Possible Forced Retirement. Step 1, Need Assistance in 401k Rollover

[JustKickItForward]

Hi Everyone.



My entire department was outsourced two years ago at a company I was at for about 25 years (only job I had out of college). During the past two years, I have taken some much needed time off (been working since elementary school?), taken care of several elderly family members (hey, it's my turn, right?), and enrolled in some training to modernize/update my skills so I can be more employable outside the company. However, after just completed a hardcore 8+ mo training certification, I now find myself not really having the internal desire to get back into the professional world slaving away for 40-50 hrs/week and playing the corporate game. I reviewed our financial situation (including running a few FIRECalc scenarios, learning a bit about social security and ObamaCare, if it came to that) and am decently confident I can early retire (just turned the BIG 50 ). I am open to some part time work at a low stress job (like driving a hotel shuttle, etc.) for the next five years until my dear wife also retires would be ideal.



I need a little help. I recently rolled over $400k from my 401k into an IRA at Vanguard and would like guidance on what to do with it. Which sub-forum would be the best place to post specifics of my portfolio and situation? I discovered Boglehead also, but am thinking I will start here first.



Thanks.


JKIF (Just Kick It Forward)

[jIMOh]

are you expecting portfolio to grow, or generate income?
what did firecalc tell you?
what is your expected mix of stocks/bonds? 60-40, 40-60 or something else?

[SecondCor521]

If you want a very conservative and reasonable approach from professionals who aren't out to sell you something, you could just call Vanguard and ask them for a free one time portfolio review. They'll recommend an asset allocation and specific mutual funds to fulfill it. The whole thing will take maybe half an hour.

As jIMOh hints at, you can run FIREcalc and use the investigate tab to see how varying your asset allocation between stocks and bonds would result in different historical success rates. Very generally speaking for most scenarios, somewhere between 30% stocks and 70% stocks will result in similar historical success rates.

[JustKickItForward]

Quote:

Originally Posted by jIMOh are you expecting portfolio to grow, or generate income? what did firecalc tell you? what is your expected mix of stocks/bonds? 60-40, 40-60 or something else?

I would like to continue generating growth, and every 3-5 years, take out 4-5 years of living expenses. Maybe 20 yrs down the road, I can think about getting more conservative and turn the portfolio into something with more income stocks. We also wish to leave our kids some money so their lives can be better (kids' education, retirement, etc.)



I ran Firecalc using different scenarios, but I am not 100% certain I have all entries correct (e.g. portfolio, spending, etc.). Success rate was over 90% most if not all the times.


Now, I have the 400k in cash ready for deployment.

Quote:

Originally Posted by SecondCor521 If you want a very conservative and reasonable approach from professionals who aren't out to sell you something, you could just call Vanguard and ask them for a free portfolio review. They'll recommend an asset allocation and specific mutual funds to fulfill it. The whole thing will take maybe half an hour. As jIMOh hints at, you can run FIREcalc and use the investigate tab to see how varying your asset allocation between stocks and bonds would result in different historical success rates. Very generally speaking for most scenarios, somewhere between 30% stocks and 70% stocks will result in similar historical success rates.

I recently (last Friday) received a Vanguard report back and it recommended a 65/35 (stock/bond) mix (tolerance = Very Aggressive), but their approach sounded too cookie cutter and I have to still confirm with them if the allocation they recommended is only for that 400k would result in the entire portfolio at 65/35. I don't quite like their allocation, specifically Total Bond Markets (US Short Term, US Intermediate, and US Long Term), International Stock, and International Bond. LOL maybe I am just not familiar with bonds and international.


Bottom line, I would like advice here and compare that against the Vanguard plan, heck, maybe we will end up in the same place.


Back to my original post - is there a sub-forum I should post my specific situation and portfolio or is it here?

[hilltide]

This is the place to post it. You will get plenty of advice and direction if you would like on your specific scenario.

[JustKickItForward]

Quote:

Originally Posted by hilltide This is the place to post it. You will get plenty of advice and direction if you would like on your specific scenario.

OK, got it. I will put something together in the next few hours (may push into tomorrow morning).


