I found bogleheads several years ago while reading up on tax loss harvesting and after reading Bernstein The Four Pillars of Investing. I've tried to build our portfolio allocation and location following advice from the wiki and said book. It's gotten messier with some TLH moves that stuck, but I'm comfortable with the spreadsheet life. We've been very fortunate to accumulate the assets listed below. I continue to manage the accounts myself, so I thought it might be time for a second set of eyes to point out any errors or inefficiencies.
Emergency funds: None (see taxable)
Income:
500k salaries and cash bonuses
300k restricted stock grants
35k FT rental revenue
10-40k STR rental revenue (TBD...this is new)
Rental income does not include expenses
Debt:
Primary Residence (Zestimate ~1.9M): 790k @ 2.500%
Vacation Home/STR (Zestimate ~830k): 550k @ 6.875%
FT Rental Property (Zestimate ~960k): 0
Tax Filing Status:
Married Filing Separately in years where joint income > 1M
CA is a community property state, so MFS = MFJ/2
Tax Rate: 37% Federal, 12.3-13.3% State
State of Residence: CA
Age: 42/39 No kids but budget for IVF/surrogacy/adoption
Desired Asset allocation: 72% stocks / 28% bonds.
Desired International allocation: 30-40% of stocks
Portfolio size: 14M, prior to any taxes due upon exercise or sale.
Current assets
Taxable
0.1% cash (sweep accounts)
0.2% cash (checking accounts)
0.4% cash (HYSA @ 4.2%)
1.8% Vanguard Treasury Money Market Fund (VUSXX) (0.09)
3.6% Treasury Bills < 1yr
1.1% I-Bonds
0.8% Vanguard Tax-Exempt Bond ETF (VTEB) (0.05)
2.3% Vanguard Intermediate-Term Tax-Exempt Fund (VWIUX) (0.09)
4.4% Vanguard California Long-Term Tax-Exempt Fund (VCLAX) (0.09)
4.3% Vanguard Total International Stock Index Fund (VTIAX) (0.12)
7.0% Vanguard FTSE All-World ex-US Index Fund (VFWAX) (0.11)
0.8% Vanguard Tax-Managed Small-Cap Fund (VTMSX) (0.09)
9.1% Vanguard Tax-Managed Capital Appreciation Fund (VTCLX) (0.09)
10.6% Vanguard Total Stock Market Index Fund (VTSAX) (0.04)
0.7% various individual stocks and ETFs
26.0% Employer stock options (subject to ordinary income tax upon exercise)
19.3 % Employer stock (subject to long term capital gains tax upon sale)
Roth 401(k)
1.3% Fidelity Total International Index Fund (FTIHX) (0.06)
1.2% Vanguard Real Estate Index Fund (VGSNX) (0.11)
Pre-Tax 401(k)s
1.1% Fidelity U.S. Bond Index Fund (FXNAX) (0.025)
0.7% Vanguard Total Bond Market Index Fund (VBTLX) (0.05)
0.1% Vanguard Real Estate Index Fund (VGSLX) (0.13)
Roth IRAs
0.7% Vanguard Emerging Markets Stock Index (VEMAX) (0.14)
1.4% Vanguard U.S. Value Factor ETF (VFVA) (0.13)
0.7% various individual stocks and ETFs
HSAs
0.5% Fidelity Small Cap Value Index Fund (FISVX) (0.05)
_____________________________________________________________
Note: Total percentage of all the above accounts together equal 100.2% due to rounding.
Contributions
New annual Contributions
$46,000 401(k)s (mega backdoor Roth unavailable)
$12,000 Roth IRA(s)
$40,000 I-Bonds (2 individual accounts, 1 trust account, 5k per tax return)
Questions:
I realize the employer stock concentration is still high, currently ~45%. This has been the primary growth engine for our wealth. I'm selling ~20% of the employer stock every year (so ~9% of the current total portfolio), mostly as options are expiring. When I make a sale, I look at the remainder of the portfolio and buy VTSAX, VTIAX, or VCLAX as needed to keep that part of the portfolio at the desired allocation. I also rebalance in the Roth 401k to keep the REITs at about 3%. I started a glide path to get to 40% bonds over the next 8 years, so mostly I end up buying bonds.
1. I based the glide to 60/40 stock/bond split on Vanguard target date fund splits close to retirement. But our portfolio is large enough that we can ride out significant drops. Is 40% bonds too conservative?
2. Given the lackluster performance of exUS stock, if I need more stock I've found myself buying 50/50 Intl and US instead of all international, so my international allocation has slipped from the initial target of 40% (to match Vanguard et al's target date funds) to around 35% today (excluding company stock). I tell myself I'm ok with 30% international, but I don't really have any rationale for what international allocation is appropriate. Should I keep going for 40% international?
3. I used to split 50/50 between all-US munis and CA-only munis. Given treasury yields in the last years, I've been leaving more money in T-bills and VUSXX, especially since we might want some of it for renovations, family planning, etc. I asked about this recently in another post and did some plotting of bond fund yields over the last year. My conclusions were:
4. We mortgaged the vacation home thinking we could refinance after some time. It's been a year, and rates are pretty much the same. In 2023 we were able to deduct about 85% of the interest. We'll probably be subject to vacation home rental loss limitations in some years, in which case that interest deduction would get carried forward instead of being deductible against the gains from the other property. Keep waiting to refinance or put some extra cash towards the principal?
5. I do our taxes ever year. This year I've been trying to get a CPA to review them. Would I benefit financially from more help, either regarding taxes or financial planning? I'd do the taxes myself anyway to see if I came to the same answer.
