My wife and I (age 29/30) currently have all our retirement savings in the Vanguard Target Retirement 2055 Fund (VFFVX) with an expense ratio of 0.18%. Looking at the individual funds I could save a bit if I built my own approximation of the fund. To do this exactly it looks like we would need 63.2% in Vanguard Total Stock Market Index (VTSMX), 26.8% Vanguard Total International Stock Index (VGTSX), 8.1% in Vanguard Total Bond Market II Index (VBMFX), and 1.9% Vanguard Total International Bond Index (VTIBX).
My calculations say that to have 1.9% in the international bond fund and still meet the minimums for the investor or admiral class shares we would need to have a total available to invest of about $158k or $526k respectively, which we don't (yet), so I thought I would skip this fund and instead invest 10% in the the total bond market fund.
We have a little less than half our savings in two Vanguard R.iras, a little more in a 403b with TIAA-Cref and about one years contribution plus growth in a Vanguard T.ira. We're solidly in the 15% bracket, so I think we'll stick with the Roth's until we're in the 25% bracket.
With TIAA-Cref we have access to institutional class shares of all but the international bond fund, so those would be VITSX (aka VTSMX/VTSAX), VTSNX (aka VGTSX/VTIAX), and VBTIX (aka VBMFX/VBTLX) with expense ratios of 0.04% (vs 0.17%/0.05%), 0.12% (vs 0.22%/0.14%), and 0.07% (vs 0.2%/0.08%).
My thinking is that we would invest all of each Roth in VTSAX since if we split it we wouldn't be able to access admiral class shares yet, then invest the 403b in VITSX, VTSNX, and VBTIX in the appropriate amounts to approximate the target date fund across all our savings. Since the T.ira is so small and won't get more contributions for now we would be stuck with investor class shares, so I thought I would just leave it in the target date. All this would really only save us about $56/year right now.
So I guess my questions are:
- Is it worth doing all this for $56/year? I suppose this is really a question of how often should I rebalance? Doesn't seem like it would take more than 1/2 an hour to do, so probably worth it if it's only once a year, but maybe not if it's more.
- If it's not worth doing financially, is it worth doing for practice and habit forming for when we have enough that it really adds up or should I just wait until then?
- Do I lose much by not investing in international bonds at all?
- How should I invest contributions until the next time I rebalance?
- Is there some other allocation I should consider instead?
Thanks!!!