Retirement prep - Please provide portfolio advice

[johnyboyd]

Hi all, First off, thanks for this wonderful finance resource. Learning so much !
As we prep for retirement, please review and provide portfolio address for retirement plans:

My wife (F54) and I (M59) live in California.
We're both currently employed.
2 adult kids, We're paying for their grad and undergrad education. Both will be complete by next summer. If younger one goes for grad school (in a couple of years), we'll provide tuition support as needed. We have enough funds for both kids in 529 plans.

I plan to retire at 62, my wife at 60.
Retirement expenses in current $ estimated to be $80k/year, outside of income taxes & capital gains.

Please check our portfolio and advice based on our plans.

Emergency funds: Three to six months of expenses (indicate if you have this, but it is generally not part of your asset allocation)

Yes. 1+ year expenses in Checking + Saving.

Debt: Indicate if you have any debt (credit card, school loans, car loans, mortgage) and the interest rate you are paying on each loan.

Mortgage of $2000. This will be paid off by year end. 3.75% interest rate.
No other debt currently.
Planning new vehicle purchase soon. (Current vehicles are 8 & 15 yrs old). Will pay mostly in cash.

Tax Filing Status: (Single, Married Filing Jointly, Married Filing Separately, Head of Household, Qualifying Widow/Widower with Dependent Children)
Married filing Jointly.

Tax Rate: 22% Federal, 9.5% State

State of Residence:
California

Age:
Him: 59, Her: 54

Desired Asset allocation: 50% stocks / 40% bonds
Desired International allocation: 10% of stocks
Please provide suggestions if above sounds fine?

Please provide an approximate size of your total portfolio:
6.25M. Plus some Oracle unvested RSUs (vests over next 3 yrs), and vested but unexercised NQSO.

Show us your current portfolio including all investment and retirement accounts (yourself and spouse or civil partner, if applicable) as it's important to look at the portfolio as a unified whole rather than look at accounts in isolation. Also include the available funds in your employer provided retirement plans.

Current retirement assets

Taxable
xx% cash (for investing – do not include emergency funds)
4% cash = $ 250,000 - in Fidelity FCASH; 2.32 % Interest. Thinking of a backdoor Roth to move 16k (8k + 8k) into a low-risk Vanguard ETF/Mutual fund. Also use some for new vehicle purchase this year and home improvements next year.

Brokerage - Vanguard
12% VBIAX - VANGUARD BALANCED INDEX ADMIRAL
.165% VEMAX - VANGUARD EMERGING MARKETS STOCK
2.4% VGSLX - VANGUARD REAL ESTATE INDEX ADMIRAL
2% VSGAX - VANGUARD SMALL CAP GROWTH INDEX
2.4% VTIAX - VANGUARD TOTAL INTL STOCK INDEX
.24% VOO - VANGUARD S&P 500 INDEX ETF
1.44% Brokered CDs in vanguard

Brokerage - ETrade
1% - AMAT
3.2% - AMZN
.2 % - C
.18% - CSCO
.26% - FDX
.5% - HD
.18% - INTC
.17% - MRK
- ORCL
.2 % - TGT
1.9% - TSLA


His 401k
Current = $390,000 at Fidelity.
Current contribution:
40% - FXAIX
40% - FSMAX
20% - LHYVX
Company match? Yes, upto 6%.

55% FXAIX - Fidelity 500 Index
31% FSMAX - Fidelity extended market index fund
14% LHYVX - Lord Abbett High Yield Fund

His Old 401k
Old 401k = $1,020,000 at Fidelity
44% - Fidelity® Contrafund
39% - Fidelity ® Growth Company Commingled Pool Class S
17% - DOXGX - DODGE & COX STOCK X

His Old 401k
Old 401k = $775,000 at ADP
100% - VTHRX - Vanguard Target Retirement 2030 Fund

Her 401k:
Current = $1,750,000 at Fidelity
Company match? Match contrbutions up to 6%
Current contribution - 100% Vanguard Target Retirement 2030.

