Investment Review: Mid-30s, Married with Young Kids

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
CocoaMi
Posts: 24
Joined: Mon Aug 31, 2020 8:20 pm

Investment Review: Mid-30s, Married with Young Kids

Post by CocoaMi »

Emergency funds: 6 months (without changing any spending habits)

Debt:
Mortgage, 2.75% with 29 years remaining. Refinanced last year. We aren’t paying any extra. We do have PMI for another 5(?) years or so.
Car loan, 1.9%, $6k left

Tax Filing Status:
Married Filing Jointly
Dependent kids (ages 3 & 6)

Tax Rate: 24% Federal, 5.25% State

State of Residence: North Carolina

Age: 36

Desired Asset Allocation: 85% stocks / 15% bonds
Desired international allocation: 30-40%

Current Retirement Assets

Total Investments: Mid/lower 6-figures

Taxable (Joint Account) - Total gain within the last 3(?-ish) years: +42%
6.00%, SCHWAB US BROAD MARKET ETF, (SCHB), (ER 0.03%) - Total gain: +56%
2.82%, SCHWAB INTERNATIONAL EQUITY ETF, (SCHF), (ER 0.06%) - Total gain: +40%
1.52%, VANGUARD FTSE EMERGING MARK ETF IV, (VWO), (ER 0.1%) - Total gain: +37%
1.41%, SCHWAB US DIVIDEND EQUITY ETF, (SCHD), (ER 0.06%) - Total gain: +34%
1.39%, VANGUARD MUNI BND TAX EXEMPT ETF, (VTEB), (ER 0.06%) - Total gain: +7%
0.44%, VANGUARD DIVIDEND APPRECIATION ETF, (VIG), (ER 0.06%) - Total gain: +39%
0.44%, ISHARES CORE MSCI EMERGING ETF, (IEMG), (ER 0.11%) - Total gain: +67%
0.42%, VANGUARD TOTAL STOCK MARKET E ETF IV, (VTI), (ER 0.03%) - Total gain: +39%
0.23%, VANGUARD ENERGY ETF, (VDE), (ER 0.1%) - Total gain: 117%
0.14%, VANGUARD FTSE DEVELOPED MKTS ETF IV, (VEA), (ER 0.05%) - Total gain: +31%
0.01%, ENERGY SELECT SECTOR SPDR ETF IV, (XLE), (ER 0.12%) - Total gain: 68%

Her Roth
4.61%, VANGUARD TOTAL STOCK MARKET E ETF IV, (VTI), (ER 0.03%) - Total gain: +86%
3.77%, VANGUARD FTSE DEVELOPED MKTS ETF IV, (VEA), (ER 0.05%) - Total gain: +33%
3.10%, VANGUARD REAL ESTATE ETF IV, (VNQ), (ER 0.12%) - Total gain: +33%
2.96%, VANGUARD FTSE EMERGING MARK ETF IV, (VWO), (ER 0.1%) - Total gain: +36%
2.92%, VANGUARD DIVIDEND APPRECIATION ETF, (VIG), (ER 0.06%) - Total gain: +75%
1.00%, SCHWAB US AGGREGATE BOND INDEX FD, (SWAGX), (ER 0.04%) - Total loss: -3%
0.93%, ISHARES IBOXX INVT GRADE BOND ETF IV, (LQD), (ER 0.14%) - Total gain: 13%

His Roth
2.30%, VANGUARD TOTAL STOCK MARKET E ETF IV, (VTI), (ER 0.03%)
1.83%, VANGUARD FTSE DEVELOPED MKTS ETF IV, (VEA), (ER 0.05%)
1.51%, VANGUARD DIVIDEND APPRECIATION ETF, (VIG), (ER 0.06%)
1.48%, VANGUARD REAL ESTATE ETF IV, (VNQ), (ER 0.12%)
1.46%, VANGUARD FTSE EMERGING MARK ETF IV, (VWO), (ER 0.1%)
0.77%, ISHARES IBOXX INVT GRADE BOND ETF IV, (LQD), (ER 0.14%)
0.55%, ISHARES JPMORGAN USD MTS BOND ETF, (EMB), (ER 0.39%)

Her HSA
3.42%, iShares Core US REIT ETF, (USRT), (ER 0.08%)
0.89%, ISHARES TRUST CORE S&P TTL STK ETF, (ITOT), (ER 0.03%)
0.72%, SCHWAB US BROAD MARKET ETF, (SCHB), (ER 0.03%)
0.47%, SCHWAB US DIVIDEND EQUITY ETF, (SCHD), (ER 0.06%)
Maxing out annual contributions

Dependent Care Account
Contributing ~$5k and using it each year

Her 401k
39.79%, American Century Retirement 2050 Collective Trust (couldn't find the exact ticker?), (ER 0.23%) - 50% employer match up to 6% of salary. My 401k contributions are capped but I have access to a Supplemental Retirement Plan option. Question below about this setup.
Available Funds in 401k:
SF Guaranteed,
Infl-Prot and Inc (MassMutual) (MIPSX) (0.57%) , Bonds
Total Return Bd (PGIM) (PDBZX) (0.49%) , Bonds
Income (PIMCO) (PIMIX) (1.09%) , Bonds
PIMCO International Bond US Dollar-Hedged Fund (PFORX) (0.6%) , Bonds
American Century In Retirement Collective Investment Trust
American Century Retirement 2025 Collective Trust
American Century Retirement 2030 Collective Trust
American Century Retirement 2035 Collective Trust
American Century Retirement 2040 Collective Trust
American Century Retirement 2045 Collective Trust
American Century Retirement 2050 Collective Trust
American Century Retirement 2055 Collective Trust
American Century Retirement 2060 Collective Trust
American Century Retirement 2065 Collective Trust
Vanguard Value Index Fund (VVIAX) (0.05%) , US Equities
American Funds Washington Mutual Investors Fund (RWMGX) (0.27%) , US Equities
BlackRock iShares S&P 500 Index Fund (WFSPX) (0.03%) , US Equities
Contrafund (Fidelity) (FCNTX) (0.86%) , US Equities
Vanguard Growth Index Fund (VIGAX) (0.05%) , US Equities
JHancock3 Disciplined Value Mid Cap Fund (JVMRX) (0.75%) , US Equities
Mid Cap Growth (MassMutual) (MGRFX) (0.81%) , US Equities
Small Cap Val (Goldman Sachs) (GSSIX) (0.96%) , US Equities
AB Small Cap Growth Fund (QUAZX) (0.82%) , US Equities
Vanguard FTSE All-World ex-US Index Fund (VFWAX) (0.11%) , International
Internl Diversification (MFS) (MDIZX) (0.75%) , International

