Portfolio Check Up - 2 Years Married Couple

[vangaal]

Hi All,

Happy New Year! It's been about 2 or 3 years since I last checked in on Bogleheads. I wanted to get some feedback on our household portfolio. I've shared details below, with a couple of questions at the bottom of the page. Thank you for any feedback, and happy investing!

Emergency funds: Yes, 6 months

Debt: Mortgage, 2.5%, $375k

Tax Filing Status: Married Filing Jointly

Tax Rate: 24% Federal, 5.75% State

State of Residence: VA

Age: 38 (Husband) and 36 (Wife)

Desired Asset allocation: 80% stocks, 10% International, 10% Bonds

Household Investment Portfolio size: $373,764 (not household income)

$9,865, TD Ameritrade
51% Moderna (MRNA), $5,112
21% Disney (DIS), $2,142
20% Vanguard Total Stock Market ETF (VTI), $2,039

$38,283, Vanguard
74% VTSAX, VANGUARD TOTAL STOCK MARKET INDEX ADMIRAL CL, .04 $28,600
26% QQQM, INVESCO NASDAQ 100 ETF .20 $9,677

12% of the household portfolio in Taxable Accounts - $48,144


His 401k - $170,633 - Note: Contribute 8% to Traditional, 7% to Roth monthly
45% of total household portfolio
100% Fidelity Freedom Index 2050 Fund - Premier Class (FRLPX) (.06%)
5.5% company match

Income
Invesco Stable Asset Fund - ADPZ Class .31%
VBILX Vanguard Intermediate Term Bond Index Fund - Admiral Class .07%
MPHQX BlackRock Total Return Fund - Class K .38%
LHYVX Lord Abbett High Yield Fund - Class R6 .59%
GSRUX Goldman Sachs Inflation Protected Securities Fund - Class R6 .37%

Growth & Income
FAPIX Fidelity Freedom Index Income Fund - Premier Class .06%
FBLPX Fidelity Freedom Index 2005 Fund - Premier Class .06%
FCYPX Fidelity Freedom Index 2010 Fund - Premier Class .06%
FFYPX Fidelity Freedom Index 2015 Fund - Premier Class .06%
FKIPX Fidelity Freedom Index 2020 Fund - Premier Class .06%
FLIPX Fidelity Freedom Index 2025 Fund - Premier Class .06%
FLIPX Fidelity Freedom Index 2030 Fund - Premier Class .06%
FLIPX Fidelity Freedom Index 2035 Fund - Premier Class .06%
FLIPX Fidelity Freedom Index 2040 Fund - Premier Class .06%
FLIPX Fidelity Freedom Index 2045 Fund - Premier Class .06%
FLIPX Fidelity Freedom Index 2050 Fund - Premier Class .06%
FLIPX Fidelity Freedom Index 2055 Fund - Premier Class .06%
FLIPX Fidelity Freedom Index 2060 Fund - Premier Class .06%
FLIPX Fidelity Freedom Index 2065 Fund - Premier Class .06%
MSFKX MFS Total Return Fund - Class R6 - .39%

Growth
OIEJX JPMorgan Equity Income Fund - Class R6 .45%
SSSYX State Street Equity 500 Index Fund - Class K .12%
PDGIX T. Rowe Price Dividend Growth Fund - Class I  .49%
RGAGX American Funds The Growth Fund of America - Class R6  .3%
VIMAX Vanguard Mid-Cap Index Fund - Admiral Class .05%

Aggressive Growth
VSIAX Vanguard Small Cap Value Index Fund - Admiral Class .07%
TISBX TIAA-CREF Small Cap Blend Index Fund - Institutional Class .05%
VSMAX Vanguard Small Cap Index Fund - Admiral Class .05%
JGMNX Janus Henderson Triton Fund - Class N .66%
BTMKX iShares MSCI EAFE International Index Fund - Class K .04%
TROIX T. Rowe Price Overseas Stock Fund - Class I .66%
AEDMX American Century Emerging Markets Fund - Class R6 .9%
PFRSX Principal Real Estate Securities Fund - Class R6 .8%
DCMSX DFA Commodity Strategy Portfolio - Institutional Class .31%

His Roth IRA at Vanguard - $65,454
17% of total household portfolio
100% Vanguard Total Stock Market Index Fund (VTSAX) (.04)

