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Asset Allocation
Old 10-27-2010, 04:32 PM   #1
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Asset Allocation

Hi Folks,

Assuming an overall asset allocation of 60% stocks and 40% bonds, it has been recommended that my retirement account be loaded up with the bonds and my non-retirement accounts be loaded up with stocks (as closely as possible given that the 60% of my assets are not in non-retirement accounts). If I intend to withdraw from my non-retirement accounts first (likely to retire this year at age 55), is the recommended approach to rebalance periodically so that as time goes by retirement accounts will approach 60% stocks and 40% bonds? Thoughts?
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Old 10-27-2010, 05:10 PM   #2
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That would be my thought, assuming you wanted to keep the same AA over time. Also a dollar in a tax deferred account is worth less than a dollar in a taxable account (after taxes). You can factor that in, too, if you want to get fancy.
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Old 10-27-2010, 07:43 PM   #3
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Originally Posted by leyland View Post
Hi Folks,

Assuming an overall asset allocation of 60% stocks and 40% bonds, it has been recommended that my retirement account be loaded up with the bonds and my non-retirement accounts be loaded up with stocks (as closely as possible given that the 60% of my assets are not in non-retirement accounts). If I intend to withdraw from my non-retirement accounts first (likely to retire this year at age 55), is the recommended approach to rebalance periodically so that as time goes by retirement accounts will approach 60% stocks and 40% bonds? Thoughts?
That's my understanding & what I've been practicing. I don't discount the value of the holdings in tax deferred accounts, though I understand the reasons for doing so.
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Old 10-27-2010, 09:56 PM   #4
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Also a dollar in a tax deferred account is worth less than a dollar in a taxable account (after taxes)

Can someone explain this to me? Inflation?
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Old 10-27-2010, 11:10 PM   #5
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Can someone explain this to me? Inflation?
Taxes - you will pay more taxes on a dollar withdrawn from your tax deferred account (ROTH's excepted) than on spending a dollar from your taxable holdings.

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