Portfolio review for retirement readiness
Portfolio review for retirement readiness
Hi Bogleheads,
This is a retirement readiness check, so please have a look at my portfolio and see my questions below. Thanks very much for your time and thoughts:
Emergency funds:
Over six months of expenses in local brick and mortar bank and online credit union.
Debt:
Current mortgage is a 30-year fixed and has $580k remaining @ 3.125% (current home value $1.7MM).
Tax Filing Status:
Married Filing Jointly (MFJ)
Tax Rate: 24% Federal, 8.5% State
State of Residence:
District of Columbia
Age:
43
Desired Asset allocation:
60% stocks, 40% bonds
Desired International allocation:
20% of stocks
Total portfolio:
$6MM
Current retirement assets
Taxable (5.3MM)
10% cash — VMRXX money market (0.1%)
9% bonds — VBTLX total bond market (0.05%)
81% stocks, consisting of:
… 3% exxon mobil (XOM)
… 27% vanguard 500 index (VFIAX) (0.04%)
… 8% vanguard high dividend yield index (VHYAX) (0.08%)
… 8% vanguard mid-cap index (VIMAX) (0.05%)
… 23% vanguard total international index (VTIAX) (0.11%)
… 25% vanguard total stock market index (VTSAX) (0.04%)
(… plus my Rollover and Roth IRA at Vanguard below accounting for the remaining 4%)
His Roth IRA at Vanguard
2% vanguard small-cap growth index (VSGAX) (0.07%)
His Rollover IRA at Vanguard
2% vanguard emerging markets index (VEMAX) (0.14%)
His 401k (700k)
56% fidelity us bond index (FXNAX) (0.025%)
22% vanguard value index (VVIAX) (0.05%)
22% vanguard growth index (VIGAX) (0.05%)
Company match — Yes, 4%
Contributions
New annual Contributions
$20.5k his 401k (employer matches 4%, and I try to max my 401k contribution by mid-February each year (aka “front loading”: my employer has a ‘true up’ clause and will still pay the full match in the following year)
$6k to my IRA/Roth IRA, contributed as early as possible each year
$75k annually goes into VTSAX taxable, coming from automated contributions from my regular paychecks every two weeks
Available funds
Funds available in his 401(k)
FID 500 INDEX (FXAIX)
FID BLUE CHIP GR K6 (FBCGX)
FID LARGE CAP STOCK (FLCSX)
INVESCO DIVRS DIV R6 (LCEFX)
VANG GROWTH IDX ADM (VIGAX)
VANG VALUE IDX ADM (VVIAX)
CRLN E MID CAP GR R6 (HRAUX)
FID EXTD MKT IDX (FSMAX)
MFS MID CAP VALUE R6 (MVCKX)
AB SM CAP GRTH Z (QUAZX)
CB SMALL CAP I (LMNSX)
DELAWARE SMCP VAL R6 (DVZRX)
FID GLB EX US IDX (FSGGX)
FID INTL CAP APPREC (FIVFX)
C&S INST REALTY SHS (CSRIX)
PGIM J UTILITY Z (PRUZX)
TRP GLBL TECH I (PGTIX)
FID BALANCED K (FBAKX)
FID FDM IDX 2005 IPR (FFGFX)
FID FDM IDX 2010 IPR (FFWTX)
FID FDM IDX 2015 IPR (FIWFX)
FID FDM IDX 2020 IPR (FIWTX)
FID FDM IDX 2025 IPR (FFEDX)
FID FDM IDX 2030 IPR (FFEGX)
FID FDM IDX 2035 IPR (FFEZX)
FID FDM IDX 2040 IPR (FFIZX)
FID FDM IDX 2045 IPR (FFOLX)
FID FDM IDX 2050 IPR (FFOPX)
FID FDM IDX 2055 IPR (FFLDX)
FID FDM IDX 2060 IPR (FFLEX)
FID FDM IDX 2065 IPR (FFIKX)
FID FDM IDX INC IPR (FFGZX)
BAIRD CORE PLUS INST (BCOIX)
EV INC FND BOSTON R6 (EIBRX)
FID US BOND IDX (FXNAX)
FID GOVT MMKT (SPAXX)
Notes:
- DW is also employed, but I’m the primary earner by a wide margin, so I’ve omitted her finances/income here for simplicity as it doesn’t significantly affect the overall portfolio as far as my questions are concerned. Our finances and accounts are all joint and shared, we can both see one another’s purchases, discuss finances and any large purchases together, etc. I feel very lucky.
