In the early '00s, I took some of the money left over from the college fund (taxable, not 529 ) and allocated half to SPY, and half to "companies I believed in." (I think this was a Motley Fool suggested strategy.) I didn't understand the advantages/differences around IRAs, Roth, etc and just kept things in a taxable account with those funds. At my public sector work, I picked a defined benefit plan (which I am now vested in, having been there 20+ years), and also started to contribute to a no-match 401(k). Married after those early allocations, no kids, mid-40s, both earning steady 100-125k/year, no plans to retire for a decade or two.
Of the "companies I believed in," I was extraordinarily lucky and a few of them have done very well. I sold off all the losers over the years and reinvested into broad market indexes. Of late I have become convinced of the Boglehead strategy and am considering a final transition.
I haven't been diligent about contributing to IRA/Roth, but I mean to get on that train now, though I have been increasing my 401(k) allocations (over the years, currently up to 8.4k/year). Luckily, the investment options available and I use are low-expense index funds (e.g. 0.03% ratio for the large cap index option), so they're about as good as I would get in my Roth/IRA options, and it keeps the money from even briefly touching my spendable accounts.
Assets in my name:
- $280k in taxable accounts, including 135k in AAPL (with a cost basis of $3.5k!), 16k in ADBE (cost basis $600!), 10k QQQ (cb 2k), most of the rest in broad market indices SPY/IVV/VXF/VXUS (no bonds)
- $300k in a 401(k) that's about 90/10 broad market indexes/bonds
- $25k in Roth IRA (90/10 VT/BND)
- $10K in IRA (90/10 VT/BND).
- $150k is the reported 'value' of the pension, vested, using as substitute for bonds in portfolio tilt.
- separate 401(k) with sane, low-cost allocations: mix of VIRSX (vanguard 2040 fund) and FFNOX (~70-85 equities/bonds): 650k [edited to correct]. Not hitting the contribution limits yet, but match is completely fulfilled.
- Also good about Roth/IRA contributions (planning a back-door this year), not sure of value ~50k?.
- Has a smattering of sanely allocated taxable investments, but no more than 40-50k total.
Debts:
- Mortgaged house: jointly owe $140k @ 3.5%, property 'worth' 360k, paid 220k. Paying off extra 1.8 payments to principal a year)
- Car loan: jointly owe $10k at 2%, value 40k. (other car owned outright, worth ~10k)
- No student loans for either of us.
- CC's paid off in full monthly.
Assets (investments, house, cars) - debts (mortgage, car) = 1.7 million. So high risk individual stocks are about 10% of that total.
The Big Question: How do I efficiently transition the individual stocks to lower risk, broad market indices? (I'm a fan of the 2 fund portfolio.)
Do I just sell them off tomorrow, take the 15% tax hit this year, and put the rest into VT? The taxable capital gains on them would be higher either of our annual income, but lower than them combined. Would it make sense to wait until December so I don't need to pay some kind of estimated taxes or penalties? The capital gains won't put us up into the 20% bracket.
Should I sell off to fully-fund both of our 401(k)'s and make sure we both max out a back-door Roth? (I don't know if either of us can do a "mega backdoor Roth" at our employers, but I could check if that's possible).
Live off the proceeds while that's happening?
Do that over this and next tax year?
I don't think I should pay-off the debts: with the rates on the mortgage and car loan, I am willing to bet the returns will outpace the cost of debt service.
We don't have high enough deductions on the mortgage to itemize after the previous tax changes.
What should I/we be doing?
[minor edits to better specify spouse's accounts]