Taxable account allocation

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Topic Author
Firewatcherdaughter
Posts: 21
Joined: Sat May 01, 2021 8:31 am

Taxable account allocation

Post by Firewatcherdaughter »

Hi,
I am new into investing in general and specifically into taxable account. I just opened a brokerage account with vanguard, I am 31 yo and have the following in my other plans
Roth IRA " first year doing it" 100% Vanguard Real estate Index fund admiral shares " I was to do real estate to diversify and read that since they are not very efficient they should be in a taxed advantaged account
403b: 100% into Vanguard retirement fund target 2055 " Currently it's about 90% stocks between US and International stocks and 10% bonds"

I am looking to keep a ratio around 90% stocks and 10% bonds. I am just having a hard time figuring out to balance it all out to keep that percentage across all accounts. I was reading that bonds are not very tax efficient and preferably should be held in 401k or 403b. but If I do 100% stocks in the brokerage account I would be screwing that allocation right?
How would you allocate the assets in the taxable account?
I appreciate all the help and advice.

Thanks,
User avatar
Duckie
Posts: 8236
Joined: Thu Mar 08, 2007 2:55 pm

Re: Taxable account allocation

Post by Duckie »

Firewatcherdaughter wrote: Fri May 14, 2021 9:08 pm I am looking to keep a ratio around 90% stocks and 10% bonds. I am just having a hard time figuring out to balance it all out to keep that percentage across all accounts. I was reading that bonds are not very tax efficient and preferably should be held in 401k or 403b. but If I do 100% stocks in the brokerage account I would be screwing that allocation right?
How would you allocate the assets in the taxable account?
You could use individual funds in your 403b instead of the target fund. Or you could choose a target fund with more than 10% bonds. I prefer the first option because it's easier to figure your percentages and rebalance accordingly.

Example #1 using individual funds in 403b:
  • Taxable -- 8%
    8% US stock index fund

    403b -- 85%
    45% US stock index fund
    30% International stock index fund
    10% US bond index fund

    Roth IRA -- 7%
    7% US stock index fund (REIT fund)
Example #2 using target fund in 403b:
  • Taxable -- 8%
    8% US stock index fund

    403b -- 85%
    85% Vanguard 2045 Fund
    VTIVX is currently 53% US stocks, 36% international stocks, and 11% bonds.
    **If the target fund is 85% of the entire portfolio and you want 10% of the entire portfolio to be bonds then the target fund needs to be close to 12% bonds. [10/85=0.11764]

    Roth IRA -- 7%
    7% US stock index fund (REIT fund)
lakpr
Posts: 7706
Joined: Fri Mar 18, 2011 9:59 am

Re: Taxable account allocation

Post by lakpr »

May I suggest an alternative? I assume you neither intend to, nor have the capacity to, invest $100k per year in taxable account (I am not including retirement plan investments).

If that assumption is correct, then you can have a 90:10 portfolio in taxable account too. You can buy I bonds up to $10k per year per SSN. If you intend to invest $15k per year in taxable and maintain a 90:10 portfolio, invest $13.5k in equities in a brokerage account and $1,500 in I bonds.

You do not need to pay tax on I bonds interest until you redeem them, or 30 years later. This will get you the tax deferral aspect of paying no taxes on bonds interest, which is why the standard recommendation is to place bonds in tax deferred accounts.

So, in your retirement plan go with target date fund that is 90:10 by default. Invest in Brokerage account 100% equities. Just open a new Treasury Direct account, and place all your bonds in there. Simple. One investment in each account. No need to complicate. Rebalancing in the future is as simple as buying additional I bonds, you have plenty of room before you hit the ceiling of $10k per year.

The interest paid on I bonds is state tax free. As a sweetener, for the next 6 months, I bonds are guaranteed to give you 3.54% interest rate.
Topic Author
Firewatcherdaughter
Posts: 21
Joined: Sat May 01, 2021 8:31 am

Re: Taxable account allocation

Post by Firewatcherdaughter »

Duckie wrote: Fri May 14, 2021 9:45 pm
Firewatcherdaughter wrote: Fri May 14, 2021 9:08 pm I am looking to keep a ratio around 90% stocks and 10% bonds. I am just having a hard time figuring out to balance it all out to keep that percentage across all accounts. I was reading that bonds are not very tax efficient and preferably should be held in 401k or 403b. but If I do 100% stocks in the brokerage account I would be screwing that allocation right?
How would you allocate the assets in the taxable account?
You could use individual funds in your 403b instead of the target fund. Or you could choose a target fund with more than 10% bonds. I prefer the first option because it's easier to figure your percentages and rebalance accordingly.

Example #1 using individual funds in 403b:
  • Taxable -- 8%
    8% US stock index fund

    403b -- 85%
    45% US stock index fund
    30% International stock index fund
    10% US bond index fund

    Roth IRA -- 7%
    7% US stock index fund (REIT fund)
Example #2 using target fund in 403b:
  • Taxable -- 8%
    8% US stock index fund

    403b -- 85%
    85% Vanguard 2045 Fund
    VTIVX is currently 53% US stocks, 36% international stocks, and 11% bonds.
    **If the target fund is 85% of the entire portfolio and you want 10% of the entire portfolio to be bonds then the target fund needs to be close to 12% bonds. [10/85=0.11764]

    Roth IRA -- 7%
    7% US stock index fund (REIT fund)
Thank you. I don't think my empolyer retirement plan has actually better options that the target fund which is why I went with it. so I am looking at example 2: I am a little confused What do you mean by 8% US stock index fond in taxable account. what is the rest of the account? and same for Roth.. I apologize if I am being too slow understanding this. sigh.
Topic Author
Firewatcherdaughter
Posts: 21
Joined: Sat May 01, 2021 8:31 am

Re: Taxable account allocation

Post by Firewatcherdaughter »

lakpr wrote: Sat May 15, 2021 8:41 am May I suggest an alternative? I assume you neither intend to, nor have the capacity to, invest $100k per year in taxable account (I am not including retirement plan investments).