- No children, nor plans to have any children at this point, so we just enjoy doting on our nieces and nephews.
- My taxable is very large compared to my tax-deferred due to aggressive saving through my whole career, aggressive saving and investing of bonuses, some of which were very large plus a company stock option exercise and payout, and generally living well below my means while working my butt off, in particular through my 30s and early 40s, all while sticking with a single employer for a long time. Increases in income throughout the years were poured into savings and investments while I tried to keep my expenses largely unchanged, and I waited a long time relative to most people to make more adult purchases like a nicer car and our first house which didn’t happen until my early 40s.
- But I’m getting a bit tired of the work hustle. My memories of my 30s and early 40s are somewhat spotty because of frequent and long bouts of long hours at work, weekends, etc. Body often hurts from so much sitting at computers. I’m ready to leave this career behind and focus my energies on my marriage, family, friends that I’ve lost touch with, and several hobbies. I’ve no concerns about filling the time when I step away from my career work, and I could easily see taking six months to a year off and then moving into part-time work in my same field, but with much lower stakes. I’ve been putting a lot of effort over the past couple of years into mentoring my reports, documenting and spreading my accumulated institutional knowledge. My employer has been good to me and I’d like to leave them prepared.
- Annual expenses for me and DW come to $120k a year (and we track our budget), including taxes due and current estimated health care through the ACA.
- In the case of retirement, I would withdraw from taxable while starting a Roth conversion ladder. Employer 401k would be rolled into my IRA and invested according to my AA.
Questions:
1. How is my retirement readiness, oh wise Bogleheads? Withdrawal rate would be about 2% and is probably taken care of through dividends alone, but of course I’m looking at funding potential 40+ years. DC is a very high cost of living area, so in the event of disaster we also have the option of selling (assuming we can sell, of course; one never knows what the market might be like) and relocating.
2. I’m admittedly averse to debt on an emotional level, and the house mortgage is of course a frequent topic here in that regard. The smart move is to just continue the remaining mortgage payments (at 3.125%), but what about recasting the remaining debt just as a way to reduce monthly payments? Are there any downsides to this other than the fact that it would extend the length of time that I’d be making those payments? It seems like a way to reduce risk, and in the end I could still pay off the mortgage early if needed.
3. Anything else I’m missing here? I feel quite prepared to step away from my work as far as things to do with my time. As mentioned above, I’m itching to focus my time elsewhere and have done a lot of thought and preparation (Zelinski’s ‘How to Retire Happy, Wild and Free’ book and in particular the ‘get a life tree’ exercise really made me feel good about my plans).
Thanks very much, everybody!
This is a retirement readiness check, so please have a look at my portfolio and see my questions below. Thanks very much for your time and thoughts:
Emergency funds:
Over six months of expenses in local brick and mortar bank and online credit union.
Debt:
Current mortgage is a 30-year fixed and has $580k remaining @ 3.125% (current home value $1.7MM).
Tax Filing Status:
Married Filing Jointly (MFJ)
Tax Rate: 24% Federal, 8.5% State
State of Residence:
District of Columbia
Age:
43
Desired Asset allocation:
60% stocks, 40% bonds
Desired International allocation:
20% of stocks
Total portfolio:
$6MM
Current retirement assets
Taxable (5.3MM)
10% cash — VMRXX money market (0.1%)
9% bonds — VBTLX total bond market (0.05%)
81% stocks, consisting of:
… 3% exxon mobil (XOM)
… 27% vanguard 500 index (VFIAX) (0.04%)
… 8% vanguard high dividend yield index (VHYAX) (0.08%)
… 8% vanguard mid-cap index (VIMAX) (0.05%)
… 23% vanguard total international index (VTIAX) (0.11%)
… 25% vanguard total stock market index (VTSAX) (0.04%)
(… plus my Rollover and Roth IRA at Vanguard below accounting for the remaining 4%)
His Roth IRA at Vanguard
2% vanguard small-cap growth index (VSGAX) (0.07%)
