Portfolio Review Request

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Topic Author
socialforums2019
Posts: 459
Joined: Sun Aug 25, 2019 10:12 am

Portfolio Review Request

Post by socialforums2019 »

Looking for feedback on current portfolio and "stay the course" plan. Open to critique and overall approach. Hoping that the following plan will allow me to reach my "number" of $5M within the next 20 years if possible and debt free.

Emergency funds/Cash: $125 - $135K From a cashflow perspective, I try to maintain $125K+. I've always been cash heavy to "sleep well" at night and to have liquidity if/when needed without needing to touch the portfolio. $125K would be around 12 months EF.

Debt: $995K Mortgage @ 2.375% ($850K equity)

Tax Filing Status: MFJ

Tax Rate: 32%-35% Federal (commission based income), 9.3% State

State of Residence: CA

Age: Mid-30s

Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 0% of stocks

Portfolio

Cash: $135K
Roth IRA: $27.5K - VTI
401K: $150K - FXAIX, $225K FXNAX
HSA: $7K - FXAIX
Taxable: $1.1M - VTI

Stay the Course Plan - Contributions

401K: Max annually
401K Company Match: $8.7 annually
Backdoor Roth: $6K annually
Taxable: $500 - $1K/monthly through cashflow
ShowMeTheER
Posts: 511
Joined: Mon May 24, 2010 9:12 am

Re: Portfolio Review Request

Post by ShowMeTheER »

Looks very strong, and simple.

Is your $5M target excluding house? Do you plan to move and/or lessen house cost as you approach retirement (or goal)?
Topic Author
socialforums2019
Posts: 459
Joined: Sun Aug 25, 2019 10:12 am

Re: Portfolio Review Request

Post by socialforums2019 »

ShowMeTheER wrote: Fri Oct 22, 2021 6:28 am Looks very strong, and simple.

Is your $5M target excluding house? Do you plan to move and/or lessen house cost as you approach retirement (or goal)?
The $5M target will be all portfolio, mortgage free and doesn't include home equity value. We don't have a plan to move/lessen house cost as we approach retirement, but that is 20+ years out so that may change.
Nate7out
Posts: 410
Joined: Wed Jan 16, 2008 1:06 pm

Re: Portfolio Review Request

Post by Nate7out »

socialforums2019 wrote: Fri Oct 22, 2021 6:16 am Looking for feedback on current portfolio and "stay the course" plan. Open to critique and overall approach. Hoping that the following plan will allow me to reach my "number" of $5M within the next 20 years if possible and debt free.

Emergency funds/Cash: $125 - $135K From a cashflow perspective, I try to maintain $125K+. I've always been cash heavy to "sleep well" at night and to have liquidity if/when needed without needing to touch the portfolio. $125K would be around 12 months EF.

Debt: $995K Mortgage @ 2.375% ($850K equity)

Tax Filing Status: MFJ

Tax Rate: 32%-35% Federal (commission based income), 9.3% State

State of Residence: CA

Age: Mid-30s

Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 0% of stocks

Portfolio

Cash: $135K
Roth IRA: $27.5K - VTI
401K: $150K - FXAIX, $225K FXNAX
HSA: $7K - FXAIX
Taxable: $1.1M - VTI

Stay the Course Plan - Contributions

401K: Max annually
401K Company Match: $8.7 annually
Backdoor Roth: $6K annually
Taxable: $500 - $1K/monthly through cashflow
Your contributions look light, like < 10% of gross. 80/20 is conservative in mid 30s. Don't know how you got 1M taxable with $1k per month.

I guess you are assuming 10% CAGR for stocks. It looks a little risky to me - risky that you won't have enough.

If you're paying extra on your mortgage, that would count under savings / contributions.

ETA: I was wrong about the tax bracket cutoff, so I updated.
Last edited by Nate7out on Fri Oct 22, 2021 8:05 am, edited 1 time in total.
tenkuky
Posts: 2626
Joined: Sun Dec 14, 2014 3:28 pm

Re: Portfolio Review Request

Post by tenkuky »

Why only 1 backdoor Roth for MFJ?
You can spousal IRA nondeductible contribute, then convert.
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: Portfolio Review Request

Post by tashnewbie »

1. Definitely do a backdoor Roth for the spouse, if they don't have any pretax balances in non-Roth IRAs. I would do this instead of taxable investing, if you can't do both.

2. May want to use different funds in taxable and Roth IRAs, to make possible future tax loss harvesting easier. You could use an S&P 500 index fund in the Roth IRAs (VOO, etc).

3. I agree your contributions look a bit light based on your income. Your taxable income would need to be ~$330k or $420k to be in the 32% or 35% bracket, respectively. So you're saving <10% of gross income. Maybe expenses are high because of VH or HCOL area?
Topic Author
socialforums2019
Posts: 459
Joined: Sun Aug 25, 2019 10:12 am

Re: Portfolio Review Request

Post by socialforums2019 »

tashnewbie wrote: Fri Oct 22, 2021 7:52 am 1. Definitely do a backdoor Roth for the spouse, if they don't have any pretax balances in non-Roth IRAs. I would do this instead of taxable investing, if you can't do both.

2. May want to use different funds in taxable and Roth IRAs, to make possible future tax loss harvesting easier. You could use an S&P 500 index fund in the Roth IRAs (VOO, etc).

