I'm a conservative retiree in my sixties. Several years ago, I decided to allocate 30% of my financial assets to stocks, with a 5% band on either side. Most of my stocks have been in taxable accounts, with a smaller amount in accounts that are tax-advantaged. As stocks have risen, I've rebalanced by shifting from stocks to bonds within my tax-advantaged accounts, where exchanges can be made without triggering taxes. But as the stock market has risen even further, I've reached the point where I have no more stocks to exchange out of within my tax-advantaged accounts. All of my stocks are now in taxable accounts, and I'm bumping up against the 35% maximum allocation.
I've refrained from investing more in stocks than I have already. My stock dividends are deposited into my money market account, and any "new" money goes into a tax-exempt bond fund. So I don't think I can rebalance out of stocks without selling shares and triggering thousands of dollars in capital gains taxes. Should I bite the tax bullet and rebalance? Or should I let my stock allocation continue to drift upward?
Perhaps I should add that my pension and my stock dividends are enough to cover my expenses, and I'd still have enough to live on even if stocks dropped dramatically. Also, I'm single and have no children to provide for.