Investment Questions with new information

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Investment Questions with new information

Post by inv021 »

Emergency fund: Yes. One year of expenses.

Debt: Mortgage - Remaining Debt $273,500 - 3% interest. No other debt.

Tax Filing Status: Married Filing Jointly

Tax Rate: 22% Federal, 5% State

State of Residence: Utah

Age: 36 - ME, 34 - Husband

Desired Asset allocation: 80% U.S. stock/10% International stock/10% Bond (Currently the bond is 9% and the International is 8%.)

Total portfolio: $491,000 (Invested).

Current retirement assets

Taxable

18% - Vanguard Total Stock Market Index Fund Admiral Shares VTSAX (0.04%)

Tax-Advantaged

His 401k with employer
8% - Large Cap Stock Index Fund - Follows the Russell 1000 (No Ticker symbol - holding is with Utah government system) (0.18%)
Company match 4%

His 457 with employer - Governmental Plan. He can withdraw early with no 10% penalty.
24% Large Cap Stock Index Fund - Follows the Russell 1000 (No Ticker symbol - holding is with Utah government system) (0.18%)

His Roth IRA at Vanguard
12% Vanguard 500 Index Fund (VFIAX) (0.04%)

His 501c with employer (Nationwide is who they contract with for this portion) - Otherwise known as VEBA
10% Nationwide S&P 500 Index Instl Svc (GRISX) (0.45%)

Her i401k at Vanguard
5% Vanguard 500 Index Fund Admiral Shares (VFIAX) (0.04%)
9% Vanguard Total Bond Market Index Fund (VBTLX) (0.05%)
8% Vanguard Total Internation Stock Index Fund (VTIAX) (0.11%)

Her Roth IRA at Vanguard
6% Vanguard Total Stock Market Index Fund (VTSAX) (0.04%)

Annual Contributions
$2,600 his 401k - 4% employer match (This is what his employer puts in)
$19,500 his 457
$4,100 his 501c (His employer adds this)
$19,500 her i401k
$6,000 his Roth IRA
$6,000 her Roth IRA
$8,320 taxable brokerage


New Questions -
1. My husband found out last week that we will be receiving a windfall payment in the form of $360,000 cash (that has already been taxed so we do not have to pay taxes on it) and $60,000 Traditional IRA that will have RMD's for the next three years. Obviously, we feel blessed and our grandparents passed away two years ago so this came as a shock to be receiving money this many years later. However, the question we have and with the portfolio information from above would be what to do now? Pay off the mortgage and invest the rest in the taxable brokerage account? Or invest all of it? I have read other windfall bogle forums and I gathered paying off the mortgage is a clear recommendation. I also read the Wiki about windfalls. Just hoping for some advice with the above portfolio we already have and what would be best.


Thank you!


I appreciate everyone's help so far on this thread. I know I might not be posting correctly so I really appreciate everyone's help and please direct me to a different way of posting if needed. Also, in the wiki it informed me I need to keep adding to this thread so everyone has the history. I hope that is accurate. Thank you.

The things I have implemented are: Simplifying the accounts. Reading the articles posted. Figuring out a good AA that my husband and I feel comfortable with, which includes international and bonds and re-allocating. Contributing more to the Tax-Advantaged accounts and decreasing the taxable brokerage contribution. Looking into switching the HSA account to a medical plan that better suits my family's needs. I am also not including his pension into our future plan, as we have no idea what the future will hold.
Last edited by inv021 on Fri Oct 29, 2021 3:27 pm, edited 4 times in total.
New. Interested. Curious.
Parkinglotracer
Posts: 3949
Joined: Fri Dec 20, 2019 2:49 am
Location: Upstate NY

Re: Four Investment Questi

Post by Parkinglotracer »

Parkinglotracer wrote: Fri Aug 27, 2021 2:55 am Congrats on your investing accomplishments to date. Have you read the boglehead wiki on the three fund or etf portfolio ? I ‘d suggest simplifying and moving towards that and where those funds / etfs are not avail finding the closest match to implement your desired asset allocation across those funds. VTI (etf) is vanguards low cost total stock market etf. If you have the ability to stay the course I would not pay someone to manage your money if they are not helping in any way. If I did pay someone I would consider paying vanguard PAS at .3%. I worked for a fee only planner for a bit; some clients used us to help their relationship by eliminating the debate as to what to do with their investments and to help stay the course. Some paid .7% of millions of dollars a year for us to place their savings in a three or four index fund portfolio, rebalance, and stay the course. It does not appear you need it if your DH is ok with your skills.

Consider using VTI ETF to lower your investment expenses. As your husband’s 401K choices have high expense ratio’s if he has the ability to self direct his
401K and buy etf’s in it you can move his to VTI too. I’d get your entire stock portfolio to VTI for simplicity. The boglehead belief as well as mine is that is plenty of diversification.

I am not a market timer but I will imagine it may be hard to stay the course with a 90-10% asset allocation over the next say 50 years of your investment horizon. I lived thru black Monday in 1985 and a few sharp declines along the way. Close your eyes and imagine the market dropping 30-40%. If you can honestly say you will be ok with 90% of your portfolio going down 30% - 40% you have the right asset allocation. If not now is the time to change it.

I have Been to Utah a few times - pretty out there.

Good luck and congrats on your investing accomplishments to date. Quite impressive.

Parkinglotracer

Last edited by Parkinglotracer on Fri Aug 27, 2021 3:43 am, edited 2 times in total.
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questi

Post by inv021 »

Parkinglotracer wrote: Fri Aug 27, 2021 3:17 am
Parkinglotracer wrote: Fri Aug 27, 2021 2:55 am Congrats on your investing accomplishments to date. Have you read the boglehead wiki on the three fund or etf portfolio ? I ‘d suggest simplifying and moving towards that and where those funds / etfs are not avail finding the closest match to implement your desired asset allocation across those funds. VTI (etf) is vanguards low cost total stock market etf. If you have the ability to stay the course I would not pay someone to manage your money if they are not helping in any way. If I did pay someone I would consider paying vanguard PAS at .3%. I worked for a fee only planner for a bit; some clients used us to help their relationship by eliminating the debate as to what to do with their investments and to help stay the course. Some paid .7% of millions of dollars a year for us to place their savings in a three or four index fund portfolio, rebalance, and stay the course. It does not appear you need it if your DH is ok with your skills.

Consider using VTI ETF to lower your investment expenses. As your husband’s 401K choices have high expense ratio’s if he has the ability to self direct his
401K and buy etf’s in it you can move his to VTI too. I’d get your entire stock portfolio to VTI for simplicity. The boglehead belief as well as mine is that is plenty of diversification.

I am not a market timer but I will imagine it may be hard to stay the course with a 90-10% asset allocation over the next say 50 years of your investment horizon. I lived thru black Monday in 1985 and a few sharp declines along the way. Close your eyes and imagine the market dropping 30-40%. If you can honestly say you will be ok with 90% of your portfolio going down 30% - 40% you have the right asset allocation. If not now is the time to change it.

I have Been to Utah a few times - pretty out there.

Good luck and congrats on your investing accomplishments to date. Quite impressive.

Parkinglotracer


I am hoping I am replying correctly....

Thank you, Parkinglotracer! I really appreciate your time and thoughtfulness. I appreciate you also saying congrats on the investing accomplishments. We did not start saving for retirement until 5 years ago and I thought we were completely behind. Sometimes I still think that. Suffice it to say consistency is key!

I have read the wiki on the three fund. When I started my i401k in 2019 I thought I would be all fancy and add more! I have not read the ETF Portfolio... can I find that in Wiki?

My question to you is this - if I decided to make things more simple how do I go about doing that? That is where I get stuck. Do I just buy and transfer my funds all in one day? I can't seem to find good articles. I also am not well-read on rebalancing, which would this essentially be the same thing?

My second question is why VTI (etf) instead of VTSAX (Index Fund)? Is it just because of the difference in expense ratio .3% versus .4%? Or is it the potential tax savings on ETF versus Index Fund when dividends are sold?

My husband can self-direct within the guidelines of what they offer. I will look to see if they have the equivalent to VTI with a lower expense ratio.

Market crashes don't seem to bother me. My emotions don't really get caught up in what it is doing. Maybe that would be different if we had a big nest egg in the market. Something to consider though as our money grows. For our age Vanguard does recommend a 90/10. How would I go about thinking about this differently and deciding on what would be good?

Utah is beautiful! We love all things outdoors and are glad we took a chance on living here!

Thank you!!
New. Interested. Curious.
LittleMaggieMae
Posts: 2569
Joined: Mon Aug 12, 2019 9:06 pm

Re: Four Investment Questions

Post by LittleMaggieMae »

I don't have anything to add about your questions - just some FYI on the HSA...

Mine has fees. I currently have to keep a minimum of 1K or pay a fee in the "basic account" - $ I would use for healthcare. The investment account side of it - also has a monthly fee based on the total value of the investment account. When the HSA was first offered - the "basic account" had a 5K minimum to avoid fees. That changed a year or two ago to the lower 1K minimum. I didn't pay much attention to the monthly fee on the "investment account" side - cause it wasn't that much per month (under a dollar) but as time went on and my account balance grew so did the monthly fee (it's $7 and up per month). I'm currently working on moving the "investment account" balance to a Fidelity HSA (which does not appear to have monthly fees on top of the fees on what I invest in. I will be keeping $4K (1K plus 3K) in the 'basic account' to keep it free and easily accessible - I'm considering this part of my EF and moving 4K of my close to 0 interest EF money to my taxable account (I'm in the process of re-evaluating the size of my EF and where it all 'lives' to better reflect my current situation and what I think my future holds).

The gist of this - understand/know how your HSA works regarding fees - and then decide if paying them is acceptable or not, based on your situation. The HSA needs to WORK for you and your situation. For the first 3 years of having/using my HSA the fees were acceptable to me based on how I was using the HSA (or thought I would use it). And then my balance(s) grew enough to where the fees weren't acceptable and my out of pocket expenses for healthcare using the HDHP didn't go as high as I thought they would - I'm at less than $500 per year after a single year with 4X that expense).
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Four Investment Questions

Post by dbr »

inv021 wrote: Thu Aug 26, 2021 8:54 pm
Questions
1. I am currently the one educating myself on investing and retirement planning. When I first began investing 5 years ago I put mine and my husband's ROTH IRA in the target retirement 2050 vanguard account VFIFX (expense ratio .15%). It was easy and I didn't have time to do research. Over the years I have been learning and educating myself more. I have been thinking about moving the money into a different account: S&P 500 or Total Stock Market.

My question is this: Should I even worry about this or just keep this as is? With the market being high I am wondering if that even makes sense to go and buy a new fund all in one day when the last five years I have been DCA weekly into VFIFX. My only reasoning to move the money is for a potential higher return (I know past history does not guarantee future returns) and for the asset allocation to be managed by me and not automatically done by VFIFX.

The steps are to first identify your overall asset allocation, second place assets in accounts for best tax efficiency, and then third pick funds. A generic answer is that a Roth best holds assets likely to grow the most, so people would often put only a stock fund there. You would have to locate the bonds you want to hold elsewhere. I personally think that when you have different kinds of accounts and are working to place your assets and pick funds that target retirement funds make things more complicated rather than simpler. Others disagree.


2. My husband's accounts tend to have higher expense ratio's because of his employment and what they offer. I have also been looking into changing these to lower expense ratio funds because his company does offer lower expense funds with better returns. Such as his 2050 target fund and his 501.
The same question as above applies to this.
501 - I can change from an expense ratio of .93 to .41 (This would be the nationwide s&P 500 Index Fund). If I did make the switch would you recommend converting the fund all at once? Or would you recommend just beginning to put the money moving forward into a new fund (which I believe he can do I just need to follow up and make sure)?

.93% is obscene and should be criminal in a 401k. Same applies to .41% but at least the damage is cut in half. Absolutely change now, keeping track of what your overall asset allocation is. It is a shame your husbands employer has no more interest in the welfare of its employees than this.

3. My husband feels like it is best to start to have someone manage the funds. I am obviously hesitant about this. The person he sought out charges .8% for his fee and the expense ratio's on the funds is .5%. I am having a hard time swallowing losing that money over time. I do not believe I am smarter than this individual but a 1.3% loss feels like a lot and especially because my husband's money is already losing more than mine with Vanguard. Sometimes I feel like I am overthinking this but thought I'd ask here.

You would have to have an extraordinary need for advice involving a complicated and special situation to justify that fee. So, no. It is likely the cost ends up more than that and that there will be pressure to buy products you don't want.

4. HSA - We max this out yearly and often use most of it because of my husband's chronic health problems. I have not begun investing this and know it is a triple tax advantage. My question is this: We currently have around $8,000. Our current insurance has an out-of-pocket max of $8,000 and the in-network max is $3,000. I thought about keeping $3,000 not invested and begin investing $5,000. What questions should I be asking myself and what asset allocation would be good to invest in? I can invest in Vanguard funds - VIGIX, VBIRX, VSMAX, VMVAX. These are the ones I have been looking at. They have about 5 more available.

I can't advise you about investing in an HSA, but I would suggest for Vanguard funds that you stay with total US and total bond or at worst add total international. Vanguard offers 139 funds of which probably at least 130 or 136 you don't need: https://www.bogleheads.org/wiki/Three-fund_portfolio
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

LittleMaggieMae wrote: Fri Aug 27, 2021 10:25 am I don't have anything to add about your questions - just some FYI on the HSA...

Mine has fees. I currently have to keep a minimum of 1K or pay a fee in the "basic account" - $ I would use for healthcare. The investment account side of it - also has a monthly fee based on the total value of the investment account. When the HSA was first offered - the "basic account" had a 5K minimum to avoid fees. That changed a year or two ago to the lower 1K minimum. I didn't pay much attention to the monthly fee on the "investment account" side - cause it wasn't that much per month (under a dollar) but as time went on and my account balance grew so did the monthly fee (it's $7 and up per month). I'm currently working on moving the "investment account" balance to a Fidelity HSA (which does not appear to have monthly fees on top of the fees on what I invest in. I will be keeping $4K (1K plus 3K) in the 'basic account' to keep it free and easily accessible - I'm considering this part of my EF and moving 4K of my close to 0 interest EF money to my taxable account (I'm in the process of re-evaluating the size of my EF and where it all 'lives' to better reflect my current situation and what I think my future holds).

