Slicing the Family PIE Investment Portfolio

This week we will describe how our investment portfolio is shaping up and we’ll break it down into some basic components. We always enjoy reading how other PF bloggers talk about their portfolios so here is ours for your reading pleasure. Let’s jump right in. Enjoy!

portfolio_sept 2016

Tax Deferred Accounts

Most of our assets are within our Tax-deferred accounts. The bulk of this particular bucket comprises Mr. and Mrs. PIE’s 401K’s

Mr. and Mrs. PIE have been contributing to these for the last 17 years and maxing out for nearly all of those years. Compound interest used to be the best friend we had yet to meet and is now part of the family. Of course during the last 17 years we had to navigate one very significant financial event of 2008 (the Great Recession), the crash being particularly painful for anybody who went through that with assets in equities. For those who remember when the proverbial crap hit the air exhaust system, the S&P 500 annual total return in 2008 was -37%.  Yes, that is a large negative number for the folks who are not as long in the tooth as Mr. PIE. Over the period 2000-2016, the CAGR (Compound Annual Growth Rate) for an equity portfolio of 100% VTSAX was 5.9%, inflation adjusted at 3.75%. This data is courtesy of the very useful back-testing asset allocation and portfolio tool provided free by investing savvy friends over at PortfolioVisualizer.

The tax deferred bucket also consists of two IRA’s, Mr. PIE’s Deferred Compensation Plan and our Health Savings Account. In these tax advantaged accounts, our funds are mainly invested in REITs, an ideal place to hold REIT funds.

Finally, there are funds in a pension savings account that Mr. PIE was saving into when he was employed in the UK (1992-1998). Since they were saved while working in the UK, he can access them according to UK regulations, at age 65. Dealing with the tax situation on those funds is work for another day and perhaps a boring post on international tax law.

Vanguard Taxable Account

The majority of funds are in VTSAX and VWIAX. In 2016, these two funds have delivered YTD returns of 8.4% and 9.5% respectively. We dollar cost average into this account on a monthly basis.

Equity in Primary Home

In the summer of 2018 (our planned FIRE date), we will sell our primary residence and relocate to our mountain home. For our primary home, we are well into a 15yr mortgage at 2.75%. We bought this home in 1999 and have refinanced three times (twice at zero closing costs) to take advantage of lower interest rate opportunities. We started out at around 8% interest rate back then (with PMI!).

The proceeds of the sale of our home (minus the plethora of closing costs) will go straight to our Vanguard account and a portion to cash. We don’t pay a great deal of attention to the housing market dynamics other than Mr. PIE logging onto Zillow and Redfin twice a week and scouring the local property paraphernalia to learn which homes flew off the lot or not. Only kidding! Based on sale of comparable properties in our neighborhood, we don’t anticipate much trouble with the sale. We live in a desirable neighborhood on a quiet cul-de-sac in an affordable suburb close to a major tech and financial hub that continues to demand more talent. Time will tell if we have any hiccups with selling. We will let you all know for sure.

Our Mountain Home

This will be the home we relocate to at FIRE. We don’t have a mortgage on our mountain home so that will be one less expense to worry about. Property taxes are also low in our town, although those low property taxes are not common for the state overall. The state also does not tax sales, retirement income (social security, pension or 401K) but does tax on capital gains and dividends. You can work out the state our mountain home is in, can’t you? Or you can go here if you can’t be bothered thinking too much.

We bought this home three years ago. It is our getaway for fun family time and is used heavily all year round. Could the money that we used to buy this home been a better investment in our taxable account at Vanguard? Mr. Bogle would of course say “yes”. Mr. and Mrs. PIE would say “maybe”.  As we have described before, our approach to life is to enjoy family experiences to the fullest. The opportunity to see our kids grow up with memories of the vacation/weekend home that will be our future families home are worth much more than a number in an account at Vanguard. It is not everybody’s philosophy but it is ours and that is all that matters. This home is a big part of our lives and we can’t wait to live there permanently.

College Funds

We have been dollar cost averaging into two 529 plans since the boys were born (9 and 7 years ago respectively). The funds are both with Vanguard. Our goal is to continue to fund these accounts for the next two years and then let them hopefully continue to grow for the remaining years before we need to access them. We like to keep these funds separate from our withdrawal rate calculations as they are earmarked for very specific purposes. If the kids have a few brain cells more than their parents and are talented enough to choose colleges that require more funds, we will certainly help out but only up to a point. A completely free ride is not on the table. You agree or disagree?