His 401k
6.04%, Vanguard Target Retirement 2045 Fund Investor Shares, (VTIVX), (ER 0.15%) - This fund is 53% US, 36% International, 11% Bonds using Vanguard Total Stock funds. This is the 1st year he's be eligible to contribute. We are maxing the account and first 1% of salary is matched by company equally. Next 5% is matched in increments of 1% at 0.5%
Available Funds for his 401k:
Vanguard Target Retirement Income Inv, VTINX (0.12%), Asset Allocation
Vanguard Target Retirement 2015 Inv, VTXVX (0.12%), Asset Allocation
Vanguard Target Retirement 2020 Inv, VTWNX (0.13%), Asset Allocation
Vanguard Target Retirement 2025 Inv, VTTVX (0.13%), Asset Allocation
Vanguard Target Retirement 2030 Inv, VTHRX (0.14%), Asset Allocation
Vanguard Target Retirement 2035 Inv, VTTHX (0.14%), Asset Allocation
Vanguard Target Retirement 2040 Inv, VFORX (0.14%), Asset Allocation
Vanguard Target Retirement 2045 Inv, VTIVX (0.15%), Asset Allocation
Vanguard Target Retirement 2050 Inv, VFIFX (0.15%), Asset Allocation
Vanguard Target Retirement 2055 Inv, VFFVX (0.15%), Asset Allocation
Vanguard Target Retirement 2060 Inv, VTTSX (0.15%), Asset Allocation
Vanguard Target Retirement 2065 Inv, VLXVX (0.15%), Asset Allocation
American Century Emerging Markets R6, AEDMX (0.15%), International Funds
MFS Intl Diversification R6, MDIZX (0.73%), International Funds
Vanguard Total Intl Stock Index Admiral, VTIAX (0.11%), International Funds
Janus Henderson Triton N, JGMNX (0.66%), Small Cap Funds
Wells Fargo Spe Sm Cp Val R6, ESPRX (0.85%), Small Cap Funds
Vanguard Extended Market Idx Adm, VEXAX (0.06%), Mid Cap Funds
AB Large Cap Growth Z, APGZX (0.53%), Large Cap Funds
JPMorgan Equity Income R6, OIEJX (0.47%), Large Cap Funds
Vanguard 500 Index Admiral, VFIAX (0.04%), Large Cap Funds
Fidelity Advisor Total Bond Z, FBKWX (0.36%), Bond Funds
PIMCO Income Instl, PIMIX (0.62%), Bond Funds
Vanguard Total Bond Market Index Admiral, VBTLX (0.05%), Bond Funds
Putnam Stable Value Fund

Her Employee Stock Program:
4.66%, Company Stock, 6% per paycheck - I do not sell right away. I have been doing this for about 1.5 years now and still hold.

** Be kind -- I double checked my math but it's possible I made a mistake :-) ** :D

Other Info:
- Taxable & Roth accounts are all at Schwab. They were moved in-kind from Wealthfront last year and I have only gotten rid of a handful of positions because it was just too much (and only in the Roth account). We do NOT do the Intelligent Portfolio at Schwab. It seems like it is just a further breakdown of the money into a bunch of funds and had a higher cash balance than I wanted. Cash across all of my investment accounts is less than .1% of the total.
- We have not contributed to our Roth for a few years. I always thought we were going to hit the income limit and didn't, but didn't have the cash on hand to do a contribution. Planning a Roth or Back Door Roth this year.
- My husband is older than me and we have already started talking about his retirement. I anticipate continuing to work for another at least 20 years and my income would continue to sustain us. So I don't anticipate us needing to take distributions of anything (unless required) when he retires.
- At this point, I want to contribute regularly (weekly) and cruise. Dive into accounts every once in a while.

Questions:
1. This feels like a LOT of funds across a ton of accounts. I want to self-manage. Should I sell off some? Or just pick a few to continue to add to and hold the rest? Selling off positions feels scary (taxes).
2. We have not yet started "college funds" or any funds for our kids yet. 529 is not deductible in North Carolina. But is there an advantage I'm missing?
3. I realize we have the same funds across different accounts, and in different tax-type accounts. What should I do about those? Is that a problem?
4. I've considered getting our accounts reviewed by a CFP, because I am also looking at the life insurance, taxes, kid planning, etc. Fees right now are $2400 annually (no contracts, stop when I want, they won't manage any money just advise). Worth it?
5. I have a Variable Universal Life policy (Supplemental Retirement on top of my 401k contribution) that I have access to at work. It's after-tax, and would be in my name. Is this work pursuing?

Putting this all together was really helpful and educational. Thank you in advance for the input and critiques.
Last edited by CocoaMi on Sun Oct 17, 2021 2:19 pm, edited 3 times in total.
User avatar
Duckie
Posts: 9767
Joined: Thu Mar 08, 2007 1:55 pm

Re: Investment Review: Mid-30s, Married with Young Kids

Post by Duckie »

CocoaMi wrote: Sat Oct 16, 2021 8:57 pm Her 401k
She chose a not low-cost target-date fund but the plan has good individual funds, mainly BlackRock iShares 500 Index and Vanguard FTSE All-World ex-US Index. Are there any bond options in this account? Because this is the biggest account this would be the best place for all your bond allocation.
His 401k
Please list the other options. Holding target-date funds when also holding individual funds makes figuring your AA and rebalancing more difficult.
Her Employee Stock Program:
4.66%, Company Stock, 6% per paycheck
Does she sell as soon as possible?
This feels like a LOT of funds across a ton of accounts. I want to self-manage. Should I sell off some? Or just pick a few to continue to add to and hold the rest? Selling off positions feels scary (taxes).
Sell in the tax-sheltered accounts first. Her Roth IRA could hold just VTI, his Roth IRA could hold VTI, and her HSA could hold just VTI or BND. Avoid putting bonds in Roth IRAs.

Then take a good look at the taxable account. Find out the current unrealized gain/loss of every ETF so you'll have an idea of the tax hit when selling. I would keep SCHB and probably SCHF. I'd eventually sell everything else and put the money in SCHB.
I realize we have the same funds across different accounts, and in different tax-type accounts. What should I do about those? Is that a problem?
It can matter if selling in taxable for a loss when buying in an IRA. Try to hold different funds in taxable than in your IRAs.
Topic Author
CocoaMi
Posts: 24
Joined: Mon Aug 31, 2020 8:20 pm

Re: Investment Review: Mid-30s, Married with Young Kids

Post by CocoaMi »

Duckie wrote: Sat Oct 16, 2021 9:35 pm
CocoaMi wrote: Sat Oct 16, 2021 8:57 pm Her 401k
She chose a not low-cost target-date fund but the plan has good individual funds, mainly BlackRock iShares 500 Index and Vanguard FTSE All-World ex-US Index. Are there any bond options in this account? Because this is the biggest account this would be the best place for all your bond allocation.
His 401k
Please list the other options. Holding target-date funds when also holding individual funds makes figuring your AA and rebalancing more difficult.
Her Employee Stock Program:
4.66%, Company Stock, 6% per paycheck
Does she sell as soon as possible?
This feels like a LOT of funds across a ton of accounts. I want to self-manage. Should I sell off some? Or just pick a few to continue to add to and hold the rest? Selling off positions feels scary (taxes).
Sell in the tax-sheltered accounts first. Her Roth IRA could hold just VTI, his Roth IRA could hold VTI, and her HSA could hold just VTI or BND. Avoid putting bonds in Roth IRAs.

