Personal Investments • Portfolio Review - Few Questions for 3 Generation Household

Hi, Our family includes a parent in law with minimal assets whose retirement we plan to fund/help. Also had a few other questions I was inspired to ask after reading several other members' portfolio reviews - thanks in advance.

Emergency funds: ~$5K (in reality have $20K of available cash, but $15K earmarked for upcoming annual payments (property tax, estimated income tax, insurance, etc)

Debt: $450K mortgages - $170K Primary Residence (low APR), $280K Rentals ~6.2% interest rate). No other debt. Use CCs for 2% back with balance fully paid each month.

Tax Filing Status: Married Filing Jointly

Income Tax Rate: 24% Federal, 0% State

Age: Him 41; Her 38; Parent-in-law (PIL) 60 lives with us too

Desired Asset allocation: 45% stocks / 50% real estate / 5% bonds/cash - (realistically we're flexible on AA; as you’ll see we’re currently heavier on real estate. Overall we plan to have high stock+real estate allocation and low bond holdings - considering larger Emergency Fund/cash holding if when approaching part-time retirement)

Current retirement assets - $1.6M

Our Investment Real Estate - 66% $1.0M
66.2% $1M (market value after mortgages and est. selling fees)

His Roth IRA - 16% $250K
7.6% $119K Fidelity 500 Index Fund (FXAIX) (0.015%)
2.7% $42K Berkshire Hathaway Class B (BRK.B) (0.00%)
1.8% $27K Fidelity Zero Total Market Index (FZROX) (0.00%)
1.6% $24K Fidelity Freedom Index 2050 Investor (FIPFX) (0.12%)
1.2% $18K Fidelity International Index Fund (FSPSX) (0.035%)
0.8% $12K Fidelity Emerging Markets Index Fund (FPADX) (0.08%)
0.5% $7K Fidelity Zero International Index (FZILX) (0.00%)

His Roth 401k - 7% $110K (realistically ~30% of this is taxable due to it being Employer match funds)
5.4% $85K State Street Russell 3000 Fund (Unknown Ticker) (0.03%)
1.4% $22K Vanguard Target Retirement 2050 Trust Plus (Vanguard Fund # 1659) (0.055%)
0.2% $3K Company Stock

Her Taxable - 7% $107K
4.4% $68K Crypto
2.0% $32K Individual Stocks (AAPL, TSLA, other Tech large cap)
0.5% $7K Fidelity Zero Total Market Index (FZROX) (0.00%)

His HSA - 3% $41K
2.6% $41K Van Total World Stock IDX Adm (VTWAX) (0.10%)

PIL Roth IRA - 1% $19K
1.0% $16K Fidelity Zero Total Market Index (FZROX) (0.00%)
0.2% $3K Fidelity Zero International Index (FZILX) (0.00%)

Contributions

New annual Contributions
$23.5K max his 401k (~$10K employer matching contributions)
$8.5K max his HSA ($1K employer contribution)
$TBD Real estate mortgage early paydown
$TBD his Mega backdoor Roth IRA
$TBD his backdoor Roth IRA
$TBD her backdoor Roth IRA
$TBD PIL Roth IRA
$TBD ESPP
$TBD taxable

2025 Est Income - $350K total includes ~$80-$90K estimated rental income/cash flow

2025 Est Tax - $50K

2025 Est Expenses: $105K

Other Non-Retirement Assets: $770K
$700K Primary Residence Home Equity (after mortgage and est selling fees)
$70K 529 Accounts for childrens’ education (paused contributions to keep new investment funds fungible for now)

Goals:
1. Allow our Parent-in-law to have comfortable retirement.
2. Allow both me and my wife to be active in our kids lifes - option for both of us to work part-time particularly in about 5 years to maximize time with kids. That said, we're not planning to not work at all. Currently my wife stays at home with our kids but would like to work part-time once the kids are school age.

Questions:

• 1. Am looking for others' thoughts on where to prioritize future contributions?
  Aside from currently maxing out Roth 401K and HSA contributions, we are currently “investing” other funds by making early payments on rental mortgages at about 6.2% interest rate (due to it being a decent after-tax, no risk return and stock market not looking to be priced very low). We have 1. the option to invest in post-tax 401K and convert to mega backdoor Roth IRA so could put up to $36K in that in 2025, 2. Roth IRA or backdoor Roth IRAs for up to 3 adults in our household (up to $22K, with one eligible for catch up contributions) 3. The option to invest up to $11K in an ESPP (purchase employer’s stock at 10% discount from current market value), but would have to hold for 15 months (which feels too long). 4. The option to invest in a taxable account, and 5. The option to invest in further real estate opportunities if/as they arrive.

• 2. Would you do anything differently with regard to a parent in law who is age 60 to ensure they have a comfortable retirement?
  For context, this person moved from another country, has minimal assets (~$20K in Roth IRA) and income ($15k/year), will be eligible for Medicare and a small Social Security payment in ~7 years. This person is helping with our kids' childcare and we want the best for them, and have expanded our real estate investments with the idea that a good amount of rental income could cover their expenses now and in the future. She could continue to make Roth IRA contributions or to a taxable account, but we don’t expect her income to change much.

• 3. Have any other married couples with different investment tendencies been able to come together to write an Investment Plan?
  I/husband default to low-cost index fund/ETF investments and my wife more towards rental real estate. I’ve learned a lot from her about real estate but would like to better align as a couple on a mutual investing plan between the both. To her credit she’s been successful with rental properties, but in my opinion has taken risky positions in crypto (and in the past highly volatile individual stocks). Fortunately, those crypto and stock positions were <10% of her investable assets, and she did buy $5K of FZROX and has been pleased to see it go up to $7K. That said I am hoping we can come together to write our own Investment Plan, as say WhiteCoatInvestor advises. Would potentially be open to meeting with hourly / fixed fee CFP and maybe spend $2-$5K to better align my wife and I’s plan.

• 4.Curious of opinions on a low Emergency Fund?
  In the past we’ve had 3-6 months or more of cash on hand but for now we’ve been only keeping $5-10K as an Emerg. fund, and putting the excess to paying down rental mortgage debt early, given the arbitrage in rate (debt at ~6.2%, after-tax interest earned from SPAXX probably 3.4%). To be clear, our rental properties are each cash flow positive, so we don't have to pay that debt down early. It's just the highest no-risk return available and I figure worst case we could withdraw cash from HSA ($10K available for past qualified medical expenses) or Roth IRA (~$100K+ in contributions) penalty and tax free if we had a sudden need for cash.

• 5. Has anybody withdrawn HSA funds to effectively transfer those funds to a Roth IRA due to the better estate planning implications or Roth IRAs vs HSAs for beneficiaries?
  Said another way if we have $10K of qualified medical expense receipts, and otherwise were not going to contribute to a backdoor Roth IRA one year, might it make sense to withdraw that from the HSA, penalty and tax-free since we have the receipts, but then use that $10K in cash to contribute to ROTH IRAs via the backdoor. Trying to gauge if this is worth the time, but overall would prefer to have larger balance in Roth IRAs than HSA if there’s an opportunity and isn’t too much work.

Appreciate everything this community has done for our family and any time or thoughts spent here. Thanks. Let me know if any clarification needed.

Statistics: Posted by PG40 — Thu Nov 21, 2024 1:04 am — Replies 0 — Views 100

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