The gist of this - understand/know how your HSA works regarding fees - and then decide if paying them is acceptable or not, based on your situation. The HSA needs to WORK for you and your situation. For the first 3 years of having/using my HSA the fees were acceptable to me based on how I was using the HSA (or thought I would use it). And then my balance(s) grew enough to where the fees weren't acceptable and my out of pocket expenses for healthcare using the HDHP didn't go as high as I thought they would - I'm at less than $500 per year after a single year with 4X that expense).
Thank you, LittleMaggieMae! I appreciate you informing me of this. I will look into this more and see if it is worth it. I also know because of our current situation and us using most of the money each year it might not make sense at all to invest depending on the fees associated with it. I do know that we cannot change to Fidelity or another firm. So we what have is what we have.
New. Interested. Curious.
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

dbr wrote: Fri Aug 27, 2021 10:49 am
inv021 wrote: Thu Aug 26, 2021 8:54 pm
Questions
1. I am currently the one educating myself on investing and retirement planning. When I first began investing 5 years ago I put mine and my husband's ROTH IRA in the target retirement 2050 vanguard account VFIFX (expense ratio .15%). It was easy and I didn't have time to do research. Over the years I have been learning and educating myself more. I have been thinking about moving the money into a different account: S&P 500 or Total Stock Market.

My question is this: Should I even worry about this or just keep this as is? With the market being high I am wondering if that even makes sense to go and buy a new fund all in one day when the last five years I have been DCA weekly into VFIFX. My only reasoning to move the money is for a potential higher return (I know past history does not guarantee future returns) and for the asset allocation to be managed by me and not automatically done by VFIFX.

The steps are to first identify your overall asset allocation, second place assets in accounts for best tax efficiency, and then third pick funds. A generic answer is that a Roth best holds assets likely to grow the most, so people would often put only a stock fund there. You would have to locate the bonds you want to hold elsewhere. I personally think that when you have different kinds of accounts and are working to place your assets and pick funds that target retirement funds make things more complicated rather than simpler. Others disagree.


2. My husband's accounts tend to have higher expense ratio's because of his employment and what they offer. I have also been looking into changing these to lower expense ratio funds because his company does offer lower expense funds with better returns. Such as his 2050 target fund and his 501.
The same question as above applies to this.
501 - I can change from an expense ratio of .93 to .41 (This would be the nationwide s&P 500 Index Fund). If I did make the switch would you recommend converting the fund all at once? Or would you recommend just beginning to put the money moving forward into a new fund (which I believe he can do I just need to follow up and make sure)?

.93% is obscene and should be criminal in a 401k. Same applies to .41% but at least the damage is cut in half. Absolutely change now, keeping track of what your overall asset allocation is. It is a shame your husbands employer has no more interest in the welfare of its employees than this.

3. My husband feels like it is best to start to have someone manage the funds. I am obviously hesitant about this. The person he sought out charges .8% for his fee and the expense ratio's on the funds is .5%. I am having a hard time swallowing losing that money over time. I do not believe I am smarter than this individual but a 1.3% loss feels like a lot and especially because my husband's money is already losing more than mine with Vanguard. Sometimes I feel like I am overthinking this but thought I'd ask here.

You would have to have an extraordinary need for advice involving a complicated and special situation to justify that fee. So, no. It is likely the cost ends up more than that and that there will be pressure to buy products you don't want.

4. HSA - We max this out yearly and often use most of it because of my husband's chronic health problems. I have not begun investing this and know it is a triple tax advantage. My question is this: We currently have around $8,000. Our current insurance has an out-of-pocket max of $8,000 and the in-network max is $3,000. I thought about keeping $3,000 not invested and begin investing $5,000. What questions should I be asking myself and what asset allocation would be good to invest in? I can invest in Vanguard funds - VIGIX, VBIRX, VSMAX, VMVAX. These are the ones I have been looking at. They have about 5 more available.

I can't advise you about investing in an HSA, but I would suggest for Vanguard funds that you stay with total US and total bond or at worst add total international. Vanguard offers 139 funds of which probably at least 130 or 136 you don't need: https://www.bogleheads.org/wiki/Three-fund_portfolio

Thank you, DBR. I appreciate your time to answer my questions. A few clarifying questions.

1. I can completely see how this makes sense and how it would help me to know my asset allocation. Right now I feel a bit all over the board and the only way I know my AA is by the vanguard chart on my home page:) Once I make a decision on your 1, 2, 3 questions do I just completely sell and buy the new fund? (Sorry that continues to be my hold-up. I just don't know how to convert it. *I do in Vanguard but what I am meaning is do I sell from the target fund and buy let's say VOO all at once?)

2. It is a shame. Some of the other funds are even more outrageous. Same question I have in #1 or would you recommend all of his future money just be invested in the new fund?

3. Thank you for the validation! We are buy no means a complex case.

4. Thank you! I appreciate the link.
New. Interested. Curious.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Four Investment Questions

Post by dbr »

inv021 wrote: Fri Aug 27, 2021 2:28 pm


Thank you, DBR. I appreciate your time to answer my questions. A few clarifying questions.

1. I can completely see how this makes sense and how it would help me to know my asset allocation. Right now I feel a bit all over the board and the only way I know my AA is by the vanguard chart on my home page:) Once I make a decision on your 1, 2, 3 questions do I just completely sell and buy the new fund? (Sorry that continues to be my hold-up. I just don't know how to convert it. *I do in Vanguard but what I am meaning is do I sell from the target fund and buy let's say VOO all at once?)

Asset allocation is all about how much risk you need or should take to meet your objectives. I think the best approach to it is the discussion in Larry Swedroe's books using the thought process of need, ability, and willingness to take risk. Other books that discuss asset allocation address the same points. Rick Ferri has a good book on asset allocation as long as you stay away from getting sidetracked into alternatives to much. You might want to start right here on the Wiki at "getting started" and work your way up: https://www.bogleheads.org/wiki/Getting_started

In a Roth, if you do decide to change the funds you can just sell all of the one and buy the other, or I think at Vanguard you can exchange the one for the other, but the effect is still to sell and buy.


2. It is a shame. Some of the other funds are even more outrageous. Same question I have in #1 or would you recommend all of his future money just be invested in the new fund?

You should certainly work at cutting costs at that level. I don't know what the first fund is. You'll have to hold some bonds somewhere, and a 401k is usually a good place for that if there is a good bond fund.

3. Thank you for the validation! We are buy no means a complex case.

A source of advice and management if you really need it would be Vanguard Personal Advisory Service. I am not sure myself how well they advise the Vanguard investment and the 401k, but one thing they do up front is some planning involving asset allocation questions and so on. Maybe someone else can add to this.

4. Thank you! I appreciate the link.
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: Four Investment Questions

Post by tashnewbie »

inv021 wrote: Fri Aug 27, 2021 2:28 pm Once I make a decision on your 1, 2, 3 questions do I just completely sell and buy the new fund? (Sorry that continues to be my hold-up. I just don't know how to convert it. *I do in Vanguard but what I am meaning is do I sell from the target fund and buy let's say VOO all at once?)

2. It is a shame. Some of the other funds are even more outrageous. Same question I have in #1 or would you recommend all of his future money just be invested in the new fund?
I'm not @dbr, but if you're going to be exchanging funds in tax-advantaged accounts (e.g., Roth IRAs and 401k), I don't think it makes sense to do this incrementally, if you only want to hold the purchased fund. Just do it all at once. At Vanguard, in your account you can click "exchange" funds, and you should be prompted to indicate which fund you want to buy. An "exchange" is really 2 steps: sale of the first fund and purchase of the second.

I agree that you don't need a portfolio manager. They'll just suck you dry with high fund fees and management fees!! This forum can probably provide better general investing advice than a high-cost manager. If you truly think you need some "kid gloves," I'd go with something like Vanguard's PAS, which is relatively cheap at something like 0.25-0.30% fee. They at least won't invest your money in expensive funds.
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

dbr wrote: Fri Aug 27, 2021 2:41 pm
inv021 wrote: Fri Aug 27, 2021 2:28 pm


Thank you, DBR. I appreciate your time to answer my questions. A few clarifying questions.

1. I can completely see how this makes sense and how it would help me to know my asset allocation. Right now I feel a bit all over the board and the only way I know my AA is by the vanguard chart on my home page:) Once I make a decision on your 1, 2, 3 questions do I just completely sell and buy the new fund? (Sorry that continues to be my hold-up. I just don't know how to convert it. *I do in Vanguard but what I am meaning is do I sell from the target fund and buy let's say VOO all at once?)

Asset allocation is all about how much risk you need or should take to meet your objectives. I think the best approach to it is the discussion in Larry Swedroe's books using the thought process of need, ability, and willingness to take risk. Other books that discuss asset allocation address the same points. Rick Ferri has a good book on asset allocation as long as you stay away from getting sidetracked into alternatives to much. You might want to start right here on the Wiki at "getting started" and work your way up: https://www.bogleheads.org/wiki/Getting_started

In a Roth, if you do decide to change the funds you can just sell all of the one and buy the other, or I think at Vanguard you can exchange the one for the other, but the effect is still to sell and buy.


2. It is a shame. Some of the other funds are even more outrageous. Same question I have in #1 or would you recommend all of his future money just be invested in the new fund?

You should certainly work at cutting costs at that level. I don't know what the first fund is. You'll have to hold some bonds somewhere, and a 401k is usually a good place for that if there is a good bond fund.

3. Thank you for the validation! We are by no means a complex case.

A source of advice and management if you really need it would be Vanguard Personal Advisory Service. I am not sure myself how well they advise the Vanguard investment and the 401k, but one thing they do upfront is some planning involving asset allocation questions and so on. Maybe someone else can add to this.

4. Thank you! I appreciate the link.
1. Thank you for the book recommendations and wiki article. I will read that tonight and look into the other books. Thank you for answering the Roth question and just exchanging the fund all at once or sell and buy depending on how Vanguard does it.

2. Sounds good. So a 401k is a good place to hold some bond allocation? So, I'll need to first figure out what that is. So, if I am understanding this correctly maybe the 401k is all bonds or maybe it is % bond and % stock?

3. I will look into VPAS and see if there is a need and how they can help.
New. Interested. Curious.
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

tashnewbie wrote: Fri Aug 27, 2021 2:47 pm
inv021 wrote: Fri Aug 27, 2021 2:28 pm Once I make a decision on your 1, 2, 3 questions do I just completely sell and buy the new fund? (Sorry that continues to be my hold-up. I just don't know how to convert it. *I do in Vanguard but what I am meaning is do I sell from the target fund and buy let's say VOO all at once?)

2. It is a shame. Some of the other funds are even more outrageous. Same question I have in #1 or would you recommend all of his future money just be invested in the new fund?
I'm not @dbr, but if you're going to be exchanging funds in tax-advantaged accounts (e.g., Roth IRAs and 401k), I don't think it makes sense to do this incrementally, if you only want to hold the purchased fund. Just do it all at once. At Vanguard, in your account you can click "exchange" funds, and you should be prompted to indicate which fund you want to buy. An "exchange" is really 2 steps: sale of the first fund and purchase of the second.

I agree that you don't need a portfolio manager. They'll just suck you dry with high fund fees and management fees!! This forum can probably provide better general investing advice than a high-cost manager. If you truly think you need some "kid gloves," I'd go with something like Vanguard's PAS, which is relatively cheap at something like 0.25-0.30% fee. They at least won't invest your money in expensive funds.
Thank you, Tashnewbie. I appreciate all perspectives.

If I exchange it all at once I am assuming I am buying it all at today's price? Is that accurate thinking? I am not opposed to this I just want to make sure I am understanding what happens. Also, I would not have any tax issues because I am not taking out, correct?

Thank you! I feel pretty confident that if I can simplify the accounts, get a good asset allocation that works and consistently invest we will be fine. By no means are we a complex case that needs over 20 different types of funds they say they will invest our money in:)
New. Interested. Curious.
User avatar
Peter Foley
Posts: 5533
Joined: Fri Nov 23, 2007 9:34 am
Location: Lake Wobegon

Re: Four Investment Questions

Post by Peter Foley »

I agree in general with dbr.

My personal preference is not to use target retirement funds. However, they are not a bad option and do not horribly complicate your asset allocation strategy and rebalancing if you have some in the mix. Asset allocation is not an exact science in that being within a couple percentage points of your goal is good enough. Many do not advise rebalancing unless you are 5% off your desired AA. Because you are young and actively contributing this can easily be done by redirecting ongoing contributions.

Watching expense ratios is very important as such expenses impact long term investment returns' compounding.
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: Four Investment Questions

Post by tashnewbie »

inv021 wrote: Fri Aug 27, 2021 2:54 pm
tashnewbie wrote: Fri Aug 27, 2021 2:47 pm
inv021 wrote: Fri Aug 27, 2021 2:28 pm Once I make a decision on your 1, 2, 3 questions do I just completely sell and buy the new fund? (Sorry that continues to be my hold-up. I just don't know how to convert it. *I do in Vanguard but what I am meaning is do I sell from the target fund and buy let's say VOO all at once?)

2. It is a shame. Some of the other funds are even more outrageous. Same question I have in #1 or would you recommend all of his future money just be invested in the new fund?
I'm not @dbr, but if you're going to be exchanging funds in tax-advantaged accounts (e.g., Roth IRAs and 401k), I don't think it makes sense to do this incrementally, if you only want to hold the purchased fund. Just do it all at once. At Vanguard, in your account you can click "exchange" funds, and you should be prompted to indicate which fund you want to buy. An "exchange" is really 2 steps: sale of the first fund and purchase of the second.

I agree that you don't need a portfolio manager. They'll just suck you dry with high fund fees and management fees!! This forum can probably provide better general investing advice than a high-cost manager. If you truly think you need some "kid gloves," I'd go with something like Vanguard's PAS, which is relatively cheap at something like 0.25-0.30% fee. They at least won't invest your money in expensive funds.
Thank you, Tashnewbie. I appreciate all perspectives.

