Hi all. I hope I have everything organized properly below. Appreciate your thoughts and advice.
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Emergency funds: Yes, not included in assets below
Debt: No debt, own my home
Tax Filing Status: Single, no children
Tax Rate: 24% Federal, 3.07% State
State of Residence: PA
Age: 47
Desired Asset allocation: 60% stocks / 40% bonds; +/-10% seems reasonable to me (50-70% stock and 30-50% bonds) though I like more conservative at start of retirement (60/40 or 50/50).
Desired International allocation: 20-25% of stocks
Total Portfolio: about 2 million without house, house worth about 225k
Taxable
3% vanguard federal money market (VMFXX), 0.11%
2% state street S&P 500 index (SVSPX), 0.16%
37.5% vanguard total stock market index (VTSAX), 0.04%
401k at Fidelity
14% State Street Global All Cap Equity Ex-U.S. Index Securities Lending Series Fund Class II (similar to SSGLX), 0.045%
13% State Street U.S. Bond Index Securities Lending Series Fund Class XIV (similar to SSFEX), 0.02%
1% State Street S&P 500 Index Securities Lending Series Fund Class II (similar to SSEYX), 0.01%; Note this is after-tax contribution that needs moved to Roth IRA.
Company match: 50% of first 6% plus 5% fixed contribution, 8% total
Roth IRA at Vanguard
7% vanguard total bond market index (VBTLX) (0.05%)
4% vanguard total stock market index (VTSAX) (0.04%)
Rollover IRA at Vanguard
17.5% vanguard total bond market index (VBTLX) (0.05%)
HSA at Schwab
1% Schwab Bond Index (SWAGX), 0.04%
New annual Contributions
$36k to pretax 401k (max 23k plus about 13k employer)
$8k to after tax 401k (hit max allowed by plan) and convert to Roth IRA. Plan allows 2 in service conversions per year. No in plan conversion to Roth 401k. This year it looks like I exceeded income limits for Roth IRA contribution, last few years I could make reduced contributions.
$7k to rollover IRA, but see question…
$4k to HSA. I don’t use for medical expenses, just for investing.
$40k taxable
Funds available in his 401(k)
GQG Partners International Equity CIT Class D (similar to GSIMX), 0.63%
State Street Global All Cap Equity Ex-U.S. Index Securities Lending Series Fund Class II (similar to SSGLX), 0.045%
State Street Russell Small/Mid Cap Index Securities Lending Series Fund Class II (similar to SSMHX), 0.02%
State Street S&P 500 Index Securities Lending Series Fund Class II (similar to SSEYX), 0.01%
Vanguard Target 2020, (similar to VTWNX), 0.065%
Vanguard Target 2025, (similar to VTTVX), 0.065%
Vanguard Target 2030, (similar to VTHRX), 0.065%
Vanguard Target 2035, (similar to VTTHX), 0.065%
Vanguard Target 2040, (similar to VFORX), 0.065%
Vanguard Target 2045, (similar to VTIVX), 0.065%
Vanguard Target 2050, (similar to VFIFX), 0.065%
Vanguard Target 2055, (similar to VFFVX), 0.065%
Vanguard Target 2060, (similar to VTTSX), 0.065%
Vanguard Target 2065, (similar to VLXVX), 0.065%
Vanguard Target 2070, (similar to VSVNX), 0.065%
Vanguard Target Income, (similar to VTINX), 0.065%
Morley Stable Value Fund Class 15 – III (ticker ??), 0.35%
Baird Aggregate Bond Fund Class Institutional (BAGIX), 0.30%
State Street U.S. Bond Index Securities Lending Series Fund Class XIV (similar to SSFEX), 0.02%
State Street U.S. Inflation Protected Bond Index Securities Lending Series Fund Class II (ticker ??), 0.04%
Fidelity BrokerageLink is also available.
Questions:
1. I just contributed 2023 and 2024 non-deductible contributions to my rollover IRA, but I’m now thinking that is probably not a good idea since it otherwise consists of pretax funds so backdoor Roth doesn’t make sense. Should I just use funds available for this in taxable accounts instead? Can and should I try to reverse these contributions? I haven’t filed taxes yet.
