemma there too.

We have emergency fund of 50k

Overall, I am looking forward to feedback regarding
1) how to go about with my previous two retirement funds
2) current employment strategy
3) spouse TSP strategy
4) vanguard portfolio advice
5) what is the best college retirement fund for the two kids, is it better to have a vanguard or similar fund/investment
6) should I continue to do 529 and add another one for second child?

Sincerely,
Thanks,
New2investment
Welcome to the forum!

Ask any and all questions here! View the wiki if you want to read up on any topic at all - personal finance and investing - it has it all, but please do ask questions here or on a new thread if you have new questions.

Not financially savvy? You have a 2.5% fixed rate mortgage - I should be taking notes from you! You have a decent accumulation of retirement savings. You are doing fine.

1) Do you and spouse have an asset allocation you are comfortable with? It is difficult to suggest a strategy for you and spouse without knowing what asset allocation and level of risk you are comfortable with. When are you targeting for retirement? Seeing as both you and spouse have/had access to a TSP, you will anticipate getting a pension at some point in the future?

TSP Plan - yes, you can go with a 60% C Fund and 40% S Fund so long as you are both comfortable with the volatility of it. Many who have access to the TSP use an all equity strategy with the pension as the fixed component of their retirement strategy. The C fund is the equivalent of VOO, the S fund is the equivalent of small cap index fund.

Your current employer offers you a choice of a Roth, is it a 401(k), 403(b), 457 or some other type of plan? It's not clear, as Traditional IRA's can be opened externally by just about anyone with earned income.

Do you know what types of investment funds are offered within the new employer plan and the associated expense ratio's of each?
It would be better to know what is available here before making suggestion on whether to leave your previous employer's fund balances as is or to consolidate it at new employer. The TSP does offer the G fund which can not be accessed elsewhere.

2) Vanguard account - VTSAX incorporates the entirety of VOO and all the midcap and small cap companies that make up the rest of the US Stock Market. I wouldn't move out of VTSAX especially if you've held the fund for a while as it's likely you have decent capital gains in it, no need to incur taxes especially since you already are participating in the performance of VOO just by staying put. You can keep the fund and add to it over time as funds become available as part of your overall asset allocation and investment strategy. Many on the forum use that fund as part of a 3 Fund Portfolio (you can read about it in the wiki) in their retirement and taxable accounts. As Jack Bogle said, don't do something, just stand there. Avoid the urge to make changes. Not sure who's telling you to switch out of it, but good thing you asked here.

3) 529 Plan - do you live in a state where you get a deduction on your taxes for making contributions to the 529 Plan. If no, suggest using either the Vanguard 529 Direct Plan if you like keeping all your accounts in one place or a plan like the Utah 529 Direct plan - www.my529.org and select an age-based allocation plan that will become more conservative as the child gets closer to college. Don't use a bank advisor or outside advisor to open the 529 Plan - the less you pay in expenses, the more you keep in your account to grow. Both the Vanguard plan and Utah plan offer low-expense ratio age based allocation plans that use index funds in the 529 Plan.

As for the person advising not to use a 529 Plan, is this an outside advisor? What is the reason for not using the 529 Plan? Here's a bit of encouragement: You are the parent(s), if you feel your child is capable of attending college or a vocational program, a 529 Plan offers a tax deferred and tax free option if you use the money for higher education. If there is extra money in there at the end, you can roll up to $35K of it into a Roth account (so long as child has earned income).

It's a personal decision - but I would open the 529 plan if you knew the above was true in your circumstances.

4) You didn't ask but seeing as you have young children - do you and spouse have a will, power of attorney and health care directive? Do you have adequate life insurance?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
Topic Author
new2investingcm79
Posts: 3
Joined: Sun Oct 27, 2024 3:20 pm

Re: Retirement and Investment planning help

Post by new2investingcm79 »

Thanks for the reply and feedback @ Grt2bOutdoors.

I was lucky regarding the 2.5% and took a chance just before the pandemic, left me a bit tight in terms of cash in hand. Hopefully will pay off in the end.

I would like to retire at 65 and if possible work till 70-health permitting, spouse would like to retire at 62.

