Hello Bogleheads
I am a new to the forum but have been lurking on and off over the years. I want to thank you all in advance for your input. You have already provided me with the information required to convince myself and my wife to rid ourselves of our financial advisor and strike out on our own. I would like some input on the portfolio as currently constructed but I will have some changes to be made through this year. My mother (56) passed in June (cancer – sudden progression) and we are working through transferring those assets over to me (and my sister, her amounts not included in list). I will list them below but the totals are not included in my existing portfolio calculations.
Inherited Assets:
Traditional 401k – American Century One Choice 2025 - $149,000 – Will sell to exchange to other investment
ESOP – Employer Stock - $140,000.00 – Will sell to exchange to other investment
Self-Directed IRA – Employer Stock $143,000, CD, $22,000 – Cash to be invested, shares will be retained in my name. These are non-publicly traded shares in a community bank which was her and is my employer. Currently paying $3,750 in dividends once annually, no further payment expected this year.
Pending Life Insurance Proceeds of $230,000 – expect this within next 60 days. $25,000 of this will be considered taxable as it was a BOLI policy payable to the bank. $25,000 is the portion of the policy that the bank will then pass on to me. My thought is to set $100-$125,000 of this aside for the increased taxes we will owe on the new assets & invest the rest.
Her home was TOD to me alone. I am selling and will spit the proceeds with my sister. My portion should be $80-100,000 after selling expenses & mortgage payoff. Given our current local market sale should happen before the end of this year. Can gift my sister her share over 2 years to stay under gift threshold (including spousal gifts, we are both married). My proceeds will be used to pay off our HELOC & increase our emergency fund.
Emergency funds:
Currently 2 months – will expand to 6-12 with cash proceeds above. Also have several years of max Roth IRA contributions for both of us. Began using YNAB this year thanks to this forum, we have sinking funds set up for major expenses and the monthly contributions to those funds are figured in my expenses. We also trimmed out a lot of unnecessary spending
Debt:
Home Mortgage $155,000 2.75% matures 2050 - conservatively valued at $278,000 – early 2020 appraisal, 2016 purchase
HELOC $38,000 9% - Will pay this off with above cash proceeds
Tax Filing Status: MFJ
Tax Rate: 22% Federal, 5.58% State
State of Residence: KS
Age: Myself 31, Wife 34 Kids 6, 1, and #3 coming this November
Household Income: $198,500 before her bonus ($15,000 last two years). I just this month had a salary increase from $80,000 to $100,000.
We each have $2,000,000 in 30yr term life purchased this year. Additional coverage through employers $410,000 him, $295,000 her. Setting up to meet with estate planner to protect our minor children if something were to happen, we have delayed this too long.
Desired Asset allocation: 80% stocks / 20% bonds – Input welcome
Desired International allocation: Market Weight (40%?) – Input welcome
Current retirement assets $347,000
Taxable at Fidelity - 2.2% (we have one account designated for each child funded from small monthly contributions by us and occasional contributions from family – to be transferred to them later on. Including these in totals for input on funds. No taxable designated for us currently, this will change as assets move out of the inherited IRAs.)