If that assumption is correct, then you can have a 90:10 portfolio in taxable account too. You can buy I bonds up to $10k per year per SSN. If you intend to invest $15k per year in taxable and maintain a 90:10 portfolio, invest $13.5k in equities in a brokerage account and $1,500 in I bonds.

You do not need to pay tax on I bonds interest until you redeem them, or 30 years later. This will get you the tax deferral aspect of paying no taxes on bonds interest, which is why the standard recommendation is to place bonds in tax deferred accounts.

So, in your retirement plan go with target date fund that is 90:10 by default. Invest in Brokerage account 100% equities. Just open a new Treasury Direct account, and place all your bonds in there. Simple. One investment in each account. No need to complicate. Rebalancing in the future is as simple as buying additional I bonds, you have plenty of room before you hit the ceiling of $10k per year.

The interest paid on I bonds is state tax free. As a sweetener, for the next 6 months, I bonds are guaranteed to give you 3.54% interest rate.

Thank you I didn't think about that idea actually yes it might be simpler, Where would you open a treasury direct account? Vanguard?
and Yes i am definitely not looking to invest 100K in the taxable account and that's what confused me more too ..the fact that the minimun investment for the US total stock market is 3000, same for bonds. so if I wanted to allocate between both I have to at least get 3000 in bonds and much more in stocks to make it close to 90/10. Aka I have to place 3000 towards bonds and 27000 towards stocks.. but I am not looking to invest that much amount.
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climber2020
Posts: 1949
Joined: Sun Mar 25, 2012 8:06 pm

Re: Taxable account allocation

Post by climber2020 »

There is no reason to have each individual account allocated the same way. Put all your bonds in tax deferred space to get to your 10% and fill up the taxable account with stocks.

This makes rebalancing very easy when you only have to do it in one account.
User avatar
Duckie
Posts: 8236
Joined: Thu Mar 08, 2007 2:55 pm

Re: Taxable account allocation

Post by Duckie »

Firewatcherdaughter wrote: Sat May 15, 2021 8:46 pm I don't think my empolyer retirement plan has actually better options that the target fund which is why I went with it.
What are the options in your 403b? List the fund names, ticker symbols, and plan expense ratios.
I am looking at example 2: I am a little confused What do you mean by 8% US stock index fund in taxable account. what is the rest of the account?
I don't know how much you hold (or plan to hold) in each account so the above are just examples. I pretended that you have (or will have) 8% in taxable, 85% in your 403b, and 7% in your Roth IRA totaling 100% in your portfolio. What do you expect your numbers to be?
Helium
Posts: 10
Joined: Sat May 15, 2021 9:06 pm

Re: Taxable account allocation

Post by Helium »

What I do is put all my bonds in the 401k up to the allocation I want. So for you, you would fill up yours until it’s 10% of your portfolio. Then fill the rest of your 401k with equities, and since all of your bond allocation is in there now, you can do 100% equities in your taxable account.
Topic Author
Firewatcherdaughter
Posts: 21
Joined: Sat May 01, 2021 8:31 am

Re: Taxable account allocation

Post by Firewatcherdaughter »

Duckie wrote: Sat May 15, 2021 9:21 pm
Firewatcherdaughter wrote: Sat May 15, 2021 8:46 pm I don't think my empolyer retirement plan has actually better options that the target fund which is why I went with it.
What are the options in your 403b? List the fund names, ticker symbols, and plan expense ratios.
I am looking at example 2: I am a little confused What do you mean by 8% US stock index fund in taxable account. what is the rest of the account?
I don't know how much you hold (or plan to hold) in each account so the above are just examples. I pretended that you have (or will have) 8% in taxable, 85% in your 403b, and 7% in your Roth IRA totaling 100% in your portfolio. What do you expect your numbers to be?
here is what's available in the plan:
PIMCO Inflation Response MultiAsst Instl
DFA Emerging Markets Core Equity I
Fidelity Total Intl Index Instl Premium
MFS Instl International Equity
DFA US Targeted Value I
Meridian Growth Institutional
Fidelity Extended Market Index
Dodge & Cox Stock Fund
Fidelity 500 Index
T. Rowe Price Large Cap Growth
PIMCO Total Return Instl
State Street Aggregate Bond Index K
Great-West Guaranteed Interest Fund

and the rest are target retirement funds.

and I see what you mean now Ok. so I am going to max out the 403b to 19500, Roth IRA 6000, and I am honestly still not sure what exaclty will be in the taxable account but maybe around 15K,
Topic Author
Firewatcherdaughter
Posts: 21
Joined: Sat May 01, 2021 8:31 am

Re: Taxable account allocation

Post by Firewatcherdaughter »

climber2020 wrote: Sat May 15, 2021 9:10 pm There is no reason to have each individual account allocated the same way. Put all your bonds in tax deferred space to get to your 10% and fill up the taxable account with stocks.