If I exchange it all at once I am assuming I am buying it all at today's price? Is that accurate thinking? I am not opposed to this I just want to make sure I am understanding what happens. Also, I would not have any tax issues because I am not taking out, correct?
If you're using mutual funds, then the price is fixed when the market closes on the day of sale (I think that's 4:00 pm ET). If you're using ETFs (like the VOO you mentioned above), then the price is generally whatever the market price is at the time you initiate the sell order (I think that's how it works; I've never used ETFs).

There are no tax consequences to buying and selling in tax-advantaged accounts like IRAs and 401k/457. There are tax consequences if you buy and sell in your taxable brokerage account.

This wiki link might be helpful: Tax-efficient fund placement

In your tax bracket, bond funds in the 401k would be a great choice. You can definitely opt to use a low-cost bond fund like VBTLX in her solo 401k, and his 401k/457 may have one too.

Personally, I would clean up her solo 401k some. I think a 3-fund portfolio would serve you well: VTSAX, VTIAX (if you want international), and VBTLX for bonds. See: 3-fund portfolio.

Edited: if you're going to be in the 24% bracket this year and possibly in years to come, then you may need to use the backdoor Roth strategy if you want to get money into a Roth IRA. Her Rollover IRA would complicate this for her. If you're over the income limit to contribute directly to Roth IRA in 2021, then you will have to fix the excess contribution. Just an FYI. See: Backdoor Roth
User avatar
Wiggums
Posts: 7051
Joined: Thu Jan 31, 2019 7:02 am

Re: Four Investment Questions

Post by Wiggums »

I use the three fund portfolio. It doesn’t get much easier than that. I would use the Vanguard Balance or a target date fund before I paid high fees which are a drag on your portfolio returns.
"I started with nothing and I still have most of it left."
Parkinglotracer
Posts: 3949
Joined: Fri Dec 20, 2019 2:49 am
Location: Upstate NY

Re: Four Investment

Post by Parkinglotracer »

inv021 wrote: Fri Aug 27, 2021 10:10 am
Parkinglotracer wrote: Fri Aug 27, 2021 3:17 am
Parkinglotracer wrote: Fri Aug 27, 2021 2:55 am Congrats on your investing accomplishments to date. Have you read the boglehead wiki on the three fund or etf portfolio ? I ‘d suggest simplifying and moving towards that and where those funds / etfs are not avail finding the closest match to implement your desired asset allocation across those funds. VTI (etf) is vanguards low cost total stock market etf. If you have the ability to stay the course I would not pay someone to manage your money if they are not helping in any way. If I did pay someone I would consider paying vanguard PAS at .3%. I worked for a fee only planner for a bit; some clients used us to help their relationship by eliminating the debate as to what to do with their investments and to help stay the course. Some paid .7% of millions of dollars a year for us to place their savings in a three or four index fund portfolio, rebalance, and stay the course. It does not appear you need it if your DH is ok with your skills.

Consider using VTI ETF to lower your investment expenses. As your husband’s 401K choices have high expense ratio’s if he has the ability to self direct his
401K and buy etf’s in it you can move his to VTI too. I’d get your entire stock portfolio to VTI for simplicity. The boglehead belief as well as mine is that is plenty of diversification.

I am not a market timer but I will imagine it may be hard to stay the course with a 90-10% asset allocation over the next say 50 years of your investment horizon. I lived thru black Monday in 1985 and a few sharp declines along the way. Close your eyes and imagine the market dropping 30-40%. If you can honestly say you will be ok with 90% of your portfolio going down 30% - 40% you have the right asset allocation. If not now is the time to change it.

I have Been to Utah a few times - pretty out there.

Good luck and congrats on your investing accomplishments to date. Quite impressive.

Parkinglotracer


I am hoping I am replying correctly....

Thank you, Parkinglotracer! I really appreciate your time and thoughtfulness. I appreciate you also saying congrats on the investing accomplishments. We did not start saving for retirement until 5 years ago and I thought we were completely behind. Sometimes I still think that. Suffice it to say consistency is key!

I have read the wiki on the three fund. When I started my i401k in 2019 I thought I would be all fancy and add more! I have not read the ETF Portfolio... can I find that in Wiki?

My question to you is this - if I decided to make things more simple how do I go about doing that? That is where I get stuck. Do I just buy and transfer my funds all in one day? I can't seem to find good articles. I also am not well-read on rebalancing, which would this essentially be the same thing?

My second question is why VTI (etf) instead of VTSAX (Index Fund)? Is it just because of the difference in expense ratio .3% versus .4%? Or is it the potential tax savings on ETF versus Index Fund when dividends are sold?

My husband can self-direct within the guidelines of what they offer. I will look to see if they have the equivalent to VTI with a lower expense ratio.

Market crashes don't seem to bother me. My emotions don't really get caught up in what it is doing. Maybe that would be different if we had a big nest egg in the market. Something to consider though as our money grows. For our age Vanguard does recommend a 90/10. How would I go about thinking about this differently and deciding on what would be good?

Utah is beautiful! We love all things outdoors and are glad we took a chance on living here!

Thank you!!

For the first question the three fund portfolio can be Done with ETF’s as mentioned in the wiki :

“One could, of course, use ETFs rather than mutual funds. For example, one could use Total Stock Market ETF (VTI) [1], Vanguard Total International Stock Index Fund (VXUS) [2] for international, and Vanguard Total Bond Market ETF (BND).”

The reason i like ETFs is because they can be bought like a stock in an account (without a high commission) maybe say in your husband’s 401k if his employer allows a self directed brokerage account option. That should avoid the high fees he has i hope (have to make sure they dont charge some ridiculous amount to buy stocks / ETFs). Big picture whether you do the three fund portfolio or three etf portfolio the expense ratios are very similar and I would not get bogged down in which one you decide to use. Use the ones cheapest to buy. I, like you, used to add a few extra funds here and there and have moved away from that as it helps when tracking my investments and asset allocation.

To simplify your accounts … if in a tax deferred account the exchange will not be a taxable event. You can sell the ones you dont want and buy the ones you do … if you call vanguard and tell them what you want to do I’d bet they will talk you thru the screens to do it … make sure they are not going to charge you for the tele help.

Sticking with the vanguard recommendation AA at your age is smart i think unless you have reason not to. 90/10 seemed aggressive at first check but not for your age.

Looks like you are getting some good advice here and congrats again on your savings accomplishments!!

A good book i liked was “your money or your life”. While obsessing about money and saving is not good … using money as You see fit aligned with the goals you and your DH have in your life is the vision I think.

We used to travel to SLC and Ogden to visit Hill AFB for work. Nice there.

Cheers,
Parkinglotracer
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

tashnewbie wrote: Fri Aug 27, 2021 3:02 pm
inv021 wrote: Fri Aug 27, 2021 2:54 pm
tashnewbie wrote: Fri Aug 27, 2021 2:47 pm
inv021 wrote: Fri Aug 27, 2021 2:28 pm Once I make a decision on your 1, 2, 3 questions do I just completely sell and buy the new fund? (Sorry that continues to be my hold-up. I just don't know how to convert it. *I do in Vanguard but what I am meaning is do I sell from the target fund and buy let's say VOO all at once?)

2. It is a shame. Some of the other funds are even more outrageous. Same question I have in #1 or would you recommend all of his future money just be invested in the new fund?
I'm not @dbr, but if you're going to be exchanging funds in tax-advantaged accounts (e.g., Roth IRAs and 401k), I don't think it makes sense to do this incrementally, if you only want to hold the purchased fund. Just do it all at once. At Vanguard, in your account you can click "exchange" funds, and you should be prompted to indicate which fund you want to buy. An "exchange" is really 2 steps: sale of the first fund and purchase of the second.

I agree that you don't need a portfolio manager. They'll just suck you dry with high fund fees and management fees!! This forum can probably provide better general investing advice than a high-cost manager. If you truly think you need some "kid gloves," I'd go with something like Vanguard's PAS, which is relatively cheap at something like 0.25-0.30% fee. They at least won't invest your money in expensive funds.
Thank you, Tashnewbie. I appreciate all perspectives.

If I exchange it all at once I am assuming I am buying it all at today's price? Is that accurate thinking? I am not opposed to this I just want to make sure I am understanding what happens. Also, I would not have any tax issues because I am not taking out, correct?
If you're using mutual funds, then the price is fixed when the market closes on the day of sale (I think that's 4:00 pm ET). If you're using ETFs (like the VOO you mentioned above), then the price is generally whatever the market price is at the time you initiate the sell order (I think that's how it works; I've never used ETFs).

There are no tax consequences to buying and selling in tax-advantaged accounts like IRAs and 401k/457. There are tax consequences if you buy and sell in your taxable brokerage account.

This wiki link might be helpful: Tax-efficient fund placement

In your tax bracket, bond funds in the 401k would be a great choice. You can definitely opt to use a low-cost bond fund like VBTLX in her solo 401k, and his 401k/457 may have one too.

Personally, I would clean up her solo 401k some. I think a 3-fund portfolio would serve you well: VTSAX, VTIAX (if you want international), and VBTLX for bonds. See: 3-fund portfolio.

Edited: if you're going to be in the 24% bracket this year and possibly in years to come, then you may need to use the backdoor Roth strategy if you want to get money into a Roth IRA. Her Rollover IRA would complicate this for her. If you're over the income limit to contribute directly to Roth IRA in 2021, then you will have to fix the excess contribution. Just an FYI. See: Backdoor Roth
Thank you! So I looked and read through the tax-efficient fund placement article. I am going to give an example to see if I am understanding this correctly.

Tax-Advantaged Accounts Include:
For simplistic reasons I will use what you suggested: VTSAX, VTIAX, and VBTLX.

Her i401k - VTSAX, VTIAX and VBTLX
Her Roth Ira - VTSAX
Her Rollover IRA - VTSAX (Maybe one day convert this to Roth if our income changes)

His 401k - (Find the equivalent to the above and definitely include a bond in this account for him)
His 457 - Maybe just fund the equivalent to VTSAX
His Roth IRA - VTSAX

Taxable Account -
Keeping this VTSAX - Which I have a question after reading the article. What I gathered is this fund is the most tax-efficient unless I move it to the ETF. But if I exchanged now I would accrue tax consequences. So, do I just keep as VTSAX? or move all new money going into the ETF version?

Also, it looks like it is not recommended to own bonds in a taxable account. Is that accurate?

Does the above look accurate as I begin to move forward?

I am going to keep my AA as is 90/10 for now and Vanguard does recommend this for my age group. When the time comes to adjust since I will already have bonds in both her and his 401k I can just begin contributing more to the bond and less to the stock?

I am aware of the ROTH and the potential issues for this year. I am watching this closely as we are contributing weekly and might need to adjust. I just heard about the difficulties I might have because of my rollover IRA. Thanks for the heads up!

Best wishes!
New. Interested. Curious.
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: Four Investment Questions

Post by tashnewbie »

inv021 wrote: Sun Aug 29, 2021 8:38 am Thank you! So I looked and read through the tax-efficient fund placement article. I am going to give an example to see if I am understanding this correctly.

Tax-Advantaged Accounts Include:
For simplistic reasons I will use what you suggested: VTSAX, VTIAX, and VBTLX.

Her i401k - VTSAX, VTIAX and VBTLX
Her Roth Ira - VTSAX
Her Rollover IRA - VTSAX (Maybe one day convert this to Roth if our income changes)

His 401k - (Find the equivalent to the above and definitely include a bond in this account for him)
His 457 - Maybe just fund the equivalent to VTSAX
His Roth IRA - VTSAX

Taxable Account -
Keeping this VTSAX - Which I have a question after reading the article. What I gathered is this fund is the most tax-efficient unless I move it to the ETF. But if I exchanged now I would accrue tax consequences. So, do I just keep as VTSAX? or move all new money going into the ETF version?

Also, it looks like it is not recommended to own bonds in a taxable account. Is that accurate?

Does the above look accurate as I begin to move forward?

I am going to keep my AA as is 90/10 for now and Vanguard does recommend this for my age group. When the time comes to adjust since I will already have bonds in both her and his 401k I can just begin contributing more to the bond and less to the stock?

I am aware of the ROTH and the potential issues for this year. I am watching this closely as we are contributing weekly and might need to adjust. I just heard about the difficulties I might have because of my rollover IRA. Thanks for the heads up!

Best wishes!
I think those choices you listed above are reasonable. I would fill the Rollover IRA and her solo 401k with bonds before I'd put any in his 401k or 457 (because you have access to VBTLX in her accounts at the retail price which is low, and it appears, based on the funds you've listed in your original post, that his accounts have higher fees).

If you list the available fund choices in his accounts that are below say 0.30% expense ratio, forum members can give suggestions about which funds to use in those accounts. I would try to use index funds that are low-cost, to the extent available.

VTSAX is perfect in a taxable account at Vanguard. It's just as tax-efficient as the ETF variant of the same fund (VTI). There's no need to change at all, if you don't want. I like the ease and convenience of using mutual funds because I can invest with a dollar amount and don't have to worry about buying whole shares (Fidelity allows fractional share purchases of ETFs, but in my opinion, it's still not as easy as buying a mutual fund). If you want the ETF variant, you can call Vanguard and ask them to convert the VTSAX holdings into VTI. This would be tax-free (if Vanguard does it!), but it's irreversible. You could invest new money into VTSAX, but you'd never be able to re-convert VTI into VTSAX.

Whenever you want to add more bonds to your portfolio, you can just sell stock in the tax-advantaged plans (e.g., her solo 401k, Rollover IRA, his 401k, 457) and purchase more bonds. No tax consequences in those accounts to do that. You can also buy more bonds with new contributions, but depending on the size of your portfolio and your desired bond allocation, new contributions may not be sufficient to get you to your desired bond allocation.
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

tashnewbie wrote: Mon Aug 30, 2021 7:34 am
inv021 wrote: Sun Aug 29, 2021 8:38 am Thank you! So I looked and read through the tax-efficient fund placement article. I am going to give an example to see if I am understanding this correctly.

