In the 24% Fed bracket as single filer, it seems you might need to utilize Backdoor Roth Contributions over direct contributions. Having a Trad IRA with a non-zero balance will trigger pro-rata rules on the backdoor contributions. I would check with your current 403b plan admin and see if they will take your old 401k/403b as a rollover "in" to keep the path clear for backdoor Roth if you AGI might exceed $146K now or in the future (the threshold where direct contributions start phasing out, but by using backdoor contributions you can still put the full $7K into a Roth each year).1. Open a traditional IRA at Vanguard and rollover the 401a, 403b 1, and 403b.
I like consolidating accounts where possible. Once this account is at Vanguard I'd probably consolidate funds down to something like Total US Stock Market and Total Int'l Stock Market, with the specific funds chosen to avoid any identical holdings in your managed Taxable account so you don't run afoul of Wash Sales.2. Transfer the Betterment Roth IRA to Vanguard (mostly for the sake of simplification).
You migh only need two holdings: US Stock and US Bonds... the Equity Index R2 is somewhat high, but it's still <0.30% so I'd use that for US Stock. You didn't list the choices available in your current plan but if there's a US bond Index for <0.30%, I'd use that as well. I'd probably ditch the Nuveen fund as 0.69 is too pricey (for me) to keep in the portfolio... the costs will significantly eat away at the total returns over a few decades. See why Costs Matter and also the chart below.3. Adjust the allocations in my current 403b (403b 3) to lower cost funds (my initial review doesn’t suggest many great options, unfortunately).
It's quite likely that having read four Bogle-aligned books, you have the knowledge to do this yourself rather than hand it over to Vanguard Personal Advisor Services. Having said that, VPAS is cheap at 0.30%, but it's still an Assets Under Management (AUM) fee on top of your underlying funds' expense ratios, so the sooner you build the confidence to DIY, the better off you'll be going forward not having that AUM drag on total return. Confidence comes with experience and it's possible (likely even?) to make a few small mistakes when building experience/confidence, but mistakes are probably the best motivators to do better going forward; don't be afraid of mistakes or you get paralyzed never acting because your plan is not yet (and never will be) "perfect."4. The preceding three are my most immediate next steps. Afterward I’m planning to take a closer look at the allocations in my Vanguard account and see if changes should be made and whether I “really need” their personal advisor service. Although I believe I’ll soon be confident enough to make my own allocations I don’t understand the nuances of some issues (e.g., tax loss harvesting) particularly well yet so I may need to do further education before making a final decision in this regard.
My suggestion would be to try and play with this very simple spreadsheet template and if you can get your AA where you want it to be while minimizing the number of holdings and accounts in the "Proposed" future state, then you could show us that plan and we can advise about any opportunities to improve regarding Tax-Efficient Fund Placement as well as any concerns with wash sales. Then you could pull the trigger and start your DIY investing journey!
Asset Allocation Sheet
AA Current and Proposed
A simple 3-Fund Portfolio might be....
403b (all old 401/403s rolled into here)
w1% US Stock Fund
w2% US Bond Fund
Roth IRA
w3% US Stock Fund
w4% Int'l Stock Fund
Taxable (savings accounts and CD rolled into Taxable brokerage accountEdit: Per @dogagility, it's probably better to pay down the mortgage with the cash than invest it if the note is 7.125% which is significantly higher than the 3m T-Bill Rate)
w5% US Stock Fund
w6% Int'l Stock Fund (if the Roth can't hold all your desired int'l stock allocation)
Tax Loss Harvesting (TLH) is an optimization and you don't necessarily have to do that. It certainly helps, but the gain in reduced tax bill is likely not worth the 0.30% AUM if that's the only real value VPAS is providing (given you "know" how to manage your portfolio, you just lack "experience" actually doing it, which will come with time).
Again, post your detailed actions here for feedback if you feel there is a risk of a big mistake, but the only thing I'd be concerned with so far is wash sales, and that's pretty minor (unless you are already a red-flag risk for an IRS audit in the first place). The more actions you take independent of VPAS, the more experience you'll gain and the more confidence that will build in eventually self-managing everything.
Once you have an Proposed AA "blue print," there's not much reason to wait to execute these steps and investing cash into 100% stocks (like VTI and/or VXUS) in a Taxable account is in adherence with tax-efficient fund placement.5. Invest most/all of the funds in the two savings accounts (and eventually the CD) in Vanguard funds (likely VTI).
Statistics: Posted by bonesly — Sat Dec 21, 2024 1:04 pm