First post: Getting married and reviewing portfolio. Advice welcome.

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Topic Author
transit
Posts: 6
Joined: Tue Jul 27, 2021 11:22 am

First post: Getting married and reviewing portfolio. Advice welcome.

Post by transit »

Hey all, first time caller.

I'm getting married in a few weeks and am taking an overdue hard look at my retirement accounts and setting up a financial plan. I've outlined my situation below, with specific questions at bottom. I would very much appreciate any feedback or suggestions you have.

I'm 29 and my income is $100k. I've contributed to a 401(k) for 7 years, but for most of that time I contributed only enough to max my employer match (8%+4% match). I recently received a nice pay bump and upped my contribution to 18% so that my take-home pay stays the same, but because I didn't do this years ago I've ended up with a decent chunk of change (~$50k) in my checking account that I need to find a home for. I started by opening a Roth IRA earlier this year and maxing out contributions for 2020 and 2021.

Here is how my accounts look at the moment:

401(k)
$65,000
  • 85% VFIAX (Vanguard 500 Index Fund Admiral Shares)
  • 15% VAIPX (Vanguard Inflation-Protected Securities Fund Admiral Shares)
These funds have, by far, the lowest ERs of any available to me at .04% and .1% respectively. I can also contribute to two Principal funds (PSPIX and PMAPX, one smallcap and one midcap) at .16%. Everything else is .5% or higher.

Roth IRA
$13,500
  • 70% SWTSX (Schwab total U.S.)
  • 30% SWISX (Schwab total international)
Taxable Brokerage
$10,000
  • 60% SWTSX
  • 30% VTI
  • 10% ARKK
Checking
$50,000

My wife-to-be has about $13,000 in a traditional IRA, invested similarly to my Roth, and about an equal amount in her 401(k). The latter is entirely in a Vanguard target date fund.


Questions

1. The breakdown across both retirement accounts is about 87% stocks, 13% bonds (VAIPX only). I am comfortable with this overall split for the time being, but I'm wondering if my stocks are too heavily weighted in S&P500. Stock holdings break down to 80% S&P500, 14% total U.S. market, 6% total international market.

2. Is it worth diversifying my bond holdings via the IRA? My understanding of the bond market is…not great, so I have a difficult time understanding whether VAIPX is a decent option here or whether it's worth holding something like SWAGX as well.

3. For the 50k in checking, I'd like to keep about 15k as cash for emergencies, and 6k will go to the IRA in January, but the remaining ~30k is just sitting. I don't want to max my 401(k) and live off of it, because we'll likely purchase a home in the next 5 years and this will likely be the basis of a downpayment, but I also don't want it to languish in the interim. I'm thinking of tossing it in the taxable brokerage account in a 60/40 or 50/50 stock/bond split. Thoughts?

Thanks for reading.
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retired@50
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Re: First post: Getting married and reviewing portfolio. Advice welcome.

Post by retired@50 »

transit wrote: Tue Jul 27, 2021 12:48 pm Questions

1. The breakdown across both retirement accounts is about 87% stocks, 13% bonds (VAIPX only). I am comfortable with this overall split for the time being, but I'm wondering if my stocks are too heavily weighted in S&P500. Stock holdings break down to 80% S&P500, 14% total U.S. market, 6% total international market.

2. Is it worth diversifying my bond holdings via the IRA? My understanding of the bond market is…not great, so I have a difficult time understanding whether VAIPX is a decent option here or whether it's worth holding something like SWAGX as well.

3. For the 50k in checking, I'd like to keep about 15k as cash for emergencies, and 6k will go to the IRA in January, but the remaining ~30k is just sitting. I don't want to max my 401(k) and live off of it, because we'll likely purchase a home in the next 5 years and this will likely be the basis of a downpayment, but I also don't want it to languish in the interim. I'm thinking of tossing it in the taxable brokerage account in a 60/40 or 50/50 stock/bond split. Thoughts?

Thanks for reading.
Welcome to the forum. :happy

About q1,
The total market and the S&P 500 are so similar over the long term, that it's not really an issue. If your 401k plan doesn't have a good international stock index fund, then you could use the Roth or taxable account to hold some more international stock index if you wish.

About q2,
It might be nice to see if you have a Stable Value Fund in the 401k plan. Sometimes they can be a solid alternative to a regular bond fund. They are really an insurance product (that behaves like a bank account with limited withdrawal rules), that will have a guaranteed interest rate for some period of time, subject to changes, but you could do some reading in your plan literature.
Also, see this link: https://www.bogleheads.org/wiki/Stable_value_fund

About q3,
Saving up for several years for a house is tough right now. Saver's are being punished by the super low rates offered, and the inflation in prices, especially housing. If you're willing to put the money at risk, then putting it into the market is certainly an option. Many folks are looking for something that doesn't exist though, and that's a 3 or 4% return without risk. If you're okay with the idea that you could lose 1/2 your down payment money by a bad week in the market, then go ahead and proceed with caution. Maybe something like 20% VTI / 80% intermediate treasuries - adjusted to your preference for risk.

