Asset Allocation

[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?

 

[travelover]

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.

 

[walkinwood]

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.

 

[bizlady]

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?

 

[DblDoc]

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Taxes - you will pay more taxes on a dollar withdrawn from your tax deferred account (ROTH's excepted) than on spending a dollar from your taxable holdings.

DD