57% - Vanguard Institutional 500 Index Trust
22% - FBAKX - Fidelity® Balanced Fund
6.8% - US Small-Mid Cap Value Stock Portfolio
3.75% - Vanguard Target Retirement 2030
3.6% - Artisan International
3.1% - DOXFX - Dodge & Cox International
2.7% - Emerging Markets Stock Portfolio
1.15% - Vanguard Institutional Total Bond Market

His Traditional IRA at Vanguard
None yet

His Roth IRA
None yet

Her Traditional IRA at Vanguard
None yet

Her Roth IRA
None yet


Questions:
1. Please comment on our portfolio allocation, and suggestions for rebalancing
2. Should've done Backdoor Roth before, but planning to start this year for a total of $16k. Since we don't have any IRAs/Roth, am thinking this should be simpler.
3. Planning on Mega backdoor Roth for subsequent few years until retirement. Since neither of us have after-tax Roth
4. Suggestions for income post-retirement and prior to RMDs. CD / Bond ladder?
5. Other suggestions?

[lakpr]

Being in California, the FIRST and MOST important suggestion I have is to NOT ever roll either of your 401(k) plans to an IRA. California is notorious for its extremely weak asset protection laws regarding the IRAs. 401(k) plans have the rock solid ERISA protections. Think of it as you are getting free umbrella insurance for $4 million (total balances in all of His and Her 401(k) plans) -- since you will need to purchase such insurance at least in that amount if you were to roll them to an IRA.

Second suggestion is to consolidate previous 401(k) plans into current plan, for both Him and Her, to make it easier for RMD calculations when the time comes. If you leave them as is, you are responsible for making sure you take RMD from each of those plans. A single $10k RMD is easier and simpler than $5k RMD + $3k RMD + $2k RMD from three different plans, for example. Since you plan to retire very soon, make sure you initiate these rollovers soon. You will very likely not able to make them once you do retire.

Why the Lord Abbett High Yield fund? High Yield is just a synonym for junk bond. Presumably you are invested in a bond fund for some perceived safety? If so junk bonds are the wrong place to be in. They crash when the stock market is crashing. You are also directing a substantial chunk of your balance into this fund. Too high and unnecessary risk in my opinion.

Last point I wanted to make: if you are in a 22% tax bracket now, with $4 million already in 401(k) plans, you are likely looking at 28% or more tax bracket in retirement. Why are you deferring taxes now at 22% Federal marginal rate now, only to be paying 28% or more tax rates later? Unless you have plans to move to a no-income-tax state in retirement? Consider switching to Roth 401(k) contributions for both Him and Her. Almost too late now for 2024, but plan for 2025 at least. Is there any flexibility in your plans to do In Plan Roth Conversions?

[Harmanic]

You need around $2 million to cover your expenses. If you collect social security at age 70, you can count on at least another $60k per year assuming you have been contributing close to the maximum for 30 years. That means you probably only need around $1.5 million.

If it were me, I would earmark the $1.5 for safe money and then have the rest in the market for discretionary spending and legacy. A TIPS ladder or bond ladder would work well with rates currently around 4.5%. Honestly, if you are happy with your current setup, I would not change it. You definitely do not need to reduce your risk as your current bond allocation and cash are enough to cover your future expenses.

[retired@50]

Tax Rate: 22% Federal, 9.5% State

Taxable
Brokerage - Vanguard
12% VBIAX - VANGUARD BALANCED INDEX ADMIRAL
.165% VEMAX - VANGUARD EMERGING MARKETS STOCK
2.4% VGSLX - VANGUARD REAL ESTATE INDEX ADMIRAL
2% VSGAX - VANGUARD SMALL CAP GROWTH INDEX
2.4% VTIAX - VANGUARD TOTAL INTL STOCK INDEX
.24% VOO - VANGUARD S&P 500 INDEX ETF
1.44% Brokered CDs in vanguard

Questions:
1. Please comment on our portfolio allocation, and suggestions for rebalancing
..
5. Other suggestions?

Welcome to the forum.

The blue funds above aren't very tax efficient and are probably causing you to pay unnecessary additional income taxes.
This has to do with the nature of the dividends and interest created by these funds.
The emerging markets fund has a low percentage of dividends that are "qualified" and thus taxed at the more favorable LTCG tax rate.
I suspect the same is true for the real estate index fund too.
The balanced index fund contains taxable bonds which create ordinary income taxed at your marginal rate.