His Rollover IRA at Vanguard
2% vanguard emerging markets index (VEMAX) (0.14%)
His 401k (700k)
56% fidelity us bond index (FXNAX) (0.025%)
22% vanguard value index (VVIAX) (0.05%)
22% vanguard growth index (VIGAX) (0.05%)
Company match — Yes, 4%
Contributions
New annual Contributions
$20.5k his 401k (employer matches 4%, and I try to max my 401k contribution by mid-February each year (aka “front loading”: my employer has a ‘true up’ clause and will still pay the full match in the following year)
$6k to my IRA/Roth IRA, contributed as early as possible each year
$75k annually goes into VTSAX taxable, coming from automated contributions from my regular paychecks every two weeks
Available funds
Funds available in his 401(k)
FID 500 INDEX (FXAIX)
FID BLUE CHIP GR K6 (FBCGX)
FID LARGE CAP STOCK (FLCSX)
INVESCO DIVRS DIV R6 (LCEFX)
VANG GROWTH IDX ADM (VIGAX)
VANG VALUE IDX ADM (VVIAX)
CRLN E MID CAP GR R6 (HRAUX)
FID EXTD MKT IDX (FSMAX)
MFS MID CAP VALUE R6 (MVCKX)
AB SM CAP GRTH Z (QUAZX)
CB SMALL CAP I (LMNSX)
DELAWARE SMCP VAL R6 (DVZRX)
FID GLB EX US IDX (FSGGX)
FID INTL CAP APPREC (FIVFX)
C&S INST REALTY SHS (CSRIX)
PGIM J UTILITY Z (PRUZX)
TRP GLBL TECH I (PGTIX)
FID BALANCED K (FBAKX)
FID FDM IDX 2005 IPR (FFGFX)
FID FDM IDX 2010 IPR (FFWTX)
FID FDM IDX 2015 IPR (FIWFX)
FID FDM IDX 2020 IPR (FIWTX)
FID FDM IDX 2025 IPR (FFEDX)
FID FDM IDX 2030 IPR (FFEGX)
FID FDM IDX 2035 IPR (FFEZX)
FID FDM IDX 2040 IPR (FFIZX)
FID FDM IDX 2045 IPR (FFOLX)
FID FDM IDX 2050 IPR (FFOPX)
FID FDM IDX 2055 IPR (FFLDX)
FID FDM IDX 2060 IPR (FFLEX)
FID FDM IDX 2065 IPR (FFIKX)
FID FDM IDX INC IPR (FFGZX)
BAIRD CORE PLUS INST (BCOIX)
EV INC FND BOSTON R6 (EIBRX)
FID US BOND IDX (FXNAX)
FID GOVT MMKT (SPAXX)
Notes:
- DW is also employed, but I’m the primary earner by a wide margin, so I’ve omitted her finances/income here for simplicity as it doesn’t significantly affect the overall portfolio as far as my questions are concerned. Our finances and accounts are all joint and shared, we can both see one another’s purchases, discuss finances and any large purchases together, etc. I feel very lucky.
- No children, nor plans to have any children at this point, so we just enjoy doting on our nieces and nephews.
- My taxable is very large compared to my tax-deferred due to aggressive saving through my whole career, aggressive saving and investing of bonuses, some of which were very large plus a company stock option exercise and payout, and generally living well below my means while working my butt off, in particular through my 30s and early 40s, all while sticking with a single employer for a long time. Increases in income throughout the years were poured into savings and investments while I tried to keep my expenses largely unchanged, and I waited a long time relative to most people to make more adult purchases like a nicer car and our first house which didn’t happen until my early 40s.
- But I’m getting a bit tired of the work hustle. My memories of my 30s and early 40s are somewhat spotty because of frequent and long bouts of long hours at work, weekends, etc. Body often hurts from so much sitting at computers. I’m ready to leave this career behind and focus my energies on my marriage, family, friends that I’ve lost touch with, and several hobbies. I’ve no concerns about filling the time when I step away from my career work, and I could easily see taking six months to a year off and then moving into part-time work in my same field, but with much lower stakes. I’ve been putting a lot of effort over the past couple of years into mentoring my reports, documenting and spreading my accumulated institutional knowledge. My employer has been good to me and I’d like to leave them prepared.
- Annual expenses for me and DW come to $120k a year (and we track our budget), including taxes due and current estimated health care through the ACA.
- In the case of retirement, I would withdraw from taxable while starting a Roth conversion ladder. Employer 401k would be rolled into my IRA and invested according to my AA.
Questions:
1. How is my retirement readiness, oh wise Bogleheads? Withdrawal rate would be about 2% and is probably taken care of through dividends alone, but of course I’m looking at funding potential 40+ years. DC is a very high cost of living area, so in the event of disaster we also have the option of selling (assuming we can sell, of course; one never knows what the market might be like) and relocating.
