Help w/understanding my wife and myself's investments

[uwbadgers19]

Hi everyone!

A relative noob here, been reading the forums now for a few months.  Just wanted to give a summary of our retirement assets so far and just get any feedback/thoughts on the overall scenario.  Anything big I'm overlooking?  Are we doing well, just keep saving?  Other thoughts/opinions?

I feel we are doing pretty well for our age but please give any thoughts on good stuff or bad stuff that might jump out at you.  Thanks in advance!


My Wife:
Age: 29
Mortgage Loan Originator US Bank
Income 65k (in 2012) to ??? in future
---My wife currently is teamed with another orignator who is retiring in July this year.  Her income should go up a fair amount as they currently split loan payouts 30/70.  While that might sound crazy, getting into mortgage at age 27 was a pretty big deal and based on how the soon to be retiree has done, things should be looking up!  She hopes to hit around 75-80k this year.  Her teammate normally has done over 100k and been in the business ~20 years.

401k:  30k

8% is put in monthly.  4% employee match for a total of 12%/month

----Vanguard 2050 Fund (VFIFX)---19k
Expense Ratio: 0.18

----US Bank Stock (USB)-------------11k
Expense Ratio: 0.13

Pension: 3.3k
In the account screen, there are 2 parts.  Once says it is a "cash balance plan." 

The other says Pension plan and lists:
Estimated benefit monthly: $70
Payment From:  annuity
Normal Retirement Date:  8/1/2048

Both of them say "eligible" as well.

So I'm not really sure what exactly those 2 things mean.  Of course, they won't matter for a while but I just want to understand.  Maybe they both are the same thing, just 2 ways to take the pension when it's time?

Roth:  39k
30k---FAAGX
3k---FGIAX
3k---FRSLX
2k---AGTHX
1k---NEWFX

While some of these have higher expense ratios, I believe any other fees are waived.  It's something to do with these funds and being a bank employee, still something I need to understand more clearly, wife has no idea :)  Most contributions are done into FAAGX, as you can see.  The lower 1k's are just rollovers from previous jobs.

Brokerage:  11k
5k---FSFIX
5k---FSGNX
1k---FAGSX

Wife Total Retirement:  80k + Pension



ME
Age: 28
Personal Trainer
Income ~ 40-45k

No plans through employer.  All savings done on own.

https://forum.mrmoneymustache.com/investor-alley/my-roth-ira-fees-expense-ratios-stress-etc/

I recently started that thread as I have begun to learn/understand more about all this (wife knows nothing!).  I am currently in the process of taking my US Bank roth and transferring over to Vanguard to get lower fees.  All paperwork and stuff is done, just waiting on the actual transfer to happen, seems to be a bit slow.

My Roth:  11k

Soon to be Vanguard 2045 fund:  VTIVX


TOTAL RETIREMENT SAVINGS:  91k + wife's pension


Other relative information.

Own condo that is rented
Mortgage: 137k @ 3.7%
Assessed: 175k

$130/month profit after expenses including property manager.  Condo is great condition and association in good standing (Wife is the treasurer!)

Soon to own house, 12 days!
Mortgage: 247k at 3.6%
Assess: 309k or higher

Other Debts:
My Car:  8k at 1%
Pay $370/month for 22 more months.  May pay off slightly early just to be done with it.

Overall we save pretty well, both autopay monthly to get 5500 in Roths along with the 8% my wife does for 401k.

[Another Reader]

Loan origination is very cyclical.  Once interest rates go up and the refi's drop off, she could find her income reduced or she could get laid off.  It's uncommon for a loan person to stay with one company for more than a few years, and it's a feast or famine business.  In your shoes I would have substantial savings in addition to your retirement accounts.

Would you be able to keep the house if her income dropped or disappeared?

The condo is a wash.  First vacancy or major repair/reno will push you into negative cash flow.  I would consider selling and putting the money in savings/investments for that rainy day.

US Bank is well managed, but I would not want a high percentage of my assets in company stock.  Can you sell some and move the money into another investment?

[uwbadgers19]

Loan origination is very cyclical.  Once interest rates go up and the refi's drop off, she could find her income reduced or she could get laid off.  It's uncommon for a loan person to stay with one company for more than a few years, and it's a feast or famine business.  In your shoes I would have substantial savings in addition to your retirement accounts.

Would you be able to keep the house if her income dropped or disappeared?

The condo is a wash.  First vacancy or major repair/reno will push you into negative cash flow.  I would consider selling and putting the money in savings/investments for that rainy day.

US Bank is well managed, but I would not want a high percentage of my assets in company stock.  Can you sell some and move the money into another investment?

Are you in the mortgage area?  Just curious why you say they only stay a few years usually.  I'm sure anything can happen, but I guess it is what it is, nothing we can do about interest rates.  People always will have to buy/move, right?  And if not, I guess I'll pick up the slack!  In my job I have potential to work more if I want, but I like having a good work/time balance better! 