Finally, the SWTSX & VTI in the taxable account is a little puzzling. They cover the same ground, so I don't see the benefit of owning two total market funds.

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
transit
Posts: 6
Joined: Tue Jul 27, 2021 11:22 am

Re: First post: Getting married and reviewing portfolio. Advice welcome.

Post by transit »

Thanks for the response!
About q1,
The total market and the S&P 500 are so similar over the long term, that it's not really an issue. If your 401k plan doesn't have a good international stock index fund, then you could use the Roth or taxable account to hold some more international stock index if you wish.
Ok, good to know. The best int'l option in the 401(k) is RWIFX, which I'm not crazy about. I think next year's Roth contribution will go entirely into international.
About q2,
It might be nice to see if you have a Stable Value Fund in the 401k plan. Sometimes they can be a solid alternative to a regular bond fund. They are really an insurance product (that behaves like a bank account with limited withdrawal rules), that will have a guaranteed interest rate for some period of time, subject to changes, but you could do some reading in your plan literature.
Also, see this link: https://www.bogleheads.org/wiki/Stable_value_fund
This is very helpful. I'm assuming the "Fixed Income Guaranteed Option" is this. I overlooked it initially. I'll look into allocating some portion of future contributions here.
About q3,
Saving up for several years for a house is tough right now. Saver's are being punished by the super low rates offered, and the inflation in prices, especially housing. If you're willing to put the money at risk, then putting it into the market is certainly an option. Many folks are looking for something that doesn't exist though, and that's a 3 or 4% return without risk. If you're okay with the idea that you could lose 1/2 your down payment money by a bad week in the market, then go ahead and proceed with caution. Maybe something like 20% VTI / 80% intermediate treasuries - adjusted to your preference for risk.
Yeah. Fortunately I've had some exposure to losing a fair amount of my cost basis and being able to hold, but that was with play money. 20/80 is probably more sensible. Losing half would be devastating, but 20% bearable, especially since we'll continue to have savings going into this pool.
Finally, the SWTSX & VTI in the taxable account is a little puzzling. They cover the same ground, so I don't see the benefit of owning two total market funds.
Ha, you noticed. I bought the VTI awhile ago but have preferred mutual funds since…I dislike seeing the little intra-day fluctuations in ETFs when I log into Schwab. Will probably consolidate those soon.

Thanks again.
tashnewbie
Posts: 4283
Joined: Thu Apr 23, 2020 12:44 pm

Re: First post: Getting married and reviewing portfolio. Advice welcome.

Post by tashnewbie »

transit wrote: Tue Jul 27, 2021 12:48 pm 3. For the 50k in checking, I'd like to keep about 15k as cash for emergencies, and 6k will go to the IRA in January, but the remaining ~30k is just sitting. I don't want to max my 401(k) and live off of it, because we'll likely purchase a home in the next 5 years and this will likely be the basis of a downpayment, but I also don't want it to languish in the interim. I'm thinking of tossing it in the taxable brokerage account in a 60/40 or 50/50 stock/bond split. Thoughts?
Welcome to the forum. Congrats on your upcoming nuptials.

I would definitely set aside $12k ($6k each for you and your soon-to-be wife) for Roth IRA contributions in January.

That leaves about $20k that isn't EF or designated Roth IRA contribution money.

Honestly, if you really plan to buy a house within less than 5 years, I probably wouldn't be willing to take much risk with this money.

If you invest 20%, then if the market crashes, you'd be at risk of losing up to half of that amount or 10% of the initial total.

You might consider I bonds for this extra money. Each individual can invest $10k/year in I bonds and a MFJ couple can also get up to another $5k in paper I bonds if they're owed a tax refund. Can't access the money for 1 year; lose 3 months' interest if you sell the bond within 5 years. Current rate is 3.54%. Rate changes biannually.
Topic Author
transit
Posts: 6
Joined: Tue Jul 27, 2021 11:22 am

Re: First post: Getting married and reviewing portfolio. Advice welcome.

Post by transit »

tashnewbie wrote: Tue Jul 27, 2021 2:27 pm You might consider I bonds for this extra money. Each individual can invest $10k/year in I bonds and a MFJ couple can also get up to another $5k in paper I bonds if they're owed a tax refund. Can't access the money for 1 year; lose 3 months' interest if you sell the bond within 5 years. Current rate is 3.54%. Rate changes biannually.
Thanks! This is really good to know.
neednewcar
Posts: 38
Joined: Sun Jul 29, 2018 10:45 am

Re: First post: Getting married and reviewing portfolio. Advice welcome.

Post by neednewcar »

Great start at 29!

Hard to tell if you are or are not, but I suggest you start maxing out your 401k. Same thing for your wife. If she can't max it with cashflow use the 50k to help it along.

You should be able to do that and save for a down payment with cash flow.
Topic Author
transit
Posts: 6
Joined: Tue Jul 27, 2021 11:22 am

Re: First post: Getting married and reviewing portfolio. Advice welcome.

Post by transit »

neednewcar wrote: Tue Jul 27, 2021 3:12 pm Great start at 29!

