Investment advice for newbie

[RiverNile]

Hi all,
I'm a newcomer to this forum and I'm just starting to read about asset allocation. I would like your advice on how to allocate the assets for me and my wife. I apologize in advance for the length of the post and the number of the questions, but I'm pretty much lost in all the different options. And it's becoming more and more confusing as I read about these topics.

Here are our combined stats for me (35 years old) and my wife (30 years old):
Income: $300k/year
401k (pre-tax): $170k
personal investments (employer stock in taxable account): $85k
mortgage: 400k@4.375% (30-year fixed) and 50k HELOC (variable rate, currently at 4%) - we also have $400k equity in the house

We both recently started maxing out our 401k accounts (pre-tax: 18k from our salaries + 9k employer matching, post-tax: 20k that will be moved to ROTH using the backdoor). We have no IRA and very little money in cash. If we need additional funds, we take them back from the HELOC (up to 160k). Today all our remaining income is going towards the repayment of the HELOC.

Here are my questions:
1. What is the best approach for the 30-year fixed mortgage?
a. Leave as is
b. Refinance at 30-year fixed (new rate will be ~3.63%, after paying $10k). Monthly payment will go down from $2000 to $1750
c. Refinance at 20-year fixed (new rate will be 3.4%, after paying $10k). Monthly payment will increase to $2200
d. Refinance at 15-year fixed (new rate will be 2.75%, after paying $10k). Monthly payment will increase to $2650

In general, is it preferable to have a shorter-duration (assuming that we can make the monthly payments) or to keep the longer duration and use the money to invest in index funds (e.g. VTSAX)? Also, even if we refinance, should we put our left-over income against the principal (to repay the mortgage even faster) or invest in index funds? Is there any good calculator to understand these options better?

I do understand that "mortgage repayment" vs "stock market investing" is a personal preference, but I'm trying to understand what data do I need, in order to make the best decision for me.

2. I am a little concerned of the fact that the HELOC has a variable rate (it recently went up from 3.75% to 4%). Also, it seems that the FED will rise short-term interest rates, so our rate will increase as well. As a result, I was wondering if it would be better to sell my employee stock, in order to repay the HELOC or to just replace the stock with VTSAX.

3. After I left my previous employer, I have $10k in a Vanguard 401k. I have 2 questions regarding this money:
a. I had originally invested this amount in the Target Retirement 2045, which is flat for the last 4 years. Should I move this the Vanguard Institutional Index Fund (VIIIX), which tracks the S&P 500, has a lower fee (0.02% vs 0.07%) and has a much better performance? If not, then is there a better allocation, based on the options that are available to me (please see below)
b. Should I rollover my Vanguard 401k to a Vanguard IRA? If yes, then should I do traditional IRA or ROTH IRA? What are the pros and cons of each option (staying at 401k, rolling over to ROTH IRA, rolling over to a traditional IRA)? How many taxes will I need to pay if I rollover to a ROTH IRA (all the money in my 401k is pre-tax)?

Here are the funds (with their tickers) and their fees in my Vanguard 401k:

Target funds:
Target Retire 2010 Tr I      0.07%
Target Retire 2015 Tr I      0.07%
Target Retire 2020 Tr I      0.07%
Target Retire 2025 Tr I      0.07%
Target Retire 2030 Tr I      0.07%
Target Retire 2035 Tr I      0.07%
Target Retire 2040 Tr I      0.07%
Target Retire 2045 Tr I      0.07%
Target Retire 2050 Tr I      0.07%
Target Retire 2055 Tr I      0.07%
Target Retire 2060 Tr I      0.07%

Domestic Stock funds:
American Beacon Small Cp Val Inst   AVFIX   0.82%
T. Rowe Price Instl Large Cap Growth   TRLGX   0.56%
Vanguard Explorer Fund Admiral   VEXRX   0.35%
Vanguard FTSE Social Index Inst   VFTNX   0.15%
Vanguard Inst Index Fund Inst Plus   VIIIX   0.02%
Vanguard Windsor II Fund Adm   VWNAX   0.26%

