Did I Make a Mistake? Opinions Please.

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Grateful01
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Did I Make a Mistake? Opinions Please.

Post by Grateful01 »

Hello all,
I am asking for your assessment/opinion on what I have done.
My 401k passed the $1million mark for the first time in December and I have become quite fond of seeing that number when I view my account.
As of today the balance is $1,004,918.90. With the recent potential for destabilization and after reading about a potential stock market crash I let my anxiety get the best of me and I put it all in the Vanguard 2035 Target Date Fund last night; expense ratio 0.0375%.
I did it trying to be a little more diversified and a little more conservative going from about 29% bonds to about 31% in the TD fund. Now I am questioning whether I should have done that. It seems my returns will be reduced by a lot with this new plan. Now I’m thinking I should have just left it alone.

I changed it from the below allocation:
VG INST 500 IDX TR A
56.34%
VG IS TOT BD MKT IDX
29.05%
VG IS TL INTL STK MK
14.61%

Did I make a mistake? Should I have left it alone?
I also have a Roth IRA that houses the Vanguard 2035 fund with a couple of others funds with about $245,000 in it.
And I have $600+k outside of the market.

I’m a 56 yr old single F that is hoping for retirement within the next 5 years but I’m willing to work until age 65.
Thanks in advance for your response and look forward to hearing your opinions.
er999
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Re: Did I Make a Mistake? Opinions Please.

Post by er999 »

A 2035 target date fund sounds fine at 56. Just leave it in that fund for life and don’t change back in 6-12 months.
Mike Scott
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Re: Did I Make a Mistake? Opinions Please.

Post by Mike Scott »

I don't think you changed it enough to make any material difference. A 2% shift in AA is negligible.
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Grateful01
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Re: Did I Make a Mistake? Opinions Please.

Post by Grateful01 »

Thanks for your reply,
Do you think putting everything in the Vanguard 2035 TF in both the 401k and the Roth be a good idea?
Mike Scott
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Re: Did I Make a Mistake? Opinions Please.

Post by Mike Scott »

If that is the allocation you want to hold, it is great. There are many many worse choices.
Thesaints
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Re: Did I Make a Mistake? Opinions Please.

Post by Thesaints »

Grateful01 wrote: Mon Feb 03, 2025 12:07 am It seems my returns will be reduced by a lot with this new plan.
But you did what you did to reduce prospective losses. Wasn’t that your paramount consideration ?
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celia
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Re: Did I Make a Mistake? Opinions Please.

Post by celia »

Grateful01 wrote: Mon Feb 03, 2025 12:07 am With the recent potential for destabilization and after reading about a potential stock market crash . . .
This is always a possibility. This could have happened last year or could happen next year. Are you going to react any time there is a negative prediction by some guru?
Did I make a mistake? Should I have left it alone?
You won't know until you need to spend it. The "mistake" that I see is that your desired Asset Allocation should be spread over all your accounts instead of just one.

Along with that, there is Asset Location (aka Tax-Efficient Fund Placement) which helps guide where you should put each asset you own. For the best tax treatment, it is best to hold your stock funds in Roth (to maximize future Tax-free growth), put your desired bond funds in tax-deferred accounts (to minimize taxes when withdrawn), and international funds that pay foreign taxes and your remaining stock funds in taxable (to get a possible Foreign Tax Credit). By using a fund of funds instead, you won't be able to put each asset where it makes the most sense.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
Harmanic
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Re: Did I Make a Mistake? Opinions Please.

Post by Harmanic »

You won't know if it is a "mistake" until after the fact, perhaps years from now. However, the only real mistake is if you keep making changes based on market timing. Find something comfortable and stick with it.
The question isn't at what age I want to retire, it's at what income. | - George Foreman
Silverado
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Re: Did I Make a Mistake? Opinions Please.

Post by Silverado »

It doesn’t sound like you made much of change. I expect to see market swings (this week, next month, next year, next decade) that will make a couple percent move disappear.