1) both me and my spouse are comfortable with asset allocation in TSP that is aggressive, more aggressive for spouse maybe and less for me, since I have the extra cusion of TIAA retirement account -does that sound reasonable. I recently changed all my TSP to G fund just before separating from my federal job and changed my spouse’s allocation to a 60% C Fund and 40% S Fund. Yes we will get pension from our federal jobs.
My biggest worry is when there is a major crash like what happened - couple of years ago I lost significant in the TIAA account. Current TIAA allocation is 97% equities and 3% guaranteed-usually has given me almost 20% return except during 2022 when I lost 25%-so thats an aggressive portfolio.

the current employer is a 401k with option for Roth.

They offer various FIdelity stock fund options like Fidelity 500 Index Fund, large, mid and small caps etc and the expense ratio ranges from 0.015 to 0.075% , Vanguard target retirement blended funds -expense ratio of 0.080% and some other options like Fidelity® Inflation-Protected Bond
Index Fun ( 0.050%) , Fidelity® Intermediate Treasury Bond Index Fund ( 0.035%), and Fidelity® U.S. Bond Index Fund ( 0.025% )

2) Vanguard investment account—Thanks for the suggestion to keep it as is and for the suggestion of a 3 Fund Portfolio in the future. The current fund has given a 12% return YTD, not so great in the first 2 years.

I can add more to Vanguard savings slowly maybe starting of 2025-do you suggest VOO as part of the new savings or continue with the current or any other allocation for future savings plan-more for short term investment for maybe kids, in addition to 529 funds.

What do you suggest with the stock investments we have-i sometimes feel, since i am not very active, just keep apple, google and sell everything else and use the funds from the stock investments for vanguard account and fund some savings for short term investment

3) 529- The financial planner is suggesting not to have 529, and some other colleagues and friends say I should invest better for better college funds.

4) we plan to have a will/ trust soon. I have life insurance up to 1m, and my spouse has life insurance through employer.

What do you suggest for the emergency fund-instead of savings account in bank -do CD? any suggestions.

Thanks again.
Topic Author
new2investingcm79
Posts: 3
Joined: Sun Oct 27, 2024 3:20 pm

Re: Retirement and Investment planning help

Post by new2investingcm79 »

Grt2bOutdoors wrote: Mon Oct 28, 2024 7:40 pm
new2investingcm79 wrote: Mon Oct 28, 2024 7:01 pm Hello, I am here to seek this community's feedback as far as retirement and financial planning advice.

I have two retirement accounts from my two previous jobs that I dont contribute to since I left these two jobs
A) TIAA-approximately have $140,000-departed in 2014, grew from $50,000 to 150,000 for last 10 years
B) TSP -approx-$240,000- recently departed

In my current employment, I have 401K with a 2% company automatic contribution and up to 4% once I match 4%, this is through fidelity, what would you recommend for us to invest here through Fidelity?

My spouse also has TSP-approx $200,000 is currently employed at the federal job-upto 5% match.

Please advise me how I should go forward with my TIAA and TSP accounts and what sort of investment we should do for my spouse's TSP -we plan to do for my spouse 60% C and 40% S funds, and keep my TSP in similar funds? any advice on this?

With my current employer-I get option to Roth and traditional IRA-What sort of % contributions should I do for my current employer.

We have a Vanguard Investment account-what is the best portfolio that we should select- We had initially for 3 years -, VTSAX, I was told I should change to VOO? advisable or what would you recommend. Not a lot in this account $50,000.

I have a Schwab account for stocks, not actively looking into it, worth 35k mainly apple and goodle, and cruise stocks.
We are late in the investment area. I had some other commitments, so a lot of my earnings went to paying off a commitment for the first 5-8 years from 2009 to 2017. Then, I started saving for a house downpayment—I have an SFH. I still owe $380K, and I have a low 2.5% 15-year payment (10 years remaining), equity of around $350k. I am really not financially savvy; we are both 45 years old and have two kids below 10. I have set up 529 plan for the 1st kid, I was discouraged from getting one for the second one by multiple people and yet some people advised to have one-so I am in dilemma there too.

We have emergency fund of 50k

Overall, I am looking forward to feedback regarding
1) how to go about with my previous two retirement funds
2) current employment strategy
3) spouse TSP strategy
4) vanguard portfolio advice
5) what is the best college retirement fund for the two kids, is it better to have a vanguard or similar fund/investment
6) should I continue to do 529 and add another one for second child?

Sincerely,
Thanks,
New2investment
Welcome to the forum!

Ask any and all questions here! View the wiki if you want to read up on any topic at all - personal finance and investing - it has it all, but please do ask questions here or on a new thread if you have new questions.

