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I WRAPPED UP MY first HumbleDollar article by declaring that I’m no investment expert. I still stand by that statement.
But I also maintain that this insight is a strength, not a weakness. Recognizing my limitations allows me to settle on an investment strategy that gives me a better shot of arriving at my retirement goal, with less likelihood of a detour along the way.
My wife Sharon and I hold most of our retirement savings at Vanguard Group. The bulk of our money is in traditional and Roth IRAs, along with a much smaller taxable account. We also have a growing stash of retirement money in our current employer’s 403(b) plan. Our approach to investing is fairly simple, but was once even simpler—and eventually will be again.
Past. Sharon and I started saving for retirement a little later than many folks. To make up for lost time, we’ve each steadily devoted a sizable chunk of our earnings to our employer-sponsored retirement plans, as well as to Roth IRAs. We began with no true investment plan. Instead, we chose funds haphazardly after a cursory glance at the offerings. We also bought some real estate, and I had an eye on buying more, to add some rental income to our plan. Eventually, though, we learned that indexing was the true route to wealth for us, and sharpened our focus in that direction.
Accordingly, we took action to reshape our hodgepodge portfolio by moving money from actively managed Roth IRAs to index funds at Vanguard. There, we invested in a simple three-fund mix consisting of total U.S. and total international stock market index funds, plus a bond index fund. Meanwhile, our employer’s 401(k) didn’t include a total market fund, but we achieved a reasonable level of diversification with the Fidelity Investments index funds on offer.
Shortly afterward, we learned about factor investing, which led us to flesh out our bare-bones portfolio with a tilt toward value and small-company stocks. We also added a real estate investment trust fund.
A few years later, our former employer was bought out by our present employer. Our jobs stayed the same, but a new signature appeared on our paychecks. Along with that new name came a new retirement plan, a 403(b), with new investment offerings. Most were low-cost Vanguard index funds, but the two international choices were both active funds with distastefully higher fees.
The plan, however, recognized the value of Vanguard Total World Stock Index Fund (symbol: VTWAX), serving it up soon after the fund’s launch. We moved most of our 403(b) money into that fund, but still kept a couple of fingers in value and small stocks. We chose to contribute to the Roth version of the 403(b) soon after it became available.
Sharon and I intended to build a diversified mix of index funds, covering a number of different asset classes and trying to capture a little extra performance with judicious rebalancing. Our interest in investing was high, and we had plenty of energy to follow through on our investment plan.
Present. As often happens, life smiled at our naiveté, shaking up our settled plans. Sharon and I gradually acquired responsibility for the financial affairs of several family members, as well as a small nonprofit organization.
Our money management duties grew from tending to our own investments to overseeing more than 50 financial accounts for individuals, family trusts and the nonprofit, including handling banking and tax returns. Though none was individually complex, in aggregate the load was a lot to bear, and we needed some relief.
In summer 2020, we took a step toward simplifying our financial life by rolling our traditional 401(k)s at Fidelity, along with our Roth IRAs, to IRAs at Vanguard. These joined our Roth IRAs already at Vanguard. We shrank the number of logins required to track our accounts, though we didn’t make the investment management much easier.
Future. The real problem, however, isn’t overseeing our relatively simple investment plan. Rather, it’s the time and neurons required to handle our expanded list of chores, financial and otherwise.
We’re thinking about how to unwind this web of entanglements, which may eventually be too complex for our aging minds. Some tasks, such as caring for older relatives, are out of our control, but the normal course of life will eventually bring them to an end. Others, like work and church responsibilities, require a little planning for a painless extraction.
By contrast, our own expanded list of funds seems like an easy target. A return to a simpler fund allocation is just a few computer keystrokes away. But I’m turtle-slow to change course, and was stymied about how to begin. HumbleDollar’s editor supplied the obvious answer a few weeks ago, a suggestion consistent with other good advice for making any big money move. A five-year plan to shift back to a skinny mix of two or three funds seems like a good path to head down.
Where does that path lead? Back to where I started. I’ll once again remind myself that I’m a half-expert on a couple of topics, like physical therapy and gardening, but investing doesn’t make the list. I’ll also once again embrace the attribute that attracted me to indexing in the first place—the ability to buy a piece of virtually every company worth owning, even though they’re packaged with many that aren’t. But since I don’t know how to pick this year’s best deals, I purchase the whole store. This humble simplicity will, I suspect, serve us well.
Ed Marsh is a physical therapist who lives and works in a small community near Atlanta. He likes to spend time with his church, with his family and in his garden thinking about retirement. His favorite question to ask a young person is, “Are you saving for retirement?” Check out Ed’s earlier articles.
