Hi, I would appreciate your feedback and suggestions for the investment approach my spouse and I should take toward our goals (1) to fund our children’s undergraduate education at a state flagship school, and (2) to have the option to retire when we turn 50.
Questions:
1. We have saved the total cost in 529 accounts for each of our two children, ages seven and age nine, to attend one of our state’s flagship universities. How should we invest our children’s 529s given our oldest won’t start college for nine more years and our youngest won’t finish for 15 more years? We will keep tabs on our state’s universities’ costs to make sure their accounts keep up with rising costs, but otherwise don’t plan to make further contributions. We have a high tolerance for volatility but want to avoid dipping excessively into other savings were their accounts to suffer a big loss as they went to college (we expect to be retired at that time, so we wouldn’t have current income).
2. We are now focused on saving funds to plus up our spending during the six years (2029-2035) when both of us could be retired (receiving pensions) but unable to access our retirement accounts (other than SEPP beginning at 55 or drawing down Roth contributions). How should we invest the money we are saving for our early retirement gap? We are currently posted abroad, which means extra pay and lower expenses (our primary residence is rented out). This enables us to save/invest $15k a month in addition to our TSP deductions. My current plan is to put half into a HYSA or treasuries to lessen volatility, and to invest the other half for growth. I’m not at all committed to this approach and am really hoping for some good suggestions as I’ve never invested outside of the three-fund approach in retirement accounts.
For background if helpful, we are each eligible for an immediate federal pension at 50 and for a social security supplement (extra monthly payment to make up for not yet receiving SS) until we are eligible to take social security at 62. The amount of each pension would be a percentage multiplied by our high-three salary with an annual “diet” COLA adjustment. At age 50 that percentage would be 37% for one spouse and 40% for the other. Each of our salaries is $191,000, the current top D.C. salary before crossing into the government’s senior service. We might cross over and slightly increase our pay, otherwise our salary growth will be limited to the small adjustments made to the federal pay scale most years. We will continue to be eligible for employer-sponsored healthcare (they pay 70%/we pay 30%) in retirement.
Neither of us would necessarily stop working at 50, but we would like to have the option and certainly will stop by the time our youngest leaves for college when we are 58/55 (we will also move to a less expensive house at that time). We are likely, however, to seek different jobs given our long years in this one and reaching pension eligibility. Our pensions would only go up by 1% for each additional year of service, e.g. from 37% of high-three to 38%.
Debt: $690,000 mortgage, 30-year fixed loan at 2.5%, market value about $1,640,000, no other debt
Tax Filing Status: MFJ
Tax Rate: 24% Federal, 5.75% State
State of Residence: Virginia
Ages: 47, 44
Desired Asset allocation: 90% stocks/10% bonds
Desired International allocation: 10% of stocks
Approximate size of your total portfolio: $2,188,000
Taxable
5% - High-Yield Savings Account/CDs (emergency funds plus his/her slush funds for personal spending)
TSP #1 (federal employee 401k)
4.6% - Fixed Income Index fund (Bloomberg Barclays U.S. Aggregate Bond Index) (0.78%)
30% - Common Stock fund (S&P 500) (0.059%)
7.6% - Small Cap Stock Index fund (Dow Jones U.S. Completion Total Stock Market Index) (0.09%)
TSP #2 (federal employee 401k)
3.7% - Fixed Income Index fund (Bloomberg Barclays U.S. Aggregate Bond Index) (0.078%)
24% - Common Stock fund (S&P 500) (0.059%)
5.7% - Small Cap Stock Index fund (Dow Jones U.S. Completion Total Stock Market Index) (0.09%)
Vanguard Roth IRA #1
4.7% - Vanguard Total International Index Fund (VTIAX) (0.11%)
Vanguard Roth IRA#2
4.7% - Vanguard Total International Index Fund (VTIAX) (0.11%)
Vanguard 529 #1 (9 years-old)
5% - Vanguard Moderate Target 2032 (0.14%)
Vanguard 529 #2 (7 years-old)
5% - Vanguard Moderate Target 2034 (0.14%)
Annual Contributions
TSP #1
$23,000 plus $9500 match
TSP #2
$23,000 plus $9500 match
Vanguard Roth #1 (backdoor)
$7,000
Vanguard Roth #2 (backdoor)
$7,000
HYSA/Treasuries/Brokerage Account???