I'd consider selling off the EM and RE funds and just adding that money to the Total International stock fund, or the S&P 500 fund.
Since the balanced index fund is a larger position, you can stop re-investing the dividends so you stop buying more shares, and then consider selling it over the course of two or more tax years.

For more on the ideas behind tax efficient fund placement, see the Boglehead wiki page on the topic.
https://www.bogleheads.org/wiki/Tax-eff ... _placement

Regards,

[johnyboyd]

Hi retired@50

Thanks much for the advice re: the VANGUARD funds.

In your suggestion of:
> Since the balanced index fund is a larger position, you can stop re-investing the dividends so you stop buying more shares,
> and then consider selling it over the course of two or more tax years.
Thoughts on where I'd put the proceeds - post tax & capital gains?
I've been loathe to touch that fund as it's been a faithful & stable growth mainstay for me over the past many many years.

Also, wouldn't it be more appropriate to sell it in my 'low-income + tax' initial-phase of retirement?

-john

[johnyboyd]

You need around $2 million to cover your expenses. If you collect social security at age 70, you can count on at least another $60k per year assuming you have been contributing close to the maximum for 30 years. That means you probably only need around $1.5 million.

If it were me, I would earmark the $1.5 for safe money and then have the rest in the market for discretionary spending and legacy. A TIPS ladder or bond ladder would work well with rates currently around 4.5%. Honestly, if you are happy with your current setup, I would not change it. You definitely do not need to reduce your risk as your current bond allocation and cash are enough to cover your future expenses.

Thanks for the advice.

The TIPS or bond ladder suggestion is for the $1.5m 'safe money', right?

-jon

[johnyboyd]

Being in California, the FIRST and MOST important suggestion I have is to NOT ever roll either of your 401(k) plans to an IRA. California is notorious for its extremely weak asset protection laws regarding the IRAs. 401(k) plans have the rock solid ERISA protections. Think of it as you are getting free umbrella insurance for $4 million (total balances in all of His and Her 401(k) plans) -- since you will need to purchase such insurance at least in that amount if you were to roll them to an IRA.

Second suggestion is to consolidate previous 401(k) plans into current plan, for both Him and Her, to make it easier for RMD calculations when the time comes. If you leave them as is, you are responsible for making sure you take RMD from each of those plans. A single $10k RMD is easier and simpler than $5k RMD + $3k RMD + $2k RMD from three different plans, for example. Since you plan to retire very soon, make sure you initiate these rollovers soon. You will very likely not able to make them once you do retire.

Why the Lord Abbett High Yield fund? High Yield is just a synonym for junk bond. Presumably you are invested in a bond fund for some perceived safety? If so junk bonds are the wrong place to be in. They crash when the stock market is crashing. You are also directing a substantial chunk of your balance into this fund. Too high and unnecessary risk in my opinion.

Last point I wanted to make: if you are in a 22% tax bracket now, with $4 million already in 401(k) plans, you are likely looking at 28% or more tax bracket in retirement. Why are you deferring taxes now at 22% Federal marginal rate now, only to be paying 28% or more tax rates later? Unless you have plans to move to a no-income-tax state in retirement? Consider switching to Roth 401(k) contributions for both Him and Her. Almost too late now for 2024, but plan for 2025 at least. Is there any flexibility in your plans to do In Plan Roth Conversions?

Thanks for the advice @lakpr.

What i've been suggested, and planning was to convert my 401ks to a Roth IRA during my immediate post-retirement/low income/low tax phase. So that further growths would be tax-free.
However, is your advice against 'rolling over either of your 401k plans to an IRA' referencing above post-retirement thinking? Curious, since that's counter to most what i've read or been told?

btw, I realized i made a mistake in my federal tax bracket - its in the mid 30s actually, not 22%. Hence deferring taxes for later.

My wife's plan does have In-plan Roth conversions. So she's thinking of the mega-backdoor Roth option starting 2025. I assume that's what you're implying in that question?

thx again
-jon

[retired@50]

Hi retired@50

Thanks much for the advice re: the VANGUARD funds.

