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Old 06-11-2019, 11:13 AM
 
164 posts, read 177,649 times
Reputation: 48

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I wish I did this 10 years ago, but, can't go back in time.

At 37 years old, filing as single and getting taxed to the max due to high salary, I realize that lots of time has been wasted and I should have done this at least at 7 years ago. It is what it is, and I can't go back in time, but I needed a plan to get myself back on track as fast as possible. Currently I have only under 40k in my 401k (my only retirement vehicle right now that I began contributing to 2-3 years ago).

Being that I don't plan to retire for another 30 years or so, my risk tolerance is high. I don't care about drops as I have enough time to weather the storm. My focus is on getting money into 401k, IRA, etc. as much as possible. I am thinking that at this point, dividends should be something to focus on in the Roth IRA for sure.

The Plan:

1) Continue maxing out 401k = Nationwide S&P 500 Index Svc (GRMSX). Learned last week that we have 1.77% fee with that fond and it's the cheapest one available. Yes, very bad.

2) Open up Roth IRA via Backdoor. Investment strategy (by % invested)
60% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
20% High Dividend REITS (VNQ, IYR or SCHH)
20% High Dividend individual stocks (ED = 3.43%, Disney = 1.33%, ABT = 1.68%, PG = 2.90%, JNJ = 2.90%, JPM = 3.02%, DOV = 2.15%, MSFT = 1.40%).


My questions;
1) What do you think? Based on what I want to achieve, is the above a plan you'd recommend?
2) Should my Roth IRA focus on S&P500 instead of Total Stock due to higher dividends in S&P Large cap?
3) Since I plan to relocate money and contribute to individual stock, should I consider going with Schwab or Fidelity instead of Vanguard for their lower "transaction fees" as these transactions will happen yearly with new money coming in AND re balancing?
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Old 06-11-2019, 12:48 PM
 
431 posts, read 104,127 times
Reputation: 1027
A paid off home could be another source of assets. You are still young enough to buy and pay off a mortgage before you retire.

When I retired I had just finished paying off the mortgage on my home.
Sold it and bought another for cash (proceeds from sale with cash left over)
I just sold that home in March and bought a condo for cash.

That "house money" was separate money from my investing and saving for retirement.
For me it works because with no mortgage payment I have more spendable income coming from my pension and some investment income.

Just throwing this out there as food for thought.
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Old 06-11-2019, 01:34 PM
 
164 posts, read 177,649 times
Reputation: 48
Quote:
Originally Posted by TMSRetired View Post
A paid off home could be another source of assets. You are still young enough to buy and pay off a mortgage before you retire.

When I retired I had just finished paying off the mortgage on my home.
Sold it and bought another for cash (proceeds from sale with cash left over)
I just sold that home in March and bought a condo for cash.

That "house money" was separate money from my investing and saving for retirement.
For me it works because with no mortgage payment I have more spendable income coming from my pension and some investment income.

Just throwing this out there as food for thought.
Thanks. Already own a home ... 28 more years to pay, but I am adding $500/mo extra to pay off in 15 years. Locked it at 3.75% interest.
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Old 06-11-2019, 01:41 PM
 
Location: Denver, CO
1,699 posts, read 4,060,618 times
Reputation: 1260
Focus on large cap growth if you are 30 years out, rebalance when you are 10 years out to something you can stomach for your retirement. Diversify with emerging markets, REITs, but don't get too caught up in the dividend game at this stage since it's too conservative to grow your portfolio.
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Old 06-11-2019, 02:30 PM
 
213 posts, read 608,000 times
Reputation: 115
Depending upon your anticipated retirement income the simple truth is you need to save more than the 401K limits. You have many years of forgone savings that you have to catch up on. You certainly can consider rental property as part of that equation.

The other benefit of this aggressive savings approach is you now are living on less and have a need for lower retirement income. To meet this goal you can look at your expenses, you probably do not need the number or as expense of automobiles as you have now and so on.
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Old 06-11-2019, 02:39 PM
 
164 posts, read 177,649 times
Reputation: 48
Our company also offers HSA ... is that something I should also focus on>?
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Old 06-11-2019, 02:53 PM
 
2,136 posts, read 524,377 times
Reputation: 3724
Quote:
Originally Posted by Pianist718 View Post
Our company also offers HSA ... is that something I should also focus on>?
Depends on your expected medical bills.
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Old 06-11-2019, 02:55 PM
 
8,820 posts, read 5,119,154 times
Reputation: 10086
Quote:
Originally Posted by Pianist718 View Post
I wish I did this 10 years ago, but, can't go back in time.

At 37 years old, filing as single and getting taxed to the max due to high salary, I realize that lots of time has been wasted and I should have done this at least at 7 years ago. It is what it is, and I can't go back in time, but I needed a plan to get myself back on track as fast as possible. Currently I have only under 40k in my 401k (my only retirement vehicle right now that I began contributing to 2-3 years ago).

Being that I don't plan to retire for another 30 years or so, my risk tolerance is high. I don't care about drops as I have enough time to weather the storm. My focus is on getting money into 401k, IRA, etc. as much as possible. I am thinking that at this point, dividends should be something to focus on in the Roth IRA for sure.

The Plan:

1) Continue maxing out 401k = Nationwide S&P 500 Index Svc (GRMSX). Learned last week that we have 1.77% fee with that fond and it's the cheapest one available. Yes, very bad.

2) Open up Roth IRA via Backdoor. Investment strategy (by % invested)
60% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)
20% High Dividend REITS (VNQ, IYR or SCHH)
20% High Dividend individual stocks (ED = 3.43%, Disney = 1.33%, ABT = 1.68%, PG = 2.90%, JNJ = 2.90%, JPM = 3.02%, DOV = 2.15%, MSFT = 1.40%).


My questions;
1) What do you think? Based on what I want to achieve, is the above a plan you'd recommend?
2) Should my Roth IRA focus on S&P500 instead of Total Stock due to higher dividends in S&P Large cap?
3) Since I plan to relocate money and contribute to individual stock, should I consider going with Schwab or Fidelity instead of Vanguard for their lower "transaction fees" as these transactions will happen yearly with new money coming in AND re balancing?
I recognize this post!
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Old 06-11-2019, 03:05 PM
 
2,136 posts, read 524,377 times
Reputation: 3724
20% REIT is too high, especially given risks to (very hypothetical) changes in the tax code that might occur after the next presidential election.

Why are you focusing on 20% dividend paying stock?

Are you familiar with the Fama-French 3 factor model? How about the Fama-French 5 factor model? https://papers.ssrn.com/sol3/papers....act_id=2287202

Or the AQR 6 factor model? https://www.aqr.com/Insights/Perspec...-Along-the-Way
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Old 06-11-2019, 03:22 PM
 
Location: In the land beyond Ohare!
888 posts, read 458,017 times
Reputation: 1932
That 1.77 E.R. you're paying on the Nationwide fund is killing you! Im not a REIT fan and holding those individual stocks is a duplication of what's in VTSAX.

You may want to do some reading, take a look at the Boglehead 3 fund portfolio approach. It's not sexy, it just works. Join their forum and ask questions as there are many wise folks on the site that have helped many, me included!

https://www.bogleheads.org/forum/vie...p?f=10&t=88005
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