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10-27-2010, 03:32 PM
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#1
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Dryer sheet aficionado
Join Date: Oct 2006
Posts: 45
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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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10-27-2010, 04:10 PM
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#2
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Mar 2007
Posts: 14,328
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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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10-27-2010, 06:43 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Jul 2006
Location: Denver
Posts: 3,519
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 Quote:
Originally Posted by leyland
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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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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10-27-2010, 08:56 PM
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#4
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Full time employment: Posting here.
Join Date: Mar 2008
Posts: 968
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Quote:
Originally Posted by travelover
Also a dollar in a tax deferred account is worth less than a dollar in a taxable account (after taxes)
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Can someone explain this to me? Inflation?
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10-27-2010, 10:10 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 1,224
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Quote:
Originally Posted by bizlady
Can someone explain this to me? Inflation?
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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.
DD
__________________
At 54% of FIRE target
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