I do not recall where I saw this (like here or Bogleheads or similar forum), but is there a 'template' which I can use to organize my specific scenario (like my portfolio holdings, family situation, other income like SS and pension(s), college costs, etc.) so it is easier for people to read ?

[target2019]

Quote:

Originally Posted by JustKickItForward OK, got it. I will put something together in the next few hours (may push into tomorrow morning). I do not recall where I saw this (like here or Bogleheads or similar forum), but is there a 'template' which I can use to organize my specific scenario (like my portfolio holdings, family situation, other income like SS and pension(s), college costs, etc.) so it is easier for people to read ?

That template is a BH thing. It's in their Wiki.

[RobbieB]

I wouldn't think 65/35 at age 50 is "very aggressive"

[JustKickItForward]

Quote:

Originally Posted by RobbieB I wouldn't think 65/35 at age 50 is "very aggressive"

Given I am shooting for 50 yrs of retirement, this 65/35 mix is one reason I am have some uneasiness about Vanguard's seemly cookie cutter plan. I also have a pension (pre-tax, non-COLA) coming up in 5 yrs that equals about 45% of my annual expense (post-tax), plus SS later. But, again, since I have no experience w/ bonds (been in stocks and mutual funds for past 30+ yrs, self managed), I could be wrong. I also read several articles/videos that current, widely used stock/bond mixes are off (I think, meaning bond percentage is too high) because these are models based on past bond yields that are a lot higher than current day yields.

[JustKickItForward]

Quote:

Originally Posted by target2019 That template is a BH thing. It's in their Wiki.

Thanks, I found it at the following:
https://www.bogleheads.org/forum/vie...php?f=1&t=6212


I will use this BH template as it seems very well organized.

[JustKickItForward]

Questions below (@ the end)



Emergency/Expense funds: $100,000 split equally four ways in one Money Market and three laddered CD’s (expect to use $25,000/yr to pay expenses. Will replenish maybe once every one to four years by redeeming from investments (ideally when markets are deemed high))
Children’s College (two kids): $200,000 (75% in CDs, 25% in 529s with Target Year 2020)
Debt: NO DEBT, JUST PAID OFF HOME (worth $750k, conservatively)
Tax Filing Status: Married Filing Jointly
Tax Rate: 12% Federal, xx% State
State of Residence: CALIFORNIA
His Age: 50
Her Age: 49
Children: TWO, high school senior and junior, college-bound. Expect to pay for their used cars and car insurance until approximately 2026
Plan to spend approximately $15,000 in 2020 for kids’ first cars
Desired Asset allocation: UNKNOWN <one main reason for this post>
Desired International allocation: UNKNOWN <one main reason for this post>
Total Annual Expense (includes property tax, home insurance, HOA fees, vacations, groceries, car insurance, entertainment, etc.): $51,000
His Employment: currently retired (age 50), possibly work part time until age 55 (2024) with goal of take home $8500/yr
Her Employment: take home approx. $22,700/yr. Will stop work at age 55 (2025)
His Pension: $24,000/yr starts in 2024 (no COLA, will pass 100% to her)
Her Pension: $1,200/yr starts in 2025
His SS $30,800/yr starting in 2036
Her SS $9,000/yr starting in 2032


Long Term Care policy - none


His life insurance - $250,000 universal life

Her life insurance - $250,000 universal life


Current retirement assets
Taxable
2.1% Janus Henderson Forty D Shr JFRDX $32,395.79
5.3% Janus Henderson Research D Shr JNRFX $80,677.99
1.6% Vanguard Mid-Cap Index Fund Admiral VIMAX $24,520.87
1.4% Vanguard Total Stock Market Index Fund Admiral VTSAX $20,719.34
0.7% WASATCH MICRO CAP VALUE FUND WAMVX $10,165.75
2.4% WASATCH SMALL CAP VALUE FUND WMCVX $36,255.48
1.7% WASATCH CORE GROWTH FUND WGROX $26,610.11


His Roth IRA
1.0% Janus Henderson Forty D Shr JFRDX $15,201.85
0.9% Janus Henderson Research D Shr JNRFX $13,837.00
0.8% Vanguard Wellington Fund Admiral Shares VWENX $12,653.73
0.1% WASATCH-FEDERATED MONEY MARKET $1,425.27
14.7% WASATCH ULTRA GROWTH FUND WAMCX $223,976.63