The worry I have for you is that if we see a wild swing soon that you will make another move, likely in the wrong direction. Swapping seven figures a couple times will, in all likelihood, make it six figures again for a lot longer than if you simply stopped looking at the balance and focused on work and life.

Please, please, please come and ask questions here before making any sudden moves. Let us help calm you.

Oh, and I would keep Roth 100% equities.
dbr
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Re: Did I Make a Mistake? Opinions Please.

Post by dbr »

It was not a good idea because you didn't make enough of a change to be worth the trouble.

Is it a mistake to be in a TD fund rather than what you were in? No, on the face of it, except that probably the Roth should be all equities and you don't get that with a TD fund there. Also you need to attend to what the stock/bond allocation glide path of a TD fund is. Does that glide path suit your future intentions?
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goingup
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Post by goingup »

It's a very small change and not worth regretting. The advantage of a TDF is that you don't have to watch all the individual components bob around.
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retiredjg
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Post by retiredjg »

There is no difference between what you had and what you exchanged into. So the move was harmless in this case.

The concerning thing is that you made this move based on your fears about the market. Such moves are often disastrous. The fact that you made this move shows you are not comfortable with your chosen asset allocation (stock to bond ratio).

Perhaps you have the idea that you should be at a certain risk level when times are good and that you can change that risk level when times are bad. Seems reasonable, but investing just does not work like that. It is a very poor investment strategy.

Find a stock to bond ratio that you can live with comfortably during the good times and the bad times. I suspect it should have more bonds than 31% (which I consider aggressive for a 56 year old).

So yes, this was a mistake, but one that will not hurt you any. :happy The next time may be different.
notjackbogle
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Re: Did I Make a Mistake? Opinions Please.

Post by notjackbogle »

My advice is to calculate what you'd need in order to secure your retirement at 61. I'm similar to you in terms of age and time to retirement.

Will 30% of your portfolio in 5-year and 10-year TIPS, plus Social Security when you decide to take it, allow you to retire for sure at 61? If so, lock that in and you're done. Congratulations, you're on track to retire at 61 unless the US government goes bankrupt (it won't). VTTHX isn't a terrible choice, but it dropped almost 20% in 2022. TIPS held to maturity won't do that.

Once you reach a place where your retirement date doesn't depend on the market, you can chase returns. Much of my money is in growth funds. Sounds crazy but I know I can retire at my desired age even if the market crashes and doesn't recover for a decade. There is crazy political uncertainty right now but my stock holdings are for when I'm 70 or 75, not 60.

I'm aware that this isn't an answer to your question, but I think anyone your age, and that close to retirement, has other AA issues that need to be cleared up if they're making these types of moves because of things that might happen to the market. This isn't even "the market crashed and now I learned that I had the wrong asset allocation", it's concern about what might happen (you're even saying you'll stretch out your retirement date by four years if you have to). I encourage you to look into guarantees like TIPS first to see what they can do for you.
rockstar
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Re: Did I Make a Mistake? Opinions Please.

Post by rockstar »

Picking an allocation where you can stay the course matters.
Last edited by rockstar on Mon Feb 03, 2025 9:43 am, edited 1 time in total.
JonFund
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Re: Did I Make a Mistake? Opinions Please.

Post by JonFund »

One thing I've learned during my investment life is that often, the best action is no action. As John Bogle once said, "Don't just do something; stand there!"
3funder
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Re: Did I Make a Mistake? Opinions Please.

Post by 3funder »

Mike Scott wrote: Mon Feb 03, 2025 12:22 am I don't think you changed it enough to make any material difference. A 2% shift in AA is negligible.
This.
Global stocks, US bonds, and time.
tibbitts
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Re: Did I Make a Mistake? Opinions Please.

