Critique my IPS

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lazyinvestor30
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Joined: Mon Apr 12, 2021 7:58 am

Critique my IPS

Post by lazyinvestor30 »

Hello everyone

Its been a great few months in this forum and i have been learning a lot and based on reading a bit, I have created the following IPS. Can you take a look and let me know anything else I should add. Of course I am looking for something that is good enough, instead of it being perfect.

Also we are in early 30's in VHCOL area...

Save at least 25% of income every year
Emergency funds in HYSA - 4 months of expenses
Max Out His 401k, His Roth, Her 401k, Her Roth
Desired Stock & Bond Allocation - Vanguard 2055 retirement fund till it reaches 60% Stocks. Then continue with 60/40
Desired International Allocation - 30%
Place all bonds in 401k till practically possible

Rebalance under following conditions
1. Withdrew greater than 10% of Assets in Taxable
2. Market moving events >15% loss in a month
3. June of every calendar year

Invest excess funds every 3 months - Jan, April, July, October as per investment priorities order
Investment Priorities - Emergency --> 401k --> Roth --> 529 --> Taxable
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retired@50
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Re: Critique my IPS

Post by retired@50 »

It might matter that the Vanguard 2055 fund probably holds 40% of the equity in international.

So, if you're determined to hold 30%, you might need to adjust.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Topic Author
lazyinvestor30
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Re: Critique my IPS

Post by lazyinvestor30 »

retired@50 wrote: Mon Jun 21, 2021 8:30 pm It might matter that the Vanguard 2055 fund probably holds 40% of the equity in international.

So, if you're determined to hold 30%, you might need to adjust.

Regards,
Yes, the Vanguard 2055 is only for the Equity / Bond allocation calculation. Planning to hold 30% international.
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luminous
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Re: Critique my IPS

Post by luminous »

A good start! Your IPS doesn't mention what your ultimate savings goal for the 529 is. For example. I saved in my kids' 529s until we reached 60% of the cost of state university. Then it has grown from there without more contributions. You may want to set a floor and ceiling for contributions.
67/12/21 US stock/international stock/bonds. Bonds capped at 10x annual spending. Semi-retired as of 2022.
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lazyinvestor30
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Re: Critique my IPS

Post by lazyinvestor30 »

luminous wrote: Mon Jun 21, 2021 8:47 pm A good start! Your IPS doesn't mention what your ultimate savings goal for the 529 is. For example. I saved in my kids' 529s until we reached 60% of the cost of state university. Then it has grown from there without more contributions. You may want to set a floor and ceiling for contributions.
I am not actually sure what it should be. My plan for the next few years (say 5) is to contribute for the state tax deduction limit and leave it at that for a few years
wetgear
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Re: Critique my IPS

Post by wetgear »

lazyinvestor30 wrote: Mon Jun 21, 2021 8:25 pm Desired Stock & Bond Allocation - Vanguard 2055 retirement fund till it reaches 60% Stocks. Then continue with 60/40
Do you mean you are going to mimic this funds AA? Holding it in all accounts might not be the most tax efficient way to hold the AA.
lazyinvestor30 wrote: Mon Jun 21, 2021 8:25 pm Rebalance under following conditions
1. Withdrew greater than 10% of Assets in Taxable
2. Market moving events >15% loss in a month


1) Why this criteria? If withdrawing causes your portfolio AA to be out of wack then re-balance per the other criteria, if it doesn't then it's too minor to worry about. Also 10% of taxable will be a varying percentage of your total portfolio which is what matters.
2) The month criteria seems too complicated. Is it a rolling 30 days or are you going to check on regular days each month? You also only account for losses, what about gains? Why not just set a threshold like +/- 15% from target allocation to trigger a re-balance so you don't have to keep track if it has been >32 days to see if it would trigger.