100% – Vanguard Total World Stock ETF (VT) (.07%)
His 401k – 21.4% - Former advisor had recommended big mix of funds, I cleaned this up last year to these two thanks to the forum
76.84% Vanguard Total World Stock Index Admiral (VTWAX) (.10%)
23.16% Vanguard Total Bond Market Index Fund Admiral (VBTLX) (.05%)
Company match 3%
His Roth IRA at Fidelity – 6.5% - Moved from advisor this year, cleaned up
100% – Vanguard Total World Stock ETF (VT) (.07%)
His ESOP – 12.5%
100% Employer Stock – employer contributions only. Historically 6-7% of annual salary. Diversification to 401k available at age 55
Her 401k – 32.6% - This is an over complicated mess – former advisor recommended the elections please help clean this up
Vanguard Developing Markets Index Admiral (VTMGX) (.08%)
Vanguard Emerging Markets Stock Index (VEMAX)
.93% - Vanguard Federal Money Market (VMFXX) (.11%)
22.61% - Vanguard Growth Index Admiral (VIGAX) (.05%)
4.67% Vanguard High Yield Corporate Admiral (VWEAX) (.12%)
9.00% Vanguard Mid-Cap Growth Index Admiral (VMGMX) (.07%)
10.8% Vanguard Mid-Cap Value Index Admiral (VMVAX) (.07%)
7.49% Vanguard Small Cap Value Index Admiral (VSIAX) (.07%)
5.6% Vanguard Small Cap Growth Index Admiral (VSGAX) (.07%)
8.23% Vanguard Total Bond Marked Index Admiral (VBTLX) (.05%)
4.54% Vanguard Total International Stock Index Admiral (VTIAX) (.12%)
17.27 % Vanguard Value Index Admiral (VVIAX) (.05%)
Company match 5%
Her Roth IRA at Fidelity – 24.8% - Moved from advisor this year, cleaned up
100% – Vanguard Total World Stock ETF (VT) (.07%)
New annual contributions – 401k contributions are possible out of our paychecks at our current spending levels. Historically we have contributed 13% (him) & 6% (her) as well as maxing out my Roth IRA for 3 years and hers for 5 or 6. We will also increase 401k contributions to hit the max this year which is about $18,000 more than we had planned on. My plan is to use the inherited funds to make the IRA & Health Savings contributions for the next few years while we have 2 in daycare. Once we are back down to 1 we can make these out of our regular cash flow again while continuing to max 401ks. Daycare cost for two will be roughly 40% of our after tax expense next year. Additionally, I do not factor in my wife’s bonus for my yearly projections so we may be able to make some contributions out of those funds as well.
$23,000.00 his 401k + 3% match
$23,000.00 her 401k + 5% match
$7,000.00 his Roth IRA – will need to backdoor this for the next few years at least on both of these
$7,000.00 her Roth IRA
$8,300 Health Savings – did not include this in portfolio as the balance is not enough for me to consider investing yet. This is the first year we are eligible and have been working to max it out with monthly contributions. Account is at Fidelity
$18,000 529 ($6,000 per child, max for state tax deduction) – undecided on if we want to do this or not. In all likelihood we will be able to cash flow college expenses for in state school but I know my mom would have wanted to make sure school was paid for so using some of the assets to make these contributions now would be a nice legacy for her if something were to happen with our ability to pay in the future. We have one account for each child (NH Plan, Fidelity) currently but they are minimally funded.
Funds available in his 401(k)
Nationwide 401(k) – access to thousands of mutual funds through Nationwide fund window. Vanguard, iShares etc. too many to list here.
Funds available in her 401(k)
Vanguard Federal Money Market VMFXX .11%
Vanguard GNMA Admiral VFIJX.11%
Vanguard High-Yld Corp Adm VWEAX .12%
Vanguard Sh Term Inv- Gr AdmVFSUX.10%
Vanguard Sh-Term Bd Index Adm VBIRX.07%
Vanguard Ttl Bd Mkt Indx Adm VBTLX.05%
Vanguard Ttl Int'l Bd Indx Adm VTABX.11%
Vanguard Inflatn-Prot Sec Adm VAIPX.1%
Vanguard 500 Index Admiral VFIAX.04%
Vanguard Div Apprec Idx Adm VDADX .08%
Vanguard Growth Index Admiral VIGAX.05%
Vanguard Value Index Admiral VVIAX .05%
Vanguard Mid-Cap Gr Index Adms VMGMX .07%
Vanguard Mid-Cap Index Admiral VIMAX .05%
Vanguard Mid-Cap Val Index Adm VMVAX .07%
Vanguard Sm Cap Value Ind Adm VSIAX.07%
Vanguard Small-Cap Index AdmVSMAX.05%
Vanguard Smallcap Grth Ind Adm VSGAX .07%
Vanguard Dev Mkts Indx Adm VTMGX .08%
Vanguard Emg Mkts Stk Idx Adm VEMAX .14%
Vanguard Ttl Int'l Stk Ind Adm VTIAX .12%
Vanguard Real Estate Index Adm VGSLX.13%
Questions:
1. Now that we will have a sizeable taxable portfolio I believe it would be beneficial to be able to TLH efficiently. Given that we will be making purchases monthly via our 401ks, how can we best set ourselves up to avoid wash sales? I assume we should also turn off automatic dividend reinvestment in our other accounts to help avoid them as well?