International Stock funds:
AllianzGI NFJ International Value R6   ANAVX   0.90%
Vanguard Tot Intl Stock Ix Inst   VTSNX   0.10%

Bond funds:
PIMCO Total Return Instl   PTTRX   0.46%
Vanguard Total Bond Mkt Index Inst   VBTIX   0.06%

Short-term:
WF Treasury Pl MMkt Inst   PISXX      0.06%

4. Most of our 401k is in Fidelity. I have 2 questions:
a. I used to invest in the BTC LifePath 2040 L, thinking that it only has 0.09% fees (based on Fidelity's website). However, I linked this account to Betterment, which reported to me that this fund has 1.06% fees. Which one should I believe?
b. The Lifepath 2040 L fund has trailed the S&P500 for the last 5 years by a big margin, so I was thinking of switching to a different fund (more specifically the Vanguard S&P 500 Index fund, which is shown below). Should I do this? If so, what are your suggestions on what to choose? Here are my options:

Name   Asset Class       Category   Gross Expense Ratio**
BTC LIFEPATH 2020   Blended Fund Investments*   N/A   0.09%
BTC LIFEPATH 2030   Blended Fund Investments*   N/A   0.09%
BTC LIFEPATH 2040   Blended Fund Investments*   N/A   0.09%
BTC LIFEPATH 2050   Blended Fund Investments*   N/A   0.09%
BTC LIFEPATH 2060   Blended Fund Investments*   N/A   0.10%
BTC LIFEPATH RET   Blended Fund Investments*   N/A   0.09%
FID CONTRAFUND POOL   Stock Investments   Large Cap   0.43%
FID GROWTH CO POOL   Stock Investments   Large Cap   0.43%
VANG RUS 1000 GR TR   Stock Investments   Large Cap   0.02%
VANG RUS 1000 VAL TR   Stock Investments   Large Cap   0.02%
VANG S&P 500 IDX TR    Stock Investments   Large Cap   0.01%
ARTISAN MID CAP          Stock Investments   Mid-Cap   0.50%
DFA SM/MD CAP VAL       Stock Investments   Small Cap   0.26%
VANG RUS 2000 GR TR   Stock Investments   Small Cap   0.03%
RUSSELL INTL GROWTH   Stock Investments   International   0.57%
RUSSELL INTL VALUE     Stock Investments   International   0.57%
PIM ALL A ALL AUTH I (PAUIX)   Blended Fund Investments*   N/A   1.87%
PIM INFL RESP MA IS (PIRMX)   Blended Fund Investments*   N/A   1.10%
PIMCO TOTAL RETURN           Bond Investments   Income   0.27%
VANG ST BD IDX IS PL (VBIPX)   Bond Investments   Income   0.05%
FIMM MONEY MKT INST (FNSXX)   Short Term Investments   N/A   0.18%

5. So far I have not made any contributions to an IRA. After reading several or these posts, I understood that I could do two things (provided that I cannot contribute directly to a ROTH IRA due to income limits):
a. Putting 5.5k/year towards a traditional IRA and then doing a backdoor to a ROTH IRA. I am a little unclear, though, about the tax contributions. I've read that I need to pay some tax for the conversion from tIRA to ROTH IRA, but my understanding is that since I don't have any other IRA accounts, then this will be tax-free. Is this correct? What if I rollover my Vanguard 401k to an IRA (either ROTH or tIRA). Does that change anything?
b. I could put the 20k towards my post-tax Fidelity 401k (with my current employer) and then use the backdoor to move them to a ROTH IRA or a ROTH 401k. Which one is better?
c. How easy is it to move money between a Fidelity IRA and a Vanguard IRA (or any other 2 IRAs)? I would like to slowly transition my money towards Vanguard or even use Betterment.

