Does anyone treat each of their accounts separately?

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yolli71
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Does anyone treat each of their accounts separately?

Post by yolli71 »

I know the Bogleheads way of investing is to look at your entire portfolio as a whole, but does anyone here treat each account separately?

For example, my wife and I have Roth IRAs and TSP accounts. As of now, we have no taxable account. The Boglehead way preaches simplicity, but I found mixing and matching between my account and my wife's account with constant shifting of contributions/allocations was not that simple (for me at least). Therefore, I decided to treat each of our accounts individually. We decided on a simple 80/20 allocation and both max out the LifeStrategy Growth Fund in our Roths, and we both max out the C/S/I funds at 80% and the G fund at 20% in our TSPs.

This strategy, while I know counters the Boglehead way, seemed to be the simplest to me. I also didn't have to worry about tax concerns. However, my wife and I are in a situation now where we will have extra money to invest each month and will likely start up a taxable account with Vanguard.

I'm "thinking" of doing Total Stock Market Index (60%), Total Intl Stock Index (20%), and either a tax exempt bond fund or I Bonds (20%).

Does this work well? Or would treating our entire portfolio as a whole be significantly more advantageous?
dbr
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Re: Does anyone treat each of their accounts separately?

Post by dbr »

Treating your portfolio as a whole does not preclude duplicating investments in various funds. That does assist in rebalancing or in making contributions or taking withdrawals. Treating the portfolio as a whole simply means that the plan starts with the overall allocation of all the assets taken together. Logically it is hardly possible to not do that because the whole of all the assets exists whether one wants to think about it or not.

The biggest reason to not duplicate allocations in each fund is the case where there are substantial tax deferred and substantial taxable investments. In that case considering the tax location of different assets makes sense.
keystone
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Re: Does anyone treat each of their accounts separately?

Post by keystone »

dbr wrote: The biggest reason to not duplicate allocations in each fund is the case where there are substantial tax deferred and substantial taxable investments. In that case considering the tax location of different assets makes sense.
Another reason not to duplicate would be if there is a big disparity among expense ratios within a given retirement plan, so one may be able to load up on a fund with the lowest possible ER in the plan and counteract that allocation in a separate account in order to minimize costs.

I like to maintain 60/40 in each of my separate retirement accounts. I would only deviate from this given the scenario above.
stlutz
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Re: Does anyone treat each of their accounts separately?

Post by stlutz »

Yes, this is what I do. As with the OP, I find this to be easier as I don't have to rebalance across accounts and I don't have to worry about things like "tax adjusting" my AA.
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telemark
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Re: Does anyone treat each of their accounts separately?

Post by telemark »

I treat my accounts separately. That's how I initially set them up, and while I periodically go through the exercise of calculating how much I would save by managing them as a single account, the answer is always "not very much" and it's simpler just to leave things the way they are.
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Re: Does anyone treat each of their accounts separately?

Post by aj44 »

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badger42
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Re: Does anyone treat each of their accounts separately?

Post by badger42 »

For purposes of overall allocation (stock / bond / cash), we treat all retirement accounts as a bucket, and all taxable accounts as a bucket. (I realize this creates some noise with non-Roth vs Roth in the retirement space, but the additional complexity of splitting hairs on Roth vs non-Roth allocation isn't worth it for our specific case / mix).

Within each account - particularly the 401(k)s - we do keep the domestic and international equity mix fairly consistent for ease of management and rebalancing, but the bond ladder is across all accounts of a class (of either 'retirement' or 'taxable').
dbr
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Re: Does anyone treat each of their accounts separately?

Post by dbr »

telemark wrote:I treat my accounts separately. That's how I initially set them up, and while I periodically go through the exercise of calculating how much I would save by managing them as a single account, the answer is always "not very much" and it's simpler just to leave things the way they are.
What do you mean by "treat" as applied to different accounts separately. I guess I would presume that means that each of your separate accounts has the same asset allocation, which then results in the overall asset allocation coming out where you want it. That could be perfectly fine. It should not be construed to imply that you have no thought about what your total asset allocation is though on the face of it you would seem to be saying that you do not have an idea for what your overall asset allocation is. Starting with an overall concept is what people mean to say when they say "treat" the entire portfolio as one. Sorry for being pedantic, but some investors would take these issues as understood and others may actually miss some important points of understanding.
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Aptenodytes
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Re: Does anyone treat each of their accounts separately?

Post by Aptenodytes »

The maxim of looking at your account as a whole does not mean you have to deliberately steer away from having your overall AA mirrored in separate accounts. There's nothing wrong with that outcome by itself. So your situation prior to establishing this new taxable fund is probably just fine.

As dbr notes, where you will benefit most in not mirroring your AA in the taxable account is tax efficiency. The Wiki can guide you in how to approach this question.

I would think about having your taxable account be 100% Total Stock Market, and either not worry about what it does to your AA overall, or bump up your G fund percentage a bit to preserve your AA.
ND Fan 1
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Re: Does anyone treat each of their accounts separately?

Post by ND Fan 1 »

yolli71 wrote:I know the Bogleheads way of investing is to look at your entire portfolio as a whole, but does anyone here treat each account separately?