Tax-Advantaged Accounts Include:
For simplistic reasons I will use what you suggested: VTSAX, VTIAX, and VBTLX.

Her i401k - VTSAX, VTIAX and VBTLX
Her Roth Ira - VTSAX
Her Rollover IRA - VTSAX (Maybe one day convert this to Roth if our income changes)

His 401k - (Find the equivalent to the above and definitely include a bond in this account for him)
His 457 - Maybe just fund the equivalent to VTSAX
His Roth IRA - VTSAX

Taxable Account -
Keeping this VTSAX - Which I have a question after reading the article. What I gathered is this fund is the most tax-efficient unless I move it to the ETF. But if I exchanged now I would accrue tax consequences. So, do I just keep as VTSAX? or move all new money going into the ETF version?

Also, it looks like it is not recommended to own bonds in a taxable account. Is that accurate?

Does the above look accurate as I begin to move forward?

I am going to keep my AA as is 90/10 for now and Vanguard does recommend this for my age group. When the time comes to adjust since I will already have bonds in both her and his 401k I can just begin contributing more to the bond and less to the stock?

I am aware of the ROTH and the potential issues for this year. I am watching this closely as we are contributing weekly and might need to adjust. I just heard about the difficulties I might have because of my rollover IRA. Thanks for the heads up!

Best wishes!
I think those choices you listed above are reasonable. I would fill the Rollover IRA and her solo 401k with bonds before I'd put any in his 401k or 457 (because you have access to VBTLX in her accounts at the retail price which is low, and it appears, based on the funds you've listed in your original post, that his accounts have higher fees).

Thank you for this suggestion. That makes a lot of sense. I have not found a fund for him that is below .40% ER.

If you list the available fund choices in his accounts that are below say 0.30% expense ratio, forum members can give suggestions about which funds to use in those accounts. I would try to use index funds that are low-cost, to the extent available.

This will not be possible because of the funds he has. I think I will change his accounts to full stocks and we will keep the bonds in my portfolio. It sounds like if it is not below .30% the bond in his fund does not make sense. Is that accurate?

VTSAX is perfect in a taxable account at Vanguard. It's just as tax-efficient as the ETF variant of the same fund (VTI). There's no need to change at all, if you don't want. I like the ease and convenience of using mutual funds because I can invest with a dollar amount and don't have to worry about buying whole shares (Fidelity allows fractional share purchases of ETFs, but in my opinion, it's still not as easy as buying a mutual fund). If you want the ETF variant, you can call Vanguard and ask them to convert the VTSAX holdings into VTI. This would be tax-free (if Vanguard does it!), but it's irreversible. You could invest new money into VTSAX, but you'd never be able to re-convert VTI into VTSAX.


Thank you! I appreciate the response on this. I think I will keep VTSAX as I have a lot of other funds I need to figure out. Maybe later I will but for now, I need to focus on simplifying changing other things. I am glad it does work though, that is good news.


Whenever you want to add more bonds to your portfolio, you can just sell stock in the tax-advantaged plans (e.g., her solo 401k, Rollover IRA, his 401k, 457) and purchase more bonds. No tax consequences in those accounts to do that. You can also buy more bonds with new contributions, but depending on the size of your portfolio and your desired bond allocation, new contributions may not be sufficient to get you to your desired bond allocation.

This makes a lot of sense. And thank you for the suggestion of selling stock to buy bonds if needed.
New. Interested. Curious.
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: Four Investment Questions

Post by tashnewbie »

inv021 wrote: Mon Aug 30, 2021 5:02 pm This will not be possible because of the funds he has. I think I will change his accounts to full stocks and we will keep the bonds in my portfolio. It sounds like if it is not below .30% the bond in his fund does not make sense. Is that accurate?
I don't think it'd make sense to use a bond fund in his account if it's above 0.30% expense ratio, because you have access to much cheaper index fund options in your accounts. And your accounts are large enough to hold your desired bond allocation, at least for now and probably a good while in the future.
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

So I am slowly chipping away at changing accounts, setting my AA, and reading up on my husband's retirement accounts.

I do have a question on his:

I found a fund for his 457 that is a Large Cap Stock Index Fund that invests in stocks included in the Russell 1000 Index. The total expense ratio is .18%. So significantly lower, in my mind, than what he is currently at. It appears to be a good transfer from his current Target Date.

However, I did find in small print that they work with Schwab PCRA. So I can move the money, all but $1,600 into a Schwab PCRA account and invest as I wish. The two things I have found so far that include a fee from his main employer using PCRA are a 0.02% will occur monthly and a $12 fee quarterly for every investment account he holds in Schwab. 1. Do we change him to Schwab to get more options and lower expenses, even though we accrue fees, or do I keep it simple and just change his account into the Large Cap Stock Index?
New. Interested. Curious.
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

tashnewbie wrote: Tue Aug 31, 2021 7:43 am
inv021 wrote: Mon Aug 30, 2021 5:02 pm This will not be possible because of the funds he has. I think I will change his accounts to full stocks and we will keep the bonds in my portfolio. It sounds like if it is not below .30% the bond in his fund does not make sense. Is that accurate?
I don't think it'd make sense to use a bond fund in his account if it's above 0.30% expense ratio, because you have access to much cheaper index fund options in your accounts. And your accounts are large enough to hold your desired bond allocation, at least for now and probably a good while in the future.

Thank you Tashnewbie! I know this is a few weeks later but I found out some things with my husband's account and am wondering if you can take a look. I posted on the thread but didn't know if it dings anyone. Thank you in advance.

So I am slowly chipping away at changing accounts, setting my AA, and reading up on my husband's retirement accounts.

I do have a question on his:

I found a fund for his 457 that is a Large Cap Stock Index Fund that invests in stocks included in the Russell 1000 Index. The total expense ratio is .18%. So significantly lower, in my mind, than what he is currently at. It appears to be a good transfer from his current Target Date.

However, I did find in small print that they work with Schwab PCRA. So I can move the money, all but $1,600 into a Schwab PCRA account and invest as I wish. The two things I have found so far that include a fee from his main employer using PCRA are a 0.02% will occur monthly and a $12 fee quarterly for every investment account he holds in Schwab. 1. Do we change him to Schwab to get more options and lower expenses, even though we accrue fees, or do I keep it simple and just change his account into the Large Cap Stock Index?
New. Interested. Curious.
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: Four Investment Questions

Post by tashnewbie »

inv021 wrote: Mon Sep 27, 2021 8:13 pm Thank you Tashnewbie! I know this is a few weeks later but I found out some things with my husband's account and am wondering if you can take a look. I posted on the thread but didn't know if it dings anyone. Thank you in advance.

So I am slowly chipping away at changing accounts, setting my AA, and reading up on my husband's retirement accounts.

I do have a question on his:

I found a fund for his 457 that is a Large Cap Stock Index Fund that invests in stocks included in the Russell 1000 Index. The total expense ratio is .18%. So significantly lower, in my mind, than what he is currently at. It appears to be a good transfer from his current Target Date.

However, I did find in small print that they work with Schwab PCRA. So I can move the money, all but $1,600 into a Schwab PCRA account and invest as I wish. The two things I have found so far that include a fee from his main employer using PCRA are a 0.02% will occur monthly and a $12 fee quarterly for every investment account he holds in Schwab. 1. Do we change him to Schwab to get more options and lower expenses, even though we accrue fees, or do I keep it simple and just change his account into the Large Cap Stock Index?
That Large Cap Stock Index Fund that follows the Russell 1000 index seems like a great option in his 457. The Russell 1000 index represents about 90% of the total US stock market, which in my opinion is good enough by itself to represent the US stock market adequately. I would happily use that fund over the TDF he's currently using (by the way, the TDF's 0.27% expense ratio is not bad, and it's only 0.09% higher than the Large Cap fund, but I'd use the individual fund because it is cheaper and it will probably make maintaining your asset allocation across all your accounts easier).

I would also use the Large Cap Stock Index Fund over using the Schwab PCRA, because the fees of the Large Cap Stock Index Fund (0.18%) are lower than what you could get through PCRA, unless the 457 has a high administrative fee that he could escape by using PCRA.

Fees in PCRA: 0.24% annualized added to every fund he uses + $48, which is higher than the 0.18% you can pay for the Large Cap Stock Index Fund in the 457. Based on the portfolio percentages you listed in your original post, it looks like he has ~$118,800 in the 457. Let's say you move $117k to PCRA and keep $1,800 in the regular 457 account. The $117k would incur fees of ~$329/year = ($117,000 x 0.24%) + $48 = 0.28% for the first year. You'd have to add 0.28% fees to each fund you use in the PCRA (this fee will gradually decrease to a little more than 0.24% as his total balance increases, because $48 will become a smaller percentage of the balance). Even if the fund fee was only 0.02%, your total fee would be 0.30% the first year.

It looks like you've done a deep dive into his 457's options. If he doesn't have any cheaper bond/fixed income options, then I would put the desired bonds in your accounts first, and then move to his 457 as a last resort.
User avatar
ruralavalon
Posts: 26353
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Four Investment Questions

Post by ruralavalon »

Deleted
Last edited by ruralavalon on Tue Sep 28, 2021 10:49 am, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
User avatar
ruralavalon
Posts: 26353
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Four Investment Questions

Post by ruralavalon »

You are not behind on investing, you are doing well, you chose good funds with low expense ratios, there is no need to be "fancy". Starting at ages 29 and 31 is not starting late. $540k at ages 34 and 36 is excellent.


inv021 wrote: Thu Aug 26, 2021 8:54 pmTax Filing Status: Married Filing Jointly

. . . . .

Age: 36 - ME, 34 - Partner
Please clarify this. Is it married or partners?

It makes a lot of difference when it comes to tax issues.

inv021 wrote: Thu Aug 26, 2021 8:54 pmAnnual Contributions
$4,500 his 401k - 4% employer match (This is what his employer puts in)
$19,500 his 457
$4,100 his 501 (His employer adds this)
$19,500 her i401k
$6,000 his Roth IRA
$6,000 her Roth IRA
$8,320 taxable brokerage
We also have an HSA account that we max out every year. (Read below for a question on this. I have not started investing.)
You have an excellent rate of contributions, about $68k annually.

Having a high rate of contributions is the most important investing decision you can make, forum discussion. The other issues you raise are far less important.

I suggest reducing contributions to the taxable brokerage account and increasing contributions to his employer's 401k plan.

Is the 457b plan a governmental plan?

Could you also please list the funds offered in the each of the employer plans, giving fund names, tickers and expense ratios? Please see this for information needed and format: "Asking Portfolio Questions".

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all your information is in one place. This will let us suggest funds to use.


inv021 wrote: Fri Aug 27, 2021 10:10 amMarket crashes don't seem to bother me. My emotions don't really get caught up in what it is doing. Maybe that would be different if we had a big nest egg in the market. Something to consider though as our money grows. For our age Vanguard does recommend a 90/10. How would I go about thinking about this differently and deciding on what would be good?
In my opinion at ages 34 and 36 an asset allocation of 90% stocks/10% fixed income is within the range of what is reasonable.

Asset allocation is the second most important investing decision you can make.

Asset allocation is a very personal decision which you and your husband must make based on your down individual ability, willingness and need to take risk.


inv021 wrote: Thu Aug 26, 2021 8:54 pmQuestions
1. I am currently the one educating myself on investing and retirement planning. When I first began investing 5 years ago I put mine and my husband's ROTH IRA in the target retirement 2050 vanguard account VFIFX (expense ratio .15%). It was easy and I didn't have time to do research. Over the years I have been learning and educating myself more. I have been thinking about moving the money into a different account: S&P 500 or Total Stock Market.
Target date funds in tax-advantaged accounts are an excellent idea. They are a simple, very diversified all-in-one portfolio, requiring no portfolio management on your part.

Using allocation funds seems to inoculate the investor against behavioral errors and so produce higher investor returns. Morningstar (8/15/2019) "Mind the Gap 2019", link.

A quick education for young investors is Dr. Bernstein's short pdf book, "If You Can", and also the wiki article "Bogleheads® investment philosophy", link.

To go beyond the most basic I suggest that you also read one or two books on investing. Wiki article "Books: recommendations and reviews", link.

Could you also please list the funds offered in the each of the employer plans, giving fund names, tickers and expense ratios? This will let us suggest funds to use.



inv021 wrote: Thu Aug 26, 2021 8:54 pmMy question is this: Should I even worry about this or just keep this as is? With the market being high I am wondering if that even makes sense to go and buy a new fund all in one day when the last five years I have been DCA weekly into VFIFX. My only reasoning to move the money is for a potential higher return (I know past history does not guarantee future returns) and for the asset allocation to be managed by me and not automatically done by VFIFX.
You could stay with the target date funds. You could keep that as is.

Could you also please list the funds offered in the each of the employer plans, giving fund names, tickers and expense ratios? This will let us suggest funds to use.


inv021 wrote: Thu Aug 26, 2021 8:54 pm2. My husband's accounts tend to have higher expense ratio's because of his employment and what they offer. I have also been looking into changing these to lower expense ratio funds because his company does offer lower expense funds with better returns. Such as his 2050 target fund and his 501.
In prioritizing account contributions, choose accounts which offer lower expense.

Could you also please list the funds offered in the each of the employer plans, giving fund names, tickers and expense ratios? This will let us suggest funds to use.



inv021 wrote: Thu Aug 26, 2021 8:54 pmThe same question as above applies to this.
501 - I can change from an expense ratio of .93 to .41 (This would be the nationwide s&P 500 Index Fund). If I did make the switch would you recommend converting the fund all at once? Or would you recommend just beginning to put the money moving forward into a new fund (which I believe he can do I just need to follow up and make sure)?
Could you also please list the funds offered in the each of the employer plans, giving fund names, tickers and expense ratios? This will let us suggest funds to use.



inv021 wrote: Thu Aug 26, 2021 8:54 pm3. My husband feels like it is best to start to have someone manage the funds. I am obviously hesitant about this. The person he sought out charges .8% for his fee and the expense ratio's on the funds is .5%. I am having a hard time swallowing losing that money over time. I do not believe I am smarter than this individual but a 1.3% loss feels like a lot and especially because my husband's money is already losing more than mine with Vanguard. Sometimes I feel like I am overthinking this but thought I'd ask here.
In my opinion staying with simple, all-in-one target date funds in all tax-advantaged accounts is much better than paying 0.80% (or any amount) to have someone manage your portfolio.