Her Tax Sheltered - 403b, Public School Teacher , $19,811
5% of total household portfolio
Company match? No.
40%, VALIC Co I Stock Index  .31% $7,888
21%, VALIC Co I Mid Cap Strategic Growth  .75% $4,176
20%, VALIC Co I Small Cap Index  .41% $3,910
12%, VALIC Co I Core Bond  .51% $1,473
VALIC Co I International Government Bond  .69%
VALIC Co I Mid Cap Index  .34%
VALIC Co I Asset Allocation  .68%
VALIC Co I Government Securities  .65%
VALIC Co I International Equities Index  .42%
VALIC Co I International Socially Responsible  .64%
VALIC Co I Systematic Core  .85%
VALIC Co I Science & Technology  .95%
VALIC Co I International Growth  1.05%
VALIC Co I Dividend Value .79
Vanguard Long-Term Investment-Grade Investor Shares .22
Vanguard Long-Term Treasury Investor Shares .20
Vanguard Windsor™ II Investor Shares .34
Vanguard Wellington™ Investor Shares .24
VALIC Co I Nasdaq-100® Index .50
Vanguard LifeStrategy Growth Investor Shares .14
Vanguard LifeStrategy Moderate Growth Investor Shares .13
Vanguard LifeStrategy Conservative Growth Investor Shares .12
Ariel Investor Class 1.00
Ariel Appreciation Investor Class 1.12
VALIC Co I Blue Chip Growth .82
VALIC Co I Systematic Value .78
VALIC Co I Inflation Protected .55
VALIC Co I Growth .77
VALIC Co I Large Capital Growth .74
VALIC Co I Small Cap Special Values .87
VALIC Co I Emerging Economies .93
VALIC Co I Global Strategy .84
VALIC Co I International Value .81
American Beacon Bridgeway Large Cap Growth Investor Class 1.24
VALIC Co I Global Real Estate .86
Invesco Balanced-Risk Commodity Strategy Class R5 1.24
VALIC Co I Dynamic Allocation .80
VALIC Co I International Opportunities .99
VALIC Co I Small Cap Growth .92
VALIC Co I Small Cap Value .79
VALIC Co I Mid Cap Value .79
VALIC Co I Capital Appreciation .71
VALIC Co I U.S. Socially Responsible .35
VALIC Co I Aggressive Growth Lifestyle .70
VALIC Co I Moderate Growth Lifestyle .65
VALIC Co I Conservative Growth Lifestyle .69
VALIC Co I High Yield Bond .71
Goldman Sachs VIT Government MMkt Instl .21

Her Hybrid 401(a) Cash Match Plan, $26,385
7% of total household portfolio
100%, n BlackRock’s LifePath Index 2050 Fund O, .08% $26,385
2.5% Cash Match Plan

Her Hybrid 457 Deferred Compensation Plan, $20,389
5% of total household portfolio
62.5% BlackRock’s Russell 2500 Index Fund F .02% $12,736.19
32.6% BlackRock’s U.S. Debt Index Fund M .03% $6,638.12
5.0%% BlackRock’s MSCI World ex-U.S .06% $1,015.28
*Moving her Hybrid 457 Deferred Compensation Plan to 100% BlackRock Equity Fund F starting 1/30/23

Her Roth IRA at Vanguard - $22,948
6% of total household portfolio
28% VANGUARD TOTAL INTL STOCK INDEX ADMIRAL (VTIAX) (.11) $6,616
72% Vanguard Total Stock Market Index Fund (VTSAX) (.04) $16,331

New annual Contributions
$20,500k his 401k (5.5% match)
$6,500 - His Roth IRA at Vanguard

$6,500 - Her Roth IRA at Vanguard
$2,600 - Her Hybrid 457 Deferred Compensation Plan
$2,600 - Her Hybrid 401(a) Cash Match Plan (2.5% match)
$2,000 - Her Tax Sheltered - 403b
$6,000 - taxable brokerage

Questions:
1. Should we adjust the fund we invest in HER 403b to be more aggressive? We are both comfortable with being more aggressive.

2. How does our total household portfolio look at this time? Where would you recommend we adjust?

[lakpr]

One immediate step you must take is to NOT have the same exact funds in both taxable and Roth IRA, to be able to take advantage of tax-loss-harvesting opportunities. I noticed that His Roth IRA is invested in VTSAX, as is your taxable.

According to this Wiki Entry: https://www.bogleheads.org/wiki/Approxi ... ock_market, a 82:18 split between Vanguard 500 Index fund and Vanguard Extended Market Index fund would replicate both the risk and returns of the Total Stock Market index.

I suggest that therefore you sell VTSAX in His Roth IRA, and buy VFIAX + VEXAX. Make sure future contributions are also split according to that 82:18 ratio, and perhaps once an year (or even more infrequently) rebalance back to that ratio.

=====================

Second point I noticed is that the amount being planned for contributions to Her 403(b) is $20,500. The limit for 2023 is $22,500. Is there any reason why you are short changing yourself / cheating yourself out of $2,000 in tax-deferred contributions?

His 401(k) has excellent target date fund at only 0.06% ER, so I would not change that at all. Stick to just that one fund, tune out all the other noise or other funds /investment choices. If you do want to go aggressive, perhaps shift to 2060 or 2065 fund instead.