2. I’m admittedly averse to debt on an emotional level, and the house mortgage is of course a frequent topic here in that regard. The smart move is to just continue the remaining mortgage payments (at 3.125%), but what about recasting the remaining debt just as a way to reduce monthly payments? Are there any downsides to this other than the fact that it would extend the length of time that I’d be making those payments? It seems like a way to reduce risk, and in the end I could still pay off the mortgage early if needed.
3. Anything else I’m missing here? I feel quite prepared to step away from my work as far as things to do with my time. As mentioned above, I’m itching to focus my time elsewhere and have done a lot of thought and preparation (Zelinski’s ‘How to Retire Happy, Wild and Free’ book and in particular the ‘get a life tree’ exercise really made me feel good about my plans).
Thanks very much, everybody!
Re: Portfolio review for retirement readiness
Looks to me like you are ready.
I don't think you currently have the full 40% in bonds/fixed/cash though. Looks to me to be about 75/25 instead of 60/40. Do you have a plan to get to 60/40?
Your roughly $900k in tax deferred accounts are not a problem now but could become a problem if allowed to grow freely for decades. That may not happen since you intend to do Roth conversions. Something else that would help is to increase the bond allocations in those accounts.
Your mortgage rates seems a touch high but not ridiculous. I'd look for opportunities to reduce it. I would not pay it off myself, but many would. Both are good choices.
I don't think you currently have the full 40% in bonds/fixed/cash though. Looks to me to be about 75/25 instead of 60/40. Do you have a plan to get to 60/40?
Your roughly $900k in tax deferred accounts are not a problem now but could become a problem if allowed to grow freely for decades. That may not happen since you intend to do Roth conversions. Something else that would help is to increase the bond allocations in those accounts.
Your mortgage rates seems a touch high but not ridiculous. I'd look for opportunities to reduce it. I would not pay it off myself, but many would. Both are good choices.
Link to Asking Portfolio Questions
Re: Portfolio review for retirement readiness
1. You have won the game, congratulations. Your net worth and living expenses will carry you through until "end of plan".
2. I prefer zero debt. I see no time pressure for you to do this, so one suggestion is stay the course and pay the mortgage according to its existing terms.
3. I identify with your comments about work, marriage, family, friends, etc. It's up to you, you have won the game. Options:
- retire now
- quit and take a job in your field at a lower level with lower pay and lower stress
- quit and consult. 50% utilization/billable hours is about what to expect, and to achieve this requires fairly active networking/marketing/promotion. If you back off on the networking, 25% utilization is something to plan around.
2. I prefer zero debt. I see no time pressure for you to do this, so one suggestion is stay the course and pay the mortgage according to its existing terms.
3. I identify with your comments about work, marriage, family, friends, etc. It's up to you, you have won the game. Options:
- retire now
- quit and take a job in your field at a lower level with lower pay and lower stress
- quit and consult. 50% utilization/billable hours is about what to expect, and to achieve this requires fairly active networking/marketing/promotion. If you back off on the networking, 25% utilization is something to plan around.
Re: Portfolio review for retirement readiness
marcus213,marcus213 wrote: ↑Sat Jan 22, 2022 7:16 am
Tax Filing Status:
Married Filing Jointly (MFJ)
Tax Rate: 24% Federal, 8.5% State
Contributions
New annual Contributions
$20.5k his 401k (employer matches 4%, and I try to max my 401k contribution by mid-February each year (aka “front loading”: my employer has a ‘true up’ clause and will still pay the full match in the following year)
$6k to my IRA/Roth IRA, contributed as early as possible each year
$75k annually goes into VTSAX taxable, coming from automated contributions from my regular paychecks every two weeks
- Annual expenses for me and DW come to $120k a year (and we track our budget), including taxes due and current estimated health care through the ACA.
What is your current annual expense? Is it 120K per year?
To be at 24% marginal tax rate, your taxable income needs to be in this range
$178,150 to $340,100
So, your gross income should be 200K and above.
Gross income = annual savings + annual expense + taxes
Please use the above formula to verify your current annual expense.
If your estimate of your current annual expense is good, you should be fine for retirement.
In your case, I would pay off the mortgage before I retire.
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Re: Portfolio review for retirement readiness
It looks like you currently have more than 500k in cash in your taxable account. It doesn't make sense to keep this here and not pay off the mortgage. You could maybe make an argument about how keeping the mortgage would let you hold more stocks, but that doesn't look like what you are planning.