Here is a guide to help in deciding if you and your husband want or need an advisor: "The great paradox of using an advisor is that you must know some basics in order to evaluate the advice, and once you do, you also know enough to consider doing your own management." "Chapter 10 – On Your Own or Hire an Advisor".

1) Vanguard offers a ”Personal Advisory Service” (PAS) that will give you advice and manage your investments for an annual fee of 0.3% of your investments. Fidelity and Schwab offer a similar service.

2) Harry Sit, who sometimes posts here, offers a service thru his blog to help people locate an advisor in their locality. "Advice-Only Search and Screening".

3) Two links for finding an advisor:
The National Association of Personal Financial Advisors (NAPFA); and
Garrett Planning Network.


inv021 wrote: Thu Aug 26, 2021 8:54 pm4. HSA - We max this out yearly and often use most of it because of my husband's chronic health problems. I have not begun investing this and know it is a triple tax advantage. My question is this: We currently have around $8,000. Our current insurance has an out-of-pocket max of $8,000 and the in-network max is $3,000. I thought about keeping $3,000 not invested and begin investing $5,000. What questions should I be asking myself and what asset allocation would be good to invest in? I can invest in Vanguard funds - VIGIX, VBIRX, VSMAX, VMVAX. These are the ones I have been looking at. They have about 5 more available.
In my opinion the first question should be -- is the High Deductible Health Plan (HDHP) offered at work suitable for his medical insurance needs?

If not, then a HDHP and using a Health Savings Account (HSA) is not wise as a way to insure for his chronic health problems.

In prioritizing investments it says "Contribute to a Health Savings Account (HSA) if a high deductible health plan is appropriate for your needs (you can think of HSA contributions as also getting a match, from the IRS)." Wiki article Prioritizing Investments.

With expensive chronic health problems a HDHP and HSA many not be a good idea. Remember this first a health insurance issue, second a tax issue, and third an investing issue. Don't let the investing and tax issues override the insurance issue.

Wiki article High deductible health plan. "Since the payment structure of an HDHP is very different, you may owe significantly more or less with an HDHP than with a conventional plan. You will need to work out the costs yourself."

inv021 wrote: Fri Aug 27, 2021 10:10 amMy question to you is this - if I decided to make things more simple how do I go about doing that? That is where I get stuck. Do I just buy and transfer my funds all in one day? I can't seem to find good articles. I also am not well-read on rebalancing, which would this essentially be the same thing?
Once you decide on an overall plan for all accounts, and the funds to use in each account, then go right ahead ahead and make any switch all at once.


inv021 wrote: Fri Aug 27, 2021 10:10 amMy second question is why VTI (etf) instead of VTSAX (Index Fund)? Is it just because of the difference in expense ratio .3% versus .4%? Or is it the potential tax savings on ETF versus Index Fund when dividends are sold?
An expense ratio difference of 0.01% is trivial and will make no real difference.

The decision between exchange traded funds (ETFs) and regular mutual funds is largely a matter of personal preference. Wiki article "ETFs vs muy funds".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

tashnewbie wrote: Tue Sep 28, 2021 8:39 am
inv021 wrote: Mon Sep 27, 2021 8:13 pm Thank you Tashnewbie! I know this is a few weeks later but I found out some things with my husband's account and am wondering if you can take a look. I posted on the thread but didn't know if it dings anyone. Thank you in advance.

So I am slowly chipping away at changing accounts, setting my AA, and reading up on my husband's retirement accounts.

I do have a question on his:

I found a fund for his 457 that is a Large Cap Stock Index Fund that invests in stocks included in the Russell 1000 Index. The total expense ratio is .18%. So significantly lower, in my mind, than what he is currently at. It appears to be a good transfer from his current Target Date.

However, I did find in small print that they work with Schwab PCRA. So I can move the money, all but $1,600 into a Schwab PCRA account and invest as I wish. The two things I have found so far that include a fee from his main employer using PCRA are a 0.02% will occur monthly and a $12 fee quarterly for every investment account he holds in Schwab. 1. Do we change him to Schwab to get more options and lower expenses, even though we accrue fees, or do I keep it simple and just change his account into the Large Cap Stock Index?
That Large Cap Stock Index Fund that follows the Russell 1000 index seems like a great option in his 457. The Russell 1000 index represents about 90% of the total US stock market, which in my opinion is good enough by itself to represent the US stock market adequately. I would happily use that fund over the TDF he's currently using (by the way, the TDF's 0.27% expense ratio is not bad, and it's only 0.09% higher than the Large Cap fund, but I'd use the individual fund because it is cheaper and it will probably make maintaining your asset allocation across all your accounts easier).

I would also use the Large Cap Stock Index Fund over using the Schwab PCRA, because the fees of the Large Cap Stock Index Fund (0.18%) are lower than what you could get through PCRA, unless the 457 has a high administrative fee that he could escape by using PCRA.

Fees in PCRA: 0.24% annualized added to every fund he uses + $48, which is higher than the 0.18% you can pay for the Large Cap Stock Index Fund in the 457. Based on the portfolio percentages you listed in your original post, it looks like he has ~$118,800 in the 457. Let's say you move $117k to PCRA and keep $1,800 in the regular 457 account. The $117k would incur fees of ~$329/year = ($117,000 x 0.24%) + $48 = 0.28% for the first year. You'd have to add 0.28% fees to each fund you use in the PCRA (this fee will gradually decrease to a little more than 0.24% as his total balance increases, because $48 will become a smaller percentage of the balance). Even if the fund fee was only 0.02%, your total fee would be 0.30% the first year.

It looks like you've done a deep dive into his 457's options. If he doesn't have any cheaper bond/fixed income options, then I would put the desired bonds in your accounts first, and then move to his 457 as a last resort.
Thanks for the help! You are correct about the expense ratio being only .09% difference. I had in my brain his 501c that I still am doing research on through Nationwide. But I do agree with switching still because it will be easier for me to know my AA across all accounts.

The 457 does not have a high administrative fee and is included in the .18%. I called and spoke with someone about the exact fees. 0.2% is an investment fee and 0.16% is the management fee.

Thank you for doing more calculations. Just out of curiosity does Schwab charge 0.24% to just use their service? I am unsure where you got 0.24%. Does everyone have that fee? I did the calculations based on the $12 per fund quarterly and the extra 0.02% monthly and it still did not make much sense.

Overall, I landed on the Russell 1000.

The bond expense ratio is 0.32%. It makes more sense for me to keep the bond allocation in my 401k for now.

Also, when looking at the AA should I be taking into account his pension? I have read mixed reviews on adding SS and Pensions to someone's overall AA. Any advice would be appreciated or a link to read more.
New. Interested. Curious.
User avatar
ruralavalon
Posts: 26353
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Four Investment Questions

Post by ruralavalon »

Is the 457(b) plan a governmental plan? It may make a big difference in how much you might want to use the plan.

Does he work for a government or government body? Or instead does he work for a charity or non-profit, a tax-exempt organization?

In a non-governmental 457b plan "plan assets are the property of the sponsoring employer and are subject to the employer's general creditors, until paid out to plan participants."

"Government 457(b) plans are subject to income tax upon withdrawal but are not subject to the 10% early withdrawal penalty. Funds can be withdrawn at retirement, upon severance from the employer, upon death, upon disability, and under stringent hardship withdrawal rules. Funds must be withdrawn at age 70 and 1/2 (unless you are still working) and are subject to the required minimum distributions rules."

"Different rules apply if you work for a tax-exempt organization (you must see the employer plan document for the details.)"

There are different rules for rollovers. IRS, pdf "Rollover Chart".

inv021 wrote: Sun Oct 03, 2021 7:38 pmOverall, I landed on the Russell 1000.

The bond expense ratio is 0.32%. It makes more sense for me to keep the bond allocation in my 401k for now.
In my opinion the Russell 1000 Index Fund ER 0.18% is a good choice in the 457b plan. It is a very diversified U.S. stock index fund, with a low expense ratio even with the added administrative fee.

I don't see any posted description of the fixed income investments offered in his employer's 457b plan.

What bond funds are offered in his employer's 457b plan? Please give fund names, tickers if any, and expense ratios.

Is there a Stable Value Fund or Guaranteed Income Fund offered in his employer's 457b plan? If so for each fund what is the current interest rate being paid, and what rate if any is guaranteed? Please give fund names, and tickers if any.

Expense ratios around 0.32% should not automatically rule out even thinking about, even looking at, funds of this type.


inv021 wrote: Sun Oct 03, 2021 7:38 pmAlso, when looking at the AA should I be taking into account his pension? I have read mixed reviews on adding SS and Pensions to someone's overall AA. Any advice would be appreciated or a link to read more.
I suggest considering the pension as an income stream in retirement, which reduces the net amount needed annually from your portfolio, rather than treating the pension as a fixed income asset in the asset allocation.

Considering the pension as an income stream does impact your ability, willingness and need to take risk. It impacts the asset allocation in that way.

If you want to count the pension as a fixed income asset (for purposes of asset allocation) consider the value as the amount of cash he could receive today if he left the job today.

You would value a stock fund (for purposes of asset allocation) at what you could sell it for today, not what it may be worth many 30 years from now. So value the pension (for purposes of asset allocation) at what he could "sell" it for today.

"Age: 36 - ME, 34 - Partner", so retirement is decades in the future. A lot can happen in that time. A pension can be terminated, modified, or simply underfunded. He may not work there long enough for the pension to vest, or long enough to earn the full pension benefits. On average workers switch employers about every five years. This makes it difficult to treat it as a fixed income asset for purposes of asset allocation.
Last edited by ruralavalon on Mon Oct 04, 2021 7:37 am, edited 3 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
User avatar
FrugalInvestor
Posts: 6214
Joined: Thu Nov 06, 2008 11:20 pm

Re: Four Investment Questions

Post by FrugalInvestor »

dbr wrote: Fri Aug 27, 2021 10:49 am You would have to have an extraordinary need for advice involving a complicated and special situation to justify that fee. So, no. It is likely the cost ends up more than that and that there will be pressure to buy products you don't want.
I will add emphasis to the fact that the products you don't want (and that the advisor will likely recommend) will add unnecessary complexity and expense to your portfolio. Adding complexity is a tool financial advisors use to make clients believe that only an advisor can successfully manage their investment portfolio. Be aware that once the complexity is added it is not only difficult but can also be very expensive to streamline your portfilio again. There have been many examples of this happening on this board over the years. With all due respect to your husband, don't let this happen to you!
Have a plan, stay the course and simplify. Then ignore the noise!
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: Four Investment Questions

Post by tashnewbie »

As I mentioned much earlier in this thread, it would be very helpful for other forum members if you updated your original post (use the pencil edit button) to add information in the "Asking Portfolio Questions" sticky post (viewtopic.php?f=1&t=6212). It would obviate the need for some of this back and forth (happy to do it, but it would be more efficient for everyone otherwise). For example, what are all the options available in each of your workplace plans (401k, 457, etc)? What type of 457 (non-governmental or governmental)? This information will help other members advise you on the best options in those plans.
inv021 wrote: Sun Oct 03, 2021 7:38 pm The 457 does not have a high administrative fee and is included in the .18%. I called and spoke with someone about the exact fees. 0.2% is an investment fee and 0.16% is the management fee.
Is the investment fee for the Russell 1000 fund in his 457 0.2% or 0.02% (you mentioned 0.2% above; may be a typo)? I assume it's 0.02% because you said the total fee is 0.18% (0.02% fund fee + 0.16% admin. fee). Presumably the administrative fee will be added to each fund he uses in the 457 (that's generally how an admin. fee works). 0.16% isn't horrible as far as admin. fees go.
Thank you for doing more calculations. Just out of curiosity does Schwab charge 0.24% to just use their service? I am unsure where you got 0.24%. Does everyone have that fee? I did the calculations based on the $12 per fund quarterly and the extra 0.02% monthly and it still did not make much sense.
I got 0.24% by multiplying the monthly fee (0.02%) by 12. I don't know what Schwab generally charges for PCRA. I think PCRA is only needed for people who are participants in institutional plans like 457, 403b, etc. Retail customers can just use Schwab's general platform, which doesn't have any fees outside of the fund fees (unless the customer uses an advisory service).
The bond expense ratio is 0.32%. It makes more sense for me to keep the bond allocation in my 401k for now.
0.32% isn't horrible for a bond fund. But, because you have better options available in your solo 401k and Rollover IRA, I would fill those with your desired bond allocation first, before using his 457.
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

FrugalInvestor wrote: Mon Oct 04, 2021 7:29 am
dbr wrote: Fri Aug 27, 2021 10:49 am You would have to have an extraordinary need for advice involving a complicated and special situation to justify that fee. So, no. It is likely the cost ends up more than that and that there will be pressure to buy products you don't want.
I will add emphasis to the fact that the products you don't want (and that the advisor will likely recommend) will add unnecessary complexity and expense to your portfolio. Adding complexity is a tool financial advisors use to make clients believe that only an advisor can successfully manage their investment portfolio. Be aware that once the complexity is added it is not only difficult but can also be very expensive to streamline your portfolio again. There have been many examples of this happening on this board over the years. With all due respect to your husband, don't let this happen to you!
Thank you, Frugalinvestor. I think I have successfully talked him out of a financial advisor. However, we did discuss the Vanguard option others suggested for .3% or a one-time payment to an advisor to look over everything. That helped him to feel comfortable knowing we had options and I felt much better knowing it would not be as expensive and knowing we are not stuck with an advisor.
I currently have a friend with a financial advisor who is making things complex for her and selling her all sorts of things that she thinks she needs. I am just happy she is investing, which is a good start for her, but I feel sad she is getting taken advantage of.
New. Interested. Curious.
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

ruralavalon wrote: Mon Oct 04, 2021 6:47 am Is the 457(b) plan a governmental plan? It may make a big difference in how much you might want to use the plan.