In response to your other thoughts, we do have ~20k E-fund.  It would be a fair amount higher but we recently hit a few of those "unexpected" moments over the last few months......someone broke my driver side mirror ($400), 4 new tires on my car ($600), wife had to have crown fixes ($600), fun stuff!

Keeping the house if her income drops would be fine.  If she lost her job, of course things would be different.  Honestly, not something really going to even think about.....guess I'm an optimist! :)  She has enough bank connections that I'm sure she'd get something without much trouble.

Don't plan on selling condo for a bit.  We have renters for the next 2 years so that is taken care of.  We may look into things more down the road but right now we like the thought of having renters pay it down for a while.  My wife has been here 7 years without any major issues.  The building was built ~2003 so it's relatively new.

USB stock can't be sold.  It is what the match is given in.  So all USB stocks owned in the 401k are from her matches distributed each year.  So I think it's like ~33% of the 401k

Thanks!

[Another Reader]

You can't sell the US Bank stock within the 401k and buy another investment?  That's a lot of your portfolio in just one stock.

I worked in a real estate field for around 30 years and I know a number of folks that USED to be in the lending business and a couple that still are.  It might help her to understand the nature of the business and the income ups and downs by talking to some of the people that have been in it for a while or were in it and left.  When volume drops, the layoffs start.  I know nothing about US Bank, but I have seen it happen at other places, including large banks.

[Ryan Dagg]

USB stock can't be sold.  It is what the match is given in.  So all USB stocks owned in the 401k are from her matches distributed each year.  So I think it's like ~33% of the 401k

I would make absolutely certain that you are correct about this. There have been so many lawsuits about this type of rule that almost no major company has it on their books anymore. They might have a time period that she must hold before diversifying, or a short time window each year that it can be done but the option is almost always there. I hope that I am correct in your case.

[anotherAlias]

It's been 5 years since I worked at US Bank, but I was able to sell my stock as soon as it hit my account.  You may want to double check with HR about that.

[On_a_slow_boat]

Thanks for the writing into the board your questions - i am familiar to a certain extent with employer sponsored pension plans so allow me to share with you what I was able to find on the USBank website


Looks like they do a very nice job explaining what the pension benefits are. I compliment most large US companies for the effort they give helping employees to understand the benefits the firm is providing

They have a normal pension and a cash balance pension - what one you are in is a function of date of hire and an election.  The website does a wonderful job explaining the two different plans, the benefits expected, and the eligibility:  I even noticed a link to a more detailed piece of information called a "summary plan description"(SPD)

Here is the link with all the information https://www.usbank.com/hr/benefits/retirement/pension.asp

I then looked at the USBank stock in the 401(k) plan

Regarding the match:
I too find it a bit hard to believe that the stock match can't be sold. After the Enron debacle the Department of Labor came down pretty hard on companies use of stock in 401(k) plans. Without looking at it very deeply the quote I copy and pasted from the site seem to imply once the match is made you have the option to change the investment.

"U.S. Bank will match your contributions dollar for dollar up to 4% of your eligible pay. The company match is made annually the following January and is invested in the U.S. Bancorp ESOP Fund.  After the matching contribution is made, you can change how it is invested at any time."

To see more k-plan information, on the first link i sent you go to plan highlights.

hope you find this helpful.

[On_a_slow_boat]

I was curious so i kept digging into the USBank website.  One of the links is the annual funding notice. This is a document that the plan's actuary is required to provide 1 time per year. It provides a static measurement of the assets and liabilities of the pension plan under an IRS prescribed approach.  One key thing to look at is how well the pension plan is funded.

you can get to the full document using the link i sent your earlier - i copied and pasted a very simple paragraph that really cut's through the actuarial / pension jargon and summarizes the market value:

"Fair Market Value of Assets
Asset values in the chart above are actuarial values, not market values. Market values tend to
show a clearer picture of a plan’s funded status as of a given point in time. However, because
market values can fluctuate daily based on factors in the marketplace, such as changes in the
stock market, pension law allows plans to use actuarial values for funding purposes. While
actuarial values fluctuate less than market values, they are estimates. As of December 31, 2012,
the fair market value of the Plan’s assets was $2,332,436,540. On this same date, the Plan’s liabilities were $3,360,188,897""

The pension plan your wife is in is currently still accruing benefits. This means as her salary grows and her years of service grow they are counted towards what she will ultimately get in the future. You can see that the plan has already promised 1 billion more in benefits than it has assets to provide under the assumptions used in the calculation.  US bank could have plenty of free cash, believe in the plan and have no plans at all of stopping future accruals. However I would at least have one eye open and keep checking the website often to make sure they don't "freeze" the plan. They legally are required to tell you if they freeze the plan - but it is your responsibility to listen and adjust your expectations accordingly.

[Hotstreak]

As others have said, she can x-fer the USB stock in to any fund within her 401k that she wants.  Also, all of her cost on her Roth is not being "waived", she is still paying the expense ratio on these funds.  They may be waiving loads, or reducing 12b, but she is absolutely still paying for the account.  This was brought up in your other thread -- is there some document from the bank indicating the account is "free"?  Have you sat down together and read the entire agreement/plan summary?