Re: Portfolio review for retirement readiness
I hereby nominate you as a model BH. You look as bulletproof as one can be, and a 2% SWR is below a perpetual withdrawal rate, as you already know. Your situation is admirable and impressive.marcus213 wrote: ↑Sat Jan 22, 2022 7:16 am 1. How is my retirement readiness, oh wise Bogleheads? Withdrawal rate would be about 2% and is probably taken care of through dividends alone, but of course I’m looking at funding potential 40+ years. DC is a very high cost of living area, so in the event of disaster we also have the option of selling (assuming we can sell, of course; one never knows what the market might be like) and relocating.
You are holding a lot of cash; you might want to consider putting some of it back to work.
Your mortgage is almost a rounding error at this point. I don't think it really matters what you do with it. I'm in the debt-free camp, but that decision was largely based on emotion as opposed to any detailed financial assessment.marcus213 wrote: ↑Sat Jan 22, 2022 7:16 am 2. I’m admittedly averse to debt on an emotional level, and the house mortgage is of course a frequent topic here in that regard. The smart move is to just continue the remaining mortgage payments (at 3.125%), but what about recasting the remaining debt just as a way to reduce monthly payments? Are there any downsides to this other than the fact that it would extend the length of time that I’d be making those payments? It seems like a way to reduce risk, and in the end I could still pay off the mortgage early if needed.
We lived for 25 years in the DC metro area. You would have no problem selling your house, and for a pretty penny, too. In a Helm's Deep scenario you could easily relocate to MCOL or LCOL, thereby monetizing your HCOL house.
Sounds like you are as set as a person can be. You may live for another half century. If I were fortunate enough to be in your shoes, I would have two lingering considerations: (1) HC; and (2) what do I do with my time? It sounds like you have both covered off in a thoughtful way. Related to the former, you might want to think about long-term care.marcus213 wrote: ↑Sat Jan 22, 2022 7:16 am 3. Anything else I’m missing here? I feel quite prepared to step away from my work as far as things to do with my time. As mentioned above, I’m itching to focus my time elsewhere and have done a lot of thought and preparation (Zelinski’s ‘How to Retire Happy, Wild and Free’ book and in particular the ‘get a life tree’ exercise really made me feel good about my plans).
You might want to look into setting up a donor advised fund for future charitable contributions.
If and when you pull the plug, and in the absence of other compelling reasons (family, friends, what have you) you might want to consider moving away from DC. Your costs almost certainly would go down further.
I'm not a SS expert so don't know if you are beyond the proverbial second bend/inflection point. Again, for you, SS will likely be icing on the cake. It does provide another backstop, however. You at least should understand what you might be leaving behind.
Congratulations.
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Re: Portfolio review for retirement readiness
Congrats on your savings accomplishments. You seem like a hard worker and job focused person like many here. As you retire can you scale back but maybe it’s best if you leave yourself an option to go back to work if you want to for non monetary reasons. Maybe take a year sabbatical and test drive retirement? If not can you go part time reducing your hours now? Consult at work part time?
You have won the financial game now you have to figure out what to do with the rest of your life - congrats! Zelinkski has a great book.
I retired at age 50 for 2.5 years, worked part time some, went back to work at old employer for 5 years, then retired again a year ago … flexibility is the key to happiness in retirement for some people.
Your finances look like you are all set to me for retirement if your living expenses are 120K year.
You have won the financial game now you have to figure out what to do with the rest of your life - congrats! Zelinkski has a great book.
I retired at age 50 for 2.5 years, worked part time some, went back to work at old employer for 5 years, then retired again a year ago … flexibility is the key to happiness in retirement for some people.
Your finances look like you are all set to me for retirement if your living expenses are 120K year.
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- Joined: Sun Mar 08, 2009 8:01 am
Re: Portfolio review for retirement readiness
Pay off the mortgage with the cash and bonds sitting in taxable that are losing ground to inflation - not to mention the interest rate risk you are taking in bonds.
Re: Portfolio review for retirement readiness
Thanks everyone very much for your responses and suggestions. As many here have said before this is one of the best spots on the internet. In lieu of buying you all a round I'll make another donation to the site.
retiredjg:
chassis:
KlangFool:
orklc:
Zeno:
I really should have at least mentioned SS in my original post! Embarrassing to leave that out entirely, though I suppose I did so because I track it from a fair distance, not considering it as a guaranteed income source in retirement but more like icing on the cake as you put it. I'm not sure yet at what age I'd start it but still have time to decide, and you're right about having passed the section bend point in the formula. Impossible to tell if it will reduced by the time I claim it and all that, but I expect there will be something significant there.
