A few points of context before I get started:
- I have found target-date to be useful and keep me from behavioral errors, i.e. market timing, and focusing on keeping high contributions.
- To that end, I recently liquidated everything but a couple shares of MSFT out of my Roth IRA and moved it to Target Date.
- Everything in our tax-deferred funds (with the exception of a couple MSFT shares I hold for sentimental reasons) is generally now in 2055 funds.
- Recently married and purchased a home about a year ago. Sold a lot of RSUs, etc, but am happy with our lifestyle.
- Got burned by recent tech downturn, learned the lesson to sell ESPP and RSUs as soon as I can and pump the cash into our M1 account.
- Have a desire to simplify my accounts. It feels almost impossible to TLH without a wash sale right now so I just avoid it and keep pumping money into the accounts. Not the worst thing, but I know it's pointless to have such tiny amounts of money spread all over the place. I'm a BIG sucker for the "deposit $50 and we'll give you $50" type deals, though... opened my schwab and fidelity accts because it was too good to resist, but would like to pare back...
- Not only is TLH impossible but as I'm reviewing, it makes it hard to understand allocation across accounts.
- We currently max pre-tax 401k with matches (to best of our ability, my plan makes it a best effort attempt), max backdoor roth IRA, max HSA, and I've been looking into mega backdoor roth plan offered at my work, though currently throw money in taxable accts. Talk about children, 529s may be in our future.
Income:
we both have pretty variable comp in tech - ranges between $350k - $500k combined depending on commissions, stock performance/vesting, bonuses, etc.
Emergency funds: About a year of expenses. Like a cushion for tax time, house repairs, peace of mind. Roughly $85k.
Debt: $732k 3.375% mortgage
Tax Filing Status: Married Filing Jointly
Tax Rate: 24% Federal (I think?) -- honestly feel like I need a CPA, our income is variable due to stock compensation, commission checks, bonuses, etc. It doesn't feel as simple as choosing the right withholding and I don't want it to bite us in the a$$.
State of Residence: WA
Age: 32 and 33
Desired Asset allocation: 95% stocks / 5% bonds
Desired International allocation: 35% of stocks
Total portfolio roughly $350k
Current retirement assets
Taxable
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(mostly) M1 Finance:
- 5.3% VTI
- 2.24% VXUS
- 2.08% assorted ETFs (won't waste your time
Seems clear as I'm typing this up that this sub-$10k sum should just be liquidated and put into VTI/VXUS.
His 401k
- 18.93% VFFVX vanguard target 2055 (expense ratio 0.08%)
His Roth IRA
- 16.62% VFFVX vanguard target 2055 (expense ratio 0.08%)
- 0.70% MSFT (ticker symbol) (expense ratio)
- 3.03% Schwab Target 2060 Index Fund (SWYNX) 0.08%
Her 401k:
- 44.5% T. Rowe Price Retirement 2055 Trust Class F (ticker symbol) (expense ratio 0.37%!!)
Very tempted to see if there is a self-directed brokerage option here to buy VFFVX instead. There is a $50 per year fee for the account but no commissions. That's less than 1/10th the current yearly cost of the expense ratio.
There is also VIIIX (Vanguard Institutional Index Fund Institutional Plus) at 0.02% which is a very cheap SP500 option.
Her HSA ($2k has to be held in cash, this is the investable part):
3.17% Schwab Target 2055 Index Fund (SWYJX) 0.08%
Her Roth IRA
3.43% VFFVX vanguard target 2055 (expense ratio 0.08%)
I also have about $25k of company stock that drops by the day and will have a decent chunk vesting next month, as well as my ESPP purchase. Plan on selling it all when I'm able to put into M1 for VTI/VXUS split.
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Contributions
New annual Contributions
- $20,500 his 401k (plus $5k company match, $25.5k total, looking into Mega Backdoor option)
- $20,500 her 401k (also specify any employer matching contributions)
- $6k each for his/her backdoor Roth IRA
- $3.5k each for his/her HSA
- Taxable varies greatly, when we bought our house last year it was very low, this year we've already put $27.5k in, shooting for $50k. Would say that $25k per year would be roughly "normal" if I had to guess, we just stick extra in when we have it in checking.
- His retirement accts --- happy with selections, feel they're best available.
- Her retirement accts --- want to change 401k, pay $50/yr to self direct and invest in VFFVX. With the $50/yr fee and 0.08% expense ratio, we'd save ~$450 a year in her account on fees right away. Other option is VIIIX which is a very cheap SP500 fund that I would not need to pay to self direct.
- Taxable -- I realize I have way too many accounts but am unsure if the cost of transfer, etc, is worth it, or if I should just bite the bullet, liquidate everything, and move all the cash to one brokerage to simplify.
Questions:
- I generally like my M1 account and have most taxable funds there. Feels like it makes sense to close the Wealthfronts, Schwabs, Fidelity, SoFi, CashApp, etc, etc, that I've used for "fun" and just shovel everything in there at a 70/30 VTI/VXUS split.... especially seeing what a dismally small percentage of assets most of these holdings represent.
- Feel like we need to make a change w/ her 401k between the options I presented.
- I like just throwing extra cash as it's available into my M1 account. It's easy and I don't really have to think about it at all. It also preserves my liquidity more than the mega backdoor roth, where money is taken out of my paycheck and I don't have the flexibility to decide when to shovel some extra into long-term holdings.... I'm tempted to sign up and commit 1-2% of income as a starting point, as I know it's beneficial... that way I can continue to contribute to taxable if and when I see fit without making any large adjustments right away, while easing my way into enjoying the tax-deferral.
Overall, I've tried to stay true to the Boglehead principles of diversification and low-costs, and have tried to focus primarily on our contribution level and making sure we save as much as is realistic for us as a couple. I clearly have an issue with tinkering with things (and account sign-up bonuses) and think that settling for Target Date funds allows me to remember that it's "good enough" and there's nothing to change or rebalance.
For taxable, I'd like to follow a similar approach and get down to 2-3 core funds (VTI/VXUS/possibly AVUV) to make my life easier and enable TLH in the future. It's hard to know right know which accounts are holding what, I have wealthfront changing ETFs, dividends coming in, etc...
Anyways, this is a massive post but I just wanted to share as much information as I could for all of you fine folks who care to read this.
Thanks very much!