This makes rebalancing very easy when you only have to do it in one account.
Thank you that makes sense. I am gonna try to put more bonds in the 403b,
lakpr
Posts: 7706
Joined: Fri Mar 18, 2011 9:59 am

Re: Taxable account allocation

Post by lakpr »

Firewatcherdaughter wrote: Sat May 15, 2021 8:54 pm
lakpr wrote: Sat May 15, 2021 8:41 am May I suggest an alternative? I assume you neither intend to, nor have the capacity to, invest $100k per year in taxable account (I am not including retirement plan investments).

If that assumption is correct, then you can have a 90:10 portfolio in taxable account too. You can buy I bonds up to $10k per year per SSN. If you intend to invest $15k per year in taxable and maintain a 90:10 portfolio, invest $13.5k in equities in a brokerage account and $1,500 in I bonds.

You do not need to pay tax on I bonds interest until you redeem them, or 30 years later. This will get you the tax deferral aspect of paying no taxes on bonds interest, which is why the standard recommendation is to place bonds in tax deferred accounts.

So, in your retirement plan go with target date fund that is 90:10 by default. Invest in Brokerage account 100% equities. Just open a new Treasury Direct account, and place all your bonds in there. Simple. One investment in each account. No need to complicate. Rebalancing in the future is as simple as buying additional I bonds, you have plenty of room before you hit the ceiling of $10k per year.

The interest paid on I bonds is state tax free. As a sweetener, for the next 6 months, I bonds are guaranteed to give you 3.54% interest rate.

Thank you I didn't think about that idea actually yes it might be simpler, Where would you open a treasury direct account? Vanguard?
and Yes i am definitely not looking to invest 100K in the taxable account and that's what confused me more too ..the fact that the minimun investment for the US total stock market is 3000, same for bonds. so if I wanted to allocate between both I have to at least get 3000 in bonds and much more in stocks to make it close to 90/10. Aka I have to place 3000 towards bonds and 27000 towards stocks.. but I am not looking to invest that much amount.
Treasury Direct is not a brokerage firm like Vanguard. It is the United States Treasury website where they sell I bonds and EE bonds directly to public

https://www.treasurydirect.gov/

You have to open an account just like you do with any other brokerage account. But a slight twist, hang on to the password for dear life, literally. Store it somewhere safe, may be in the cloud. I heard it is a great hassle to change password (no direct experience of course). You can buy I bonds as little denomination as $50.

Edit: I see that you are also considering the suggestion to out all bonds in the 403b plan. In that plan, the "State Street Aggregate Bond Index K" seems to be the best among the choices.
Last edited by lakpr on Sat May 15, 2021 10:07 pm, edited 1 time in total.
User avatar
Duckie
Posts: 8236
Joined: Thu Mar 08, 2007 2:55 pm

Re: Taxable account allocation

Post by Duckie »

Firewatcherdaughter wrote: Sat May 15, 2021 9:32 pm here is what's available in the plan:
You left out the expense ratios, but the following appear to be the best options:
  • Fidelity 500 Index -- Large caps, 80% of US stocks
  • Fidelity Extended Market Index -- Mid/small caps, 20% of US stocks
  • Fidelity Total Intl Index -- Complete international stocks
  • State Street Aggregate Bond Index K -- US bonds
You'll notice they all have "index" in the title.
I am going to max out the 403b to 19500, Roth IRA 6000, and I am honestly still not sure what exaclty will be in the taxable account but maybe around 15K.
Ok, those numbers change the percentages.

Example #1 using individual funds in 403b:
  • Taxable -- $15K -- 37%
    37% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)

    403b -- $19.5K -- 48%
    8% (FXAIX) Fidelity 500 Index Fund (0.015% ??)
    30% (FTIHX) Fidelity Total International Index Fund (0.06% ??)
    10% (SSFEX) State Street Aggregate Bond Index Fund Class K (0.025% ??)

    Roth IRA at Vanguard -- $6K -- 15%
    15% (VGSLX) Vanguard REIT Index Fund Admiral Shares (0.12%)
Example #2 using target funds in 403b:
  • Taxable -- $15K -- 37%
    37% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)

    403b -- $19.5K -- 48%
    48% (VFORX) Vanguard Target Retirement 2040 Fund (0.14% ??)
    VFORX is currently 49% US stocks, 33% international stocks, and 18% bonds.
    **If the target fund is 48% of the entire portfolio and you want 10% of the entire portfolio to be bonds then the target fund needs to be close to 21% bonds. [10/48=0.208]

    Roth IRA at Vanguard -- $6K -- 15%
    15% (VGSLX) Vanguard REIT Index Fund Admiral Shares (0.12%)
Topic Author
Firewatcherdaughter
Posts: 21
Joined: Sat May 01, 2021 8:31 am

Re: Taxable account allocation

Post by Firewatcherdaughter »

Duckie wrote: Sat May 15, 2021 10:04 pm
Firewatcherdaughter wrote: Sat May 15, 2021 9:32 pm here is what's available in the plan:
You left out the expense ratios, but the following appear to be the best options:
  • Fidelity 500 Index -- Large caps, 80% of US stocks
  • Fidelity Extended Market Index -- Mid/small caps, 20% of US stocks
  • Fidelity Total Intl Index -- Complete international stocks
  • State Street Aggregate Bond Index K -- US bonds
You'll notice they all have "index" in the title.
I am going to max out the 403b to 19500, Roth IRA 6000, and I am honestly still not sure what exaclty will be in the taxable account but maybe around 15K.
Ok, those numbers change the percentages.