Parkinglotracer:
Outer Marker:
retiredjg:
Yes, it will have to be combination of shifting investments in my 401k, redirecting income toward bonds and then also investing any future bonuses the same way. At the same time if I consider my bond allocation in terms of years worth of living expenses, it's already pretty conservative / ample, so I might end up splitting the difference. I realize that's a little broad so I need to focus this plan.I don't think you currently have the full 40% in bonds/fixed/cash though. Looks to me to be about 75/25 instead of 60/40. Do you have a plan to get to 60/40?
chassis:
Thanks, I'm already thinking along these lines, first with a long break in order to spend time with family and begin reconnecting with friends, and then spending time networking and re-entering my field but with an aim toward shorter term and lower stress applications. I followed the advice of many here and had several sessions with a therapist who specializes in employment and career issues and counseling, and I came away from that feeling pleasantly energized and relieved in the sense of realizing how I still have a passion for the core of what I do but that it was simply time to move on. That was a surprising feeling because I was really feeling like I was just done period, but working through things with the therapist helped me see this as the closing of one large book on the shelf before selecting and starting another, and now I look forward to the prospect and the reconfiguring and learning it will require.- quit and take a job in your field at a lower level with lower pay and lower stress
- quit and consult. 50% utilization/billable hours is about what to expect, and to achieve this requires fairly active networking/marketing/promotion. If you back off on the networking, 25% utilization is something to plan around.
KlangFool:
Yes, I'm doing some fudging and rounding for simplicity's sake here, but you're correct about the gross income. I'll count this as another vote for paying the mortgage off, and doing so is perhaps another avenue to making a sizeable shift in my AA before I decide to pull the ripcord.So, your gross income should be 200K and above.
Gross income = annual savings + annual expense + taxes
If your estimate of your current annual expense is good, you should be fine for retirement.
In your case, I would pay off the mortgage before I retire.
orklc:
Yes, this is way high, I agree, and it's largely made up of the most recent windfall which is slowly being allocated, donated (charities through my DAF), as well as considered for helping out with nieces and nephew's potential college ambitions, but of course that's a whole other can of worms. But yes, I won't be letting that chunk just sit there.It looks like you currently have more than 500k in cash in your taxable account. It doesn't make sense to keep this here and not pay off the mortgage.
Zeno:
Great point about long-term care. Our not having any children really sticks in my mind when I think about future decades. LTC is something I need to research and I've not done so. Fidelity DAF is all set up and in motion, thanks. I made this pick after reading so many positive comments here, and it's been a very convenient way to manage our charitable giving. Ha! Your Helm's Deep comment made me laugh because it took me a moment to remember what it was referring to. We do intend to stick around the DC area for a while, but selling and relocating is another potential margin of safety.you might want to think about long-term care.
You might want to look into setting up a donor advised fund for future charitable contributions.
In a Helm's Deep scenario...
SS will likely be icing on the cake. ... You at least should understand what you might be leaving behind.
I really should have at least mentioned SS in my original post! Embarrassing to leave that out entirely, though I suppose I did so because I track it from a fair distance, not considering it as a guaranteed income source in retirement but more like icing on the cake as you put it. I'm not sure yet at what age I'd start it but still have time to decide, and you're right about having passed the section bend point in the formula. Impossible to tell if it will reduced by the time I claim it and all that, but I expect there will be something significant there.
Parkinglotracer:
Precisely, and yes part-time would be possible for me though I need to invest time in networking first. There's likely no going back to my current pay level but I feel prepared to cross that bridge and do some hustling. Your retire/part-time/previous employer scenario is inspiring.Maybe take a year sabbatical and test drive retirement? If not can you go part time reducing your hours now?
Outer Marker:
Noted, and thank you. Given the percentage of responses here regarding paying off or continuing the mortgage plus my own aversion to debt, I'll likely split the difference and just put a really massive debt in the remaining balance, trimming it down to something that doesn't concern me.Pay off the mortgage with the cash and bonds sitting in taxable that are losing ground to inflation - not to mention the interest rate risk you are taking in bonds
Re: Portfolio review for retirement readiness
Assuming you wish to continue living on $120k per year, you are fine.
