Author Topic: Need advise - max'd out in usual suspects, what to invest in next?  (Read 9089 times)

WorkingToBeFIREd

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Hi all - finally decided to stop lurking and see if I could ask the collective Mustachians for advice.

My wife and I have been contributing the max to Roth IRAs since their inception (1998?).  I contribute the max to my 401K at work, and my wife does the same in her 403B.  We've been working with her financial planner (nice guy, although I'm ashamed to admit I think he's done pretty well from sales commissions) and our retirement nest egg has grown decently.  The house is paid off, we have zero debt, and a nice stockpile of cash in a money market account earning a fraction of a percent in interest (administer facepunch here).  I can't find any other pre-tax ways to contribute to our retirement (ideally in the next 4 years, although we may do part-time "second act" careers), and am looking for recommendations to invest the cash surplus assuming it will have to be a taxable investment.  For reference, the current cash position totals about 30% of the value of the retirement accounts, and I'd probably want to keep a six month buffer in cash.

I had been planning on running the standard Vanguard index lazy portfolio, but the investment adviser at my bank (who got VERY interested when I talked about a large scale withdrawal to fund Vanguard) recommend other funds including a JPMorgan fund that was a "tax aware" index (JPECX).  Basically, his recommendation was that VTSAX has a much higher potential capital gains exposure at 32.1% versus JPECX at 7.55%, and that in our tax bracket, we could be increasing our potential taxes pretty significantly if there was a large sell-off of VTSAX holdings (I think I got that right).  I'll be the first to admit I am an investing newbie and was trying to follow along, but am trying to get a sense of how important PCGE is in comparison to higher sales charges and fees on JPECX versus Vanguard.

I'm not sure if I've provided enough info and would be happy to provide additional info if it will help with recommendations.  Our financial guy hasn't done bad for us, but I also recognize he's recommending what he gets paid for and really am looking for some unbiased advice.

Thanks in advance!

rmendpara

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #1 on: June 12, 2014, 09:38:07 AM »
I don't know much about the JPM funds, so I'll defer to someone else.

Anything you hold in a taxable account will be taxed... but only when you sell.

If you are generally a longer term holder (1+ years), that rate will only be 15%, which is very reasonable.

Let's stay you keep adding to a position in VTSAX for the next 5 years, your taxes during that time will only be for the dividends you receive from the fund (and those paid directly by the fund.. which are minimal, if any).

Did I miss something?

MDM

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #2 on: June 12, 2014, 10:21:51 AM »
With the usual disclaimers about "past returns do not guarantee future returns", compare http://quotes.morningstar.com/fund/JPECX/f?t=JPECX vs. http://quotes.morningstar.com/fund/VTSAX/f?t=VTSAX.

For tax-specific information, click the "Tax" tab on the links above (or linked here:  http://performance.morningstar.com/fund/tax-analysis.action?t=JPECX&region=usa&culture=en-US vs. http://performance.morningstar.com/fund/tax-analysis.action?t=VTSAX&region=usa&culture=en-US)

See http://quicktake.morningstar.com/datadefs/fundtotalreturns.html for explanations.

Yes, one would assume your financial guy gets some fraction of the 1% load JPECX charges.

The choice is yours....

jfer_rose

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #3 on: June 12, 2014, 11:10:52 AM »
The stock series here was very helpful to me in figuring this stuff out:

http://jlcollinsnh.com/stock-series/

As a result, I'm quite content to have the taxable portion of my investments in VTSAX. I'm one or two months away from being able to switch to Admiral Shares too, yay!

kendallf

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #4 on: June 12, 2014, 11:15:59 AM »
It's interesting to note that Morningstar rates:

Potential Cap Gains Exposure           
 
JPECX 35.45

VTSAX 32.94

This is miles apart from what your advisor told you.  Again, not a tax professional here but you'd think that big index funds will, on average, have less turnover and therefore greater tax efficiency.  I looked up the ETF that I'm using currently in a non-tax advantaged account, ITOT, and it shows 5% turnover and 16.76 Potential Cap Gains Exposure.

WorkingToBeFIREd

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #5 on: June 12, 2014, 11:39:52 AM »
Thanks all - really appreciate the help.  I just pulled out the printed "investment illustration" the guy at the bank gave me (not my usual financial adviser) when trying to pitch this stuff, and he used the JPDEX Institutional shares for illustration, but apparently could only sell C-shares (JPECX).  The JPDEX PCGE is 8.59% today on Morningstar (7.55% in my book from a couple months ago), but I find it ironic that the C-shares he actually can sell me have a higher PCGE after he spent 30 minutes railing against it!

