Originally Posted by GatorBuzz
Please pardon the alliteration in the thread title.
Okay, as anyone can see here (http://www.early-retirement.org/foru...ong-27909.html
) I have only been investing for about a year. I am now stuck and have done various internet searches, but canít find what Iím looking for.
In many of the books Iíve read, Iíve seen mention of treating all your accounts like one contiguous account AFA asset allocation goes. Put tax-efficient funds in your taxable accounts and tax inefficient funds in 401k and Roth, etc. Simple enough and makes sense. But Iím confused about spreading the asset allocation across all accounts in total. Do you have, for example, 1-4 funds in the His Roth and 1-4 in the Her Roth and 1-4 in the 401k that completes your AA?
As it stands now, Iíve got basically the asset allocation I want in my 401k and our Roths are in VG Target Retirement Funds. I also have a taxable account with VG Total International. As we build up our Roths, I am wondering if I should break out of the Retirement Fund so that I can slice and dice the index funds that I want at the percentage I want. There are classes not currently in the Retirement Fund that Iíd like to include. If I had to boil this convoluted post down to one question, it would be this: Do you spread your asset allocation over all your accounts or do you treat each account separately? In either case, why? Okay, thatís two questions.
Iím looking to see how others do it and the reason they do it that way.
Thanks in advance.
I have one asset allocation. It is
43% domestic large cap
15% domestic mid cap
15% domestic small cap
(73% domestic stock)
15% foreign large cap
10% foreign small cap
(25% foreign stock)
Each account has a similar high level allocation, depending on the choices available, adjustments which make sense are made.
My 401k is 73% domestic stock, 25% foreign and 2% bonds. No mid cap fund availble, so small cap gets 25% and company stock gets 5%. Instead of small cap foreign, I use an emerging markets fund for this portion.
Wife's 401k is 75% domstic stock, 25% foreign equity. She has no good mid cap fund, so again I overweight the small cap allocation above to 25% and add 5% to her company stock.
We each have a rollover IRA. My rollover is 73-25-2. In addition because I can pick and choose the funds, I use 43-15-15-15-10-2 allocation.
We each have a Roth. The allocation is combined across Roths, because this is smallest balance of the accounts. I hold all the domestic positions, and some foreign positions. Wife holds rest of foreign positions.
The key is "why".
From 1997-present I have worked at one employer with 4 name changes because of buyouts, mergers, acquisitions and another merger. 401k changed each time (current 401k is the worst of the 4). If I changed the fund selections 4 times in 11 years, that would be too much to track. After 3rd 401k in 8 years, I decided to allocate each account as it's own entity.
From 1998-present my wife had 5-7 jobs. First two years were tough (maybe 3-5 employers in 2-3 years). Again a changing 401k and only cherry picking the best funds would have affected 4 accounts. Too much work.
Add to this some funds I chose for my Roth are currently closed (RPMGX for example) and no way I would give that fund up because a 401k had a good mid cap offering.
We probably own close to 20 funds across all accounts. I do own the same funds in my rollover and Roth to a degree. All IRAs are with T Rowe Price.
Some of the 401k funds were chosen because they were the only choice for that asset class.
I can get one account statement and rebalance that account without regard to the others.
My 401k is rebalanced 2X per year. In June I adjust contributions, in December I buy/sell as needed to rebalance.
My Roth is rebalanced based on contributions each month. My Roth maxes out in August each year (I send in $625/month). The tweaks each month keep asset allocation in line.
My wife's 401k is rebalanced 1X per year by me by buying and selling.
I consider the Roth IRA the core of the whole invesment puzzle. These are the funds not subject to RMDs, and we want maximum growth in the Roth. IMO you should have Roth fully allocated at minimum so it grows the largest. Roth is "densest" investment possible- as withdraws are tax free (40k from Roth is better than 40k in a taxable account is better than 40k in a 401k/Traditional IRA).