$180,000
Questions:
1. We have saved the total cost in 529 accounts for each of our two children, ages seven and age nine, to attend one of our state’s flagship universities. How should we invest our children’s 529s given our oldest won’t start college for nine more years and our youngest won’t finish for 15 more years? We will keep tabs on our state’s universities’ costs to make sure their accounts keep up with rising costs, but otherwise don’t plan to make further contributions. We have a high tolerance for volatility but want to avoid dipping excessively into other savings were their accounts to suffer a big loss as they went to college (we expect to be retired at that time, so we wouldn’t have current income).
2. We are now focused on saving funds to plus up our spending during the six years (2029-2035) when both of us could be retired (receiving pensions) but unable to access our retirement accounts (other than SEPP beginning at 55 or drawing down Roth contributions). How should we invest the money we are saving for our early retirement gap? We are currently posted abroad, which means extra pay and lower expenses (our primary residence is rented out). This enables us to save/invest $15k a month in addition to our TSP deductions. My current plan is to put half into a HYSA or treasuries to lessen volatility, and to invest the other half for growth. I’m not at all committed to this approach and am really hoping for some good suggestions as I’ve never invested outside of the three-fund approach in retirement accounts.
For background if helpful, we are each eligible for an immediate federal pension at 50 and for a social security supplement (extra monthly payment to make up for not yet receiving SS) until we are eligible to take social security at 62. The amount of each pension would be a percentage multiplied by our high-three salary with an annual “diet” COLA adjustment. At age 50 that percentage would be 37% for one spouse and 40% for the other. Each of our salaries is $191,000, the current top D.C. salary before crossing into the government’s senior service. We might cross over and slightly increase our pay, otherwise our salary growth will be limited to the small adjustments made to the federal pay scale most years. We will continue to be eligible for employer-sponsored healthcare (they pay 70%/we pay 30%) in retirement.
Neither of us would necessarily stop working at 50, but we would like to have the option and certainly will stop by the time our youngest leaves for college when we are 58/55 (we will also move to a less expensive house at that time). We are likely, however, to seek different jobs given our long years in this one and reaching pension eligibility. Our pensions would only go up by 1% for each additional year of service, e.g. from 37% of high-three to 38%.
Debt: $690,000 mortgage, 30-year fixed loan at 2.5%, market value about $1,640,000, no other debt
Tax Filing Status: MFJ
Tax Rate: 24% Federal, 5.75% State
State of Residence: Virginia
Ages: 47, 44
Desired Asset allocation: 90% stocks/10% bonds
Desired International allocation: 10% of stocks
Approximate size of your total portfolio: $2,188,000
Taxable
5% - High-Yield Savings Account/CDs (emergency funds plus his/her slush funds for personal spending)
TSP #1 (federal employee 401k)
4.6% - Fixed Income Index fund (Bloomberg Barclays U.S. Aggregate Bond Index) (0.78%)
30% - Common Stock fund (S&P 500) (0.059%)
7.6% - Small Cap Stock Index fund (Dow Jones U.S. Completion Total Stock Market Index) (0.09%)
TSP #2 (federal employee 401k)
3.7% - Fixed Income Index fund (Bloomberg Barclays U.S. Aggregate Bond Index) (0.078%)
24% - Common Stock fund (S&P 500) (0.059%)
5.7% - Small Cap Stock Index fund (Dow Jones U.S. Completion Total Stock Market Index) (0.09%)
Vanguard Roth IRA #1
4.7% - Vanguard Total International Index Fund (VTIAX) (0.11%)
Vanguard Roth IRA#2
4.7% - Vanguard Total International Index Fund (VTIAX) (0.11%)
Vanguard 529 #1 (9 years-old)
5% - Vanguard Moderate Target 2032 (0.14%)
Vanguard 529 #2 (7 years-old)
5% - Vanguard Moderate Target 2034 (0.14%)
Annual Contributions
TSP #1
$23,000 plus $9500 match
TSP #2
$23,000 plus $9500 match
Vanguard Roth #1 (backdoor)
$7,000
Vanguard Roth #2 (backdoor)
$7,000
HYSA/Treasuries/Brokerage Account???
$180,000
Statistics: Posted by Reai Life — Thu Jan 18, 2024 6:02 pm — Replies 0 — Views 54