Does he work for a government or government body? Or instead does he work for a charity or non-profit, a tax-exempt organization?

He works for a government body. He can withdrawal early with no penalty.

In a non-governmental 457b plan "plan assets are the property of the sponsoring employer and are subject to the employer's general creditors, until paid out to plan participants."

"Government 457(b) plans are subject to income tax upon withdrawal but are not subject to the 10% early withdrawal penalty. Funds can be withdrawn at retirement, upon severance from the employer, upon death, upon disability, and under stringent hardship withdrawal rules. Funds must be withdrawn at age 70 and 1/2 (unless you are still working) and are subject to the required minimum distributions rules."

This is the rule that applies to him.

"Different rules apply if you work for a tax-exempt organization (you must see the employer plan document for the details.)"

There are different rules for rollovers. IRS, pdf "Rollover Chart".

He did not have a rollover.
inv021 wrote: Sun Oct 03, 2021 7:38 pmOverall, I landed on the Russell 1000.

The bond expense ratio is 0.32%. It makes more sense for me to keep the bond allocation in my 401k for now.
In my opinion the Russell 1000 Index Fund ER 0.18% is a good choice in the 457b plan. It is a very diversified U.S. stock index fund, with a low expense ratio even with the added administrative fee.

I don't see any posted description of the fixed income investments offered in his employer's 457b plan.

What bond funds are offered in his employer's 457b plan? Please give fund names, tickers if any, and expense ratios.

I will be able to provide this tomorrow.

Is there a Stable Value Fund or Guaranteed Income Fund offered in his employer's 457b plan? If so for each fund what is the current interest rate being paid, and what rate if any is guaranteed? Please give fund names, and tickers if any.

Expense ratios around 0.32% should not automatically rule out even thinking about, even looking at, funds of this type.

Thank you for making me consider looking at a fund of this type. I have not ruled it out but thought I would start with the bond in my 401k first before moving to his. I am working on simplifying, understanding AA, and working on streamlining things. I hope in the long run that is a good decision for me.
inv021 wrote: Sun Oct 03, 2021 7:38 pmAlso, when looking at the AA should I be taking into account his pension? I have read mixed reviews on adding SS and Pensions to someone's overall AA. Any advice would be appreciated or a link to read more.
I suggest considering the pension as an income stream in retirement, which reduces the net amount needed annually from your portfolio, rather than treating the pension as a fixed income asset in the asset allocation.

Considering the pension as an income stream does impact your ability, willingness, and need to take risk. It impacts the asset allocation in that way.

If you want to count the pension as a fixed income asset (for purposes of asset allocation) consider the value as the amount of cash he could receive today if he left the job today.

This is difficult because the State does not give lump sums. I have called the pension department. He is vested. With how many years he has worked now and if hypothetically he left tomorrow, beginning at age 65 years old he would get $900 a month before taxes. So, if I were to consider it a fixed income asset do I look at it in the sense of needing less from my portfolio withdrawal when in retirement. I'll give an example. Example: let's say we need $100,000 in retirement and if he works until he can retire with full pension he would get $35,000 a year. So, technically we would need $65,000 from the portfolio in order to meet our needs. Would this mean we need a smaller portfolio with fixed income streams?

You would value a stock fund (for purposes of asset allocation) at what you could sell it for today, not what it may be worth many 30 years from now. So value the pension (for purposes of asset allocation) at what he could "sell" it for today.

"Age: 36 - ME, 34 - Partner", so retirement is decades in the future. A lot can happen in that time. A pension can be terminated, modified, or simply underfunded. He may not work there long enough for the pension to vest, or long enough to earn the full pension benefits. On average workers switch employers about every five years. This makes it difficult to treat it as a fixed income asset for purposes of asset allocation.
We are definitely aware that the pension system could dry up. This is where I get mixed messages when I read things about adding it to AA or not adding it because you can't bank on things such as pensions or SS.
Thanks for all your help, ruralavalon.
New. Interested. Curious.
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

ruralavalon wrote: Tue Sep 28, 2021 10:48 am You are not behind on investing, you are doing well, you chose good funds with low expense ratios, there is no need to be "fancy". Starting at ages 29 and 31 is not starting late. $540k at ages 34 and 36 is excellent.

Thank you, ruralavalon! It is comforting to hear you say this. I appreciate the validation and encouragement.
inv021 wrote: Thu Aug 26, 2021 8:54 pmTax Filing Status: Married Filing Jointly

. . . . .

Age: 36 - ME, 34 - Partner
Please clarify this. Is it married or partners?

It makes a lot of difference when it comes to tax issues.

We are married.
inv021 wrote: Thu Aug 26, 2021 8:54 pmAnnual Contributions
$4,500 his 401k - 4% employer match (This is what his employer puts in)
$19,500 his 457
$4,100 his 501 (His employer adds this)
$19,500 her i401k
$6,000 his Roth IRA
$6,000 her Roth IRA
$8,320 taxable brokerage
We also have an HSA account that we max out every year. (Read below for a question on this. I have not started investing.)
You have an excellent rate of contributions, about $68k annually.

Having a high rate of contributions is the most important investing decision you can make, forum discussion. The other issues you raise are far less important.

Thank you! I plan on reading this link!

I suggest reducing contributions to the taxable brokerage account and increasing contributions to his employer's 401k plan.

Is this advice given so we can take more advantage of tax-advantaged accounts? I did not consider this but it would make sense to do this.

Is the 457b plan a governmental plan?

Could you also please list the funds offered in the each of the employer plans, giving fund names, tickers and expense ratios? Please see this for information needed and format: "Asking Portfolio Questions".

Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all your information is in one place. This will let us suggest funds to use.

I plan on doing this tomorrow.
inv021 wrote: Fri Aug 27, 2021 10:10 amMarket crashes don't seem to bother me. My emotions don't really get caught up in what it is doing. Maybe that would be different if we had a big nest egg in the market. Something to consider though as our money grows. For our age Vanguard does recommend a 90/10. How would I go about thinking about this differently and deciding on what would be good?
In my opinion at ages 34 and 36 an asset allocation of 90% stocks/10% fixed income is within the range of what is reasonable.

Asset allocation is the second most important investing decision you can make.

Asset allocation is a very personal decision which you and your husband must make based on your down individual ability, willingness and need to take risk.


inv021 wrote: Thu Aug 26, 2021 8:54 pmQuestions
1. I am currently the one educating myself on investing and retirement planning. When I first began investing 5 years ago I put mine and my husband's ROTH IRA in the target retirement 2050 vanguard account VFIFX (expense ratio .15%). It was easy and I didn't have time to do research. Over the years I have been learning and educating myself more. I have been thinking about moving the money into a different account: S&P 500 or Total Stock Market.
Target date funds in tax-advantaged accounts are an excellent idea. They are a simple, very diversified all-in-one portfolio, requiring no portfolio management on your part.

Using allocation funds seems to inoculate the investor against behavioral errors and so produce higher investor returns. Morningstar (8/15/2019) "Mind the Gap 2019", link.

A quick education for young investors is Dr. Bernstein's short pdf book, "If You Can", and also the wiki article "Bogleheads® investment philosophy", link.

To go beyond the most basic I suggest that you also read one or two books on investing. Wiki article "Books: recommendations and reviews", link.

I have a few books at the library waiting for me from the book recommendations list! Thanks for more suggestions.

Could you also please list the funds offered in the each of the employer plans, giving fund names, tickers and expense ratios? This will let us suggest funds to use.



inv021 wrote: Thu Aug 26, 2021 8:54 pmMy question is this: Should I even worry about this or just keep this as is? With the market being high I am wondering if that even makes sense to go and buy a new fund all in one day when the last five years I have been DCA weekly into VFIFX. My only reasoning to move the money is for a potential higher return (I know past history does not guarantee future returns) and for the asset allocation to be managed by me and not automatically done by VFIFX.
You could stay with the target date funds. You could keep that as is.

Could you also please list the funds offered in the each of the employer plans, giving fund names, tickers and expense ratios? This will let us suggest funds to use.


inv021 wrote: Thu Aug 26, 2021 8:54 pm2. My husband's accounts tend to have higher expense ratio's because of his employment and what they offer. I have also been looking into changing these to lower expense ratio funds because his company does offer lower expense funds with better returns. Such as his 2050 target fund and his 501.
In prioritizing account contributions, choose accounts which offer lower expense.

Could you also please list the funds offered in the each of the employer plans, giving fund names, tickers and expense ratios? This will let us suggest funds to use.



inv021 wrote: Thu Aug 26, 2021 8:54 pmThe same question as above applies to this.
501 - I can change from an expense ratio of .93 to .41 (This would be the nationwide s&P 500 Index Fund). If I did make the switch would you recommend converting the fund all at once? Or would you recommend just beginning to put the money moving forward into a new fund (which I believe he can do I just need to follow up and make sure)?
Could you also please list the funds offered in the each of the employer plans, giving fund names, tickers and expense ratios? This will let us suggest funds to use.



inv021 wrote: Thu Aug 26, 2021 8:54 pm3. My husband feels like it is best to start to have someone manage the funds. I am obviously hesitant about this. The person he sought out charges .8% for his fee and the expense ratio's on the funds is .5%. I am having a hard time swallowing losing that money over time. I do not believe I am smarter than this individual but a 1.3% loss feels like a lot and especially because my husband's money is already losing more than mine with Vanguard. Sometimes I feel like I am overthinking this but thought I'd ask here.
In my opinion staying with simple, all-in-one target date funds in all tax-advantaged accounts is much better than paying 0.80% (or any amount) to have someone manage your portfolio.

Here is a guide to help in deciding if you and your husband want or need an advisor: "The great paradox of using an advisor is that you must know some basics in order to evaluate the advice, and once you do, you also know enough to consider doing your own management." "Chapter 10 – On Your Own or Hire an Advisor".

1) Vanguard offers a ”Personal Advisory Service” (PAS) that will give you advice and manage your investments for an annual fee of 0.3% of your investments. Fidelity and Schwab offer a similar service.

2) Harry Sit, who sometimes posts here, offers a service thru his blog to help people locate an advisor in their locality. "Advice-Only Search and Screening".

3) Two links for finding an advisor:
The National Association of Personal Financial Advisors (NAPFA); and
Garrett Planning Network.

Thank you for suggestions on if we move in this direction. So far my husband is okay with us going the Vanguard PAS route or having an advisor be per fee each time they look at it. This is if we do need help.
inv021 wrote: Thu Aug 26, 2021 8:54 pm4. HSA - We max this out yearly and often use most of it because of my husband's chronic health problems. I have not begun investing this and know it is a triple tax advantage. My question is this: We currently have around $8,000. Our current insurance has an out-of-pocket max of $8,000 and the in-network max is $3,000. I thought about keeping $3,000 not invested and begin investing $5,000. What questions should I be asking myself and what asset allocation would be good to invest in? I can invest in Vanguard funds - VIGIX, VBIRX, VSMAX, VMVAX. These are the ones I have been looking at. They have about 5 more available.
In my opinion the first question should be -- is the High Deductible Health Plan (HDHP) offered at work suitable for his medical insurance needs?

If not, then a HDHP and using a Health Savings Account (HSA) is not wise as a way to insure for his chronic health problems.

In prioritizing investments it says "Contribute to a Health Savings Account (HSA) if a high deductible health plan is appropriate for your needs (you can think of HSA contributions as also getting a match, from the IRS)." Wiki article Prioritizing Investments.

With expensive chronic health problems a HDHP and HSA many not be a good idea. Remember this first a health insurance issue, second a tax issue, and third an investing issue. Don't let the investing and tax issues override the insurance issue.

Wiki article High deductible health plan. "Since the payment structure of an HDHP is very different, you may owe significantly more or less with an HDHP than with a conventional plan. You will need to work out the costs yourself."

This is great advice! Thanks for pointing this out. We do spend a lot each year. I'll do some digging.

inv021 wrote: Fri Aug 27, 2021 10:10 amMy question to you is this - if I decided to make things more simple how do I go about doing that? That is where I get stuck. Do I just buy and transfer my funds all in one day? I can't seem to find good articles. I also am not well-read on rebalancing, which would this essentially be the same thing?
Once you decide on an overall plan for all accounts, and the funds to use in each account, then go right ahead and make any switch all at once.


inv021 wrote: Fri Aug 27, 2021 10:10 amMy second question is why VTI (etf) instead of VTSAX (Index Fund)? Is it just because of the difference in expense ratio .3% versus .4%? Or is it the potential tax savings on ETF versus Index Fund when dividends are sold?
An expense ratio difference of 0.01% is trivial and will make no real difference.

The decision between exchange traded funds (ETFs) and regular mutual funds is largely a matter of personal preference. Wiki article "ETFs vs muy funds".
Thank you for all your help! I will work on updating the main post with the pencil Icon. I am still new to this.
New. Interested. Curious.
User avatar
ruralavalon
Posts: 26353
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Four Investment Questions

Post by ruralavalon »

Figuring out the HDHP and HSA issue may be hard, but it is important.

At our house we both have significant, very costly, chronic health issues. For us a HDHP and HSA do not make any financial sense, even for the so-called "triple tax advantage".

You simply have to run the numbers for your own health facts. It is simple, but perhaps not easy.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
User avatar
Jon Luskin
Posts: 920
Joined: Sat May 18, 2013 1:56 am
Location: San Diego, CA

Re: Four Investment Questions

Post by Jon Luskin »

inv021 wrote: Thu Aug 26, 2021 8:54 pm
3. My husband feels like it is best to start to have someone manage the funds. I am obviously hesitant about this. The person he sought out charges .8% for his fee and the expense ratio's on the funds is .5%. I am having a hard time swallowing losing that money over time. I do not believe I am smarter than this individual but a 1.3% loss feels like a lot and especially because my husband's money is already losing more than mine with Vanguard. Sometimes I feel like I am overthinking this but thought I'd ask here.
You understand the impact of cost on investing. The guy using 0.5%-fee funds to invest doesn't. Therefore, you *are* smarter than that individual - at least when it comes to the importance of managing costs in investing.