The jhcollinsnh stuff is great and is what got me started down the path towards Vanguard.  I'm going to read through that stuff again to dust off what I've forgotten!

More and more, I'm realizing why Vanguard self-directed is a better bet.  I appreciate salesmanship as much as the next guy, but this only reinforces my belief that it was a waste of time to spend the 30 minutes talking to the bank financial adviser.

Net-net, assuming that I'm out of pre-tax options and want to get my money working harder for me than the fractional rate the bank is paying, it sounds like a taxable Vanguard account is my best bet.  The Lending Club stuff that MMM does sounds interesting for a very small portion of the portfolio, but I'm more of a "fire and forget", long-term hold kind of guy which is where I think the Vanguard stuff would work well.

Thanks again...


gimp

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #6 on: June 12, 2014, 12:23:28 PM »
I think your conclusions are correct - don't listen to the salesman. When random people like us recommend vanguard, it's not because we have any benefit coming to us if you do it... and there's a reason people recommend vtsax and not jpecx.

ADK_Junkie

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #7 on: June 12, 2014, 12:57:52 PM »
Whoa... hold up.  Stay away from mutual funds (ie, anything with 5 letters in its ticker is a mutual fund). All mutual funds can be subject to capital gains taxes.  This is one of the primary benefits (the taxes) of ETFs (exchange traded funds).  Stay away from the VTSAX. 

Instead, invest in VTI = Vanguard's Total US Market Index.  You will receive dividends (which are subject to Interest/dividend taxes.... and will have no impact on your earnings/labor taxes.  But you won't be subject to Capital Gains taxes until you sell shares.  This ETF is a set-it-and-forget-it type of investment. 

jfer_rose

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #8 on: June 12, 2014, 01:09:59 PM »
Whoa... hold up.  Stay away from mutual funds (ie, anything with 5 letters in its ticker is a mutual fund). All mutual funds can be subject to capital gains taxes.  This is one of the primary benefits (the taxes) of ETFs (exchange traded funds).  Stay away from the VTSAX. 

Instead, invest in VTI = Vanguard's Total US Market Index.  You will receive dividends (which are subject to Interest/dividend taxes.... and will have no impact on your earnings/labor taxes.  But you won't be subject to Capital Gains taxes until you sell shares.  This ETF is a set-it-and-forget-it type of investment.

ADK_Junkie, I'm not sure what you're saying is accurate. Yes, VTSAX is a mutual fund but since it is an index fund, the funds within it aren't actively traded like in many non-index mutual funds. With VTSAX, you also don't pay Capital Gains unless you sell (but you do pay tax on dividends).

ivyhedge

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #9 on: June 12, 2014, 01:20:07 PM »
Whoa... hold up.  Stay away from mutual funds (ie, anything with 5 letters in its ticker is a mutual fund). All mutual funds can be subject to capital gains taxes.  This is one of the primary benefits (the taxes) of ETFs (exchange traded funds).  Stay away from the VTSAX. 

Instead, invest in VTI = Vanguard's Total US Market Index.  You will receive dividends (which are subject to Interestidend taxes.... and will have no impact on your earnings/labor taxes.  But you won't be subject to Capital Gains taxes until you sell shares.  This ETF is a set-it-and-forget-it type of investment.

ADK_Junkie, I'm not sure what you're saying is accurate. Yes, VTSAX is a mutual fund but since it is an index fund, the funds within it aren't actively traded like in many non-index mutual funds. With VTSAX, you also don't pay Capital Gains unless you sell (but you do pay tax on dividends).


@ jfer: s/t and l/t capital gains can be triggered due to rebalancing. If the fund is held in a taxable account, there are situations where all manner of index funds can generate such gains upon which an owner would be taxed: it's uncommon, but it happens.


Aside: If one is going to hold equities in a taxable account, one should look to international or EM, from which one will likely be able to recoup some of the foreign income tax liability.

ivyhedge

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #10 on: June 12, 2014, 01:22:37 PM »
@ workingtobefired: ibonds if you want to build up fixed income exposure. They need to make sense for you w/r/t your anticipated tax rate in retirement, but investing in them ($10k/member of household/year) will open up some tax deferred space for you.