====================

Third point I want to mention is that, SHE should be maximizing the 457 plan in preference to the 403(b) plan. The 457 plan has excellent, and cheaper, options than the 403(b) plan. The advantage with the 457 plan -- and this is a GOVERNMENTAL 457 plan I assume, being that you are a public school teacher -- is that the money in that plan is available for withdrawal at any time with the only precondition being that you separate from that employer.
[I am in NJ, my wife is a public school teacher too. Unfortunately she does not have access to a 457 plan, otherwise I'd have preferred that over the 403(b) .... ]

With $375k gross income in the household, I think you can afford to max out both the 403(b) plan and the 457 plan at the same time. Get rid of that Moderna and Disney stocks if this would mean your take-home-pay isn't able to fully meet the expenses, and live off those proceeds. This way you would have indirectly transferred the Moderna/Disney stock into your tax-deferred accounts.

Within the 403(b) plan, it seems that the Life Strategy Growth Fund has the cheapest expense ratio, so I'd pick that over anything else.

=====================

Fourth point: have you thought about buying I-bonds, for both of you? That's another $20k of tax-deferred space, granted this particular space can only hold "bonds", but you can compensate by going for a more aggressive option in your tax-deferred accounts. This would allow you to invest completely in the stock funds in Her 403(b) and Her 457 plans, yet meet your desired asset allocation (well, as I said the 403(b) plan should be Life Strategy Growth fund that has 20% bonds)

=====================

Why both VTI and VTSAX in the taxable account? They are essentially the same fund, ETF version vs. mutual fund version.

[tashnewbie]

Household Portfolio size: $373,764k

It became apparent to me pretty quickly that you didn't mean $373.764k which would be $373.764 million. May be worth editing to eliminate any possible confusion among other forum members.

$9,865, TD Ameritrade
51% Moderna (MRNA), $5,112
21% Disney (DIS), $2,142
20% Vanguard Total Stock Market ETF (VTI), $2,039

$38,283, Vanguard
74% VTSAX, VANGUARD TOTAL STOCK MARKET INDEX ADMIRAL CL, .04 $28,600
26% QQQM, INVESCO NASDAQ 100 ETF .20 $9,677

Why 2 taxable accounts? If it's not to collect some brokerage bonus, I would consolidate these into 1 place. If you want to move out of Vanguard, you should call them and ask them to do a tax-free conversion of VTSAX to VTI, because it will be easy to hold and sell VTI at other brokerages (may not be true for VTSAX).

Why the Moderna and Disney holdings? They seem to be <2% of your portfolio so not enough to move the needle of your portfolio, in either direction, so I wouldn't consider it worth holding them. Because they're such small amounts, any capital gains you'd incur to sell them would be really small. I would sell them and buy more VTI. That simplifies your portfolio.

His Roth IRA at Vanguard - $65,454
17% of total household portfolio
100% Vanguard Total Stock Market Index Fund (VTSAX) (.04)

Her Roth IRA at Vanguard - $22,948
6% of total household portfolio
28% VANGUARD TOTAL INTL STOCK INDEX ADMIRAL (VTIAX) (.11) $6,616
72% Vanguard Total Stock Market Index Fund (VTSAX) (.04) $16,331

I agree with lakpr that you shouldn't use the same funds in tax-advantaged accounts that you use in taxable accounts. I would sell VTSAX in both of these IRAs and buy something like VFIAX (can also combine with extended market to approximate total market, as lakpr described).

Her Tax Sheltered - 403b, Public School Teacher , $19,811

I think you forgot to mention what this 403b is invested in.

I would use one of the Vanguard LifeStrategy funds because they are the cheapest available options and the underlying holdings are solid. I'd use whichever helps you get to your target asset allocation.

New annual Contributions
$20,500k his 401k (5.5% match)
$6,500 - His Roth IRA at Vanguard

$6,500 - Her Roth IRA at Vanguard
$2,600 - Her Hybrid 457 Deferred Compensation Plan
$2,600 - Her Hybrid 401(a) Cash Match Plan (2.5% match)
$2,000 - Her Tax Sheltered - 403b
$6,000 - taxable brokerage

Why are you putting money in taxable before you put more in her tax-advantaged accounts? It's not clear to me whether you should put more in traditional/tax-deferred accounts because she will presumably have a pension of some amount and possibly also Social Security. Depending on the size of that pension and how long you both plan to work, it may make sense to do a combination of traditional and Roth in her employer plans (review the traditional vs. Roth wiki for things to consider as you think through that decision). But I think Roth is generally better than taxable for most people. So if her 403b or 457 has a Roth option, I would put any extra money you want to invest in that before putting it in taxable, unless you have short-term spending needs. If you have those, then you shouldn't be investing in stocks with that $6k. It should be in fixed income that matches the time when you need the money.

