Personal Investments • Re: Seeking Advice on My Portfolio

I still am not grasping how MMFs work – please help me understand the basics in terms of what they are, how they differ from stocks/bonds, how they relate to taxes, and if I should factor them into my asset allocation. I also don’t understand the difference between MMFs and “cash” within my accounts. @bonesly, you recommend keeping my EF and other short-term savings in the highest yielding MMF within my taxable account. So now that I’m at Fidelity, it looks like that would be either SPRXX or SPAXX – is one better than the other? Finally, I don’t plan on investing in my taxable account until later next year, but should I open it now and put funds in an MMF within it?

I don't think this will be a problem. If you're 43 now and retire in 11 years at age 54, then you can't withdraw earnings from the Roth IRA penalty-free until age 59.5 (which is a 5.5 year wait). If you have saved/earned enough in your Taxable account to get you through that 5.5y bridge, then all the 5-year clocks go away at age 59.5... there will be no early withdrawal penalties once you reach that age, even if you made your last conversion at age 58.5.

@bonesly – if it’s a choice between saving enough in a taxable account for those first 5 years of retirement (before age 59.5) or being able to get funds via a Roth IRA conversion ladder (and therefore not doing the backdoor Roth that resets the clock), is one option better than the other? I’m thinking the way to evaluate that is to look at how much I could put into the Roths over the 11 years ($7,000 x 11 = $77k for each of us), which wouldn’t be enough to cover 5 years of retirement. Therefore, we should prioritize the taxable investing and put anything remaining in the Backdoor Roth?

Also, how is a Backdoor Roth IRA actually done? Would I call Fidelity for help with funding a traditional IRA by end of year and then help convert that over to the existing Roths? I assume it may take days so we should get this underway well before Dec. 31…

@cubbyfruitbat,
Very interesting thread for me as I have many of the same questions. However what I didn't catch is how you went from an allocation of 80/20 to 100/0? Reason I ask is although I am 5 years older than you, my allocation is currently 59/41 and increasing fixed income by 1 every year (according to IPS I'll stop at 50/50). So my equity allocation is much lower than yours and even then I react very negatively to large drops in value. For example, Dec 2018 correction or the COVID crash in 2020, when I log into the account and see a drop of like $20k in one day I can't help but think about the times when I had to fight traffic, spend nearly all my life at work, and go through enormous work-related stress for 6 months to make that 20k Image may be NSFW.
Clik here to view.
That is obviously the wrong way of looking at it (the past is the past) but my point is how are you going to feel if "2008 hits again" (a similar event in terms of price correction), and you basically see that you have 1/2 the money? Say you had 1M and now you have 500k. My concern is that with the recent run-up in stock prices we're forgetting that it can go in the other direction.

@Alex GR – note in the middle of this thread that I had a change of heart and adjusted my AA to 80/20. I tend to be more aggressive in my investing and don’t watch my money on a daily basis, so I’m going to trust the approach and gradually make the allocation more conservative. When the market has had big shifts in the past, I haven’t sweated it and just stay the course.

Currently the California Scholarshare plan, administered by TIAA, has the absolute-lowest costs of any 529 plan in the nation. It offers an equity index option (equivalent to S&P 500 Index) at an expense ratio of 0.06%, to offer an example. It also does have the other two ingredients of a 3-fund portfolio (international equities and bonds) if you are so inclined, at comparable ERs.

@lakpr – I’ve set both kids up with CA 529 accounts – thanks for the tip!

Statistics: Posted by cubbyfruitbat — Fri Oct 11, 2024 12:27 am

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