2. 401k plan is with Fidelity. I was thinking of opening a Roth IRA there so it would be easier to convert after-tax 401k contributions. Is this a bad idea for any reason other than having an extra account at another institution?
3. Should I work to get out of SVSPX? It has significant year end long term capital gains (usually 5-6k). I don’t reinvest the dividends or the capital gains so not making it worse at least. I do have about 17k in long term gains from stock price increase that would be taxable.
4. My biggest question is what to do with new contributions to prepare for early retirement? I would expect this to be in 5 to 8 years (age 52 to 55). It seems I can mostly prepare using new contributions instead of changing existing holdings. Though as I add to bonds in 401k I’m thinking I will switch bonds in the HSA and Roth IRA to stock index fund as long as overall asset allocation in on target. Mainly, I want to minimize the risk of drawing down stock holdings before 59.5 in case of any significant market declines. I’m also thinking I’d probably like to buy/build a new house around age 60, but would have flexibility on that depending on market returns and available assets. I’ve thought of a few options:
•Simplest would be to work to 55 and plan to use the rule of 55 where I would both accumulate more funds by working longer and have more flexibility of which funds to pull from (access to 401k without 10% penalty) so getting to 59.5 without much impact on taxable account seems very likely. In this scenario I would probably just add to taxable VTSAX holdings and add to tax advantaged in bonds. However, I feel like I should be able to retire sooner than that if desired. I’m estimating 60k per year in expenses which would include health care (ACA or private insurance for myself).
•Use new taxable contributions to buy about 200k worth of treasury notes over the next 5 years that mature between age 52 and 55. That, plus emergency fund, plus interest and dividends on taxable funds would get me close to 59.5 and insulate from market downturn. Though I guess this would add to federal taxable income.
•Work part time to cover some or all expenses. This seems less flexible, less certain, and could impact Roth conversions I would probably do once I stop working. Probably least interested in this option. Maybe I will work part time, but don’t like using it as my strategy, just a bonus if I want to.
-------------------------------------------
-------------------------------------------
Emergency funds: Yes, not included in assets below
Debt: No debt, own my home
Tax Filing Status: Single, no children
Tax Rate: 24% Federal, 3.07% State
State of Residence: PA
Age: 47
Desired Asset allocation: 60% stocks / 40% bonds; +/-10% seems reasonable to me (50-70% stock and 30-50% bonds) though I like more conservative at start of retirement (60/40 or 50/50).
Desired International allocation: 20-25% of stocks
Total Portfolio: about 2 million without house, house worth about 225k
Taxable
3% vanguard federal money market (VMFXX), 0.11%
2% state street S&P 500 index (SVSPX), 0.16%
37.5% vanguard total stock market index (VTSAX), 0.04%
401k at Fidelity
14% State Street Global All Cap Equity Ex-U.S. Index Securities Lending Series Fund Class II (similar to SSGLX), 0.045%
13% State Street U.S. Bond Index Securities Lending Series Fund Class XIV (similar to SSFEX), 0.02%
1% State Street S&P 500 Index Securities Lending Series Fund Class II (similar to SSEYX), 0.01%; Note this is after-tax contribution that needs moved to Roth IRA.
Company match: 50% of first 6% plus 5% fixed contribution, 8% total
Roth IRA at Vanguard
7% vanguard total bond market index (VBTLX) (0.05%)
4% vanguard total stock market index (VTSAX) (0.04%)
Rollover IRA at Vanguard
17.5% vanguard total bond market index (VBTLX) (0.05%)
HSA at Schwab
1% Schwab Bond Index (SWAGX), 0.04%
New annual Contributions
$36k to pretax 401k (max 23k plus about 13k employer)
$8k to after tax 401k (hit max allowed by plan) and convert to Roth IRA. Plan allows 2 in service conversions per year. No in plan conversion to Roth 401k. This year it looks like I exceeded income limits for Roth IRA contribution, last few years I could make reduced contributions.
$7k to rollover IRA, but see question…
$4k to HSA. I don’t use for medical expenses, just for investing.