As lakpr mentioned, a governmental 457 has some favorable withdrawal rules if you retire before 55/59.5. If you think you're in that camp, prioritizing the 457 over the 403b is probably preferable.

If you find it convenient to analyze your portfolio and its asset allocation using a combination of target date funds and individual funds, keep doing it. If you find it inconvenient or tedious, consider swapping the TDFs for individual funds in the employer plans, where there are good available options.

[BitTooAggressive]

I would add picking individual stocks is a losers game statistically since out performing short term t bills is concentrated in few stocks.

[vangaal]

One immediate step you must take is to NOT have the same exact funds in both taxable and Roth IRA, to be able to take advantage of tax-loss-harvesting opportunities. I noticed that His Roth IRA is invested in VTSAX, as is your taxable.

According to this Wiki Entry: https://www.bogleheads.org/wiki/Approxi ... ock_market, a 82:18 split between Vanguard 500 Index fund and Vanguard Extended Market Index fund would replicate both the risk and returns of the Total Stock Market index.

I suggest that therefore you sell VTSAX in His Roth IRA, and buy VFIAX + VEXAX. Make sure future contributions are also split according to that 82:18 ratio, and perhaps once an year (or even more infrequently) rebalance back to that ratio.

This is great feedback. Thank you! I sold VTSAX in His Roth IRA in exchange for VFIAX and VEXAX. Would you recommend holding VTSAX in my Vanguard Brokerage AND transferring all assets from TD Ameritrade brokerage account to Vanguard VTSAX?

=====================

Second point I noticed is that the amount being planned for contributions to Her 403(b) is $20,500. The limit for 2023 is $22,500. Is there any reason why you are short changing yourself / cheating yourself out of $2,000 in tax-deferred contributions?
No, there wasn't a specific reason. That was just a projection of what I think we would actually contribute. I can adjust that to the max though.

His 401(k) has excellent target date fund at only 0.06% ER, so I would not change that at all. Stick to just that one fund, tune out all the other noise or other funds /investment choices. If you do want to go aggressive, perhaps shift to 2060 or 2065 fund instead.
Sounds good!

====================

Third point I want to mention is that, SHE should be maximizing the 457 plan in preference to the 403(b) plan. The 457 plan has excellent, and cheaper, options than the 403(b) plan. The advantage with the 457 plan -- and this is a GOVERNMENTAL 457 plan I assume, being that you are a public school teacher -- is that the money in that plan is available for withdrawal at any time with the only precondition being that you separate from that employer.
[I am in NJ, my wife is a public school teacher too. Unfortunately she does not have access to a 457 plan, otherwise I'd have preferred that over the 403(b) .... ]
Thanks for the feedback here.

With $375k gross income in the household, I think you can afford to max out both the 403(b) plan and the 457 plan at the same time. Get rid of that Moderna and Disney stocks if this would mean your take-home-pay isn't able to fully meet the expenses, and live off those proceeds. This way you would have indirectly transferred the Moderna/Disney stock into your tax-deferred accounts.
Note that the $375k is not gross income, but is our total investment portfolio (minus home equity). Do you think it is worthwhile to sell Moderna/Disney and move it to VTSAX in Vanguard Brokerage?

Within the 403(b) plan, it seems that the Life Strategy Growth Fund has the cheapest expense ratio, so I'd pick that over anything else.
That is a good suggestion!

=====================

Fourth point: have you thought about buying I-bonds, for both of you? That's another $20k of tax-deferred space, granted this particular space can only hold "bonds", but you can compensate by going for a more aggressive option in your tax-deferred accounts. This would allow you to invest completely in the stock funds in Her 403(b) and Her 457 plans, yet meet your desired asset allocation (well, as I said the 403(b) plan should be Life Strategy Growth fund that has 20% bonds)
I am not too familiar with I-Bonds. Is that something that I can find in Vanguard?

=====================

Why both VTI and VTSAX in the taxable account? They are essentially the same fund, ETF version vs. mutual fund version.

As I've asked above, should I sell and transfer into one brokerage at Vanguard?

[vangaal]

Household Portfolio size: $373,764k

It became apparent to me pretty quickly that you didn't mean $373.764k which would be $373.764 million. May be worth editing to eliminate any possible confusion among other forum members.
I made the edit. Thanks!

$9,865, TD Ameritrade
51% Moderna (MRNA), $5,112
21% Disney (DIS), $2,142
20% Vanguard Total Stock Market ETF (VTI), $2,039

$38,283, Vanguard
74% VTSAX, VANGUARD TOTAL STOCK MARKET INDEX ADMIRAL CL, .04 $28,600
26% QQQM, INVESCO NASDAQ 100 ETF .20 $9,677

Why 2 taxable accounts? If it's not to collect some brokerage bonus, I would consolidate these into 1 place. If you want to move out of Vanguard, you should call them and ask them to do a tax-free conversion of VTSAX to VTI, because it will be easy to hold and sell VTI at other brokerages (may not be true for VTSAX).
I'd prefer to keep all in Vanguard. Do you recommend selling VTI, Moderna, DIS from TD Ameritrade and moving into Vanguard?

