Ralphboy, thank you for putting all your current information in one post.
It makes this so much easier to work with.
ralphboy wrote:
I invested $23,000 in a brokerage account in 2014 and quit adding money to it. I currently just invest $100 a week in my 401k.
About $5200 a year into the 401k.
Are you also putting new money into Roth IRA? The profit plan? Or the stock purchase plan?
My annual salary is under $35,000.
This puts you well into the 12% tax bracket. And you are getting the saver's credit, right? You have not mentioned kids so I suspect you are not getting the earned income credit. Is that right?
I have made 2 $6,000 contributions in my roth by selling $6,000 worth of investments in my brokerage account for the past 2 years [I sold 3 of the 5 investments that I had in them since they were near there all time highs. I didn't sell the other two: PNQI and SOCL because there were going down. This was a big mistake because they have really tanked].
You should not be afraid of selling investments you do not want. You can use the loss to reduce the amount of your taxable income. Also, if you sell low (like now) and buy low (like now), you are not really losing anything, just making a sideways move.
Have you contributed to your Roth IRA for 2022? If not, I suggest you sell something and do it.
This is what your portfolio looks like. Notice that I have based all the percentages on the total portfolio of
$99,560 instead of by each account.
Brokerage account $28,617 28.7%
13.3% PNQI [Invesco Nasdaq Internet ETF] $13,205
7.3% SOCL [Global X Social Media ETF] $7,244
8.2% FFNOX [Fidelity® Multi-Asset Index Fund] $8,161 (15% of this is bonds)
Roth IRA $10,938 11%
5.3% FXAIX 48% [Fidelity® 500 Index Fund] $5,271
1.3% FSMAX 12% [Fidelity® Extended Market Index Fund] $1,245
2.7% FSPSX 25% [Fidelity® International Index Fund] $2,720
1.7% FXNAX 15% [Fidelity® U.S. Bond Index Fund] $1,700.
401k $22,06 22.2%
13.4% State Street S&P 500 Index Fund $13,385.54
4.3% RERGX [American EuroPacific Growth R6] $4,265.49
4.4% BAGIX [Baird Aggregate Bond Fund] $4,336.80
0.01% Cash Component of Publix Stock $75.01
Free Publix stock = $27,324 27.4%
Publix stock that I purchased outside of the 401k = $10,619 10.7%
Notice that all those little percentages add up to 100% of your portfolio.
Here's the thing. Your portfolio is about 93% stocks, 7% bonds, with 7.5% of the stocks in international. That stock to bond ratio is quite aggressive. But the scary thing is that 38% of your portfolio is invested in the same company that pays your salary.
In spite of the stories you have heard about people who have gotten lucky, this is not a good idea. If your company goes south, and some do, you not only lose your job, your income, and your insurance, you also lose your nest egg. That would be a complete financial catastrophe from which you would never recover.
Obviously, you can't do anything about the stock they give you and that's OK. But you can stop purchasing the stock you are buying both inside and outside of the 401k. If you have not already stopped doing this, please consider it. And any dividends you might get in cash should not be reinvested back into the company stock. Invest those dividends in the 500 index or something like that.
It is important that you stop going in circles and stop changing things around. You need to get to a goal and stay there other than adding more bonds as the years go by. You do not want to arrive at retirement with a high stock allocation.
I was thinking about this and that is why I was considering a target date fund; but I was told "ROTH IRAs should only have stocks in them so any target retirement or fund that mixes bonds and stocks is not appropriate. You want as much tax free growth as possible in Roth. No room for bonds."
That's an opinion, not a rule by any means. And all things being equal, not bad advice to follow in many situations.
But when/if there is a benefit from using a target fund in a Roth IRA, you should consider doing just that. You will make a little less money that is tax free but it will not be a lot. After all, you are only looking at putting a small portion of your Roth IRA into bonds, not the entire thing.
If you like target funds and think it would benefit you to use one, you should.
I know the closer it gets to the date, the larger the bond portion is. I like that it becomes safer as I get closer to retirement. I was thinking once I retire and have my 401k and publix stock all inside the roth, I could buy the Vanguard Balanced Index Fund Admiral Shares (VBIAX) for a $75 fidelity fee and keep that until I die. I would love to have one fund when I'm retired and have it on autopilot for monthly/yearly withdraws. I also saw that Fidelity has a 50/50 fund [FASMX], so maybe move the money to that?
I'm not sure how you are going to get your Publix stock into the Roth IRA. Not sure it works that way.
Yes, a simple 1 fund portfolio in retirement would be nice. Vanguard's Balanced Index might be a nice choice but things may be very different by that time, so picking a fund now is not very helpful.
Option 1) some 500 index and/or extended market index to fill in extra space
Do you have a recommendation for what to buy? I had someone reach out to me and tell me to put "Small Cap Index, Small Cap Growth Index and maybe Small Cap Value Index (or the equivalent from any low cost no load fund company)" inside a roth.
It is going to depend on what you decide to do with the rest of your portfolio. I would avoid SC Growth Index. Either Small cap index or small cap value might be a choice, but all three of those are included in the extended market index so what's the point?
What you need to do now is
1. decide what stock to bond ratio you want for your portfolio.
2. decide about selling something in taxable to give you more money to put into Roth IRA and the 401k.
3. decide if you want a portfolio of individual funds or if you want the simplicity of using the target funds.
When you decide these things, it will be easy to help you get there and you can stop going around in circles.