Originally Posted by kiki
I'd like to get others thoughts on maintaining multiple asset allocations. I know the general consensus is to maintain one allocation, but I'm not convinced this makes sense if the time frames differ for the end goal.
The case I'm thinking of is our retirement (core) asset allocation and then our kid's college funds. For the retirement fund, we are looking at a 30 year time frame, but for the college funds it's 10-15 years.
My thinking is that I should treat theirs separately and I'm wondering what others think?
Btw, right now their accounts are invested in an S&P500 Index, but I want to diversify and I'm thinking that I might use one of Vanguard's Target Retirement Funds to keep it simple (either the 2015 or 2020, but most likely the latter).
Between my wife and I, we have 3 retirement accounts, each of them has it's own asset allocation. We also have life insurance with it's own allocation, and if we have kids (god willing), the education accounts will have their own allocation. If we use HSA's, that too would have it's own allocation.
The 3 retirement accounts:
My 401k (~120k)
Wife's 401k (~20k)
IRAs (2 rollover, 2 Roth, ~40k)
Each of these 3 is either 100% equity or 99% equity, 1% bond.
The equity position in each is:
45% domestic large cap
15% domestic mid cap
15% domestic small cap
15% international large cap
10% international small cap
we are 34/33 yo, 20 years or so before we can comtemplate retirement.
I have had one job for 11 years. In those 11 years, I have had FOUR 401ks based on getting bought/sold by bigger fish (or smaller fish, depends on which side you are on).
My wife has had FOUR 401ks in 7 or 8 years. Her employment has stablized last 2 years, but before that it appeared she had a new job every 18-24 months.
If we only cherry picked the "best funds" from the 401k, the complimented the IRAs with what was missing, we would have been buying/selling the IRAs so often we would have hit transaction limits at T Rowe Price (where all IRAs are kept).
It is much easier for me to look at my 401k, choose the best large cap funds (22% and 23% into those), and best small cap funds (10% into each of 3 different small cap choices). No mid cap fund in my 401k exists, so I reallocate that to something close (wilshire index is one of 3 funds I send 10% to). My 401k does not have a small cap international fund... no issue, I put 25% into a foreign large cap fund, and allocate according to 45%/15%/15%/15%/10% model as best I can.
I then look at my wife's 401k, find the best large cap, mid cap and small cap funds, for example. I find the best international fund (again no small caps), and allocate according to 45%/15%/15%/15%/10% model as best I can.
In the IRAs, all IRAs are treated as one (with T Rowe Price), with the pure 45%-15%-15%-15%-10% allocation we have designed.
When we get any of the account statements, I can see if any are out of whack without needing to chase down information for 6 or 7 different accounts.
My 401k is rebalanced twice a year. I sell 1% to bonds every 6 months (until this position is 20%). We contribute 11% and increase this by 1% per year.
My wife's 401k is rebalanced very little. Once per year, but we only contribute up to match on this, so this doesn't grow very fast.
Our IRAs are rebalanced each month based on contributions. My Roth is maxed out each August, and my wife's Roth is maxed each December. By tweaking the contributions to the 7 funds we own, we can rebalance without selling.
The IRA's are the true "core". Eventually all the assets will be in an IRA, so it's important the IRA is built solid. We have some close funds in the Roth (RPMGX) and two other funds have been closed before (PRNHX and PRIDX), so selling these funds because a 401k has a good choice "right now" in that category makes little sense to me.