We'd appreciate your help sorting through the mess and getting back on track.
Emergency funds: Yes, part of taxable fixed income allocation.
Debt: Mortgage (30-year fixed, 6.25%, 30 years remaining, $1.5M principle remaining, $600k equity)
Tax Filing Status: Married Filing Jointly
Tax Rate: 37% Federal, 0% State
State of Residence: WA
Age: Me 34, Spouse 32
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 30% of stocks
Approximate size of your total portfolio: $3.1M
Current retirement assets
My 401k at Fidelity
6% Fidelity Total Market Index Fund (FSKAX) (0.01%)
3% Fidelity U.S. Bond Index Fund (FXNAX) (0.03%)
Company match? No
Mega Backdoor Roth IRA available
My Roth IRA at Schwab
4% Vanguard Total Stock Market Index Fund ETF (VTI) (0.01%)
2% Fidelity Total Market Index Fund (FSKAX) (0.01%)
0% Schwab Total Stock Market Index Fund (SWTSX) (0.03%)
Spouse's Roth IRA at Schwab
4% Schwab Total Stock Market Index Fund (SWTSX) (0.03%)
My Taxable at Schwab
6% Vanguard Total Stock Market Index Fund ETF (VTI) (0.01%)
3% Vanguard Total International Stock Index Fund ETF (VXUS) (0.07%)
Joint Taxable at Schwab
72% Cash
Contributions
New annual contributions
$66,000 my 401k (no employer match, max out pre-tax amount, max remaining total contribution limit with after-tax)
$6,500 my Roth IRA (via backdoor)
$6,500 spouse's Roth IRA (via backdoor)
whatever remains after expenses to mortgage/taxable
Available funds
Funds available in my 401(k)
COL DIVIDEND INC I3 (CDDYX) (0.55%)
FID 500 INDEX (FXAIX) (0.015%)
FID LG CAP GR IDX (FSPGX) (0.035%)
FID TOTAL MKT IDX (FSKAX) (0.015%)
BLKRK MD CP GR EQ K (BMGKX) (0.7%)
FID MID CAP IDX (FSMDX) (0.025%)
MFS MID CAP VALUE R6 (MVCKX) (0.63%)
AM CENT SMCAP VAL R6 (ASVDX) (0.74%)
FID SM CAP IDX (FSSNX) (0.025%)
AF NEW WORLD R6 (RNWGX) (0.57%)
FID EMRG MKTS IDX (FPADX) (0.075%)
FID INTL INDEX (FSPSX) (0.035%)
JPM INTL EQUITY R6 (JNEMX) (0.61%)
C&S INST REALTY SHS (CSRIX) (0.76%)
LD ABT DEV GRTH R6 (LADVX) (0.59%)
FID FDM IDX 2005 IPR (FFGFX) (0.08%)
FID FDM IDX 2010 IPR (FFWTX) (0.08%)
FID FDM IDX 2015 IPR (FIWFX) (0.08%)
FID FDM IDX 2020 IPR (FIWTX) (0.08%)
FID FDM IDX 2025 IPR (FFEDX) (0.08%)
FID FDM IDX 2030 IPR (FFEGX) (0.08%)
FID FDM IDX 2035 IPR (FFEZX) (0.08%)
FID FDM IDX 2040 IPR (FFIZX) (0.08%)
FID FDM IDX 2045 IPR (FFOLX) (0.08%)
FID FDM IDX 2050 IPR (FFOPX) (0.08%)
FID FDM IDX 2055 IPR (FFLDX) (0.08%)
FID FDM IDX 2060 IPR (FFLEX) (0.08%)
FID FDM IDX 2065 IPR (FFIKX) (0.08%)
FID FDM IDX INC IPR (FFGZX) (0.08%)
AF INFL LINKED BD R6 (RILFX) (0.29%)
DFA INVT GRD PORT IS (DFAPX) (0.19%)
FID US BOND IDX (FXNAX) (0.025%)
PGIM HIGH YIELD R6 (PHYQX) (0.38%)
FID GOVT MMKT K6 (FNBXX) (0.27%)
Proposed portfolio
Before the disruption of liquidating funds for the house down payment and the windfall, we had a 3-fund portfolio of mostly VTI, VXUS, and VMFXX (Vanguard Federal Money Market).
My proposal for how to clean this up is:
My 401k at Fidelity
9% Fidelity U.S. Bond Index Fund (FXNAX) (0.03%)
Company match? No
Mega Backdoor Roth IRA available
My Roth IRA at Schwab
6% Schwab Total Stock Market Index Fund (SWTSX) (0.03%)
NOTE: Choosing the Schwab Total Stock Market fund here to avoid wash sales in taxable.
Spouse's Roth IRA at Schwab
4% Schwab Total Stock Market Index Fund (SWTSX) (0.03%)
My Taxable at Schwab
6% Vanguard Total Stock Market Index Fund ETF (VTI) (0.01%)
3% Vanguard Total International Stock Index Fund ETF (VXUS) (0.07%)
NOTE: leaving this untouched as there are large capital gains here.
Joint Taxable at Schwab
33% Vanguard Total Stock Market Index Fund ETF (VTI) (0.01%)
18% Vanguard Total International Stock Index Fund ETF (VXUS) (0.07%)
21% Schwab U.S. Treasury Money Fund – Ultra Shares (SUTXX) (0.19%)
0% Schwab Municipal Money Fund - Ultra Shares (SWOXX) (0.19%)
0% Schwab Value Advantage Money Fund – Ultra Shares (SNAXX) (0.19%)
NOTE: Planning to use the large cash balance we have to hit the $1M minimum on the 3 major classes of money market fund to get access to the ultra shares.
Questions
- Does my proposed portfolio and asset allocation look reasonable?
- We currently have sufficient assets in cash to pay off the mortgage. At a 6.25% rate, should we do this?
- Our tax advantaged space is not sufficient to hold our entire bond allocation. Should my 401k be 100% bonds or 0% bonds? I think tax-equivalent yields if holding fixed income in taxable, future RMDs, and the ability to do Roth conversions between early retirement and full retirement age are major considerations here, but I don't have enough background to know how to evaluate this choice.
- My family currently has health/vision/dental insurance (through my employer), disability insurance (a small policy through my employer), car insurance with $1M in liability coverage, homeowners insurance with $300k in liability coverage, an umbrella policy with $5M in liability coverage, earthquake insurance on our home. Are we missing anything here?
- My family is lacking in the estate planning department. All retirement accounts have beneficiaries assigned. Other than putting a will in place, is there anything else I should be considering for estate planning? Will I want to store these assets in a revocable trust?