Category Archive: Investing

Current Retirement Asset Class Allocation

Here’s a look at our current retirement investment portfolio.  These numbers are current as of today.  This breakdown does not include my wife’s pension plan, nor does it include money invested for college education savings.  We use four accounts to save for retirement (in addition to my wife’s pension).  My 403(b), my Roth IRA, my wife’s Roth IRA, and a SEP IRA for business income investing.

Our current retirement investement allocation.

Large Cap / Total US Market = 46%

Mid Cap / Small Cap = 34%

International = 17%

Cash / Bonds = 2%

The majority of the large cap / total US market stocks are held in Vanguard’s VTI ETF – which tracks the broader US market.  The majority of mid / small cap stocks are held in my 403(b) via a REIT.  All of the international stocks are held in a fund with my 403(b).  I recently made a change to my future contributions, so the amount held in cash / bonds should increase, as a percentage of the portfolio, over time.

One of my goals for 2009 is to fully-fund my 403(b) ($16,500).  I also hope to fully-fund my Roth IRA ($5,000) and my wife’s Roth IRA ($5,000).

This is my personal portfolio, constructed after doing my own research and according to my own risk tolerance. I may even change it in the future.  It is not a recommendation to purchase any specific securities.  I am not a financial professional or investment adviser, nor do I play one on the web.

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Roth IRA Deposit Gone Awry

I have just gotten off of the phone after the better part of an hour.   I can’t be sure, but I think I’ve fixed a problem, that until today, I never knew existed.

The background -

I have a Roth IRA.  My wife has a Roth IRA.  One of my goals for 2009, is to fully-fund both Roth IRAs.  We have a joint checking account.  From time to time, I will send a payment (deposit) from our checking account to the brokerage where we have our Roth IRAs.  Clear enough?  Good.

The problem -

Last week, I logged in to my checking account, and initiated two payments (deposits), one for my Roth, one for my wife’s Roth.

Today, when checking on the status of said payments, I was shocked to find that the deposit intended for my wife’s Roth IRA was rejected.

Apparently, when my bank sends a payment to another company, the only name on the payment check is my name, even though the checking account is a joint account.  Well, when the brokerage received the payment, and noticed that my wife’s name was not on the check, they rejected the check, because they do not accept third-party payments.

The solution -

I called my brokerage, and they suggested that I send a copy of a recent bank statement, along with my wife’s name and account information, showing that she is, indeed, a joint holder of the checking account.  This sounded like a lot of work, and I’m just not in the mood for a lot of work.

I then called my bank, pressed zero fifty times, talked to a very nice CSR, and had him add my wife’s name to all future online bill payment checks.  Problem, hopefully, solved.

I also canceled the payment to the brokerage, the one for my wife’s Roth IRA.  Once the money, which has already been deducted from my checking account, is safely back in the account, I’ll initiate another payment.  Hopefully, this one will have my wife’s name on it, and all will go smoothly.

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A 10 Step Outline Of Our Financial Plan

From a recent email –

I love your site!  (Thank you…)  I’ve been working on a basic plan for managing my finances.  Could you write a post about your current plan?  Or maybe a post about some of the things you’ve done to get where you are?  Thanks!

I love it when I get questions like these.  It makes me happy to see that folks are taking control of their own finances.  Bravo!  So, here are the basic steps I’ve taken (and plan to take), with links for further reading.

1.  I stopped using credit cards.

Before I could fill in the hole, I had to stop digging it deeper.  Putting my credit card in my wallet, and just leaving it there, taught me to live on the money that I actually make.  I do not like credit cards, and I am of the firm belief that most people would be better off without them.

2.  I started living on a budget.

This sounds very basic, I know, but living on a budget really works.  As a testimony, a brief examination of my own life.  I worked for 16 years, and had over $11,000 in debt and $500 in the bank.  10 months after giving up my credit cards and living on a budget, I was debt free.  Less than a year later, I had $20,000 in the bank.  Living on a budget works.

3.  I created a mini-emergency fund.

During my debt reduction period, I always maintained a cash reserve between $500 and $2000.  This cash reserve came in handy, and I was able to use it for “emergencies”, that in the past, would have required the use of a credit card.

4.  I systematically paid off my debts.

I used a plan like the one outlined in my free Debt Reduction E-Book.  The plan is simple.  It’s easy to follow.  It really does work.