$40k taxable
Funds available in his 401(k)
GQG Partners International Equity CIT Class D (similar to GSIMX), 0.63%
State Street Global All Cap Equity Ex-U.S. Index Securities Lending Series Fund Class II (similar to SSGLX), 0.045%
State Street Russell Small/Mid Cap Index Securities Lending Series Fund Class II (similar to SSMHX), 0.02%
State Street S&P 500 Index Securities Lending Series Fund Class II (similar to SSEYX), 0.01%
Vanguard Target 2020, (similar to VTWNX), 0.065%
Vanguard Target 2025, (similar to VTTVX), 0.065%
Vanguard Target 2030, (similar to VTHRX), 0.065%
Vanguard Target 2035, (similar to VTTHX), 0.065%
Vanguard Target 2040, (similar to VFORX), 0.065%
Vanguard Target 2045, (similar to VTIVX), 0.065%
Vanguard Target 2050, (similar to VFIFX), 0.065%
Vanguard Target 2055, (similar to VFFVX), 0.065%
Vanguard Target 2060, (similar to VTTSX), 0.065%
Vanguard Target 2065, (similar to VLXVX), 0.065%
Vanguard Target 2070, (similar to VSVNX), 0.065%
Vanguard Target Income, (similar to VTINX), 0.065%
Morley Stable Value Fund Class 15 – III (ticker ??), 0.35%
Baird Aggregate Bond Fund Class Institutional (BAGIX), 0.30%
State Street U.S. Bond Index Securities Lending Series Fund Class XIV (similar to SSFEX), 0.02%
State Street U.S. Inflation Protected Bond Index Securities Lending Series Fund Class II (ticker ??), 0.04%
Fidelity BrokerageLink is also available.
Questions:
1. I just contributed 2023 and 2024 non-deductible contributions to my rollover IRA, but I’m now thinking that is probably not a good idea since it otherwise consists of pretax funds so backdoor Roth doesn’t make sense. Should I just use funds available for this in taxable accounts instead? Can and should I try to reverse these contributions? I haven’t filed taxes yet.
2. 401k plan is with Fidelity. I was thinking of opening a Roth IRA there so it would be easier to convert after-tax 401k contributions. Is this a bad idea for any reason other than having an extra account at another institution?
3. Should I work to get out of SVSPX? It has significant year end long term capital gains (usually 5-6k). I don’t reinvest the dividends or the capital gains so not making it worse at least. I do have about 17k in long term gains from stock price increase that would be taxable.
4. My biggest question is what to do with new contributions to prepare for early retirement? I would expect this to be in 5 to 8 years (age 52 to 55). It seems I can mostly prepare using new contributions instead of changing existing holdings. Though as I add to bonds in 401k I’m thinking I will switch bonds in the HSA and Roth IRA to stock index fund as long as overall asset allocation in on target. Mainly, I want to minimize the risk of drawing down stock holdings before 59.5 in case of any significant market declines. I’m also thinking I’d probably like to buy/build a new house around age 60, but would have flexibility on that depending on market returns and available assets. I’ve thought of a few options:
•Simplest would be to work to 55 and plan to use the rule of 55 where I would both accumulate more funds by working longer and have more flexibility of which funds to pull from (access to 401k without 10% penalty) so getting to 59.5 without much impact on taxable account seems very likely. In this scenario I would probably just add to taxable VTSAX holdings and add to tax advantaged in bonds. However, I feel like I should be able to retire sooner than that if desired. I’m estimating 60k per year in expenses which would include health care (ACA or private insurance for myself).
•Use new taxable contributions to buy about 200k worth of treasury notes over the next 5 years that mature between age 52 and 55. That, plus emergency fund, plus interest and dividends on taxable funds would get me close to 59.5 and insulate from market downturn. Though I guess this would add to federal taxable income.
•Work part time to cover some or all expenses. This seems less flexible, less certain, and could impact Roth conversions I would probably do once I stop working. Probably least interested in this option. Maybe I will work part time, but don’t like using it as my strategy, just a bonus if I want to.
Statistics: Posted by newbogleheader02 — Sat Mar 09, 2024 10:04 pm — Replies 1 — Views 659