Multiple Accounts Asset Allocation

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Topic Author
IM_MM
Posts: 2
Joined: Sun Apr 11, 2021 6:34 pm

Multiple Accounts Asset Allocation

Post by IM_MM »

Hi all,

New to the forum and to investing. To keep it short - my wife and I only recently were able to get serious with savings and thinking about our future - career changes and challenges and whatnot. We have some $$ tucked away in retirement accounts from previous and current jobs, but really were not paying attention to what that money has been doing - more like pick the target date fund and leave it alone. I'm hoping to follow the three-fund formula across the entire portfolio and I'm wondering if this type of allocation makes sense for a 70/30 split with 50 US/20 Int'l
  • Her 401(k) - $33,000 - All bonds (29%)
  • Her IRA - $13,582 - All Int'l (12%)
  • Her 403(b) - $13,510 - All US (12%)
  • Her Roth IRA - $6,000 - All Int'l (5%)
  • His Roth IRA - $6,000 - All US (5%)
  • His 403(b) - $38,980 - All US (34%)
  • His IRA - $2,015 - All Int'l (2%)
Is there a reason not to dedicate a specific account fully to one of the funds in this way since they are all tax-advantaged? One caveat is the only accounts that will continue to get contributions are His/Her 403(b) and His/Her Roth IRA accounts. I suppose that might make rebalancing a problem.

Any comments/feedback/straight talk welcome. I'm looking to roll some accounts into Schwab so that we have three instead of five different institutions to deal with.

I'll end by just saying how appreciative I've been of the forum, the posts, the videos and the people. Most folks in my personal life think they can fool around a few hours a day and beat the market to somehow become independently wealthy overnight. I'm glad I've found a community to help tune the nonsense out.

Best,
M
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Duckie
Posts: 9777
Joined: Thu Mar 08, 2007 1:55 pm

Re: Multiple Accounts Asset Allocation

Post by Duckie »

IM_MM, welcome to the forum.
IM_MM wrote: Sun Apr 11, 2021 7:02 pm Is there a reason not to dedicate a specific account fully to one of the funds in this way since they are all tax-advantaged? One caveat is the only accounts that will continue to get contributions are His/Her 403(b) and His/Her Roth IRA accounts. I suppose that might make rebalancing a problem.
Holding just one fund in small accounts is fine. But pick one or two accounts to hold more than one fund, usually the largest pre-tax accounts. You have a pre-tax 401k and a pre-tax 403b. Depending on their options you could use one or both of them to do all your rebalancing by holding two or three funds.
Topic Author
IM_MM
Posts: 2
Joined: Sun Apr 11, 2021 6:34 pm

Re: Multiple Accounts Asset Allocation

Post by IM_MM »

Thank you Duckie! Is there an advantage to having multiple funds in multiple large accounts vs one fund each if the starting $$ amount gets me to my desired asset allocation?
MrJedi
Posts: 3540
Joined: Wed May 06, 2020 11:42 am

Re: Multiple Accounts Asset Allocation

Post by MrJedi »

There isn't really a benefit to number of funds in an account other than differences in simplicity and complexity. Each fund you pick should be evaluated at an individual level as well.

My 401k is by far my biggest account. I do all of my balancing in there because I keep one fund each in my taxable, IRA, and HSA accounts. This makes rebalancing easier since I only need to touch one account. I couldn't do that if my 401k was all in a single fund due to its size compared to other accounts. My 401k also has good options for all of the asset classes I care about. If my 401k had a good US fund, good bond fund, but poor international funds, I would likely try to keep the 401k fund in the US fund and bond fund, and try to balance out the international in my IRA where I have more flexibility in fund options. This might mean more than one fund in more than one account.
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woolie
Posts: 49
Joined: Sat Jan 12, 2019 9:17 am

Re: Multiple Accounts Asset Allocation

Post by woolie »

Welcome to the forum!
A few thoughts for you to consider:
1) check the article in the wiki about tax efficient placement of funds.
2) there’s nothing wrong with using a target date fund in every account. In fact this would be a damn hard strategy to beat, even though it isn’t the optimal one from a long-term tax efficiency perspective. The inherent foolproofing and removal of temptation to time the markets is immensely valuable.
3) the three fund portfolio is a great way to go. I use it myself. You do have to occasionally rebalance to stay at your desired asset allocation. It is much, much easier to rebalance if you have all classes (domestic stock, international stock, and bonds) in the same account. You may have to accept higher fees and/or a less than perfect tax strategy in order to have a simple way to rebalance with just a couple of sell-to-buy orders.

Good luck!
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woolie
Posts: 49
Joined: Sat Jan 12, 2019 9:17 am

Re: Multiple Accounts Asset Allocation

Post by woolie »

Welcome to the forum!
A few thoughts for you to consider:
1) check the article in the wiki about tax efficient placement of funds.
2) there’s nothing wrong with using a target date fund in every account. In fact this would be a damn hard strategy to beat, even though it isn’t the optimal one from a long-term tax efficiency perspective. The inherent foolproofing and removal of temptation to time the markets is immensely valuable.
3) the three fund portfolio is a great way to go. I use it myself. You do have to occasionally rebalance to stay at your desired asset allocation. It is much, much easier to rebalance if you have all classes (domestic stock, international stock, and bonds) in the same account. You may have to accept higher fees and/or a less than perfect tax strategy in order to have a simple way to rebalance with just a couple of sell-to-buy orders.

Good luck!
HomeStretch
Posts: 11415
Joined: Thu Dec 27, 2018 2:06 pm

Re: Multiple Accounts Asset Allocation

Post by HomeStretch »

Have you checked each account to see if there is a good low-cost fund option for whatever you selected to put into it? Sometimes the fund choices and ERs in an account like a 401k or 403b influence what you put into it.
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