Portfolio Review

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Topic Author
hpygfme
Posts: 2
Joined: Thu Jul 16, 2015 5:01 pm

Portfolio Review

Post by hpygfme »

Emergency funds: Three to six months of expenses held in cash

Debt:Zero debt. Mortgage paid in full. 3 autos fully owned.

Tax Filing Status:Married Filing Jointly, with 2 dependant children, ages 18 and 16

Tax Rate:37% Federal, 3.07% Pennsylvania

State of Residence: Pennsylvania

Age: 52, physician, spouse 51, homemaker

Desired Asset allocation: 65% stocks / 35% bonds
Desired International allocation: 45% of stocks

All holdings are index funds or similar ETFs from Fid/Van/iShares so very low expense ratios

Current Portfolio approx 5.2 million (excludes 529 accounts)
Home value: $500,000

Taxable:
0.3% Vanguard Dev Markets VEA 150,000
7% Vanguard target 2030 VTHRX 380,000
10% Vanguard target 2035 VTTHX 523,000
8% Vanguard total int’l VTIAX 422,000
18% Vanguard total stock VTSAX 958,000
5.4% Vanguard emerging markets VWO 285,000
3.8% Fidelity PA Muni FPXTX 199,000
4.7% Fidelity total bond FXNAX 243,000
2.0% Fidelity zero total market FZROX 109,000

His 401k[/b]
11.9% FXNAX 620,000
8% iShares TIPS bond etf TIP 418,000
3.7% Vanguard REIT etf VNQ 192,000

His Backdoor Roth IRA at Vanguard
3.7% Vanguard total int’l VSIAX 191,000

His IRA
1.3% VNQ 66,000

Her Roth
0.4% FXNAX 22,000
0.15% Fidelity multi-asset index FFNOX 8,000

Her Traditional IRA
0.4% FFTHX 20,000
0.9% TIP 46,000
1.5% VNQ 77,000
0.4% Fidelity freedom 2035 FFTHX 19,000
1.5% TIP 80,000
2.6% FXNAX 136,000

His HSA
0.4% FZROX 22,000

New annual Contributions
$67,500 his 401k
Cash contributions to taxable accounts are roughly 200k per year on income of 500k.

529 accounts:
16 yo son: 365,000
18 yo son (currently a freshman): 301,000

Umbrella insurance: approx 6 million through USAA
Life insurance: his 2.5 million; hers 500k
Expected Social Security at age 70: his 48k/year; her 24k/year
Yearly spending: approx 240k

Questions:
1. Should I change HSA holdings from fidelity zero total market to TIP or something else?
2. How can I decrease the complexity of my portfolio (too many holdings!) without taking a large tax hit from capital gains?
3. My job covers medical malpractice insurance but should I also consider other asset protection strategies such as trusts?
4. I’m thinking about early retirement or working part-time and purchasing a second home in Florida. Any suggestions on how much of a second home I can afford and when I can retire early? 55?
User avatar
retired@50
Posts: 12833
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Portfolio Review

Post by retired@50 »

hpygfme wrote: Sat Jan 15, 2022 10:24 am
Her Traditional IRA
...
0.4% Fidelity freedom 2035 FFTHX 19,000
...
Questions:
1. Should I change HSA holdings from fidelity zero total market to TIP or something else?
2. How can I decrease the complexity of my portfolio (too many holdings!) without taking a large tax hit from capital gains?
3. My job covers medical malpractice insurance but should I also consider other asset protection strategies such as trusts?
4. I’m thinking about early retirement or working part-time and purchasing a second home in Florida. Any suggestions on how much of a second home I can afford and when I can retire early? 55?
Welcome (back) to the forum. :happy
Answers to questions:
1. I don't think it matters what the HSA is holding, it's only 0.4% of your total. I'd leave it alone.
2. You've got yourself into a bit of a predicament in the taxable account with some tax inefficient funds (like the target date retirement funds). So, the easiest way to avoid a large capital gains tax hit is to give them to charity, or give away some shares as a gift to a family member in a lower income tax bracket. Short of these two ideas, you should stop re-investing dividends in the tax inefficient funds, and instead, direct any new dividends toward the tax efficient stock index funds.
3. I don't know. Maybe check out the White Coat Investor site for more physician-related discussion. https://www.whitecoatinvestor.com/
4. Early retirement can be different for everyone, but your readiness revolves around your annual expenses and your level of comfort with withdrawal rates. Some retirees are conservative and are only withdrawing 2-3% of their assets, while others are less cautious and withdraw 4-5%.