Example #1 using individual funds in 403b:
  • Taxable -- $15K -- 37%
    37% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)

    403b -- $19.5K -- 48%
    8% (FXAIX) Fidelity 500 Index Fund (0.015% ??)
    30% (FTIHX) Fidelity Total International Index Fund (0.06% ??)
    10% (SSFEX) State Street Aggregate Bond Index Fund Class K (0.025% ??)

    Roth IRA at Vanguard -- $6K -- 15%
    15% (VGSLX) Vanguard REIT Index Fund Admiral Shares (0.12%)
Example #2 using target funds in 403b:
  • Taxable -- $15K -- 37%
    37% (VTSAX) Vanguard Total Stock Market Index Fund Admiral Shares (0.04%)

    403b -- $19.5K -- 48%
    48% (VFORX) Vanguard Target Retirement 2040 Fund (0.14% ??)
    VFORX is currently 49% US stocks, 33% international stocks, and 18% bonds.
    **If the target fund is 48% of the entire portfolio and you want 10% of the entire portfolio to be bonds then the target fund needs to be close to 21% bonds. [10/48=0.208]

    Roth IRA at Vanguard -- $6K -- 15%
    15% (VGSLX) Vanguard REIT Index Fund Admiral Shares (0.12%)

Ok. this is very helpful thank you very much. Now this leads me to these questions if you do not mind:
1. If I was to change the allocation I have in my 403b now to the suggested example 2, do I do that moving forward? " keep what I already have in the target fund 2055 but do this for future contribution" or do I just convert what I already have which is around 46K to the suggested allocation? would that result in paying taxes or commission fees?
2. This might be so dumb of a question but I can use any target fund " even if i am not retiring 2035?" cause someone old told me that those funds have something like an expiration date? " I don't know how informed that person was honestly, but now that I know more about finances than I did before it doesnt make sense. but I just want to make sure"

I realize I left out a very important piece: I am married and my wife has a 401k from old employer than she will roll over into her current new employer 401k soon " she just became eligible" so I am going to allocate the same in her 401K. she has the same 6000 in Roth IRA in REIT and the brokerage account is for both of us of course.
I am gonna actually post a seperate question on the suggested investement percentage and such :)
Last edited by Firewatcherdaughter on Sun May 16, 2021 10:01 am, edited 1 time in total.
Topic Author
Firewatcherdaughter
Posts: 21
Joined: Sat May 01, 2021 8:31 am

Re: Taxable account allocation

Post by Firewatcherdaughter »

lakpr wrote: Sat May 15, 2021 10:00 pm
Firewatcherdaughter wrote: Sat May 15, 2021 8:54 pm
lakpr wrote: Sat May 15, 2021 8:41 am May I suggest an alternative? I assume you neither intend to, nor have the capacity to, invest $100k per year in taxable account (I am not including retirement plan investments).

If that assumption is correct, then you can have a 90:10 portfolio in taxable account too. You can buy I bonds up to $10k per year per SSN. If you intend to invest $15k per year in taxable and maintain a 90:10 portfolio, invest $13.5k in equities in a brokerage account and $1,500 in I bonds.

You do not need to pay tax on I bonds interest until you redeem them, or 30 years later. This will get you the tax deferral aspect of paying no taxes on bonds interest, which is why the standard recommendation is to place bonds in tax deferred accounts.

So, in your retirement plan go with target date fund that is 90:10 by default. Invest in Brokerage account 100% equities. Just open a new Treasury Direct account, and place all your bonds in there. Simple. One investment in each account. No need to complicate. Rebalancing in the future is as simple as buying additional I bonds, you have plenty of room before you hit the ceiling of $10k per year.

The interest paid on I bonds is state tax free. As a sweetener, for the next 6 months, I bonds are guaranteed to give you 3.54% interest rate.

Thank you I didn't think about that idea actually yes it might be simpler, Where would you open a treasury direct account? Vanguard?
and Yes i am definitely not looking to invest 100K in the taxable account and that's what confused me more too ..the fact that the minimun investment for the US total stock market is 3000, same for bonds. so if I wanted to allocate between both I have to at least get 3000 in bonds and much more in stocks to make it close to 90/10. Aka I have to place 3000 towards bonds and 27000 towards stocks.. but I am not looking to invest that much amount.
Treasury Direct is not a brokerage firm like Vanguard. It is the United States Treasury website where they sell I bonds and EE bonds directly to public

https://www.treasurydirect.gov/

You have to open an account just like you do with any other brokerage account. But a slight twist, hang on to the password for dear life, literally. Store it somewhere safe, may be in the cloud. I heard it is a great hassle to change password (no direct experience of course). You can buy I bonds as little denomination as $50.

