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Advice on setting up my pp - mix of Taxable and Retirement accounts

Posted: Mon Sep 10, 2012 10:37 am
by sapperleader
Hello,
Long time lurker and tire kicker, new poster :)  I have been reading the forum for years, but until this year when I had an opportunity to rollover my 401k to a vanguard IRA that I control was not ready to implement the PP.  My fiance and I have been slowly migrating into the PP this year, and would like to run our final plan past the community for thier input.  Our plan is to run two PP side by side until we marry next year, when it becomes one unified PP, or at least as much as separate 401k and US treasury accounts allow us to do so.  Hers was very easy to set up, since she had access to all 4 assets in her  401k, and her only taxable being checking/savings account, ibonds, and physical gold.  Mine is a bit more complicated since I have a a new Vanguard IRA, and a Fidelity brokerage account(taxable), and ibonds through Treasury Direct, and some physical gold and currently no 401k.

Little background on us, is we are both in our early thirties, live and work in Northern VA(dc metro area is very expensive) and have a very solid income.  We are not under the IRA and Roth ira contribution/deduction thresholds, if that influences anyone's suggestions. 

My proposed breakdown for implementing my piece is:
  • 84,000 in the IRA - 26000 each in Bonds(split between some TLT for easy rebalancing and mostly buying bonds direct), Stocks aka VTSAX, and gold(IAU).  6000 remaining for Cash, doing a 1-3 year bond ladder(though might go lazy route and just do SHY). 
    15k in Ibonds
    5,000 in physical gold coins
    15,000 in checking and savings(liquid portion of my emergency fund for ~3-5 months of living expenses for job loss or large medical/car repairs).  Will shift a third of this to a other assets in  December once some of my Ibonds are 12 months old and liquid.
    10,000 in Fidelity brokerage(50/50 split between LT bonds, and stocks)
Our plan, is we are saving for a house down payment over the next 3 years.  Future contributions will be a mix of retirement and taxable investing, though the exact nature of that wont be decided until my business partner and I finish setting up our corporate retirement plan.  Therefore we wanted a mix of all 4 asset classes in taxable and tax deferred to allow max flexibility on re balancing.  Our contribution plan for 2013 onward, is max out I-bonds and as much of E-bonds as we can, then split our remaining contributements across the other three asset classes(ie buy the cheapest, trailing asset ). 

This puts us slightly cash heavy on our contributions for the next 3 years, but according to my spreadsheet, we wont reach a rebalancing threshold of 35% cash weighting until 2015.  that allows us to cash out a lot of the i and e bonds as we need them for down payments, closing costs, and the slew of other costs that will hit over our first year of home ownership, and worst case drop down to a 15-20% cash allocation during that year.  Using the PP approach for all of our assets also protects us against inflation during that time, versus all savings or CD's.

I debated on keeping long term bonds and stocks out of taxable, but decided the extra flexibility for our multitude of accounts, plus allowing us to take advantage of profits in either the retirement of the taxable accounts as needed.  With that goal in mind, any suggestions or tweaks to our approach would be appreciated.

For the Fidelity account, does anyone know if TLT offers tax advantages over the bond ladder?  I have been reading conflicting info, and am not sure either way.  VTI seemed to be my best choice on taxable stock options even with having to pay a brokerage fee to buy it through fidelity.

Any other suggestions, comments, or tweaks will not go amiss :)
thanks!
Kyle

Re: Advice on setting up my pp - mix of Taxable and Retirement accounts

Posted: Fri Sep 14, 2012 10:01 am
by sapperleader
So I went for it, and outside of the actual bonds I need to order on the bond desk tomorrow, I have TLT, buys for VTSAX, and IAU in my IRA pending today.  Feels good to finally be implemnting the PP.

Re: Advice on setting up my pp - mix of Taxable and Retirement accounts

Posted: Fri Sep 14, 2012 10:03 am
by l82start
congratulations and welcome to the forum..

Re: Advice on setting up my pp - mix of Taxable and Retirement accounts

Posted: Sun Sep 16, 2012 7:30 pm
by notsheigetz
My gosh, you are so far ahead of me in regards to financial planning compared to before I got married I wouldn't presume to give you any advice.

Just enjoy your marriage. Sounds like you've got the money part down already with the PP. If there's anything else out there that can provide you with the same kind of financial security that you are looking for I don't know about it.