We hold about 3% of our total portfolio in cash. When we reach FIRE, we will increase that percentage to hold about 3 years of expenses in cash. Some might argue that multiple is overly conservative given the information coming next.

Mr. PIE Company Pension – An Additional Income Stream

The percentage in the PIE chart reflects the current value of the pension. We don’t include this pension as part of our net worth. It does not show up on our Personal Capital tracking, for example. That is a sure sign we don’t track it closely. Isn’t it funny how important Personal Capital has become for the average investor? Those chaps from San Carlos, CA are onto something – except when they send you endless messages offering financial check-ups. A first step to fees, expenses and money out of your pocket into their coffers. They are indeed smart but so are we.

There is endless debate out there on “net worth” and what to include, what not to include but the pension will be a real income stream going forward. The pension is in the form of a Cash Balance so the value is “real” if you know what we mean. It is $$’s sitting in an account somewhere. Rather than cashing it out at a future date, we will be taking it in the form of an annuity. This annuity will provide an income floor for our future expenses and therefore withdrawal rate. We think of it as the floor foundation that has been 18 years in the making. Mr. PIE will start to receive this annuity when he separates from service. (**Please see footnote for an important recent update on this story).

With this partial safety net in place, we are thinking very hard about the ratio of our stocks/bonds allocation at FIRE and can probably lean toward a larger stocks allocation than is traditionally recommended for our ages and risk tolerance.  “Whoa! The PIE’s are getting aggressive with investments”, we hear you cry. We have been doing a lot of thinking about this in recent months and a number of posts by the Physician on Fire and Early Retirement Now have been extremely helpful in this regard. Thanks guys for some terrific posts on the subject of bonds allocation and lively FIRE community discussion!

What’s Lurking in the PIE Investment Closet?

Eh, nothing really. No gold bullion (pet rock as Mr. Buffett playfully describes it), fancy jewelry, musty old stock certificates or pillowcases stuffed with $ bills. Now and again we find the children there playing hide n’ seek. We may keep them there if their generally good behavior ever slides. Certainly too many work shirts, suits, pants and dresses (the latter belong to Mrs. PIE in case you were wondering….) that we regularly enjoy donating to the local thrift store. Other than that, there are no skeletons.

What’s Next?

The family PIE will continue to save aggressively into tax-deferred, taxable and college fund accounts over the next two years. Any performance bonuses, stock option grants (both are NOT guaranteed) will funnel directly to our taxable account at Vanguard. We think our portfolio is shaping up nicely for FIRE in July 2018. We have a good handle on the things we can control. The market will do what the market does. Only an epic crash of 2008 proportions would have us reconsidering the plan. If that happens, we will all have plenty material to talk about on our blogs. Let’s hope for blog material of a different variety.

** Footnote: This update reflects something that Mr. PIE has been eager to understand for some time. Suffice to say that getting to the bottom of his company pension plan has felt harder than the very long hike we completed this weekend. A number of conversations with employment benefits advisors over the last 6 months had provided mixed information to put it mildly.  It was quite the kerfuffle (translation – “a commotion or fuss, especially one caused by conflicting views”) to be honest. To be fair, it is complicated with so many different plans in place in such a large organization that has acquired companies and spun out companies over the years – either that or spurious information from the buffoons who populate the help-desk of our benefits division. You decide. Mr. PIE won’t pass judgment too quickly.

Mr. PIE finally managed to speak to a very knowledgeable gentleman who walked him through all the details and a number of subtleties of his plan. It’s good when you have those helpful conversations. The bottom line is that he is able to take the pension whenever he separates from service, either in the form of an annuity or lump sum.  Not at age 55 as he was previously led to believe. Based on years of service + age, Mr. PIE’s company currently adds 11% of his monthly earnings (earnings defined as base salary plus bonus) as pay credits into the Cash Balance account. Oh, please don’t think it has been 11% since he started working! Cash Balance pensions typically ramp up the pay credits based on age plus year of service and often start out at 3% or less. Interest credits are also added and are an average 30-year Treasury bond rate based on a 3-month “look back”. That means interest credits added for August are based on April. For those geeks out there, the 30-year Treasury bond rate at end of April 2016 was 2.66%. Thus 0.22% interest credit (2.66/12) was added in August on top of the 11%.


