Hey Mustachians,
I've been much more of a lurker than an active poster, as I honestly don't feel experienced enough to give any real advice as of yet. I'm just shy of 2.5 years into my FI experiment and after a lot of overall success (and definitely more than a few missteps/learning experiences too), I felt I would share a bit of my experience and ask for some advice, as a lot of life changes are on the near horizon!
Let me preface this by saying that finding this forum by happenstance one sleepless night 2.5 years ago has already changed my life in many, many positive ways. It then led me to the blogs of MMM, JL Collins, and the Mad Fientist (among others), to whom I owe a great deal of gratitude as they were particularly influential in giving us a new lease on life. Since then I've subjected myself to a number of financial and frugality experiments, which I intend to share in great detail once I reach the 5 year mark.
Anyways, long story short, at 36 and 31 years old respectively, my husband and I are about a 1/3 of our way to FI. As I am a great seeker of simplicity in most things because other aspects of our lives are almost paradoxically complex, our FI (and then some) goals are simple: $1M in investments and our 2 properties paid-off. Our current early retirement strategy after we reach FI is to use the SEPP method to access funds from our tax-advantaged funds, and supplementing such with rental income and income from personal side projects as needed.
As of right now, we currently have about $375K in total investments and owe $425K on properties currently worth $725K (that we estimate will be worth $1M total when we reach FI and finish the DIY work on them). Our goal is to reach our definition of FI by the time I'm 45, which is basically 9 years from now.
So, we're both about to change jobs in the next few months and at that time, we will have about $320K total spread across 3 different 401(k)'s that will receive no additional contributions moving forward. Outside of a few other "experiments", we have the majority of our taxable investments in Vanguard (VTSAX) and two Betterment accounts (90/10 and 40/60 stocks vs. bonds experiments). As the aforementioned 401(k)'s will be sitting idle, albeit in decent plans, I would like to further simplify our finances and portfolios moving forward.
As Vanguard is pretty awesome and as I love the simplicity and user experience of Betterment, those are my two top choices for rolling over our 401(k)'s. However, while I like many aspects of Betterment, I have not yet been able to take advantage of the tax loss harvesting feature due to the current complexity of our portfolio and fear of wash sales (e.g., VTSAX and VTI). Also, the actual performance of the Betterment portfolio hasn't been particularly stellar over the last two years in comparison with my other investments. I know this is a very short view, but when I use the Portfolio Visualizer backtesting tool from 2008 to the present, the Betterment 100% equity portfolio still does not stack up in comparison to VTSAX, VWIAX (which I'm also strongly considering and could prevent VTSAX/VTI wash sales), the S&P 500, and basically all 3 of our current 401(k) portfolios. I know these aren't exactly apples to apples comparisons and many of the Betterment funds don't have extensive longitudinal data as of yet, but I'm also not factoring in the Betterment management fees here (another .15% at the $100k+ threshold). Also, the Betterment portfolio has much more of an international focus, which while performing poorly, is basically "on sale" right now (though VTSAX and the S&P 500 already appears to source a significant portion of their revenue internationally too).
Nevertheless, at the end of the day, it just doesn't seem like Betterment offers much advantage for tax-advantaged accounts that aren't receiving additional contributions (e.g., rebalancing and tax loss harvesting seem unnecessary). Also, this Go Curry Cracker article seems to voice a lot of my same concerns with Betterment:
http://www.gocurrycracker.com/why-betterment-has-zero-of-our-dollars/So, while from a simplicity and user experience perspective, rolling over all the 401(k)'s and our current VTSAX Vanguard taxable account into Betterment is highly desirable…BUT when looking at this from a more logical performance and frugality/cost vs. benefit perspective, my feeling is that simply moving these funds into VTSAX or VWIAX would yield superior performance and lower fees.
I would love to hear your thoughts, as I feel like I'm doing mental gymnastics or missing something really critical here?
Reference: Portfolio Visualizer backtesting with Betterment vs. VWIAX vs. VTSAX vs. S&P 500
https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=2008&firstMonth=1&endYear=2016&lastMonth=12&endDate=04%2F16%2F2016&initialAmount=1000000&annualOperation=3&annualAdjustment=30000&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&showYield=false&reinvestDividends=true&benchmark=%5ESPXTR&symbol1=VTI&allocation1_1=18&symbol2=VTV&allocation2_1=18&symbol3=VOE&allocation3_1=5&symbol4=VBR&allocation4_1=5&symbol5=VEA&allocation5_1=41&symbol6=VWO&allocation6_1=13&symbol7=VIG&symbol8=XLE&symbol9=MUB&symbol10=VTSAX&allocation10_3=100&symbol11=VWIAX&allocation11_2=100&symbol12=SPY&symbol13=VXUS
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