wealth building generalities

[medder79]

I'm 36 years old and married with a 2 year old kid. My wife and I are in good stable jobs and are lucky enough to max out our 401Ks and SEP IRA to a combined 70K per year. Also, we convert traditional IRA's to Roths for an additional 11K yearly. On top of this, we're able to save about 80K-100K per year. We also put money into a 529 for our kid. Until now, I've let my 401K be managed by a Schwab retirement plan- earning +1.9% this year, -3.8% last year, + 6.8% 2014). I put one of our converted Roths in a Bogle-style 3 fund portfolio with Schwab and put the other converted Roth in a Vanguard Life Strategy fund. The rest of the savings I placed in diversified Schwab mutual funds thinking I would need the savings to advance from our starter home. 5 years later, we haven't moved out of our starter home and the market in Seattle has been good enough that the new equity in our house will be enough for a downpayment on a larger home when we're ready.

I've been thinking about moving the savings, which are now over 300K over to Betterment after MMM's post and the comments that followed. I've also considered moving them all into a 3 fund lazy portfolio, the schwab intelligent portfolio, or Vanguard's life strategy. The bottom line is that I haven't been disciplined about rebalancing the diversified funds. I'd rather know that I'm doing the best I can to grow wealth and not think about it as much as I do.  I really need some general advice specific to my situation. I have met with financial advisors in the past but the ones I've met seem like salesmen with calculators, more interested in golf than the math and art of investing.  Of course, if someone has a fee for service financial advisor they would recommend I would consider talking with them as well. It would be helpful for me to come up with a diversified wealth building strategy. I would like to have the opportunity to retire in 20 years.

I've ready many of the MMM posts and find the comments very helpful.  I've followed the pros and cons of Betterment, Schwab intelligent portfolios with its "cash drag" effect, and vanguard where some say the life strategy is equivalent to a lazy fund without the extra ER. For me, however, I don't currently have any TLH built into my portfolio and would probably benefit from not having to think about rebalancing. But do I move all my savings to Vanguard, to Betterment, or into Schwab's intelligent portofolio or do I diversity and put pieces in each? Do I diversify into real estate or other investment strategies?

Thank you for your insight,

Medder79

[boarder42]

unless all your retirement is at betterment if you are in the wealth building phases you would likely be commiting wash sale violations in either your 401k or IRAs that would negate any benefits you see from TLH.

[MDM]

unless all your retirement is at betterment if you are in the wealth building phases you would likely be commiting wash sale violations in either your 401k or IRAs that would negate any benefits you see from TLH.

To date, the IRS has not claimed that 401k transactions need to be considered for wash sale reasons.  One could argue that IRA transactions should also not be considered, or that if IRAs are then so should 401ks be, but the status quo is what it is.

[MDM]

I'm 36 years old and married with a 2 year old kid. My wife and I are in good stable jobs and are lucky enough to max out our 401Ks and SEP IRA to a combined 70K per year.

Looks great - good for you!

Also, we convert traditional IRA's to Roths for an additional 11K yearly.

Why?  Alternatively, why not wait until you retire, your income is lower, and you can convert at a lower tax rate?

[boarder42]

I'm 36 years old and married with a 2 year old kid. My wife and I are in good stable jobs and are lucky enough to max out our 401Ks and SEP IRA to a combined 70K per year.

Looks great - good for you!

Also, we convert traditional IRA's to Roths for an additional 11K yearly.

Why?  Alternatively, why not wait until you retire, your income is lower, and you can convert at a lower tax rate?

Bc if you put it in and instantly roll it's a backdoor Roth contribution and would be taxed as if you had just put it straight into the roth.

[MDM]

Also, we convert traditional IRA's to Roths for an additional 11K yearly.

Why?  Alternatively, why not wait until you retire, your income is lower, and you can convert at a lower tax rate?

Bc if you put it in and instantly roll it's a backdoor Roth contribution and would be taxed as if you had just put it straight into the roth.

Yes, if that is what they are doing with this year's non-deductible contributions then fine.  If they are converting existing tIRAs funded with deductible contributions, then probably not fine.

[PhysicianOnFIRE]

I'm 36 years old and married with a 2 year old kid. My wife and I are in good stable jobs and are lucky enough to max out our 401Ks and SEP IRA to a combined 70K per year. Also, we convert traditional IRA's to Roths for an additional 11K yearly. On top of this, we're able to save about 80K-100K per year. We also put money into a 529 for our kid. Until now, I've let my 401K be managed by a Schwab retirement plan- earning +1.9% this year, -3.8% last year, + 6.8% 2014). I put one of our converted Roths in a Bogle-style 3 fund portfolio with Schwab and put the other converted Roth in a Vanguard Life Strategy fund. The rest of the savings I placed in diversified Schwab mutual funds thinking I would need the savings to advance from our starter home. 5 years later, we haven't moved out of our starter home and the market in Seattle has been good enough that the new equity in our house will be enough for a downpayment on a larger home when we're ready.

I've been thinking about moving the savings, which are now over 300K over to Betterment after MMM's post and the comments that followed. I've also considered moving them all into a 3 fund lazy portfolio, the schwab intelligent portfolio, or Vanguard's life strategy. The bottom line is that I haven't been disciplined about rebalancing the diversified funds. I'd rather know that I'm doing the best I can to grow wealth and not think about it as much as I do.  I really need some general advice specific to my situation. I have met with financial advisors in the past but the ones I've met seem like salesmen with calculators, more interested in golf than the math and art of investing.  Of course, if someone has a fee for service financial advisor they would recommend I would consider talking with them as well. It would be helpful for me to come up with a diversified wealth building strategy. I would like to have the opportunity to retire in 20 years.

I've ready many of the MMM posts and find the comments very helpful.  I've followed the pros and cons of Betterment, Schwab intelligent portfolios with its "cash drag" effect, and vanguard where some say the life strategy is equivalent to a lazy fund without the extra ER. For me, however, I don't currently have any TLH built into my portfolio and would probably benefit from not having to think about rebalancing. But do I move all my savings to Vanguard, to Betterment, or into Schwab's intelligent portofolio or do I diversity and put pieces in each? Do I diversify into real estate or other investment strategies?

Thank you for your insight,

Medder79

You've got the earning and savings part all figured out. Congrats on that!  I think if you're smart enough to make that kind of income and have the discipline to save a high proportion of it, you can set up a lazy portfolio really easily on your own.

I wrote a 20 step guide guide to DIY investing with lots of good links and resources. You've probably covered at least half of the steps already.  If you have specific questions, I'm happy to help.

Best,
-PoF