, you want an AA of 80% stocks, 20% bonds (that's a little low for your age), with 30% of stocks in international. That breaks down to 56% US stocks, 24% international stocks, and 20% bonds. Here is a possible retirement portfolio:Taxable at Treasury Direct -- 3%
3% I Savings BondsTaxable at Vanguard -- 22%
) Vanguard Total Stock Market Index Fund Admiral Shares (0.06%)
) Vanguard Total International Stock Index Fund Admiral Shares (0.18%)401k at Merrill Lynch -- 56%
) BlackRock S&P 500 Stock Fund (0.18%)
) PIMCO Total Return Fund Institutional Class (0.46%)Roth IRA at Vanguard -- 19%
) Vanguard Extended Market Index Fund Admiral Shares (0.14%) <-- Roughly four parts large caps (S&P 500) to one part mid/small caps (Extended Market) makes up the total US stock market. This is a little low for now.
) Vanguard Total International Stock Index Fund Admiral Shares (0.18%)My comments:
-- This ignores the money market and checking account.
-- From now on add only TISM to taxable (plus the I Bonds) until you can have the entire 24% there. This is to take advantage of the Foreign Tax Credit
-- I would up the bond allocation to at least 25% (if not 30%), but it's your choice.Your questions:
1. This is the result of a major rebalancing of my portfolio to simplify the number of holdings and for tax efficiency completed around six months ago, and has just seen the funds rebalanced. I would appreciate any commentary or suggested tweaks.-- See above.
2. The 401(k)'s options are terrible, I know. However, I am looking for advice/suggestions on making do with a bad set of investment options.-- See above.
3. Are there any suggestions for additional diversification beyond the total market index funds listed here? Should I consider the Vanguard REIT Index, overweighting some sectors, or the like?-- I'm not a fan of overweighting. The Vanguard REIT would have to go in the Roth IRA and you need that room for other things right now. You could always add it later.
4. Because I do the backdoor Roth each year, I've left the Roth IRA as a single fund; that way I don't need to worry about it affecting the allocation of the rest of the accounts. Thoughts on this approach?-- It would be better to have individual funds in the Roth IRA to complete your AA in a less expensive manner. The above portfolio removes two expensive funds from your 401k and puts cheaper options in your Roth IRA.
5. To date, I have been making my 401(k) contributions on a pre-tax basis. My 401(k) is fully funded for 2012. For 2013, I am considering moving to making 100% of my contributions as Roth 401(k) contributions. Is this a sound strategy? Should I split between Roth 401(k) and pre-tax 401(k) in order to benefit from tax diversification? I can afford the annual taxes, but, obviously, want to minimize. -- For most people the pre-tax 401k is better. Your case may be different. The Finance Buff (who posts here as tfb) wrote a couple of articles about this: The Case Against Roth 401(k) and Roth 401(k) for People Who Contribute the Max.
6. I have, based on what others here have done, begun buying Series I Savings Bonds each year. What are the board's thoughts on the total amount that I should be aiming to have invested in these savings bonds? Maximum per year, every year, ad infinitum? Or some other amount. For what it is worth, my assets are held in a trust for estate planning purposes, and I believe the trust can purchase an additional $10,000 per year (for a total of $20,000). Assuming I have the funds available, should I increase those purchases?-- The more you hold in I Bonds the less you would need in PIMCO which is more expensive. However, PIMCO is also more diversified. I wouldn't hold more than 40% of my retirement fixed income in I Bonds (and probably less). Your choice.
Something to think about.