Of course, you already know this, so I wonder if you have a real question?
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Re: Portfolio review for retirement readiness
With $5.3M in taxable and more in cash and bonds sitting there than the value of your mortgage, there is no reason not to pay off your mortgage in full. Why are you borrowing money at 3.125% and lending it at 0.5% ? Just get rid of it. By paying it off completely, you also eliminate your largest monthly obligation and free up additional cash flow for investing or whatever. Plus it feels good being mortgage free.marcus213 wrote: ↑Sun Jan 23, 2022 5:52 am Given the percentage of responses here regarding paying off or continuing the mortgage plus my own aversion to debt, I'll likely split the difference and just put a really massive debt in the remaining balance, trimming it down to something that doesn't concern me.
Re: Portfolio review for retirement readiness
Yeah personally I would sell the house, buy a house in FL or wherever at the realized price- mortgage payoff (around 1M it seems), then live off your 2% withdrawal rate on the 6M and go fishing everyday....
I suppose (I see zero reason!) if you want to stay in DC and maybe keep working, then at least paying off the mortgage, or putting the cash to better use (making more than the mortgage rate at least) would be a good start.
But the pack it all up and go fishing option seems best to me. Congrats!
I suppose (I see zero reason!) if you want to stay in DC and maybe keep working, then at least paying off the mortgage, or putting the cash to better use (making more than the mortgage rate at least) would be a good start.
But the pack it all up and go fishing option seems best to me. Congrats!
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Re: Portfolio review for retirement readiness
marcus213 wrote: ↑Sat Jan 22, 2022 7:16 am Hi Bogleheads,
This is a retirement readiness check, so please have a look at my portfolio and see my questions below. Thanks very much for your time and thoughts:
Emergency funds:
Over six months of expenses in local brick and mortar bank and online credit union.
Debt:
Current mortgage is a 30-year fixed and has $580k remaining @ 3.125% (current home value $1.7MM).
Tax Filing Status:
Married Filing Jointly (MFJ)
Tax Rate: 24% Federal, 8.5% State
State of Residence:
District of Columbia
Age:
43
Desired Asset allocation:
60% stocks, 40% bonds
Desired International allocation:
20% of stocks
Total portfolio:
$6MM
Current retirement assets
Taxable (5.3MM)
10% cash — VMRXX money market (0.1%)
9% bonds — VBTLX total bond market (0.05%)
81% stocks, consisting of:
… 3% exxon mobil (XOM)
… 27% vanguard 500 index (VFIAX) (0.04%)
… 8% vanguard high dividend yield index (VHYAX) (0.08%)
… 8% vanguard mid-cap index (VIMAX) (0.05%)
… 23% vanguard total international index (VTIAX) (0.11%)
… 25% vanguard total stock market index (VTSAX) (0.04%)
(… plus my Rollover and Roth IRA at Vanguard below accounting for the remaining 4%)
His Roth IRA at Vanguard
2% vanguard small-cap growth index (VSGAX) (0.07%)
His Rollover IRA at Vanguard
2% vanguard emerging markets index (VEMAX) (0.14%)
His 401k (700k)
56% fidelity us bond index (FXNAX) (0.025%)
22% vanguard value index (VVIAX) (0.05%)
22% vanguard growth index (VIGAX) (0.05%)
Company match — Yes, 4%
Contributions
New annual Contributions
$20.5k his 401k (employer matches 4%, and I try to max my 401k contribution by mid-February each year (aka “front loading”: my employer has a ‘true up’ clause and will still pay the full match in the following year)
$6k to my IRA/Roth IRA, contributed as early as possible each year
$75k annually goes into VTSAX taxable, coming from automated contributions from my regular paychecks every two weeks
Available funds
Funds available in his 401(k)
FID 500 INDEX (FXAIX)
FID BLUE CHIP GR K6 (FBCGX)
FID LARGE CAP STOCK (FLCSX)
INVESCO DIVRS DIV R6 (LCEFX)
VANG GROWTH IDX ADM (VIGAX)
VANG VALUE IDX ADM (VVIAX)
CRLN E MID CAP GR R6 (HRAUX)
FID EXTD MKT IDX (FSMAX)
MFS MID CAP VALUE R6 (MVCKX)
AB SM CAP GRTH Z (QUAZX)
CB SMALL CAP I (LMNSX)
DELAWARE SMCP VAL R6 (DVZRX)
FID GLB EX US IDX (FSGGX)
FID INTL CAP APPREC (FIVFX)
C&S INST REALTY SHS (CSRIX)
PGIM J UTILITY Z (PRUZX)
TRP GLBL TECH I (PGTIX)
FID BALANCED K (FBAKX)
FID FDM IDX 2005 IPR (FFGFX)
FID FDM IDX 2010 IPR (FFWTX)