Post by tibbitts »

Grateful01 wrote: Mon Feb 03, 2025 12:30 am Thanks for your reply,
Do you think putting everything in the Vanguard 2035 TF in both the 401k and the Roth be a good idea?
No, due to the (tax) location issues mentioned above. In fact for that reason a target fund anywhere might well not be the best idea.
WeakOldGuy
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Re: Did I Make a Mistake? Opinions Please.

Post by WeakOldGuy »

Grateful01 wrote: Mon Feb 03, 2025 12:07 am
As of today the balance is $1,004,918.90. With the recent potential for destabilization and after reading about a potential stock market crash I let my anxiety get the best of me and I put it all in the Vanguard 2035 Target Date Fund last night; expense ratio 0.0375%.
I did it trying to be a little more diversified and a little more conservative going from about 29% bonds to about 31% in the TD fund. Now I am questioning whether I should have done that. It seems my returns will be reduced by a lot with this new plan. Now I’m thinking I should have just left it alone.
I think you did exactly the right thing, for you.

You said that your anxiety caused you to make a change in your investments. Now you are having some FOMO about your recent decision. Both of those things would indicate to me that you are a perfect candidate for a target date fund and the Vanguard TDF is an very low cost way to do it. Putting money into a TDF in your retirement account allows you an inexpensive way to have professionals keep your account rebalanced. Your only responsibility is to keep earning, saving, and getting on with your life.

I used a TDF in my 401k during my late working career. Since I was always contributing to it, it was always automatically being rebalanced.
On investing; I have lots of questions, many opinions, and little knowledge. A dangerous combination. Be warned.
miket29
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Re: Did I Make a Mistake? Opinions Please.

Post by miket29 »

Grateful01 wrote: Mon Feb 03, 2025 12:07 am With the recent potential for destabilization and after reading about a potential stock market crash I let my anxiety get the best of me...
Did I make a mistake? Should I have left it alone?
Yes I think you made a mistake. Not in asset choice; there is barely a difference from what you had before in bonds although the TF has a higher percentage int'l. The mistake was letting the decision be driven by worry. And the market hasn't even crashed yet! What are you going to do when the market is down by a third and your once million-dollar portfolio is sitting around $750K? When the financial press is filled with doom and gloom about how this is going to last for years and we haven't even come close to the bottom yet? Will you sell and lock in losses? You're at an age where you can't work for another 15-20 years if you blow up your retirement portfolio and do it right the next time.

There may be too much market risk for your preference in your portfolio, both the one before and the current choice. You could reduce this by holding both a TD and a bond fund, effectively upping your bond percentage above that of the TF. However I'm curious why you chose a 2035 TF if you'd like to retire in 2030? TF follow a glide slope to reduce market risk in early retirement years as shown in https://institutional.vanguard.com/inve ... -path.html Given your concern about market volatility it might be better to choose a TF that matches your hoped-for retirement year.
Grateful01 wrote: Do you think putting everything in the Vanguard 2035 TF in both the 401k and the Roth be a good idea?
No. Since a Roth in tax-free forever I suggest holding the assets with the highest potential for appreciation there, especially when the Roth is only a quarter the size of your 401K. That means holding only stocks in the Roth. See https://www.bogleheads.org/wiki/Tax-eff ... _placement
Navillus1968
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Re: Did I Make a Mistake? Opinions Please.

Post by Navillus1968 »

Grateful01 wrote: Mon Feb 03, 2025 12:07 am Did I make a mistake? Should I have left it alone?
I also have a Roth IRA that houses the Vanguard 2035 fund with a couple of others funds with about $245,000 in it.
And I have $600+k outside of the market.
You're fine, as others have said adjusting your stock/bond AA by 2% is nothing.
Most BH try to keep Roth accounts 100% stocks, so you might want to re-balance from the TDF in Roth into 100% VTI/VOO/etc.
In order to keep your overall AA the same, you could re-balance the 401k into the VG 2030 or 2025 TDF, each of which has more bonds than the 2035 version, about 39% & 50%, respectively.

When you say "$600+k outside of the market" do you mean cash/MMA in a taxable account or something else?
mortfree
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Re: Did I Make a Mistake? Opinions Please.

