The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Rubyvroom on October 17, 2016, 12:57:07 PM
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My husband and I are currently maxing our 401k and HSA. Our income is too high to get the deduction from a traditional IRA. We have not opened Roth IRAs yet for either of us. I intend to open a Vanguard account under each of our names to invest $11,000 in each account ($5,500 now for 2016 and $5,500 in January for 2017). Come January, I will be able to upgrade each account to admiral shares, assuming we still have $10K in each fund at that point.
The bond index funds in our 401ks and HSA have fairly atrocious expense ratios, so I do not have any bonds in those accounts. We are young - mid 30s - so I want to shoot for an approximate 90/10 allocation. That means I need some bonds in either our Roth accounts or taxable accounts. It seems to me the best option, given the high bond fund expense ratios in our 401ks (0.44%) and HSA (0.76%), is to invest in bonds in our Roth accounts with Vanguard to shelter the dividends and take advantage of the low expense ratio, to the extent that it helps us achieve a 90/10 allocation.
My question is, what funds do you prefer in your Roth? Do you prefer higher growth funds, like total stock market funds? Or is it not necessarily a bad choice to use the Roth accounts to shelter dividends from bond funds, when the alternative is eating a 0.44%/0.76% expense ratio in our 401k/HSA? When I try to research (aka Google) an answer on "optimal" Roth funds, I of course find many different opinions on the matter. I'm assuming it's purely situational.
Any thoughts would be appreciated! I learn a lot from these boards. If I left out any key details, let me know.