Edit: I see that you are also considering the suggestion to out all bonds in the 403b plan. In that plan, the "State Street Aggregate Bond Index K" seems to be the best among the choices.
thank you. I appreciate your input. yes I am looking at the different options I have. All i used to do before was just contribute through retirement plan at work so now that I have saved some cash I feel it's time to start investing and any ideas are recommendations are welcome :)
Topic Author
Firewatcherdaughter
Posts: 21
Joined: Sat May 01, 2021 8:31 am

Re: Taxable account allocation

Post by Firewatcherdaughter »

Helium wrote: Sat May 15, 2021 9:24 pm What I do is put all my bonds in the 401k up to the allocation I want. So for you, you would fill up yours until it’s 10% of your portfolio. Then fill the rest of your 401k with equities, and since all of your bond allocation is in there now, you can do 100% equities in your taxable account.

yes this seems to be the simplest way to do it, Thank you
Topic Author
Firewatcherdaughter
Posts: 21
Joined: Sat May 01, 2021 8:31 am

Investment percentage

Post by Firewatcherdaughter »

[Thread merged into here --admin LadyGeek]

Hi,
I am curious as to what percentage of your gross income would you place into investing. I am 31 yo and my wife is 32 yo. we have worked well on saving in general but didn't invest much I guess. We bought a house last year and wanted to make sure we have enough cash for any upcoming issues or improvement projects. we built an emergency fund .Now that we have ssaved good amount of cash and it's just sitting in the bank I wonder how much of this should go into investments? and how would you invest it?

Here is the current situation:
combined total gross income 342K
maxed out 401K for her and 403b for myself " I have total 48K and she has 29K"
Roth IRA 6000 for each of us.
Liabilities:
372K home mortgage with interest rate 2.25%
she has 21K left on student loans with interest rate 4.9%
She has about 6K left on her car loan
I have 20K left on my Subaru outback " purchased last year "
Total savings in the bank account 165K. If I take out 50K " as emergency fund" that would leave about 115K.

We just opened a brokerage account recently and still wondering how much of our monthly income " and current savings" should go into this? Would you put a lump sump into the brokerage account ? like 50K? or just go slow on investments and put those 115K into a high yield saving account " like Ally bank".
How about Real estate syndications? I have been hearing and reading a lot about this lately ,would you consider these opportunities with this amount of savings? or is it too high of a risk at this point.

finally I would like to add this : we currently do not have children but looking into IVF probably in the next year or 2. So I definitely want to leave some cushion for that " which is why we actually held on this amount of cash till now". I also might have to assist my parents overseas financially " I would factor about 6-10K per year"


based on our current investment in work retirement plans and roth IRA we are only investing 51K from our total gross income which I realize now might be low low.

Any ideas and suggestions are welcomed!
Thank you
WyomingFIRE
Posts: 92
Joined: Wed Sep 12, 2018 10:44 am

Re: Investment percentage

Post by WyomingFIRE »

deleted
Last edited by WyomingFIRE on Sun May 16, 2021 4:07 pm, edited 1 time in total.
bds3
Posts: 43
Joined: Mon Dec 19, 2016 8:02 pm

Re: Investment percentage

Post by bds3 »

What’s up with the quotation marks?
Marseille07
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Joined: Fri Nov 06, 2020 1:41 pm

Re: Investment percentage

Post by Marseille07 »

Personally I like to pay off loans first, so I wouldn't even think about investing (other than retirement accounts) until they're paid off.
User avatar
Wiggums
Posts: 3871
Joined: Thu Jan 31, 2019 8:02 am

Re: Investment percentage

Post by Wiggums »

We invested 40% except when kids were in all-day daycare.

We kept detailed records of our expenses and didn’t have car loans or student loans. I would consider eliminating the small loans before investing in taxable.
User avatar
ruralavalon
Posts: 21419
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Investment percentage

Post by ruralavalon »

Firewatcherdaughter wrote: Sun May 16, 2021 10:50 am Hi,
I am curious as to what percentage of your gross income would you place into investing. I am 31 yo and my wife is 32 yo. we have worked well on saving in general but didn't invest much I guess. We bought a house last year and wanted to make sure we have enough cash for any upcoming issues or improvement projects. we built an emergency fund .Now that we have ssaved good amount of cash and it's just sitting in the bank I wonder how much of this should go into investments? and how would you invest it?

Here is the current situation:
combined total gross income 342K
maxed out 401K for her and 403b for myself " I have total 48K and she has 29K"
Roth IRA 6000 for each of us.
Liabilities:
372K home mortgage with interest rate 2.25%
she has 21K left on student loans with interest rate 4.9%
She has about 6K left on her car loan
I have 20K left on my Subaru outback " purchased last year "
Total savings in the bank account 165K. If I take out 50K " as emergency fund" that would leave about 115K.

We just opened a brokerage account recently and still wondering how much of our monthly income " and current savings" should go into this? Would you put a lump sump into the brokerage account ? like 50K? or just go slow on investments and put those 115K into a high yield saving account " like Ally bank".
How about Real estate syndications? I have been hearing and reading a lot about this lately ,would you consider these opportunities with this amount of savings? or is it too high of a risk at this point.

finally I would like to add this : we currently do not have children but looking into IVF probably in the next year or 2. So I definitely want to leave some cushion for that " which is why we actually held on this amount of cash till now". I also might have to assist my parents overseas financially " I would factor about 6-10K per year"


based on our current investment in work retirement plans and roth IRA we are only investing 51K from our total gross income which I realize now might be low low.

