Few questions/clarifications:
My working theory is your $20k emergency funds is not included in your $675k portfolio... That's completely fine - just trying to track...
Is the HYSA there for a specific purpose? Home purchase? Other? If this money is for a shorter-term purpose, completely fine to treat it "separately" (like the emergency fund).
If not, is there a reason it's not part of your AA? More specifically, one's AA isn't "bonds" exactly, but "fixed income" which would be bonds, cash, cash like investments (potentially excluding one's "emergency fund" - although that's its own debate). Which means if the HYSA is part of your "long-term investments", you aren't hitting your AA as you are saying 10% "fixed income" but already have nearly 20% in cash alone (before figuring out any other fixed income in other accounts).
More specifically, was any of this inherited, and if so, how long ago and did you properly get a "step-up" in basis at the time.
To the later point, many of us have adopted a "rebalancing band" - such as 5%. For example, if my AA target is 70/30, my actual AA could be anywhere between 74/26 - 66/34 and it will be just fine. Again, I'll nudge my AA back towards target by putting my contributions into whatever is low. And if/when needed, I'll "exchange" funds to bring me back to target.
All this to say that changing your AA by 1% every 1-2 years is an OK "plan/target", but don't sweat it when you see it fluctuate more than that. Just keep nudging it back via future contributions and when/where needed, rebalance so it doesn't get too far out of alignment.
But that isn't to say that TLH opportunity are closed to you. For example, let's say you invested $500k into VT (or similar) today. Let's say it grows to $700k in the next several years. And then gets a 50% crash, bringing its value to $350k. You can still TLH - sell the $350k of VT, "harvest" the loss, and re-invest in another fund.
This is why I said don't get too hung up on a specific fund like VT. There are several great Total Stock Market funds to pick from. Personally, I don't use the "world" versions, but on the US side, I'd use any of the following: VTI, ITOT, SCHB, SPTM, VV, FSKAX, etc. And I might end up with more than one in my portfolio if I only had certain "lots" available to harvest with loses.
That said, if you want a "mirrored" portfolio for simplicity, there's nothing wrong with that. Although if you want even more simplicity, you could simply use a "target date" fund (like in your 401k) - and get "hands off" management.
However, many of us follow the approach where our AA is managed across all of our accounts. For example, Roths are typically 100% stocks, as are taxable accounts, with pre-tax/traditional retirement accounts holding the majority of our fixed income.
More info: https://www.bogleheads.org/wiki/Asset_a ... e_accounts
One consideration could be to start maxing out your 401k contributions. More specifically, you have a very sizable taxable account, and instead of "spending" your paycheck you could "spend" the equivalent amount from your taxable account. That could grow your tax-deferred space by roughly $20k/year "extra" (unclear on if you'd get more match), with probably even more "spendable" money.
Hypothetically, let's say you make $78k a year, or $75k taxable after your $3k annual contributions. Per https://engaging-data.com/tax-brackets/ ... =0&yr=2025, you'd pay $8,114 in taxes, leaving you $66,886 to spend, or $59,886 after $7k for your IRA. (Note, this doesn't include state taxes, social security, medicare, etc.)
If you maxed out your 401k, that drops your taxable income to $54,500. Per https://engaging-data.com/tax-brackets/ ... =0&yr=2025, you'd pay $4,501 in taxes, having $43,000 left to spend after $7K IRA. So, you need $16,888 [after-tax] from your taxable account to make-up the $20k contribution to your tax-deferred, getting you back to about $60k/year to spend. Let's assume your taxable accounts have done well and you have 50% gains. Let's just say you sell $20k from taxable (again $20k into pre-tax, $20k from stock), assuming 50% gains - $10k is "tax-free" (as its a return of principle) and 50% taxable - presumably as [long term] capital gains. Plug that in, and we get https://engaging-data.com/tax-brackets/ ... 00&yr=2025 showing federal tax $4,674, with income kept at $59,826 + $10k [not shown] for "tax-free" return of principle - $7k IRA = $62,826.
tl;dr given your large taxable balance and small contributions, you could very likely benefit from spending down some of your taxable long-term gains while increasing your 401k contributions. Especially if you haven't maxed out employer match yet. Per my example above, just on federal taxes alone, and doing a simple $20k "swap" (assuming 50% gain on taxable) you'd come out ahead by a few thousand a year - while drastically increasing your tax-advantaged space, and thus being able to fit your fixed income into taxable as you continue this...