Why the Moderna and Disney holdings? They seem to be <2% of your portfolio so not enough to move the needle of your portfolio, in either direction, so I wouldn't consider it worth holding them. Because they're such small amounts, any capital gains you'd incur to sell them would be really small. I would sell them and buy more VTI. That simplifies your portfolio.
I made a one time investment that I felt comfortable doing in Moderna and Disney, mainly just for fun. I'd prefer to keep brokerage money in Vanguard. Should I sell and move to Vanguard Brokerage instead of TD Ameritrade?

His Roth IRA at Vanguard - $65,454
17% of total household portfolio
100% Vanguard Total Stock Market Index Fund (VTSAX) (.04)

Her Roth IRA at Vanguard - $22,948
6% of total household portfolio
28% VANGUARD TOTAL INTL STOCK INDEX ADMIRAL (VTIAX) (.11) $6,616
72% Vanguard Total Stock Market Index Fund (VTSAX) (.04) $16,331

I agree with lakpr that you shouldn't use the same funds in tax-advantaged accounts that you use in taxable accounts. I would sell VTSAX in both of these IRAs and buy something like VFIAX (can also combine with extended market to approximate total market, as lakpr described).
I exchanged VTSAX in HIS Roth IRA, what would you suggest for HER Roth IRA?

Her Tax Sheltered - 403b, Public School Teacher , $19,811

I think you forgot to mention what this 403b is invested in.

I would use one of the Vanguard LifeStrategy funds because they are the cheapest available options and the underlying holdings are solid. I'd use whichever helps you get to your target asset allocation.
Sound advice!

New annual Contributions
$20,500k his 401k (5.5% match)
$6,500 - His Roth IRA at Vanguard

$6,500 - Her Roth IRA at Vanguard
$2,600 - Her Hybrid 457 Deferred Compensation Plan
$2,600 - Her Hybrid 401(a) Cash Match Plan (2.5% match)
$2,000 - Her Tax Sheltered - 403b
$6,000 - taxable brokerage

Why are you putting money in taxable before you put more in her tax-advantaged accounts? It's not clear to me whether you should put more in traditional/tax-deferred accounts because she will presumably have a pension of some amount and possibly also Social Security. Depending on the size of that pension and how long you both plan to work, it may make sense to do a combination of traditional and Roth in her employer plans (review the traditional vs. Roth wiki for things to consider as you think through that decision). But I think Roth is generally better than taxable for most people. So if her 403b or 457 has a Roth option, I would put any extra money you want to invest in that before putting it in taxable, unless you have short-term spending needs. If you have those, then you shouldn't be investing in stocks with that $6k. It should be in fixed income that matches the time when you need the money.
She only has a traditional option, not Roth.

As lakpr mentioned, a governmental 457 has some favorable withdrawal rules if you retire before 55/59.5. If you think you're in that camp, prioritizing the 457 over the 403b is probably preferable.
What if we are not planning to retire before that age? What would you do?

If you find it convenient to analyze your portfolio and its asset allocation using a combination of target date funds and individual funds, keep doing it. If you find it inconvenient or tedious, consider swapping the TDFs for individual funds in the employer plans, where there are good available options.

I am okay with the Target date funds for right now. They are straightforward. However, it does make it a little more challenging to analyze the asset allocation as opposed to just individual funds.

[lakpr]

@vangaal,

Not quoting the wall of text above again, just answering the questions you asked here.

1) Yes, consolidation to a single brokerage firm is good. If your preference is Vanguard, do an ACAT transfer of your TD Ameritrade assets to Vanguard. That transfer in and if itself should be a non taxable transaction. If you sell Moderna or Disney to buy VTSAX though that is a taxable transaction, if you sell for a gain.

2) I-bonds are Series I Savings bonds offered from US Treasury. To buy them you will have to open an account at treasurydirect.gov website. Actually both spouses need to, one each. These savings bonds can only be bought from US Treasury and sold back to US Treasury. The maturity period of those bonds is 30 years, although you can sell them back after a one year holding period.

You cannot sell them back before 1 year period is up, even if you are the direst emergency and scream to the high heavens. So be absolutely sure you can lock the money up for the first one year from the date of purchase.

After 1 year, and up to 5 years from the date of purchase, they gave a 3 month interest penalty, specifically the last 3 months interest earned. No more penalties from 5th year to 30 years.

Max you can buy is $10,000 per year per person. You can also get an additional $5,000 per tax return in paper bonds format, IF you deliberately overpay your tax liability and then ask IRS to issue $5,000 of that refund as I bonds.

