Good afternoon all, I am a total newbie when it comes to investing and have only been reading for a week now so I would greatly, greatly appreciate any advice you all have for me!
Emergency funds: I have this
Debt: No debt
Tax Filing Status: Single
Tax Rate: 25% Federal, 9.3% CA
Age: 26
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 30% of stocks (?Not sure about this)
I am a new resident physician just starting out with an annual income 51k, emergency fund in the bank, and I just found out I have ~120k in taxable mutual funds with high ERs (0.56-0.99%) from custodial accounts outside Vanguard that I would like to liquidate completely to reinvest into low cost Vanguard funds. I figured I’d withdraw the entire amount immediately (rather than portions) because my capital gains tax rates will stay the same at 15% federal and 9.3% state with my income of 51k (at least that’s how I understand it).
I am trying to maximize on Roth contributions while in Residency for the next 6 years while I still can. I am planning to re-invest the cash from the custodial account into a Roth IRA as well as a Roth 403b (with low-cost index Vanguard funds) for the remainder of this year and the next coming year.
I am trying to max out the 403b contributions this academic year as much as possible because the next institution I attend in July 2018 only offers a 457 with a single investment option with returns of 1.1% and expense-ratio of 1.2%. I don’t believe I will contribute any more than the mandatory 4.5% with matching 3% to this 457 at my next institution. Therefore, I’d rather invest the cash from the custodial account into a taxable account than save it to invest in my future 457. This is because I think I can expect higher returns with a taxable account that will justify not investing in a tax-deferred account. Unless there is another option for me that I don’t know of?
Therefore, based on my preliminary calculations, leaving some cash from the custodial accounts aside to pay taxes and supplement my income while I try to max my 403b contributions, I should have:
My planned contributions 2017-2018
-Roth 403b at Vanguard (will not be able to contribute to after July 2018)
-13.2k for remainder of 2017
-18k to max out before July 2018
Roth IRA at Vanguard
- 5.5k yearly for 6 years
Taxable account at Vanguard (for retirement)
- 70k to invest right now
457 at future employer starting July 2018
- mandatory 4.5% with matching 3% (~4.3k) yearly for 5 years
Available funds
Low-cost index funds available in my Roth 403b at Vanguard:
Domestic stocks
- Vanguard Institutional Total Stock Market Index Fund Institutional Plus Shares (VITPX) (0.02%)
- Vanguard Value Index Fund Institutional Shares (VIVIX) (0.05%)
- Vanguard FTSE Social Index Fund Institutional Shares (VFTNX) (0.12%)
Bonds
- Vanguard Total Bond Market Index Fund Institutional Plus Shares (VBMPX) (0.03%)
My planned assets by the end of year 2017
Taxable at Vanguard (79%) ~70k
-55% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04%)
-24% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11%)
Roth 403b (15%) – 13.2k
-1% Vanguard Institutional Total Stock Market Index Fund Institutional Plus Shares (VITPX) (0.02%)
-14% Vanguard Total Bond Market Index Fund Institutional Plus Shares (VBMPX) (0.03%)
Roth IRA (6%) – 5.5k
- 6% Vanguard Total Bond Market Index Fund Investor Shares (VBMFX) (0.15%)
Questions:
1. I am really lucky to be in this situation in that my parents have given me this custodial account, I don’t have any student loans, and I have a stable job prospect. I’d really like to start my retirement savings off on the right foot. Does my short-term plan for liquidating the custodial mutual funds to reinvest in my upcoming contributions, as detailed above, make sense?
2. Is my asset allocation of 80% stock/ 20% bond bordering on conservative for my situation or is this perfectly reasonable? I understand it’s hard to say since you’re not me. I am wondering if I can be more aggressive because my investments are purely for retirement for now and I plan to rebalance annually no matter what. On the other hand, while I could afford to take the risk in investing in more stocks, I’m not sure I have the need to take more risk if I have good job security. Also, is having 30% of my stocks being international reasonable?
3. I’d like to make a three-fund portfolio that is distributed tax-efficiently across my Roth and taxable accounts that also takes into account the fact that I won’t be able to contribute to my 403b after I change institutions. I’ve planned it out based on what I’ve read from the asset allocation guide across multiple accounts. Does my planned asset allocation for this year make sense in terms of tax efficiency and easy rebalancing? Is there anything I could do better? Perhaps add another fund for another type of bond for a 4-fund portfolio?