Additionally, by being able to hold the majority of your fixed income allocation in a tax-deferred account, you'll be able to more easily stay aligned to your target AA without paying taxes. Worst case, if you need to "rebalance", doing so isn't taxable as you'd simply be exchanging two different tax-deferred funds.
This also helps with #5 below...
Ultimately, there aren't any "good ways" to do so. They will do what they can to try to retain your business - aka to try to continue to make excess money from you for leaving you poorer both from their fees and their more complex and typically worse performance. You just have to go in with conviction... They may not admit it, but "it's just business." You won't be the first client they lost - you won't be the last.
That said, you also don't "need" to have a "discussion." Unless you have some "contract" to navigate, you can likely contact the brokerage you want the funds to end up at (such as Vanguard, Fidelity, etc.) and have them start the transfer process. They know how to get things moved over, and will walk you through any steps if/as needed.
Assuming they can, these would be transferred as "in-kind", meaning you'll own whatever funds you own, but now in your own account letting you deal with things as you want.
See #5 below.
You really need to understand the "gains" - and thus "taxes" that would be owed on each of your positions.
Anything with "loses" could be immediately sold, harvest the loss, and then re-invested as you want.
Anything with small gains, could potentially be sold to use up any losses (and/or pay small taxes), and re-invested as you want.
Anything with large gains - you need to think through... While a "single fund" like VT might be desirable, as noted in #1, you might end up with multiple funds over 30 years of TLH anyway... And some of your funds aren't "bad" funds, as an example, I hold SCHX - and have (and would) use that as a "tax-loss harvesting pair" with other "total stock market index" funds. So, it might require more consideration on which funds are OK to keep and which you really want to dump... (I'm not familiar with them all - and didn't attempt to review them to give you specific advice on the funds...)
Back to #3, a consideration might also be to "spend" some of that taxable portfolio to increase (potentially max out) your 401k contributions. That gives you another way to "clean up" some of the funds you might not want. My example in #3 showed how it's likely favorable to you even with 50% gains (maybe even more with state taxes, etc.). But you could setup a prioritized list and "spend" the worst ones first.
Lastly, even if you do decide to "sell everything and start over", it probably would be best to do so over several years. Our tax-system is "progressive", meaning the more income the higher % of taxes. In my hypothetical example above with a gross income of $78k, or $54,500 taxable after maxing out 401k, the first $10k of [long-term] capital gains fell in the 0% LTCG bracket! Maybe going into the 15% bracket could make sense, but you'd want probably want to minimally spread out any gains/taxes to stay out of the 20% LTCG bracket as well as avoid NIIT (which would be at $200k of total income for single filer https://www.irs.gov/newsroom/questions- ... income-tax).
Congrats on taking the first step on your journey to bring your financial future into your own hands!![:beer]( "beer")
Feel free to ask questions!
I'm not sure how to read these...Emergency funds: $20,000
Total Portfolio Size: $675,361.58
High Yield Savings Account
19.85% cash
My working theory is your $20k emergency funds is not included in your $675k portfolio... That's completely fine - just trying to track...
Is the HYSA there for a specific purpose? Home purchase? Other? If this money is for a shorter-term purpose, completely fine to treat it "separately" (like the emergency fund).
If not, is there a reason it's not part of your AA? More specifically, one's AA isn't "bonds" exactly, but "fixed income" which would be bonds, cash, cash like investments (potentially excluding one's "emergency fund" - although that's its own debate). Which means if the HYSA is part of your "long-term investments", you aren't hitting your AA as you are saying 10% "fixed income" but already have nearly 20% in cash alone (before figuring out any other fixed income in other accounts).
