I've been investing in indexes for a while, but I've been trying to figure out the best way to optimize my whole portfolio this year, and I'm getting confused about what I need to do and how.
I'm a single 37F, make ~$73K after taxes and contributions, and have ~$135K invested across these accounts:
- Fidelity Brokerage
My dad started this for me when I was 15 and we both contributed $25/month until my late 20s. This is why (perhaps unfortunately) it's my largest account. I don't add any more cash to it now, but it builds up money through dividends/distributions that I let sit in case I want to buy on a dip and to help rebalance at the end of the year. It started out as a 3 index fund portfolio allocated according to a Vanguard quiz I took years ago, but for the past few years I've rebalanced it heavier towards stocks over bonds.- 62% ITOT ~$39,750
- 20.25% IXUS ~$13K
- 7.5% AGG ~$4,750
- 6.75% FIW ~$4,350 -- This is a water ETF with a 0.55% ER that I first bought in 2018, then another big chunk in Mar 2020. I was kind of trying out buying something I think is undervalued for the future. It's gained 65% but I honestly don't know how to measure that against the high expense ratio.
- 3.5% SPAXX ~$2,250
- Fidelity Roth IRA
I just transferred this over from Vanguard last week to consolidate my accounts into Fidelity (I hated the VG UI). This was a conversion from an old 401(K) that I've usually added a lump $6K to when I rebalance and do taxes at the end of the year. I haven't added to it this year yet.- VTIVX ~$37.6K (VG Target Retirement 2045 Investor Shares, 0.15% ER)
- SPAXX ~$17
- Fidelity 403(b)
From my previous employer, I stay in it because it seems I wouldn't have access to this particular fund otherwise. It seems to have a really good expense ratio for a target date fund.- VITLX ~$23K (VG Institutional Target Retirement 2045 Fund, 0.09% ER)
- VALIC/AIG 403(b)
My current employer. I just upped my contribution from 5% to 8% to meet their matching. They have really crappy fund selection as far as low-cost indexes (I think these were literally all they had). I tried to approximate a Total US index between VFIAX and VSIIX.- 15% VFIAX ~$1.4K (VG 500 Index Fund Admiral Shares, 0.04% ER)
- 25% VSIIX ~$2.5K (VG Small-Cap Value Index Fund Institutional Shares, 0.06% ER)
- 30% VTIAX ~$2.9K (VG Total International Stock Index Fund Admiral Shares, 0.11% ER)
- 30% VBTLX ~$2.8K (VG Total Bond Market Index Fund Admiral Shares, 0.05% ER)
What I'm trying to figure out is how to rebalance all this taking taxes into consideration. From what I've read it seems like it's best to have bonds in tax-advantaged accounts and international stocks in taxable accounts? I've also learned that VG has started including international bonds in its index milieu, so I'm seeing if I should add it into mine.
So this is what I figured out might be the best allocation for me, based on US vs. Int'l and stocks vs bonds, compared to how I'm currently allocated now (though it seems like this sub might think my target is way too heavy in bonds?):
| Allocation | Target | Current |
|---|---|---|
| US Stocks | 48% | 61% |
| Int'l Stocks | 32% | 29% |
| US Bonds | 14% | 10% |
| Int'l Bonds | 6% | 1% |
What I can't figure out is how to rebalance and redistribute so that my bonds are mostly in tax-advantaged accounts while my internationals are mostly in taxable accounts, and how to do that when the VALIC 403(b) is getting the most contributions and the brokerage is getting none. Is the tax efficiency even worth it to figure out?
The rest of my finances:
- ~$28.5K checking account that pays 1.5% interest monthly (though I'm suspicious that's been cut to 0.75% based on last month's deposit)
- I owe $195K on a condo I bought in July 2020 with a 20Y mortgage at 3%. I've been adding an extra $185 to my monthly payment towards the principal.
Going through the flow chart in the wiki, I think I'm at the stage where I need to consider upping my contribution to my 403(b) to 15%, although I haven't contributed $6K to my Roth yet for 2020. But should I do that instead of Roth? Or do both? Or contribute less than 15% to the 403(b) based on the Roth contribution? Is there a better way to go about this yearly?
I think this sub might also recommend I not keep cash sitting in SPAXX? What about buying on dips and being able to rebalance without selling?
I actually wish I could move the brokerage SPAXX money into the Roth, but how would the tax on that work out (since all the cash in it is from dividends and cap gains distributions)?
I was also planning to trade VTIVX in the Roth for VTI, VXUS, BND ETFs. Though would selling VTIVX mean I pay taxes on the gains? Would that be worth it for the lower expense ratios?
Any thoughts on any of this would be much appreciated!
Submitted February 14, 2021 at 12:34AM by opineapple https://ift.tt/3dcAaWE