2.I know I we have 10 years to empty out the inherited accounts. Currently the plan is to accelerate this given known tax rates over the next two years. Our regular income has us firmly in the 22% bracket so we will not be any lower for the foreseeable future. My thought is to draw in to the 24% bracket this year past the NIIT threshold as I do not have considerable investment income this year. I project our AGI this year without any of the withdrawals to be around $150,000. This includes a projected bonus of $15,000, the $25,000 of life insurance that will be taxable, Max 401k & HSA and my wife missing her final 3 paychecks this year for maternity leave. Next year would have more investment income so I think we would want to stay under $250,000. I have hired a CPA to prepare taxes for us and my mother’s final return (we are historically DIY on this) and she will be running her own analysis on this but I would like the group’s input as well. I am thinking to transfer out $200,000 this year and maybe $100,000 next year and then the remainder over the last 9 years.
3. Currently all of our 401k contributions are traditional and I believe we need to keep that up while we are working through moving the inherited assets over. The question becomes after that should we be doing some/all Roth. I do not currently have the ability to MBDR in mine, I am unsure of my wife’s plan. Factors in this are future career growth which is likely for both of us & additional inherited funds (likely low 7 figures from my father, likely low -mid 7 figures from her parents as well) down the line which could bump us in to even higher brackets. On the other end we do not have many tax deductions available to us outside of retirement contributions so this seems like a good bet to continue traditional. I do not want to count on any of this money for consumption purposes but it seems wise to take it in consideration for planning purposes in respect to our contributions.
I am a new to the forum but have been lurking on and off over the years. I want to thank you all in advance for your input. You have already provided me with the information required to convince myself and my wife to rid ourselves of our financial advisor and strike out on our own. I would like some input on the portfolio as currently constructed but I will have some changes to be made through this year. My mother (56) passed in June (cancer – sudden progression) and we are working through transferring those assets over to me (and my sister, her amounts not included in list). I will list them below but the totals are not included in my existing portfolio calculations.
Inherited Assets:
Traditional 401k – American Century One Choice 2025 - $149,000 – Will sell to exchange to other investment
ESOP – Employer Stock - $140,000.00 – Will sell to exchange to other investment
Self-Directed IRA – Employer Stock $143,000, CD, $22,000 – Cash to be invested, shares will be retained in my name. These are non-publicly traded shares in a community bank which was her and is my employer. Currently paying $3,750 in dividends once annually, no further payment expected this year.
Pending Life Insurance Proceeds of $230,000 – expect this within next 60 days. $25,000 of this will be considered taxable as it was a BOLI policy payable to the bank. $25,000 is the portion of the policy that the bank will then pass on to me. My thought is to set $100-$125,000 of this aside for the increased taxes we will owe on the new assets & invest the rest.
Her home was TOD to me alone. I am selling and will spit the proceeds with my sister. My portion should be $80-100,000 after selling expenses & mortgage payoff. Given our current local market sale should happen before the end of this year. Can gift my sister her share over 2 years to stay under gift threshold (including spousal gifts, we are both married). My proceeds will be used to pay off our HELOC & increase our emergency fund.
Emergency funds:
Currently 2 months – will expand to 6-12 with cash proceeds above. Also have several years of max Roth IRA contributions for both of us. Began using YNAB this year thanks to this forum, we have sinking funds set up for major expenses and the monthly contributions to those funds are figured in my expenses. We also trimmed out a lot of unnecessary spending
Debt:
Home Mortgage $155,000 2.75% matures 2050 - conservatively valued at $278,000 – early 2020 appraisal, 2016 purchase
HELOC $38,000 9% - Will pay this off with above cash proceeds
Tax Filing Status: MFJ
Tax Rate: 22% Federal, 5.58% State
State of Residence: KS
Age: Myself 31, Wife 34 Kids 6, 1, and #3 coming this November
Household Income: $198,500 before her bonus ($15,000 last two years). I just this month had a salary increase from $80,000 to $100,000.