Be sure to understand liquidity, penalties, utility for education expenses, etc, prior to doing anything. :)

jfer_rose

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #11 on: June 12, 2014, 01:26:39 PM »
Doing some reading in Bogleheads about ETFs vs. Mutual funds, I found the following quote which indicates to me that since my account is a Vanguard one, there's no need for me to switch from VTSAX to the matching ETF:
http://www.bogleheads.org/wiki/ETFs_vs_mutual_funds

Quote
Vanguard funds

Vanguard ETFs are structured as another share class of a mutual fund, like Admiral or Investor shares. This is a process unique to Vanguard, protected by a patent until 2023, with two important consequences for the mutual fund investor:
Tax efficiency: the mutual fund shares benefit from the disposition of capital gains through ETF shares, making Vanguard funds with ETF share classes as efficient as an ETF.
Conversion: mutual fund shares can be converted to ETF shares without a taxable event. This helps when transferring assets to another broker, including charitable donations. Conversion in the other direction is not possible.
The second point is an argument to start with mutual fund shares, if unsure. One can always convert to ETF later if needed.
To find out whether a mutual fund has ETF shares, visit the fund page on vanguard.com and look for "Also available as an ETF". Most or all index funds do have ETF shares and benefit from the above considerations. In addition, the Admiral shares of index funds generally have the same expense ratios as the ETF shares, which are themselves competitively priced in the ETF market, so if Admiral shares are available and one meets the required minimum (usually $10,000), there is no fee advantage for using ETFs.

milesdividendmd

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #12 on: June 12, 2014, 01:45:16 PM »
One tax-shelter not mentioned yet is arguably the most powerful tax shelter, the health savings account. Do you have access to a high deductible health plan through either your or your wife's work?

HSA's have the advantage of pretax contributions which are even sheltered from FICA taxes, tax-free growth, and untaxed withdrawals if the withdrawals are used for healthcare expenses.

If you have access to this, that will be another $6550 year of tax sheltered income at your disposal.

Assuming you do not have the option of an HSA, I like this resource for looking at the best offerings of many different fund types, including tax efficient funds.

http://www.altruistfa.com/dfavanguard.htm

Enjoy.




« Last Edit: June 12, 2014, 01:58:05 PM by milesdividendmd »

gimp

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #13 on: June 12, 2014, 02:33:52 PM »
Totally agree with miles. I get to put $3300 a year for myself, and my employer actually contributes a small but noticeable portion of that (enough of a contribution to cover my entire health + dental insurance.) And it's tax free, all the way, as long as I use it for something related to health. I figure it'll be needed x years down the road...

Scandium

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #14 on: June 12, 2014, 04:08:45 PM »
JPECX has an ER of 1.46%!? holyshit. With no math whatsoever I'll just guess that any loss due to taxes (if that's even true) will be more than offset by those insane fees.

Everything in VTI, ER=0.05%. Done

WorkingToBeFIREd

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Re: Need advice - max'd out in usual suspects, what to invest in next?
« Reply #15 on: June 13, 2014, 09:20:18 AM »
Thanks again guys - totally awesome advice, although why would I expect anything else?  :)

@ADK_junkie, jfer_rose, Ivyhedge - I think this is where that "creative" adviser was going with potential tax exposure - that rebalancing could trigger a taxable event outside of dividends.  Based on the Vanguard article jfer_rose linked to, it sounds like it would make sense to start with the mutual fund VTSAX, as I can roll that over to an ETF if needed, but not the other way.  I would be going with Admiral shares at the onset as well.

@Ivyhedge - Thanks for the tip on I-bonds.  Did some Googling last night, as I hadn't come across them before.  Will need to spend some more time reading, but more options are always good!

@milesdividendmd, gimp - Great callout.  My wife has an FSA that we contributed to previously as we knew there was some upcoming expensive oral surgery in the next year, but outside of situations like that, we tend not to have a lot of medical expenses per year (knock on wood) - it's just the two of us with no kids, and we're both reasonably healthy.  My current job covers our health benefits, and her job pays out if she doesn't take the health care plan.  All of that would obviously change when we get FIRE'd and have to pick up the tab ourselves.