Post by mortfree »

Do you believe that a target date fund will not lose money?
Closer to 50 than 40
theorist
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Re: Did I Make a Mistake? Opinions Please.

Post by theorist »

Vanguard 2035 TDF is well diversified, cheap, and has diversified exposure to equities and bonds. It is an excellent holding for someone in your age group outside of taxable accounts. (It isn’t ideal for taxable accounts because of the interest from the bond funds, but as I understand it, your change was in a tax deferred 401k — so this isn’t an issue.)

I would just stick with this in the future, and stop checking on your account. It may go down to well below 1M again. History says over a long period, it will go back up and exceed the current balance. (History may be wrong, but you don’t have a better guide, and going all to TIPS or something seems a more radical move than you want to make.)
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Grateful01
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Re: Did I Make a Mistake? Opinions Please.

Post by Grateful01 »

WeakOldGuy wrote: Mon Feb 03, 2025 11:42 am
Grateful01 wrote: Mon Feb 03, 2025 12:07 am
As of today the balance is $1,004,918.90. With the recent potential for destabilization and after reading about a potential stock market crash I let my anxiety get the best of me and I put it all in the Vanguard 2035 Target Date Fund last night; expense ratio 0.0375%.
I did it trying to be a little more diversified and a little more conservative going from about 29% bonds to about 31% in the TD fund. Now I am questioning whether I should have done that. It seems my returns will be reduced by a lot with this new plan. Now I’m thinking I should have just left it alone.
I think you did exactly the right thing, for you.

You said that your anxiety caused you to make a change in your investments. Now you are having some FOMO about your recent decision. Both of those things would indicate to me that you are a perfect candidate for a target date fund and the Vanguard TDF is an very low cost way to do it. Putting money into a TDF in your retirement account allows you an inexpensive way to have professionals keep your account rebalanced. Your only responsibility is to keep earning, saving, and getting on with your life.

You hit the nail on the head. I never make changes to my portfolio but I let this recent uncertainty get to me. I made the change mostly because I was tired of worrying about if at age 56 whether I. needed to be more proactive, and not just do nothing as this is what I’ve done for many years. So, I made rushed decisions to put it all in the TD fund to just set it and forget with not worry about it. But after I did it I thought maybe I should have left it alone as it has been working for me thus far and getting good returns so I feared I may of made a mistake and messed up a good thing. However, after read comments here, I understand that there should not be that big of a difference in returns. From here on out I will go back to my hands off approach with the 401k since I know the TD fund will take care of it.
Now I will just have to sort my Roth.
Thanks for your response, I appreciate it.
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arcticpineapplecorp.
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Post by arcticpineapplecorp. »

Grateful01 wrote: Mon Feb 03, 2025 12:07 am I did it trying to be a little more diversified and a little more conservative going from about 29% bonds to about 31% in the TD fund.
generally for every 10% you add in bonds to your portfolio you reduce your return by 0.5% (half of 1 percent) long term.

You increased your bonds by just 2% so you may have lessened your returns by 0.10% (1 tenth of 1 percent).

So if you expected to earn 5% a year, that just reduced to 4.9% per year.

nothing to really worry about, right?
Last edited by arcticpineapplecorp. on Mon Feb 03, 2025 8:35 pm, edited 2 times in total.
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Grateful01
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Re: Did I Make a Mistake? Opinions Please.

Post by Grateful01 »

Navillus1968 wrote: Mon Feb 03, 2025 7:12 pm
Grateful01 wrote: Mon Feb 03, 2025 12:07 am Did I make a mistake? Should I have left it alone?
I also have a Roth IRA that houses the Vanguard 2035 fund with a couple of others funds with about $245,000 in it.
And I have $600+k outside of the market.
You're fine, as others have said adjusting your stock/bond AA by 2% is nothing.
Most BH try to keep Roth accounts 100% stocks, so you might want to re-balance from the TDF in Roth into 100% VTI/VOO/etc.
In order to keep your overall AA the same, you could re-balance the 401k into the VG 2030 or 2025 TDF, each of which has more bonds than the 2035 version, about 39% & 50%, respectively.

