This is the crux of the problem that you need to address first and foremost. Simplification is easy, and you just start at the beginning and do it. I'm not sure why you've been thinking about this with high anxiety for 10 years and feel helpless. I suspect that you don't feel comfortable because you either don't understand Boglehead principles or you don't yet believe in the BH approach. I suggest that you read and learn as much as you can until you do understand and feel comfortable. There's lots of places to start, but you could begin here:Questions:
1. I need a lot of help to simplify my retirement accounts. I don’t know where to start. I have been thinking about this constantly for over 10 years, but always felt so helpless. This has contributed to my high anxiety for years. How do I sequence my rebalance? I would like to do the three funds approach. Any advice is appreciated.
https://www.bogleheads.org/wiki/Three-fund_portfolio
After that you might read elsewhere in the BH wiki or as many BH-type books as it takes, such as those on the following list:
https://www.bogleheads.org/wiki/Suggested_reading
When and if you're ready, you can pick the asset allocation that you're financially and emotionally prepared to stick with, using resources such as:
https://www.bogleheads.org/wiki/Asset_allocation
You don't need to pay an investment advisor or manager. A three fund portfolio is the ultimate in simplicity and will save you fees and eliminate the uncompensated/unsystematic risk that you've experienced with your individual stock picking. Consider those loses to be tuition in the school of hard knocks.
If it were me, I'd tax loss harvest by selling all of the individual stocks and then never buying another individual stock again. I'd also get out of all all of the unnecessarily clutered and high expense ratio funds in your tax-advantaged accounts. If possible, I'd put all fixed income holdings (bonds or "cash") in tax-deferred accounts except for the amount needed to meet ordinary cash flow. A low-cost S&P 500 index fund (e.g., VOO) is a good choice for Roth, with a broader US market index fund (e.g., VTI) in taxable, and an international index fund (e.g., VXUS) in either taxable or tax-deferred (the higher non-qualified dividend percent can offset the loss of the foreign tax credit).
After you get your holdings down to the equivalent of only VOO, VTI, VXUS, BND, and "cash" placed in the most tax-efficient accounts, then you can revisit the other questions. If you bear in mind that your goal is "good enough," not perfection, maybe that will allay some of your anxiety that has led to ten years of analysis paralysis.
Thanks Rocinante Rider for your reply.
Yes, I do want to simplify my investments. I think my problem is that I over think things and make things more complicated than it should be. If I know what I know now about investment (which is not much), and new to investment, I will definitely start out with a three fund portfolio. Unfortunately, I found out about the three fund portfolio years after I started my career/started investing, and by then, I have made too many mistakes (individual risky stocks, funds with high fees, no game plan, etc.). I just don't want to make more mistakes when cleaning up my portfolio, and that is why I have "analysis paralysis".
Questions:
1) What is the reason to put "cash" in tax-efficient accounts? Is it used for opportunity to buy when you need to rebalance your AA? My cash (Chase, Ally, and Capital One) are in taxable accounts because I thought I didn't have other options. I thought you can only contribute to tax-efficient accounts (401k, Traditional IRA, and Roth IRA) during their annual contribution? I contribute 20% of my annual salary to my 401k, and it gets invested immediately to my Fidelity RSP TARGET DATE 2050. There are cash in my Roth IRA because of the After-tax 401k setup. So, I should leave cash in there until I am ready to invest it? How much "cash" should I keep in the Roth IRA? How do I move my current taxable "cash" into tax-efficient accounts?
2) Is there a preference between 401k, Rota IRA, and Traditional IRA to hold cash in? If so, what recommendation do you have for cash investment? I currently have SPAXX for Fidelity.
3) Just for my knowledge, you can't access your "cash" in your tax efficient account until retirement, right?
4) Confirming your recommendation below: I am using Fidelity funds because my 401k is with Fidelity.
a) Make sure fixed income holdings (bonds (FXNAX) or "cash") in tax-deferred accounts (401k, Roth IRA, or Traditional IRA). See question 1 above for cash in taxable accounts.
b) For His 401k; max out pre-tax 401k first, then After-tax 401k. Select company fund RSP TARGET DATE 2050 for pre-tax 401k or desired AA fund. When After-tax 401k is moved to Roth IRA, select low-cost S&P 500 index fund (FXAIX?)?
c) For Traditional IRA, select international index fund (FZILX). If there is additional cash, you can invest in taxable account
d) For Taxable account, select US market index fund (FSKAX)
Statistics: Posted by SacramentoInvestor — Sun Aug 04, 2024 7:13 pm