Any ideas and suggestions are welcomed!
Thank you
After setting aside your emergency fund you have $115k to invest.

I suggest using $47k to zero out the student debt and the car loans.

Then invest the remaining $68k in a taxable brokerage account at a low cost fund provider like Vanguard, Fidelity or Schwab. Use very tax-efficient stock index funds. Wiki article, "Tax-efficient Fund Placement", link. Examples include Vanguard Total Stock Market Index Fund (VTSAX) and Vanguard Total International Stock Index Fund (VTIAX).

Where is the brokerage account that you opened recently?

I would invest that $68k all in a lump sum now, rather than string out the process. Historically lump sum investing has worked out better than investing in stages about 2/3 of the time. Vanguard (July 2012), "Dollar-cost averaging just means taking risk later", pdf link.

Wiki article "Dollar cost averaging", link. "Lump sum investing will always carry a higher expected return, because it immediately moves your funds from asset classes with lower expected returns to ones with higher expected returns. Note that higher expected returns do not guarantee that your actual returns will be higher. According to an investopedia article,[5] studies indicate that lump sum investing has produced higher returns 66% of the time."

I suggest not investing in real estate syndications. They are risk,and illiquid. If you want a real estate investment consider a fund like Vanguard Real Estate Index Fund Admiral Shares (VGSLX) in a tax-advantaged account.

On gross income of $342k, investing $51k annually is a savings rate of about 15%, which is probably too low for you. Will either or both of you you be eligible for both a significant pension and Social Security benefits?

If you don't already budget and track your spending then I suggest you start. You could try an app like YNAB or Mint, or use Quicken.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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Duckie
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Re: Taxable account allocation

Post by Duckie »

Firewatcherdaughter wrote: Sun May 16, 2021 9:55 am If I was to change the allocation I have in my 403b now to the suggested example 2, do I do that moving forward? " keep what I already have in the target fund 2055 but do this for future contribution" or do I just convert what I already have which is around 46K to the suggested allocation? would that result in paying taxes or commission fees?
You set up your future contributions to the new fund(s) and then sell the old fund and buy the new fund. There are no taxes for selling inside a tax-sheltered account and there shouldn't be commissions either.

I really, really recommend you go with Example #1. It's a lot easier to figure your current allocation and rebalance when using individual funds.
This might be so dumb of a question but I can use any target fund " even if i am not retiring 2035?" cause someone old told me that those funds have something like an expiration date?
You should pick a target fund by the AA inside, not the date in the title. However, to answer your specific question, you are allowed to choose any target fund you want. Although there is no "expiration date" usually a few years after a target fund hits its date it morphs into the target retirement income fund and stays that way. For example, VFORX is currently 18% bonds. It will gradually move to a higher bond allocation. Around 2047 it will become 70% bonds and stay that way.
I realize I left out a very important piece: I am married and my wife has a 401k from old employer than she will roll over into her current new employer 401k soon " she just became eligible" so I am going to allocate the same in her 401K.
Yeah, that's important. We look at ALL your retirement assets as one big portfolio. Leaving out your wife's accounts means the information I provided above is lacking. Consider using the Asking Portfolio Questions template to provide ALL your information.
she has the same 6000 in Roth IRA in REIT
You realize you guys are overweighting REITs, right?

What are the 403b plan expenses ratios for the following funds (not retail rates, your plan rates)?
  • Fidelity 500 Index
  • Fidelity Extended Market Index
  • Fidelity Total Intl Index
  • State Street Aggregate Bond Index
  • Vanguard Target Retirement 2040 Fund
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Firewatcherdaughter
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Re: Taxable account allocation

Post by Firewatcherdaughter »

Duckie wrote: Sun May 16, 2021 4:06 pm
Firewatcherdaughter wrote: Sun May 16, 2021 9:55 am If I was to change the allocation I have in my 403b now to the suggested example 2, do I do that moving forward? " keep what I already have in the target fund 2055 but do this for future contribution" or do I just convert what I already have which is around 46K to the suggested allocation? would that result in paying taxes or commission fees?
You set up your future contributions to the new fund(s) and then sell the old fund and buy the new fund. There are no taxes for selling inside a tax-sheltered account and there shouldn't be commissions either.

I really, really recommend you go with Example #1. It's a lot easier to figure your current allocation and rebalance when using individual funds.
This might be so dumb of a question but I can use any target fund " even if i am not retiring 2035?" cause someone old told me that those funds have something like an expiration date?
You should pick a target fund by the AA inside, not the date in the title. However, to answer your specific question, you are allowed to choose any target fund you want. Although there is no "expiration date" usually a few years after a target fund hits its date it morphs into the target retirement income fund and stays that way. For example, VFORX is currently 18% bonds. It will gradually move to a higher bond allocation. Around 2047 it will become 70% bonds and stay that way.
I realize I left out a very important piece: I am married and my wife has a 401k from old employer than she will roll over into her current new employer 401k soon " she just became eligible" so I am going to allocate the same in her 401K.
Yeah, that's important. We look at ALL your retirement assets as one big portfolio. Leaving out your wife's accounts means the information I provided above is lacking. Consider using the Asking Portfolio Questions template to provide ALL your information.
she has the same 6000 in Roth IRA in REIT
You realize you guys are overweighting REITs, right?