Are these taxable or retirement accounts?Managed Portfolio at Schwab
Contains 39 individual stocks that don't seem worth listing here, since nothing here is an ETF or low cost mutual fund. Let me know if it's relevant and I'll edit those in. Fee is 1.08%
Schwab Intelligent Portfolio
1.92% cash
7.59% PRF (0.33% expense ratio)
6.33% SCHX (0.03% expense ratio)
0.0045% FNDA (0.25% expense ratio)
5.68% PRFZ (0.39% expense ratio)
3.66% VB (0.05% expense ratio)
2.78% FNDF (0.25% expense ratio)
1.85% SCHF (0.06% expense ratio)
0.54% SCHH (0.07% expense ratio)
Have you "maxed out" your employer match? If not, I'd recommend putting 100% of contributions here until you do. Best return you'll get is the "free-money" employer match. See: https://www.bogleheads.org/wiki/Priorit ... nvestmentsNew annual Contributions
$3,023.96 my 401k (includes my contributions plus employer's match)
This may not be enough savings... The 22% tax-bracket for single would put your income between $48,476 to $103,350. If you are at the lower end, you are doing phenomenal as that would be potentially a 20% savings rate. But at the higher end, that would only be about 9.7%. The general advice is to try to save at 15% or more of your income. (Although it looks like you have a large jump start, so that might work out anyway - just wanted to note the 15% recommendation...)New annual Contributions
$3,023.96 my 401k (includes my contributions plus employer's match)
$6,999.96 my Roth IRA
Given your low annual contributions, how did you come by a much larger portfolio?Total Portfolio Size: $675,361.58
More specifically, was any of this inherited, and if so, how long ago and did you properly get a "step-up" in basis at the time.
Several thoughts:Questions:
Preface: I'm looking at streamlining my taxable accounts to holding 90% VT, 5% VTEB (intermediate municipal bonds), 5% VGIT (intermediate treasuries). I prefer this for simplicity and behavioral reasons, but if there's anything that can improve with this do let me know.
- The general recommendation is to hold most of your "fixed income" in tax-deferred (aka 401k) accounts: https://www.bogleheads.org/wiki/Tax-eff ... _placement, so I personally wouldn't hold VTEB or VGIT in taxable (unless needed due to not having enough space in your tax-deferred accounts)
- Generally, municipal bonds would only be recommended for people in the top tax-brackets (rarely, if ever, in the 22% bracket). So, if you needed/wanted to hold "bonds" in taxable, you'd probably be better of with a Total Bond Index fund like VBTLX. While you'll owe some taxes, typically at the 22% tax-bracket, you'll have a better after-tax return.
- I personally wouldn't get hung up on a "specific" fund like VT - see thoughts below in tax loss harvesting...
This is a fine "plan", but don't get hung up on "false precision." More specifically, I can guarantee you it won't work out this way... Stocks and fixed income move at different rates, you are going to see your AA go up-and-down just based on what the market does. Then as you make contributions, you might nudge the thing "down" back up, only to see the market change things again. And at some point, the market might put you so out of alignment that you should probably "rebalance."I also plan to increase fixed income allocation as I age until I reach 40% fixed income at age 65. The plan would be to increase fixed income by 1% every 2 years until age 50. Then increase by 1% every year until age 60. Then increase by 2% until age 65.
To the later point, many of us have adopted a "rebalancing band" - such as 5%. For example, if my AA target is 70/30, my actual AA could be anywhere between 74/26 - 66/34 and it will be just fine. Again, I'll nudge my AA back towards target by putting my contributions into whatever is low. And if/when needed, I'll "exchange" funds to bring me back to target.
