Back to the Future

Edmund Marsh

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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