Financial Portfolio Review

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Bogle101
Posts: 468
Joined: Mon Oct 01, 2012 10:14 am

Financial Portfolio Review

Post by Bogle101 »

Hi all,

I had been a casual user of these forums growing up, and then kind of lost my financial mind for a few years. Long story short, gambled away like 500k and totally decimated my investment portfolio. Only saving grace, was I was able to keep myself from touching my retirement accounts.

I would love any experienced users to comment on how my financial portfolio looks compared to the normal 35 - 40 year old American and if you think I need to keep saving cash or it’s time for me to finally try and start my taxable investment account again after blowing it all.

I live in a very high cost of living city with heavy tax burden and do not have the option of moving to a more reasonable area in the near future.

Combined annual income - 950k
Cash - 175k
529 plans - 30k
Taxable investments - 0

Combined 401k - 700k
Combined Roth IRA - 250k

Mortgage 1 - 1.3mm @ 3.625% / value only 1.6mm / monthly payment, including taxes is 10k
Mortgage 2 - 330k @ 4.5% / value 500k / rent covers monthly payment

Thanks!
40% Extended Market | 40% S&P 500 | 10% REIT | 5% State Muni Bond | 5% Cash
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celia
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Location: SoCal

Re: Financial Portfolio Review

Post by celia »

Bogle101 wrote: Thu Oct 21, 2021 3:03 pm I would love any experienced users to comment on how my financial portfolio looks compared to the normal 35 - 40 year old American and if you think I need to keep saving cash or it’s time for me to finally try and start my taxable investment account again after blowing it all.
Compared to the average 35-40yo Boglehead, you probably have 4 times the assets as they do. Compared to the average 35-40yo American, you have multiples more than that.

But you are in a fortunate situation income-wise. What is your plan to not repeat the past? Do you have a FIRE goal? Buy a rentals goal? Help charities?

One thing I would suggest is to open a new checking account and one credit card link for automatic payments from that account. Consider that account a fun/ entertainment / gamble account. Put up to 10% of the income in there every month. Use only that account and that one credit card for the frivolous things you want.

Use your existing checking account and credit cards for transportation, housing, utilities, food to eat at home, insurance (ie, typical expenses most people have) and for investments. Set up automatics transfer of some money from this checking account to the Taxable brokerage account you once used. Fill it up again, then keep going.

Also read and take advantage of the Backdoor Roth and Mega-backdoor Roth techniques to help ensure your retirement.
tashnewbie
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Re: Financial Portfolio Review

Post by tashnewbie »

Find a way to protect you from yourself?

Give the reins of the taxable account to someone else?

Do you have a need to continue to save cash, other than reticence about using the brokerage account again?
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Bogle101
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Re: Financial Portfolio Review

Post by Bogle101 »

celia wrote: Thu Oct 21, 2021 3:29 pm Also read and take advantage of the Backdoor Roth and Mega-backdoor Roth techniques to help ensure your retirement.
I def do the backdoor Roth every year.

I have heard of this mega backdoor, but my understanding was that you need to be lucky enough to work at a company that allows this to be a possibility.

Is that true? Or anyone can do it, just like anyone can do a backdoor Roth?
40% Extended Market | 40% S&P 500 | 10% REIT | 5% State Muni Bond | 5% Cash
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Bogle101
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Re: Financial Portfolio Review

Post by Bogle101 »

tashnewbie wrote: Thu Oct 21, 2021 3:49 pm Find a way to protect you from yourself?

Give the reins of the taxable account to someone else?

Do you have a need to continue to save cash, other than reticence about using the brokerage account again?
I’m not concerned of losing control again. For some reason the urge to gamble has left me and I simply avoid Vegas and AC now.

My question is more rooted around someone with my high expenses and tax rate, I basically 50% tax as I live in an expensive democratic city, how much cash should I hold before investing again.

Half of 950, just leaves me with only 450k a year. I pay 11k a month for mortgage, real estate taxes and hoa fees. Need to save for two kids education, and then bogleheads preach a rainy day, living expense fund in case job goes away.

So much cash should I hold to be safe?
40% Extended Market | 40% S&P 500 | 10% REIT | 5% State Muni Bond | 5% Cash
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celia
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Re: Financial Portfolio Review

Post by celia »

Bogle101 wrote: Fri Oct 22, 2021 12:27 am
celia wrote: Thu Oct 21, 2021 3:29 pm Also read and take advantage of the Backdoor Roth and Mega-backdoor Roth techniques to help ensure your retirement.
I def do the backdoor Roth every year.

I have heard of this mega backdoor, but my understanding was that you need to be lucky enough to work at a company that allows this to be a possibility.