6. I'm a little concerned that after maximizing 401k (pre-tax and ROTH) and IRA (traditional, ROTH) and, then my take-home income decreases a lot and there might not be enough to use from the time that I retire until I hit 59.5 years old (so that I can take money out of the 401k and the IRA). I see in all the websites that the important part is to maximize contributions to those accounts, but in the end I was wondering whether this means that I will need to work until I am 59.5 years old because otherwise my taxable investments will be low. Any thoughts on that?

7. I'm trying to calculate a good retirement target for me and my wife. I've read about the 4% rule (i.e. that my retirement savings should be 25x our withrawals). I was wondering, though, about inflation. For example, is it safe to assume that each of us will be ready to retire after we have $2.5M of today's money (i.e. we can each live with $100k of today's money)? From people, who are close to retirement and have given a good thought about this, what are your thoughts and your retirement targets? Also, what are your thoughts regarding our current status? Are we trending ok towards a $2.5M retirement target?

[Telecaster]

Whew, a lot there.  Good questions though, looks like you are doing well so far.   I take a quick pass through them:

Here are my questions:
1. What is the best approach for the 30-year fixed mortgage?
a. Leave as is
b. Refinance at 30-year fixed (new rate will be ~3.63%, after paying $10k). Monthly payment will go down from $2000 to $1750
c. Refinance at 20-year fixed (new rate will be 3.4%, after paying $10k). Monthly payment will increase to $2200
d. Refinance at 15-year fixed (new rate will be 2.75%, after paying $10k). Monthly payment will increase to $2650

In general, is it preferable to have a shorter-duration (assuming that we can make the monthly payments) or to keep the longer duration and use the money to invest in index funds (e.g. VTSAX)? Also, even if we refinance, should we put our left-over income against the principal (to repay the mortgage even faster) or invest in index funds? Is there any good calculator to understand these options better?

I do understand that "mortgage repayment" vs "stock market investing" is a personal preference, but I'm trying to understand what data do I need, in order to make the best decision for me.

Hotly debated topic.  The way the math works out is that it is better to have a nice long, 30-year mortgage and invest the difference.   Some people don't like having a mortgage, so they would rather pay it down.   But the math says don't. 

2. I am a little concerned of the fact that the HELOC has a variable rate (it recently went up from 3.75% to 4%). Also, it seems that the FED will rise short-term interest rates, so our rate will increase as well. As a result, I was wondering if it would be better to sell my employee stock, in order to repay the HELOC or to just replace the stock with VTSAX.

You probably want to sell your stock in general for diversification reasons.  The HELOC is a good thing to pay down, but it isn't typically pressing.  Low interested, often a tax break, etc.  But you need to get rid of it eventually for the reasons you mentioned.   Maybe do half and half or something. 

3. After I left my previous employer, I have $10k in a Vanguard 401k. I have 2 questions regarding this money:
a. I had originally invested this amount in the Target Retirement 2045, which is flat for the last 4 years. Should I move this the Vanguard Institutional Index Fund (VIIIX), which tracks the S&P 500, has a lower fee (0.02% vs 0.07%) and has a much better performance? If not, then is there a better allocation, based on the options that are available to me (please see below)
b. Should I rollover my Vanguard 401k to a Vanguard IRA? If yes, then should I do traditional IRA or ROTH IRA? What are the pros and cons of each option (staying at 401k, rolling over to ROTH IRA, rolling over to a traditional IRA)? How many taxes will I need to pay if I rollover to a ROTH IRA (all the money in my 401k is pre-tax)?

3a.  You're probably okay where it is.  It is a personal preference kind of thing.  You have some bond exposure there, so both the ups and downs will be a little smother.   

3b.  Yes, do the IRA.  IRAs are more flexible than 401(k)s if you need the money for some reason.   Do not roll into the Roth.   

