401k mix

[Ronstar]

I'm gradually gearing down into full retirement over the next 4 years. My $890k American Funds 401k is:

34.3% growth
54.1% growth and income
11.6% international

I get from this forum and reading that my mix should be less aggresive at this stage of my career. It seems like now would be a great time to re-allocate. Any thoughts?

[Dawg52]

Quote:

Originally Posted by Ronstar I'm gradually gearing down into full retirement over the next 4 years. My $890k American Funds 401k is: 34.3% growth 54.1% growth and income 11.6% international I get from this forum and reading that my mix should be less aggresive at this stage of my career. It seems like now would be a great time to re-allocate. Any thoughts?

What is your overall allocation including your taxable account? Will you receive a pension? Some people look on that as part of their bond exposure. If you do have a nice pension and your are at social security age, 100% stocks may not be unreasonable. For me, I would scale back to a 60/40 allocation even with a pension. I would sleep better at night.

[Ronstar]

Quote:

Originally Posted by Dawg52 What is your overall allocation including your taxable account? Will you receive a pension?

No pension for me but my wife gets one starting in 4 yrs. I don't have a clue what my overall allocation is. I'm glad you brought that up. I'll calc the overall allocation because I believe I'll need to make other moves as well.

[teejayevans]

Quote:

Originally Posted by Ronstar I get from this forum and reading that my mix should be less aggresive at this stage of my career. It seems like now would be a great time to re-allocate. Any thoughts?

Technically, it should be less aggressive if you are going to be withdrawing
within 10-15 yrs. Using age is a bad rule of thumb, so decide what you need
and when, make your investments based on that.
TJ

[jIMOh]

Quote:

Originally Posted by Ronstar I'm gradually gearing down into full retirement over the next 4 years. My $890k American Funds 401k is: 34.3% growth 54.1% growth and income 11.6% international I get from this forum and reading that my mix should be less aggresive at this stage of my career. It seems like now would be a great time to re-allocate. Any thoughts?

sell 3% off top every 6 months and buy an intermediate term bond fund with the 3%.

In 4 years this should give you 24% bonds, which is a good starting point for retirement.

[yakers]

I like what jimoh said but would add, if you have tax free/deferred space available, some TIPS. Maybe 50% intermediate bonds & 50% TIPS. Its not that I love TIPS but there is a genuine possibility of inflation with our national debt. I don't have TIPS myself, I expect a COLAd pension and use that to address inflation.

[LOL!]

Quote:

sell 3% off top every 6 months and buy an intermediate term bond fund with the 3%. In 4 years this should give you 24% bonds, which is a good starting point for retirement.

We can't tell about the 24% number. The American "growth and income" fund could be 50% bonds right now. Ronstar could already have 25% bonds altogether right now.

What does a Morningstar X-ray say your asset allocation is right now? Include ALL your investments, not just your 401K. Also include any investments of your spouse. It would be nice to know where you are now and where you want to be in the future.

[Ronstar]

Ok, I figured the allocation of all 401k, IRA, & taxable accounts:

US equities 33.1% (90% of which is in retirement accounts)
Non US equities 22.1% (100% of which is in retirement accounts)
Cash 12.2% (29% of which is in retirement accounts)
Bonds 3.9% (100% of which is in retirement accounts)
Private company stock 18.8%
Rental real estate 9.9% (15% share of LLC with 3 other partners)

I plan on selling private company stock within next 2-4 years while I'm gearing down. We plan on selling real estate in 2-4 years. The proceeds from these sales will be allocated toward retirement but won't be in a 401k/ira.

I'll need to start full withdrawals in 4 years at full retirement, maybe with smaller withdrawals beginning in 2 years. I was planning on withdrawing from taxable accounts first, leaving the 401k's/IRA's until last.

It does look like I'm short on bonds. I could re-allocate some non 401/IRA cash to bonds, or would it be better in the 401/IRA's? I'll check out the TIPS as well.

[LOL!]

Do NOT use bonds and TIPS in your taxable acccount now. You would have to pay taxes on the interest earned. Put them in your 401k/IRA where the interest is tax-deferred or tax-free (RothIRA). For example, if you want 10% more TIPS, exchange 10% equivalent of IRA from equities to TIPS. Use tax efficient index funds like total stock market or total international stock market in your taxable accounts.

[jIMOh]

FYI- if the 401k is kept in the 401k while retired, the company stock may have provisions to only pay capital gains taxes (and not ordinary income taxes).

When I opened my 401k in 1997, someone, somewhere, explained this exception about 401ks and how company stock inside it gets taxed.

This is only true if money stays in the 401k, it is NOT true if you roll it over. Look into this.