All this to say that changing your AA by 1% every 1-2 years is an OK "plan/target", but don't sweat it when you see it fluctuate more than that. Just keep nudging it back via future contributions and when/where needed, rebalance so it doesn't get too far out of alignment.
Respectfully, unless you didn't include taxable contributions in your list, the odds of you having meaningful tax loss harvesting is fairly small. Most tax loss harvesting is going to occur with "newly invested" money (aka new contributions). For example, if I invested $1000 yesterday and the market fell 10%, I have a $100 loss I can harvest. After that money being invested for many years, those small losses are rarely bigger than your gains, meaning no TLH opportunity is most common.1) Given the simple portfolio, I'm forgoing any opportunities to tax loss harvest. The more I think about it and the process of doing so, the less I care for it. Should I care about it more? Am I missing out on a lot by forgoing tax loss harvesting opportunities?
But that isn't to say that TLH opportunity are closed to you. For example, let's say you invested $500k into VT (or similar) today. Let's say it grows to $700k in the next several years. And then gets a 50% crash, bringing its value to $350k. You can still TLH - sell the $350k of VT, "harvest" the loss, and re-invest in another fund.
This is why I said don't get too hung up on a specific fund like VT. There are several great Total Stock Market funds to pick from. Personally, I don't use the "world" versions, but on the US side, I'd use any of the following: VTI, ITOT, SCHB, SPTM, VV, FSKAX, etc. And I might end up with more than one in my portfolio if I only had certain "lots" available to harvest with loses.
Typically, it is not advised to hold bonds in Roth (see previous tax efficient fund placement article).2) For my Roth IRA, I started off at 80% S&P 500 and 20% international. Is it fine to stay this course? Should I add in bonds for the sake of keeping my portfolio consistent with the 90/10 split?
That said, if you want a "mirrored" portfolio for simplicity, there's nothing wrong with that. Although if you want even more simplicity, you could simply use a "target date" fund (like in your 401k) - and get "hands off" management.
However, many of us follow the approach where our AA is managed across all of our accounts. For example, Roths are typically 100% stocks, as are taxable accounts, with pre-tax/traditional retirement accounts holding the majority of our fixed income.
More info: https://www.bogleheads.org/wiki/Asset_a ... e_accounts
I guess I'm not clear on the "fixed income portion needing to be in taxable." I'm assuming this is because of the size of these accounts compared with your overall portfolio...3) Due to my fixed income portion needing to be in taxable accounts, are there any improvements to be made to my approach? I prefer to keep it to bond funds, if possible. But if I need to go beyond bond funds then I'm open to that as well.
One consideration could be to start maxing out your 401k contributions. More specifically, you have a very sizable taxable account, and instead of "spending" your paycheck you could "spend" the equivalent amount from your taxable account. That could grow your tax-deferred space by roughly $20k/year "extra" (unclear on if you'd get more match), with probably even more "spendable" money.
Hypothetically, let's say you make $78k a year, or $75k taxable after your $3k annual contributions. Per https://engaging-data.com/tax-brackets/ ... =0&yr=2025, you'd pay $8,114 in taxes, leaving you $66,886 to spend, or $59,886 after $7k for your IRA. (Note, this doesn't include state taxes, social security, medicare, etc.)
If you maxed out your 401k, that drops your taxable income to $54,500. Per https://engaging-data.com/tax-brackets/ ... =0&yr=2025, you'd pay $4,501 in taxes, having $43,000 left to spend after $7K IRA. So, you need $16,888 [after-tax] from your taxable account to make-up the $20k contribution to your tax-deferred, getting you back to about $60k/year to spend. Let's assume your taxable accounts have done well and you have 50% gains. Let's just say you sell $20k from taxable (again $20k into pre-tax, $20k from stock), assuming 50% gains - $10k is "tax-free" (as its a return of principle) and 50% taxable - presumably as [long term] capital gains. Plug that in, and we get https://engaging-data.com/tax-brackets/ ... 00&yr=2025 showing federal tax $4,674, with income kept at $59,826 + $10k [not shown] for "tax-free" return of principle - $7k IRA = $62,826.
tl;dr given your large taxable balance and small contributions, you could very likely benefit from spending down some of your taxable long-term gains while increasing your 401k contributions. Especially if you haven't maxed out employer match yet. Per my example above, just on federal taxes alone, and doing a simple $20k "swap" (assuming 50% gain on taxable) you'd come out ahead by a few thousand a year - while drastically increasing your tax-advantaged space, and thus being able to fit your fixed income into taxable as you continue this...
