Hello,
I am new here. My spouse and I are 36 years old, based in Texas (no state income tax) with a total combined pre-tax net worth of around $2.6mm and an annual income of $230k. Around $2mm is in securities (brokerage, 401k, Roth IRA, and 529). We plan to retire or semi-retire by age 50, which is in around 15 years, and allocate $100k per year in 401k, Roth IRA, HSA, and remaining to after-tax brokerage until then.
Here's a breakdown of our current portfolio:
After-tax brokerage:
Total: $1,182k
- VTI: $550k
- VOO: $590k (including $320k in parental funds)
- VXF: $40k
401k:
Total: $460k
- S&P 500 index funds
Roth IRA:
Total: $185k
- FXAIX: $160k
- VXF: $25k
HSA:
Total: $45k
- S&P 500 index fund
529 Plan:
Total: $125k
- VTI
Other Assets / Liabilities:
- Cash in MM Fund: $40k (Emergency Reserve)
- Rental Property: $460k (Equity: $270k)
- Primary Residence: $465k (Equity: $300k)
- Other Big Assets (paid-off cars, etc.): $50k
- Credit Card Debt (0% APR promo period): $20k
Questions:
1) Move to Bonds and Cash Position Strategy:
If I need to increase our allocation to bonds, how much should I consider allocating, and what would be the most effective way to implement this change? One approach I am considering is increasing our cash-like position to around 10% of our liquid net worth, similar to Warren Buffett's strategy of maintaining 90% in equities (like the S&P 500) and 10% in cash or cash-like investments. This would involve accumulating approximately $200k in cash over the next couple of years. I would achieve this by gradually saving up, while continuing to maximize contributions to our tax-advantaged accounts (401k, Roth IRA, and HSA). Would this be a balanced approach to diversifying risk, or should I consider a different strategy?
2) Managing Parental Funds with a Balanced Risk Approach:
As mentioned, I manage approximately $320k in VOO, which is actually my parents' money. They are both in their 70s and might need access to these funds in the near future. If they don't need them, these funds could potentially become my inheritance. I'm seeking advice on how to balance the need for growth with the need for preservation, given their age and potential financial needs. Should I consider moving these funds into a more conservative allocation, such as a mix of bonds and cash?
3) Streamlining Positions for Tax-Loss Harvesting (TLH) Efficiency:
I realize that I was not very strategic with the placement of certain investments between our Roth IRA and after-tax brokerage accounts. This has made tax-loss harvesting (TLH) more challenging. What steps can I take to simplify TLH in our current portfolio setup and if it makes sense to do it? What other TLH strategies could help optimize our tax efficiency without significantly impacting our overall asset allocation or exposing us to wash sale rules?
4) Reinvestment Strategy After Selling Rental Property:
I am considering selling our rental property because I am tired of the responsibilities associated with being a landlord. If I sell, I am contemplating reinvesting the proceeds in a bond ETF like BND within our after-tax account (but not certain) or just keep as cash in MM fund getting to ~10% allocation. I understand this may not be the most tax-efficient option given the ordinary income tax treatment of bond interest. What other reinvestment strategies would you recommend that could provide a more tax-efficient income stream or capital appreciation?
5) Do we need individual life and LTD insurance (with our NW)? Both of us currently have group LTD coverage and life insurance equal to 1x salary (both portable) through our employers. However, my spouse has a chronic condition and is unable to obtain individual life and LTD coverage. I have no pre-existing conditions and can qualify for individual policies. We are planning to have a child soon. We maintain group health, P&C insurance and umbrella insurance equaling NW.
6) For estate planning, our relatives are overseas and are non-U.S. citizens; it's just my spouse and me here in the U.S. Based on advice from multiple BH threads, essential documents yet to obtain include a Will, Living Will, and Healthcare Power of Attorney - please advise if I miss anything. It is also important to ensure beneficiaries are designated on all accounts - are there any specifics I may miss? However, this becomes complex since our relatives are overseas, unless we name each other as beneficiaries for everything. We however have a niece and nephew who are international students in the U.S. and wonder if they can be named as beneficiaries. We consider ourselves beginners in estate planning and would appreciate more advice on how to navigate these complexities.
