Newly FIREd, moving assets around

[Parizade]

This is a continuation of another thread I started
Help me invest my HSA

I officially retired on June 21 and started collecting social security (will get my first payment next month). My COL is so low I can comfortably live off SS and let my 'stache grow. I also have an emergency savings account equal to one year of SS payments. and a few thousand cash in my HSA that is not invested.

My current portfolio allocation is:
25% Stock from former employer purchased through the options program
10% IRA invested in FFFDX
59% 401k invested in WFLPX
6% HSA invested in VFIAX and VTSAX

My plan for this year is:
Sell employer stock and invest in VTIAX
Move 401K to IRA and invest the combined in VBTLX and VTSAX
Move my emergency savings into a high interest account at Fidellity.

If I do the above, my portfolio allocation will look like this:
25%   VTIAX (taxable)
38%   VBTLX (IRA)
33%   VTSAX (IRA and HSA)
3%   VFIAX (HSA)

Next year I will start moving my IRA into a Roth IRA, a little every year to keep taxes low and avoid mandatory withdrawals when  I turn 70.

Does this look like a sound plan? Are there additional considerations I'm overlooking? thanks in advance for the perennially good advice.

[EvenSteven]

Thumbs up and congratulations!

[insufFIcientfunds]

Your plan sounds like a really good one! I'm currently moving my asset allocation to something similar.

On the savings - I have an HSBC online savings and it's been great. Years ago it was offering 5%. It's not as great now, but it's still 2.3% and I am happy with that. I was worried about ease of getting money in and out when I started it, but it really is a breeze. I need money, it takes a day or two, and it's in my local credit union account.

I've thought about splitting my reserve into a short term reserve and a mid/longer term reserve. Keeping the short in HSBC and mid/long is something like brokered CDs. I have not done that yet because of the HSBC interest rate.

Congrats!

[smoghat]

What will you really get out of that bond fund? I put some money in there in 2016 and it has been a drag on my portfolio ever since. I literally get better returns at the local bank (2% at present savings, 2.7% CD) and I don’t see VBTLX ever catching fire. I am highly skeptical of seeking alpha and it’s Russian minders, but this is a decent assessment.

https://seekingalpha.com/article/4251090-vanguard-bond-fund-road-nowhere

[Parizade]

What will you really get out of that bond fund? I put some money in there in 2016 and it has been a drag on my portfolio ever since. I literally get better returns at the local bank (2% at present savings, 2.7% CD) and I don’t see VBTLX ever catching fire. I am highly skeptical of seeking alpha and it’s Russian minders, but this is a decent assessment.

https://seekingalpha.com/article/4251090-vanguard-bond-fund-road-nowhere

I see your point, maybe AGG is a better choice?

@insufFIcientfunds, all my accounts are with Fidelity now (employer choice) so I'm going to stay there and use their new HI savings account option for my emergency fund.

Thanks @Even Steven, I appreciate the congrats and encouragement

[Financial.Velociraptor]

If you are happy living off your SS, it hardly matters if you optimize the rest perfectly.  And your plan is perfectly reasonable.  Congrats on having made it.

[MustacheAndaHalf]

My advice is don't optimize the bonds much.  The purpose of bonds isn't performance - it's to be there when stocks take a hit.  While the current financial news can't predict the next recession - it will arrive one day.  It's better to have bonds when that day arrives, so you can take withdrawls from the bonds - and rebalance into stocks at the low point.

Without knowing your age, I don't know how many years you have until age 70.  Nor the value of your 401(k).  And your 401(k) will grow between now and age 70, so you'll have to take out slightly more than you'd expect from straight division.  Once you have a rough number of how much you're moving into an IRA each year, you can figure out the tax implications.

I think there's also a point where income - or Roth conversions - would impact how your social security gets taxed.  But I'm not familiar with the details (someone in the "Tax" section of the forum should know).

[Parizade]

Thank you @Financial.Velociraptor!

@MustacheAndaHalf, on my first thread @MDM gave me the link to a spreadsheet I can use to figure out a lot of that stuff. It hasn't made it to the top of my priority list because I can't open a Roth until next year, but as we are now in the last half of 2019 it will become a priority soon.

Big thanks to all who have replied to my investment question threads. I used to get anxiety attacks at the thought of balancing my checkbook, now I look forward to rebalancing my portfolio. Your patient and thoughtful advice have made this money management thing actually FUN!

[smoghat]

Yes but then why not just get a savings account that delivers 2%? Bonds made sense in the past, huge amounts of sense in some cases (imagine if you had some juicy thirty year 25% bonds from the 1980s...), but now they deliver poor performance and will *lose money* during a recession (just check out the mini-correction from last December) so why bother with them?

My advice is don't optimize the bonds much.  The purpose of bonds isn't performance - it's to be there when stocks take a hit.  While the current financial news can't predict the next recession - it will arrive one day.  It's better to have bonds when that day arrives, so you can take withdrawls from the bonds - and rebalance into stocks at the low point. There are plenty of savings accounts and CDs that offer similar performance with less risk.

Without knowing your age, I don't know how many years you have until age 70.  Nor the value of your 401(k).  And your 401(k) will grow between now and age 70, so you'll have to take out slightly more than you'd expect from straight division.  Once you have a rough number of how much you're moving into an IRA each year, you can figure out the tax implications.

I think there's also a point where income - or Roth conversions - would impact how your social security gets taxed.  But I'm not familiar with the details (someone in the "Tax" section of the forum should know).