For my clients who *don't* want to manage their investments themselves, we review the low-cost options for professional management. Fortunately, there are multiple options for low-cost, professional investment management. Today, investors can pay for low-cost professional management of 0.25%-0.3%, when invested in low-cost index funds charging 0.03%-0.12%. That can be quite reasonable for those who don’t want to do it on their own.

I hope that helps. :D

Good luck! :sharebeer
When there are multiple solutions to a problem, choose the simplest one. ~Jack Bogle
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

ruralavalon wrote: Tue Oct 05, 2021 9:42 am Figuring out the HDHP and HSA issue may be hard, but it is important.

At our house we both have significant, very costly, chronic health issues. For us a HDHP and HSA do not make any financial sense, even for the so-called "triple tax advantage".

You simply have to run the numbers for your own health facts. It is simple, but perhaps not easy.
Thank you for your thoughts. We are working on this now. I appreciate your perspective as one with costly, chronic health issues. I understand that.
New. Interested. Curious.
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

JonL wrote: Tue Oct 05, 2021 6:00 pm
inv021 wrote: Thu Aug 26, 2021 8:54 pm
3. My husband feels like it is best to start to have someone manage the funds. I am obviously hesitant about this. The person he sought out charges .8% for his fee and the expense ratio's on the funds is .5%. I am having a hard time swallowing losing that money over time. I do not believe I am smarter than this individual but a 1.3% loss feels like a lot and especially because my husband's money is already losing more than mine with Vanguard. Sometimes I feel like I am overthinking this but thought I'd ask here.
You understand the impact of cost on investing. The guy using 0.5%-fee funds to invest doesn't. Therefore, you *are* smarter than that individual - at least when it comes to the importance of managing costs in investing.

For my clients who *don't* want to manage their investments themselves, we review the low-cost options for professional management. Fortunately, there are multiple options for low-cost, professional investment management. Today, investors can pay for low-cost professional management of 0.25%-0.3%, when invested in low-cost index funds charging 0.03%-0.12%. That can be quite reasonable for those who don’t want to do it on their own.

I hope that helps. :D

Good luck! :sharebeer
This does help! Thank you for explaining and giving me another perspective that there are other options for low-cost management that take into account low-cost index funds.
New. Interested. Curious.
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

tashnewbie wrote: Mon Oct 04, 2021 7:31 am As I mentioned much earlier in this thread, it would be very helpful for other forum members if you updated your original post (use the pencil edit button) to add information in the "Asking Portfolio Questions" sticky post (viewtopic.php?f=1&t=6212). It would obviate the need for some of this back and forth (happy to do it, but it would be more efficient for everyone otherwise). For example, what are all the options available in each of your workplace plans (401k, 457, etc)? What type of 457 (non-governmental or governmental)? This information will help other members advise you on the best options in those plans.
inv021 wrote: Sun Oct 03, 2021 7:38 pm The 457 does not have a high administrative fee and is included in the .18%. I called and spoke with someone about the exact fees. 0.2% is an investment fee and 0.16% is the management fee.
Is the investment fee for the Russell 1000 fund in his 457 0.2% or 0.02% (you mentioned 0.2% above; may be a typo)? I assume it's 0.02% because you said the total fee is 0.18% (0.02% fund fee + 0.16% admin. fee). Presumably the administrative fee will be added to each fund he uses in the 457 (that's generally how an admin. fee works). 0.16% isn't horrible as far as admin. fees go.
Thank you for doing more calculations. Just out of curiosity does Schwab charge 0.24% to just use their service? I am unsure where you got 0.24%. Does everyone have that fee? I did the calculations based on the $12 per fund quarterly and the extra 0.02% monthly and it still did not make much sense.
I got 0.24% by multiplying the monthly fee (0.02%) by 12. I don't know what Schwab generally charges for PCRA. I think PCRA is only needed for people who are participants in institutional plans like 457, 403b, etc. Retail customers can just use Schwab's general platform, which doesn't have any fees outside of the fund fees (unless the customer uses an advisory service).
The bond expense ratio is 0.32%. It makes more sense for me to keep the bond allocation in my 401k for now.
0.32% isn't horrible for a bond fund. But, because you have better options available in your solo 401k and Rollover IRA, I would fill those with your desired bond allocation first, before using his 457.
Thank you for helping me Tashanewbie. I really appreciate your help and patience. I am sorry if I was a hassle or burden. I am still unsure if I did the pencil icon correctly but I updated it with new information and questions. It is now posted at the top. Please advise if that is not correct.
New. Interested. Curious.
User avatar
ruralavalon
Posts: 26353
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Four Investment Questions

Post by ruralavalon »

In selecting funds strive for a combination of both broad diversification (to reduce risk) and low expense ratios (to increase your net return). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Please see:
1) Wiki article "Three-fund portfolio";
2) Forum discussion, "The Three-Fund Portfolio"; and
3) Taylor Larimore post, "Articles recommending the three-fund portfolio".


inv021 wrote: Thu Aug 26, 2021 8:54 pm Emergency fund: Yes. One year of expenses.

Debt: Mortgage - Remaining Debt $273,500 - 3% interest. No other debt.

Tax Filing Status: Married Filing Jointly

Tax Rate: 22% Federal, 5% State

State of Residence: Utah

Age: 36 - ME, 34 - Husband

Desired Asset allocation: 80% U.S. stock/10% International stock/10% Bond (Currently the bond is 9% and the International is 8%.)
In my opinion your desired asset allocation is within the range possible what is reasonable.


inv021 wrote: Thu Aug 26, 2021 8:54 pmTotal portfolio: $491,000 (Invested).

Current retirement assets

Taxable

18% - Vanguard Total Stock Market Index Fund Admiral Shares VTSAX (0.04%)
This is a good fund choice, very diversified with a very low expense ratio, and very tax-efficient.

Wiki article, "Tax-efficient Fund Placement".


inv021 wrote: Thu Aug 26, 2021 8:54 pmTax-Advantaged

His 401k with employer
8% - Large Cap Stock Index Fund - Follows the Russell 1000 (No Ticker symbol - holding is with Utah government system) (0.18%)
Company match 4%
This is a good fund choice, very diversified with a low expense ratio. With no ticker symbol this is probably a Collective Investment Trust.

I suggest making some additional contributions to this account.

What international stock funds and what bond funds are offered in his employer's 401k plan? Please give fund names, tickers and expense ratios.

This might be a good account to use for increasing international stocks and bonds up to your desired asset allocation.



inv021 wrote: Thu Aug 26, 2021 8:54 pmHis 457 with employer - Governmental Plan. He can withdraw early with no 10% penalty.
24% Large Cap Stock Index Fund - Follows the Russell 1000 (No Ticker symbol - holding is with Utah government system) (0.18%)

His Roth IRA at Vanguard
12% Vanguard 500 Index Fund (VFIAX) (0.04%)

His 501 with employer (Nationwide is who they contract with for this portion)
10% Nationwide Investor Destinations Aggressive Fund: Service Class (NDASX) (0.93%)

Her i401k at Vanguard
5% Vanguard 500 Index Fund Admiral Shares (VFIAX) (0.04%)
9% Vanguard Total Bond Market Index Fund (VBTLX) (0.05%)
8% Vanguard Total Internation Stock Index Fund (VTIAX) (0.11%)

Her Roth IRA at Vanguard
6% Vanguard Total Stock Market Index Fund (VTSAX) (0.04%)
All are good fund choices, very diversified with low or very low expense ratios.


inv021 wrote: Thu Aug 26, 2021 8:54 pmAnnual Contributions
$2,600 his 401k - 4% employer match (This is what his employer puts in)
$19,500 his 457
$4,100 his 501c (His employer adds this)
$19,500 her i401k
$6,000 his Roth IRA
$6,000 her Roth IRA
$8,320 taxable brokerage
We also have an HSA account that we max out every year.
I suggest stopping contributions to the taxable account and making contributions to his 401k account.

Here is a general account funding priority that usually works well for many people (when there is no high interest debt or HSA use):
1) Contribute to the work-based plans (401k, 403b, 457, SIMPLE IRA, TSP, etc.) enough to get the full employer match (the match is like free money, your best possible investment);
2) Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique), depending on eligibility and personal circumstances;
3) Contribute the remainder of the maximum employee contribution to the work-based accounts; and
4) Contribute to a taxable investing account.

"If the company plan offers good, low-cost funds, it may be preferable to contribute to the company plan before contributing to an IRA." Please see the wiki article "Prioritizing investments", link.



inv021 wrote: Thu Aug 26, 2021 8:54 pmNew Questions -
1. How do I include my husband's pension plan into retirement savings. I am curious because I am unsure how to best approach the pension and our AA. If he stays in service the entire time he will get in today's dollars $37,500 a year gross.
My suggestion is to value a pension (for asset allocation purposes) as the amount of cash he could receive today if he left that employer today.

This avoids the hassle of a present cash value calculation, with all of the guesses which that type of calculation requires.

A lot can happen to his pension in 30 years. The plan could terminate, be modified, benefits be frozen, COLA dropped, the plan could go broke, and the employer could cease to exist.

He might not stay with this employer for 30 years. The average worker tenure at an employer is just 4-5 years, and employees on average have 12 employers during their working life. Employee Benefit Research Institute (EBRI), "The Good Old Days", link; and Bureau of Labor Statistics, FAQ.

For asset allocation purposes you would value stock funds at what you could sell them for today, not what they might be worth 30 years from now.

So (for asset allocation purposes) likewise value his pension at how much he could "sell" it for today, not what it might be worth in 30 years.

Otherwise immediateannuities.com is a good resource for valuing an income stream for retirement planning purposes.



inv021 wrote: Thu Aug 26, 2021 8:54 pm2. I have worked on simplifying the accounts. Does this look about right for where certain holdings should be?
Yes.

Wiki article, "Tax-efficient Fund Placement".



inv021 wrote: Thu Aug 26, 2021 8:54 pm3. The 501c is still something I need help with. Here are the options I am looking at and ticker symbols below. In the portfolio options he has a lot of Class A which has a load fee of 5.50%. From what I have read on these forums this is not a good option and I didn't think it would be either. I looked at small cap and mid cap options but they both only offer 3 and they both have the load charge. So I am only including the ones that do not have a Class A. Taking into account the rest of our accounts where should this money go? Or keep the one we have?

American Century Ultra Inv (TWCUX) (0.97%)
Nationwide Institutional Service (MUIFX) (0.71%)
Nationwide S&P 500 Index Instl Svc (GRISX) (0.45%)
Neuberger Berman Large Cap Value Fund: Investor Class (NPRTX) (0.85%)
I could choose any target date fund from 2020 to 2060 the fees range from (0.66% to 0.75% beling the 2060 fund).

These are really my only options unless I go international or bond but for simple reasons I have kept those in my 401k.
Nationwide S&P 500 Index Instl Svc (GRISX) (0.45%) looks like like the best (least bad) fund choice.


inv021 wrote: Thu Aug 26, 2021 8:54 pm4. Should I even be adding the 501c to my AA since in retirement and from what I read we can only use it for medical?
I am not familiar with the term "501c" in this context.

The term "501c" usually refers to a tax-exempt organization like a charity, or a non-profit organization such as an organization set up for religious, educational, or scientific purposes.

. . . . .

Education.
A quick education for a relatively novice investor is Dr. Bernstein's short pdf book, "If You Can". Also take a look at the Boglehead’s wiki, the "Bogleheads’ investment philosophy" link I give below.

To go beyond the most basic I suggest that you also read one or two books on investing. Wiki article, "Books: recommendations and reviews". When I first stated managing my own investments, I found this tutorial very helpful in learning investing terminology/jargon and some of the investing basics. Morningstar, "Investing Classroom".

If you have any questions just ask.

I hope that this helps.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: Four Investment Questions

Post by tashnewbie »

inv021 wrote: Mon Oct 18, 2021 9:21 pm Thank you for helping me Tashanewbie. I really appreciate your help and patience. I am sorry if I was a hassle or burden. I am still unsure if I did the pencil icon correctly but I updated it with new information and questions. It is now posted at the top. Please advise if that is not correct.
No bother or burden at all. I just wanted to ensure you were getting efficient feedback!

It looks like you got rid of her Rollover IRA.

I agree with @ruralavalon above that Nationwide S&P 500 Index Instl Svc (GRISX) (0.45%) would be the best available option in his 501c (which I'm not familiar with at all).
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

tashnewbie wrote: Tue Oct 19, 2021 7:44 am
inv021 wrote: Mon Oct 18, 2021 9:21 pm Thank you for helping me Tashanewbie. I really appreciate your help and patience. I am sorry if I was a hassle or burden. I am still unsure if I did the pencil icon correctly but I updated it with new information and questions. It is now posted at the top. Please advise if that is not correct.
No bother or burden at all. I just wanted to ensure you were getting efficient feedback!
Thank you!

It looks like you got rid of her Rollover IRA.
I rolled my rollover into my i401k with Vanguard. I did this so if we need to utilize the backdoor Roth IRA I could do this more easily. I transferred the rollover and made it my bond allocation. I did not see advice for this so I am hoping that was the right step from what I read.

I agree with @ruralavalon above that Nationwide S&P 500 Index Instl Svc (GRISX) (0.45%) would be the best available option in his 501c (which I'm not familiar with at all).
501c is also considered a VEBA. "A voluntary employees’ beneficiary association (VEBA) plan is a type of tax-exempt trust used by its members and eligible dependents to pay for eligible medical expenses." /color]
New. Interested. Curious.
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

ruralavalon wrote: Tue Oct 19, 2021 6:29 am In selecting funds strive for a combination of both broad diversification (to reduce risk) and low expense ratios (to increase your net return). To simply and easily achieve those two goals I suggest choosing funds to simulate the very well diversified, low expense ratio "three-fund portfolio". Please see:
1) Wiki article "Three-fund portfolio";
2) Forum discussion, "The Three-Fund Portfolio"; and
3) Taylor Larimore post, "Articles recommending the three-fund portfolio".


inv021 wrote: Thu Aug 26, 2021 8:54 pm Emergency fund: Yes. One year of expenses.

Debt: Mortgage - Remaining Debt $273,500 - 3% interest. No other debt.