Not financially savvy? You have a 2.5% fixed rate mortgage - I should be taking notes from you! You have a decent accumulation of retirement savings. You are doing fine.

1) Do you and spouse have an asset allocation you are comfortable with? It is difficult to suggest a strategy for you and spouse without knowing what asset allocation and level of risk you are comfortable with. When are you targeting for retirement? Seeing as both you and spouse have/had access to a TSP, you will anticipate getting a pension at some point in the future?

TSP Plan - yes, you can go with a 60% C Fund and 40% S Fund so long as you are both comfortable with the volatility of it. Many who have access to the TSP use an all equity strategy with the pension as the fixed component of their retirement strategy. The C fund is the equivalent of VOO, the S fund is the equivalent of small cap index fund.

Your current employer offers you a choice of a Roth, is it a 401(k), 403(b), 457 or some other type of plan? It's not clear, as Traditional IRA's can be opened externally by just about anyone with earned income.

Do you know what types of investment funds are offered within the new employer plan and the associated expense ratio's of each?
It would be better to know what is available here before making suggestion on whether to leave your previous employer's fund balances as is or to consolidate it at new employer. The TSP does offer the G fund which can not be accessed elsewhere.

2) Vanguard account - VTSAX incorporates the entirety of VOO and all the midcap and small cap companies that make up the rest of the US Stock Market. I wouldn't move out of VTSAX especially if you've held the fund for a while as it's likely you have decent capital gains in it, no need to incur taxes especially since you already are participating in the performance of VOO just by staying put. You can keep the fund and add to it over time as funds become available as part of your overall asset allocation and investment strategy. Many on the forum use that fund as part of a 3 Fund Portfolio (you can read about it in the wiki) in their retirement and taxable accounts. As Jack Bogle said, don't do something, just stand there. Avoid the urge to make changes. Not sure who's telling you to switch out of it, but good thing you asked here.

3) 529 Plan - do you live in a state where you get a deduction on your taxes for making contributions to the 529 Plan. If no, suggest using either the Vanguard 529 Direct Plan if you like keeping all your accounts in one place or a plan like the Utah 529 Direct plan - www.my529.org and select an age-based allocation plan that will become more conservative as the child gets closer to college. Don't use a bank advisor or outside advisor to open the 529 Plan - the less you pay in expenses, the more you keep in your account to grow. Both the Vanguard plan and Utah plan offer low-expense ratio age based allocation plans that use index funds in the 529 Plan.

As for the person advising not to use a 529 Plan, is this an outside advisor? What is the reason for not using the 529 Plan? Here's a bit of encouragement: You are the parent(s), if you feel your child is capable of attending college or a vocational program, a 529 Plan offers a tax deferred and tax free option if you use the money for higher education. If there is extra money in there at the end, you can roll up to $35K of it into a Roth account (so long as child has earned income).

It's a personal decision - but I would open the 529 plan if you knew the above was true in your circumstances.

4) You didn't ask but seeing as you have young children - do you and spouse have a will, power of attorney and health care directive? Do you have adequate life insurance?

Thanks for the reply and feedback @ Grt2bOutdoors.

I was lucky regarding the 2.5% and took a chance just before the pandemic, left me a bit tight in terms of cash in hand. Hopefully will pay off in the end.

I would like to retire at 65 and if possible work till 70-health permitting, spouse would like to retire at 62.

1) both me and my spouse are comfortable with asset allocation in TSP that is aggressive, more aggressive for spouse maybe and less for me, since I have the extra cusion of TIAA retirement account -does that sound reasonable. I recently changed all my TSP to G fund just before separating from my federal job and changed my spouse’s allocation to a 60% C Fund and 40% S Fund. Yes we will get pension from our federal jobs.
My biggest worry is when there is a major crash like what happened - couple of years ago I lost significant in the TIAA account. Current TIAA allocation is 97% equities and 3% guaranteed-usually has given me almost 20% return except during 2022 when I lost 25%-so thats an aggressive portfolio.

the current employer is a 401k with option for Roth.

They offer various FIdelity stock fund options like Fidelity 500 Index Fund, large, mid and small caps etc and the expense ratio ranges from 0.015 to 0.075% , Vanguard target retirement blended funds -expense ratio of 0.080% and some other options like Fidelity® Inflation-Protected Bond
Index Fun ( 0.050%) , Fidelity® Intermediate Treasury Bond Index Fund ( 0.035%), and Fidelity® U.S. Bond Index Fund ( 0.025% )

2) Vanguard investment account—Thanks for the suggestion to keep it as is and for the suggestion of a 3 Fund Portfolio in the future. The current fund has given a 12% return YTD, not so great in the first 2 years.