The great advantages of I bonds are that 1) the interest earned on the bonds need not be reported on your tax return unless you sell them or they mature after 30 years, so it is like a tax deferred account; 2) interest earned is free from state taxes; 3) guaranteed to never lose value unlike bond funds which drop in value if interest rates rise; 4) rates paid on the I bonds are adjusted once every 6 months to keep pace with inflation, so you’re further guaranteed that your investment in these bonds if worth $10,000 today they would be worth $10,000 tomorrow and worth $10,000 30 years later too.

If you are interested in maximizing your Roth IRA which has a lower limit of $6,500 you should also be interested in maximizing this additional $10,000 space; and unlike Roth or Traditional IRA there is requirement of earned income.

A perfect vehicle for your bonds allocation, IF your purpose of holding bonds is to hold an investment that would never go down in value and act as a ballast for your investment ship.

[tashnewbie]

I exchanged VTSAX in HIS Roth IRA, what would you suggest for HER Roth IRA?

Same thing you invested his Roth IRA in. VFIAX (with or without the extended market) is fine.

Why are you putting money in taxable before you put more in her tax-advantaged accounts? It's not clear to me whether you should put more in traditional/tax-deferred accounts because she will presumably have a pension of some amount and possibly also Social Security. Depending on the size of that pension and how long you both plan to work, it may make sense to do a combination of traditional and Roth in her employer plans (review the traditional vs. Roth wiki for things to consider as you think through that decision). But I think Roth is generally better than taxable for most people. So if her 403b or 457 has a Roth option, I would put any extra money you want to invest in that before putting it in taxable, unless you have short-term spending needs. If you have those, then you shouldn't be investing in stocks with that $6k. It should be in fixed income that matches the time when you need the money.

She only has a traditional option, not Roth.

Does he have a Roth option? I'd prefer to max her traditional 457 and then put any extra money in his Roth 401k, instead of investing in taxable, because Roth is generally better than taxable (all growth and future withdrawals are tax-free). You'll have to review the traditional vs. Roth wiki to determine whether you should do a combination of Roth and traditional in the workplace plans (and feel free to ask questions on the forum).

As lakpr mentioned, a governmental 457 has some favorable withdrawal rules if you retire before 55/59.5. If you think you're in that camp, prioritizing the 457 over the 403b is probably preferable.

What if we are not planning to retire before that age? What would you do?

I'd still prioritize the 457 over the 403b because you retain the optionality. Plans can change and if you decide to retire before "standard" age, then you can take advantage of the 457's withdrawal advantages. All else being equal (e.g., overall fees and fund options), I don't see any disadvantage in using a governmental 457 over the 403b.

I am okay with the Target date funds for right now. They are straightforward. However, it does make it a little more challenging to analyze the asset allocation as opposed to just individual funds.

With several investment accounts in different places, I find it easier to manage my portfolio and asset allocation by using individual funds. But if TDFs work for you, you should keep them. They insulate a lot of people from behavioral risks, and that benefit probably outweighs any potential benefit of maintaining the asset allocation.

[lakpr]

@tashnewbie,

Although I am quoting you here, my replies are meant to be advice to the OP, @vangaal. It's just that I wanted to add a few more comments on top of yours that I chose to quote you, not being argumentative or disagreeing with your advice to the OP in any way

Does he have a Roth option? I'd prefer to max her traditional 457 and then put any extra money in his Roth 401k, instead of investing in taxable, because Roth is generally better than taxable (all growth and future withdrawals are tax-free). You'll have to review the traditional vs. Roth wiki to determine whether you should do a combination of Roth and traditional in the workplace plans (and feel free to ask questions on the forum).

For the OP, who reported being in 24% Federal tax bracket + 5.75% state tax bracket in Virginia, I am not sure choosing Roth option in any retirement plan (except backdoor Roth IRA) is a good idea ...

It is also possible that the OP may choose to retire to a state with no income tax in retirement, in which case contributing to the retirement plan as Traditional right now is equivalent to getting 5.75% cash back, that you won't have to repay ...

I'd still prioritize the 457 over the 403b because you retain the optionality. Plans can change and if you decide to retire before "standard" age, then you can take advantage of the 457's withdrawal advantages. All else being equal (e.g., overall fees and fund options), I don't see any disadvantage in using a governmental 457 over the 403b.

The 457(b) has BETTER options than the 403(b). Funds in the 457 plan, provided by OP, has expense ratios of 0.06 or less, whereas the 403(b) plan's cheapest fund is the LifeStrategy Growth fund at 0.2%.

===============================

Note that with the 457 option, even if you contribute as Roth contributions, any withdrawals prior to age 59.5 are treated as proportional withdrawals of contributions and earnings. Only at age 59.5, will all the earnings magically become tax free, assuming of course that the first contribution to 457 plan was at least 5 years prior.