Emergency funds: I have this
Debt: No debt
Tax Filing Status: Single
Tax Rate: 25% Federal, 9.3% CA
Age: 26
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 30% of stocks (?Not sure about this)
I am a new resident physician just starting out with an annual income 51k, emergency fund in the bank, and I just found out I have ~120k in taxable mutual funds with high ERs (0.56-0.99%) from custodial accounts outside Vanguard that I would like to liquidate completely to reinvest into low cost Vanguard funds. I figured I’d withdraw the entire amount immediately (rather than portions) because my capital gains tax rates will stay the same at 15% federal and 9.3% state with my income of 51k (at least that’s how I understand it).
I am trying to maximize on Roth contributions while in Residency for the next 6 years while I still can. I am planning to re-invest the cash from the custodial account into a Roth IRA as well as a Roth 403b (with low-cost index Vanguard funds) for the remainder of this year and the next coming year.
I am trying to max out the 403b contributions this academic year as much as possible because the next institution I attend in July 2018 only offers a 457 with a single investment option with returns of 1.1% and expense-ratio of 1.2%. I don’t believe I will contribute any more than the mandatory 4.5% with matching 3% to this 457 at my next institution. Therefore, I’d rather invest the cash from the custodial account into a taxable account than save it to invest in my future 457. This is because I think I can expect higher returns with a taxable account that will justify not investing in a tax-deferred account. Unless there is another option for me that I don’t know of?
Therefore, based on my preliminary calculations, leaving some cash from the custodial accounts aside to pay taxes and supplement my income while I try to max my 403b contributions, I should have:
My planned contributions 2017-2018
-Roth 403b at Vanguard (will not be able to contribute to after July 2018)
-13.2k for remainder of 2017
-18k to max out before July 2018
Roth IRA at Vanguard
- 5.5k yearly for 6 years
Taxable account at Vanguard (for retirement)
- 70k to invest right now
457 at future employer starting July 2018
- mandatory 4.5% with matching 3% (~4.3k) yearly for 5 years
Available funds
Low-cost index funds available in my Roth 403b at Vanguard:
Domestic stocks
- Vanguard Institutional Total Stock Market Index Fund Institutional Plus Shares (VITPX) (0.02%)
- Vanguard Value Index Fund Institutional Shares (VIVIX) (0.05%)
- Vanguard FTSE Social Index Fund Institutional Shares (VFTNX) (0.12%)
Bonds
- Vanguard Total Bond Market Index Fund Institutional Plus Shares (VBMPX) (0.03%)
My planned assets by the end of year 2017
Taxable at Vanguard (79%) ~70k
-55% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04%)
-24% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11%)
Roth 403b (15%) – 13.2k
-1% Vanguard Institutional Total Stock Market Index Fund Institutional Plus Shares (VITPX) (0.02%)
-14% Vanguard Total Bond Market Index Fund Institutional Plus Shares (VBMPX) (0.03%)
Roth IRA (6%) – 5.5k
- 6% Vanguard Total Bond Market Index Fund Investor Shares (VBMFX) (0.15%)
Questions:
1. I am really lucky to be in this situation in that my parents have given me this custodial account, I don’t have any student loans, and I have a stable job prospect. I’d really like to start my retirement savings off on the right foot. Does my short-term plan for liquidating the custodial mutual funds to reinvest in my upcoming contributions, as detailed above, make sense?
2. Is my asset allocation of 80% stock/ 20% bond bordering on conservative for my situation or is this perfectly reasonable? I understand it’s hard to say since you’re not me. I am wondering if I can be more aggressive because my investments are purely for retirement for now and I plan to rebalance annually no matter what. On the other hand, while I could afford to take the risk in investing in more stocks, I’m not sure I have the need to take more risk if I have good job security. Also, is having 30% of my stocks being international reasonable?
3. I’d like to make a three-fund portfolio that is distributed tax-efficiently across my Roth and taxable accounts that also takes into account the fact that I won’t be able to contribute to my 403b after I change institutions. I’ve planned it out based on what I’ve read from the asset allocation guide across multiple accounts. Does my planned asset allocation for this year make sense in terms of tax efficiency and easy rebalancing? Is there anything I could do better? Perhaps add another fund for another type of bond for a 4-fund portfolio?
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