Does this make sense?

[hoosier]

Hello, All,

As the title suggests, I need to think out loud a little and get some input from others who have much stronger Vanguard-Fu than I.

Background:

Age 34.  No debt whatsoever.  Max 401K and IRAs, just started putting about $1k/month in the taxable account.

I have $119K in my 401k that has to stay put.  The investment choices pretty much suck (high expense ratio), mostly invested in FUSEX (Spartan 500).

I have $67K in my Roth IRA and $60K in my wife’s Roth IRA I'm in the process of transferring to Vanguard Roth IRAs, $10K in a taxable account going to Vanguard, and about $6K in cash that I want to keep very liquid.

For the retirement accounts, given that I already have a large stake in the Spartan 500 fund, what should I do with my new Vanguard accounts? I’m thinking 40/40/20 VTSAX/VTIAX/VBTLX spread between the two accounts to reach the minimums, then purchase a 2040 target date fund monthly, then redistribute/rebalance out of the target date fund every so often (every 6 months?).  The would land me the equivalent of 70/30/10.  Or should I just dump all of it in a target date fund and be done with it?

I have no idea what to do with the brokerage account…it is pretty much all for retirement.  Going to be hard to hit the minimums for a while with only $10K and get a good mix.

What would you do if you needed to invest about $150K for the long haul?

[ZiziPB]

What is the overall asset allocation you are trying to achieve (stock/bonds, US/International)?  Once you answer that question, think about your total portfolio as one big pot and see if you can achieve this allocation across the accounts.  Not every account has to have the same allocation.  For example, you could have all your bonds in just one account and all of your international allocation in another and then the rest would be all US.

So, say your 401K is all US large stock (S&P 500), the IRAs will have small and mid US sotck and bonds and the brokerage account just holds international (this is not the actual allocation, just an example of thought process that would go into it). 

If you do it along these lines, it will be much easier to meet any fund minimums and simpler to maintain that constantly moving funds in and out of a target fund in order to achieve your AA.

[forummm]

Agree with Zizi. You can also just think of the S&P500 as being the US market. It's missing the 20% that is mid and small caps, but it's pretty close, and the 20% you are missing is pretty well correlated with the S&P 500 (a bit more volatile, sometimes beats and sometimes lags the S&P500). If it makes your allocations simpler, it's an easy shortcut.

[Interest Compound]

You'd be fine with 40/40/20 VTSAX/VTIAX/VBTLX across ALL your accounts, including the 401k.  Simply consider the S&P500 fund the equivalent of VTSAX and call it a day.

You'd also be fine with simply putting all your non-401k money (including the taxable account) in the 2040 target date fund.  Yea you're total allocation will be a bit more tilted towards stocks due to the 401k account, but that's only temporary.  When you leave the job you can roll the 401k over to an IRA and put it into the 2040 target date fund too.

As long as you and your partner don't earn more than $266,451 a year at work (assuming you're each maxing out a 401k), you shouldn't see a tax hit by putting the 2040 target date fund in taxable.  I'd only go with the 3 fund solution if you:

1.  Don't mind the extra complexity, which really isn't much in my opinion.
and
2.  Think the extra small bit of complexity is worth the slightly lower fees.