Everything else looks good though
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luminous
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Re: Critique my IPS

Post by luminous »

lazyinvestor30 wrote: Mon Jun 21, 2021 8:54 pm
luminous wrote: Mon Jun 21, 2021 8:47 pm A good start! Your IPS doesn't mention what your ultimate savings goal for the 529 is. For example. I saved in my kids' 529s until we reached 60% of the cost of state university. Then it has grown from there without more contributions. You may want to set a floor and ceiling for contributions.
I am not actually sure what it should be. My plan for the next few years (say 5) is to contribute for the state tax deduction limit and leave it at that for a few years
Ah, that's a good plan. I don't live in a state with a tax deduction so I didn't have that helpful guidepost.
67/12/21 US stock/international stock/bonds. Bonds capped at 10x annual spending. Semi-retired as of 2022.
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lazyinvestor30
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Re: Critique my IPS

Post by lazyinvestor30 »

wetgear wrote: Mon Jun 21, 2021 9:24 pm
lazyinvestor30 wrote: Mon Jun 21, 2021 8:25 pm Desired Stock & Bond Allocation - Vanguard 2055 retirement fund till it reaches 60% Stocks. Then continue with 60/40
Do you mean you are going to mimic this funds AA? Holding it in all accounts might not be the most tax efficient way to hold the AA.
lazyinvestor30 wrote: Mon Jun 21, 2021 8:25 pm Rebalance under following conditions
1. Withdrew greater than 10% of Assets in Taxable
2. Market moving events >15% loss in a month


1) Why this criteria? If withdrawing causes your portfolio AA to be out of wack then re-balance per the other criteria, if it doesn't then it's too minor to worry about. Also 10% of taxable will be a varying percentage of your total portfolio which is what matters.
2) The month criteria seems too complicated. Is it a rolling 30 days or are you going to check on regular days each month? You also only account for losses, what about gains? Why not just set a threshold like +/- 15% from target allocation to trigger a re-balance so you don't have to keep track if it has been >32 days to see if it would trigger.

Everything else looks good though
The overall asset allocation will be based on target fund. But will hold bonds in 401k and stocks in Roth and taxable

Rebalance condition- I see it now that’s too complicated. Just having a criteria with a threshold will be much more simpler I agree. Thanks for the suggestions
pkcrafter
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Re: Critique my IPS

Post by pkcrafter »

Rebalance under following conditions
1. Withdrew greater than 10% of Assets in Taxable
This doesn't sound right. Are you sometimes withdrawing assets marked for retirement? If you have money in a taxable account for retirement, it should not be withdrawn, it needs to be marked for retirement. If it's for other purposes or discretionary, it should not be counted as retirement money.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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lazyinvestor30
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Re: Critique my IPS

Post by lazyinvestor30 »

pkcrafter wrote: Tue Jun 22, 2021 8:55 am
Rebalance under following conditions
1. Withdrew greater than 10% of Assets in Taxable
This doesn't sound right. Are you sometimes withdrawing assets marked for retirement? If you have money in a taxable account for retirement, it should not be withdrawn, it needs to be marked for retirement. If it's for other purposes or discretionary, it should not be counted as retirement money.

Paul
I am considering all money outside of the emergency funds and regular cash flow as one big pile. Once I have a better idea and time frame for using that money (say a car or home improvement needs) I can earmark it for that purpose at that time
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grabiner
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Re: Critique my IPS

Post by grabiner »

pkcrafter wrote: Tue Jun 22, 2021 8:55 am
Rebalance under following conditions
1. Withdrew greater than 10% of Assets in Taxable
This doesn't sound right. Are you sometimes withdrawing assets marked for retirement? If you have money in a taxable account for retirement, it should not be withdrawn, it needs to be marked for retirement. If it's for other purposes or discretionary, it should not be counted as retirement money.
Plans change. I viewed everything as one portfolio until I decided to buy a home in 2013. At that point, I knew I would sell stock to make the home down payment, and adjust my allocation accordingly. (I didn't actually sell any stock until I signed the contract to buy the specific home, as I didn't want to take a larger capital gain than necessary; I adjusted my overall allocation by switching between bonds and stock in my employer plan.)
Wiki David Grabiner
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