My Investment Plan/Asset Allocation

[Frenchy1011]

I wanted to see if I could get some feedback on my distribution and investment plan that I have added below. Any thoughts and criticism would be appreciated. Thanks!

 

1) Roth IRA --- Vanguard Total U.S. Stock VTSMX (comes to 11.765% of our assets)

 

2) Spousal Roth IRA --- REIT Index VGSIX (comes to 11.765% of our assets)

 

3) Non-Governmental 457(b) --- Vanguard Total International Stock Index Admiral VTIAX (only putting 9K out of possible 18K at this time, coming to 19.25% of our assets)

 

4) Employer-Contributed 403(b)

A) Vanguard Institutional Index I VINIX (43.91% of the 403(b) to come to 25.125% of our assets)

B) Vanguard Extended Market Index Inst VIEIX (10.30% of the 403(b) to come to 5.85% of our assets)

C) Vanguard Total International Stock Index Admiral VTIAX (10.836% of the 403(b) to come to 6.2% of our assets)

D) Metropolitan West Total Return Bond Fund MWTSX (34.954% of the 403(b) to come to 20% of our assets)

 

This all comes out to:

U.S. Stock: 42.78%

International Stock: 25.45%

U.S. Bond: 20%

REIT: 11.765%

 

Thoughts?

 

[Peds]

if thats the AA you want and split the way you want, then great.

is that your best bond option?

does your spouse have any retirement accounts?

also may as well max out the 457.

[Frenchy1011]

Peds wrote:

is that your best bond option?

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Unfortunately yes. There is the MWTSX, then there is the FTGLX (Federated Total Return Govt R6 Fund), and a Vanguard TIPS fund. That's it for Bond funds in my 403/457 acct. I haven't found a good way to try and allocated my bond assets into a Total Bond Fund yet (only availability would be into my Roth accts, which I wanted to save for the higher return funds. Kind of a bad situation, makes me wonder why my employer fund options are not better when it comes to bonds.

Peds wrote:

does your spouse have any retirement accounts?

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She does not, other than the Spousal Roth IRA that we have in her name.

Peds wrote:

also may as well max out the 457.

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I definitely am planning to once I can afford to do so.

[PhysicianOnFIRE]

Looks good based on the options from your other recent post.

One thing to watch out for when you have enough money to start a taxable account is to set up your portfolio in a way that allows you to tax loss harvest without triggering wash sales by automated investing (or reinvestment of dividends) in the tax advantaged accounts.

I do this by not holding substantially identical funds (to what I hold in taxable) in the tax advantaged accounts. I keep small and mid-caps in the tax advantaged accounts and swap between S&P 500 and Total Stock Market in taxable. I also swap between different international funds in taxable.

Cheers!

-PoF

[Frenchy1011]

PhysicianOnFIRE wrote:

Looks good based on the options from your other recent post. One thing to watch out for when you have enough money to start a taxable account is to set up your portfolio in a way that allows you to tax loss harvest without triggering wash sales by automated investing (or reinvestment of dividends) in the tax advantaged accounts. I do this by not holding substantially identical funds (to what I hold in taxable) in the tax advantaged accounts. I keep small and mid-caps in the tax advantaged accounts and swap between S&P 500 and Total Stock Market in taxable. I also swap between different international funds in taxable.

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Thanks for the information. Definitely will be good to know when I am able to save enough to start that taxable account. I'm glad you think that this allocation is reasonable, I definitely value your opinion.

[ENT Doc]

PhysicianOnFIRE wrote:

Looks good based on the options from your other recent post.

One thing to watch out for when you have enough money to start a taxable account is to set up your portfolio in a way that allows you to tax loss harvest without triggering wash sales by automated investing (or reinvestment of dividends) in the tax advantaged accounts.

I do this by not holding substantially identical funds (to what I hold in taxable) in the tax advantaged accounts. I keep small and mid-caps in the tax advantaged accounts and swap between S&P 500 and Total Stock Market in taxable. I also swap between different international funds in taxable.

Cheers!

-PoF

Click to expand...

PoF, so a wash sale determination isn't based on the flow of cash from the actual sale?  I guess this makes sense, but can't the IRS easily see that the dividends were clearly set up for reinvestment separately in another fund within the tax deferred account and that there were no additional cash purchases in the taxable fund that you sold?  Does this mean you stop dividend reinvestment for the taxable fund that you sold when you TLH?  Also, is the wash sale algorithmic and built into every trading platform that will recognize if you have done so or not (and thus generate the capital loss on your tax forms) or is this just precautionary in case the IRS comes knocking?  I haven't done TLH yet and am looking to do so this year (if the opportunity arises).  I was wondering about the S&P vs Total Stock fund.  I hold both in my taxable account in preparation for TLH.  But they are very similar.  Is it written somewhere where the IRS has deemed these substantially different?  Sorry for all the questions.  Thanks!

