401k, Roth IRA, and Taxable -- Asset Allocations?!

[the585]

Hello! I'm new to the community and love the idea of early retirement. I'm 26 years old and want to revamp my asset allocations now that I'm maxing out my 401k contributions and Roth IRA, with additional investments in a Vanguard taxable account. Here's my current investment picture:

Taxable Accounts

• ~$10,000 VTSAX (Vanguard Total Stock Market Index Fund)
• ~$10,000 VTIAX (Vanguard Total International Stock Index Fund)

Roth IRA

• ~$10,000 VFFVX (Vanguard Target Retirement 2055 Fund)

401k Pre-Tax

• ~$45,000 Target Retirement 2055 Fund (BlackRock)

For the Roth IRA, I chose the target retirement fund as a temporary holding until I can shift it to something better. Through some research, I think going all REIT for Roth would be advantageous given the tax-free aspect. But given these three different investment vehicles, how can I best establish a suitable asset allocation? I've always preferred to keep my money in as few accounts as possible for simplicity, but the need to split into these different investment accounts has thrown me for a loop. Should I break up the 401k funds into individual funds (S&P 500 and Bonds) to weight more allocation to bonds, as it appears there are none in my current portfolio?

Any tips or advice for reallocation and investment strategy going forward would be fantastic, thanks in advance!!

[Animorph]

To add bonds, simply select an earlier dated target retirement fund.

Your AA looks fine for a simple portfolio. I wouldn't change to a bunch of REIT's, especially when vnq is one of my best performing funds for the past few years. That's bound to change sooner or later. Stick with the broad funds.

Your AA should apply to the total of all your accounts. The location of the various components should be determined by growth characteristics and tax concerns. With pretty much all equities, you don't have much to worry about right now.

[LOL!]

First, select an asset allocation without regard to specific products and funds.

Second, choose the funds to fulfill that asset allocation. You will be constrained by what your 401(k) plan offers.

Third, consider tax-efficiency and asset location in order to minimize taxes.

Fourth, get it right now so that you don't have to sell things in a taxable account because you started off on the wrong foot.

[pb4uski]

At your young age, your AA can be 100% equities. When you get 10 years or so from retirement begin investing contributions and income in bonds until you get to your target retirement date AA.

[target2019]

Quote:

Originally Posted by the585 Hello! I'm new to the community and love the idea of early retirement. I'm 26 years old and want to revamp my asset allocations now that I'm maxing out my 401k contributions and Roth IRA, with additional investments in a Vanguard taxable account. Here's my current investment picture: Taxable Accounts ~$10,000 VTSAX (Vanguard Total Stock Market Index Fund) ~$10,000 VTIAX (Vanguard Total International Stock Index Fund) Roth IRA ~$10,000 VFFVX (Vanguard Target Retirement 2055 Fund) 401k Pre-Tax ~$45,000 Target Retirement 2055 Fund (BlackRock) For the Roth IRA, I chose the target retirement fund as a temporary holding until I can shift it to something better. Through some research, I think going all REIT for Roth would be advantageous given the tax-free aspect. But given these three different investment vehicles, how can I best establish a suitable asset allocation? I've always preferred to keep my money in as few accounts as possible for simplicity, but the need to split into these different investment accounts has thrown me for a loop. Should I break up the 401k funds into individual funds (S&P 500 and Bonds) to weight more allocation to bonds, as it appears there are none in my current portfolio? Any tips or advice for reallocation and investment strategy going forward would be fantastic, thanks in advance!!

What's available in your 401k? The Blackrock target fund has a very high expense ratio. Over long periods it will probably consume a good portion of your new earnings.

[Markola]

Good start. Your AA is fine for your age and all of your funds are self-balancing. You've chosen well. Simplicity is a big part of success, and that's what you have.