Long time lurker, first time posting, admitted novice. I'm in need of your advice... as in, what would you do in my situation.
I'm a 33 y/o male, engaged to be married in April of 2013 to a 31 y/o female. I'm about to receive an inheritance of around $250,000. Please take into account our current situation of being single, and near future marriage (and hopefully 1-2 kids starting 2-5 years from now).
My investment goals:
50%US, 50% foreign
Small cap and value tilt on US stocks
Retire at age 65 with 70K/yr (as a very realistic goal, I'm shooting for 50 y/o though), 4% withdrawal rate from savings, own my home free and clear, own 5 rental properties free and clear that average $4,000/mo in rent, giving about $2,000 in cash flow per month, or $24,000/yr in cash flow (all in 2012 dollars), .
$250,000 in inheritance
Stable job, earn $132K/yr or 28% tax bracket while single (live in FL, no state tax)
: $16,250 sitting in a checking account, making next to nothing (still deciding what to do here to better store my emergency funds)
I am just now adding 17K to this. I had to wait till June in order to get the match after 1 yr of employment. They match $0.50 for every $1 up to 6%, and automatically put 1.25% of salary with 100% vested interest after 3 yrs.
Here are low cost funds available to purchase…
Low ER funds:
Vang Tot Bnd (VBTSX) - tracks the Barclay Cap Aggregate Bnd Index - ER 0.11%
Vang Instl Index (VINIX) - tracks the standard and poor 500 - ER 0.04%
Vang Md-Cp Idx (VMISX) tracks the MSCI US Mid Cap 450 Index - ER 0.12%
Vang Dev Mkts (VDMAX) - tracks MSCI EAFE Index - ER 0.12%
Others to consider:
Vang Windsor II (VXNAX) - Large and Mid-Cap Value - ER 0.27%
Vang SC Val Idx (VISVX) - track the MSCI US Small Cap Value Index - 0.37%
Vang SC Growth (VSGIX) - tracks MSCI Small Cap Growth Index - 0.08%
My plan was to use the 17K (really about $20,960 after match) with this split and without taking out expense:
38% in VDMAX ($7,964)
25% in VINIX ($5,240)
25% in VMISX ($5,240)
12% in VBTSX ($2,515)
What I have so far:
BND Vanguard Total Bond Market Etf $10,193.04
VNQ vanguard reit index fund $5,506.23
vanguard total stock market index fund (VTI) $33,648.64
vanguard small-cap value index fund (VBR) $11,579.34
Vanguard Intl Equity Ind Fd (VEU) $47,238.40
vanguard total stock market index fund (VTI) $2,917.12
What it looks like at the end of this year if goes as planned:
Name Dollar amount % of total Total dollars
vti $36,565.76 28% $132,041.77
vbr $11,579.34 9% Total breakdown
veu $47,238.40 36% 44% US stocks, 44% International stocks, 10% Bonds, 4% REITs
bnd $10,193.04 8%
vnq $5,506.23 4%
vdmax $7,964.00 6%
vinix $5,240.00 4%
vmisx $5,240.00 4%
vbtsx $2,515.00 2%
I own a recently rehabbed duplex worth around $165K, paid $158,200 with 3% down on a FHA loan at 4.35% on Oct 2011. The remaining balance is $152,064. The monthly breakdown is $769.78 for the mortgage, $145.19 for PMI and taxes and insurance make a total of $1,199/month. It is a 3/2 that I rent out for $1,225 and I live in the 1/1. Once I move in with my fiancé (she wants to wait till after marriage even though there is a higher cost of living), I should be able to get $575-600 in rent. So about $1,800/mo rent for $1,200/mo PITI.
Also, I keep a CYA account
in my checking of 6 months rent for each rental property (right now it is $7,358) for future maintenance.
: $128,039.50 at 3.25%. Monthly payments are $631.38 ($7576.56) I have another 28 yrs on the loan.
I just started working for a non-profit hospital, which means I may be able to receive loan forgiveness on the remaining balance after 120 consecutive payments (10 yrs). I am also trying to lower my monthly payment in order to take advantage of this program. I chose a graduated increase in monthly payments to best take advantage of this program. Here is how my new payment structure will look like:
Period (years) Monthly Payment Annual Payments
1 - 2 $340.91 $4090.92
3 - 4 $365.58 $4386.96
5 - 6 $392.04 $4704.48
7 - 8 $420.41 $5044.92
9 - 10 $450.84 $5410.08
I own a 2006 scion tC (2 door, small car) free and clear. I plan on driving it for another 5 years or more if there are no major expense or if it becomes a hassle with future kids.
Credit score: 780-800
Stable job, earns 40K/yr or 25% tax bracket (lives in FL, no state tax)
: none really. Has close to $1K in checking that she uses to stay ahead of bills. Mostly month to month.
401K previous employer
401K current employer
Right now, not maxing company matching. Company matches $0.50 for every $1 up to 6% in 401K.
No Roth IRA.
No student loans or cc debt
She owns a 3/2 SFH worth $115K, paid $112K with 10% down on a conventional loan at 4.75% in 2010. The remaining balance is $ 100,000. I’m not sure of her monthly breakdown, but is 1.5 yrs into her 30 yr note and does have PMI on her home as well. She was renting a room for $600/month, but no longer has a roommate. The house could rent for $1050-$1100/mo and cost about $850 PITI.
2006 Ford Explorer with 12 months of payments left at 9% interest.
Credit score: 760-780
I am encouraging her to try to save money (like let me buy dinners, etc.) to get the full match of her 401K and pay, contribute to Roth IRA. "My" money and "her" money won't become "our" money till after marriage, so that's when I will help accomplish these goals and bring her 401K in line with our overall investment plan. Right now she has active management on both her 401K’s.
After getting married (her parents are paying, we might have to chip in about 2K), we are going to initially move into her place. On one hand, it makes sense since my duplex can cover itself, including monthly payments going towards future expenses. With her mortgage being so low, it wouldn't take long to pay off the total balance. However, I would like to move to a neighborhood that is more convenient of a drive to work for the both of us, and has great public schools for future kids. While I'm not in a rush to buy a new place, with prices and mortgage rates so low, it's tempting to make that move now and add her place as a rental property as well. These houses range from 200-250K.
Another consideration... we will still have another 30K after tax, after cost of living money to invest after the 401K, 403b and both Roth IRA’s are maxed out (though this will be less once the kids come along).
1) How would you use the inheritance? Pay off my place, her place, both places, student loans, her car, buy a new place to live in with all cash? Or just add to taxable account?
2) Would you try for some sort of hybrid... for instance, do a no cost refi on both places, put enough down to get rid of PMI on both places, change the loans from a 30 to a 15 yr. note, etc.
3) Real estate is still at a bargain in FL (my opinion)... would you use the $ to pick up a couple of rental properties? I can get a place for around 40-50K after rehab value that rents for $650-$700. I'm renting a place now (and have done so in the past), so I have some idea as to time/money invested of being a landlord.
4) Is my portfolio too aggressive with such a high foreign %, small cap tilt and low bond %? How would you adjust the asset allocation and/or location of the funds?
5) Would you do anything else for the emergency fund and CYA funds for the rental properties? CD ladder, I-Bonds, Money Market?
6) Have her do a rollover from previous 401K to a IRA?
Before you answer, we've discussed moving in together before marriage and she doesn't want to. We've also agreed on doing a prenuptial agreement.
Thank you so much for all of your help.