Please Critique my Investment Plan

[Singuy]

Okay so my wife and I will start our journey for some major investing/saving. in 4 months time and I am doing mad research to see what's the best way to tackle this.

Our goal is to invest 180k/year +2% increase/year post tax money.

My current 401k account is maxed, and I am going to put in 5500 into 401 roth conversion as well. My wife DOES NOT have a 401k/Sep IRA account. She is a small business owner and qualifies for up to 53k/year to invest in a tax free account. But I am not sure if I really want to stash so much away into retirement accounts because we may retire earlier than 59.

Investment plan breakdown.

70k into dividend growth stocks paying out at least 3 - 4% dividend
20k Munibonds paying out 5% tax free
20k Preferred stocks cumulative at 6%
30k Low cost Index funds/S&P (will scale up after correction and inverse with dividend growth stock.
20k Peerstreet real estate
10k Lending club
10k cash

Hoping for a 7% return that are tax efficient due to our tax bracket.
I hear that even taking the early penalty of a sep-ira/401k is worth it so maybe I should open up a sep-ira for the wife. If I were to do sep-ira, I may just do 50% bonds or preferred stocks plus 50% dividend growth.

Current age: 33/32

Ultimate Goal for Financial Independence

5 million of total capital @ 7% return
We will reinvest 5-6% back to the nest egg and live off 1%-2% for the rest of our lives.
My goal is not to have enough for retirement, but to have a nest egg huge enough that my children and children's children can live off of. I plan to have a trust in which no one can touch the nest egg, and only the returns of 3% will be distributed to my children after our passing while the rest will be left alone to combat inflation. I want this money to last centuries...not for my kids to purchase Ferraris with.

Any thoughts on optimization?

[Jluke]

Are you going to wait till the Presidential Election to start or do you see that as a no impact event on the market?

What dividend stocks are you looking at?

Who are you using for the investments (Vanguard, etc)?

BRK.A on your radar?

How will you minimize fees?

Are you only interested in owning one residence? no vacation home?

[Like2Plan]

Our goal is to invest 180k/year +2% increase/year post tax money.

My currently 401k account is maxed, and I am going to put in 5500 into 401 roth conversion as well. My wife DOES NOT have a 401k/Sep IRA account. She is a small business owner and qualifies for up to 53k/year to invest in a tax free account. But I am not sure if I really want to stash so much away into retirement accounts because we may retire earlier than 59....

...I hear that even taking the early penalty of a sep-ira/401k is worth it so maybe I should open up a sep-ira for the wife. If I were to do sep-ira, I may just do 50% bonds or preferred stocks plus 50% dividend growth.


Any thoughts on optimization?

I just wanted to comment on your DW's ability to set up a sep-ira/401k. Even if you decide to retire prior to 59.5, you will not need access to all your money at once. You will have to save money outside of retirement funds anyway (you will run out of tax advantaged space).

This may not be on your radar--(because who ever thinks they might have a judgement against them?), but retirement accounts do provide some protection from BK and judgements. (IRA's may or may not have as much protection as a 401k--depending on your state)

Also, you are most likely in the highest tax bracket right now--there is a good chance you will be in a lower bracket if you plan to live on 1-2% of your portfolio. Plus, you would have some years in which you could do some conversions to Roth--something worth thinking about.

[corn18]

You can do a SEPP and get the money out before 59.5:

https://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-Substantially-Equal-Periodic-Payments

[Singuy]

I believe Hillary is most likely going to be the next president which will have very minimal impact on the stock market. Trump, tho a long shot, may cause the stock to crash a little because of his nonsense economic plans.

I do believe we are at the very peak of the stock market and a correction is long overdue. The next time ISIS blows up something significant or China takes a dump on their stocks, or Greece/Europe on the brink of defaulting..that'll cause the correction I need to be more aggressive with index funds. and Yes I will be using Vanguard to minimize fees.

I'll purchase some of the top 10 dividend stocks floating around on Dividend Mantra and also invest into some Dividend index funds. I may split some of index fund investment into BRK.B. I am still unsure if the returns from BRK is justified because I do believe the stocks will go south after Warren passes and this is inevitable..

Also no vacation homes. My house is fully paid for as well as all my other debts. I don't see myself upgrading anymore since it's more than 4k squareft on a ski lake with great schools and biking distance to my wife's business...pretty much everything we'll ever need.

[Singuy]

You can do a SEPP and get the money out before 59.5:

https://www.irs.gov/Retirement-Plans...iodic-Payments

I can get the money out but there's a 10% penalty..which some financial gurus did the calculation and they are saying it's still worth it.