@Scandium - Yeah, exactly.  I wouldn't have a problem paying more if they were crushing Vanguard's performance, but they are basically at parity....I just get to pay 30x more fees.  I've started digging into fees in some of our other investments with our usual adviser, and I've been facepunching myself all night.  I'm going to be having a chat with that guy ASAP about reallocation.

I appreciate the unbiased advice, and am looking forward to making our hard-earned greenbacks work harder for us for a change.  For a portfolio mix, my initial thoughts were 70% VTSAX Total Stock Market, 20% VGSLX REIT Index, and 10% VBTLX Total Bond Index...any feedback?

Thanks again....


milesdividendmd

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #16 on: June 13, 2014, 09:55:13 AM »

Thanks again guys - totally awesome advice, although why would I expect anything else?  :)

@ADK_junkie, jfer_rose, Ivyhedge - I think this is where that "creative" adviser was going with potential tax exposure - that rebalancing could trigger a taxable event outside of dividends.  Based on the Vanguard article jfer_rose linked to, it sounds like it would make sense to start with the mutual fund VTSAX, as I can roll that over to an ETF if needed, but not the other way.  I would be going with Admiral shares at the onset as well.

@Ivyhedge - Thanks for the tip on I-bonds.  Did some Googling last night, as I hadn't come across them before.  Will need to spend some more time reading, but more options are always good!

@milesdividendmd, gimp - Great callout.  My wife has an FSA that we contributed to previously as we knew there was some upcoming expensive oral surgery in the next year, but outside of situations like that, we tend not to have a lot of medical expenses per year (knock on wood) - it's just the two of us with no kids, and we're both reasonably healthy.  My current job covers our health benefits, and her job pays out if she doesn't take the health care plan.  All of that would obviously change when we get FIRE'd and have to pick up the tab ourselves.

@Scandium - Yeah, exactly.  I wouldn't have a problem paying more if they were crushing Vanguard's performance, but they are basically at parity....I just get to pay 30x more fees.  I've started digging into fees in some of our other investments with our usual adviser, and I've been facepunching myself all night.  I'm going to be having a chat with that guy ASAP about reallocation.

I appreciate the unbiased advice, and am looking forward to making our hard-earned greenbacks work harder for us for a change.  For a portfolio mix, my initial thoughts were 70% VTSAX Total Stock Market, 20% VGSLX REIT Index, and 10% VBTLX Total Bond Index...any feedback?

Thanks again....

Having good health makes an HSA doubly rewarding.

In fact to get full value from an HSA, you should use it as a "stealth IRA."

In other words you should never use it to pay for medical expenses until you need the money in retirement.

For more see here:

http://whitecoatinvestor.com/retirement-accounts/the-stealth-ira/

I would recommend looking into your options prior to next years open enrollment.

Good luck.



shuffler

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #17 on: June 14, 2014, 12:08:00 AM »
I can't find any other pre-tax ways to contribute to our retirement ...

Maybe your employer's 401k offers after-tax contributions that can be rolled to Roth?
It's not pre-tax, but it's still tax-advantaged.

http://forum.mrmoneymustache.com/investor-alley/after-max-401k-and-roth-ira-what-to-do-next/msg277728/#msg277728

WorkingToBeFIREd

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #18 on: June 14, 2014, 04:05:57 AM »
Thanks Shuffler - hadn't thought of that before.  My primary employer 401k doesn't have enough overall participants, so I get handed back contributions every year.  This past year, I setup a separate 401k for a side business I have and was able to roll the refund back into that, as well as pay in additional funds as profit sharing.  Would after tax 401k contributions still fall under max Roth contributions intra year?  We currently do the "back door Roth" trick via a traditional IRA converted each year to get the max contribution in (we phased out completely on income for direct contributions).

MilesDividendMD - thanks for the link.  I checked it out, as well as that site's recommendation for a provider with Vanguard funds, but it sounds like I can't set this up separately unless I don't currently have health insurance.  I will check our employer options to see if there's anything offered that might work for us.

Any additional feedback on Vanguard portfolio mix?

Thanks again!




milesdividendmd

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Need advise - max'd out in usual suspects, what to invest in next?
« Reply #19 on: June 14, 2014, 09:46:29 AM »
I think your portfolio's makeup is very reasonable for an aggressive allocation simple domestic portfolio.

The only quibble that I have with it is that there is a very high REIT allocation.