I can add more to Vanguard savings slowly maybe starting of 2025-do you suggest VOO as part of the new savings or continue with the current or any other allocation for future savings plan-more for short term investment for maybe kids, in addition to 529 funds.

What do you suggest with the stock investments we have-i sometimes feel, since i am not very active, just keep apple, google and sell everything else and use the funds from the stock investments for vanguard account and fund some savings for short term investment

3) 529- The financial planner is suggesting not to have 529, and some other colleagues and friends say I should invest better for better college funds.

4) we plan to have a will/ trust soon. I have life insurance up to 1m, and my spouse has life insurance through employer.

What do you suggest for the emergency fund-instead of savings account in bank -do CD? any suggestions.

Thanks again.
HomeStretch
Posts: 12436
Joined: Thu Dec 27, 2018 2:06 pm

Re: Retirement and Investment planning help

Post by HomeStretch »

Welcome to the forum.

You mention a financial planner. Who is this and what are their fees they are charging you?

Your biggest fear is losing portfolio value. Be sure to set an appropriate asset allocation (AA) for your overall portfolio. 97% equity is aggressive but your TIAA account is only part of your portfolio. Here is a BH wiki page about AA:
https://www.bogleheads.org/wiki/Asset_allocation

There is some pertinent information such as desired asset allocation, marginal tax rate, planned contributions, available Fidelity 401k funds, etc. that is missing from your post. For best feedback, please consider editing your original post using the pencil icon to use the BH wiki template in the “Asking Portfolio Questions”:
https://www.bogleheads.org/wiki/Asking_ ... _questions

General feedback:
1. Consider rolling over your old TIAA 401k plan balance into your new Fidelity 401k if it allows rollovers in and is a low-cost plan with good fund choices.
2. TSP offers a unique G Fund so consider that if your desired asset allocation includes fixed income.
3. To reduce the # of financial institutions you deal with, consider holding both Taxable brokerage accounts at one brokerage - Fidelity, Schwab or Vanguard.
4. If you are adequately saving for retirement, 529 accounts can be a good vehicle for college savings especially if there is a state income tax deduction for 529 contributions.
5. Read the BH wiki to increase your investing knowledge. “Getting Started” is found here:
https://www.bogleheads.org/wiki/Getting_started

When/if you revise your original post, it will be possible to give you feedback on your holdings and placement.
bonesly
Posts: 2124
Joined: Mon Dec 18, 2017 9:28 pm
Location: WA

Re: Retirement and Investment planning help

Post by bonesly »

new2investingcm79 wrote: Mon Oct 28, 2024 7:01 pm Hello, I am here to seek this community's feedback as far as retirement and financial planning advice.
You've provided what seems like a lot of information, but a great deal of information that we typically ask for is missing. Consider editing your first post (pencil icon in the upper right of that first post) to reformat your situation (fill in missing info) and clarify your questions per the template for Asking Portfolio Questions. This will enable us to give the best answer possible because we know all the relevant information about your debt, assets, and how your portfolio is invested among stocks, bonds, and cash, as well as what your desired allocation is. We can then hep with the missing info in addition to answer as best we can.
new2investingcm79 wrote: Mon Oct 28, 2024 7:01 pm 1) how to go about with my previous two retirement funds
2) current employment strategy
3) spouse TSP strategy
4) vanguard portfolio advice
These four "questions" are all related to how to invest your retirement portfolio. Before anyone can give a meaningful answer we need to know your desired Asset Allocation (AA) among stocks and bonds, along with an international exposure as a percentage of stocks. Then we need to know how your portfolio is currently invested (dollar amounts or % of the total of all accounts, fund name, ticker, and expense ratio). Also knowing your tax bracket is helpful if there's a Taxable account that is "for retirement" and not just an emergency fund in case one or both of you get laid off from work.
new2investingcm79 wrote: Mon Oct 28, 2024 7:01 pm I have two retirement accounts from my two previous jobs that I dont contribute to since I left these two jobs
A) TIAA-approximately have $140,000-departed in 2014, grew from $50,000 to 150,000 for last 10 years
B) TSP -approx-$240,000- recently departed