FID FDM IDX 2015 IPR (FIWFX)
FID FDM IDX 2020 IPR (FIWTX)
FID FDM IDX 2025 IPR (FFEDX)
FID FDM IDX 2030 IPR (FFEGX)
FID FDM IDX 2035 IPR (FFEZX)
FID FDM IDX 2040 IPR (FFIZX)
FID FDM IDX 2045 IPR (FFOLX)
FID FDM IDX 2050 IPR (FFOPX)
FID FDM IDX 2055 IPR (FFLDX)
FID FDM IDX 2060 IPR (FFLEX)
FID FDM IDX 2065 IPR (FFIKX)
FID FDM IDX INC IPR (FFGZX)
BAIRD CORE PLUS INST (BCOIX)
EV INC FND BOSTON R6 (EIBRX)
FID US BOND IDX (FXNAX)
FID GOVT MMKT (SPAXX)
Notes:
- DW is also employed, but I’m the primary earner by a wide margin, so I’ve omitted her finances/income here for simplicity as it doesn’t significantly affect the overall portfolio as far as my questions are concerned. Our finances and accounts are all joint and shared, we can both see one another’s purchases, discuss finances and any large purchases together, etc. I feel very lucky.
- No children, nor plans to have any children at this point, so we just enjoy doting on our nieces and nephews.
- My taxable is very large compared to my tax-deferred due to aggressive saving through my whole career, aggressive saving and investing of bonuses, some of which were very large plus a company stock option exercise and payout, and generally living well below my means while working my butt off, in particular through my 30s and early 40s, all while sticking with a single employer for a long time. Increases in income throughout the years were poured into savings and investments while I tried to keep my expenses largely unchanged, and I waited a long time relative to most people to make more adult purchases like a nicer car and our first house which didn’t happen until my early 40s.
- But I’m getting a bit tired of the work hustle. My memories of my 30s and early 40s are somewhat spotty because of frequent and long bouts of long hours at work, weekends, etc. Body often hurts from so much sitting at computers. I’m ready to leave this career behind and focus my energies on my marriage, family, friends that I’ve lost touch with, and several hobbies. I’ve no concerns about filling the time when I step away from my career work, and I could easily see taking six months to a year off and then moving into part-time work in my same field, but with much lower stakes. I’ve been putting a lot of effort over the past couple of years into mentoring my reports, documenting and spreading my accumulated institutional knowledge. My employer has been good to me and I’d like to leave them prepared.
- Annual expenses for me and DW come to $120k a year (and we track our budget), including taxes due and current estimated health care through the ACA.
- In the case of retirement, I would withdraw from taxable while starting a Roth conversion ladder. Employer 401k would be rolled into my IRA and invested according to my AA.
Questions:
1. How is my retirement readiness, oh wise Bogleheads? Withdrawal rate would be about 2% and is probably taken care of through dividends alone, but of course I’m looking at funding potential 40+ years. DC is a very high cost of living area, so in the event of disaster we also have the option of selling (assuming we can sell, of course; one never knows what the market might be like) and relocating.
2. I’m admittedly averse to debt on an emotional level, and the house mortgage is of course a frequent topic here in that regard. The smart move is to just continue the remaining mortgage payments (at 3.125%), but what about recasting the remaining debt just as a way to reduce monthly payments? Are there any downsides to this other than the fact that it would extend the length of time that I’d be making those payments? It seems like a way to reduce risk, and in the end I could still pay off the mortgage early if needed.
3. Anything else I’m missing here? I feel quite prepared to step away from my work as far as things to do with my time. As mentioned above, I’m itching to focus my time elsewhere and have done a lot of thought and preparation (Zelinski’s ‘How to Retire Happy, Wild and Free’ book and in particular the ‘get a life tree’ exercise really made me feel good about my plans).
Thanks very much, everybody!
Looks great.
As others pointed out-
1. Pay off Mortgage.
2. I like VT or VTWAX, All others are just a titing one way or another and I hate tilting.
36% (IRA) - Individual LT Corporate Bonds , 33%(taxable) - schy, 33%(taxable) - SCHD Dividend Growth