Then take a good look at the taxable account. Find out the current unrealized gain/loss of every ETF so you'll have an idea of the tax hit when selling. I would keep SCHB and probably SCHF. I'd eventually sell everything else and put the money in SCHB.
I realize we have the same funds across different accounts, and in different tax-type accounts. What should I do about those? Is that a problem?
It can matter if selling in taxable for a loss when buying in an IRA. Try to hold different funds in taxable than in your IRAs.
Sorry I'm not sure I did the reply/quote properly. Here are my responses. Thanks so much for your questions/responses!
Her 401k - updated original post with all options
His 401k - updated original post with all options
Stock program - no I haven't sold any, and have been doing it for the past 1.5 years.
Selling - yes I need to think through/plan out these steps
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Investment Review: Mid-30s, Married with Young Kids

Post by ruralavalon »

New annual contributions.
How much do you contribute annually to each account?

Establishing a high rate of contributions is the most important investing decision you can make, forum discussion.


Asset allocation.
CocoaMi wrote: Sat Oct 16, 2021 8:57 pmAge: 36

Desired Asset Allocation: 85% stocks / 15% bonds
Desired international allocation: 30-40%
In my opinion your desired asset allocation is within the range of what is reasonable.


Fund selection criteria.
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".


Coordination.
It is often better to coordinate investments among all accounts, in other words treat all accounts together as a single unified portfolio, rather than view each account separately. Select just one or two of the better funds (most diversified + lower expense ratio) in the work-based account (401k, 403b, 457, SIMPLE IRA, TSP etc.), where the choices offered are always limited and often not good. Then complete the rest of the asset allocation using the nearly unlimited choices available in a taxable account or any IRAs. It is not necessary to put all elements of the desired asset allocation in each account.

This approach allows for better tax-efficiency if you use taxable account too. Wiki article, "Tax-efficient Fund Placement" link.


Her 401k
In my opinion in her employer's 401k plan the better funds to consider using are:
1) BlackRock iShares S&P 500 Index Fund (80% of U.S. stock market) (WFSPX) ER 0.03%;
2) Vanguard FTSE All-World ex-US Index Fund (like a total international stock index fund, omits only stocks of small-cap companies) (VFWAX) ER 0.11%; and
3) PGIM Total Return Bd (intermediate-term, investment-grade bonds) (PDBZX) ER 0.49%.


U.S.stocks, for domestic stocks I suggest using a total stock market index fund where available. "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations".

In my opinion in a plan that lacks a total stock market index fund, a S&P 500 index fund is good enough by itself for a domestic stock allocation. A S&P 500 index fund covers over 80% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies. In the 29 years since the creation of the first total stock market index fund the performance of the two types of funds has been almost identical. Portfolio Visualizer, 1993-2021. So it seems that adding a little in mid/small cap stocks trying to mimic the holdings of a total stock market fund has historically made little difference in performance.

See also:
1) Allan Roth, CBS Moneywatch (02/03/2010), "John C. Bogle on the S&P 500 vs. the Total Stock Market"; and
2) Wall Street Physician (01/17/2019), "Should You Invest in the S&P 500 or the Total Stock Market?".



International stocks, the absence of stocks of small-cap companies in Vanguard FTSE All-World ex-US Index Fund (VFWAX) has been inconsequential in my opinion, it's performance has been very similar to a total international stock index fund. Portfolio Visualizer, 2012-2021.



Bonds, although actively managed PGIM Total Return Bd (PDBZX) ER 0.49% is a good, diversified (13% government bonds, 32% corporate bonds, 31% securitized), intermediate-term (effective duration = 7.55 years), investment-grade (credit quality = BBB) bond fund with an "average" expense ratio. This information is from Morningstar.

The performance of PGIM Total Return Bd (PDBZX) has compared well to a total bond market index fund. Portfolio Visualizer, 1997-2021.



His 401k.
In my opinion in his employer's 401k plan the better funds to consider using are:
1) Vanguard 500 Index Admiral (80% of U.S. stock market) (VFIAX) ER 0.04%%;
2) Vanguard Total Intl Stock Index Admiral (VTIAX) ER 0.11%%; and
3) Vanguard Total Bond Market Index Admiral, (VBTLX) ER 0.05%%.

For domestic stocks I suggest using a total stock market index fund where available. "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations".




His and hers Roth IRAs.
In the Roth IRAs at Vanguard I suggest using:
1) Vanguard Total Stock Market Index Fund (VTSAX) ER 0.04%; and
2) Vanguard Total International Stock Index Fund (VTIAX) ER 0.11%.

Bond funds are not very tax-efficient. Ordinarily a bond fund should be placed in a tax-advantaged account, preferably a tax-deferred account like a traditional 401k. Wiki article “Tax-efficient fund placement”, link.

Withdrawals from a Roth IRA are tax free. Stock funds have a higher expected return. Morningstar (1/20/2021) "Experts Forecast Stock and Bond Returns: 2021 Edition", link. So in a Roth IRA use stock funds with their higher expected returns, not bond funds.


Taxable account at Schwab.
Eleven ETFs is far too complex, and unnecessary as far as I can see.

It's difficult to unwind a complex taxable account without incurring income tax liability.

Bond funds are not very tax-efficient. Ordinarily a bond fund should be placed in a tax-advantaged account, preferably a tax-deferred account like a traditional 401k. Wiki article “Tax-efficient fund placement”, link.

"Tax Rate: 24% Federal, 5.25% State". Dividend funds are not tax-efficient, you pay tax at higher ordinary income rates on any "ordinary" dividends you earn. The maximum tax rate for qualified dividends is 20%; for ordinary dividends for the 2019 calendar year, it is 37%. Investopedia.

In my opinion of the funds you are currently using the better ETFs to continue to use are:
1) Schwab US Broad Market ETF™ (SCHB) ER 0.03%;
2) Schwab International Equity ETF™ (SCHF) ER 0.06%;
3) Vanguard Total Stock Market ETF (VTI) ER 0.03%; and
4) Vanguard FTSE Developed Markets ETF (VEA) ER 0.05%.

All of those four ETFs are very tax-efficient.

Reinvest distributions from those four ETFs in those same four ETFs. If you contribute new money to the taxable account, then invest that in those four ETFs.

I suggest that you take the distributions of the other ETFs, and reinvest those in the four ETFs I just listed.

What is the UNrealized capital gain/loss status, and amount for each of the other ETFs in your taxable account?

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 of your information is in one place.
Last edited by ruralavalon on Tue Oct 19, 2021 8:08 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
816_Feet
Posts: 83
Joined: Sun Nov 03, 2019 9:14 am
Location: Chicago, IL

Re: Investment Review: Mid-30s, Married with Young Kids

Post by 816_Feet »