Also, I'd make a change to the Fidelity target date fund in "Her Traditional IRA". You're using a fund (FFTHX) with an expense ratio of 0.72% when you could be using a Fidelity Freedom 2035 INDEX Fund (FIHFX) with an expense ratio of 0.12%.

Finally, I'd suggest you read this link about tax efficient fund placement: https://www.bogleheads.org/wiki/Tax-eff ... _placement
And maybe this one about paying a tax cost to switching funds: https://www.bogleheads.org/wiki/Paying_ ... itch_funds

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
JBTX
Posts: 11228
Joined: Wed Jul 26, 2017 12:46 pm

Re: Portfolio Review

Post by JBTX »

hpygfme wrote: Sat Jan 15, 2022 10:24 am Emergency funds: Three to six months of expenses held in cash

Debt:Zero debt. Mortgage paid in full. 3 autos fully owned.

Tax Filing Status:Married Filing Jointly, with 2 dependant children, ages 18 and 16

Tax Rate:37% Federal, 3.07% Pennsylvania

State of Residence: Pennsylvania

Age: 52, physician, spouse 51, homemaker

Desired Asset allocation: 65% stocks / 35% bonds
Desired International allocation: 45% of stocks

All holdings are index funds or similar ETFs from Fid/Van/iShares so very low expense ratios

Current Portfolio approx 5.2 million (excludes 529 accounts)
Home value: $500,000

Taxable:
0.3% Vanguard Dev Markets VEA 150,000
7% Vanguard target 2030 VTHRX 380,000
10% Vanguard target 2035 VTTHX 523,000
8% Vanguard total int’l VTIAX 422,000
18% Vanguard total stock VTSAX 958,000
5.4% Vanguard emerging markets VWO 285,000
3.8% Fidelity PA Muni FPXTX 199,000
4.7% Fidelity total bond FXNAX 243,000
2.0% Fidelity zero total market FZROX 109,000

His 401k[/b]
11.9% FXNAX 620,000
8% iShares TIPS bond etf TIP 418,000
3.7% Vanguard REIT etf VNQ 192,000

His Backdoor Roth IRA at Vanguard
3.7% Vanguard total int’l VSIAX 191,000

His IRA
1.3% VNQ 66,000

Her Roth
0.4% FXNAX 22,000
0.15% Fidelity multi-asset index FFNOX 8,000

Her Traditional IRA
0.4% FFTHX 20,000
0.9% TIP 46,000
1.5% VNQ 77,000
0.4% Fidelity freedom 2035 FFTHX 19,000
1.5% TIP 80,000
2.6% FXNAX 136,000

His HSA
0.4% FZROX 22,000

New annual Contributions
$67,500 his 401k
Cash contributions to taxable accounts are roughly 200k per year on income of 500k.

529 accounts:
16 yo son: 365,000
18 yo son (currently a freshman): 301,000

Umbrella insurance: approx 6 million through USAA
Life insurance: his 2.5 million; hers 500k
Expected Social Security at age 70: his 48k/year; her 24k/year
Yearly spending: approx 240k

Questions:
1. Should I change HSA holdings from fidelity zero total market to TIP or something else?
I don't think it matters a lot. If you plan to liquidate it any time soon for medical expenses I'd probably go for something more stable.