His IRA
3.0% Vanguard Wellington Fund Admiral VWENX $44,957.46
27.6% Vanguard Federal Money Market Fund $420,162.31

His 401k (may rollover to Vanguard at some point in time)
7.8% FIDELITY RSP TARGET DATE 2035 $118,383.76
4.6% FIDELITY RSP LARGE STK INDEX $70,132.03
2.9% FIDELITY RSP INT'L STK INDEX $44,514.15
1.8% FIDELITY RSP SMALL STK INDEX $28,126.89
1.1% FIDELITY RSP WORLD STOCK INDX $17,417.91
0.9% FIDELITY RSP MONEY MARKET $12,974.95
0.6% FIDELITY RSP TARGET DATE 2030 $9,619.58
0.2% FIDELITY RSP BOND INDEX $3,383.83

Her Roth IRA
6.8% AMERICAN FD MUTUAL FD CL F1 AMFFX $104,286.14
7.0% Janus Henderson Growth And Income Fund JAGIX $106,979.02
0.2% Schwab Cash and Money Market Fund $2,867.61

Her IRA
0.4% iShares Edge MSCI USA Value Factor ETF VLUE $5,776.44
0.2% iShares Edge MSCI Intl Value Factor ETF IVLU $3,543.94
0.0% Schwab Emerging Markets Equity ETF SCHE $682.29
0.3% Schwab Fundamental US Small Company ETF FNDA $4,329.00
0.1% Schwab Intermediate-Term US Trs ETF SCHR $1,367.50
0.1% Schwab Short-Term US Treasury ETF SCHO $1,665.18
0.4% Schwab US Aggregate Bond ETF SCHZ $5,887.84
0.3% Schwab US Large-Cap Value ETF SCHV $4,662.00
0.1% Schwab US TIPS ETF SCHP $1,445.86
0.1% Schwab Cash and Money Market Fund $1,895.05

Her 403b
0.7% FIDELITY PURITAN FPURX $10,116.64
0.0% FIDELITYGOVT MMRK PRM FZCXX $330.56


Total $1,523,947.75


Contributions

New annual Contributions
$6000 his Roth IRA (used funds from either selling of taxable funds and/or from Emergency/Expense funds). Will contribute until she stops working in 2025
$6000 her Roth IRA (used funds from either selling of taxable funds and/or from Emergency/Expense funds). Will contribute until she stops working in 2025

Other
Perform IRA conversions to Roth IRA when room exists in the 12% Fed tax rate (like last year when we only made $45,000, so we converted IRA’s to Roth IRAs. Preferably do this during down markets.

Questions:
1. How to best allocate the $420k in His IRA at Vanguard? The suggested allocation from Vanguard’s cookie cutter plan to achieve a 65%/35% (stock/bond) split is:
Vanguard Total Stock Market ETF VTI $163,831
Vanguard Total International Stock ETF VXUS $109,221
Vanguard Total Bond Market ETF BND $102,920
Vanguard Total International Bond ETF BNDX $44,108


2. Has anyone heard of or tried that one approach (created by some professor) of splitting a portfolio into 12 equal groups, each at 8.33% of the portfolio. The 12 groups include gold, REITS, international, domestic, etc. and sounds solid. The idea in any given year, one or more of the 12 will have a spectacular performance, smoothing out the

3. Any comment/concerns/questions on the approach outline above?

[brucethebroker]

Quote:

Originally Posted by JustKickItForward I am open to some part time work at a low stress job (like driving a hotel shuttle, etc.) for the next five years until my dear wife also retires would be ideal. Thanks. JKIF (Just Kick It Forward)

Had a snowbird neighbor (he passed recently) who told me he originally moved to that warm weather location needing a little extra $ to make retirement work. Worked as a PT shuttle driver (about 2 miles, from hotel to the private beach) for a luxury hotel nearby. Was employed 5 years and loved it-enjoyed "chatting up" the passengers. He finally decided he no longer wanted to work at anything and fully retired. Sounded like a pretty nice gig.

