Author Topic: I have no idea if I'm doing this correctly  (Read 653 times)

less stuff more happiness

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I have no idea if I'm doing this correctly
« on: August 21, 2019, 07:58:35 AM »
This is currently how I am invested, my question is, does this seem OK? I mean, I know people can't tell me what to invest in, but can you say if this seems reasonable or if I'm really messing up somewhere? I just don't see this growing that much and maybe it's just because the market is shaky? I've just done all of this on my own and sometimes I feel more confused with each thing that I read. My husband and I (he let's me do all money stuff which is why I said "on my own") are 47, while we would like to retire early, I don't see it as an option and that's fine, I am hoping we can get out in at least 15 years though, or at least maybe one of us can. Do you think the current allocation might get us there?

401k (just me, he doesn't get any retirement vehicle) - 87k right now it's all in a Vanguard Target Retirement 2030 inv (expense ration on this one is .14%, if anyone wanted to know)
Brokerage account - 87k VTSAX
Roth IRA - 24k VTSAX
Roth IRA - 6k VTSAX
Traditional IRA - 24k VTSAX

As long as our financial situation stays that same we will continue to max out my 401k (18.5 for last year, 19k for this year and so on), and one Roth (6k), one Trad (6k). We are on track to invest at least 25k annually into the brokerage account.

Thanks for any help, or advice you may provide.

no pension - only retirement will be accounts I've listed (401k, roth etc).

It is aggressive. I have no idea how I will weather market downturns in the 20% or more range but we will see! I'm sure I won't like it.
« Last Edit: August 21, 2019, 08:33:10 AM by less stuff more happiness »

Kcinegnet

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Re: I have no idea if I'm doing this correctly
« Reply #1 on: August 21, 2019, 08:10:23 AM »
I think this looks okay. It seems like you have this index investing thing down. I also like that you have your investments in different vehicles, ie Roth via tradition 401k. Keep socking away as there really is no "right" way to do it.

Guizmo

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Re: I have no idea if I'm doing this correctly
« Reply #2 on: August 21, 2019, 08:29:07 AM »
100% VTSAX is probably more aggressive than many people would recommend for a 47 year old. If you think you have the tolerance for wild market swings then it is probably okay, and if you think you would stress out if the market went down 10 or 20 percent, then you should probably scale back your equity position and add some fixed income. You are already doing that with your 2030 target retirement fund.

Are you going to have a pension in addition to your savings?

ecchastang

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Re: I have no idea if I'm doing this correctly
« Reply #3 on: August 21, 2019, 09:50:50 AM »
100% VTSAX is probably more aggressive than many people would recommend for a 47 year old. If you think you have the tolerance for wild market swings then it is probably okay, and if you think you would stress out if the market went down 10 or 20 percent, then you should probably scale back your equity position and add some fixed income. You are already doing that with your 2030 target retirement fund.

Are you going to have a pension in addition to your savings?
OP stated no pension.

PDXTabs

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Re: I have no idea if I'm doing this correctly
« Reply #4 on: August 21, 2019, 09:56:28 AM »
100% VTSAX is probably more aggressive than many people would recommend for a 47 year old. If you think you have the tolerance for wild market swings then it is probably okay, and if you think you would stress out if the market went down 10 or 20 percent, then you should probably scale back your equity position and add some fixed income. You are already doing that with your 2030 target retirement fund.

Are you going to have a pension in addition to your savings?
OP stated no pension.

Yes, but they have a 401k, which means they live in the USA, and strongly hint at retiring when they are 62 and can pull SS. In many countries you would call that a pension.

Guizmo

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Re: I have no idea if I'm doing this correctly
« Reply #5 on: August 21, 2019, 10:02:16 AM »
100% VTSAX is probably more aggressive than many people would recommend for a 47 year old. If you think you have the tolerance for wild market swings then it is probably okay, and if you think you would stress out if the market went down 10 or 20 percent, then you should probably scale back your equity position and add some fixed income. You are already doing that with your 2030 target retirement fund.

Are you going to have a pension in addition to your savings?
OP stated no pension.

I think OP edited their post to answer the questions in my reply.

Guizmo

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Re: I have no idea if I'm doing this correctly
« Reply #6 on: August 21, 2019, 10:05:35 AM »
OP. You may want to make your portfolio less aggressive based on what you said. The worst thing you could do is sell when the market is low.

I don't think you'll be able to retire early, but you should have a decent nest egg if y'all keep saving 25k a year for the next 15 years. If you do decide to retire early, I think healthcare will probably be your biggest concern apart from having enough income.