Tax Filing Status: Married Filing Jointly

Tax Rate: 22% Federal, 5% State

State of Residence: Utah

Age: 36 - ME, 34 - Husband

Desired Asset allocation: 80% U.S. stock/10% International stock/10% Bond (Currently the bond is 9% and the International is 8%.)
In my opinion your desired asset allocation is within the range possible what is reasonable.
Thank you. I will continue to add to my bond and international and re-allocate to get them to the 10% by end year. Over time, I will continue to increase with age my bond and am considering bumping up international to 20%. Still working on understanding our AA needs and risk tolerance.

inv021 wrote: Thu Aug 26, 2021 8:54 pmTotal portfolio: $491,000 (Invested).

Current retirement assets

Taxable

18% - Vanguard Total Stock Market Index Fund Admiral Shares VTSAX (0.04%)
This is a good fund choice, very diversified with a very low expense ratio, and very tax-efficient.

Wiki article, "Tax-efficient Fund Placement".


inv021 wrote: Thu Aug 26, 2021 8:54 pmTax-Advantaged

His 401k with employer
8% - Large Cap Stock Index Fund - Follows the Russell 1000 (No Ticker symbol - holding is with Utah government system) (0.18%)
Company match 4%
This is a good fund choice, very diversified with a low expense ratio. With no ticker symbol this is probably a Collective Investment Trust.

I suggest making some additional contributions to this account.

What international stock funds and what bond funds are offered in his employer's 401k plan? Please give fund names, tickers and expense ratios.

This might be a good account to use for increasing international stocks and bonds up to your desired asset allocation.

I am first going to increase my international and bond in my 401k. I have room to do so and plan on contributing and re-allocating so by end-year they are both at 10%. I know over time I will need to add to another portfolio, which will either be his 401k or his 457. Is there a recommendation on which fund to add to first for tax-efficient reasons? I believe they both are tax-efficient for both international and bond funds.

inv021 wrote: Thu Aug 26, 2021 8:54 pmHis 457 with employer - Governmental Plan. He can withdraw early with no 10% penalty.
24% Large Cap Stock Index Fund - Follows the Russell 1000 (No Ticker symbol - holding is with Utah government system) (0.18%)

His Roth IRA at Vanguard
12% Vanguard 500 Index Fund (VFIAX) (0.04%)

His 501 with employer (Nationwide is who they contract with for this portion)
10% Nationwide Investor Destinations Aggressive Fund: Service Class (NDASX) (0.93%)

Her i401k at Vanguard
5% Vanguard 500 Index Fund Admiral Shares (VFIAX) (0.04%)
9% Vanguard Total Bond Market Index Fund (VBTLX) (0.05%)
8% Vanguard Total Internation Stock Index Fund (VTIAX) (0.11%)

Her Roth IRA at Vanguard
6% Vanguard Total Stock Market Index Fund (VTSAX) (0.04%)
All are good fund choices, very diversified with low or very low expense ratios.


inv021 wrote: Thu Aug 26, 2021 8:54 pmAnnual Contributions
$2,600 his 401k - 4% employer match (This is what his employer puts in)
$19,500 his 457
$4,100 his 501c (His employer adds this)
$19,500 her i401k
$6,000 his Roth IRA
$6,000 her Roth IRA
$8,320 taxable brokerage
We also have an HSA account that we max out every year.
I suggest stopping contributions to the taxable account and making contributions to his 401k account.

Here is a general account funding priority that usually works well for many people (when there is no high interest debt or HSA use):
1) Contribute to the work-based plans (401k, 403b, 457, SIMPLE IRA, TSP, etc.) enough to get the full employer match (the match is like free money, your best possible investment);
2) Contribute the maximum to an IRA, traditional or Roth (or backdoor Roth technique), depending on eligibility and personal circumstances;
3) Contribute the remainder of the maximum employee contribution to the work-based accounts; and
4) Contribute to a taxable investing account.

"If the company plan offers good, low-cost funds, it may be preferable to contribute to the company plan before contributing to an IRA." Please see the wiki article "Prioritizing investments", link.
That is the plan for the taxable brokerage account. Sorry, I put that in the things I am changing down below but forgot to change it here.


inv021 wrote: Thu Aug 26, 2021 8:54 pmNew Questions -
1. How do I include my husband's pension plan into retirement savings. I am curious because I am unsure how to best approach the pension and our AA. If he stays in service the entire time he will get in today's dollars $37,500 a year gross.
My suggestion is to value a pension (for asset allocation purposes) as the amount of cash he could receive today if he left that employer today.

This avoids the hassle of a present cash value calculation, with all of the guesses which that type of calculation requires.

A lot can happen to his pension in 30 years. The plan could terminate, be modified, benefits be frozen, COLA dropped, the plan could go broke, and the employer could cease to exist.

He might not stay with this employer for 30 years. The average worker tenure at an employer is just 4-5 years, and employees on average have 12 employers during their working life. Employee Benefit Research Institute (EBRI), "The Good Old Days", link; and Bureau of Labor Statistics, FAQ.

For asset allocation purposes you would value stock funds at what you could sell them for today, not what they might be worth 30 years from now.

So (for asset allocation purposes) likewise value his pension at how much he could "sell" it for today, not what it might be worth in 30 years.

Otherwise immediateannuities.com is a good resource for valuing an income stream for retirement planning purposes.

This is difficult because when I call to talk to them and how is pension is set up, they do not sell or do a lump sum buy out. So, the only option they give if he leaves his job early is for him to get a portion of the pension later in life. Which would come out to be around $700 dollars a month beginning at age 62 or around $1000 a month beginning at age 65.

inv021 wrote: Thu Aug 26, 2021 8:54 pm2. I have worked on simplifying the accounts. Does this look about right for where certain holdings should be?
Yes.

Wiki article, "Tax-efficient Fund Placement".



inv021 wrote: Thu Aug 26, 2021 8:54 pm3. The 501c is still something I need help with. Here are the options I am looking at and ticker symbols below. In the portfolio options he has a lot of Class A which has a load fee of 5.50%. From what I have read on these forums this is not a good option and I didn't think it would be either. I looked at small cap and mid cap options but they both only offer 3 and they both have the load charge. So I am only including the ones that do not have a Class A. Taking into account the rest of our accounts where should this money go? Or keep the one we have?

American Century Ultra Inv (TWCUX) (0.97%)
Nationwide Institutional Service (MUIFX) (0.71%)
Nationwide S&P 500 Index Instl Svc (GRISX) (0.45%)
Neuberger Berman Large Cap Value Fund: Investor Class (NPRTX) (0.85%)
I could choose any target date fund from 2020 to 2060 the fees range from (0.66% to 0.75% beling the 2060 fund).

These are really my only options unless I go international or bond but for simple reasons I have kept those in my 401k.
Nationwide S&P 500 Index Instl Svc (GRISX) (0.45%) looks like like the best (least bad) fund choice.
Thank you. I appreciate the feedback and suggestion.

inv021 wrote: Thu Aug 26, 2021 8:54 pm4. Should I even be adding the 501c to my AA since in retirement and from what I read we can only use it for medical?
I am not familiar with the term "501c" in this context.

The term "501c" usually refers to a tax-exempt organization like a charity, or a non-profit organization such as an organization set up for religious, educational, or scientific purposes.
I clarified what it was above but it is also considered a VEBA. "A voluntary employees’ beneficiary association (VEBA) plan is a type of tax-exempt trust used by its members and eligible dependents to pay for eligible medical expenses."
. . . . .

Education.
A quick education for a relatively novice investor is Dr. Bernstein's short pdf book, "If You Can". Also take a look at the Boglehead’s wiki, the "Bogleheads’ investment philosophy" link I give below.

To go beyond the most basic I suggest that you also read one or two books on investing. Wiki article, "Books: recommendations and reviews". When I first stated managing my own investments, I found this tutorial very helpful in learning investing terminology/jargon and some of the investing basics. Morningstar, "Investing Classroom".

If you have any questions just ask.

I hope that this helps.
New. Interested. Curious.
Nowizard
Posts: 4842
Joined: Tue Oct 23, 2007 5:33 pm

Re: Four Investment Questions

Post by Nowizard »

Regarding your husband's pension: First, there are numerous questions to answer based on your personal circumstances that affect an evaluation. For example, what are the chances he will stay with current employment, the chances the company will do what many others have done and change to another retirement option, what is the stability of the company's funding for pensions, etc.? Though a pension in retirement can be a major benefit, things can change. A second issue is whether the pension has an attached COLA.

Assuming a pension occurs and has a COLA, it can be used to reduce the requirement of other assets to meet retirement expenses, as can SS, another income stream in retirement that requires projection of amount and availability.
Given your ages and presumed significant time periods before retirement, it is probably best to focus on a process for maximizing acquisition of assets within your own risk tolerance and to at least somewhat avoid projections so far in advance regarding a possible pension. As we know, predictions are difficult, particularly of the future, as Yogi Berra supposedly said. The suggestion of focusing on maximizing acquisition through a process is made based on personal experience. Approximately 20 years ago, we had a projection of assets until death made by Vanguard based on providing extensive information. We laugh now as its accuracy is nil due to a variety of issues occurring in the interim, none of which were startling. If there is a belief in the generally accepted maxim that no one knows where the market will go, an extension of that applies to individual investing where we only control process, not outcome. It looks like you have developed an evolving process that offers a high probability of success and have the discipline to continue doing so.

Tim
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: Four Investment Questions

Post by tashnewbie »

inv021 wrote: Tue Oct 19, 2021 9:38 am I rolled my rollover into my i401k with Vanguard. I did this so if we need to utilize the backdoor Roth IRA I could do this more easily. I transferred the rollover and made it my bond allocation. I did not see advice for this so I am hoping that was the right step from what I read.
Sounds like a great consolidation move.
User avatar
ruralavalon
Posts: 26353
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Four Investment Questions

Post by ruralavalon »

inv021 wrote: Tue Oct 19, 2021 9:48 am I am first going to increase my international and bond in my 401k. I have room to do so and plan on contributing and re-allocating so by end-year they are both at 10%. I know over time I will need to add to another portfolio, which will either be his 401k or his 457. Is there a recommendation on which fund to add to first for tax-efficient reasons [emphsis added]? I believe they both are tax-efficient for both international and bond funds.
No recommendation based on tax-efficiency.

For diversification the bond allocation is probably more important.

Also in general it's better to hold a bond allocation in traditional tax-deferred accounts like a traditional 401k, so that space in any Roth accounts can be reserved for stock funds with their higher expected returns.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
inv021
Posts: 51
Joined: Sun Aug 15, 2021 3:03 pm
Location: Utah

Re: Four Investment Questions

Post by inv021 »

Nowizard wrote: Tue Oct 19, 2021 10:01 am Regarding your husband's pension: First, there are numerous questions to answer based on your personal circumstances that affect an evaluation. For example, what are the chances he will stay with current employment, the chances the company will do what many others have done and change to another retirement option, what is the stability of the company's funding for pensions, etc.? Though a pension in retirement can be a major benefit, things can change. A second issue is whether the pension has an attached COLA.

Assuming a pension occurs and has a COLA, it can be used to reduce the requirement of other assets to meet retirement expenses, as can SS, another income stream in retirement that requires projection of amount and availability.
Given your ages and presumed significant time periods before retirement, it is probably best to focus on a process for maximizing acquisition of assets within your own risk tolerance and to at least somewhat avoid projections so far in advance regarding a possible pension. As we know, predictions are difficult, particularly of the future, as Yogi Berra supposedly said. The suggestion of focusing on maximizing acquisition through a process is made based on personal experience. Approximately 20 years ago, we had a projection of assets until death made by Vanguard based on providing extensive information. We laugh now as its accuracy is nil due to a variety of issues occurring in the interim, none of which were startling. If there is a belief in the generally accepted maxim that no one knows where the market will go, an extension of that applies to individual investing where we only control process, not outcome. It looks like you have developed an evolving process that offers a high probability of success and have the discipline to continue doing so.

Thank you, Tim, for your thoughtful reply. This makes a lot of sense in regard to "it is probably best to focus on a process for maximizing acquisition of assets within your own risk tolerance and to at least somewhat avoid projections so far in advance regarding a possible pension." In my original post, I did not ask about the pension because I was building our portfolio/AA/savings rate off of what we know today i.e. age, how many years we have left, risk tolerance for age, and so forth. I will continue to move forward in this regard, not knowing what the future will hold and not adding the pension, since we really have no idea. And obviously, keep the discipline! Thanks once again.

Tim
New. Interested. Curious.
User avatar
ruralavalon
Posts: 26353
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Four Investment Questions

Post by ruralavalon »

inv021 wrote: Thu Aug 26, 2021 8:54 pmAge: 36 - ME, 34 - Husband
inv021 wrote: Sun Oct 03, 2021 7:38 pmAlso, when looking at the AA should I be taking into account his pension? I have read mixed reviews on adding SS and Pensions to someone's overall AA. Any advice would be appreciated or a link to read more.
My suggestion is to value a pension (for asset allocation purposes) as the amount of cash he could receive today if he left that employer today.

This avoids the hassle of a present cash value calculation, with all of the guesses which that type of calculation requires.

A lot can happen to his pension in 30 years. The plan could terminate, be modified, benefits be frozen, COLA dropped, the plan could go broke, and the employer could cease to exist.

He might not stay with this employer for 30 years. The average worker tenure at an employer is just 4-5 years, and employees on average have 12 employers during their working life. Employee Benefit Research Institute (EBRI), "The Good Old Days", link; and Bureau of Labor Statistics, FAQ.

For asset allocation purposes you would value your stock funds at what you could sell them for today, not what they might be worth 30 years from now.

So (for asset allocation purposes) likewise value his pension at how much he could "sell" it for today, not what it might be worth in 30 years.

Otherwise immediateannuities.com is a good resource for valuing an income stream for retirement planning purposes.

When young the most important investing decision you can make is to establish a high rate of contributions. "Savings rate is the most important retirement savings decision, not only because of the math but because of the way it drives your financial mindset and habits." Forum discussion on Jonathan Clements’ article "Show me the Money". So concentrate on that for now.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Post Reply