So that is how our portfolio looks today. Six slices of varying size and each slice an important piece of our overall plan. The basic ingredients are simple – saving, time and compound interest. As we said earlier, we really enjoy reading how other bloggers build their portfolios and hope this read gives you a little insight into ours.

Enough of all this, work is looming tomorrow. It is slightly less than two years before we no longer need to write the previous sentence. We’re not counting at all.

How is your portfolio shaping up? How do you consider a pension if you have one? Are all your employee benefits (now or future) transparent and easy to understand? Do these ramblings make any sense?

Let’s discuss.


  1. Thanks for the breakdown, always interesting to read through.

    Neither of us have a pension plan, it’s pretty awesome the you can start collecting as soon as you retire.

    17 years of maxed 401ks is awesome!

    1. Thanks AE.

      The pension plan in private sector is rare so we are lucky. The 401k’s have always been important to us and a high priority since pretty much day 1.

  2. I love hearing other folks portfolio allocations as well, thanks for sharing!

    Although it may not be invested how you’d like, the pension is a nice bonus.

    I like the idea of holding about 3 years of cash or some sort of safe asset, combined with a more aggressive asset allocation. You are giving me some good things to think about as I evolve my plans. Thanks!

    1. In any bear market, you don’t want to sell any asset class, equities or bonds or gold for that matter. Cash then is truly King! And since a bear market can extend to 3-4 years, then that multiple is necessary. For most at FIRE, it becomes asset preservation rather than asset accumulation.

      The pension is a rare beast and is much loved by those who have such a non contributory gem. We are very fortunate to have it.

        1. Thanks for question. The best investing strategy is buy and hold. Trying to time the market requires knowing when to get out and knowing when to get in. Two difficult things in their own right and impossible to do as a combination. If you are in broadly diversified index funds, time in the market will be your friend rather than timing the market.

  3. It’s fascinating to see what y’all are doing. Thanks for sharing. Did you decide on three years worth of cash spending because of your children, or because of a belief/fear of a correction/crash? I’ve seen two years before and for some reason that level of protection makes sense to me, but three is so big. Then I remember that I do not have dependents and am far away from FIRE.

    1. Hi ZJ.

      Good question. It really relates to the extent of any bear market. You don’t want to be selling assets like equities or bonds or even gold. Thus having cash to weather what could be a 3 yr or even longer bear market is important. And yes, kids do bring another level of thinking to the equation. Great insight.

  4. This is so interesting to me. Thank you for the peek inside your portfolio. My current hangup is trying to balance the benefits of a 403b with our supposed pensions. The plan is to stay in education for the long haul (until 55). If we do that, our income bracket will be much higher than it is now (if our pensions exist). So that’s the struggle. We have kind of crummy 403b options so it’s hard to really be incredibly motivated to put money away there. But at the same time, Roths don’t feel like enough.

    1. Penny, I can understand that dilemma and sympathize. You are doing more than most though by pumping money into Roth and thinking about 403b. Has Ed Mills offered any advice on strategies for dealing with crummy 403b’s? Is it high fees or just lousy funds or the double whammy of both?

  5. Thanks for sharing this info. That pension is awesome and it’s nice to see you have that floor.

    I have a defined contribution pension at my job, so it really just acts like a 401k. Only benefit is that I can access the money without penalty at 55.

    The one thing I do have that I think is great for potential Fire purposes is my state 457 plan. It allows early withdrawal without penalty, so its particularly helpful if I’m pursuing Fire.

    1. Thanks for swinging by Financial Panther. The 457 is really awesome. I also have a deferred compensation plan beyond my 401k which I can access when I choose. I set each withdrawal date on an annual basis. So if I wish to save $5 000 in 2016, the withdrawal date is set by me for age 52 or 55 or whatever, my choice.

  6. So great to read this! I always get nervous thinking I should do more, then I remember that we’re just not there yet (saving up an emergency fund) so my 403b/401k has just my general desired asset allocation in it — don’t have to worry about which accounts are best for what when there’s only one so far!