Questions:
1. This feels like a LOT of funds across a ton of accounts. I want to self-manage. Should I sell off some? Or just pick a few to continue to add to and hold the rest? Selling off positions feels scary (taxes).
2. We have not yet started "college funds" or any funds for our kids yet. 529 is not deductible in North Carolina. But is there an advantage I'm missing?
3. I realize we have the same funds across different accounts, and in different tax-type accounts. What should I do about those? Is that a problem?
4. I've considered getting our accounts reviewed by a CFP, because I am also looking at the life insurance, taxes, kid planning, etc. Fees right now are $2400 annually (no contracts, stop when I want, they won't manage any money just advise). Worth it?
5. I have a Variable Universal Life policy (Supplemental Retirement on top of my 401k contribution) that I have access to at work. It's after-tax, and would be in my name. Is this work pursuing?
  1. That's a lot of funds. You could simplify and get the same asset allocation with lower ERs in some cases. It'd mostly make it easier to track what your actual asset allocation and mix of investments is. Selling and buying different funds in your tax advantaged accounts won't incur any taxes. The taxable is a smaller portion of your overall portfolio and the larger holdings are mostly fine where they're at. Even the oddballs are low ERs, so you could hold or at least wait until you're more comfortable making changes. I'd consolidate and put almost everything in VT, VTI, or equivalents. You could also wait for a low income year to do this.
  2. 529s don't offer too much advantage if there's no state tax deduction. 529s grow tax free. The tradeoff is that you have to earmark the money. The standard advice here is to max all of your tax advantaged space before you fund 529s if at all.
  3. Not necessarily. I used the Asset allocation in multiple accounts from the wiki to approximate VT/VTWAX across all of our accounts.
  4. It could be if your total assets are enough (maybe ~$1 million), you truly don't feel comfortable managing your own assets,. and/or you feel like you might panic sell during a down market. The general tenants of managing your accounts is less complex that people tend to think - low ERs, broad market index funds, hold, use tax advantaged space - that's 95% of it. The actual mechanics of it do take a little time to get comfortable with.
  5. The standard advice here is that for 99% of situations it's most efficient to use term life insurance for that risk and keep the investing portion of your portfolio in your 401ks, IRAs, etc.
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Investment Review: Mid-30s, Married with Young Kids

Post by ruralavalon »

CocoaMi wrote: Sat Oct 16, 2021 8:57 pm2. We have not yet started "college funds" or any funds for our kids yet. 529 is not deductible in North Carolina. But is there an advantage I'm missing?
Probably not.


CocoaMi wrote: Sat Oct 16, 2021 8:57 pm5. I have a Variable Universal Life policy (Supplemental Retirement on top of my 401k contribution) that I have access to at work. It's after-tax, and would be in my name. Is this work pursuing?
Is that paid for or subsidized by your employer?

If not stick to low cost term life insurance.

Do you have a disability income policy?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
User avatar
Taylor Larimore
Posts: 32839
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

Re: Investment Review: Mid-30s, Married with Young Kids

Post by Taylor Larimore »

ruralavalon:

Your reply, above, is one of the best replies I have read on this forum. I can only imagine how long it must have taken you in its preparation. I also congratulate the original postor for giving us adequate information for an educated response.

Thank you both!!
Taylor
Jack Bogle's Words of Wisdom: “Success” in short, can be measured not in what we attain for ourselves, but in what we contribute to society."
"Simplicity is the master key to financial success." -- Jack Bogle
Topic Author
CocoaMi
Posts: 24
Joined: Mon Aug 31, 2020 8:20 pm

Re: Investment Review: Mid-30s, Married with Young Kids

Post by CocoaMi »

Taylor Larimore wrote: Sun Oct 17, 2021 1:22 pm ruralavalon:

Your reply, above, is one of the best replies I have read on this forum. I can only imagine how long it must have taken you in its preparation. I also congratulate the original postor for giving us adequate information for an educated response.

Thank you both!!
Taylor
Jack Bogle's Words of Wisdom: “Success” in short, can be measured not in what we attain for ourselves, but in what we contribute to society."
Could not agree more myself -- I've printed out the thread and will study and respond.

Edit: I was so excited about the response above from ruralavalon that I didn't even read your compliment. Thank you. Everyone starting their career (or really at any point) should be required to go through the exercise of plotting out your accounts *on your own*. Putting the original post together was already an educational step for me.
Last edited by CocoaMi on Sun Oct 17, 2021 1:53 pm, edited 1 time in total.
Topic Author
CocoaMi
Posts: 24
Joined: Mon Aug 31, 2020 8:20 pm

Re: Investment Review: Mid-30s, Married with Young Kids

Post by CocoaMi »

ruralavalon wrote: Sun Oct 17, 2021 1:01 pm
CocoaMi wrote: Sat Oct 16, 2021 8:57 pm2. We have not yet started "college funds" or any funds for our kids yet. 529 is not deductible in North Carolina. But is there an advantage I'm missing?
Probably not.


CocoaMi wrote: Sat Oct 16, 2021 8:57 pm5. I have a Variable Universal Life policy (Supplemental Retirement on top of my 401k contribution) that I have access to at work. It's after-tax, and would be in my name. Is this work pursuing?
Is that paid for or subsidized by your employer?

If not stick to low cost term life insurance.

Do you have a disability income policy?
Re: Life insurance, it is not subsidized. I am capped at $13k in my 401k which I already hit this year, so this is an option if you want to keep contributing and still get the company match. At a minimum, I wanted to get my full company match. My employer does provide Short Term (and I believe Long Term Disability) as well. These are subsidized.
Topic Author
CocoaMi
Posts: 24
Joined: Mon Aug 31, 2020 8:20 pm

Re: Investment Review: Mid-30s, Married with Young Kids

Post by CocoaMi »

ruralavalon wrote: Sun Oct 17, 2021 11:41 am New annual contributions.
How much do you contribute annually to each account?

Establishing a high rate of contributions is the most important investing decision you can make, forum discussion.
Taxable account: $100/week
Roth IRAs: None for now, planning a lump sum contribution this year however
His 401k: $19,500
Her 401k: $13,000 (maximum allowable, and I hit it in July this year)
Savings Account (Cash): 1/3 of my paycheck semi-monthly
ruralavalon wrote: Sun Oct 17, 2021 11:41 am Fund selection criteria.
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:
Unfortunately, I found Bogleheads after I made our accounts in Wealthfront. I am struggling now with the unwinding of all the funds across accounts. Thankfully I am seeing some suggestions that I can look into.
ruralavalon wrote: Sun Oct 17, 2021 11:41 am His and hers Roth IRAs.
In the Roth IRAs at Vanguard I suggest using:
1) Vanguard Total Stock Market Index Fund (VTSAX) ER 0.04%; and
2) Vanguard Total International Stock Index Fund (VTIAX) ER 0.11%.
I will look into this. All of our accounts are at Schwab.
ruralavalon wrote: Sun Oct 17, 2021 11:41 am This approach allows for better tax-efficiency if you use taxable account too. Wiki article, "Tax-efficient Fund Placement" link.
Thank you I had been looking for a resource like this!
ruralavalon wrote: Sun Oct 17, 2021 11:41 am Reinvest distributions from those four ETFs in those same four ETFs. If you contribute new money to the taxable account, then invest that in those four ETFs.
Yes that's exactly what I've been doing!!
ruralavalon wrote: Sun Oct 17, 2021 11:41 am 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 of your information is in one place.
I will update the original post with this info.
Topic Author
CocoaMi
Posts: 24
Joined: Mon Aug 31, 2020 8:20 pm

Re: Investment Review: Mid-30s, Married with Young Kids

Post by CocoaMi »

