Asset Allocation to all VTSAX/Total Stock Market Index

[MD23]

Hey Everyone,

My wife and I are both physicians and will be starting our attending jobs. Our goal is to be financially independent in 15 years. We are planning to max both 401k/403b's, both backdoor Roths, and then the remaining into a taxable account. We will consider HSA and 529 as available also. We are prioritizing a taxable account as we want the ability to retire early with access to the money.

Our plan is $12,500 monthly to the taxable account. We were thinking 100% into VTSAX. I know there are opinions on including international and bonds. However, since this is primarily an asset growth phase will it make a large difference? I know I could run into market downturns, but I would be continuing to dollar cost average every month to counteract large turns and we would continue to hold.

If we did go with this strategy, or 100% into stocks, how many years before retirement would you reallocate into bonds? And what would be your split for stocks to bonds at that time and during retirement (ex: 70% stocks, 30% bonds)?

Thanks for your input and help

[Dewangski1]

Similar plan and strategy. FIRE @ 55.

Planning on triggering bond allocation in 401k about 5 years prior to retirement, depending on market cycle.

My bond allocation will be less about % and more about years funded. I’m looking at around 10 years spending in bonds.

[artemis]

It's fine to go with 100% stock allocation if you are many years from retirement and have the intestinal fortitude to ride out the market swings. (Some people don't.) Do remember that you need to keep SOME money in cash or bonds so you don't need to sell stocks in a downturn to pay for semi-predictable expenses like a new car or replacing the roof on your house.

The time to think about moving into bonds is about 5 years from retirement. You want enough bonds/cash to ride out the average market downturn (which generally lasts no more than 4 years) during your first few years of retirement.

[CordMcNally]

I would still prioritize an HSA before taxable. Your bond percentage or if you even need them at all will depend somewhat on how much you're planning to have for retirement and how much you'll need. For example, if you'll have $10M for retirement and only need $100k/year then it's reasonable to never buy bonds in that situation but that situation will likely be the exception and not the rule.

[Larry Ragman]

Your plan is fine. I am personally more conservative, but a lot of literature supports 100% equities during working years. Agree with beginning the shift to bonds 5 years before retirement. It may be semantics but I do not agree that the bond allocation should directly equate to years of planned spending. If you do a bucket strategy, that is what the cash is for - to ride out market drops without having to sell. The bond allocation is risk reduction. It offsets the drop in equities, especially if you rebalance. If you keep a cash bucket then I’d say 70-30 is fine. But I am not dogmatic about it. The key is to be clear with yourself what your plan is and why.

[GasFIRE]

No problem with your plan as long as you have an emergency cash stash. If you save your healthcare receipts the funds inside an HSA are accessible without tax or penalty so I would consider it before taxable.

Early career your NW will increase more due to accumulation from your high savings rate rather than market returns. Mid-career and onward your portfolio returns will have a more noticeable effect on your NW. That’s a good time to reassess your stomach for 100% equities. Some can handle it while others can’t. A bear market or two can also help define your tolerance for volatility.

[xraygoggles]

VTI is fine, but I would have some sizable cash cushion or maybe 10% in bonds. In case a large expense comes up and you need cash, at the same time the market is down, for ex.

[MD23]

Thanks for all the replies so far everyone. I am feeling more reassured about this plan. I will definitely plan to have a sizeable cash emergency fund available along the way as suggested.

For when I decide to move into bonds, does anyone have any preferences or advice? I was thinking a total bond market index (VBTLX) in tax advantaged accounts and a tax exempt such as VTEAX (or the state specific one for wherever I reside at the time I'm purchasing bonds in the taxable account).

[Tangler]

Reasonable plan. Add some international if you wish.
Bonds when you near retirement and/or a cash bucket.

my latest philosophy for at retirement is to have is 2 big buckets.

2 buckets:

1. cash in taxable for EF + SORR (1-5 years worth)

2. Stock index funds

I also plan to have some I-bonds but the percentage is negligible.

As long as you never panic sell, stocks for the long run for the win!

[Larry Ragman]

Thanks for all the replies so far everyone. I am feeling more reassured about this plan. I will definitely plan to have a sizeable cash emergency fund available along the way as suggested.

For when I decide to move into bonds, does anyone have any preferences or advice? I was thinking a total bond market index (VBTLX) in tax advantaged accounts and a tax exempt such as VTEAX (or the state specific one for wherever I reside at the time I'm purchasing bonds in the taxable account).

In tax deferred, which is where you should bias your bond funds, I agree with total bond market index. If you end up with bonds in taxable (I have as a place to store an inheritance pending redistribution), I recommend the intermediate term tax exempt fund.

[Kennyt7]

for all your yearsGotta know SORR prior to retirement-probably the MOST IMPORTANT RETIREMENT issue related to your portfolio lasting

[Tim]

"We are prioritizing a taxable account as we want the ability to retire early with access to the money."
You are also prioritizing 100% stocks for the first 15 years. There is nothing wrong with 100% stocks. However, very few have the stomach for it.
https://www.fidelity.com/learning-ce...iversification

The reality is the returns over the long term don't have near the out performance you might anticipate.
https://www.portfoliovisualizer.com/...icientFrontier

Play with the tools and do more than ask opinions of a 100% allocation. The risk is you start transitioning or changing AA at what turns out to be exactly the wrong time.
Get ready for a roller coaster that gets very uncomfortable during the ride. There is statistical evidence that 100% equity will actually under perform.
100% stocks is actually due to the recent performance. I don't think it is the slam dunk you are assuming.

[MD23]

for all your yearsGotta know SORR prior to retirement-probably the MOST IMPORTANT RETIREMENT issue related to your portfolio lasting

Any good resources where I can start to read up more on SORR? Thanks

[MD23]

"We are prioritizing a taxable account as we want the ability to retire early with access to the money."
You are also prioritizing 100% stocks for the first 15 years. There is nothing wrong with 100% stocks. However, very few have the stomach for it.
https://www.fidelity.com/learning-ce...iversification

The reality is the returns over the long term don't have near the out performance you might anticipate.
https://www.portfoliovisualizer.com/...icientFrontier

Play with the tools and do more than ask opinions of a 100% allocation. The risk is you start transitioning or changing AA at what turns out to be exactly the wrong time.
Get ready for a roller coaster that gets very uncomfortable during the ride. There is statistical evidence that 100% equity will actually under perform.
100% stocks is actually due to the recent performance. I don't think it is the slam dunk you are assuming.

Got it thanks for the input. I will definitely look through these tools.

[Tangler]

Any good resources where I can start to read up more on SORR? Thanks

https://www.physicianonfire.com/buffer-assets/

https://earlyretirementnow.com/2017/...turn-risk/amp/

https://www.fiphysician.com/buffer-a...f-return-risk/