[DrRoy]

Quote:

I wouldn't think 65/35 at age 50 is "very aggressive"

+1

[target2019]

Quote:

Originally Posted by JustKickItForward Questions below (@ the end) Emergency/Expense funds: $100,000 split equally four ways in one Money Market and three laddered CD’s (expect to use $25,000/yr to pay expenses. Will replenish maybe once every one to four years by redeeming from investments (ideally when markets are deemed high)) Children’s College (two kids): $200,000 (75% in CDs, 25% in 529s with Target Year 2020) Debt: NO DEBT, JUST PAID OFF HOME (worth $750k, conservatively) Tax Filing Status: Married Filing Jointly Tax Rate: 12% Federal, xx% State State of Residence: CALIFORNIA His Age: 50 Her Age: 49 Children: TWO, high school senior and junior, college-bound. Expect to pay for their used cars and car insurance until approximately 2026 Plan to spend approximately $15,000 in 2020 for kids’ first cars Desired Asset allocation: UNKNOWN <one main reason for this post> Desired International allocation: UNKNOWN <one main reason for this post> Total Annual Expense (includes property tax, home insurance, HOA fees, vacations, groceries, car insurance, entertainment, etc.): $51,000 His Employment: currently retired (age 50), possibly work part time until age 55 (2024) with goal of take home $8500/yr Her Employment: take home approx. $22,700/yr. Will stop work at age 55 (2025) His Pension: $24,000/yr starts in 2024 (no COLA, will pass 100% to her) Her Pension: $1,200/yr starts in 2025 His SS $30,800/yr starting in 2036 Her SS $9,000/yr starting in 2032 Long Term Care policy - none His life insurance - $250,000 universal life Her life insurance - $250,000 universal life Current retirement assets Taxable 2.1% Janus Henderson Forty D Shr JFRDX $32,395.79 5.3% Janus Henderson Research D Shr JNRFX $80,677.99 1.6% Vanguard Mid-Cap Index Fund Admiral VIMAX $24,520.87 1.4% Vanguard Total Stock Market Index Fund Admiral VTSAX $20,719.34 0.7% WASATCH MICRO CAP VALUE FUND WAMVX $10,165.75 2.4% WASATCH SMALL CAP VALUE FUND WMCVX $36,255.48 1.7% WASATCH CORE GROWTH FUND WGROX $26,610.11 His Roth IRA 1.0% Janus Henderson Forty D Shr JFRDX $15,201.85 0.9% Janus Henderson Research D Shr JNRFX $13,837.00 0.8% Vanguard Wellington Fund Admiral Shares VWENX $12,653.73 0.1% WASATCH-FEDERATED MONEY MARKET $1,425.27 14.7% WASATCH ULTRA GROWTH FUND WAMCX $223,976.63 His IRA 3.0% Vanguard Wellington Fund Admiral VWENX $44,957.46 27.6% Vanguard Federal Money Market Fund $420,162.31 His 401k (may rollover to Vanguard at some point in time) 7.8% FIDELITY RSP TARGET DATE 2035 $118,383.76 4.6% FIDELITY RSP LARGE STK INDEX $70,132.03 2.9% FIDELITY RSP INT'L STK INDEX $44,514.15 1.8% FIDELITY RSP SMALL STK INDEX $28,126.89 1.1% FIDELITY RSP WORLD STOCK INDX $17,417.91 0.9% FIDELITY RSP MONEY MARKET $12,974.95 0.6% FIDELITY RSP TARGET DATE 2030 $9,619.58 0.2% FIDELITY RSP BOND INDEX $3,383.83 Her Roth IRA 6.8% AMERICAN FD MUTUAL FD CL F1 AMFFX $104,286.14 7.0% Janus Henderson Growth And Income Fund JAGIX $106,979.02 0.2% Schwab Cash and Money Market Fund $2,867.61 Her IRA 0.4% iShares Edge MSCI USA Value Factor ETF VLUE $5,776.44 0.2% iShares Edge MSCI Intl Value Factor ETF IVLU $3,543.94 0.0% Schwab Emerging Markets Equity ETF SCHE $682.29 0.3% Schwab Fundamental US Small Company ETF FNDA $4,329.00 0.1% Schwab Intermediate-Term US Trs ETF SCHR $1,367.50 0.1% Schwab Short-Term US Treasury ETF SCHO $1,665.18 0.4% Schwab US Aggregate Bond ETF SCHZ $5,887.84 0.3% Schwab US Large-Cap Value ETF SCHV $4,662.00 0.1% Schwab US TIPS ETF SCHP $1,445.86 0.1% Schwab Cash and Money Market Fund $1,895.05 Her 403b 0.7% FIDELITY PURITAN FPURX $10,116.64 0.0% FIDELITYGOVT MMRK PRM FZCXX $330.56 Total $1,523,947.75 Contributions New annual Contributions $6000 his Roth IRA (used funds from either selling of taxable funds and/or from Emergency/Expense funds). Will contribute until she stops working in 2025 $6000 her Roth IRA (used funds from either selling of taxable funds and/or from Emergency/Expense funds). Will contribute until she stops working in 2025 Other Perform IRA conversions to Roth IRA when room exists in the 12% Fed tax rate (like last year when we only made $45,000, so we converted IRA’s to Roth IRAs. Preferably do this during down markets. Questions: 1. How to best allocate the $420k in His IRA at Vanguard? The suggested allocation from Vanguard’s cookie cutter plan to achieve a 65%/35% (stock/bond) split is: Vanguard Total Stock Market ETF VTI $163,831 Vanguard Total International Stock ETF VXUS $109,221 Vanguard Total Bond Market ETF BND $102,920 Vanguard Total International Bond ETF BNDX $44,108 2. Has anyone heard of or tried that one approach (created by some professor) of splitting a portfolio into 12 equal groups, each at 8.33% of the portfolio. The 12 groups include gold, REITS, international, domestic, etc. and sounds solid. The idea in any given year, one or more of the 12 will have a spectacular performance, smoothing out the 3. Any comment/concerns/questions on the approach outline above?