4. Most of our 401k is in Fidelity. I have 2 questions:
a. I used to invest in the BTC LifePath 2040 L, thinking that it only has 0.09% fees (based on Fidelity's website). However, I linked this account to Betterment, which reported to me that this fund has 1.06% fees. Which one should I believe?
b. The Lifepath 2040 L fund has trailed the S&P500 for the last 5 years by a big margin, so I was thinking of switching to a different fund (more specifically the Vanguard S&P 500 Index fund, which is shown below). Should I do this? If so, what are your suggestions on what to choose? Here are my options:

Those Lifepath funds blow.  Dump them.   Combo funds like that tend to have high expense ratios.  If you want some bond exposure, put like 20% (or whatever number you like) in VBTLX and the rest in VTSAX.  Then rebalance yourself. 

5. So far I have not made any contributions to an IRA. After reading several or these posts, I understood that I could do two things (provided that I cannot contribute directly to a ROTH IRA due to income limits):
a. Putting 5.5k/year towards a traditional IRA and then doing a backdoor to a ROTH IRA. I am a little unclear, though, about the tax contributions. I've read that I need to pay some tax for the conversion from tIRA to ROTH IRA, but my understanding is that since I don't have any other IRA accounts, then this will be tax-free. Is this correct? What if I rollover my Vanguard 401k to an IRA (either ROTH or tIRA). Does that change anything?
b. I could put the 20k towards my post-tax Fidelity 401k (with my current employer) and then use the backdoor to move them to a ROTH IRA or a ROTH 401k. Which one is better?
c. How easy is it to move money between a Fidelity IRA and a Vanguard IRA (or any other 2 IRAs)? I would like to slowly transition my money towards Vanguard or even use Betterment.

A little more there than I can deal with in on bite.   If you do the backdoor properly, there is no tax on the conversion.  But read up on it. 

5B.  Same as before, IRA > 401(K)

5C.  Easy.

6. I'm a little concerned that after maximizing 401k (pre-tax and ROTH) and IRA (traditional, ROTH) and, then my take-home income decreases a lot and there might not be enough to use from the time that I retire until I hit 59.5 years old (so that I can take money out of the 401k and the IRA). I see in all the websites that the important part is to maximize contributions to those accounts, but in the end I was wondering whether this means that I will need to work until I am 59.5 years old because otherwise my taxable investments will be low. Any thoughts on that?

Yes, you can withdraw money from your IRA before 59.5.   Don't have the forum link handy, but search a bit and it should pop up.   But it is good to have some money in taxable accounts for a variety of reasons.   

7. I'm trying to calculate a good retirement target for me and my wife. I've read about the 4% rule (i.e. that my retirement savings should be 25x our withrawals). I was wondering, though, about inflation. For example, is it safe to assume that each of us will be ready to retire after we have $2.5M of today's money (i.e. we can each live with $100k of today's money)?

4% rule is inflation adjusted based on the initial portfolio balance.

[mpcharles]

Sorry dude you lost me on page 33. I'll give my opinion tomorrow :)

Sent from my ASUS_Z00AD using Tapatalk

[MDM]

Here are my questions:
1. What is the best approach for the 30-year fixed mortgage?
a. Leave as is
b. Refinance at 30-year fixed (new rate will be ~3.63%, after paying $10k). Monthly payment will go down from $2000 to $1750
c. Refinance at 20-year fixed (new rate will be 3.4%, after paying $10k). Monthly payment will increase to $2200
d. Refinance at 15-year fixed (new rate will be 2.75%, after paying $10k). Monthly payment will increase to $2650

Do you need to pay $10K to refinance?  Have you looked around?
With your income the 15 year, lower interest rate, seems attractive.

In general, is it preferable to have a shorter-duration (assuming that we can make the monthly payments) or to keep the longer duration and use the money to invest in index funds (e.g. VTSAX)? Also, even if we refinance, should we put our left-over income against the principal (to repay the mortgage even faster) or invest in index funds? Is there any good calculator to understand these options better?

It boils down to the after-tax interest rate you are paying or getting: put your money towards the higher rate.