We each have $2,000,000 in 30yr term life purchased this year. Additional coverage through employers $410,000 him, $295,000 her. Setting up to meet with estate planner to protect our minor children if something were to happen, we have delayed this too long.
Desired Asset allocation: 80% stocks / 20% bonds – Input welcome
Desired International allocation: Market Weight (40%?) – Input welcome
Current retirement assets $347,000
Taxable at Fidelity - 2.2% (we have one account designated for each child funded from small monthly contributions by us and occasional contributions from family – to be transferred to them later on. Including these in totals for input on funds. No taxable designated for us currently, this will change as assets move out of the inherited IRAs.)
100% – Vanguard Total World Stock ETF (VT) (.07%)
His 401k – 21.4% - Former advisor had recommended big mix of funds, I cleaned this up last year to these two thanks to the forum
76.84% Vanguard Total World Stock Index Admiral (VTWAX) (.10%)
23.16% Vanguard Total Bond Market Index Fund Admiral (VBTLX) (.05%)
Company match 3%
His Roth IRA at Fidelity – 6.5% - Moved from advisor this year, cleaned up
100% – Vanguard Total World Stock ETF (VT) (.07%)
His ESOP – 12.5%
100% Employer Stock – employer contributions only. Historically 6-7% of annual salary. Diversification to 401k available at age 55
Her 401k – 32.6% - This is an over complicated mess – former advisor recommended the elections please help clean this up
Vanguard Developing Markets Index Admiral (VTMGX) (.08%)
Vanguard Emerging Markets Stock Index (VEMAX)
.93% - Vanguard Federal Money Market (VMFXX) (.11%)
22.61% - Vanguard Growth Index Admiral (VIGAX) (.05%)
4.67% Vanguard High Yield Corporate Admiral (VWEAX) (.12%)
9.00% Vanguard Mid-Cap Growth Index Admiral (VMGMX) (.07%)
10.8% Vanguard Mid-Cap Value Index Admiral (VMVAX) (.07%)
7.49% Vanguard Small Cap Value Index Admiral (VSIAX) (.07%)
5.6% Vanguard Small Cap Growth Index Admiral (VSGAX) (.07%)
8.23% Vanguard Total Bond Marked Index Admiral (VBTLX) (.05%)
4.54% Vanguard Total International Stock Index Admiral (VTIAX) (.12%)
17.27 % Vanguard Value Index Admiral (VVIAX) (.05%)
Company match 5%
Her Roth IRA at Fidelity – 24.8% - Moved from advisor this year, cleaned up
100% – Vanguard Total World Stock ETF (VT) (.07%)
New annual contributions – 401k contributions are possible out of our paychecks at our current spending levels. Historically we have contributed 13% (him) & 6% (her) as well as maxing out my Roth IRA for 3 years and hers for 5 or 6. We will also increase 401k contributions to hit the max this year which is about $18,000 more than we had planned on. My plan is to use the inherited funds to make the IRA & Health Savings contributions for the next few years while we have 2 in daycare. Once we are back down to 1 we can make these out of our regular cash flow again while continuing to max 401ks. Daycare cost for two will be roughly 40% of our after tax expense next year. Additionally, I do not factor in my wife’s bonus for my yearly projections so we may be able to make some contributions out of those funds as well.