[corn18]

There is no 10% penalty if you use the substantially equal periodic payment method.

[sv2007]

..
My wife DOES NOT have a 401k/Sep IRA account. She is a small business owner and qualifies for up to 53k/year to invest in a tax free account. But I am not sure if I really want to stash so much away into retirement accounts because we may retire earlier than 59.
...

Why start the retirement accounts for your wife; that tax deferred gain is great, esp if your income tax is high like you mentioned. It is probably the best thing for you to do. Max out your IRAs and every single retirement account, then fill the taxable accounts.

[sv2007]

I believe Hillary is most likely going to be the next president which will have very minimal impact on the stock market. Trump, tho a long shot, may cause the stock to crash a little because of his nonsense economic plans.

I do believe we are at the very peak of the stock market and a correction is long overdue. The next time ISIS blows up something significant or China takes a dump on their stocks, or Greece/Europe on the brink of defaulting..that'll cause the correction I need to be more aggressive with index funds. and Yes I will be using Vanguard to minimize fees.

I'll purchase some of the top 10 dividend stocks floating around on Dividend Mantra and also invest into some Dividend index funds. I may split some of index fund investment into BRK.B. I am still unsure if the returns from BRK is justified because I do believe the stocks will go south after Warren passes and this is inevitable..

Also no vacation homes. My house is fully paid for as well as all my other debts. I don't see myself upgrading anymore since it's more than 4k squareft on a ski lake with great schools and biking distance to my wife's business...pretty much everything we'll ever need.

Right now dividend stocks are hot because of low bond yield, but historically it doesn't last. Once that yield goes up, I wonder how much $ will leave these dividend stocks. Possibly pushing their prices down (i.e. the total return may be lower than the div yield).

The only constant is change. Now, that's got some truth to it.

We own a vacation home mainly because a child likes a certain location; but on our recent visits, he's changed his mind, so we sold the vacation home. When we bought it, we thought we'll live there during retirement, but things change.

Never say never. and plan accordingly.

[tripods68]

Investment plan breakdown.

70k into dividend growth stocks paying out at least 3 - 4% dividend
20k Munibonds paying out 5% tax free
20k Preferred stocks cumulative at 6%
30k Low cost Index funds/S&P (will scale up after correction and inverse with dividend growth stock.
20k Peerstreet real estate
10k Lending club
10k cash

Any thoughts on optimization?

I'm not a fan of Lending club/Peerstreet real estate.

180K in retirement this is where I put my fully diversified portfolio:
20 International
20Large Cap Index S&P
10/10 Mid Cap Index(Wellington Fund) & Small Cap Value
10/10 Emerging market & REITS
15 MUNI/BOND
5 Cash

20k Preferred stocks cumulative at 6% (SELL)
20k Peerstreet real estate (SELL)
10k Lending club (SELL)

[Singuy]

I'm not a fan of Lending club/Peerstreet real estate.

180K in retirement this is where I put my fully diversified portfolio:
20 International
20Large Cap Index S&P
10/10 Mid Cap Index(Wellington Fund) & Small Cap Value
10/10 Emerging market & REITS
15 MUNI/BOND
5 Cash

20k Preferred stocks cumulative at 6% (SELL)
20k Peerstreet real estate (SELL)
10k Lending club (SELL)

Wow that's a lot in international. Care to explain why you don't like preferred stocks and P2P lending?

[tripods68]

Wow that's a lot in international. Care to explain why you don't like preferred stocks and P2P lending?

That's actually low for International. For real optimization you should be at 25-40%. I'm at 25% international right now trying to increase to 35 a year or two once a rebalance. A lot of small/mid/large cap are US domestic, not much international exposure.

p2p lending view is more a hobby for me (like day-trading) but not a optimum for long-term investment.

[feh]

Any thoughts on optimization?

Don't shoot for optimization. Keep things simple; your current plan seems unnecessarily complex.

Start here: https://www.bogleheads.org/wiki/Bogl...g_start-up_kit

PS - I also suggest you not seek out high dividend stocks/funds

[snafu]

cancel

[Singuy]

Don't shoot for optimization. Keep things simple; your current plan seems unnecessarily complex.

Start here: https://www.bogleheads.org/wiki/Bogl...g_start-up_kit

PS - I also suggest you not seek out high dividend stocks/funds

Hi dividend as in around 4% that are high cap companies...I am not jumping into 10+% dividend stocks.

You may be right, my portfolio looks a little complex.