In your suggestion of:
> Since the balanced index fund is a larger position, you can stop re-investing the dividends so you stop buying more shares,
> and then consider selling it over the course of two or more tax years.
Thoughts on where I'd put the proceeds - post tax & capital gains?
I've been loathe to touch that fund as it's been a faithful & stable growth mainstay for me over the past many many years.

Also, wouldn't it be more appropriate to sell it in my 'low-income + tax' initial-phase of retirement?

-john

I'd put the dividends from the balanced index fund in the international stock index fund or the S&P 500 fund.

If and/or when you decide to sell any of the balanced fund, you can consider the tax implications at that point. It might be wise to wait until you're in a low income phase of life.

Regards,

[Harmanic]

You need around $2 million to cover your expenses. If you collect social security at age 70, you can count on at least another $60k per year assuming you have been contributing close to the maximum for 30 years. That means you probably only need around $1.5 million.

If it were me, I would earmark the $1.5 for safe money and then have the rest in the market for discretionary spending and legacy. A TIPS ladder or bond ladder would work well with rates currently around 4.5%. Honestly, if you are happy with your current setup, I would not change it. You definitely do not need to reduce your risk as your current bond allocation and cash are enough to cover your future expenses.

Thanks for the advice.

The TIPS or bond ladder suggestion is for the $1.5m 'safe money', right?

-jon

Exactly. There are several ways to structure "safe money" and TIPS ladders are popular options.

[lakpr]

Thanks for the advice @lakpr.

What i've been suggested, and planning was to convert my 401ks to a Roth IRA during my immediate post-retirement/low income/low tax phase. So that further growths would be tax-free.
However, is your advice against 'rolling over either of your 401k plans to an IRA' referencing above post-retirement thinking? Curious, since that's counter to most what i've read or been told?

btw, I realized i made a mistake in my federal tax bracket - its in the mid 30s actually, not 22%. Hence deferring taxes for later.

My wife's plan does have In-plan Roth conversions. So she's thinking of the mega-backdoor Roth option starting 2025. I assume that's what you're implying in that question?

Being in California, yes I do think you should rethink about rolling over the 401(k) plan assets into an IRA. UNLESS you also want to move out of California during retirement to a state where IRA assets are protected at least a bit better than California.

For your reading pleasure: https://www.forbes.com/sites/jayadkisso ... bably-not/
Jay Adkisson is a GIANT among the asset protection lawyers in the country, you cannot be googling any sort of asset protection laws without encountering his name at the top of the search results.

If your tax bracket is in mid-30's, then absolutely take the tax break now. You will break even with the 32% tax bracket only if the Traditional assets in your retirement plans (combined altogether) are close to $10 million.

Thirdly, while after-tax contributions conversion to Roth within the 401(k) plan ARE a thing (Mega Backdoor Roth, I have one too), but what I exactly mean is that *SOME* plans also allow in-plan conversion of EMPLOYER contributions to Roth. They may restrict it to only retirees/ex-employees/over-55 age group. I think EMPLOYEE contributions will remain as Traditional, set in stone, once you make them.

[ruralavalon]

Does your current 401k plan permit Roth contributions?

If so then I suggest that you switch to Roth 401k contributions.

Which funds are offered in your current employer's 401k plan? Please give fund names, tickers and expense ratios.

If decent funds are offered in your current employer's 401k plan (which seems probable) then I suggest that you rollover the old 401k accounts into your current employer's 401k plan.

Does your employer's plan have the features necessary for The Elusive Mega Backdoor Roth?

1. whether your employer’s 401k/403b plan allows non-Roth after-tax contributions; and

2a. if it does, whether such contributions can be distributed while you are still working there (“in-service distribution”); or

2b. if the plan also offers a Roth 401k option, whether the non-Roth after-tax contributions can be rolled over to the Roth 401k part of the plan (“in-plan Roth rollover”)

[rs9876lg]

My only comment is regarding the presumed expenses. For somebody who is in over 30 tax bracket 80k retirement spending sounds very low. Is that number derived from rigorous analysis or from thin air?

[johnyboyd]

Fair comment.

It is based on an analysis that puts our mortgage and kids' education expenses to 0 post-retirement.
Both of us are by nature/background/experience, on the low-spend side.

