1st time poster, Vanguard AA

[tickgoestheclock]

1st time, thought I best try a new thread vs clog up someone elses. Hear goes:: Would appreciate the community input, I know there are stong feelings in the 3 fund index etc..

Wife and I are 51 today and plan to work 4 more years Retire by Jan 2018 with the target AA below,

Intent is to enjoy life off the taxible account for as long as possible with ~6% withdrawl rate on that account (Less than 4% overall)

If the taxible account strategy holds up we could delay tapping into Tax deferred and SS untill 2030 at 67 years old or even 2033 at 70 years old

I realize our AA is aggressive, untill this year we were over 90% equities (always have been) infact right now we are still 84% not including property..

I have not made the move to Wellesley yet, that 30% is still all in Midcaps (doing quite well, but also a bit risky)

I like the Vanguard Managed Funds in our Tax Deferred as long term they seem to do well, need tax effeciency in the other account so all big index funds.

If we move out of Calif-tax-ornia I will shift the Calif tax exempt muni to short term investment grade, I need it now while working as we are in the top tax bracket

$ 1,000,000 equity in 2 homes one is rental that nets $10K/yr
$ 3,000,000 equity in Vanguard expected by Jan 2018

$ 1,000,000 Tax Deferred Accounts (starting allocation, reballance yearly, shift to more Wellesley over time if confidence in bonds returns)

$ 150,000 15%VWILXVanguard International Growth: Managed can include emerging
$ 400,000 40%VWENXVanguard Wellington Fund Admiral: Managed Large / Bond blend 65/35
$ 300,000 30%VWIAXVanguard Wellesley Income Admiral: Managed Large / Bond blend 35/65
$ 150,000 15%VASVXVanguard Select Value: Managed midcap
100%

$ 2,000,000 Taxible Accounts (starting allocation, reballance yearly keeping 1 year in Prime and 4years in Muni, may increase holdings for inflation)

$ 120,000 6%VNNXXVanguard Prime Money Market (spending for current year starting 2018)
$ 480,000 24%VCAIXVanguard Calif IT tax exempt Mnui (spending for years 2-5)
$ 400,000 20%VTIAXVanguard Total International Stock Index Admiral
$ 1,000,000 50%VTSAXVanguard Total Stock Market Index Admiral
100%

Starting AA 70/30 at 55 shift to 60/40 by 60 shift to 50/50 by 70 shift to 60/40 by 80

51%US
18%InternationalCould be higher as the Wellington and Wellesly can invest international
27%Bond
4%Cash
100%

 

[pb4uski]

Those AAs seem appropriate for those ages. You might find this link interesting, particularly the graph at the bottom of the page.

I would consider having all fixed income in tax-deferred (especially if your 401k offers a stable value fund) and all international equities in taxable accounts (to take advantage of foreign tax credit) for tax efficiency purposes. Also see Principles of tax-efficient fund placement - Bogleheads

Have you had Vanguard do a personal financial plan for you?

 

[Animorph]

I don't see anything that stands out to me. For reference, I'm nominally 100% equities, retired, but DW still working PT.

You have a perfect setup for Roth conversions after you retire. That will reduce your tax-deferred tax rates, reduce RMD's (and taxes on them), and transfer some of your taxable value into the Roth (same account value, but after-tax instead of taxable).

 

[Midpack]

I'm not sure this community has strong feelings for the "3 fund index" approach specifically. I'd describe the basic tenets as (much like John Bogle and others have recommended for decades):

• Determine an asset allocation based on risk tolerance and goals, and maintain it via rebalancing. Change asset allocation only as circumstances change (age, need for risk, etc.)
• Build a portfolio made up of low expense ratio passive/index funds. Often along the lines of the many "lazy portfolios" using as few as 2-3 funds or up to 10-12.
• Invest for the long term. Understand market history well enough to not monkey around and do anything rash when markets inevitably rise and fall, sometimes dramatically/suddenly.

I hold 11 funds only for small, value, emerging markets tilts, so I slice-n-dice more than 3 funds. To be honest, my returns provide only (very) slightly better returns than a 3 fund, with slightly less risk (std dev). I expect to hold fewer funds, not more, in the many years ahead. But I don't see anything wrong with what you've laid out, the end result is consistent with many folks here.

I did get tired of earning nothing on VMMXX and moved all our cash to Ally. 0.90-1% is better than nothing...

 

[tickgoestheclock]

Thanks to all the "Quick Replies" !! I already went and looked at the chart you can move the curser on recommended by pb4uski,,, and yes to ROTH conversions when the rules let me do it is in the plan animorph,,, Midpack I have looked at the lazy portfolios and agree that for my situation as well I need (want) more than 3. The thing that sent me to post on this site is (1) I dont want to pay an advisor 1% or more, (2) while I want to be tax effecient my taxible account is larger and I will need liquidity in it to cove me for 12-15 years untill I tap the 401K that is the ballance I am looking for..

 

[Animorph]

Thanks to all the "Quick Replies" !! I already went and looked at the chart you can move the curser on recommended by pb4uski,,, and yes to ROTH conversions when the rules let me do it is in the plan animorph,,, Midpack I have looked at the lazy portfolios and agree that for my situation as well I need (want) more than 3. The thing that sent me to post on this site is (1) I dont want to pay an advisor 1% or more, (2) while I want to be tax effecient my taxible account is larger and I will need liquidity in it to cove me for 12-15 years untill I tap the 401K that is the ballance I am looking for..

You can keep cash and bonds in retirement accounts and still use them for current expenses. It's not too difficult to sell some taxable equity shares for cash in the taxable account and buy the same shares in the retirement account. That simply transfers cash from the retirement account to the taxable account without shifting your AA. One complication is a wash sale if you have to sell for a taxable loss. In that case you hove to buy something slightly different.

On the other hand, your bonds were CA Munis, so holding them in a taxable account seemed fine. If you held bonds in the retirement account you might be able to diversify that.

Same thing with the MM account. It would be nice not to pay tax on the interest, but the interest will be so small (currently) that it's not a big deal sitting out in the taxable account.

 

[LOL!]

You might as well ask the folks at Bogleheads Investing Advice and Info too. But maybe read at least 50 of the posts over there first.

 

[NanoSour]

I did get tired of earning nothing on VMMXX and moved all our cash to Ally. 0.90-1% is better than nothing...

Midpack, any problems with using Ally? Thinking of moving our cash out of VMMXX also.

 

[Midpack]

Midpack, any problems with using Ally? Thinking of moving our cash out of VMMXX also.

Nope, easy-peasy. Many others here seem to have gone to Ally (among other options) for pure liquid cash. I kept waiting for Vanguard to offer similar rates somehow (not via VMMXX), and finally gave up. I assume there's some technical reason they can't...

 

[NanoSour]

Nope, easy-peasy. Many others here seem to have gone to Ally (among other options) for pure liquid cash. I kept waiting for Vanguard to offer similar rates somehow (not via VMMXX), and finally gave up. I assume there's some technical reason they can't...

Thanks....just signed up. Every little bit helps.