PDXTabs

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Re: I have no idea if I'm doing this correctly
« Reply #7 on: August 21, 2019, 10:05:41 AM »
My husband and I (he let's me do all money stuff which is why I said "on my own") are 47, while we would like to retire early, I don't see it as an option and that's fine, I am hoping we can get out in at least 15 years though, or at least maybe one of us can. Do you think the current allocation might get us there?

As long as our financial situation stays that same we will continue to max out my 401k (18.5 for last year, 19k for this year and so on), and one Roth (6k), one Trad (6k). We are on track to invest at least 25k annually into the brokerage account.

Thanks for any help, or advice you may provide.

It is aggressive. I have no idea how I will weather market downturns in the 20% or more range but we will see! I'm sure I won't like it.

A couple notes:
  • By my math you already have $228k
  • You think that you can continue to invest $56k/yr

Assuming a 7% real return* and inflationary raises you could have ~$2.1M in 15 years, right when you can start pulling SS. Do you really need that much? It's okay if you do, I'm just trying to point out that you may be FI well before that.

My other note: I would diversify away from the USA some. I personally invest in a market cap weighted global portfolio which means that right now I'm only ~55% USA equities. Other folks consider this too much foreign investment for a resident of the USA and are happier with 80% USA / 20% RoW.

EDITed to add: * - of course, there is a chance that we won't see a 7% real return over the next 15 years. There is also a chance that we will see greater than a 7% real return.
« Last Edit: August 21, 2019, 10:08:17 AM by PDXTabs »

less stuff more happiness

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Re: I have no idea if I'm doing this correctly
« Reply #8 on: August 21, 2019, 10:24:12 AM »
sorry, I don't know how to reply directly yet, I assume it's the "quote" button, I'll figure it out. I did just edit my OP to add in the pension info. We do live in the USA, That 25k is in addition to the 401k/IRA contributions, so hopefully that works out money wise to the tune of 2+ million (as guessed by PDX). I know we can pull SS when we are older but I'm trying not to count on that. It will be a bonus, if we get it. I just want to feel like I am doing everything right so far and that if the market tanks, and we lose money, it's not because I did not allocate properly. I know words like "right" "properly" can be relative, but for me I wanted to go aggressive for at least ten years which would put us at 57, then scale back if needed, maybe go more in bonds, idk. Maybe I'll do it sooner. I'm really  just learning and since pulling my money away from a FA I have been worried. Imagine how I'll be in a downturn! I am committed to staying the course though and not pulling money out, continuing to put in it, no matter what.  From the replies it sounds like if I want to be aggressive, I am allocated properly and having a ton of it in VTSAX is fine. The 401k one was just picked by the company, I didn't even know what it was when I started. I have always wondered if I should change that... 

PDXTabs

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Re: I have no idea if I'm doing this correctly
« Reply #9 on: August 21, 2019, 10:30:43 AM »
I know we can pull SS when we are older but I'm trying not to count on that. It will be a bonus, if we get it.

That's not a bad plan for the time being, I do the same thing. But once you get close you can of course reconsider.

Financial.Velociraptor

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Re: I have no idea if I'm doing this correctly
« Reply #10 on: August 21, 2019, 11:32:59 AM »
Your savings rate drives probably 90% of your time to FIRE and NOT investment returns.  You are worrying about optimizing the wrong parameter.  Focus on mindful spending and accumulation.  Virtually any of the main broad indexes at Vanguard will do the trick for you in that case.

Villanelle

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Re: I have no idea if I'm doing this correctly
« Reply #11 on: August 21, 2019, 12:24:53 PM »
What % of the 2030 Target fund is bonds?  (If you don't know, you can go to Morningstar, enter the ticker, and then a click or two will get you to a section that tells you the underlying allocation of the fund.)  I'm guessing (and could be way off, but am too lazy to look it up myself), that it's around 30-35%, so you do have at least some bond exposure, though given that its ~30% of about 40% of your retire investment amount, its about 12 total, assuming I'm correct on that 30% guess for the 2030 fund.

That's aggressive.  But assuming even growth rates (which may not be a great assumption), you will naturally get more conservative over time as you are putting more in the 2030 fund than the other funds, and because the 2030 fund will get more bond heavy over time. 

So the real question is simply one of your risk level.  Are you willing to risk having to work another X years in order to gain more opportunity to retire sooner?  Does the risk of an extra two years seem worth it for the risk of two (or one, or three) fewer years? 

ALL that said, the best thing you can do is invest more, rather than focus on where you invest, since you've already accepted the "broad index fund" concept.