But I do concur that something in the 120k/year range (excluding taxes) would be a reasonable scenario to consider, with adjusting down if needed.
We do think we're quite set for that as well.

thx
-john

[rs9876lg]

You have at least 7mm in retirement assets plus you will get substantial social security. Forget supporting 80k expenses! 240k with the help of social security is easily possible

I hope you already know that. If the above comes as a shock to you I will be surprised

[smitcat]

Fair comment.

It is based on an analysis that puts our mortgage and kids' education expenses to 0 post-retirement.
Both of us are by nature/background/experience, on the low-spend side.

But I do concur that something in the 120k/year range (excluding taxes) would be a reasonable scenario to consider, with adjusting down if needed.
We do think we're quite set for that as well.

thx
-john

You have done a great job saving up to this point. I have no idea if you desire higher spending in the future, have charitable goals, or want to optimize funds for heirs and/or gifting.
Based on your poosts so far I suggest one path is to find a respected single fee only financial advisor to put together a plan for your future. This will likely cost a few thousand dollars but give you some form of starting point to work from.
One alternative to that is to use the lower cost and less comprehensive services at Fidelity/Vanguard/Merrill/Schwab/etc.
Another alternative to that is to read a few hundred posts here on this site and learn to use a few retirement tools on the Bogle web pages.

[johnyboyd]

You have at least 7mm in retirement assets plus you will get substantial social security. Forget supporting 80k expenses! 240k with the help of social security is easily possible

I hope you already know that. If the above comes as a shock to you I will be surprised

Thanks!

I do realize it, especially with the current stock market growth.
I've been assuming about a 3.3 % withdrawal rate as a rough estimate for post-retirement calculations.

btw, am also assuming something like 75-80k tax to add on to the 80k expenses. That make sense?

[johnyboyd]

Fair comment.

It is based on an analysis that puts our mortgage and kids' education expenses to 0 post-retirement.
Both of us are by nature/background/experience, on the low-spend side.

But I do concur that something in the 120k/year range (excluding taxes) would be a reasonable scenario to consider, with adjusting down if needed.
We do think we're quite set for that as well.

thx
-john

You have done a great job saving up to this point. I have no idea if you desire higher spending in the future, have charitable goals, or want to optimize funds for heirs and/or gifting.
Based on your poosts so far I suggest one path is to find a respected single fee only financial advisor to put together a plan for your future. This will likely cost a few thousand dollars but give you some form of starting point to work from.
One alternative to that is to use the lower cost and less comprehensive services at Fidelity/Vanguard/Merrill/Schwab/etc.
Another alternative to that is to read a few hundred posts here on this site and learn to use a few retirement tools on the Bogle web pages.

Thanks!

Yes, I've talked with a few such fee-only advisors, not associated with the major brokerage services.

The last one I talked to is providing such a report, but is also 'pushing' a 'managed services' model wherein they'll do trades, exchanges etc, without necessarily informing me. I'm very hesitant to hand over that much control over my investments, so not at all planning that part.
They are also pushing a 'private credit/private equity fund option', apparerntly not available to retail investors and stating that their managed services option would be the only way for that.


-jon

[johnyboyd]

Does your current 401k plan permit Roth contributions?

If so then I suggest that you switch to Roth 401k contributions.

Which funds are offered in your current employer's 401k plan? Please give fund names, tickers and expense ratios.

If decent funds are offered in your current employer's 401k plan (which seems probable) then I suggest that you rollover the old 401k accounts into your current employer's 401k plan.

Does your employer's plan have the features necessary for The Elusive Mega Backdoor Roth?

1. whether your employer’s 401k/403b plan allows non-Roth after-tax contributions; and

2a. if it does, whether such contributions can be distributed while you are still working there (“in-service distribution”); or

2b. if the plan also offers a Roth 401k option, whether the non-Roth after-tax contributions can be rolled over to the Roth 401k part of the plan (“in-plan Roth rollover”)

Thanks.

(1) Both mine and wife's 401k (thru Fidelity) have a 'ROTH' option in the 'Contribution amount' and 'Catchup Contribution Amount' sections. We each contribute 15% to the Pre-tax section and 5% to the 'ROTH' section. That percentage hits the annual allowed 401k+catchup amount by year end.
Though now I'm not sure this Roth contrib is the right strategy as we are in quite a high (37%) federal tax bracket currently.
Instead we could use a 'backdoor Roth' strategy on an external IRA. Especially as we do NOT have an external IRA at present, so no tax complications if starting such a strategy.