When you say "$600+k outside of the market" do you mean cash/MMA in a taxable account or something else?
Thank for the response.
I will sort my Roth and consider 100% VOO since the 401k has the total stock market.
The $600+ is in a high yield savings and CD.
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Grateful01
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Re: Did I Make a Mistake? Opinions Please.

Post by Grateful01 »

arcticpineapplecorp. wrote: Mon Feb 03, 2025 8:22 pm
Grateful01 wrote: Mon Feb 03, 2025 12:07 am I did it trying to be a little more diversified and a little more conservative going from about 29% bonds to about 31% in the TD fund.
generally for every 10% you add in bonds to your portfolio you reduce your return by 0.5% (half of 1 percent) long term.

You increased your bonds by just 2% so you may have lessened your returns by 0.10% (1 tenth of 1 percent).

So if you expected to earn 5% a year, that just reduced to 4.9% per year.

nothing to really worry about, right?
Right. Thanks so much for the breakdown!
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arcticpineapplecorp.
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Post by arcticpineapplecorp. »

Grateful01 wrote: Mon Feb 03, 2025 12:07 am My 401k passed the $1million mark for the first time in December and I have become quite fond of seeing that number when I view my account.
As of today the balance is $1,004,918.90. With the recent potential for destabilization and after reading about a potential stock market crash I let my anxiety get the best of me
Another thing to think about is you seem to want to have/hold $1 million in portfolio balance, but if you have a fund that holds 70% in stocks and stocks fall by 20% (bear market?) then you'd likely be looking at (around) a decline of 14% (.70 x .20). Sure you've got the bonds to maybe soften the blow, but only 30%. Even if bonds earn 5% a year that'd contribute 1.5% (.30 x .05) to offset that 14% decline which means your portfolio would still fall by 12.5%. Which means on a million dollar portfolio, you'd see a loss of around $125,000. Here's an example of that when stocks fell -20% in 2018. Your $1 million was only worth $916,000.

How would you feel about that?

What if the stock market fell 30% (like it did in 2020 between 2/23/20 and 3/23/20)? Your $1 million would only be worth $770,126.

not trying to scare you, just trying to say that 70% in stocks is aggressive and losses will show up in your portfolio even if you increase your bonds by 2%.

So be prepared, and mostly avoid the noise. Turn off the television. Let today's events be a lesson to not get sucked into the fray. The futures markets were down 600 points last night. And today by the end of the day, the market ended down an amount that on any other day when there wasn't such drama in the world, would not have garnered as much as a mention.

what do you think about that?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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Grateful01
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Re: Did I Make a Mistake? Opinions Please.

Post by Grateful01 »

mortfree wrote: Mon Feb 03, 2025 7:22 pm Do you believe that a target date fund will not lose money?
No, I know it can and will also fluctuate just like my last allocation. At my age I was tired of worrying about if I should be more protective of it and made a spontaneous decision to move it to the TD fund to reduce worry. After I did it I had a moment of regret thinking I may have messed up a good thing because it has been working for me thus far.
Thanks for your response.
WeakOldGuy
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Re: Did I Make a Mistake? Opinions Please.

Post by WeakOldGuy »

Grateful01 wrote: Mon Feb 03, 2025 8:15 pm From here on out I will go back to my hands off approach with the 401k since I know the TD fund will take care of it.
Now I will just have to sort my Roth.
Thanks for your response, I appreciate it.
Others have already recommended it, but I would also suggest that make your Roth 100% equities. Personally, I think that international holdings are an important part of a diversified portfolio. In my Roth, I have VTI and VXUS. Total US market and Total ex-US market. My target is to have international be ~35% of my total equity holdings. In your Roth, an easy way to do that is either by VT (a world market cap weighted ETF) or just buy whatever allocation you want in your Roth, and rebalance, or not, over time.

