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Critique My Financial State- How can I do better?

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  • Critique My Financial State- How can I do better?

    Hi Everyone,


    I am hoping people can critique my current portfolio and overall financial state.


    I am 38 years old with 2 young children (both below age 5).  My wife and I both work. As of now, our pre-tax salary is approximately 650k. Next summer, I anticipate that it will increase to approximately 900k.


    We contribute max to Roth 401k, profit sharing, HSA, and each contribute to a backdoor Roth IRA. My practice also has a cash benefit plan to which I contribute 50k annually and our target yearly return is 3% (this basically is my bond allocation).


    Debt: Our only debt is our home.

    1. Balance of loan is 1.5 million. 2 years into the original 30 year fixed jumbo loan at 3.75%.

    2. Current value of home is 2.2-2.3 million

    3. Purchase price of 1.9 million.


    We contribute the annual max to our kids’ 529 plans.


    Here is our portfolio. Total value approximately 1.7 million.


    1. Solo 401k: $235k

      1. Fidelity total market index fund FSKAX: 88k

      2. Fidelity total bond index fund FXNAX: 58K


      4. from my previous job; no longer contributing to this

    2. 403(b): 185k

      1. Fidelity total market index fund FSKAX: 185k

      2. from my time as a resident; no longer contributing to this

    3. Defined contribution plan: 29k

      1. Fidelity total market index fund FSKAX: 29k

      2. from my time as a resident; no longer contributing to this

    4. Brokerage account: 333k

      1. Amazon: 3K







      8. FSKAX: 3K


      10. INTC INTEL: 21K



    5. Brokerage account: 268k

      1. Vanguard Total Stock Market Index vtsax: 148k

      2. Vanguard Total International Stock: 119k

    6. Roth IRA: 67K

      1. Vanguard Real Estate Index Fund vgslx: 57k

      2. Vanguard Small-Cap Value Index Fund vsiax: 10k

    7. Profit sharing plan: 144K


    8. Roth IRA: 20K


    9. 401k: 34k


    10. Wife’s 401K and profit sharing: 250k

      1. Vanguard target date fund

    11. HSA: 25K

      1. Vanguard Total Stock Market Index Fund ETF : 25K

    12. Cash Balance plan: 100k

    How can I do better?

    What am I missing?

    Does it make sense to contribute to a Roth 401k or should i just do a traditional 401k?

    Many thanks in advance!









  • #2
    •You need an IPS
    • 4. Brokerage account: 333k
    What are you doing with this?
    • Are you saving 20% plus per year for retirement?
    • Simplify where possible. (Old accounts , multiple brokerage accounts)
    • What is your desired AA?

    You provided what you have, not what you are doing or what your objectives are.


    • #3

      Honestly just figure out your AA and clean up your fund selection is nit picking (why use a TDF?).

      save 20% for retirement.

      i would not use Roth 401k. any year you take off and convert youll come out ahead. but depends on future total estate.


      Just don't blow it on magic beans and you'll be fine.


      • #4
        As long as you keep spending reasonable and keep saving you'll be able to retirement close to whenever you want. I agree on the IPS and developing a more refined plan. Your brokerage account looks like it was just randomly selected by Ray Charles.


        • #5
          from a dollar standpoint you're doing great. Make sure you're putting at least 20% towards retirement (from those balances I don't see how you're NOT doing that). 2 critiques:

          1) Don't do Roth 401k that pre-tax (the only exception is if you live in a low (under 5%) or no income tax state and you plan to retire to a high-state income tax state like CA or HI)

          2) Your accounts are really complicated. Roll everything together into whichever current account has the lowest odds ratios. Why have two taxable accounts? The one not at Vanguard seems so necessarily complex. It also at a glance doesn't seem tax efficient.


          • #6
            At first glance, it appears to me you are doing very well. It also appears you are also a great sector fund picker. I too think Fidelity has some of the greatest funds and we overlap on some of our funds. I know why you picked out FBIOX, it had a great run for quite a few years. Lately biotech has fallen a bit out of favor, look at FSELX (Semiconductors) - I switched infusions to this 2-3 years ago, up 34.67% YTD, 13.39% 1 year blew the indexes out of the water.