(2) My wife's 401k plan also shows an 'After tax contribution' section which allows Roth 'In-plan' conversions. (My fidelity account does Not).
So thinking she could start contributing a much higher amount to this section of her 401k and roll-over those to the Roth section as a mega-backdoor?
I'm a bit confused about this particular roll-over is an automatic process, or requires a call to Fidelity each payperiod - which would be a real pain and not really practical ..

Thx for your comments.
-john

[lakpr]

(1) Both mine and wife's 401k (thru Fidelity) have a 'ROTH' option in the 'Contribution amount' and 'Catchup Contribution Amount' sections. We each contribute 15% to the Pre-tax section and 5% to the 'ROTH' section. That percentage hits the annual allowed 401k+catchup amount by year end.
Though now I'm not sure this Roth contrib is the right strategy as we are in quite a high (37%) federal tax bracket currently.

With someone in 37% tax bracket, be aware that the "catchup" contributions MUST BE made as Roth 401(k) contributions, per SECURE Act 2.0.

While the law mandated it to be effective from 2024 itself, due to severe push back from hundreds of 401(k) plans that requested time to implement the new rule, IRS indicated that they will implement this rule of enforcing Roth 401(k) catchup for high earners only starting from the tax year 2026. THAT SAID, at least my employer has informed us that they will enforce it for 2025 itself. The qualifying income is from the year prior, so 2024 income will determine whether you can make 2025 Traditional or Roth 401(k) contributions (for the catchup part). Similarly 2025 income will determine whether you can make 2026 Traditional or Roth 401(k) contributions for the catchup part.

Be sure to take that into your consideration. You may not really have a choice about that $7500 extra / $8000 extra catchup.

[rs9876lg]

You have at least 7mm in retirement assets plus you will get substantial social security. Forget supporting 80k expenses! 240k with the help of social security is easily possible

I hope you already know that. If the above comes as a shock to you I will be surprised

Thanks!

I do realize it, especially with the current stock market growth.
I've been assuming about a 3.3 % withdrawal rate as a rough estimate for post-retirement calculations.

btw, am also assuming something like 75-80k tax to add on to the 80k expenses. That make sense?

Not at all! Expenses and taxes are NOT related at least at your asset level. Fortunately your tax deferred percentage is quite low. We have similar numbers but our tax deferred are 70 percent! Your RMD will be quite low (comparatively speaking). I do not see 80k tax at all but much less

May be I am confused but 3.3% of 7m is 225k per year in perpetuity. And only fraction of that will be coming out of untaxed money. Your taxes would be shockingly low

[johnyboyd]

(1) Both mine and wife's 401k (thru Fidelity) have a 'ROTH' option in the 'Contribution amount' and 'Catchup Contribution Amount' sections. We each contribute 15% to the Pre-tax section and 5% to the 'ROTH' section. That percentage hits the annual allowed 401k+catchup amount by year end.
Though now I'm not sure this Roth contrib is the right strategy as we are in quite a high (37%) federal tax bracket currently.

With someone in 37% tax bracket, be aware that the "catchup" contributions MUST BE made as Roth 401(k) contributions, per SECURE Act 2.0.

While the law mandated it to be effective from 2024 itself, due to severe push back from hundreds of 401(k) plans that requested time to implement the new rule, IRS indicated that they will implement this rule of enforcing Roth 401(k) catchup for high earners only starting from the tax year 2026. THAT SAID, at least my employer has informed us that they will enforce it for 2025 itself. The qualifying income is from the year prior, so 2024 income will determine whether you can make 2025 Traditional or Roth 401(k) contributions (for the catchup part). Similarly 2025 income will determine whether you can make 2026 Traditional or Roth 401(k) contributions for the catchup part.

Be sure to take that into your consideration. You may not really have a choice about that $7500 extra / $8000 extra catchup.

Thanks for that information. Something definitely to keep in mind & check for next year.

