Debt: 596k, 30-year fixed, 2.375%, 60% LTV
Tax Filing Status: Married Filing Jointly
Tax Rate: 37% Federal, 0% State
State of Residence: WA
Age: 34m / 39f
Desired Asset allocation: 100% stocks / 0% bonds
Desired International allocation: FTSE Global All Cap (~42% currently)
Portfolio Size ~1M
Current retirement assets
Overall
4.15% HSA
31.00% Roth
36.90% Deferred
27.95% Taxable
Taxable
6.12% Vanguard Total Stock Market Index (VTSAX) (0.04%)
21.82% Vanguard Total International Stock Index (VTIAX) (0.11%)
Her Solo 401k (Traditional)
2.68% Fidelity Total International Index (FTIHX) (0.06%)
Her Employer 401k
11.65% Fidelity 500 Index Fund (FXAIX) (0.015%) (Traditional)
10.17% Fidelity 500 Index Fund (FXAIX) (0.015%) (Mega Backdoor Roth)
His Solo 401k (Traditional)
10.63% Fidelity Total International Index (FTIHX) (0.06%)
His Employer 401k (Traditional)
3.52% Vanguard Institutional 500 Index Trust (no ticker) (0.012%)
3.20% Vanguard Institutional Extended Market Index Trust (no ticker) (0.031%)
3.97% Vanguard Developed Markets Index Fund (VDIPX) (0.04%)
1.25% Vanguard Emerging Markets Index (VEMRX) (0.08%)
His Employer 401k (Mega Backdoor Roth)
2.61% Vanguard Institutional 500 Index Trust (no ticker) (0.012%)
3.20% Vanguard Institutional Extended Market Index Trust (no ticker) (0.031%)
1.54% Vanguard Developed Markets Index Fund (VDIPX) (0.04%)
0.49% Vanguard Emerging Markets Index (VEMRX) (0.08%)
Her Roth IRA
5.67% Vanguard Total Stock Market Index (VTSAX) (0.04%)
His Roth IRA
7.33% Vanguard Total Stock Market Index (VTSAX) (0.04%)
HSA
4.15% Vanguard Institutional Index Fund (VIIIX) (0.02%)
Contributions
New annual Contributions
$58,0000 his 401k Deferred + Mega Backdoor (including $9,750 match)
$58,0000 her 401k Deferred + Mega Backdoor (including $2,500 match)
$6,000 his Backdoor Roth IRA
$6,000 her Backdoor Roth IRA
$7,300 HSA ($2,000 from employer)
$300,000 taxable
Other Information
- We plan to "retire," in ~5-10 years. I don't think either of us will just stop being productive all together. We want to take a few years to travel, explore hobbies, etc while we are young. We want to retain the option to not return to work.
- After the pandemic, we gradually adjusted out of prior 20% bond allocation. Neither of us were worried with the 6 figure drop in our portfolio in a month. We decided to take on the extra risk to help boost our progress towards retiring early, and start adding some bond allocation back as we get closer.
- Our house can cash flow break-even as a rental. We were careful to buy like this to allow renting during long-term travel or to build a small RE portfolio.
- No kids or desire for any.
- I am interested in hearing thoughts on our fund placement.
- When I designed our portfolio to have as much international in taxable as possible, we were in a lower tax bracket. I did this for the tax credit. Out of inertia, I’ve continued. However, we now pay 23.8% tax on qualified dividends and 41.8% on non-qualified. We’re adding ~25k per month. I shift 401k assets / contributions to keep the FTSE weighting. I am second guessing this since international pays higher dividends, and wondering If I should start buying VTSAX (or something else) instead. It would be more of a no-brainer for me, if weren't for "retiring" in ~5 years. We can just pay a bit extra tax until we drop into 0% dividend bracket. However, it's possible we still do something that earns an income in "retirement." Additionally, net investment income tax will likely hit us in 10-20 years anyways, since the $250k income limit isn't inflation adjusted.
- I have been thinking about diversifying our Roth exposure to include international. Thus far, our gamble that US equity will grow more has paid off. We are now less comfortable with this gamble due to the amount of Roth assets.
- Our retirement plan is to live on $80k income initially @ 2% withdrawal rate (flexible in downturn) with maybe a 70 global stock : 30 us bond allocation. If I understand the tax code correctly, based on the current tax code we will be able to:
- Aim for taxable income of $105,900 - $25,100 deduction = $80,800 => 0% qualified dividend / LTCG. Take up to $80,800 dividends and/or LTCG from taxable for living expenses at 0% tax.
- Start Roth conversions from traditional 401k in the 10 & 12% brackets, while being careful to not drive our dividend bracket up over the $105,900 income. Our portfolio should continue to compound (2% withdrawal rate initially). We may actually arbitrage cost of living for a few years (outside current VHCOL) to let it grow and jump start larger Roth conversions.
- As our portfolio grows, we can gradually increase standard of living and/or charity. We can start accessing Roth principal (Roth ladder basically), if we want to live a higher standard of living as our portfolio grows.
- Is there anything else you all think I should consider as we continue to scale this portfolio or plan retirement?