In my current employment, I have 401K with a 2% company automatic contribution and up to 4% once I match 4%, this is through fidelity, what would you recommend for us to invest here through Fidelity?
The typical recommendation is to keep things simple by using a 3-Fund Portfolio. So at Fidelity the funds to utilize would be:
US Stock - Fidelity Total Market Index Fund (FSKAX),
Int'l Stock - Fidelity Total International Index Fund (FTIHX), and
US Bonds - Fidelity U.S. Bond Index Fund (FXNAX)

The specific % split among these funds (if you even need all three) would be to maintain your desired AA, so it is based on the other holdings for both you and your spouse, but we don't have a complete picture of that so can't make any % split recommendations.
new2investingcm79 wrote: Mon Oct 28, 2024 7:01 pm Please advise me how I should go forward with my TIAA and TSP accounts and what sort of investment we should do for my spouse's TSP -we plan to do for my spouse 60% C and 40% S funds, and keep my TSP in similar funds? any advice on this?
Before choosing a split (e.g., 60% C-Fund, 40% S-Fund), you need to do the homework to pick an overall joint Target AA. Then you can pick funds in proportions to meet your target. You didn't list a Target AA (which would be requested in template for Asking Portfolio Questions). Here's some ideas on how you each should pick an individual AA, then you can average your two individual targets to determine a joint target.

Control Your Risk
1) Read the Wiki article for Assessing Risk Tolerance, take the Vanguard Investor Questionnaire, then tailor the asset allocation (AA) that was recommended by the quiz based on your knowledge of your personal risk tolerance having read the Wiki article.

2) Alternatively (or in addition to), ask "How much of a drop in portfolio value as a % of total value can I handle?" cut that % in half to get standard deviation, then lookup that std. dev. on the X-Axis of the chart below, and finally scan up to see what AA that corresponds to. As an example, if you can only stomach a -24% drop in portfolio value, that's a ±12% std. dev, which corresponds to an AA of 60/40. The return you get is an average and you'll get what you get with your unique sequence of returns (there's a lot of variance in outcomes due to the associated volatility of stocks so it probably will NOT be the average, but something more or less).
Image
new2investingcm79 wrote: Mon Oct 28, 2024 7:01 pm With my current employer-I get option to Roth and traditional IRA-What sort of % contributions should I do for my current employer.
The decision between Traditional vs Roth depends on your current tax bracket (which you know) and your future tax bracket in early & late retirement (which you can only guess at). You didn't list your tax bracket so nobody can meaningfully answer your question without more information (tax bracket now, best guess at tax bracket later, will you retire early and live off Taxable or will you retire at 65 and take pension/SocSec at that time, etc.).
new2investingcm79 wrote: Mon Oct 28, 2024 7:01 pm We have a Vanguard Investment account-what is the best portfolio that we should select- We had initially for 3 years -, VTSAX, I was told I should change to VOO? advisable or what would you recommend. Not a lot in this account $50,000.
Both Total US Stock Market (VTSAX) and S&P-500 (VOO) are fine US Stock funds. Typically one chooses VTSAX in a Taxable account to avoid Wash Sales with a Total US Stock Market holding in a tax-advantaged account (e.g., Trad & Roth TSP, 401k, IRA). Often, employer plans don't offer a Total US Stock fund but do offer an S&P-500 fund, so the choices if that's the case are VTSAX in Taxable and VOO in tax-advantaged.
new2investingcm79 wrote: Mon Oct 28, 2024 7:01 pm I have a Schwab account for stocks, not actively looking into it, worth 35k mainly apple and goodle, and cruise stocks.
Holding individual stocks can be fine for "fun money" but if you're counting on this money to partially fund your retirement, then you should stick with a 3-Fund portfolio across all accounts. The risk of failure for an individual company compared to an index of 500+ companies is pretty large in comparison and the risk of high reward... well if it was easy to pick stocks everyone would be a billionaire, but the reality is that 80% of professional fund managers with masters in finance/economics and a Chartered Financial Analyst (CFA) designation fail to pick winners consistently (80% of Active Managers Fail to Beat the Market). If you think you're in the 20% that can beat the passive index for a short burst or the one or two that can do it for 20+ years (Warren Buffet/Berkshire Hathaway and Theo Koltrones/Vanguard PRIMECAP), then that's likely hubris or simple lack of knowledge. You'd better off in a low-cost 3-Fund Index portfolio.
new2investingcm79 wrote: Mon Oct 28, 2024 7:01 pm I am really not financially savvy; we are both 45 years old and have two kids below 10. I have set up 529 plan for the 1st kid, I was discouraged from getting one for the second one by multiple people and yet some people advised to have one-so I am in dilemma there too.
You can use a single 529 account to fund both kids' education or you can setup two individual 529 accounts to fund each child's education separately. For a single account covering two children, the AA for the 529 just has to be blended to account for the age difference (unless you have twins both entering college the same year). Since you can do it with a single account, I'd recommend that just for simplicity.