816_Feet wrote: Sun Oct 17, 2021 12:54 pm
Questions:
1. This feels like a LOT of funds across a ton of accounts. I want to self-manage. Should I sell off some? Or just pick a few to continue to add to and hold the rest? Selling off positions feels scary (taxes).
2. We have not yet started "college funds" or any funds for our kids yet. 529 is not deductible in North Carolina. But is there an advantage I'm missing?
3. I realize we have the same funds across different accounts, and in different tax-type accounts. What should I do about those? Is that a problem?
4. I've considered getting our accounts reviewed by a CFP, because I am also looking at the life insurance, taxes, kid planning, etc. Fees right now are $2400 annually (no contracts, stop when I want, they won't manage any money just advise). Worth it?
5. I have a Variable Universal Life policy (Supplemental Retirement on top of my 401k contribution) that I have access to at work. It's after-tax, and would be in my name. Is this work pursuing?
  1. That's a lot of funds. You could simplify and get the same asset allocation with lower ERs in some cases. It'd mostly make it easier to track what your actual asset allocation and mix of investments is. Selling and buying different funds in your tax advantaged accounts won't incur any taxes. The taxable is a smaller portion of your overall portfolio and the larger holdings are mostly fine where they're at. Even the oddballs are low ERs, so you could hold or at least wait until you're more comfortable making changes. I'd consolidate and put almost everything in VT, VTI, or equivalents. You could also wait for a low income year to do this.
  2. 529s don't offer too much advantage if there's no state tax deduction. 529s grow tax free. The tradeoff is that you have to earmark the money. The standard advice here is to max all of your tax advantaged space before you fund 529s if at all.
  3. Not necessarily. I used the Asset allocation in multiple accounts from the wiki to approximate VT/VTWAX across all of our accounts.
  4. It could be if your total assets are enough (maybe ~$1 million), you truly don't feel comfortable managing your own assets,. and/or you feel like you might panic sell during a down market. The general tenants of managing your accounts is less complex that people tend to think - low ERs, broad market index funds, hold, use tax advantaged space - that's 95% of it. The actual mechanics of it do take a little time to get comfortable with.
  5. The standard advice here is that for 99% of situations it's most efficient to use term life insurance for that risk and keep the investing portion of your portfolio in your 401ks, IRAs, etc.
1. Yes, thanks that's where my head was at too, holding but no longer contributing.
4. Total assets aren't at $1m (YET!) though that is definitely my minimum goal We didn't sell last year when things dropped, but I did stop contributing and put money into a savings account instead until I felt comfortable things were going back up.
5. I actually have a Whole Life Insurance policy that my parents bought for me when I was a wee tot. I am paying premiums on it $25/month for $100k. Since I have this new option from work, trying to see what makes sense. And I understand that the whole life policy I have now is *not* the recommendation.

Thanks for all your input! I will dive into the resources and suggestions along with input from the other posters.
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Investment Review: Mid-30s, Married with Young Kids

Post by ruralavalon »

CocoaMi wrote: Sat Oct 16, 2021 8:57 pm
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 of your information is in one place.
I will update the original post with this info.
What is needed for each ETF in the taxable account is (1) UNrealized gain or loss, (2) short-term versus long-term, and (3) dollar amounts not percentage change.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
CocoaMi
Posts: 24
Joined: Mon Aug 31, 2020 8:20 pm

Re: Investment Review: Mid-30s, Married with Young Kids

Post by CocoaMi »

ruralavalon wrote: Sun Oct 17, 2021 4:39 pm [quote=CocoaMi post_id=6278837 time=<a href="tel:1634435835">1634435835</a> user_id=165207]
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 of your information is in one place.
I will update the original post with this info.
What is needed for each ETF in the taxable account is (1) UNrealized gain or loss, (2) short-term versus long-term, and (3) dollar amounts not percentage change.
[/quote]

Oh sorry! Ok I will have to work on that. I didn’t see it when I looked on Schwab, will try again. Thank you
User avatar
Duckie
Posts: 9767
Joined: Thu Mar 08, 2007 1:55 pm

Re: Investment Review: Mid-30s, Married with Young Kids

Post by Duckie »

The following portfolio example has an AA of 85% stocks, 15% bonds, with 30% of stocks in international. That breaks down to 60% US stocks, 25% international stocks, and 15% bonds. After cleaning up taxable, eventually you could have something simple like this:

Taxable at Schwab -- 15%
15% (SCHB) Schwab U.S. Broad Market ETF (0.03%)

Her Employee Stock Program -- 5%
5% (N/A) Company Stock

Her 401k -- 40%
6% (WFSPX) BlackRock iShares S&P 500 Index Fund (0.03%)
25% (VFWAX) Vanguard FTSE All-World ex-US Index Fund Admiral Shares (0.11%)
9% (PDBZX) Prudential Total Return Bond Fund Class Z (0.49%)

His 401k -- 6%
6% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.05%)

Her Roth IRA at Schwab -- 19%
19% (VTI) Vanguard Total Stock Market ETF (0.03%)

His Roth IRA at Schwab -- 10%
10% (VTI) Vanguard Total Stock Market ETF (0.03%)

Her Health Savings Account -- 5%
5% (VTI) Vanguard Total Stock Market ETF (0.03%)

My comments:
  • Even though 5% isn't a big risk, I still recommend you sell all employee stock as soon as possible.
  • His 401k should hold just bonds for now because his 401k bond option is better that her 401k bond option and will therefore reduce the decent but expensive bond fund in her 401k.
  • If her HSA has a decent low-cost bond option like BND that would be appropriate also.
  • Consider increasing your bond allocation to 20%.
Just some possibilities.
Topic Author
CocoaMi
Posts: 24
Joined: Mon Aug 31, 2020 8:20 pm

Re: Investment Review: Mid-30s, Married with Young Kids

Post by CocoaMi »

Thanks everyone! I am off now doing my homework :D happy to report back on progress.
User avatar
abuss368
Posts: 27850
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!
Contact:

Re: Investment Review: Mid-30s, Married with Young Kids

Post by abuss368 »

ruralavalon wrote: Sun Oct 17, 2021 11:41 am
"Tax Rate: 24% Federal, 5.25% State". Dividend funds are not tax-efficient, you pay tax at ordinary income rates on all dividends you earn.
Hi ruralavalon -

An excellent and very helpful post! I would consider editing the statement regarding dividend taxation. Not all dividends are taxed at originally income tax rates. If held for the certain period of time (typically 60 days before and after a dividend has paid) and if all other requirements met, the dividend may be taxed at lower qualified rates: 0%, 15%, and 20% depending on overall income levels.

When you have a moment please let me know your thoughts.

Best.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Investment Review: Mid-30s, Married with Young Kids

Post by ruralavalon »

abuss368 wrote: Mon Oct 18, 2021 8:45 pm
ruralavalon wrote: Sun Oct 17, 2021 11:41 am
"Tax Rate: 24% Federal, 5.25% State". Dividend funds are not tax-efficient, you pay tax at ordinary income rates on all dividends you earn.
Hi ruralavalon -

An excellent and very helpful post! I would consider editing the statement regarding dividend taxation. Not all dividends are taxed at originally income tax rates. If held for the certain period of time (typically 60 days before and after a dividend has paid) and if all other requirements met, the dividend may be taxed at lower qualified rates: 0%, 15%, and 20% depending on overall income levels.

When you have a moment please let me know your thoughts.