5.  I fully-funded my emergency fund.

As soon as I paid off my last debt, I started to build an emergency fund equal to six months of my wages.

6.  I began to focus on retirement.

I use several accounts to save for retirement.  Here’s the breakdown.

Pre-Tax Accounts -

My 403(b) – 15% of our gross household income is contributed to my 403(b) account.

My wife’s pension – 5% of my wife’s salary is contributed to my wife’s pension.

After-Tax Accounts -

My Roth IRA – I make maximum contributions to my Roth IRA.

My wife’s Roth IRA – My wife makes maximum contributions to her Roth IRA.

Side Note – asset allocation (what I invest in) – I buy index-based mutual funds and ETFs.  I am not a professional investor or adviser, and my investment choices are pretty boring.  If you ever take a peek at the Vanguard VTI ETF, you’ll have a pretty good idea about how the majority of my investments are doing.  I do, however, have a small portion of my portfolio invested in very aggressive small-cap and international funds, and I own one individual stock, CLX.  Why?  I like being clean, and I like Clorox.

7.  I began to focus on saving for my kids’ college expenses.

I have opened and continue to fund 3 Education Savings Accounts (ESAs), one for each of our children.  The maximum annual contribution to each account is $2,000.

8.  I save for future major purchases.

After funding retirement and education accounts, I then focus on saving for future major purchases.  Currently, I am saving for the purchase of a newer automobile, and the possible purchase of a new home.  The new car purchase should occur in the next five years, while the new home purchase should occur within the next decade.  (I hope to pay cash for the new home.  It’s a major goal, but one I’m hoping to achieve!)  You can read more hear, about how a few years ago, I paid cash for a new-to-me automobile.

9.  I try to maintain proper amounts of insurance.

I have health insurance, life insurance, renter’s insurance, long-term disability insurance, dental insurance, and automobile insurance.  Insurance coverage can be expensive, but it’s an important part of a well-rounded financial plan.  (We waited until we were out of debt, and then we purchased additional life and disability insurance, but we had a minimal amount of both, even while in debt.)  We also have wills and other end-of-life documents.

10.  I am always looking for ways to save more and spend less.

This step makes all of the other steps possible.  In fact, it could have been number 1.  I’m constantly evaluating my spending habits, and always looking for ways to save money.  At the same time, I’m also looking for ways to increase my income and maximize my earning potential.  By the way, here are some of the best tips for saving money, submitted by my favorite people, you, my awesome readers!

I like to keep things simple – very, very simple.  The outline above is easy-to-follow.  I tend to ignore most of the noise surrounding financial planning, and focus on the things I understand.  I’ll leave the high-risk maneuvers to those who can tolerate violent swings in the economy.  For me, I want to maintain an emergency fund, methodically fund my retirement accounts, plan for major future expenses, and spend the rest of my life… living my life!

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Our Current Asset Allocation

Inspired by a recent article by Nickel, over at Five Cent Nickel, about his current asset allocation, I thought it might be a good time to take a look at our current asset allocation.

Between us, my wife and I have five retirement accounts – two Roth IRAs, my 403(b), a SEP-IRA, and my wife’s pension. The calculations in this article are based on four of those accounts – and exclude my wife’s pension.

Our current asset allocation:

100% stocks, broken into the following –

Total US 25.98%
Mid-Cap 6.51%
S&P 500 25.75%
REIT 11.91%
Small-Cap 11.12%
International 18.74%

Our allocation will shift over the coming months, as we continue to make contributions to my wife’s Roth IRA and my 403(b). Current plans are for future contributions to the 403(b) to be invested in an S&P 500 Index Fund and future contributions to my wife’s Roth IRA to be invested in a Total US Stock Market mutual fund.

Like my buddy, FMF, over at Free Money Finance, I prefer investing in Index Funds. I’m still working to refine my investing strategy, and it feels good to have a snap-shot of my current situation. Just like Nickel suggested, I have decided to treat all of my investments as ‘one big pot of money’ – and I’ll make adjustments to our allocation using my SEP-IRA contributions throughout 2008.

Edit:  After reading a comment left by Nickel, I wanted to make a note about the aggressive nature of our investments.  Instead of bonds or a bond fund, we have my wife’s pension, which grows at a guaranteed rate.  If we did not have her pension, we would change our asset allocation.

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