"Simplicity is the master key to financial success." -- John C. Bogle

The only drawback to a 529 is if you fully fund 4 years of college and your child decides not to go. Only $35K of unused 529 funds can be rolled to a Roth IRA (perhaps $70K if two 529s are setup, one in your name and one in your spouse's name). That could be a reason that some are advising to not fund both children via 529. Mitigating this "my kid didn't attend college" risk could be accomplished by only funding the 529 to the level that it would reach no more than $35K per account and then putting the rest of the college funding in a plain Taxable account. Two outcomes for this limited 529 approach are as follows:
a) If your child attends all 4 years and spends the entire 529 balance on qualified expenses then the earnings were tax-free, but the portion that was funded from Taxable had taxes owed on it every year (probably at the 15% long-term capital gains rate rather than the higher ordinary income rate).
b)If your child chooses not to attend college at all, then $35K is rolled to a Roth rather than owing a 10% penalty + ordinary income tax on the earnings. The Taxable account at 15% LTCG is ahead of a 10% penalty + ordinary income tax.
Don't do what Bogleheads tell you. Listen to what we say, consider other sources, and make your own decisions, since you have to live with the risks & rewards (not us or anyone else).
Grt2bOutdoors
Posts: 25863
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Retirement and Investment planning help

Post by Grt2bOutdoors »

new2investingcm79 wrote: Wed Oct 30, 2024 10:31 pm

I can add more to Vanguard savings slowly maybe starting of 2025-do you suggest VOO as part of the new savings or continue with the current or any other allocation for future savings plan-more for short term investment for maybe kids, in addition to 529 funds.

What do you suggest with the stock investments we have-i sometimes feel, since i am not very active, just keep apple, google and sell everything else and use the funds from the stock investments for vanguard account and fund some savings for short term investment.
If it's not a hobby for you and you want to simplify, then depending on how large the gains are, you may wish to sell it and invest the proceeds in your taxable account.

3) 529- The financial planner is suggesting not to have 529, and some other colleagues and friends say I should invest better for better college funds.
Why do you have a financial planner? Do you feel the financial planner is providing value to you? I question what the motivation of the financial planner is, especially if having more assets under their control means a higher fee they can earn by selling you other options. The benefit of the the 529 plan is tax free growth of assets especially if your time horizon is 10 years or longer. Seeing as your younger child has at least 10-15 years until higher education, its hard to argue against tax-free compounding growth especially is low-cost index funds.

As for your friends - there could be higher earning investments but remember that high risk goes hand-in-hand with the idea of higher returns. In essence, they are suggesting that a lottery ticket with a high payout and high chance of loss is a better investment than a well diversified fund that could return 6-7% per year on average with less risk. There is one main lever that drives how much you will accumulate over time, that is savings rate - the more you invest the higher the likelihood you will end with a higher amount. For every (pick your name) there are thousands which returned far less and some were completely wiped out. Ask yourself if you are willing to bet your kids college money on some "better investment". If you do want to do that - then no more than 1%, everything else I would put in the 529 plan.


4) we plan to have a will/ trust soon. I have life insurance up to 1m, and my spouse has life insurance through employer.
Unless your spouse has a pre-existing condition which would preclude her from a preferred rate, consider comparing the monthly employer cost to that sold by independent insurance brokers such as term4sale.com. As she ages, the employer cost will increase as the rates offered are based on group underwriting as opposed to single medical underwriting based on the health of the policyholder. Just something to keep in mind.

What do you suggest for the emergency fund-instead of savings account in bank -do CD? any suggestions.
If you need liquidity, a high yield savings account is preferable to a CD which is a term deposit and would subject you to penalties if you cashed out before the term was up, assuming you needed to access the cash before it matured.
Thanks again.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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