3. After I left my previous employer, I have $10k in a Vanguard 401k. I have 2 questions regarding this money:
a. I had originally invested this amount in the Target Retirement 2045, which is flat for the last 4 years. Should I move this the Vanguard Institutional Index Fund (VIIIX), which tracks the S&P 500, has a lower fee (0.02% vs 0.07%) and has a much better performance? If not, then is there a better allocation, based on the options that are available to me (please see below)

No way to know what will be best going forward.  See https://www.bogleheads.org/wiki/Callan_periodic_table_of_investment_returns.

b. Should I rollover my Vanguard 401k to a Vanguard IRA? If yes, then should I do traditional IRA or ROTH IRA? What are the pros and cons of each option (staying at 401k, rolling over to ROTH IRA, rolling over to a traditional IRA)? How many taxes will I need to pay if I rollover to a ROTH IRA (all the money in my 401k is pre-tax)?

Having a traditional IRA will get in the way of doing a backdoor Roth (but will have no effect on a mega backdoor Roth).  You might roll the Vanguard 401k into the Fidelity 401k.

4. Most of our 401k is in Fidelity. I have 2 questions:
a. I used to invest in the BTC LifePath 2040 L, thinking that it only has 0.09% fees (based on Fidelity's website). However, I linked this account to Betterment, which reported to me that this fund has 1.06% fees. Which one should I believe?

The 401k documentation is supposed to be correct.  Call Fidelity and ask.
 

b. The Lifepath 2040 L fund has trailed the S&P500 for the last 5 years by a big margin, so I was thinking of switching to a different fund (more specifically the Vanguard S&P 500 Index fund, which is shown below). Should I do this? If so, what are your suggestions on what to choose?

Again, don't go chasing the most recent returns.  Pick an asset allocation you can live with for decades.

5. So far I have not made any contributions to an IRA. After reading several or these posts, I understood that I could do two things (provided that I cannot contribute directly to a ROTH IRA due to income limits):
a. Putting 5.5k/year towards a traditional IRA and then doing a backdoor to a ROTH IRA. I am a little unclear, though, about the tax contributions. I've read that I need to pay some tax for the conversion from tIRA to ROTH IRA, but my understanding is that since I don't have any other IRA accounts, then this will be tax-free. Is this correct? What if I rollover my Vanguard 401k to an IRA (either ROTH or tIRA). Does that change anything?

See https://www.bogleheads.org/wiki/Backdoor_Roth_IRA.

6. I'm a little concerned that after maximizing 401k (pre-tax and ROTH) and IRA (traditional, ROTH) and, then my take-home income decreases a lot and there might not be enough to use from the time that I retire until I hit 59.5 years old (so that I can take money out of the 401k and the IRA). I see in all the websites that the important part is to maximize contributions to those accounts, but in the end I was wondering whether this means that I will need to work until I am 59.5 years old because otherwise my taxable investments will be low. Any thoughts on that?

With your income you should have no difficulty funding taxable investments even after maximizing tax-advantaged ones.  See http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/.

7. I'm trying to calculate a good retirement target for me and my wife. I've read about the 4% rule (i.e. that my retirement savings should be 25x our withrawals). I was wondering, though, about inflation. For example, is it safe to assume that each of us will be ready to retire after we have $2.5M of today's money (i.e. we can each live with $100k of today's money)? From people, who are close to retirement and have given a good thought about this, what are your thoughts and your retirement targets? Also, what are your thoughts regarding our current status? Are we trending ok towards a $2.5M retirement target?

Read more - inflation is accounted for.  See http://www.retailinvestor.org/pdf/Bengen1.pdf and http://www.aaii.com/journal/article/retirement-savings-choosing-a-withdrawal-rate-that-is-sustainable.

[MDM]

A basic, empirically driven premise that can underlie equity investment decisions are:
- The small cap value stock universe * ( followed by small cap growth ) has produced the highest alpha premium of all stock universes.  If you overweight in small mid cap value, then you put historical odds in your favor towards maximal asset growth.

Recognize that marketmap has a particular point of view.  Doesn't mean that it is incorrect, but one might want to consider other perspectives as well.  E.g, https://blogs.cfainstitute.org/investor/2015/12/08/o-value-where-art-thou/, https://www.bogleheads.org/forum/viewtopic.php?t=125218, etc.