Best.
Tony
Done
"Tax Rate: 24% Federal, 5.25% State". Dividend funds are not tax-efficient, you pay tax at higher ordinary income rates on any "ordinary" dividends you earn. The maximum tax rate for qualified dividends is 20%; for ordinary dividends for the 2019 calendar year, it is 37%. Investopedia
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Investment Review: Mid-30s, Married with Young Kids

Post by ruralavalon »

CocoaMi wrote: Sun Oct 17, 2021 1:50 pm
ruralavalon wrote: Sun Oct 17, 2021 1:01 pm
CocoaMi wrote: Sat Oct 16, 2021 8:57 pm2. We have not yet started "college funds" or any funds for our kids yet. 529 is not deductible in North Carolina. But is there an advantage I'm missing?
Probably not.


CocoaMi wrote: Sat Oct 16, 2021 8:57 pm5. I have a Variable Universal Life policy (Supplemental Retirement on top of my 401k contribution) that I have access to at work. It's after-tax, and would be in my name. Is this work pursuing?
Is that paid for or subsidized by your employer?

If not stick to low cost term life insurance.

Do you have a disability income policy?
Re: Life insurance, it is not subsidized. I am capped at $13k in my 401k which I already hit this year, so this is an option if you want to keep contributing and still get the company match. At a minimum, I wanted to get my full company match.
I don't understand what you said. Please elaboate.

Are you permited to contribute the to $13k only if you buy the life insurance?

Are you permited make the maximum annual employee contribution of $19.5k if, and only if, you buy the life insurance?

Which insurer issues this Variable Universal Life policy? What is the amount of the death benefit, and the amount of the premium?

CocoaMi wrote: Sun Oct 17, 2021 1:50 pm My employer does provide Short Term (and I believe Long Term Disability) as well. These are subsidized.
It's a good idea to add the subsidized disability income insurance, if this is "own occupation" disability income insurance.

In my opinion this can be as important as having adequate life insurance.

What is your professional or occupation?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
Topic Author
CocoaMi
Posts: 24
Joined: Mon Aug 31, 2020 8:20 pm

Re: Investment Review: Mid-30s, Married with Young Kids

Post by CocoaMi »

ruralavalon wrote: Tue Oct 19, 2021 8:21 am Are you permited to contribute the to $13k only if you buy the life insurance?
No. They are completely separate benefits. I am capped at $13k for my 401k contributions. The Life Insurance Policy option is a separate benefit and typically added on after the 401k limit has been met.
ruralavalon wrote: Tue Oct 19, 2021 8:21 am Are you permited make the maximum annual employee contribution of $19.5k if, and only if, you buy the life insurance?
No, I cannot contribute $19.5k to my 401k. However, the Life Insurance Policy does not have a maximum.
ruralavalon wrote: Tue Oct 19, 2021 8:21 am Which insurer issues this Variable Universal Life policy? What is the amount of the death benefit, and the amount of the premium?
Believe it's provided by Pacific Life. $250k, ~$600/month. It is also after tax. In that policy, they have a hypothetical earnings rate of 7.10%.
ruralavalon wrote: Tue Oct 19, 2021 8:21 am It's a good idea to add the subsidized disability income insurance, if this is "own occupation" disability income insurance.
Yes, I did sign up for that!
ruralavalon wrote: Tue Oct 19, 2021 8:21 am What is your professional or occupation?
I work for a consulting firm.

Thank you!
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Investment Review: Mid-30s, Married with Young Kids

Post by ruralavalon »

CocoaMi wrote: Sun Oct 17, 2021 1:50 pm
ruralavalon wrote: Sun Oct 17, 2021 1:01 pm
CocoaMi wrote: Sat Oct 16, 2021 8:57 pm2. We have not yet started "college funds" or any funds for our kids yet. 529 is not deductible in North Carolina. But is there an advantage I'm missing?
Probably not.


CocoaMi wrote: Sat Oct 16, 2021 8:57 pm5. I have a Variable Universal Life policy (Supplemental Retirement on top of my 401k contribution) that I have access to at work. It's after-tax, and would be in my name. Is this work pursuing?
Is that paid for or subsidized by your employer?

If not stick to low cost term life insurance.

Do you have a disability income policy?
Re: Life insurance, it is not subsidized. I am capped at $13k in my 401k which I already hit this year, so this is an option if you want to keep contributing and still get the company match. At a minimum, I wanted to get my full company match. My employer does provide Short Term (and I believe Long Term Disability) as well. These are subsidized.

CocoaMi wrote: Thu Oct 21, 2021 8:36 pm
ruralavalon wrote: Tue Oct 19, 2021 8:21 am Are you permited to contribute the to $13k only if you buy the life insurance?
No. They are completely separate benefits. I am capped at $13k for my 401k contributions. The Life Insurance Policy option is a separate benefit and typically added on after the 401k limit has been met.
ruralavalon wrote: Tue Oct 19, 2021 8:21 am Are you permited make the maximum annual employee contribution of $19.5k if, and only if, you buy the life insurance?
No, I cannot contribute $19.5k to my 401k. However, the Life Insurance Policy does not have a maximum.
ruralavalon wrote: Tue Oct 19, 2021 8:21 am Which insurer issues this Variable Universal Life policy? What is the amount of the death benefit, and the amount of the premium?
Believe it's provided by Pacific Life. $250k, ~$600/month. It is also after tax. In that policy, they have a hypothetical earnings rate of 7.10%.
ruralavalon wrote: Tue Oct 19, 2021 8:21 am It's a good idea to add the subsidized disability income insurance, if this is "own occupation" disability income insurance.
Yes, I did sign up for that!
ruralavalon wrote: Tue Oct 19, 2021 8:21 am What is your professional or occupation?
I work for a consulting firm.

Thank you!
Since the premium on the Pacific Life Variable Universal Life Insurance policy ($250k, ~$600/month) is not subsidized by your employer, I suggest instead buying low cost term life insurance.

Use the savings to enable additional contributions to the taxable brokerage account investing in very tax-efficient stock index ETFs such as Vanguard Total Stock Market ETF (VTI) ER 0.03%.

. . . . .

In order to plan how to cleanup the 11 ETFs in your taxable brokerage account, in a way which reduces income tax consequences, you need to gather and post some more information.

What is needed for each ETF in the taxable account is (1) UNrealized gain or loss, (2) short-term versus long-term, and (3) dollar amounts not percentage change.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
wetgear
Posts: 859
Joined: Thu Apr 06, 2017 10:14 am

Re: Investment Review: Mid-30s, Married with Young Kids

Post by wetgear »

CocoaMi wrote: Sat Oct 16, 2021 8:57 pm Debt:
Mortgage, 2.75% with 29 years remaining. Refinanced last year. We aren’t paying any extra. We do have PMI for another 5(?) years or so.
You've got some great advice in this thread so far but no one has yet mentioned this yet. I'd try to get out from under that PMI as soon as you can as it is just wasted money. Depending on when last year you refinanced your home may have appreciated enough to refi and have 20% equity. Also possible that you could reduce the rate ever so slightly. If that's not the case I'd sell the company stock and stop contributing to taxable until you can refi and get rid of the PMI.
Topic Author
CocoaMi
Posts: 24
Joined: Mon Aug 31, 2020 8:20 pm