-john

[smitcat]

You have done a great job saving up to this point. I have no idea if you desire higher spending in the future, have charitable goals, or want to optimize funds for heirs and/or gifting.
Based on your poosts so far I suggest one path is to find a respected single fee only financial advisor to put together a plan for your future. This will likely cost a few thousand dollars but give you some form of starting point to work from.
One alternative to that is to use the lower cost and less comprehensive services at Fidelity/Vanguard/Merrill/Schwab/etc.
Another alternative to that is to read a few hundred posts here on this site and learn to use a few retirement tools on the Bogle web pages.

Thanks!

Yes, I've talked with a few such fee-only advisors, not associated with the major brokerage services.

The last one I talked to is providing such a report, but is also 'pushing' a 'managed services' model wherein they'll do trades, exchanges etc, without necessarily informing me. I'm very hesitant to hand over that much control over my investments, so not at all planning that part.
They are also pushing a 'private credit/private equity fund option', apparerntly not available to retail investors and stating that their managed services option would be the only way for that.


-jon

NO!
The description you provide of this 'advisor' is not one that we would promote at all. Rather it is a formula that we would avoid at all times and at all costs.
The fee only advisor folks that we are speaking about do not manage any funds, steer any business, nor make money or get kickbacks for any part of the work they perform. They provide a plan only and no other products to confuse the motivations. You pay for that plan only from a fiduciary which is only motivated to provide the best plan based on your inputs and goals.

[ruralavalon]

Does your current 401k plan permit Roth contributions?

If so then I suggest that you switch to Roth 401k contributions.

Which funds are offered in your current employer's 401k plan? Please give fund names, tickers and expense ratios.

If decent funds are offered in your current employer's 401k plan (which seems probable) then I suggest that you rollover the old 401k accounts into your current employer's 401k plan.

Does your employer's plan have the features necessary for The Elusive Mega Backdoor Roth?

Thanks.

(1) Both mine and wife's 401k (thru Fidelity) have a 'ROTH' option in the 'Contribution amount' and 'Catchup Contribution Amount' sections. We each contribute 15% to the Pre-tax section and 5% to the 'ROTH' section. That percentage hits the annual allowed 401k+catchup amount by year end.
Though now I'm not sure this Roth contrib is the right strategy as we are in quite a high (37%) federal tax bracket currently.
Instead we could use a 'backdoor Roth' strategy on an external IRA. Especially as we do NOT have an external IRA at present, so no tax complications if starting such a strategy.

(2) My wife's 401k plan also shows an 'After tax contribution' section which allows Roth 'In-plan' conversions. (My fidelity account does Not).
So thinking she could start contributing a much higher amount to this section of her 401k and roll-over those to the Roth section as a mega-backdoor?
I'm a bit confused about this particular roll-over is an automatic process, or requires a call to Fidelity each payperiod - which would be a real pain and not really practical ..

Thx for your comments.
-john

What is your tax bracket, both federal and state?

It's probably going to be a good idea to begin making more in Roth contributions and /or use of the Mega Backdoor Roth in her employer's 401k plan.

Which funds are offered in your current employer's 401k plan? Please give fund names, tickers and expense ratios.

Which funds are offered in her current employer's 401k plan? Please give fund names, tickers and expense ratios.

Will either or both of you be eligible for a substantial pension?

About how much do the two of you currently have in traditional tax-deferred accounts?

About how much will the two of you be able to contribute annually to investing?

[johnyboyd]

Thanks!

Yes, I've talked with a few such fee-only advisors, not associated with the major brokerage services.

The last one I talked to is providing such a report, but is also 'pushing' a 'managed services' model wherein they'll do trades, exchanges etc, without necessarily informing me. I'm very hesitant to hand over that much control over my investments, so not at all planning that part.
They are also pushing a 'private credit/private equity fund option', apparerntly not available to retail investors and stating that their managed services option would be the only way for that.


-jon

NO!
The description you provide of this 'advisor' is not one that we would promote at all. Rather it is a formula that we would avoid at all times and at all costs.
The fee only advisor folks that we are speaking about do not manage any funds, steer any business, nor make money or get kickbacks for any part of the work they perform. They provide a plan only and no other products to confuse the motivations. You pay for that plan only from a fiduciary which is only motivated to provide the best plan based on your inputs and goals.

Thank you for the advice, and we out plan as well.
-john