Additionally, by being able to hold the majority of your fixed income allocation in a tax-deferred account, you'll be able to more easily stay aligned to your target AA without paying taxes. Worst case, if you need to "rebalance", doing so isn't taxable as you'd simply be exchanging two different tax-deferred funds.
This also helps with #5 below...
Recommend you read: "If You Can": https://www.flip4u.org/docs/If%20You%20 ... nstein.pdf4) I'm not sure how to have the difficult conversation with my advisor that I'd like to end our relationship. I'm having a hard time coming up with a way to do so. How would you handle this?
Ultimately, there aren't any "good ways" to do so. They will do what they can to try to retain your business - aka to try to continue to make excess money from you for leaving you poorer both from their fees and their more complex and typically worse performance. You just have to go in with conviction... They may not admit it, but "it's just business." You won't be the first client they lost - you won't be the last.
That said, you also don't "need" to have a "discussion." Unless you have some "contract" to navigate, you can likely contact the brokerage you want the funds to end up at (such as Vanguard, Fidelity, etc.) and have them start the transfer process. They know how to get things moved over, and will walk you through any steps if/as needed.
Assuming they can, these would be transferred as "in-kind", meaning you'll own whatever funds you own, but now in your own account letting you deal with things as you want.
See #5 below.
Your biggest challenge will be to deal with the tax-implications of the vast majority of your funds being in taxable accounts. Unless you have minimal gains (such as if this was a recent inheritance which got a reset in cost basis), I would not recommend "selling everything and starting over."5) Are there any comments on my proposed glide path?
You really need to understand the "gains" - and thus "taxes" that would be owed on each of your positions.
Anything with "loses" could be immediately sold, harvest the loss, and then re-invested as you want.
Anything with small gains, could potentially be sold to use up any losses (and/or pay small taxes), and re-invested as you want.
Anything with large gains - you need to think through... While a "single fund" like VT might be desirable, as noted in #1, you might end up with multiple funds over 30 years of TLH anyway... And some of your funds aren't "bad" funds, as an example, I hold SCHX - and have (and would) use that as a "tax-loss harvesting pair" with other "total stock market index" funds. So, it might require more consideration on which funds are OK to keep and which you really want to dump... (I'm not familiar with them all - and didn't attempt to review them to give you specific advice on the funds...)
Back to #3, a consideration might also be to "spend" some of that taxable portfolio to increase (potentially max out) your 401k contributions. That gives you another way to "clean up" some of the funds you might not want. My example in #3 showed how it's likely favorable to you even with 50% gains (maybe even more with state taxes, etc.). But you could setup a prioritized list and "spend" the worst ones first.
Lastly, even if you do decide to "sell everything and start over", it probably would be best to do so over several years. Our tax-system is "progressive", meaning the more income the higher % of taxes. In my hypothetical example above with a gross income of $78k, or $54,500 taxable after maxing out 401k, the first $10k of [long-term] capital gains fell in the 0% LTCG bracket! Maybe going into the 15% bracket could make sense, but you'd want probably want to minimally spread out any gains/taxes to stay out of the 20% LTCG bracket as well as avoid NIIT (which would be at $200k of total income for single filer https://www.irs.gov/newsroom/questions- ... income-tax).
Congrats on taking the first step on your journey to bring your financial future into your own hands!
Feel free to ask questions!
Statistics: Posted by SnowBog — Fri Feb 07, 2025 6:51 pm