Author Topic: Shakin' up my Investments - appreciate some input on my plan  (Read 3540 times)

pirate_wench

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Looking for input on my plan to shake up my savings plan, with the goal of lowering expense ratios and to retire in 10 years or less:

I've always used the Lifecycle/Target Date Retirement Funds, as I didn't know better, and maybe I still don't know any better, but have become obsessed with expense ratios

What I have right now is the following (rounded slightly):

401(k) -    $89,900 Fidelity Freedom 2040 (FFKFX) Expense Ratio .68%  Average yearly contribution: $8,000
Roth IRA - $69,500 Fidelity Freedom 2040 (FFFFX) Expense Ratio .81%  Max out yearly contribution: $5,500
Generic Retirement Fund - $ 43,600 Vanguard Total Stock Market Admiral (0085) Expense Ratio .05%, avg yearly contribution $2000
Taxable Account - $19,000 Vanguard Total Stock Market Admiral (0085) Expense Ratio .05%, plan on $12,000/year savings
Cash - $81,000 that I've been too afraid to invest yet....

Total Investments/cash: $303000
Total approximate yearly investments:$27,500

So with my 401(k), I have to stick with Fidelity, but upon advice from awesome Mustachians, I see that I have two spartan options, the SPTN 500 INDEX INST (FXSIX) Expense Ratio .05% and the SPTN EXT MKT IDX ADV (FSEVX) with a .07% expense ratio.


So my thinking is that the taxable account has a shorter time horizon, so should be a less volatile mix of stocks/bonds, whereas the retirement accounts will be used last, so can be invested more heavily in the stock market. 

The following is my plan so far (after much beating my head against the wall):

401(K) - Fidelity Spartan 500 Index Fund = $89,900 in STOCK + $8,000/yr
Roth IRA - Rollover to Vanguard Total Stock Market Admiral = $69,500 + $5,500/yr STOCK
Generic Ret. Account - Keep at Vanguard Total Stock Market Admiral = $43,600 + $2,000/yr STOCK
Taxable Account - Move to Vanguard Balanced Fund (VBIAX) = $100,000 (60/40 stock/bond) + $12,000/yr

The totals for right now would equal a portfolio that is about 13.2% Bond, and 86.8% Stock, with expense ratios .09% or lower. If I don't account for the ups and downs of the market and dividends, then the balance moves very slightly to more bonds, less stocks with the above contributions, but I can't really guess how it would go exactly. I don't want to get too complicated by introducing international stocks/bonds, otherwise I would just go to the Target Retirement date funds which do that for me. Vanguards' equivalent to what I have right now has a .18% expense ration, still vastly below Fidelity's...I am open to that idea as it is simplest in my opinion...

Any input on the above plan?  Any general advice on other options? Sorry, I can't figure out how to be more concise...

Thanks in advance.

timmoney

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Re: Shakin' up my Investments - appreciate some input on my plan
« Reply #1 on: May 08, 2014, 04:06:35 PM »
I would include municipalbonds

Eric

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Re: Shakin' up my Investments - appreciate some input on my plan
« Reply #2 on: May 08, 2014, 04:33:05 PM »
What's a Generic Retirement Fund and how does that differ from your regular taxable account?

You ready for something else to consider? Your proposed allocations are not very tax efficient.  It's better to hold bonds in your tax advantaged accounts.

http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement

Also, invest your non-emergency fund cash already!

pirate_wench

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Re: Shakin' up my Investments - appreciate some input on my plan
« Reply #3 on: May 08, 2014, 05:03:32 PM »
What's a Generic Retirement Fund and how does that differ from your regular taxable account?

You ready for something else to consider? Your proposed allocations are not very tax efficient.  It's better to hold bonds in your tax advantaged accounts.

http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement

Also, invest your non-emergency fund cash already!


Eric -

The Generic Retirement Account is through my pension plan, though it is something in addition to a traditional monthly pension. It's called the "My Union's Name Individual Retirement Account Plan" (So far I don't count the traditional monthly pension, because I don't want to work until I'm 55+ and I have no way of knowing what it will be)  I don't completely understand this fund, but I get to self-direct how it's invested through an assortment of Vanguard options, I'm vested so I'm counting it, and it is tax-deferred. It is NOT my 401(K), which I also have, and it's not a traditional IRA even though the name sounds similar. I don't contribute to it at all, my employers do. So yes, anyway, I have three different tax-deferred retirement accounts, two of which I directly contribute to, and only one of which my employers contribute to, and one taxable account that I recently opened.

I happened into about $100,000 cash recently, like about two months ago when I sold my condo, so it hasn't been sitting around long. This is a big part of why I'm reaching out trying to get my shite together, because to me that is a huge sum of money to willy nilly dump in some random investment all at once. I figured I'd get all my ducks in a row into some sort of cohesive plan :)

Thanks for the link and the input. Hope this clarifies some things.

brewer12345

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Re: Shakin' up my Investments - appreciate some input on my plan
« Reply #4 on: May 08, 2014, 05:45:35 PM »
I would say your proposed allocations are extremely aggressive and not well diversified.  I think that big picture you would be better off with no more than 80% equities and even that is a little stretched.  I also would urge you to reconsider international equities.  If I were to set up a portfolio like this, t would be 75% equities (tops), 1/3 international and 2/3 domestic.

I have chosen to have a lower volatility portfolio for taxable and pay the taxes simply because that is what is getting tapped first.  It is a trade-off.  If you want to do it this way, I would not use a balanced fund for the taxable account.  A much better choice would be a mix of foreign equity, domestic equity and maybe some medium term munis if your tax bracket is high enough to warrant it.  The reason to keep things separate and rebalance yourself is that there are a lot of potentially advantageous tax fiddles you can engage in that will lower your tax exposure.  You also have more control over what taxable gains you realize in which years.  By jumping in with a balanced fund you lose that discretion.

timmoney

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Re: Shakin' up my Investments - appreciate some input on my plan
« Reply #5 on: May 08, 2014, 11:28:29 PM »
Another to consider is your age. The rule of thumb is your bond allocation should be equal to your age but really that's a personal choice. Some might consider that to conservative

hodedofome

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Re: Shakin' up my Investments - appreciate some input on my plan
« Reply #6 on: May 09, 2014, 08:08:25 AM »
If you wanted to have the equivalent of the Vanguard Total Stock Market fund in your 401k, then you would combine the S&P 500 fund with the Extended Market fund. I believe the ratio is about 75% S&P 500 and 25% Extended Market, and you would want to rebalance annually.