Author Topic: Confused about asset allocation across multiple accounts  (Read 2409 times)

mptolman

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Confused about asset allocation across multiple accounts
« on: February 06, 2018, 09:00:44 AM »
Age: 33
Asset allocation: 80/20

I'm currently maxing out Roth IRA and 401k and throwing excess into taxable (VTSAX).

I've read that I should diversify across my portfolio as a whole, rather than having a split of 80/20 within each account. I have enough room in my 401k to hold my entire bond allocation there, so I can have 100% stocks in Roth IRA and taxable. Is that a bad idea? I assume when I leave work that I'll need to live off the taxable balance until RMDs kick in. Is this risky when taxable is 100% stocks? At what point should I start adding bonds to Roth and/or taxable? How do you diversify across your portfolio?

Mississippi Mudstache

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Re: Confused about asset allocation across multiple accounts
« Reply #1 on: February 06, 2018, 09:22:29 AM »
I've read that I should diversify across my portfolio as a whole, rather than having a split of 80/20 within each account.

This is correct. Your entire portfolio is what matters. I have 3 401ks, 5 IRAs, and an HSA. Some of them have better options (ie, lower fees) for bond funds, some have better options for international funds. All of them have access to good domestic stock funds. I keep my bonds and international stock in the accounts with the lowest fees on those items, and spread out the domestic stocks among the remaining accounts. I try not to have more than 2-3 funds in any account because it helps with bookkeeping when it's time to re-balance. Since you have taxable accounts, you will want to keep your most tax-efficient investments in those accounts. It would be wise to keep your bonds (which are subject to income tax) in the 401k, as you suggest.

Radagast

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Re: Confused about asset allocation across multiple accounts
« Reply #2 on: February 06, 2018, 09:16:54 PM »
Age: 33
Asset allocation: 80/20

I'm currently maxing out Roth IRA and 401k and throwing excess into taxable (VTSAX).

I've read that I should diversify across my portfolio as a whole, rather than having a split of 80/20 within each account. I have enough room in my 401k to hold my entire bond allocation there, so I can have 100% stocks in Roth IRA and taxable. Is that a bad idea? I assume when I leave work that I'll need to live off the taxable balance until RMDs kick in. Is this risky when taxable is 100% stocks? At what point should I start adding bonds to Roth and/or taxable? How do you diversify across your portfolio?
You got it right already! Start moving towards bonds in Roth or taxable (depending on tax situation) about 5 years ahead of time, selling bonds in 401k to meet target %.

electriceagle

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Re: Confused about asset allocation across multiple accounts
« Reply #3 on: February 07, 2018, 03:47:56 PM »
International stock funds are often charged foreign taxes, which are passed on to you. You can get a tax credit for these if they are in a non-retirement account, but lose the credit if they are in a retirement account.

 

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