Hello,
After reading with great interest for the last couple of months, this is my first posting to this fine forum. I have a question about adding bonds to my investments that I'm hoping to get some advice on. And if anyone has any other thoughts on my situation, please chime in.
In early December, we will be paying off the last of our mortgage, which means that we will have some extra money each month to invest. Since I've only recently begun to think about investing in terms of FI and early retirement, I'm also trying to reexamine my investments in general through that lens. There are too many variables right now for us to predict an FI date with confidence, but 5-7 years is probably pretty close.
Age: 43 (me), 40 (my wife)
Time until FI and semi-retirement: 5-7 years -- but will continue to bring in at least a little income through freelance work
Current Investments: Me -- $90,000 in Roth and 401k -- around 93% stocks, 7% bonds; My wife -- $65,000 in Roth and 401k -- all in T Rowe Price 2040 target date fund (currently approx. 90% stock, 10% bond) -- Cash: $50,000 (around $20k to be used to finish off the mortgage)
Tax-advantaged account options: In my job, I can contribute to both a 401k and a 457 plan. If I understand correctly, I will be able to withdraw funds from the 457 without penalty after leaving my job, so it's likely that we would be depending on some of these funds while we wait for the funds from a Roth ladder to become available. My wife can contribute to a 401k. We can also contribute to a Roth.
Question 1: I'd like to increase the percentage of bonds in the mix to around 20-30% (in the form of a bond fund -- I have Vanguard Total Bond Fund (VBTIX) as well as multiple Vanguard target date funds available in my work plans). I keep telling myself, however, that putting money into bonds under current market conditions is buying high and that I should wait until interest rates start to increase again. Am I overthinking it? Trying to time the market when I shouldn't? I just opened the 457 account, so I was thinking that I might just start contributing at the desired stock/bond allocation (80/20 or 70/30) and keep doing so until I leave the job.
Question 2: Does an allocation of around 15% Intl., 15% Small cap, 50% large cap, 20% bonds sound reasonable given our timeframe?
Question 3: Any opinions on target date funds in general? All of my wife's money is in one right now, but I don't think she'd be against changing that.
Thanks for any thoughts that anyone has.
Pigpen