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Should I simplify the redundancy of my investments?

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  • Should I simplify the redundancy of my investments?

    I am wondering if I should simplify my holdings (100% Target Date Retirement or 100% VTI) or just keep as is??

    I am 34 years old with a working spouse (80k/year, non-medical) about to start a 1 year Fellowship and trying to get my finances in order prior to those first big attending paychecks. Nobody taught me anything about personal finance in school or training so during residency I accumulated fairly redundant assets:

    All accounts are at Vanguard (about $120k total)
    • Roth IRA: 100% Vanguard Target Date Retirement 2055 (VFFVX)
    • Spouse Roth IRA: 100% Vanguard Target Date Retirement 2050 (VFIFX)
    • Individual 401K (from moonlighting as a resident): 100% Vanguard 500 Index (VFIAX)
    • Governmental 457b: INVESCO Stable Asset Fund (will soon convert this to Roth or rollover to a new tax deferred IRA)
    • Taxable Brokerage: 70% Total Stock (VTI), 30% Total Intl Stock (VXUS). Its' not much but we've been using this account to save for a home downpayment in 5 years or so, it's done well and will change it to something low risk soon (money market, CDs, high yield savings, etc) so we have the money when we need it.
    • Cash (checking/savings/emergency fund): $25k (having our second child soon and moving across the country, figure it would be good to have some extra cash on hand for that)
    • Federal Student Loans: $150k (networth of $0 if I include our cars, which we own, yay!!)

    Simplify my holdings (100% Target Date Retirement or 100% VTI) or just keep as is??

    Thanks, I'm learning so much from this forum and WCI! I'd like to get that free Fire Your Financial Advisor course promotion right now, but not sure I'm ready to refinance my federal loans till end of Fellowship once I find a job.

  • #2
    In the long run, simplifying is good. From what I see, it is pretty simple as presented. Agree with taking some risk off the table in the taxable account if you are planning to use the funds to buy a home in the next 3-5 years. Well done!

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    • #3
      Assuming you are in a one year fellowship, then will have 4 years of attending level paychecks before you need money for your down payment:

      I would keep the taxable account as is, and not move it to anything "safer". You can start saving for a downpayment for the house once you make attending salary, and I will assume the difference between fellowship and first attending year's paychecks will be >> whatever is in your taxable account right now. You want the money in the taxable account to be able to grow for 20-30+ years, dont take money out now unless its an emergency.

      Keep reading on this forum and the blog, also check out POF's website. The 4 physicians series is a great read.
      Read "A simple path to wealth" by JL Collins.
      Your investment holdings are simple enough, I don't think you need to go 100% in a target date fund or 100% in VTI. Having some international (imho) is ok. You can browse the blog post of the "100 (150?) portfolios better than yours".

      Save at least 20% gross for retirement once you're an attending. Figure out your student loans repayment options. Live like a fellow/resident for 1-2 more years and you will be golden.

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      • #4
        Not a fan of TDF’s, but you could do worse, so I’m not going to rag on you for that. A little concerned about your e-fund ($25k) given your move and 1 add’l yr of fellowship, but you’ll prolly be fine. Don’t invest for money you’ll need in the next 5 yrs, just commit to high cash savings once you’re an attending. As billy said, keep soaking up all of the knowledge here and save as much as possible. And make sure your spouse is on board - if not, that could wreck your whole plan. Be gentle and non combative when discussing finances.
        Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Is that Stable asset fund the only thing you're allowed to invest in?

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          • #6
            Yes, the stable asset fund is the only option in my 457b. I only invest enough to get the 4% employer match.

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            • #7
              Given that 457b allocation, I'd think about switching the TDFs to 100% equities (whatever mix of US/Intl/small cap).

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              • #8
                dominating, simply dominating

                You really can just keep as is- very simple already what I am going to say next is pretty nit picky, but here it goes:

                1. what does your financial plan call for in terms of "asset allocation"? does it call for some bonds that increase with time? then TDF's are fine. If you were planning on 100% equities and didn't freak out during last year's coronabear, I would suggest go all VTI/VXUS

                2. if you want to keep TDF's then I suggest considering holding them in your solo 401k, given the tenets of "asset location". A Roth will never get taxed, so you want your highest returning assets in there, and not have any bonds in a Roth. You want to minimize the governments cut of your money! the solo 401k will get taxed on the way out during retirement, so in retirement if you are in the 25% tax bracket then really you are investing about 25% of that money on behalf of Uncle Sam- put the TDF's in there.

                3. speaking of higher returning assets, consider some subasset classes of equities such as small cap value and/or emerging markets. you can easily invest in these cheaply. For example, the Fidelity® Small Cap Value Index Fund, FISVX, is only 5bps!!! Small cap value has historically garnered higher returns than the S and P 500. I myself in my asset allocation have a 10% small cap value tilt.

                Again man, excellent job, the above is not necessary, just some things to consider to up your game. You are already ahead of where I was at age 34!

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                • #9
                  VTI does not include international exposure, so would be more inclined to be in the TDF (VFFVX or VFIFX) which does provide/contain international exposure. Like JFox, not a huge fan of TDF's because the asset allocation will change over time and would rather 'control/guess' at my own destiny. I would suggest insuring the TDF asset allocation matches your own AA targets over time. The approach I take is to use VTIAX (International Index), VTSAX (US Index), VBLTX (US Bond Index) to achieve my asset allocation and adjust over time.

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