            For disclosure, I'm not introducing new money into this market until conditions are more favorable. Don't focus too much on investments only to grow net worth. Earnings and savings are just as important, and naturally as those are optimized the resources you have to invest are optimized.

            Regarding earnings, a jump from an already very healthy $650K to $900K is very powerful, which you need to support home price/maintenance, utilities, property taxes, etc. Keep a healthy growth in household income over the decades. We're earning about 4 fold what we were earning post-training about 20 years ago, with a healthy upswing expected again for 2019. With such healthy earnings, you will have more diversified investment opportunities so you don't have to be dependent on a sideways or risky market. I chose business ownership and commercial real estate to diversify for income growth, risk management/asset diversification, and tax advantages. I also chose to optimize geographic arbitrage.

            With healthier earnings, your savings rates should go up comfortably if you avoid too much lifestyle creep. While your effective tax rate goes up with this, we offset that with tax deductible and tax deferred investments/earnings and this has gotten us to a pre-tax savings rate around 50%, or about 70% post-tax. A 20% savings rate is a reasonable start, but easy to surpass.

            You seem to be paying the minimum or close to that on your home mortgage assuming a standard down payment. That's a lot of interest over the years you'll be paying with new limitations on deductions now. Over a decade ago, we built a home for $1.5M but my general rule is to pay anything I buy within 5 years, and I did. Now I only do 10 or 15 year loans due to amortization schedules. I personally prefer you consider paying down some of this debt with the extra income rather than invest more in this market, but I seem to be in the minority here. That's what I'm doing with my office building debt to be paid off next year, within 3-4 years of construction. Wealthy prefer to be debt free most of the time.


            • #7
              “ As of now, our pre-tax salary is approximately 650k. Next summer, I anticipate that it will increase to approximately 900k.”

              I hope for your sake, the bump becomes reality. That 38% increase brings a point. Either you on your own or with a FA need to have a financial plan . Things like term life, DI, with each account fitting in the broad financial plan that guides decisions. Yes, two Roth’s make sense. One for you and one for the spouse. Backdoor every year. The current employer plans, each gets funded max every year. Taxable (one needed) two maybe. Why? First is necessary for retirement with the other for building wealth. You might decide from a wealth perspective the the risk profile (capacity and tolerance) to take a portion and diversify outside of the stock market.
              Automate and simplify as much as possible.
              With a big shovel, decisions like paying off the mortgage or investing etc are already decided. Shortcuts, like CBP is bonds won’t cut it. How do you rebalance and to what AA?
              I have no idea how long you or your spouse wish to work or if you favor leaving a legacy or prefer charitable endeavors. Your choice. Your challenge isn’t “how am I doing”, it’s “Where am I going?”
              • Don’t upgrade your house
              • Don’t pay taxes sooner than later.
              • Default excess funds into taxable in broad market index funds. That is by far the best of any bad choices you could make.


              • #8
                I am guessing you have/had an advisor who set up that brokerage account?

                I would just simplify where it is easy and economical to do so.  Otherwise make sure you pay yourself first with income raises by putting away your 20% but it should be hard to screw this one up.


                • #9
                  Too much funds in Fidelity. But not end of world if you leave it alone.

                  At 600-900K income I would try and shoot for 30% savings. Otherwise you might fritter away the excess money. If you want, you can even add extra to the Principal of the mortgage.


                  • #10

                    At 600-900K income I would try and shoot for 30% savings. Otherwise you might fritter away the excess money. If you want, you can even add extra to the Principal of the mortgage.
                    Click to expand...


                    Overall you seem to be doing great.  How much $ are you saving per year in total?

                    529 plan?  Do you get a state tax deduction where you live?


                    • #11

                      I’m not introducing new money into this market until conditions are more favorable. Don’t focus too much on investments only to grow net worth
                      Click to expand...

                      For the original poster, I would ignore this advice. Keep investing, keep dumping in money through thick and thin, market up or down.


                      • #12
                        Also at some point I would get bored of that mortgage and start to pay it down.