I think of REITs as weak stocks with big dividends. Their diversification benefits are shrinking. So I try to keep my REIT allocation at 10% or less to reflect real estate's tole in the larger economy.

This is arguable and very much splitting hairs. So I would say go for it.




« Last Edit: June 14, 2014, 09:53:20 AM by milesdividendmd »

Psychstache

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #20 on: June 14, 2014, 12:20:24 PM »
given that your wife has a 403b i assume she works for some part of the government. Does she have access to a 457? That would be another 17.5K to shelter and no hoops to jump through to get access once she leaves the job.

shuffler

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #21 on: June 14, 2014, 10:36:32 PM »
Would after tax 401k contributions still fall under max Roth contributions intra year?
No, it wouldn't.  The limit you're talking about is the limit on IRA contributions, and has no bearing on 401k contribution limits.

Your post-tax 401k contributions would be limited by the "Overall Limit on Contribution" of $52k (which is different than the the "Deferral Limits" of $17.5k that most people think of when they think of 401k's).

http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics---401(k)-and-Profit-Sharing-Plan-Contribution-Limits

Will

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Re: Need advice - max'd out in usual suspects, what to invest in next?
« Reply #22 on: June 15, 2014, 12:28:02 AM »

I appreciate the unbiased advice, and am looking forward to making our hard-earned greenbacks work harder for us for a change.  For a portfolio mix, my initial thoughts were 70% VTSAX Total Stock Market, 20% VGSLX REIT Index, and 10% VBTLX Total Bond Index...any feedback?

Thanks again....

Perhaps I missed it, but is there a reason why you aren't going more into international?  Is it because of the international exposure you are getting from within VTSAX?  Even if that is the case, I would cut back some on the REIT and add some to international and/or emerging markets.

And +1 to the ibonds suggestion.

WorkingToBeFIREd

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #23 on: June 19, 2014, 07:24:49 AM »
@ksaleh - My wife is a school teacher, so quasi-government? :)  I'm not sure if she has that option or not, but based on some reading it looks like she'd still be held to the maximum total contribution between 403b and 457 of $17,500?  We max out her 403b currently each year.

@shuffler - You're right; fingers didn't type what the brain was thinking!  I was looking at deferral limits for the 401k, but now I understand I might be able to add more contributions post-tax up to $52K.  After spending some time over the last few days looking at fund options in my 401k (more on that in a new thread), it looks like the lowest ER fund is 0.7%.  I'm still trying to get my head wrapped around "tax advantaged" - assuming I pay tax on the funds before pushing them back into the 401K, would the advantage be tax-deferral on the gains?

@Will - Great catch.  I just put the Bogleheads book on hold at the library and will do more reading, but was missing an international component (I don't believe VTSAX has much international exposure).  I'm looking at changing up the allocation based on a slight variant "Core Four" portfolio:
  • VTSAX Total Stock Index - 50%
  • VTIAX International Stock Index - 25%
  • VBTLX Total Bond Index - 15%
  • VGSLX REIT Index - 10%

Any additional feedback or insight is greatly appreciated!

milesdividendmd

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #24 on: June 19, 2014, 11:27:11 AM »

@ksaleh - My wife is a school teacher, so quasi-government? :)  I'm not sure if she has that option or not, but based on some reading it looks like she'd still be held to the maximum total contribution between 403b and 457 of $17,500?  We max out her 403b currently each year.

@shuffler - You're right; fingers didn't type what the brain was thinking!  I was looking at deferral limits for the 401k, but now I understand I might be able to add more contributions post-tax up to $52K.  After spending some time over the last few days looking at fund options in my 401k (more on that in a new thread), it looks like the lowest ER fund is 0.7%.  I'm still trying to get my head wrapped around "tax advantaged" - assuming I pay tax on the funds before pushing them back into the 401K, would the advantage be tax-deferral on the gains?

@Will - Great catch.  I just put the Bogleheads book on hold at the library and will do more reading, but was missing an international component (I don't believe VTSAX has much international exposure).  I'm looking at changing up the allocation based on a slight variant "Core Four" portfolio:
  • VTSAX Total Stock Index - 50%
  • VTIAX International Stock Index - 25%
  • VBTLX Total Bond Index - 15%
  • VGSLX REIT Index - 10%

Any additional feedback or insight is greatly appreciated!

There is nothing wrong with Core Four.