For example, say you have $100k in your Roth and you roughly want your international to be about 30% of your total portfolio. You could just buy $30k of VXUS and $70k of VTI and let it be. When you go to contribute more to the Roth, just rebalance via your contributions. In essence, it again is a set and forget account. Sure, the balance between VTI and VXUS will fluctuate depending on how the markets are doing, but likely not enough over the course of a year to worry about.
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Grateful01
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Re: Did I Make a Mistake? Opinions Please.

Post by Grateful01 »

WeakOldGuy wrote: Mon Feb 03, 2025 8:48 pm
Grateful01 wrote: Mon Feb 03, 2025 8:15 pm From here on out I will go back to my hands off approach with the 401k since I know the TD fund will take care of it.
Now I will just have to sort my Roth.
Thanks for your response, I appreciate it.
In your Roth, an easy way to do that is either by VT (a world market cap weighted ETF) or just buy whatever allocation you want in your Roth, and rebalance, or not, over time.

For example, say you have $100k in your Roth and you roughly want your international to be about 30% of your total portfolio. You could just buy $30k of VXUS and $70k of VTI and let it be. When you go to contribute more to the Roth, just rebalance via your contributions. In essence, it again is a set and forget account. Sure, the balance between VTI and VXUS will fluctuate depending on how the markets are doing, but likely not enough over the course of a year to worry about.
Thank you for this suggestion. I will buy VT and set it and forget.
Wannaretireearly
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Re: Did I Make a Mistake? Opinions Please.

Post by Wannaretireearly »

Good move in your 401k to a target date fund.
Once you get used to this fund, you may adjust again (potentially after doing a full review here)

I hold the 2025 fund to balance other parts of the port. Overall I’m 70/30 & happy at mid/late 40s. I would trend towards 60/40 at mid/late 50s (overall AA).
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anoop
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Re: Did I Make a Mistake? Opinions Please.

Post by anoop »

arcticpineapplecorp. wrote: Mon Feb 03, 2025 8:22 pm
Grateful01 wrote: Mon Feb 03, 2025 12:07 am I did it trying to be a little more diversified and a little more conservative going from about 29% bonds to about 31% in the TD fund.
generally for every 10% you add in bonds to your portfolio you reduce your return by 0.5% (half of 1 percent) long term.

You increased your bonds by just 2% so you may have lessened your returns by 0.10% (1 tenth of 1 percent).

So if you expected to earn 5% a year, that just reduced to 4.9% per year.

nothing to really worry about, right?
Here's a recent relevant x post on this.
https://x.com/PeterMallouk/status/1886054465569951903
Navillus1968
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Re: Did I Make a Mistake? Opinions Please.

Post by Navillus1968 »

Grateful01 wrote: Mon Feb 03, 2025 8:23 pm Thank for the response.
I will sort my Roth and consider 100% VOO since the 401k has the total stock market.
The $600+ is in a high yield savings and CD.
It turns out your overall asset allocation is pretty conservative, once the $600k of cash/CD is added to the 31% of your 401k TDF that is in bonds (~$310k).
With $910,000k in fixed income out of an overall portfolio of $1,845,000 (1,000,000 401k + 245,000 Roth + 600,000 HYSA/CD), your AA is about 51/49 stocks/fixed income.
If you're planning to retire in the next 5 years, that AA will work very nicely. I would use 60/40, but that's me- you need an AA that suits you. Plus, the higher returns from holding an additional 10% in stocks are not going to be that much higher, as noted by arcticpineapplecorp upthread.

One last note- you may be a candidate for holding cash needs in a tax-advantaged account. Read the wiki- https://www.bogleheads.org/wiki/Placing ... ed_account

Basically, the advantage comes from replacing interest income in taxable (taxed as OI) with qualified dividends from holding a stock MF/ETF (taxed as LTCG).
$600k of cash/CD in taxable could generate over $25k in interest annually at today's rates, which is $5,500 in taxes in the 22% bracket. $6,000 in the 24%.
$600k of VTI/VOO stocks will generate about $9,000 in QDI at 1.5% yield, taxed at 15%= $1,350 in taxes, a significant savings.