3. I agree your contributions look a bit light based on your income. Your taxable income would need to be ~$330k or $420k to be in the 32% or 35% bracket, respectively. So you're saving <10% of gross income. Maybe expenses are high because of VH or HCOL area?
1. Wife doesn't work but still possible to do backdoor Roth? If that is the case, then I'll plan to make $12K contributions in January every year instead of $1K/mo into taxable. Any excess cash during the year, I'll invest in taxable to continue saving (see item 3 below).

2. Will keep this in mind. So in summary, sell VTI for VOO? I'll need to research more around tax loss harvesting and the strategy.

3. The reason why you think that is because I don't capture commission/bonus that will be contributed over time. The numbers I provided are based off just my base salary of $220K pretax as I don't anticipate my pay structure to continue to be commission based until retirement. For example, prior year commissions were $370K+ pretax (all of this went towards house down payment) and this year currently on pace for $200K+ pretax. I don't expect commissions to be this lucrative and anticipate an average of $50K-$100K/year going forward which the majority of that will be extra contributions on top of my Stay the Course Plan.
Last edited by socialforums2019 on Sat Oct 23, 2021 8:06 am, edited 1 time in total.
Topic Author
socialforums2019
Posts: 459
Joined: Sun Aug 25, 2019 10:12 am

Re: Portfolio Review Request

Post by socialforums2019 »

Nate7out wrote: Fri Oct 22, 2021 7:21 am
socialforums2019 wrote: Fri Oct 22, 2021 6:16 am Looking for feedback on current portfolio and "stay the course" plan. Open to critique and overall approach. Hoping that the following plan will allow me to reach my "number" of $5M within the next 20 years if possible and debt free.

Emergency funds/Cash: $125 - $135K From a cashflow perspective, I try to maintain $125K+. I've always been cash heavy to "sleep well" at night and to have liquidity if/when needed without needing to touch the portfolio. $125K would be around 12 months EF.

Debt: $995K Mortgage @ 2.375% ($850K equity)

Tax Filing Status: MFJ

Tax Rate: 32%-35% Federal (commission based income), 9.3% State

State of Residence: CA

Age: Mid-30s

Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 0% of stocks

Portfolio

Cash: $135K
Roth IRA: $27.5K - VTI
401K: $150K - FXAIX, $225K FXNAX
HSA: $7K - FXAIX
Taxable: $1.1M - VTI

Stay the Course Plan - Contributions

401K: Max annually
401K Company Match: $8.7 annually
Backdoor Roth: $6K annually
Taxable: $500 - $1K/monthly through cashflow
Your contributions look light, like < 10% of gross. 80/20 is conservative in mid 30s. Don't know how you got 1M taxable with $1k per month.

I guess you are assuming 10% CAGR for stocks. It looks a little risky to me - risky that you won't have enough.

If you're paying extra on your mortgage, that would count under savings / contributions.

ETA: I was wrong about the tax bracket cutoff, so I updated.
Regarding how I got to $1M taxable with $1K/mo. Please refer to item #3 in the post above for that detail.
tashnewbie
Posts: 4284
Joined: Thu Apr 23, 2020 12:44 pm

Re: Portfolio Review Request

Post by tashnewbie »

socialforums2019 wrote: Sat Oct 23, 2021 7:30 am
tashnewbie wrote: Fri Oct 22, 2021 7:52 am 1. Definitely do a backdoor Roth for the spouse, if they don't have any pretax balances in non-Roth IRAs. I would do this instead of taxable investing, if you can't do both.

2. May want to use different funds in taxable and Roth IRAs, to make possible future tax loss harvesting easier. You could use an S&P 500 index fund in the Roth IRAs (VOO, etc).

3. I agree your contributions look a bit light based on your income. Your taxable income would need to be ~$330k or $420k to be in the 32% or 35% bracket, respectively. So you're saving <10% of gross income. Maybe expenses are high because of VH or HCOL area?
1. Wife doesn't work but still possible to do backdoor Roth? If that is the case, then I'll plan to make $12K contributions in January every year instead of $1K/mo into taxable. Any excess cash during the year, I'll invest in taxable to continue saving (see item 3 below).

2. Will keep this in mind. So in summary, sell VTI for VOO? I'll need to research more around tax loss harvesting and the strategy.

3. The reason why you think that is because I don't capture commission/bonus that will be contributed over time. The numbers I provided are based off just my base salary of $220K pretax as I don't anticipate my pay structure to continue to be commission based until retirement. For example, prior year commissions were $370K+ pretax (all of this went towards house down payment) and this year currently on pace for $200K+ pretax. I don't expect commissions to be this lucrative and anticipate an average of $50K-$100K/year going forward which the majority of that will be extra contributions on top of my Stay the Course Plan.
1. Yes, even if spouse doesn’t work outside the home, you can make a spousal IRA contribution for them as long as total household income at least matches the amount you put in both IRAs ($12k), which isn’t an issue for you. You can do backdoor Roth for spouse. If you have $6k now, I’d do that before the end of the year. You could also make the spouse’s 2021 contribution by the tax filing deadline in 2022, but I think it’s easier to do both steps of the backdoor in the tax year the contribution is affiliated with.

2. Yes, exchange VTI for VOO in the IRAs. Not a necessary move but may make TLH easier if you ever want to do it.
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