explanade
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- May 10, 2008
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Since they provide it for free and since I've never really gone through the exercise, I went through the process.
So they recommend going from 23/28/49 (stocks/bonds/short-term reserves) to 60/40 (stocks/bonds).
For the period from 1926 to 2009, my current allocation averages 6% return while the target allocation averages 8.7%.
Best year 19% (1982) vs. 36.7% (1933)
Worst year -9.9% (1931) vs. -26.6% (1931)
Years with loss 10/84 (11.9%) vs. 21/84 (25%)
By sectors:
Individual stocks 4% vs. 0%
US Large 7% vs. 33%
US Mid/Small 6% vs. 15%
International 7% vs. 12%
Short-term bonds 2% vs. 0%
Intermediate-term 24% vs. 40%
Long-term/High-Yield 1% vs. 0%
Short-term reserves 49% vs. 0%
They suggest an Integrated or Consolidated Portfolio. The latter promises lower annual costs, greater tax-efficiency and simplicity. Here is the table of current vs. integrated vs. consolidated:
Number of holdings 43 38 14
Projected annual costs $2600 $5700 $5400
Avg. Net expense ratio .15% .33% .31%
Taxable capital gain N/A ($10k) ($3200)
to implement
Already have big holdings with VG, approximately $900k out of $1.4 to $1.5 million in taxable assets. 401K and IRA add another $250-300k.
So the biggest suggestion is to move $556k or $644k into Total Stock Market Index Fund Admiral Shares and move all or most of my 401k to "Intermediate-Term Bond Fund" depending on whether I choose integrated or consolidated portfolio and about 1/6 in to a "Developed International Fund"
In the questionnaire they ask at what age you want to retire and what you want for annual income. I put down 55 (currently 49) said about $70k (probably should have put a little more).
So given that, they list the projected balances at retirement (5-6 years away) for Integrated vs. Consoidated portfolios:
Best scenario: $3,914,400 $3,918,900
Avg. scenario: $2,536,700 $2,539,600
Worst scenario: $1,315,000 $1,316,500
Then they list the approx. amount needed by retirement of $1,379,500 (which seems real low, considering I already have more than that.).
They also have a "Estimated amount you will accumulate at current savings rate" for which they cite my 401k contributions and match and IRA. The figures are $2,536,700 for Integrated Portfolio and $2,539,600 for Consolidated, which match the "Average Scenario" above.
Those figures are about 50% higher than my current assets so assume about a 10% growth per year, it seems, which is higher than the average 8.7% annual return of a 60/40 allocation.
Should I be surprised/concerned that they'd have me move money from other investments into VG funds?
Or the big reliance into large-cap, especially their Total Stock Market Index fund?
So they recommend going from 23/28/49 (stocks/bonds/short-term reserves) to 60/40 (stocks/bonds).
For the period from 1926 to 2009, my current allocation averages 6% return while the target allocation averages 8.7%.
Best year 19% (1982) vs. 36.7% (1933)
Worst year -9.9% (1931) vs. -26.6% (1931)
Years with loss 10/84 (11.9%) vs. 21/84 (25%)
By sectors:
Individual stocks 4% vs. 0%
US Large 7% vs. 33%
US Mid/Small 6% vs. 15%
International 7% vs. 12%
Short-term bonds 2% vs. 0%
Intermediate-term 24% vs. 40%
Long-term/High-Yield 1% vs. 0%
Short-term reserves 49% vs. 0%
They suggest an Integrated or Consolidated Portfolio. The latter promises lower annual costs, greater tax-efficiency and simplicity. Here is the table of current vs. integrated vs. consolidated:
Number of holdings 43 38 14
Projected annual costs $2600 $5700 $5400
Avg. Net expense ratio .15% .33% .31%
Taxable capital gain N/A ($10k) ($3200)
to implement
Already have big holdings with VG, approximately $900k out of $1.4 to $1.5 million in taxable assets. 401K and IRA add another $250-300k.
So the biggest suggestion is to move $556k or $644k into Total Stock Market Index Fund Admiral Shares and move all or most of my 401k to "Intermediate-Term Bond Fund" depending on whether I choose integrated or consolidated portfolio and about 1/6 in to a "Developed International Fund"
In the questionnaire they ask at what age you want to retire and what you want for annual income. I put down 55 (currently 49) said about $70k (probably should have put a little more).
So given that, they list the projected balances at retirement (5-6 years away) for Integrated vs. Consoidated portfolios:
Best scenario: $3,914,400 $3,918,900
Avg. scenario: $2,536,700 $2,539,600
Worst scenario: $1,315,000 $1,316,500
Then they list the approx. amount needed by retirement of $1,379,500 (which seems real low, considering I already have more than that.).
They also have a "Estimated amount you will accumulate at current savings rate" for which they cite my 401k contributions and match and IRA. The figures are $2,536,700 for Integrated Portfolio and $2,539,600 for Consolidated, which match the "Average Scenario" above.
Those figures are about 50% higher than my current assets so assume about a 10% growth per year, it seems, which is higher than the average 8.7% annual return of a 60/40 allocation.
Should I be surprised/concerned that they'd have me move money from other investments into VG funds?
Or the big reliance into large-cap, especially their Total Stock Market Index fund?