Re: Investment Review: Mid-30s, Married with Young Kids

Post by CocoaMi »

wetgear wrote: Fri Oct 22, 2021 3:20 pm
CocoaMi wrote: Sat Oct 16, 2021 8:57 pm Debt:
Mortgage, 2.75% with 29 years remaining. Refinanced last year. We aren’t paying any extra. We do have PMI for another 5(?) years or so.
You've got some great advice in this thread so far but no one has yet mentioned this yet. I'd try to get out from under that PMI as soon as you can as it is just wasted money. Depending on when last year you refinanced your home may have appreciated enough to refi and have 20% equity. Also possible that you could reduce the rate ever so slightly. If that's not the case I'd sell the company stock and stop contributing to taxable until you can refi and get rid of the PMI.
Wow thanks for suggesting this... I hadn't even considered it. We refi'd October/November last year. I double-checked again and we have 2 years left of PMI at ~$35/month. Honestly, I saw that as small potatoes compared to everything else, but still a great suggestion to look at. Thank you
Topic Author
CocoaMi
Posts: 24
Joined: Mon Aug 31, 2020 8:20 pm

Re: Investment Review: Mid-30s, Married with Young Kids

Post by CocoaMi »

I took a recommended allocation from a previous poster, added my priorities, tweaks, and questions. Thanks Duckie for outlining this and ruralavalon for all the detailed info!

Priority #1 - clean up 401k accounts
Her 401k -- 40%
6% (WFSPX) BlackRock iShares S&P 500 Index Fund (0.03%)
25% (VFWAX) Vanguard FTSE All-World ex-US Index Fund Admiral Shares (0.11%)
9% (PDBZX) Prudential Total Return Bond Fund Class Z (0.49%)

His 401k -- 6%
6% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.05%)
Question:
- ruralavalon had suggested also VFIAX and VTIAX. I am reading that this bond in His 401k is better than what is available in mine, so it's best to take advantage in his 401k account. Is there something I am missing by not adding those other Vanguard funds?

Priority #2 - clean up Roth accounts
Her Roth IRA at Schwab -- 19%
19% (VTI) Vanguard Total Stock Market ETF (0.03%)

His Roth IRA at Schwab -- 10%
10% (VTI) Vanguard Total Stock Market ETF (0.03%)

Question:
- Is there a reason why I would use VTI in the Roth instead of using SCHB, since all of our accounts are at Schwab? I saw this post when searching for "VTI vs. SCHB" (viewtopic.php?t=348382) and based on what I read and in other research (https://etfdb.com/tool/etf-comparison/S ... /#overview) it seems as though: 1) using both funds allows for Tax Loss Harvesting 2) they've performed almost identical/near same holdings but 3) VTI is significantly larger and maybe perceived to have more longevity?

Priority #3 - clean up HSA acct
Her Health Savings Account -- 5%
5% (VTI) Vanguard Total Stock Market ETF (0.03%)
Questions:
1. would it make sense to have VTI in this account and the Roths? Otherwise I might use BND here. My HSA is invested at TD Ameritrade so I have no problem getting BND.
2. what tax implications are there for selling in HSA?

Priority #4 - look into ESPP selling
Her Employee Stock Program -- 5% -- will look into what it takes to sell, but not my top priority
5% (N/A) Company Stock

Priority #5 - clean up Taxable
Taxable at Schwab -- 15%
15% (SCHB) Schwab U.S. Broad Market ETF (0.03%)

Thanks!
User avatar
ruralavalon
Posts: 26297
Joined: Sat Feb 02, 2008 9:29 am
Location: Illinois

Re: Investment Review: Mid-30s, Married with Young Kids

Post by ruralavalon »

About how much do you expect that you will be able to contribute annually to each of your seven accounts?

CocoaMi wrote: Mon Oct 25, 2021 9:29 pm I took a recommended allocation from a previous poster, added my priorities, tweaks, and questions. Thanks Duckie for outlining this and ruralavalon for all the detailed info!

Priority #1 - clean up 401k accounts
Her 401k -- 40%
6% (WFSPX) BlackRock iShares S&P 500 Index Fund (0.03%)
25% (VFWAX) Vanguard FTSE All-World ex-US Index Fund Admiral Shares (0.11%)
9% (PDBZX) Prudential Total Return Bond Fund Class Z (0.49%)

His 401k -- 6%
6% (VBTLX) Vanguard Total Bond Market Index Fund Admiral Shares (0.05%)
Question:
- ruralavalon had suggested also VFIAX and VTIAX. I am reading that this bond in His 401k is better than what is available in mine, so it's best to take advantage in his 401k account. Is there something I am missing by not adding those other Vanguard funds?
Her 401k is 40% of total portfolio. To make portfolio management and rebalancing easier it is a idea to use all three funds in a large tax-advantaged account like her 401k.

His 401k is just 6% of total portfolio, so his 401k account is not large enough to hold all of the desired bond allocation of 15%.

In his 401k start with just Vanguard Total Bond Market Index Fund because it is the better bond fund than the actively managed fund in her 401k plan. Consider adding the stock funds later when the account is a larger portion of the total portfolio from new annual contributions.

About how much do you expect that you will be able to contribute annually to each of your seven accounts?


CocoaMi wrote: Mon Oct 25, 2021 9:29 pmPriority #2 - clean up Roth accounts
Her Roth IRA at Schwab -- 19%
19% (VTI) Vanguard Total Stock Market ETF (0.03%)

His Roth IRA at Schwab -- 10%
10% (VTI) Vanguard Total Stock Market ETF (0.03%)

Question:
- Is there a reason why I would use VTI in the Roth instead of using SCHB, since all of our accounts are at Schwab? . . . .
In my opinion Schwab U.S. Broad Market ETF (SCHB) ER 0.03% would be fine in the Roth IRAs at Schwab.

In a Roth IRA at Schwab instead I suggest using a regular mutual fund Schwab Total Stock Market Index (SWTSX) ER 0.03%, because more convenient for setting up both automatic investment of new contributions and automatic reinvestment of dividends and distributed gains.

I
CocoaMi wrote: Mon Oct 25, 2021 9:29 pmPriority #3 - clean up HSA acct
Her Health Savings Account -- 5%
5% (VTI) Vanguard Total Stock Market ETF (0.03%)
Questions:
1. would it make sense to have VTI in this account and the Roths? Otherwise I might use BND here. My HSA is invested at TD Ameritrade so I have no problem getting BND.
2. what tax implications are there for selling in HSA?
There are no tax implications to making changes in the Health Savings Account (HSA).

In my opinion either Vanguard Total Stock Market ETF (VTI) ER 0.03%, or Vanguard Total Bond Market ETF (BND) ER 0.035%, or both, would be a good choice in the HSA.

Is there a requirement to keep a certain amount of the HSA in cash?