What are the 403b plan expenses ratios for the following funds (not retail rates, your plan rates)?
  • Fidelity 500 Index
  • Fidelity Extended Market Index
  • Fidelity Total Intl Index
  • State Street Aggregate Bond Index
  • Vanguard Target Retirement 2040 Fund
Ok. YEs I agree with you. it seems that example one might be easier for future rebalancing. I just want to make sure those individual funds are good choices as well. here are the expense ratios:

Fidelity 500 Index: 0.02%
Fidelity Extended Market Index 0.04%
Fidelity Total Intl Index 0.06%
State Street Aggregate Bond Index 0.22%
Vanguard Target Retirement 2040 Fund 0.09%

and Did we overdo the REIT :/? how much would be reasonable?
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Firewatcherdaughter
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Re: Investment percentage

Post by Firewatcherdaughter »

Marseille07 wrote: Sun May 16, 2021 11:22 am Personally I like to pay off loans first, so I wouldn't even think about investing (other than retirement accounts) until they're paid off.
I thought about this first yes. but I have to check and see if paying down the car loan would cut out the interest we are paying monthly. in other words I need to find out if the interest was already folded into the whole loan amount. cause otherwise I do not see why I would pay it early rather than investing that money. Please feel free to correct me if I am wrong or missing anything in here
The student loans should be paid off between June and December. She should be receiving a bonus that she will put all towards them.
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Firewatcherdaughter
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Re: Investment percentage

Post by Firewatcherdaughter »

Wiggums wrote: Sun May 16, 2021 11:28 am We invested 40% except when kids were in all-day daycare.

We kept detailed records of our expenses and didn’t have car loans or student loans. I would consider eliminating the small loans before investing in taxable.
Thank you!
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Firewatcherdaughter
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Re: Investment percentage

Post by Firewatcherdaughter »

ruralavalon wrote: Sun May 16, 2021 11:41 am
Firewatcherdaughter wrote: Sun May 16, 2021 10:50 am Hi,
I am curious as to what percentage of your gross income would you place into investing. I am 31 yo and my wife is 32 yo. we have worked well on saving in general but didn't invest much I guess. We bought a house last year and wanted to make sure we have enough cash for any upcoming issues or improvement projects. we built an emergency fund .Now that we have ssaved good amount of cash and it's just sitting in the bank I wonder how much of this should go into investments? and how would you invest it?

Here is the current situation:
combined total gross income 342K
maxed out 401K for her and 403b for myself " I have total 48K and she has 29K"
Roth IRA 6000 for each of us.
Liabilities:
372K home mortgage with interest rate 2.25%
she has 21K left on student loans with interest rate 4.9%
She has about 6K left on her car loan
I have 20K left on my Subaru outback " purchased last year "
Total savings in the bank account 165K. If I take out 50K " as emergency fund" that would leave about 115K.

We just opened a brokerage account recently and still wondering how much of our monthly income " and current savings" should go into this? Would you put a lump sump into the brokerage account ? like 50K? or just go slow on investments and put those 115K into a high yield saving account " like Ally bank".
How about Real estate syndications? I have been hearing and reading a lot about this lately ,would you consider these opportunities with this amount of savings? or is it too high of a risk at this point.

finally I would like to add this : we currently do not have children but looking into IVF probably in the next year or 2. So I definitely want to leave some cushion for that " which is why we actually held on this amount of cash till now". I also might have to assist my parents overseas financially " I would factor about 6-10K per year"


based on our current investment in work retirement plans and roth IRA we are only investing 51K from our total gross income which I realize now might be low low.

Any ideas and suggestions are welcomed!
Thank you
After setting aside your emergency fund you have $115k to invest.

I suggest using $47k to zero out the student debt and the car loans.

Then invest the remaining $68k in a taxable brokerage account at a low cost fund provider like Vanguard, Fidelity or Schwab. Use very tax-efficient stock index funds. Wiki article, "Tax-efficient Fund Placement", link. Examples include Vanguard Total Stock Market Index Fund (VTSAX) and Vanguard Total International Stock Index Fund (VTIAX).

Where is the brokerage account that you opened recently?

I would invest that $68k all in a lump sum now, rather than string out the process. Historically lump sum investing has worked out better than investing in stages about 2/3 of the time. Vanguard (July 2012), "Dollar-cost averaging just means taking risk later", pdf link.

Wiki article "Dollar cost averaging", link. "Lump sum investing will always carry a higher expected return, because it immediately moves your funds from asset classes with lower expected returns to ones with higher expected returns. Note that higher expected returns do not guarantee that your actual returns will be higher. According to an investopedia article,[5] studies indicate that lump sum investing has produced higher returns 66% of the time."

I suggest not investing in real estate syndications. They are risk,and illiquid. If you want a real estate investment consider a fund like Vanguard Real Estate Index Fund Admiral Shares (VGSLX) in a tax-advantaged account.

On gross income of $342k, investing $51k annually is a savings rate of about 15%, which is probably too low for you. Will either or both of you you be eligible for both a significant pension and Social Security benefits?