    1. A tax deferred account is a great start! Trying to put as much as you can into that account is the goal. Then work on taxable.You are off to a very good start so keep it up.

  7. Looks great, P.I.E.’s ( any chance your SWR will be 3.14 repeating? 🙂 Awful…I know…and digress. The deal sealer will be when your current primary residence is sold and the proceeds poured into the taxable savings bucket if you will ( although your appreciation on the home won’t be taxed unless the profit exceeds 500k I believe.) As far as the pension dilemma, I too have one waiting for me at 65 from the “phunny pharm” ( don’t worry, no doubt a different company clear across the U.S.-so I won’t “out you”.) I do not include either the pharma pension or SS in my calculations for what it’s worth.

    1. Jon, we have indeed played with many variants of the PIE theme but not this one just yet! Ha ha!
      If only our property could realize a capital gain of >$500K…..wishful thinking indeed. That would be a hot property market, even by North East standards. Most folks fortunate to have a pension don’t seem to factor it into net worth.

  8. Me to, I enjoy reading the composition of and thinking behind a portfolio and net worth.

    It is actually interesting tat out can take the pension as soon as the service ends. I know of nothing similar like that in Belgium. Ii it worth to wait a few years to get a higher annuity?

    I also do understand the 3 years of cash. That should prevent you from having to sell at the real low periods of the market. I guess I will do something similar.

    1. Good question ATL.

      It will grow if I defer it, after retiring. I will get 14% more in annuity per year if I defer it four years. i.e. take it at age 55 instead of 51. Of course taking it earlier provides an immediate income floor and a lower withdrawal rate in those early years when WR is critical particularly if markets are down.

  9. I also didn’t track the value of my company pension in our FIRE calculations for 20+ years. It wasn’t until I was about 5 years out from retiring early (@ age 49) that I realized how valuable it had become. I can’t tap it until age 55 – and can’t get it lump sum, but that’s alright. Every year I ‘wait’ to take the pension means it grows at a ~7% growth rate. I will probably hold off as long as I can. I also am holding 3 years spending in CASH – like you said, probably conservative, but feels good to me.

    1. Like you, I did not pay too much attention until about two years ago when I realized we were close to FI. We also have to decide on whether to defer (and get an increased annuity) or enjoy the comfort level a very low WR in those early years – when it is really important to counter the effects of any stock market downturn.

      Cash allocation to us is also very important. We enjoy sleeping well.

    1. Hello Tawcan.
      We are indeed very fortunate to have it. Other than a company collapse of Enron proportion, we should be good. It is a component of our plan that does allow a lower WR in FIRE so it is important from that respect.

  10. Looks like you’re in great shape, PIE family. The use of a pie chart is filling… er, I mean fitting.

    Having less than half tied up in the retirement accounts is nice. There are, of course, ways to access that money, too, but not without some effort. I love having a sizable taxable account.


    1. Thanks PoF. Ha Ha!

      We share the same view of tax deferred vs taxable ratio. I think we will be close to 50:50 when the date comes round. Seems good to us.

      And thanks again for the series on bonds. Very helpful discussion. The great part of blogging is learning from others. And a whole lot less expensive than advisors.

  11. The simplicity of Wellesley Income as an inexpensive reliable conservative managed fund is certainly appealing, or even Wellington for more risk. Also, I agree with the doc and give you kudos on utilizing the Pie Chart. The irony. I’d say that my split is roughly 40% retirement accounts 60% taxable. My dad always told me I shouldn’t put everything in the retirement account because I might want to do something else with the $$$. I still try to contribute as much as I can though.

    1. TJ, thanks for swinging by.

      Wellesley suits our risk tolerance and is a fund that continues to perform extremely well. We will be around 50:50 ratio of tax deferred to taxable at FIRE. Of course we can do Roth conversion ladder if necessary between FIRE date and age 59.5.
      The tremendous tax advantage of the retirement account is hard to resist.

  12. Ah! A PIE family Chart! I love it. Thanks for sharing your portfolio and how you view each one. I’m really pleased you said you’re going to increase your cash. I think that’s the best way to go about it really – you never know how much of it you’re going to need.


    1. Hi Tristan,

      Hope you got my Twitter message. We can elaborate more if needed, just let us know.