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You might want to read the Bogleheads thread titled “Finding out your Power of Attorney is useless”. Some major brokerages appear easier to work with than others, and many demand their own form instead of a properly drafted and notarized POA from an attorney.
After reading the thread and similar ones on Bogleheads I moved to Fidelity.
My wife and I have experience with powers of attorney from doing business for our mothers. Insurance companies, pension plans, phone providers and the like often won’t accept the POA that we paid the lawyer to create. It often takes a phone call with my mother present or a three-way call long distance, which is sometimes not easy with an elderly person. I appreciate the security, but efforts to help can be frustrated—and frustrating. You’re right, I need to think about being on the elderly side of the relationship.
Ed, Nice article. Thanks for sharing your thoughts. The act of simplification can often become very complicated.
Yes—very ironic. And I can double the complexity.
Ed, We are identical twins. In my working days I was a PT, and still garden (the seeds from Burpee are supposed to arrive by the end of the week). My current portfolio is more complicated than it should be. When I feel like I’m starting to slip in either my interest or capacity to manage it I will convert all to a classic Boglehead Vanguard three fund portfolio of US, and international stock funds, and a total US bond fund. This will be much easier to rebalance and target my future RMDs. As John Bogle was fond of saying, “why try to find the needle in a haystack, just buy the entire haystack”.
We do share a demographic. We’d bore the other party guests talking work and soil amendments. I’m looking forward to a simpler portfolio, but wouldn’t be great to exit factors on a high note?
My poor son married a PA and my wife was a PTA. Sometimes when we get together…
Ed,
Great post. I showed this to my wife, Sharon (yes her real name), and she gasped. I could have written this article nearly word for word. Good to know that others out there have gone through the same pathway with the same struggles and ultimately, hopefully, the same correct conclusions.
Hope your garden survived the freeze last week. I will have some tasks for my garden this spring…
All the best from Atlanta,
Renato
Thanks for your comments. Wouldn’t it be great to start life with a little more information downloaded? “Live and learn” is so true.
In the garden, the B. Sprouts, collards and kale are looking healthy, but the salad greens got too cold.
You picked a great name for your wife!
Ed, I think many of us here on HD are at a stage where we want to start simplifying, our investments along with everything else. Sounds like you’re on the right track, and frankly, ahead of me in that pursuit. It can be a challenging task.
I’m reminded of one of my favorite anecdotes. Back in those ancient days when friends actually corresponded by letter, a renowned author wrote a lengthy missive to a friend, another famous author. He ended the letter with: “Please excuse the length of this letter but I didn’t have time to be brief.”
That’s a good one, Andrew, thank you for taking the time to share it. I know a few conversationalists who live by that maxim.
Add: I certainly agree with Marjorie’s sentiments in her article, but I confess that I also think of what can go wrong. Lately, I’ve been considering how complicated my “simple life” in a semi-rural setting really is. I’m on a campaign to shore-up and trim down.
I know most people here know this, but for anyone reading that doesn’t know:
VT is the ETF equivalent of VTWAX and can be owned at any brokerage. I am just emphasizing this in case someone wants to own it outside of Vanguard.
Thanks for that addition, Nate.
Nate,
Thanks for that important piece of knowledge.
I did not know that. Your comment was very helpful!
Congratulations on your article and I appreciate your wise counsel from it, plus all your previous comments on posts. I am closing some of our straggler accounts to streamline our situation. Next step is to analyze all our holdings. Looking at you Morningstar x-ray! 😀
I am grateful for the daily nuggets of wisdom from this community!
Morningstar’s X-ray feature is worth every penny of the $240/year membership fee. Makes rebalancing a breeze, and is a lot cheaper than a financial advisor (which I remind my wife each time we have to re-up during the holidays). The articles form Christine Benz and John Rekenthaler are invaluable too.
Thank you for your comment, Stacey. Streamlining the stragglers is a good way to phrase it.
Ed, you have taken on a lot and you have your hands full. Planning is fine, to an extent, but overthinking every investment issue can exhaust our every waking hours, and can overtax “the little gray cells”.
you are in a good position to implement the five year plan Jonathan suggested and at just the right age. Good luck!
you have a kind and generous nature.
Thank you for your kind words. I know we won’t stop planning, but we’re ready to start shifting our focus toward the last horizon and making the part of the journey within our control a little simpler.
Just curious Ed, how did your same job go from eligible for a 401k to 403b?
Our for-profit hospital was bought out by a non-profit.