[PhysicianOnFIRE]

ENT Doc wrote:

PhysicianOnFIRE wrote:

Looks good based on the options from your other recent post.

One thing to watch out for when you have enough money to start a taxable account is to set up your portfolio in a way that allows you to tax loss harvest without triggering wash sales by automated investing (or reinvestment of dividends) in the tax advantaged accounts.

I do this by not holding substantially identical funds (to what I hold in taxable) in the tax advantaged accounts. I keep small and mid-caps in the tax advantaged accounts and swap between S&P 500 and Total Stock Market in taxable. I also swap between different international funds in taxable.

Cheers!

-PoF

Click to expand…

PoF, so a wash sale determination isn’t based on the flow of cash from the actual sale?  I guess this makes sense, but can’t the IRS easily see that the dividends were clearly set up for reinvestment separately in another fund within the tax deferred account and that there were no additional cash purchases in the taxable fund that you sold?  Does this mean you stop dividend reinvestment for the taxable fund that you sold when you TLH?  Also, is the wash sale algorithmic and built into every trading platform that will recognize if you have done so or not (and thus generate the capital loss on your tax forms) or is this just precautionary in case the IRS comes knocking?  I haven’t done TLH yet and am looking to do so this year (if the opportunity arises).  I was wondering about the S&P vs Total Stock fund.  I hold both in my taxable account in preparation for TLH.  But they are very similar.  Is it written somewhere where the IRS has deemed these substantially different?  Sorry for all the questions.  Thanks!

Click to expand...

Purchases of "replacement shares" of a substantially identical fund 30 days before or after taking a loss will trigger a wash sale. How the broker keeps track will vary. It may be up to you to report a wash sale to the IRS that you discover.

Best practice (to avoid wash sales) is to turn off automatic reinvestment in all taxable funds and direct dividends to a money market account (I use VMFXX). Reinvest in a single fund of your choice when you receive your dividends (quarterly for most stock funds).

S&P 500 and Total Stock Market track similarly, but TSM holds thousands of additional stocks; they make excellent trading partners and you won't risk a wash sale with those two.

 

Best,

-PoF

 

 

[ENT Doc]

Interesting.  Thank you.  So doesn't matter what account the replacement shares are purchased in or where the cash came to do that - all the IRS cares about (it seems) is that the same/similar stock/fund was purchased regardless in that 30/30 day window.  Looks like I have some buying/selling to do to set this up better.

[Hatton]

Be sure to set up the specific lot ID at vanguard so you sell just your losing lots. Sometimes only part of a position needs to be sold.

[Hatton]

Frenchy I like that you put your reits into your roth

[Virajith Wijeweera]

Your overall AA looks fine.  If you care to get more detailed, you may also want to look at how much you have in small, mid, and large and even growth vs. value.

You may want to look into a Self-Directed Brokerage Account (if allowed) for your workplace retirement plan accounts if you have a limited selection of options.  SDBA's definitely give you more investment options.

 

[PhysicianOnFIRE]

ENT Doc wrote:

Interesting.  Thank you.  So doesn’t matter what account the replacement shares are purchased in or where the cash came to do that – all the IRS cares about (it seems) is that the same/similar stock/fund was purchased regardless in that 30/30 day window.  Looks like I have some buying/selling to do to set this up better.

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Correct. It's not perfectly clear from IRS language, but better safe than sorry.

I've been meaning to write up a big post on TLH, but the last time I had the opportunity to actually TLH in my Vanguard account was early November, and I lost the screen shots. For better or worse, a good opportunity hasn't presented itself in nearly five months since.

 

 

[Frenchy1011]

hatton1 wrote:

Frenchy I like that you put your reits into your roth

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Great thanks!

[Frenchy1011]

Virajith Wijeweera wrote:

Your overall AA looks fine. If you care to get more detailed, you may also want to look at how much you have in small, mid, and large and even growth vs. value. You may want to look into a Self-Directed Brokerage Account (if allowed) for your workplace retirement plan accounts if you have a limited selection of options. SDBA’s definitely give you more investment options.

Click to expand...

Thanks I'll definitely look into that. I think overall the funds are fine, the only thing I wish they had was more bond options, and a total bond market would be best but splitting my relatively low allocation (20% of portfolio) to the MWTSX and FTGLX should be fine for me for the time being. Once I start wanting to put more into bonds as I get a bit older, I'll need to re-evaluate probably.