      Cash is going to a real important safety net to help weather any market downswings. We think 3x will allow us to sleep well and let the portfolio ride out any storms that come. Some might say 3x is high but even with our guaranteed income floor from pension, we think it is appropriate.

      1. Thanks Mr PIE – I did see it, just replied. I think we’d do the exact same, maybe even 3.5 years so we could take advantage of a big market drop at the time. But there’s for 20-years-in-the-future Tristan and Jasmin to worry about.


  13. Thanks for slicing up your pie! It’s great to see what you’re doing. I’m so envious of your mountain home – it’s in Wyoming? You might recall we almost purchased 20 acres in Montana.

    Mr. Groovy starts his pension next month. We’re accounting for it as part of our cash flow towards expenses but we’ve never added it to our net worth. We debated about whether he should take it later and let it grow a little but we think we can put it to better use now. It will keep us from needing to cash out investments and the direct deposit every month will give us a psychological boost.

    1. Hello Mrs.G.

      We will be relocating to NH although we do love WY very much. Especially the skiing in the Tetons where we are headed next February for a family trip. And we could also learn to love Montana too. We skied there two years ago at BigSky. Both fabulous places and warm, warm people.

      Love the thinking about your pension strategy. The psychology of personal finance should not be underestimated, as Daniel Kahneman teaches us.

  14. I agree with your view to not let the kids have a completely free ride to college. Not that it wouldn’t be a wonderful thing, but giving the kids the opportunity to work to fund their education has proven to be a good strategy (in terms of empowerment and commitment), for the few examples I’ve seen. My education was paid for so I can’t complain, but all of my friends who have been working while studying eventually developed a stronger entrepreneurial spirit and did equally well.
    Everything of course has to stay relative, if college costs are 400k$ then, it isn’t really fair for any young professional to start a career with the purpose of paying down debt for the next 10-20 years.

    1. Hello Nick,

      Couldn’t agree more. Nicely put. I think of two kids at Stanford and $70K per year. That is $560K in today’s money. Ouch, ouch!!

      We will of course fund what we can within reason. A little bit of early finance planning for our kids and as you put it nicely, entrepreneurship can go a long way in the education of the college kid out of school and hungry to build a career.

  15. I agree wholeheartedly with your point that decisions that others might scoff at could still be perfectly right for you, like with your mountain home that will become your home home very soon. It’s so important that none of us follow financial gospel blindly, but instead do what aligns to our own values and passions. Seems like you have a well-balanced “pie” in both a financial and life sense. 🙂

    1. Hello Ms ONL,

      The old adage of personal finance being “personal” is so true. It is interesting in the blogosphere that approaches can often be portrayed as a one-size fits all. Whether it is home ownership or emergency fund or Roth ladder conversion or stock/bonds allocation. It has been interesting to see some quite strong views on all of these in our relatively short time blogging.

  16. Agreed – we would like to help the kids out with college, but they also need to contribute.

    Thanks for sharing 🙂 I always find it fascinating to read about the variety in assets and liabilities, and how each of us are crafting a uniquely awesome future with the tools at our disposal. Only two more years . . . how exciting!!!

    1. Harmony, thanks for sharing our excitement. Yeah, the unique positions we all find ourselves in should be further worked to fit our own needs. It is crazy just thinking that we will be done in less than two years. Mind boggling in fact!!

  17. I love reading about how other people’s asset allocation is broken out. It looks like you are incredibly diversified to handle any storm.

    For curiousity sake can you walk me through why you are choosing to increase you cash allocation to three years of cash?

    1. MSM, thanks for checking us out!
      The cash buffer of three years allows us to use that to cover expenses in any bear market. You don’t want to be forced to sell stocks or bonds in a down market.
      We will wait until market recovers (may be less than three years, hopefully not more) before we consider selling stocks or bonds to cover our expense needs. Good question!

  18. I like reading other’s investment allocation, thank you for the detailed breakdown. Since I just started work, my 401k balance isn’t that high but have a significant cash balance in my trading account just ready for opportunities to pop up. Hopefully I can recognize it when the time comes!

    1. Trying to time when to seize the opportunity is tough. Don’t hang on too long….

      We just executed purchase of some international funds based on the recent 5% correction in that sector.

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