You get the exact same advantage with the 403(b) plan too (at age 59.5 all earnings and contributions become tax free, again assuming at least 5 years since the first contribution to that particular plan). The main advantage of 457 plan over 403(b) plan prior to age 59.5 is the absence of 10% Federal tax penalties, that's it.

So, IF, God forbid, you separate from this job prior to age 59.5 and decide to withdraw from the 457 plan, would it not be better to NOT having to keep track of contributions and earnings? Wouldn't it be easier to just say "all money into the 457 plan is pre-tax, all withdrawals, if any, in the future will be pre-tax"; and similarly "all money into 403(b) is Roth, I just have to wait until age 59.5 then all withdrawals from 403(b) is tax-free" ?

[tashnewbie]

@tashnewbie,

Although I am quoting you here, my replies are meant to be advice to the OP, @vangaal. It's just that I wanted to add a few more comments on top of yours that I chose to quote you, not being argumentative or disagreeing with your advice to the OP in any way

No offense taken at all. I think the additional input adds to the conversation and is helpful for the OP!!

Does he have a Roth option? I'd prefer to max her traditional 457 and then put any extra money in his Roth 401k, instead of investing in taxable, because Roth is generally better than taxable (all growth and future withdrawals are tax-free). You'll have to review the traditional vs. Roth wiki to determine whether you should do a combination of Roth and traditional in the workplace plans (and feel free to ask questions on the forum).

For the OP, who reported being in 24% Federal tax bracket + 5.75% state tax bracket in Virginia, I am not sure choosing Roth option in any retirement plan (except backdoor Roth IRA) is a good idea ...

It is also possible that the OP may choose to retire to a state with no income tax in retirement, in which case contributing to the retirement plan as Traditional right now is equivalent to getting 5.75% cash back, that you won't have to repay ...

I agree completely. My intention with this line of commentary was that the OP should not invest in taxable before they put more in the tax-advantaged plans (unless taxable is for short-term spending, and it is in stuff like HYSA, MMF, etc. that are reasonable for near-term needs).

In OP's tax brackets, I think traditional contributions are probably a better idea. But given the pension and Social Security, I think they need to review the traditional vs. Roth wiki to see if they should do some combination of traditional and Roth.

[vangaal]

@vangaal,

Not quoting the wall of text above again, just answering the questions you asked here.

1) Yes, consolidation to a single brokerage firm is good. If your preference is Vanguard, do an ACAT transfer of your TD Ameritrade assets to Vanguard. That transfer in and if itself should be a non taxable transaction. If you sell Moderna or Disney to buy VTSAX though that is a taxable transaction, if you sell for a gain.
Super helpful information. Thank you!

2) I-bonds are Series I Savings bonds offered from US Treasury. To buy them you will have to open an account at treasurydirect.gov website. Actually both spouses need to, one each. These savings bonds can only be bought from US Treasury and sold back to US Treasury. The maturity period of those bonds is 30 years, although you can sell them back after a one year holding period.

You cannot sell them back before 1 year period is up, even if you are the direst emergency and scream to the high heavens. So be absolutely sure you can lock the money up for the first one year from the date of purchase.

After 1 year, and up to 5 years from the date of purchase, they gave a 3 month interest penalty, specifically the last 3 months interest earned. No more penalties from 5th year to 30 years.

Max you can buy is $10,000 per year per person. You can also get an additional $5,000 per tax return in paper bonds format, IF you deliberately overpay your tax liability and then ask IRS to issue $5,000 of that refund as I bonds.

The great advantages of I bonds are that 1) the interest earned on the bonds need not be reported on your tax return unless you sell them or they mature after 30 years, so it is like a tax deferred account; 2) interest earned is free from state taxes; 3) guaranteed to never lose value unlike bond funds which drop in value if interest rates rise; 4) rates paid on the I bonds are adjusted once every 6 months to keep pace with inflation, so you’re further guaranteed that your investment in these bonds if worth $10,000 today they would be worth $10,000 tomorrow and worth $10,000 30 years later too.

If you are interested in maximizing your Roth IRA which has a lower limit of $6,500 you should also be interested in maximizing this additional $10,000 space; and unlike Roth or Traditional IRA there is requirement of earned income.

A perfect vehicle for your bonds allocation, IF your purpose of holding bonds is to hold an investment that would never go down in value and act as a ballast for your investment ship.

I will do some more research on I-Bonds.Thank you!

[vangaal]

I exchanged VTSAX in HIS Roth IRA, what would you suggest for HER Roth IRA?

Same thing you invested his Roth IRA in. VFIAX (with or without the extended market) is fine.

Makes sense. Thank you!