$23,000.00 his 401k + 3% match
$23,000.00 her 401k + 5% match
$7,000.00 his Roth IRA – will need to backdoor this for the next few years at least on both of these
$7,000.00 her Roth IRA
$8,300 Health Savings – did not include this in portfolio as the balance is not enough for me to consider investing yet. This is the first year we are eligible and have been working to max it out with monthly contributions. Account is at Fidelity
$18,000 529 ($6,000 per child, max for state tax deduction) – undecided on if we want to do this or not. In all likelihood we will be able to cash flow college expenses for in state school but I know my mom would have wanted to make sure school was paid for so using some of the assets to make these contributions now would be a nice legacy for her if something were to happen with our ability to pay in the future. We have one account for each child (NH Plan, Fidelity) currently but they are minimally funded.
Funds available in his 401(k)
Nationwide 401(k) – access to thousands of mutual funds through Nationwide fund window. Vanguard, iShares etc. too many to list here.
Funds available in her 401(k)
Vanguard Federal Money Market VMFXX .11%
Vanguard GNMA Admiral VFIJX.11%
Vanguard High-Yld Corp Adm VWEAX .12%
Vanguard Sh Term Inv- Gr AdmVFSUX.10%
Vanguard Sh-Term Bd Index Adm VBIRX.07%
Vanguard Ttl Bd Mkt Indx Adm VBTLX.05%
Vanguard Ttl Int'l Bd Indx Adm VTABX.11%
Vanguard Inflatn-Prot Sec Adm VAIPX.1%
Vanguard 500 Index Admiral VFIAX.04%
Vanguard Div Apprec Idx Adm VDADX .08%
Vanguard Growth Index Admiral VIGAX.05%
Vanguard Value Index Admiral VVIAX .05%
Vanguard Mid-Cap Gr Index Adms VMGMX .07%
Vanguard Mid-Cap Index Admiral VIMAX .05%
Vanguard Mid-Cap Val Index Adm VMVAX .07%
Vanguard Sm Cap Value Ind Adm VSIAX.07%
Vanguard Small-Cap Index AdmVSMAX.05%
Vanguard Smallcap Grth Ind Adm VSGAX .07%
Vanguard Dev Mkts Indx Adm VTMGX .08%
Vanguard Emg Mkts Stk Idx Adm VEMAX .14%
Vanguard Ttl Int'l Stk Ind Adm VTIAX .12%
Vanguard Real Estate Index Adm VGSLX.13%
Questions:
1. Now that we will have a sizeable taxable portfolio I believe it would be beneficial to be able to TLH efficiently. Given that we will be making purchases monthly via our 401ks, how can we best set ourselves up to avoid wash sales? I assume we should also turn off automatic dividend reinvestment in our other accounts to help avoid them as well?
2.I know I we have 10 years to empty out the inherited accounts. Currently the plan is to accelerate this given known tax rates over the next two years. Our regular income has us firmly in the 22% bracket so we will not be any lower for the foreseeable future. My thought is to draw in to the 24% bracket this year past the NIIT threshold as I do not have considerable investment income this year. I project our AGI this year without any of the withdrawals to be around $150,000. This includes a projected bonus of $15,000, the $25,000 of life insurance that will be taxable, Max 401k & HSA and my wife missing her final 3 paychecks this year for maternity leave. Next year would have more investment income so I think we would want to stay under $250,000. I have hired a CPA to prepare taxes for us and my mother’s final return (we are historically DIY on this) and she will be running her own analysis on this but I would like the group’s input as well. I am thinking to transfer out $200,000 this year and maybe $100,000 next year and then the remainder over the last 9 years.
3. Currently all of our 401k contributions are traditional and I believe we need to keep that up while we are working through moving the inherited assets over. The question becomes after that should we be doing some/all Roth. I do not currently have the ability to MBDR in mine, I am unsure of my wife’s plan. Factors in this are future career growth which is likely for both of us & additional inherited funds (likely low 7 figures from my father, likely low -mid 7 figures from her parents as well) down the line which could bump us in to even higher brackets. On the other end we do not have many tax deductions available to us outside of retirement contributions so this seems like a good bet to continue traditional. I do not want to count on any of this money for consumption purposes but it seems wise to take it in consideration for planning purposes in respect to our contributions.
Statistics: Posted by DinKS — Thu Aug 08, 2024 11:38 am — Replies 0 — Views 15