A classic!



gimp

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #25 on: June 19, 2014, 04:34:16 PM »
401k means you don't pay tax today on the money you put in, and you don't pay tax on the money as it grows, but you do pay tax once you withdraw money - it gets added onto your income.

Also a 0.7% ER is pretty expensive. 0.07% is much better. Are you sure there is no way to get lower than 0.7%? Maybe something similar to Schwab's PCRA, where you get access to just about any fund you want, at the cost of having to deal with it yourself?

shuffler

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #26 on: June 19, 2014, 11:27:12 PM »
"tax advantaged" - assuming I pay tax on the funds before pushing them back into the 401K, would the advantage be tax-deferral on the gains?
Yes, that's what a Roth 401k would do.  The tax treatment is similar to the Roth IRA, which is why (I assume) they share the "Roth" name.
The way it works for me (and I probably already said this in the thread(s) I linked) is that I make after-tax contributions to my traditional 401k, and then I do an in-service roll-over of only those after-tax contributions to the Roth 401k.  From that point on, the growth on those funds is tax-free.  The key is that your company's 401k needs to both allow for after-tax contributions, and have a Roth 401k component to their overall plan.  Not all 401k plans support these features.

401k means you don't pay tax today on the money you put in, and you don't pay tax on the money as it grows, but you do pay tax once you withdraw money - it gets added onto your income.
That's true for the tax treatment of a traditional 401k.
A Roth 401k is different.

WorkingToBeFIREd

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #27 on: June 20, 2014, 06:56:32 AM »
@gimp - Agreed!  Most of the 401k funds are not great on ER.  I've got a separate thread going specifically on that where it will show rate of return and ER for all funds available, as well as how I'm allocated today.  I'll look into it, but I don't think I've got a lot of options to change up the 401k...we also don't get matching either.  :(  My 401k thread is here:

http://forum.mrmoneymustache.com/investor-alley/reallocate-my-401k-for-lower-expenses/

@shuffler - Thank you...that helps.  I don't believe we have a Roth 401k component as part of our plan, but will double check to make sure.  That would be a nice trick if our plan supports the after-tax contributions and has a Roth component, but given the nature of our plan through ADP, I'm not optimistic.

Thanks all for the help!

CorpRaider

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #28 on: June 20, 2014, 09:21:35 AM »
You should do more DD on the 457 plan.  The $17500 annual cap for the 457 is not impacted by 401K or 403(b) contributions.  For a quick primer/example, Rootofgood has some info about his use of all three plans on his blog. Look for the tax focused post in his most popular posts.   

EDIT:  Here's a link to the post I was referencing.  His summary of the interaction of the contribution limits is correct, from what I've been able to determine.  There's a publication on the IRS website if you need something with a little more authority.

http://rootofgood.com/make-six-figure-income-pay-no-tax/

After that, if you have kids, you could look into a 529 plan.
« Last Edit: June 23, 2014, 09:15:10 AM by CorpRaider »

WorkingToBeFIREd

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Re: Need advise - max'd out in usual suspects, what to invest in next?
« Reply #29 on: July 10, 2014, 06:07:47 AM »
Thanks CorpRaider - I've asked my wife to check with her benefits person on the availability of a 457 plan.  I haven't seen that as an option, but definitely worth checking to see if it's available and (if so) will max it out.  I'm also going to see if an HSA is available through her work health plan, but believe that may not be the case.  We are DINKs, so no option for a 529 plan.

A few other updates on the tax-deferred accounts:
  • Spoke with my 401K plan administrator (ADP) and although those E/R rates are real (none of which are great), at least the front end loads are waived.
  • On my 401K plan, there is no option for after-tax or Roth 401K contributions.
  • Trying to track down my wife's 403b plan advisor so we can confirm F/E loads are also waived in her plan, as well as reallocate to lower E/R funds (queue facepunching)
I also went ahead and opened a Vanguard account with the cash we had been stupidly hoarding in a craptastic bank money market account earning a whopping 0.45%.  It's basically a "Core Four" portfolio consisting of:
  • VTSAX Total Stock Index - 55%
  • VTIAX International Stock Index - 20%
  • VBTLX Total Bond Index - 15%
  • VGSLX REIT Index - 10%
I agonized over 5% here and there in the allocation before finally just saying "f*** it" and pressing the submit key.  A few points either way in the grand scheme of things probably won't mean much.

Thanks to all for motivating me to improve my Mustachiness!  :)