Emergency funds: None (see taxable)
Income:
500k salaries and cash bonuses
300k restricted stock grants
35k FT rental revenue
10-40k STR rental revenue (TBD...this is new)
Rental income does not include expenses
Debt:
Primary Residence (Zestimate ~1.9M): 790k @ 2.500%
Vacation Home/STR (Zestimate ~830k): 550k @ 6.875%
FT Rental Property (Zestimate ~960k): 0
Tax Filing Status:
Married Filing Separately in years where joint income > 1M
CA is a community property state, so MFS = MFJ/2
Tax Rate: 37% Federal, 12.3-13.3% State
State of Residence: CA
Age: 42/39 No kids but budget for IVF/surrogacy/adoption
Desired Asset allocation: 72% stocks / 28% bonds.
Desired International allocation: 30-40% of stocks
Portfolio size: 14M, prior to any taxes due upon exercise or sale.
Current assets
Taxable
0.1% cash (sweep accounts)
0.2% cash (checking accounts)
0.4% cash (HYSA @ 4.2%)
1.8% Vanguard Treasury Money Market Fund (VUSXX) (0.09)
3.6% Treasury Bills < 1yr
1.1% I-Bonds
0.8% Vanguard Tax-Exempt Bond ETF (VTEB) (0.05)
2.3% Vanguard Intermediate-Term Tax-Exempt Fund (VWIUX) (0.09)
4.4% Vanguard California Long-Term Tax-Exempt Fund (VCLAX) (0.09)
4.3% Vanguard Total International Stock Index Fund (VTIAX) (0.12)
7.0% Vanguard FTSE All-World ex-US Index Fund (VFWAX) (0.11)
0.8% Vanguard Tax-Managed Small-Cap Fund (VTMSX) (0.09)
9.1% Vanguard Tax-Managed Capital Appreciation Fund (VTCLX) (0.09)
10.6% Vanguard Total Stock Market Index Fund (VTSAX) (0.04)
0.7% various individual stocks and ETFs
26.0% Employer stock options (subject to ordinary income tax upon exercise)
19.3 % Employer stock (subject to long term capital gains tax upon sale)
Roth 401(k)
1.3% Fidelity Total International Index Fund (FTIHX) (0.06)
1.2% Vanguard Real Estate Index Fund (VGSNX) (0.11)
Pre-Tax 401(k)s
1.1% Fidelity U.S. Bond Index Fund (FXNAX) (0.025)
0.7% Vanguard Total Bond Market Index Fund (VBTLX) (0.05)
0.1% Vanguard Real Estate Index Fund (VGSLX) (0.13)
Roth IRAs
0.7% Vanguard Emerging Markets Stock Index (VEMAX) (0.14)
1.4% Vanguard U.S. Value Factor ETF (VFVA) (0.13)
0.7% various individual stocks and ETFs
HSAs
0.5% Fidelity Small Cap Value Index Fund (FISVX) (0.05)
_____________________________________________________________
Note: Total percentage of all the above accounts together equal 100.2% due to rounding.
Contributions
New annual Contributions
$46,000 401(k)s (mega backdoor Roth unavailable)
$12,000 Roth IRA(s)
$40,000 I-Bonds (2 individual accounts, 1 trust account, 5k per tax return)
Questions:
I realize the employer stock concentration is still high, currently ~45%. This has been the primary growth engine for our wealth. I'm selling ~20% of the employer stock every year (so ~9% of the current total portfolio), mostly as options are expiring. When I make a sale, I look at the remainder of the portfolio and buy VTSAX, VTIAX, or VCLAX as needed to keep that part of the portfolio at the desired allocation. I also rebalance in the Roth 401k to keep the REITs at about 3%. I started a glide path to get to 40% bonds over the next 8 years, so mostly I end up buying bonds.
1. I based the glide to 60/40 stock/bond split on Vanguard target date fund splits close to retirement. But our portfolio is large enough that we can ride out significant drops. Is 40% bonds too conservative?
2. Given the lackluster performance of exUS stock, if I need more stock I've found myself buying 50/50 Intl and US instead of all international, so my international allocation has slipped from the initial target of 40% (to match Vanguard et al's target date funds) to around 35% today (excluding company stock). I tell myself I'm ok with 30% international, but I don't really have any rationale for what international allocation is appropriate. Should I keep going for 40% international?
3. I used to split 50/50 between all-US munis and CA-only munis. Given treasury yields in the last years, I've been leaving more money in T-bills and VUSXX, especially since we might want some of it for renovations, family planning, etc. I asked about this recently in another post and did some plotting of bond fund yields over the last year. My conclusions were:
- Our income puts us in the 20% capital gains bracket, so there's no advantage while we're still working of having a tax free money market. After tax, VUSXX beats VCTXX most of the time, and beats the short term bond funds.
- VCLAX is the my best option for a intermediate/long bond fund in taxable.
4. We mortgaged the vacation home thinking we could refinance after some time. It's been a year, and rates are pretty much the same. In 2023 we were able to deduct about 85% of the interest. We'll probably be subject to vacation home rental loss limitations in some years, in which case that interest deduction would get carried forward instead of being deductible against the gains from the other property. Keep waiting to refinance or put some extra cash towards the principal?
5. I do our taxes ever year. This year I've been trying to get a CPA to review them. Would I benefit financially from more help, either regarding taxes or financial planning? I'd do the taxes myself anyway to see if I came to the same answer.
Statistics: Posted by snvr — Wed Jun 05, 2024 9:03 pm — Replies 0 — Views 44