For each investing account, it will help to add the institution. Add expense ratios for all investments.
- You can do with 2-3 investments for each account.
- Higher expense ratio investments should be traded for the lower cost fund (Wellington), especially in Roth and IRA.
- IRA and Roth should be simplified now, using principles above.
- His IRA you want to invest the large amount in MMF. Wellington by itself will give you the 65/35 you look for. You could also look at adding TSM and TBM in 65/35 proportion.
- if you want REIT, use VG fund in Roth or IRA.
- Your IRA, find one TSM etf and go with that.
- Taxable - be aware that what you sell may throw off a gain, so take baby steps. For CA, look for VG MMF that is tax free for some of that. Some of your choices there are more tax-efficient, some are not.

To guide your transition, no one knows for sure that 3 or 4 or 40 ETFs (for example) is the correct one. You have 37 investments (was) and can easily simplify to 15 (will be). Start with your IRA, which is 2% of all. Pick one investment, and eliminate 25% of your complexity...

But you could use a better idea of where you're going overall, and what moves are required.

[Bamaman]

I try to keep my investments in about 5 accounts--for simplicity sake--not including my liquid funds.

How can you possibly monitor so many investment sources?

Although I'm fully retired, I don't choose to make following my investments a full time job.

[Gumby]

I'm not sure how others do it, but when I consider our portfolio allocation, I consider everything together. That is, we have multiple 401k, 403b, 457 accounts from different employers, and well as IRA and Roth accounts. To achieve a 65/35 split, I need to consider all the assets in all the accounts and the investment alternatives available in each. One big portfolio, as it were; that's how FIRECalc looks at it.

It appears that Vanguard is telling you how to achieve a 65/35 split for only the assets currently in a money market account inside "his IRA", without reference to any other holdings in other accounts. In my view, that is hot helpful advice. You should view your financial affairs in a holistic manner, not in separate silos.

I would be uncomfortable with as many different holdings as you. I just retired two weeks ago and the young wife retired yesterday. My plan over this summer is to consolidate/rollover all our various holdings (by direct trustee to trustee transfer) at Vanguard, so that we have essentially only three accounts. A taxable account (joint), taxable IRA account (his and hers) and Roth account (his and hers). I will then implement the Rick Ferri Core Four portfolio, allocating the various categories of assets in the most tax efficient manner.