2. How can I decrease the complexity of my portfolio (too many holdings!) without taking a large tax hit from capital gains?
Given your tax bracket I probably would not make changes now unless you have a compelling reason to do so. At a minimum don't reinvest distributions. As a general rule for the future target dates may be better in tax advantaged but at the point I wouldn't change anything.
3. My job covers medical malpractice insurance but should I also consider other asset protection strategies such as trusts?
I'm not a lawyer and MD so I can't directly answer that question. You can lessen exposure in some cases by using retirement accounts, 529s and annuities or insurance products (but they come with high fees). Trust tax rates are high but you are already in a high tax bracket. This is really something to discuss with a qualified attorney. Also, you may want to post this and explore whitecoatinvestor - he is a poster here who has his own forum dedicated to doctor financial issues.
4. I’m thinking about early retirement or working part-time and purchasing a second home in Florida. Any suggestions on how much of a second home I can afford and when I can retire early? 55?
You seem to be in very good shape so unless you want a beachfront mcmansion you should be fine. Florida real estate does have substantial asset (lawsuit) protection!
Topic Author
hpygfme
Posts: 2
Joined: Thu Jul 16, 2015 5:01 pm

Re: Portfolio Review

Post by hpygfme »

These are excellent and helpful replies. Thank you!
chassis
Posts: 2183
Joined: Tue Mar 24, 2020 4:28 pm

Re: Portfolio Review

Post by chassis »

hpygfme wrote: Sat Jan 15, 2022 10:24 am Emergency funds: Three to six months of expenses held in cash

Debt:Zero debt. Mortgage paid in full. 3 autos fully owned.

Tax Filing Status:Married Filing Jointly, with 2 dependant children, ages 18 and 16

Tax Rate:37% Federal, 3.07% Pennsylvania

State of Residence: Pennsylvania

Age: 52, physician, spouse 51, homemaker

Desired Asset allocation: 65% stocks / 35% bonds
Desired International allocation: 45% of stocks

All holdings are index funds or similar ETFs from Fid/Van/iShares so very low expense ratios

Current Portfolio approx 5.2 million (excludes 529 accounts)
Home value: $500,000

Taxable:
0.3% Vanguard Dev Markets VEA 150,000
7% Vanguard target 2030 VTHRX 380,000
10% Vanguard target 2035 VTTHX 523,000
8% Vanguard total int’l VTIAX 422,000
18% Vanguard total stock VTSAX 958,000
5.4% Vanguard emerging markets VWO 285,000
3.8% Fidelity PA Muni FPXTX 199,000
4.7% Fidelity total bond FXNAX 243,000
2.0% Fidelity zero total market FZROX 109,000

His 401k[/b]
11.9% FXNAX 620,000
8% iShares TIPS bond etf TIP 418,000
3.7% Vanguard REIT etf VNQ 192,000

His Backdoor Roth IRA at Vanguard
3.7% Vanguard total int’l VSIAX 191,000

His IRA
1.3% VNQ 66,000

Her Roth
0.4% FXNAX 22,000
0.15% Fidelity multi-asset index FFNOX 8,000

Her Traditional IRA
0.4% FFTHX 20,000
0.9% TIP 46,000
1.5% VNQ 77,000
0.4% Fidelity freedom 2035 FFTHX 19,000
1.5% TIP 80,000
2.6% FXNAX 136,000

His HSA
0.4% FZROX 22,000

New annual Contributions
$67,500 his 401k
Cash contributions to taxable accounts are roughly 200k per year on income of 500k.

529 accounts:
16 yo son: 365,000
18 yo son (currently a freshman): 301,000

Umbrella insurance: approx 6 million through USAA
Life insurance: his 2.5 million; hers 500k
Expected Social Security at age 70: his 48k/year; her 24k/year
Yearly spending: approx 240k

Questions:
1. Should I change HSA holdings from fidelity zero total market to TIP or something else?
2. How can I decrease the complexity of my portfolio (too many holdings!) without taking a large tax hit from capital gains?
3. My job covers medical malpractice insurance but should I also consider other asset protection strategies such as trusts?
4. I’m thinking about early retirement or working part-time and purchasing a second home in Florida. Any suggestions on how much of a second home I can afford and when I can retire early? 55?
You have won the game, congratulations.

You can make any changes you like to rebalance or simplify in the tIRA and 401k on a non-taxable basis. Taxable account changes trigger capital gains tax.

Using napkin math a $1m second house is affordable on paper, while still obeying the 4% "rule", if it doesn't increase your living expenses. Because that is not a good assumption (second house will indeed increase your living expenses), more napkin math suggests a $500k second home might be in the cards.
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