r2i forum

Hello, I have been reading AAP section for a little while and I really appreciate the efforts to help each other with investment decisions. I would like to get some advise on my AAP situation. I got this template from another thread and hopefully this has all the information that is needed.

Please advise me on how I should work on creating a AAP to suit my situation. Primarily with my desire to invest in Indian market and with diversifying my portfolio based on my risk tolerance and to have discipline in investing.
AAP questionnaire:


1. Return to India (R2I) or Live In America (LIA): R2I
2. Your current age: 29
3. Marital Status: Married
4. Number of dependents and ages: Wife and no kids
5. Citizenship and/or Immigration status: H1B
6. Retirement Age: 50
7. Is spouse also working? No
8. RNOR eligibility of you and your spouse (use the calculator in doc section) or how long you have been out of India? Myself out of India for 7 years and my wife 1.5 yr
9. If you are a R2I, going to still work or semi-retire or retire? N/A
10. When are you R2I? 2015
11. Annual savings: 25K
12. Annual expenses (excluding tax): 40K
13. House owner? Yes
14. What percentage of your total portfolio loss in a year make you loose sleep? 25%
15. What are your short term(1 year) medium term (2-5 years) and long term (>5 years) financial goals?
Short Term:
a. Buy a pre-owned SUV (10K)
b. Go to school to get Professional MBA (myself) --- 10K (out of pocket) + employer support
d. Emergencies (10K)
e. buy a small investment property (land/house) in India for 25K

Medium Term:
a.Go to school for higher studies (wife) ? 10K + stipend
b.Replace my car --- 15K
c.Plan for R2I (?)

Long Term:
a.Save for Kids?s school/college expenses
b.Save for Retirement

16. Do you have any loans? CC? Car loans? House loans? What is the current interest rate?- Have House Loan 5/1 for 5.8% on 140K and second house loan for 7.8% on 20K.
17. You and your spouse?s participation in US retirement plans: 401K, IRA, Roth-IRA ? myself 5% contribution. Employer matches dollar to dollar until 5%
18. Need to save money for your kids future US education? Do you have 529 plan? ? Not yet
19. If you are R2I, what percentage of your portfolio you want to leave in US? and where? Stocks? Bonds? Cash? I don?t know and I need guidance here?
20.If you are LIA, do you have any insurance? Life, disability, long-term care? Total value of your policy?
21.Do you have an emergency fund? How it is invested? ? 10K in bank CD

Current US Assets*:
1. Stocks ? 24K in 401K + 27K in Vanguard taxable
--- 24K in 401K is invested as 16.5K in a fund that tracks S&P500 and 7.5K in a fund that tracks a total international stock market index.
--- 27K in Vanguard is invested as 16.5K in VTSMX (total stock) and 10.5K in VGTSX (total international stock)
2. Bonds ? 37K intermediate term bond in 401K
3. Cash?1 K + 10K Emergency.
4. Real estate ? Home in US for about 190K
5. Other - No


Current India Assets:
1. Stocks - $0
2. Bonds - $0
3. Cash - $0
4. Real estate ? $45K House. This would be our R2I place or a primary source of money for a R2I house in the future.
5. Other - No

For each asset (both US and India), provide the breakdown of your retirement and Non-retirement portion.

Right now, I am putting all my retirement in 401K and non-retirement in Vanguard. I just finished buying house in India and hence I need to build up some cash.

Thank you...

Desi and Experts, just wanted to check if you had a chance to read this my post. One of my questions while coming up with my first AAP was this. there was a recommendation to put bonds in 401k and stocks outside 401k.

If short-term needs to be in bonds (Vinod's document says this I don't know if I misunderstood that), then I would have to withdraw against my 401k (for which there is tax penalty). So, I am not sure where to keep bonds for short/intermediate needs. Having bonds outside of 401k means more stocks in 401k. I would not be able to deduct the capital losses then... bit confused :) Please help with my AAP.

dfwresident;38822Desi and Experts, just wanted to check if you had a chance to read this my post. One of my questions while coming up with my first AAP was this. there was a recommendation to put bonds in 401k and stocks outside 401k. [/quote]

The steps are as follows:

1. Keep aside your emergency funds and short term goal monies in taxable account in money market or CDs. Money needed for near term goals should not be sitting in tax deferred accounts unless there are other extenuating circumstances.

2. Long term money should be allocated based on AAP ratios. The first thing to do is to start purchasing bond funds in tax deferred but only to the limit of AAP. If tax deferred accounts has money left over after fixed income allocation has been exhausted, then it is OK to purchase equity funds in tax deferred.

If all of tax deferred money has been exhausted in fixed income (bond MFs) purchases and AAP dictates still more fixed income purchases, then fixed income purchases should be considered even in taxable, however some tax planning becomes necessary then.

[QUOTE]If short-term needs to be in bonds (Vinod's document says this I don't know if I misunderstood that), then I would have to withdraw against my 401k (for which there is tax penalty).

Is money needed for your short term needs invested within 401K? If so, which short term needs? If you need to tap 401K for your short term needs, yes there will be penalty, so reassess your needs or assess alternative plans. Think what is your long term exit strategy from 401K / IRA.

[QUOTE]
So, I am not sure where to keep bonds for short/intermediate needs. Having bonds outside of 401k means more stocks in 401k. I would not be able to deduct the capital losses then... bit confused :) Please help with my AAP.


Please re read Vinod document and go thru some of the links that I am pasting below.

AAPs take a lot of time and when I had the time, I have done perhaps a 100 AAPs. At present, it has been difficult to free up substantial time to address AAPs. I suggest that you go thru some earlier AAPs done as an example and start developing your own. The links below will help.


http://www.r2iclub.com/rrk/articles.htm#aap
Basic Financial Planning by Vinod
basic steps for asset allocation by Bobus

AAP for ssgn05

AAP request for sspp

many more AAPs in this and in the MSN forum

Thanks Desi, for your time. Let me read the earlier threads on this and related articles.