Hard to tell if you are or are not, but I suggest you start maxing out your 401k. Same thing for your wife. If she can't max it with cashflow use the 50k to help it along.

You should be able to do that and save for a down payment with cash flow.
Thank you :) Hard to shake the feeling that I'm behind when comparing to some other posts here, but hopefully we'll be alright.

I haven't been maxing out 401k to date, but my updated contribution rate will put me right at the max in future years. I may increase it in the fall to get closer to the max for this year.
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retired@50
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Re: First post: Getting married and reviewing portfolio. Advice welcome.

Post by retired@50 »

transit wrote: Tue Jul 27, 2021 3:37 pm Thank you :) Hard to shake the feeling that I'm behind when comparing to some other posts here, but hopefully we'll be alright.
Comparing yourself to others isn't particularly helpful. It's not a competition.
Retirement investing is about you, and your goals. They are personal to you.

Just to put you in a better mood about your situation, here's a fun fact.
I didn't contribute to a 401k plan until the year I turned 30. I contributed $985 for that year.

It's a long road ahead, don't get bogged down in the past, or in things you cannot control.

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
transit
Posts: 6
Joined: Tue Jul 27, 2021 11:22 am

Re: First post: Getting married and reviewing portfolio. Advice welcome.

Post by transit »

retired@50 wrote: Tue Jul 27, 2021 1:56 pm About q2,
It might be nice to see if you have a Stable Value Fund in the 401k plan. Sometimes they can be a solid alternative to a regular bond fund. They are really an insurance product (that behaves like a bank account with limited withdrawal rules), that will have a guaranteed interest rate for some period of time, subject to changes, but you could do some reading in your plan literature.
Also, see this link: https://www.bogleheads.org/wiki/Stable_value_fund
Looked into this… my plan's fixed income option is currently at 1.55%. Hasn't been above 2% since 2012. Is that worthwhile?

Comparing yourself to others isn't particularly helpful. It's not a competition.
Retirement investing is about you, and your goals. They are personal to you.

Just to put you in a better mood about your situation, here's a fun fact.
I didn't contribute to a 401k plan until the year I turned 30. I contributed $985 for that year.

It's a long road ahead, don't get bogged down in the past, or in things you cannot control.
Thanks, that's good to hear.
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Sandtrap
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Re: First post: Getting married and reviewing portfolio. Advice welcome.

Post by Sandtrap »

Congratulations on getting married.
:sharebeer

j🌺
Wiki Bogleheads Wiki: Everything You Need to Know
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retired@50
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Re: First post: Getting married and reviewing portfolio. Advice welcome.

Post by retired@50 »

transit wrote: Wed Jul 28, 2021 7:06 am
retired@50 wrote: Tue Jul 27, 2021 1:56 pm About q2,
It might be nice to see if you have a Stable Value Fund in the 401k plan. Sometimes they can be a solid alternative to a regular bond fund. They are really an insurance product (that behaves like a bank account with limited withdrawal rules), that will have a guaranteed interest rate for some period of time, subject to changes, but you could do some reading in your plan literature.
Also, see this link: https://www.bogleheads.org/wiki/Stable_value_fund
Looked into this… my plan's fixed income option is currently at 1.55%. Hasn't been above 2% since 2012. Is that worthwhile?
I'd certainly consider it. What other bond funds do you have to choose from?

If you provide a list, the forum will help you evaluate which one(s) might be best. Sometimes a higher expense ratio isn't totally disqualifying.

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
transit
Posts: 6
Joined: Tue Jul 27, 2021 11:22 am

Re: First post: Getting married and reviewing portfolio. Advice welcome.

Post by transit »

retired@50 wrote: Wed Jul 28, 2021 8:42 am I'd certainly consider it. What other bond funds do you have to choose from?

If you provide a list, the forum will help you evaluate which one(s) might be best. Sometimes a higher expense ratio isn't totally disqualifying.
Sure thing. Here are the four options I have:

VPAIX (0.1%) Vanguard Inflation-Protected Securities Admiral Fund
ANAZX (0.5%) AB Global Bond Z Fund
CBDIX (0.56%) Calvert Bond I Fund
DODIX (0.42%) Dodge & Cox Income Fund
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retired@50
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Re: First post: Getting married and reviewing portfolio. Advice welcome.

Post by retired@50 »

transit wrote: Wed Jul 28, 2021 8:49 am
retired@50 wrote: Wed Jul 28, 2021 8:42 am I'd certainly consider it. What other bond funds do you have to choose from?

If you provide a list, the forum will help you evaluate which one(s) might be best. Sometimes a higher expense ratio isn't totally disqualifying.
Sure thing. Here are the four options I have:

VPAIX (0.1%) Vanguard Inflation-Protected Securities Admiral Fund
ANAZX (0.5%) AB Global Bond Z Fund
CBDIX (0.56%) Calvert Bond I Fund
DODIX (0.42%) Dodge & Cox Income Fund
I'd use the Dodge & Cox fund if you're not happy with the TIPS fund from Vanguard.

I'm not certain a TIPS fund is a good fit for someone your age. My understanding is that they make more sense after 55 years old.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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