pulps wrote: Thu Sep 18, 2025 1:55 pm
Current allocation (look-through)• US Total Market: 61%
• International: 24%
• US Small-Cap Value tilt: 11%
• Bonds: 4%
• Cash: 0%
(Note: I also keep a meaningful amount of cash in money market accounts outside of this portfolio. If that were factored in, my cash allocation would be closer to 10%. My living expenses are low relative to my income, and I could easily reduce them to the bare minimum if my income went down.)
Is this “meaningful amount of cash” in Taxable for planned lumpy expenses (like bi-annual property tax, home repairs/upgrades, replacement cars, quarterly/annual bills… essentially any known bills that are not monthly) -OR- is it “just because” you can sleep better at night with a 10% cash pile. If it’s the former then fine, although you might want to improve your tax-efficiency by moving that 10% cash in Taxable to US Total Market and then moving a like $ amount from US Total Market into cash inside a Trad Tax-Deferred account (see the Wiki topic on Holding Cash in a Tax-Deferred Account). That reduces the immediate tax-bill since interest on cash is taxed at your 35% Fed + 4.25% MI rate, while Total US Market distributions are most likely taxed at 15% LTCG rate.
pulps wrote: Thu Sep 18, 2025 1:55 pm
1. Portfolio: General feedback on my current portfolio structure — am I on the right track? What changes would you recommend either to rebalance current holdings or regarding future contributions?
Your Current layout, as @HomeStretch mentioned, has Dimensional SCV fund which is expensive (highlighted in yellow with the ER in red) and you have some potential for Wash Sales with VTI in Taxable but also in Trad & Roth 401ks (highlighted in red). SCV is probably not as tax-efficient as large-cap blend or total US stock (which is 85% large-cap blend). Total Int’l stock is also probably not as tax-efficient as Developed Markets. About 3% of your 5% fixed-income allocation is in Roth accounts, which diminishes the tax-free earnings attribute of that account type (highlighted in purple). Roth should be 100% stocks if possible.
In the Proposed layout, I’ve suggested retaining VTI and replacing VXUS with VEA which is likely more tax-efficient in the long-run. All the SCV will be held in the Trad 401k, but but there’s a Tax Cost to Switch Funds in Taxable, so consider the unrealized gain and whether cost reduction and simplification are worth it to you for the cost you’ll pay. The TDFs were eliminated (which gets bonds out of Roth accounts) and the 5% bond allocation is entirely in the Trad 401k (since it seems you can independently pick funds between Trad & Roth and all bonds/cash in Trad is the preferred location per Tax-Efficient Fund Placement).
A template spreadsheet (not your data) to help with asset allocation assessment and rebalance planning is linked below. Make a copy in your local GoogleSheets space to edit (or download to your local machine if you have Excel). It should only take about 10-20 minutes once a year to update your balances and plan a shuffle among funds if any deltas are off by more than ±5% (or whatever your personal rebalance threshold is).
Asset Allocation Sheet
pulps wrote: Thu Sep 18, 2025 1:55 pm
2. VFIFX vs ETFs: I’m considering switching from VFIFX into the underlying Vanguard ETFs (VTI, VXUS, BND) for lower expense ratios and more control. One option is to sell off all VFIFX and buy the ETFs in the same accounts. Another would be to use that change to shift more international holdings to taxable. What would you recommend?
I would just buy the ETFs in the same accounts (my proposal assumed you only had funds available in your 401k, but if you can buy ETFs that’s probably more flexibility for investment choices than I assumed). A shift towards more int’l stock is a higher-level change at the desired int’l stock exposure level up there with your basic AA among stocks & bonds. Do you feel 25% int’l stocks is too low for you personally? Why the shift now (hopefully something like “I would have always preferred the world-cap weighting” and not “I think US is over-valued and it’s time for int’l to outperform)?
pulps wrote: Thu Sep 18, 2025 1:55 pm
3. Life insurance: I have a $1.5M 30-year term life insurance policy started 7 years ago (premium ~$1,100/year). I bought it when I thought I’d have a family soon. I’m happily unmarried now but hope to have a family in the next 5 years. Should I keep the policy (no new health issues since started), or cancel it and apply for a new one if/when I have the actual need?
As @HomeStretch alluded to, I would probably keep it since getting a new policy as you’re older (or potentially have had a bad medical diagnosis) can be much more difficult than simply renewing an existing policy. If your plan was to stay single forever, I’d say ditch the policy, but that’s not your plan.
pulps wrote: Thu Sep 18, 2025 1:55 pm
4. Direct indexing: Is there any sense in using direct indexing through a service like Frec? Their fees are quite low. I wouldn’t put all my taxable with them, but I figure I would save at least $1k/year in taxes with TLH. I also don’t anticipate being at this tax bracket forever (not FIRE, since I enjoy my work, but I would like the option).
Direct Indexing seems to be the latest craze among the “assets under management” crowd (I notice Fidelity is pushing this too). I don’t think the savings in TLH is going to surpass the fees in a 50y life-cycle, so i don’t think it’s worth it. I also think that once you “try this” for even a short period, you end up with a mess of 30+ individual stock holdings which is more complicated than a simple S&P-500 or Total US Stock Market fund. So no, I would not think this “new craze” makes sense… it’s like all products you don’t need–pushed by a salesman looking to make a commission. Follow Bogle’s mantra and keep it simple.
“Simplicity is the master key to financial success.” — John C. Bogle
On the TLH harvesting paying for the fee and then some… do you really think it can make up for the kind of differences that Bogle pointed out to us over a 50y period? Maybe extrapolate that difference to 60y if you plan to be solvent until age 98. High fees are guaranteed year after year, while savings from TLH are not (and the tax savings probably shrinks as your gains over cost basis grow after decades of compounding).