Why are you putting money in taxable before you put more in her tax-advantaged accounts? It's not clear to me whether you should put more in traditional/tax-deferred accounts because she will presumably have a pension of some amount and possibly also Social Security. Depending on the size of that pension and how long you both plan to work, it may make sense to do a combination of traditional and Roth in her employer plans (review the traditional vs. Roth wiki for things to consider as you think through that decision). But I think Roth is generally better than taxable for most people. So if her 403b or 457 has a Roth option, I would put any extra money you want to invest in that before putting it in taxable, unless you have short-term spending needs. If you have those, then you shouldn't be investing in stocks with that $6k. It should be in fixed income that matches the time when you need the money.

She only has a traditional option, not Roth.

Does he have a Roth option? I'd prefer to max her traditional 457 and then put any extra money in his Roth 401k, instead of investing in taxable, because Roth is generally better than taxable (all growth and future withdrawals are tax-free). You'll have to review the traditional vs. Roth wiki to determine whether you should do a combination of Roth and traditional in the workplace plans (and feel free to ask questions on the forum).
This makes sense. And, yes HE does have a Roth 401k option through employer. Currently. HE contributed 8% to traditional and 7% to Roth in 401k plan

As lakpr mentioned, a governmental 457 has some favorable withdrawal rules if you retire before 55/59.5. If you think you're in that camp, prioritizing the 457 over the 403b is probably preferable.

What if we are not planning to retire before that age? What would you do?

I'd still prioritize the 457 over the 403b because you retain the optionality. Plans can change and if you decide to retire before "standard" age, then you can take advantage of the 457's withdrawal advantages. All else being equal (e.g., overall fees and fund options), I don't see any disadvantage in using a governmental 457 over the 403b.
Thank you!

I am okay with the Target date funds for right now. They are straightforward. However, it does make it a little more challenging to analyze the asset allocation as opposed to just individual funds.

With several investment accounts in different places, I find it easier to manage my portfolio and asset allocation by using individual funds. But if TDFs work for you, you should keep them. They insulate a lot of people from behavioral risks, and that benefit probably outweighs any potential benefit of maintaining the asset allocation.

[vangaal]

Regarding the 457 Plan. My wife just informed me that she has a max contribution of 4% to her 457 plan

[lakpr]

Regarding the 457 Plan. My wife just informed me that she has a max contribution of 4% to her 457 plan

Max it out!! May be she kept her contribution rate as 4%, I dont think any employer can set up the max contribution an employee can make, to only 4%.

[Mustang8307]

So it looks like your wife could choose Vanguard for her 403b? If true, I would do that. VALIC (variable annuity life insurance company) is pretty terrible. Check out 403bwise for more information on the hidden fees inside plans for teachers. There are many, many teachers out there paying 2% in fees each year.

[vangaal]

Regarding the 457 Plan. My wife just informed me that she has a max contribution of 4% to her 457 plan

Max it out!! May be she kept her contribution rate as 4%, I dont think any employer can set up the max contribution an employee can make, to only 4%.

This is directly from the plan's website. I am currently logged into her account " Please note that the maximum contribution percentage allowed by the plan is 4.0%."

[vangaal]

Regarding the 457 Plan. My wife just informed me that she has a max contribution of 4% to her 457 plan

Max it out!! May be she kept her contribution rate as 4%, I dont think any employer can set up the max contribution an employee can make, to only 4%.

This is directly from the plan's website. I am currently logged into her account " Please note that the maximum contribution percentage allowed by the plan is 4.0%."

[lakpr]

This is directly from the plan's website. I am currently logged into her account " Please note that the maximum contribution percentage allowed by the plan is 4.0%."

I believe you, but I am flabbergasted, really. Usually such restrictions apply only to HCEs

[wetgear]

Regarding the 457 Plan. My wife just informed me that she has a max contribution of 4% to her 457 plan

Max it out!! May be she kept her contribution rate as 4%, I dont think any employer can set up the max contribution an employee can make, to only 4%.

This is directly from the plan's website. I am currently logged into her account " Please note that the maximum contribution percentage allowed by the plan is 4.0%."

That sounds more like a max match.

[vangaal]

Regarding the 457 Plan. My wife just informed me that she has a max contribution of 4% to her 457 plan

Max it out!! May be she kept her contribution rate as 4%, I dont think any employer can set up the max contribution an employee can make, to only 4%.

This is directly from the plan's website. I am currently logged into her account " Please note that the maximum contribution percentage allowed by the plan is 4.0%."

That sounds more like a max match.

Reading through the detailed plan information and the maximum contribution to HER 457 plan is 4% plus 2.5% match from her employer.

[vangaal]

This is directly from the plan's website. I am currently logged into her account " Please note that the maximum contribution percentage allowed by the plan is 4.0%."

I believe you, but I am flabbergasted, really. Usually such restrictions apply only to HCEs

I agree with you. I can't for the life of me understand why there is a 4% cap on the contribution.