CocoaMi wrote: Mon Oct 25, 2021 9:29 pmPriority #5 - clean up Taxable
Taxable at Schwab -- 15%
15% (SCHB) Schwab U.S. Broad Market ETF (0.03%)

Thanks!
CocoaMi wrote: Sat Oct 16, 2021 8:57 pmTax Rate: 24% Federal, 5.25% State
. . . . . .
Taxable (Joint Account) - Total gain within the last 3(?-ish) years: +42%
6.00%, SCHWAB US BROAD MARKET ETF, (SCHB), (ER 0.03%) - Total gain: +56%
2.82%, SCHWAB INTERNATIONAL EQUITY ETF, (SCHF), (ER 0.06%) - Total gain: +40%
1.52%, VANGUARD FTSE EMERGING MARK ETF IV, (VWO), (ER 0.1%) - Total gain: +37%
1.41%, SCHWAB US DIVIDEND EQUITY ETF, (SCHD), (ER 0.06%) - Total gain: +34%
1.39%, VANGUARD MUNI BND TAX EXEMPT ETF, (VTEB), (ER 0.06%) - Total gain: +7%
0.44%, VANGUARD DIVIDEND APPRECIATION ETF, (VIG), (ER 0.06%) - Total gain: +39%
0.44%, ISHARES CORE MSCI EMERGING ETF, (IEMG), (ER 0.11%) - Total gain: +67%
0.42%, VANGUARD TOTAL STOCK MARKET E ETF IV, (VTI), (ER 0.03%) - Total gain: +39%
0.23%, VANGUARD ENERGY ETF, (VDE), (ER 0.1%) - Total gain: 117%
0.14%, VANGUARD FTSE DEVELOPED MKTS ETF IV, (VEA), (ER 0.05%) - Total gain: +31%
0.01%, ENERGY SELECT SECTOR SPDR ETF IV, (XLE), (ER 0.12%) - Total gain: 68%
In my opinion of the funds you are currently using the better ETFs to continue to use are:
1) Schwab US Broad Market ETF™ (SCHB) ER 0.03%;
2) Schwab International Equity ETF™ (SCHF) ER 0.06%;
3) Vanguard Total Stock Market ETF (VTI) ER 0.03%; and
4) Vanguard FTSE Developed Markets ETF (VEA) ER 0.05%.

All of those four ETFs are very tax-efficient. All four are good, very diversified funds with very low expense ratios.

I think it would be a mistake to reduce the taxable account down to just Schwab U.S. Broad Market ETF (SCHB) ER 0.03%. You would incur unnecessary income tax liability by selling the other three ETFs with their large (31%, 39%, 40%) UNrealized capital gains.

. . . . .

Here is how you can cleanup the taxable account, while minimizing unnecessary income tax liability.

First.
Reinvest distributions from those four ETFs in those same four ETFs. If you contribute new money to the taxable account, then invest that in those four ETFs.

I suggest that you take the distributions of the other ETFs, and reinvest those in the four ETFs I just listed.


Second.
Do you donate to charities? If so instead of donating cash instead consider Donating appreciated securities.

"If you have appreciated stock or mutual funds in your taxable account, you will have to pay capital-gains tax if you sell them. However, by donating appreciated securities directly to a charity you can forgo paying tax as long as you have held the securities for more than one year."


Third.
Some additional information will be useful in deciding how to further clean up the taxable brokerage account while minimizing income tax liability.

What is the UNrealized capital gain/loss status, the short-term/long-term dollar amounts, and total dollar amount UNrealized gain or loss for each of the other ETFs in your taxable account?

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 of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
User avatar
Duckie
Posts: 9767
Joined: Thu Mar 08, 2007 1:55 pm

Re: Investment Review: Mid-30s, Married with Young Kids

Post by Duckie »

CocoaMi wrote: Mon Oct 25, 2021 9:29 pm Is there a reason why I would use VTI in the Roth instead of using SCHB, since all of our accounts are at Schwab?
I suggested VTI in the Roth IRAs because of the possibility of TLH since your SCHB is more than a third of the taxable account and will get bigger if you reinvest only in that ETF. If you continue to hold VTI in taxable then go with ITOT in the Roth IRAs.
Her Health Savings Account -- 5%
5% (VTI) Vanguard Total Stock Market ETF (0.03%)
Questions:
1. would it make sense to have VTI in this account and the Roths? Otherwise I might use BND here. My HSA is invested at TD Ameritrade so I have no problem getting BND.
BND would be suitable in her HSA. That would reduce the expensive PDBZX in her 401k to 4%.
2. what tax implications are there for selling in HSA?
None in your state.
Topic Author
CocoaMi
Posts: 24
Joined: Mon Aug 31, 2020 8:20 pm

Re: Investment Review: Mid-30s, Married with Young Kids

Post by CocoaMi »

ruralavalon wrote: Tue Oct 26, 2021 8:07 am About how much do you expect that you will be able to contribute annually to each of your seven accounts?
Her HSA: $7,300 (max contribution). I am required to keep $1k in the account and I invest the rest of it.
His 401k: $19,500 (max)
Her 401k: $13k
Taxable: ~$5,000
Her Roth (back door): $6,000
His Roth (back door): $6,000
ESPP: $3,400
Total: $60,200
(not including our savings account, which I am about 75% funded right now)

UPDATE ON THE VARIABLE UNIVERSAL LIFE POLICY THROUGH MY WORK -- need guidance please:
My company matches 3% per paycheck, so the only way to get the full match is if I make a contribution DURING THAT MONTH to the 401k or the Supplemental Retirement Plan. Again, this plan is consecutive to my 401k -- so only once that is fully funded at $13k can I add to the SRP.

Investment options:
There is no bottom protection on the Variable accounts. I have the option to put money into either fixed indexed options or fixed accounts which provide downside protection. The rate of return can fluctuate and it would be using any number of mutual fund options available in the platform(you have 85-90 options here) to create a balanced portfolio as well as have annual call about the policy to make sure you are on track. There is an S&P 500 fund along with other options so you are not tied just to that index.

I have another policy that I can 1035 and fund the account with about $10k which increases the benefit.
Monthly contributions are estimated at ~$812/month
Based on a 7.1% net rate of return assumption
Withdrawing starting at age 66 (starting as a withdrawal and then classifying the withdrawal as a policy loan)
Provides a tax free income of ~$30,000/year (average starting age 66 through 90)

My concerns:
- I feel locked into $800 payment each month for many years
- Fees: In the 1st 10 years, estimate is $10,000/yr. In one of the projections, the total estimated charges at 85yo was $142,000 while the gross rate of return is projected at $1.9M -- so the fees would be about 10% of the return.

The agents biggest selling points is:
- Tax free growth and distributions
- Company match (the amount honestly, against the fees above, doesn't seem worth it)

Now -- let's say I put that $800/month in VTI in my taxable account. Using the Backtest Portfolio Analyzer (https://www.portfoliovisualizer.com/bac ... sisResults) the annual return over the last 20 years with 100% in VTI is 22% (please tell me if I'm doing that wrong). The only place I have to put this money is in my Taxable account. So while the rate of return for VTI is way better (based on past performance) the tax on the gains seems like it would take a hit to any growth.
I know I've read a ton on just using Term insurance -- that you really should just do this instead. But I feel like I am not taking full advantage of a company benefit if I don't participate.
Duckie wrote: Tue Oct 26, 2021 5:41 pm I suggested VTI in the Roth IRAs because of the possibility of TLH since your SCHB is more than a third of the taxable account and will get bigger if you reinvest only in that ETF. If you continue to hold VTI in taxable then go with ITOT in the Roth IRAs.
Good point thank you! I decided to go with VTI in Roths. Slowly but surely working through those moves.
Post Reply