, for your parents you want an AA of 60% stocks, 40% bonds, with 20%-25% of stocks in international. I'll pick 25%. That breaks down to 45% US stocks, 15% international stocks, and 40% bonds. Here is a possible retirement portfolio:Taxable at Vanguard -- 42%
) Vanguard Total Stock Market Index Fund Admiral Shares (0.06%)
) Vanguard Total International Stock Index Fund Admiral Shares (0.18%)His 403b at Fidelity -- 35%
) Spartan 500 Index Fund Institutional Class (0.05%)
) Spartan Extended Market Index Fund Advantage Class (0.07%) <-- Roughly 80% large caps (500 Index) plus 20% mid/small caps (Extended Market) makes up the total US stock market.
) Spartan U.S. Bond Index Fund Institutional Class (0.07%)Her 403b at Fidelity -- 23%
) Spartan U.S. Bond Index Fund Institutional Class (0.07%)My comments:
-- Your folks are doing great.
-- It's great that you are planning to put TISM in the taxable account because of the
Foreign tax credit
-- You realize that the other non-specified assets they have may overlap or conflict with this proposed portfolio.Your questions:
1. With contributions going only to the 403b account, what is the best way to maintain my desired international allocation?-- See #3 below.
2. Any thoughts on my AA and decision to go with a 3 Fund-like approach? Is there a better approach for their situation?-- I like your AA. However, you wrote: "Desired International allocation: 20%-25%", but then wrote "25% VG Total International..." Usually the international allocation is a percentage of the total equity percentage, not the total portfolio. For example, 25% of 60% stocks equals 15% international stocks. You had it as ~40% of 60% stocks which equals 25% international. That's on the high edge but if that's what you want I can refigure it.
Vanguard has found between 20% and 40% of stocks in international to be the "sweet spot". See the discussion and the Vanguard paper link. Vanguard splits the difference and uses 30% in their Target Retirement and LifeStrategy funds.
3. How often should I rebalance? Are there any tax implications of rebalancing the taxable Vanguard account?-- Rebalance once or twice a year. For the taxable account, take all dividends and capital gains distributions in cash. In other words, don't automatically reinvest them. Have them put in a money market or savings account. Most if not all will be used to purchase more TISM.
Alternatively, have all dividends and capital gains distributions from both funds reinvested in TISM. This limits your options a bit (you may need the money for something else, including taxes), but may be easier. Avoid selling to rebalance.
Something to think about.