Is that true? Or anyone can do it, just like anyone can do a backdoor Roth?
You’re correct. The employer needs to allow the non-deductable donation AND allow an in-service (while still working) rollover to Roth.
Activesloth
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Re: Financial Portfolio Review

Post by Activesloth »

Yes, with that much income, you can do a mega-back door Roth conversion. You can basically open a traditional IRA at Vanguard and invest after tax dollars up to $950k, then convert the entire sum to your Roth. There are certain restrictions to withdrawing the cash such as the 5 year rule, but maybe that will protect you from yourself.
Wannaretireearly
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Re: Financial Portfolio Review

Post by Wannaretireearly »

With your income, you can quickly dig yourself out of this hole.

Set targets. I’m trying hard to save $1M in taxable. Hard, but keeps me from spending too freely.
“At some point you are trading time you will never get back for money you will never spend.“ | “How do you want to spend the best remaining year of your life?“
tashnewbie
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Re: Financial Portfolio Review

Post by tashnewbie »

Activesloth wrote: Fri Oct 22, 2021 1:05 am Yes, with that much income, you can do a mega-back door Roth conversion. You can basically open a traditional IRA at Vanguard and invest after tax dollars up to $950k, then convert the entire sum to your Roth. There are certain restrictions to withdrawing the cash such as the 5 year rule, but maybe that will protect you from yourself.
How is what you describe possible? The annual max contribution to an IRA is $6k or $7k (if >=50).

If his employer's 401k plan doesn't allow after-tax non-Roth contributions and in-service rollover to Roth 401k or withdrawal to Roth IRA, then he doesn't have access to the Mega Backdoor Roth.
tashnewbie
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Re: Financial Portfolio Review

Post by tashnewbie »

Bogle101 wrote: Fri Oct 22, 2021 12:31 am Half of 950, just leaves me with only 450k a year. I pay 11k a month for mortgage, real estate taxes and hoa fees. Need to save for two kids education, and then bogleheads preach a rainy day, living expense fund in case job goes away.

So much cash should I hold to be safe?
Personal decision. Do what makes you feel comfortable. General rules of thumb say 3-6 months of expenses. Depending on individual characteristics (e.g., if you have less stable job security or single-income family), then you might want more.
Investor1986
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Re: Financial Portfolio Review

Post by Investor1986 »

You have 1 million dollars in annual income and are you asking how are you doing compared to the average American?
I would say with some discipline and following a simple low cost index portfolio you will be set very soon again! Stay the course.
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Bogle101
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Re: Financial Portfolio Review

Post by Bogle101 »

Wannaretireearly wrote: Fri Oct 22, 2021 1:29 am With your income, you can quickly dig yourself out of this hole.

Set targets. I’m trying hard to save $1M in taxable. Hard, but keeps me from spending too freely.
My main worry is that living in such a tax-unfriendly state and the everyday cost of living in a tier 1 city will prevent me from that $1M taxable goal. Also, starting from zero is so daunting, especially with the markets at such an all time high. I keep waiting for the crash that never comes.
40% Extended Market | 40% S&P 500 | 10% REIT | 5% State Muni Bond | 5% Cash
majiaknight
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Re: Financial Portfolio Review

Post by majiaknight »

Understand your concerns in today's investing environment. It's hard to not trying to time the market in such a long bull market.

I'm in late-30s living in VHCOL areas (less HHI than yours but with x2 more assets) and below are my 2 cents:

1) Build a 10-12x monthly expenses emergency fund to be a little bit conservative in your case. (FYI: I've been slowly using I Bond to build up my emergency funds over years; see below "I Bond Manifesto" for details)

2) If your two kids are still very young, you could try to 'superfund' two 529s ($75K/each) and let them grow over a decade and don't need to touch them in the near term.
-- https://www.savingforcollege.com/articl ... a-529-plan

3) If you choose not to superfund 529s, you could also buy your kids Savings I Bond and (maybe) EE Savings Bond and start two UTMAs (if more flexibility is preferred). So, for two kids and yourself the annual total will be $10K*3*2=$60K/year for I/EE Savings Bond. You could buy more in a trust and tax refund. I've bought them for my family of three ($60K/year) for recent years. I split monthly contribution to 529 and UTMA.

-- The EE Bond Manifesto: viewtopic.php?t=358793
-- The I Bond Manifesto: viewtopic.php?f=10&t=358732

4) Refi your mortgage which seems to be a little bit too high. It may make sense to accelerate the pay down of your 2nd mortgage 330K@4.5% as you can't get any fixed income (or bond) returns exceeding 4.5% (after-tax) nowadays. And you have a lot of cash sitting in bank account earning nothing. (FYI: I did a refi w/ a small online lender (not the one below) for the 1st time early this year for a loan amount of $470K at 15Y@2%).

-- Compare refi quote w/ some online lenders: https://www.aimloan.com/

5) After you complete 1)-4) you should have higher risk tolerance and could start to slowly DCA into your taxable accounts using stock index funds.

Good luck!
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