PS - Welcome aboard. There are many very knowledgeable, and very helpful, people on this forum.

[JustKickItForward]

Quote:

Originally Posted by Gumby I'm not sure how others do it, but when I consider our portfolio allocation, I consider everything together. That is, we have multiple 401k, 403b, 457 accounts from different employers, and well as IRA and Roth accounts. To achieve a 65/35 split, I need to consider all the assets in all the accounts and the investment alternatives available in each. One big portfolio, as it were; that's how FIRECalc looks at it. It appears that Vanguard is telling you how to achieve a 65/35 split for only the assets currently in a money market account inside "his IRA", without reference to any other holdings in other accounts. In my view, that is hot helpful advice. You should view your financial affairs in a holistic manner, not in separate silos.....

Thanks for confirming the Vanguard Advisor did NOT do as he promised, which was to build a plan to put the $420k in the money market acct inside "his IRA" to work with a holistic view. I will see if this can be corrected.

[JustKickItForward]

Quote:

Originally Posted by target2019 ... - His IRA you want to invest the large amount in MMF. .

What is "MMF" ?


>>>UPDATE: since someone clarified "MMF" is Money Market Fund.

So, why would we want to invest a large amount of"His IRA" , totaling in excess of $465k ($420+$45), in a money market fund?

Quote:

Originally Posted by target2019 ... - Your IRA, find one TSM etf and go with that.

By "Your IRA", are you referring to "His IRA" or "Her IRA" ?

Quote:

Originally Posted by target2019 ... - Taxable - be aware that what you sell may throw off a gain, so take baby steps. For CA, look for VG MMF that is tax free for some of that....

Good point about the a baby steps. What is "VG MMF" ?

[JustKickItForward]

Quote:

Originally Posted by Bamaman ... How can you possibly monitor so many investment sources? ....

Over the years, as new monies came in (like spouse's employment change, etc), situation changed, etc., we started new investments instead of selling existing.

However, along the way, we "rebalanced" by using the nine quadrant stock allocation model from Morningstar (small, med, large vs value, core, growth) to maintain a balance we were comfortable with. We used this method of "rebalancing" since the early 1990's, got comfortable with it and have not changed since.

If it is not apparent, bond holdings and non-US stock holdings was not a part of my focus during the "rebalances" we did over the years. Aside from the Wellington fund, any other bonds and international stocks holdings in my current porfolio is due to them simply being in the mutual funds we selected to maintain our comfortable Morningstar model balance.

Now, that said, I specifically excluded my Fidelity 401k (where the $420k in Vanguard's money market rolled over from) from the Morningstar balance over the past couple of decades because of Fidelity's use of proprietary funds (the various "RSP" holdings in my listed portfolio) which I cannot map in Morningstar. This inability to map (opaque) Fidelity funds to maintain a balance across my entire portfolio is one main reason I am starting to move money from Fidelity to Vanguard.


Hopefully this clarifies 1) why we have so many funds 2) our approach to self driving our portfolio over the years. Side note, the Schwab and iShares listed under "Her IRA" is a bad (in hindsight) attempt to bring onboard a financial advisor - that is his thought into a balanced portfolio without looking at the holistic picture (ignoring our other non-Schwab holdings). I will deal with that $30k Schwab account at a later date.

[JustKickItForward]

Quote:

Originally Posted by brucethebroker Had a snowbird neighbor (he passed recently) who told me he originally moved to that warm weather location needing a little extra $ to make retirement work. Worked as a PT shuttle driver (about 2 miles, from hotel to the private beach) for a luxury hotel nearby. Was employed 5 years and loved it-enjoyed "chatting up" the passengers. He finally decided he no longer wanted to work at anything and fully retired. Sounded like a pretty nice gig.

May I ask what "that warm weather location " was ?


On a side note, if not obvious, one (of several) reason I did not mention on why I wouldn't mind the PT gig is to minimize digging into our portfolio this early in our transition to retirement, basically to give it time to work/grow.