Read the fine print in the wiki closely before you decide to use this method, since you have to account for stock market dips/corrections of up to 50%.
cjcerny
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Re: Did I Make a Mistake? Opinions Please.

Post by cjcerny »

It was a mistake if you were planning on keeping a similar asset allocation in your 3 fund portfolio for the rest of your life. Likely not a mistake if you were planning on adding more bonds to your 3 fund portfolio as you age. Not a big mistake, though. Easy to fix if you want to.
miket29
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Joined: Tue Jun 20, 2017 9:07 pm

Re: Did I Make a Mistake? Opinions Please.

Post by miket29 »

Navillus1968 wrote: Tue Feb 04, 2025 10:50 am It turns out your overall asset allocation is pretty conservative, once the $600k of cash/CD is added to the 31% of your 401k TDF that is in bonds (~$310k).
With $910,000k in fixed income out of an overall portfolio of $1,845,000 (1,000,000 401k + 245,000 Roth + 600,000 HYSA/CD), your AA is about 51/49 stocks/fixed income. If you're planning to retire in the next 5 years, that AA will work very nicely.
Unfortunately it may not stay this way. Back in Oct the OP asked for advice in the thread viewtopic.php?p=8094679#p8094679 She wrote in part
Cash:
Total $636,000
CD = $600,000 5.15 APY matures in 6/2025
Saving = $36,000 APY 4.0%
(Plus a Checking and savings with about $4,500 I use for everyday and bill pay)
—From what I’ve been reading, I’m too heavy in cash. From what I’ve been figuring, if I stay heavy in cash, the interest I earn on it will be counted as unearned income and taxed accordingly. But, if I invest in a brokerage account it will be taxed at the lower capital gains rate if I can figure out how to keep my income low enough using the different accounts. If I can get over my fear of losing the money, I will open a brokerage account and put $400,000 in VTI and keep $250,000 or so dollars in a regular account in CDs and savings.
Nobody really pointed out that stocks and bonds/CDs differ in more than tax treatment, there are huge differences in risk. To move from a 20% or so ordinary-income tax rate to the 15% capital gains rate the OP takes the risk of losing $200K or more in a market drop. And given her worries about losses mentioned both in this thread and the other she may well sell and lock in a big permanent loss.

Nor is such a move with cash consistent with a stable portfolio asset allocation, by boosting risk at the wrong time. I suspect the OP may not actually have chosen an AA.

AA is discussed in the wiki https://www.bogleheads.org/wiki/Asset_allocation The OP has done so well saving over the years, it would be unfortunate if a few moves at the end cause her portfolio to lose hundreds of thousands of dollars and lead to a panic sell.
Last edited by miket29 on Tue Feb 04, 2025 7:38 pm, edited 2 times in total.
Navillus1968
Posts: 1136
Joined: Mon Feb 22, 2021 5:00 pm
Location: FL Tampa Bay

Re: Did I Make a Mistake? Opinions Please.

Post by Navillus1968 »

miket29 wrote: Tue Feb 04, 2025 11:36 am Nobody really pointed out that stocks and bonds/CDs differ in more than tax treatment, there are huge differences in risk. To move from a 20% or so ordinary-income tax rate to the 15% capital gains rate the OP takes the risk of losing $200K or more in a market drop.
Valid point, but I wasn't recommending that OP shift her AA toward stocks. I said OP should take a look at holding a good chunk of her cash in her 401k to avoid OI taxation on the interest & buy a stock ETF in taxable in the same amount. Her overall AA would be unchanged, but she'd save a decent amount on taxes due to lower QDI yield vs CD/MMA interest & favorable LTCG rates on the smaller amount of QDI.
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