If you don't already budget and track your spending then I suggest you start. You could try an app like YNAB or Mint, or use Quicken.
Thank you for the suggestions. so both our Roth IRAs are REIT. I guess we should stop here when it comes to real estate?
the new brokerage account is with Vanguard.
I forgot to mention an important piece. 2020 was our first year with that gross income. prior to that it was actually 150K combined. and we both had a late start in our careers. We both save very well and very conscious about spending actually but I agree I am sure we can save more if we pay more attention to budgeting. so I just got Mint like you suggested. Thank you!! After we bought the house last year we had to do some work on it and actually spent about 50K on fixing and improving some things. we couldn't avoid those expenses :/ So I think we did Ok in regards to saving money.. mostly more than 15% .. I hope..
My wife would be would eligible for a pension plan in 8 years.
lazynovice
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Re: Investment percentage

Post by lazynovice »

Firewatcherdaughter wrote: Sun May 16, 2021 8:07 pm
Marseille07 wrote: Sun May 16, 2021 11:22 am Personally I like to pay off loans first, so I wouldn't even think about investing (other than retirement accounts) until they're paid off.
I thought about this first yes. but I have to check and see if paying down the car loan would cut out the interest we are paying monthly. in other words I need to find out if the interest was already folded into the whole loan amount. cause otherwise I do not see why I would pay it early rather than investing that money. Please feel free to correct me if I am wrong or missing anything in here
The student loans should be paid off between June and December. She should be receiving a bonus that she will put all towards them.
Why not pay them off now and then invest the bonus? Get the guaranteed 4.9% return.
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Duckie
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Re: Taxable account allocation

Post by Duckie »

Firewatcherdaughter wrote: Sun May 16, 2021 8:01 pm I just want to make sure those individual funds are good choices as well. here are the expense ratios:
The funds are great. The bond fund is a little expensive but still worth it.
Did we overdo the REIT :/? how much would be reasonable?
REITs are about 4% of a total US stock index fund. You have 15% of your entire portfolio, not just the US stock portion, in REITs. And that ignores your wife's accounts. A little overweighting is fine. You're way past "a little". I would skip the extra REITs until you have a lot more assets. Once you get to $100K then add some REITs.
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Firewatcherdaughter
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Re: Taxable account allocation

Post by Firewatcherdaughter »

Duckie wrote: Sun May 16, 2021 8:44 pm
Firewatcherdaughter wrote: Sun May 16, 2021 8:01 pm I just want to make sure those individual funds are good choices as well. here are the expense ratios:
The funds are great. The bond fund is a little expensive but still worth it.
Did we overdo the REIT :/? how much would be reasonable?
REITs are about 4% of a total US stock index fund. You have 15% of your entire portfolio, not just the US stock portion, in REITs. And that ignores your wife's accounts. A little overweighting is fine. You're way past "a little". I would skip the extra REITs until you have a lot more assets. Once you get to $100K then add some REITs.
Thank you. that was going to be my question actually. so you consider the REIT portion as a stock portion?
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Duckie
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Re: Taxable account allocation

Post by Duckie »

Firewatcherdaughter wrote: Mon May 17, 2021 10:14 am so you consider the REIT portion as a stock portion?
Yes. REITs are stocks.
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Re: Taxable account allocation

Post by LadyGeek »

Firewatcherdaughter - In order to provide appropriate advice, it's best to keep all the information in one spot. I merged your update back into the original thread. This allows us to see what was discussed before. You are asking about investment percentages, but answers should be in the context of your own situation, i.e. how to manage your portfolio.

If you have any questions, ask them here. If you didn't understand something, please let us know and we'll try again.

(Thanks to the member who reported the post and explained what's wrong. The member also notes that lakpr is giving very good advice.)
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Firewatcherdaughter
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Re: Taxable account allocation

Post by Firewatcherdaughter »

LadyGeek wrote: Mon May 17, 2021 6:47 pm Firewatcherdaughter - In order to provide appropriate advice, it's best to keep all the information in one spot. I merged your update back into the original thread. This allows us to see what was discussed before. You are asking about investment percentages, but answers should be in the context of your own situation, i.e. how to manage your portfolio.

If you have any questions, ask them here. If you didn't understand something, please let us know and we'll try again.

(Thanks to the member who reported the post and explained what's wrong. The member also notes that lakpr is giving very good advice.)
that's great. Thank you!
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Firewatcherdaughter
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Re: Taxable account allocation

Post by Firewatcherdaughter »

Duckie wrote: Mon May 17, 2021 3:40 pm
Firewatcherdaughter wrote: Mon May 17, 2021 10:14 am so you consider the REIT portion as a stock portion?
Yes. REITs are stocks.
Gotcha. Thank you!
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Firewatcherdaughter
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Re: Investment percentage

Post by Firewatcherdaughter »

lazynovice wrote: Sun May 16, 2021 8:25 pm
Firewatcherdaughter wrote: Sun May 16, 2021 8:07 pm
Marseille07 wrote: Sun May 16, 2021 11:22 am Personally I like to pay off loans first, so I wouldn't even think about investing (other than retirement accounts) until they're paid off.
I thought about this first yes. but I have to check and see if paying down the car loan would cut out the interest we are paying monthly. in other words I need to find out if the interest was already folded into the whole loan amount. cause otherwise I do not see why I would pay it early rather than investing that money. Please feel free to correct me if I am wrong or missing anything in here
The student loans should be paid off between June and December. She should be receiving a bonus that she will put all towards them.
Why not pay them off now and then invest the bonus? Get the guaranteed 4.9% return.
I guess we can do that as well. Since it turned out the interest amount was already folded in the whole loan amount. paying off won't make a difference but definitely paying the student loans would. Thank you!
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