                        • #13
                          Checking your mortgage is soooooooooo boring.
                          Principal- check, no change.
                          Accrued interest - small change
                          Update the spreadsheet (just checking the computation)
                          Analyze every article and Fed release and inverted yield curve forecast possible.
                          Terms and conditions- check, never change (not a word, 50 pages of tiny print).
                          The most exciting thing is the monthly payment.
                          Identify Theft! Maybe Life Lock or a bank or a credit bureau got hacked! Who knows, someone could steal it! Geez, it’s just numbers, it’s an asset to the lender, some idiot could steal it and start making unauthorized payments! They COULD!
                          Chew on this one. Who would you report a stolen mortgage to? Then the tax implications ( casualty/theft loss), it certainly isn’t loan forgiveness.
                          And then it’s gone.

                          The only benefit of keeping a mortgage is it prevents/cures insomnia. Mortgage watching is SUPER boring. Don’t believe me? Try checking your mortgage daily for just one week. That alone will motivate you to pay it off. OP will definitely get rid of the mortgage if he tracks it.


                          • #14
                            Thank you all for your responses and input. It is very much appreciated.

                            1. I definitely need to clean up my portfolio. I actually do have an IPS, but one of my brokerage accounts (the one with all the fidelity funds is managed by my father) and doesn't totally fit with my IPS. he wanted something to do in retirement and he's pretty learned in investing. hes gotten great returns, so i cant complain. may not be the boglehead/WCI method, but i'm ok with it.

                            2. Overall this was my initial desired AA when i started working:

                            Proposed Asset Allocation: 85% stocks; 15% bonds
                            - Of the stocks, 80% domestic and 20% international
                            - Domestic stocks will have a slight small cap value tilt
                            Total Percentages of Entire Portfolio:
                            1. Domestic: 68%
                            a. Total Domestic Stock Market: 44.0%
                            b. Total Small Cap Value: 16.0 %; in tax advantaged account
                            c. Total REIT: 8.0%; in tax advantaged account
                            2. International: 17%
                            3. Bonds: 15%
                            a. in tax advantaged account
                            (I have since changed and now desire to be almost 95% equities and 5% bonds-- i'm ok with this risk and figure, i'm still relatively young)

                            1. I dont mind having a bunch of different accounts at different brokerages. It's slightly annoying to have to log into multiple websites, but besides that, I dont see any really downside. Is there anything else i'm missing with having multiple accounts?

                            2. I think I will stop doing a Roth 401k and start a traditional 401k next year. We will still be living in california when we retire and i anticipate our RMD will still make it such that we will still be in a pretty high tax bracket when we retire. Also, given our current tax rate, I think i'd rather save taxes now and ideally, invest the tax savings.

                            3. Overall, we save 30% of our pre-tax income and will continue to do so with my anticipated pay increase next year. That would be about 300k/year. I'm satisfied with that number.

                            4. As far as paying down the mortgage is concerned, the prospect of long-term debt is obviously annoying and a source of anxiety. We will live in this house for the rest of our lives (mainly because we can't afford anything more). I just haven't done all the calculations to determine if paying off mortgage vs investing that same money is the better option. I figure i'll be good either way. Even if paying off mortgage doesnt bring the same absolute monetary value as investing the money, the psychological benefit of reducing the mortgage is intangible and may be worth it.

                            Thanks again for all of your responses!



                            • #15
                              a) What change in your risk capacity and tolerance? Cutting 10% of your bonds (2/3’s from 15% to 5%) is substantial. Might it be reduced further in the future? Probably. Pouring more savings in to stocks leave you no choice.
                              b) acct 4) $333 is Dad’s playboy? By the way, for the last 10 yrs it’s been extremely difficult to lose money. It really has.

                              My point is , no complaints is not a plan. How often do you rebalance? Using AA is the absolute largest risk management tool you have. Controlling the investments is next. Certainly seems like brushing off bonds and giving Dad some money to play with is going to be a little loose.
                              c) Lastly, not to razz you too much. Not the intent since you might take offense, but please humor us. How you planning on spending an extra $100k per year? That’s the $1,000 question! Enjoy.