[USER]

Seeking advice on diversification and future planning post lay off:
About Me:
45 year old divorced mom living in HCOL with 13 year old daughter.

My daughter is with me 85% of the time, and I receive minimal child support. Currently renting in SF and planning on doing so until daughter goes to college in 4.5 years.

Had partner move in last summer. Expenses are split, although not 50/50, since he doesn’t make as much as me, and my daughter and I have collectively have more expenses.

He has no children, only a dog.

We have no plans to get married in the foreseeable future. He doesn’t have much saved at the moment.

I’m working with him to get him to a better place financially.

Overall networth- ~$2.4 million
– HYSA – ~$270k
– HSA ~$18K
– Vested stock $176K
– 401K $282K

– Brokerage – $1.2 million. This used to be managed by Personal Capital until 2023 and I had to move out into Vanguard and still have some individual stocks.

– VOO $630K
– VTEB $60k
– VTI 124K
– VXUS 43K
– Individual Stocks – ~$340k
– Roth IRA – $370K

– 529 $140K. Her Dad has a separate 529 with ~$100K
-Annual Expenses ~$150K, including rent.

Goal – FIRE within the next 10 years. Based on current projection will need to hit ~$3.75 million based on current expenses.

I will most likely not completely stop working, but planning on having a side gig. Will most likely not live in HCOL, but looking to travel with my partner for a few years, ideally once my daughter goes to college.

I was laid off in October, but they’ve asked me to continue working until end of Feb after which i will receive 6 months severance and benefits as well as additional stock vest.

I was also paid out a percentage of the annual bonus as part of the severance package.

My base pay was $270k with a 35% bonus and RSUs, so it’s a pretty good package.

I was planning on taking some time off and not looking for a job right away, however I was approached by a recruiter and may have a potential opportunity come up as soon as my employment ends.

If this opportunity doesn’t work out, then I still plan on taking some time before I look for a job.

I understand I’m in an incredibly fortunate situation with my finances, given the overall job market in Tech.

Questions:
– How should I got about diversifying my overall portfolio given my goals?

– What is the recommendation on the individual stock that i still have. They include Google, NVIDIA, Apple, Meta, Tesla etc. Is there any guidance or suggestions on if I should hold onto any or sell?

– Any advice around being in a situation where you’re close to retirement or have retired and your partner isn’t as close?

Thank you for your time and advice! It’s greatly appreciated.

[Scott]

1) You also hold a fair bit of the Mag 7 in VOO/VTI so that is pretty concentrated in those stocks.

2) If you end up taking effectively a sabbatical…that is a good time to tax gain harvest the individual positions at 15% tax rate. If you FIRE that will be an even better time to tax gain harvest.

3) You could consider some flavor of direct indexing. That is if if your individual positions are the Mag 7 in your taxable account add some sector funds to replicate the other appx 65% of the S&P 500.

You could do this with maybe a half dozen, give or take, sector funds.

You can buy those sector funds quickly/tax effectively inside the IRAs.

The downside is this is creating some complexity but that seems worthwhile as a solution to your first-world problem of concentration risk in a handful of names with large unrealized gains

4) Issue with partner is a lifestyle/relationship decision not really a financial decision. Obviously you need to have all your
estate/beneficiary designations in place for your daughter’s benefit, I presume you attended to that as a consequence of the divorce proceedings.

[Jenny]

Impressive portfolio! I hope you have a will and trust in place to protect your daughter. If you have great companies with individual stocks, hold them.

Selling them would create big tax bill and then you would buy them back in the index funds.

It looks like there’s a bit of overlap in your index funds at Vanguard, look at their holdings and see if you can sell some to simplify if they are in your IRA.

Your cash is probably too high, but given your uncertainty in job situation, it gives you peace of mind.

Look at it this way, if you can live on $96k per year, you are FI.

It’s up to you whether to retire or not. You have already funded your daughter’s college education.

[Rick]

Stop funding the 529 plan. About $240k already and with the last expenses 9-10 years out…. seems like a recipe for overfunding.

As soon as a new job is secured, reduce the very large cash drag of almost $300k+. It has a tremendous cost over time.

Decide how you want to diversify your asset classes. $30-40k in an exUS and a muni bond fund at your overall net worth is not worth the hassle. 10-20% of net worth is a meaningful diversification target.

If you have a full tax year of low income, consider tax gain harvesting or Roth conversions.

On the individuals stocks, I would keep them or the VOO/VTI but not all 3 simply as they are mostly overlapping.

Use the proceeds from any of the three you sell to fund you asset classes diversification, again 10% minimum of net worth.

And big time congrats on all you have accumulated and how it has given you peace in a time of job turmoil. You have been crushing it and I am sure you will continue!

[Frank]

First question. Why do you think that “diversifying my overall portfolio” has much of anything to do with your goals at this point?

Isn’t the problem you had with Personal Capital is that they put you in some complicated and unnecessary nonsense in the name of “diversification”?

(And isn’t that the endemic problem with most of these idiotic robo-thingies, target date funds and “sophisticated” AUM financial advisors?)

What did you learn from that experience? Do you still think complexity = efficacy?

You need less of this fake diversification where you just run around buying all kinds of large cap stocks willy nilly that overlap the same index funds you already hold.

If you really want “more diversification” for some unknown reason here, stop investing in predominately large cap growth stocks and large cap international stocks.

But you probably don’t even want “more fake diversification” because you are not living off your portfolio any time soon.

Retiring in ten years is unlikely to be a problem here if you are able to support your current lifestyle with income and keep most of your invested assets in index funds. (If you really want “diversification”, you are missing small cap value stocks.)

You are also likely holding too much in cash unless you plan on going on a sabbatical.

Stick with index funds and revisit at least 5 years before actually retiring.

THEN you need to diversify your portfolio for drawing down on (unless your real retirement plan is “don’t spend money”).

That is a whole different conversation.

[Author]

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