I am new here. My spouse and I are 36 years old, based in Texas (no state income tax) with a total combined pre-tax net worth of around $2.6mm and an annual income of $230k. Around $2mm is in securities (brokerage, 401k, Roth IRA, and 529). We plan to retire or semi-retire by age 50, which is in around 15 years, and allocate $100k per year in 401k, Roth IRA, HSA, and remaining to after-tax brokerage until then.
Here's a breakdown of our current portfolio:
After-tax brokerage:
Total: $1,182k
- VTI: $550k
- VOO: $590k (including $320k in parental funds)
- VXF: $40k
401k:
Total: $460k
- S&P 500 index funds
Roth IRA:
Total: $185k
- FXAIX: $160k
- VXF: $25k
HSA:
Total: $45k
- S&P 500 index fund
529 Plan:
Total: $125k
- VTI
Other Assets / Liabilities:
- Cash in MM Fund: $40k (Emergency Reserve)
- Rental Property: $460k (Equity: $270k)
- Primary Residence: $465k (Equity: $300k)
- Other Big Assets (paid-off cars, etc.): $50k
- Credit Card Debt (0% APR promo period): $20k
Questions:
1) Move to Bonds and Cash Position Strategy:
If I need to increase our allocation to bonds, how much should I consider allocating, and what would be the most effective way to implement this change? One approach I am considering is increasing our cash-like position to around 10% of our liquid net worth, similar to Warren Buffett's strategy of maintaining 90% in equities (like the S&P 500) and 10% in cash or cash-like investments. This would involve accumulating approximately $200k in cash over the next couple of years. I would achieve this by gradually saving up, while continuing to maximize contributions to our tax-advantaged accounts (401k, Roth IRA, and HSA). Would this be a balanced approach to diversifying risk, or should I consider a different strategy?
2) Managing Parental Funds with a Balanced Risk Approach:
As mentioned, I manage approximately $320k in VOO, which is actually my parents' money. They are both in their 70s and might need access to these funds in the near future. If they don't need them, these funds could potentially become my inheritance. I'm seeking advice on how to balance the need for growth with the need for preservation, given their age and potential financial needs. Should I consider moving these funds into a more conservative allocation, such as a mix of bonds and cash?
3) Streamlining Positions for Tax-Loss Harvesting (TLH) Efficiency:
I realize that I was not very strategic with the placement of certain investments between our Roth IRA and after-tax brokerage accounts. This has made tax-loss harvesting (TLH) more challenging. What steps can I take to simplify TLH in our current portfolio setup and if it makes sense to do it? What other TLH strategies could help optimize our tax efficiency without significantly impacting our overall asset allocation or exposing us to wash sale rules?
4) Reinvestment Strategy After Selling Rental Property:
I am considering selling our rental property because I am tired of the responsibilities associated with being a landlord. If I sell, I am contemplating reinvesting the proceeds in a bond ETF like BND within our after-tax account (but not certain) or just keep as cash in MM fund getting to ~10% allocation. I understand this may not be the most tax-efficient option given the ordinary income tax treatment of bond interest. What other reinvestment strategies would you recommend that could provide a more tax-efficient income stream or capital appreciation?
5) Do we need individual life and LTD insurance (with our NW)? Both of us currently have group LTD coverage and life insurance equal to 1x salary (both portable) through our employers. However, my spouse has a chronic condition and is unable to obtain individual life and LTD coverage. I have no pre-existing conditions and can qualify for individual policies. We are planning to have a child soon. We maintain group health, P&C insurance and umbrella insurance equaling NW.
6) For estate planning, our relatives are overseas and are non-U.S. citizens; it's just my spouse and me here in the U.S. Based on advice from multiple BH threads, essential documents yet to obtain include a Will, Living Will, and Healthcare Power of Attorney - please advise if I miss anything. It is also important to ensure beneficiaries are designated on all accounts - are there any specifics I may miss? However, this becomes complex since our relatives are overseas, unless we name each other as beneficiaries for everything. We however have a niece and nephew who are international students in the U.S. and wonder if they can be named as beneficiaries. We consider ourselves beginners in estate planning and would appreciate more advice on how to navigate these complexities.
Statistics: Posted by pualius38 — Mon Sep 02, 2024 11:16 am — Replies 0 — Views 75