For example, my wife and I have Roth IRAs and TSP accounts. As of now, we have no taxable account. The Boglehead way preaches simplicity, but I found mixing and matching between my account and my wife's account with constant shifting of contributions/allocations was not that simple (for me at least). Therefore, I decided to treat each of our accounts individually. We decided on a simple 80/20 allocation and both max out the LifeStrategy Growth Fund in our Roths, and we both max out the C/S/I funds at 80% and the G fund at 20% in our TSPs.

This strategy, while I know counters the Boglehead way, seemed to be the simplest to me. I also didn't have to worry about tax concerns. However, my wife and I are in a situation now where we will have extra money to invest each month and will likely start up a taxable account with Vanguard.

I'm "thinking" of doing Total Stock Market Index (60%), Total Intl Stock Index (20%), and either a tax exempt bond fund or I Bonds (20%).

Does this work well? Or would treating our entire portfolio as a whole be significantly more advantageous?

I'm running into the same problem, as I'm working towards simplifying my portfolio, following advice from here and the Wiki. I also have a TSP account, with all of my bond allocation in the G fund since everyone agrees to not have bonds in taxable and that the G Fund is the best bond fund out there. I'm working through how I will re-balance if no other accounts (2 IRAs and taxable) have bonds. I think I'm going to have US Total Stock in all accounts since its my largest overall allocation (42%) So when my overall allocation is out of whack, I start re-balancing from US Total Stock to any fund which needs a bump. Whatever I take out of US Total Stock, I will then take out of the G fund and buy the C and S funds in the TSP (maintaining a 4-1 ratio to replicate the Total US Stock Market). I think this will work, I haven't tried it yet.

My concerns would be eventually, I could run out of US Total Stock in the non-TSP accounts and have most of my "Total Stock" would in the C and S funds and not VG Total Stock. Is this ok? Would I lose some performance? I have a large balance of Total Stock, so it would take a while to deplete totally.

I have also re-directed all dividends and distributions in my IRAs and taxable to go to my Money Market Account. So I can use those funds to re-balance as well throughout the year.

Another issue, is by doing this eventually, I will not have the 10K minimum for Admiral shares, so I will use the Total Stock ETF whenever I dip below the 10K. I would prefer mutual funds, however at least the Total Stock ETF does not have the bid/ask spread issues and is easily traded. Another downside can only sell once every 30 days. But I plan on re-balancing annually or less.

Hope this helps
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Phineas J. Whoopee
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Re: Does anyone treat each of their accounts separately?

Post by Phineas J. Whoopee »

I share dbr's lack of understanding of OP's word "treat" in this context.

I have several accounts, with several companies. I track each, and reconcile each, and complain about the rare not-my-fault-errors in them individually. I don't phone Vanguard if somebody I owed and paid online using my main checking account at Charles Schwab Bank says I didn't send the money, to ask for proof of payment. In that sense I suppose I do treat them separately.

My strategy has to do with all of my assets less current liabilities, and a very important part of it is my retirement portfolio (I also own a dwelling and keep a few dollars in the bank).

In terms of my portfolio's asset allocation as a whole, I treat it as a whole. Using my portfolio's individual parts, many of which are in different accounts, I try to do the best job I can of keeping things low cost and tax efficient, so long as doing so doesn't interfere with another goal. I have, for example, 401(k) constraints, but I have never regarded resigning, all on its own and without other context, as a meaningful strategy for eliminating them.

PJW
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yolli71
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Re: Does anyone treat each of their accounts separately?

Post by yolli71 »

Thanks for all the responses!

To answer Phineas and dbr, dbr got it right by saying "means that each of your separate accounts has the same asset allocation, which then results in the overall asset allocation coming out where you want it."

To keep things simple, I basically do a 3 fund portfolio (US, Intl, and bonds) among my accounts. In my TSP, my AA is 80/20; the same goes for my Vanguard Roth. Thus, my goal is the same for my new taxable account as long as I can make it tax efficient. I was just wondering if there were major downsides to doing it this way b/c I find it confusing and tedious to do it the other way (having so many different parts and rebalancing between all our accounts).
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Phineas J. Whoopee
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Re: Does anyone treat each of their accounts separately?

Post by Phineas J. Whoopee »

To the extent your taxable account is small, or its fixed income allocation is small, and your top marginal tax rate is small, it makes little difference.

If any of those conditions is not true, it can make a great deal of difference.

PJW
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stratton
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Re: Does anyone treat each of their accounts separately?

Post by stratton »

A lot of depends on what's available in each type of account. 401k options can really constrain things.

Smaller accounts can sometimes be easier to deal with using a balanced fund that approximates the stock/bond balance of your asset allocation. This allows an investor to ignore a specific account, but still be true to their asset allocation.
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telemark
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Re: Does anyone treat each of their accounts separately?

Post by telemark »

dbr wrote:
telemark wrote:I treat my accounts separately. That's how I initially set them up, and while I periodically go through the exercise of calculating how much I would save by managing them as a single account, the answer is always "not very much" and it's simpler just to leave things the way they are.
What do you mean by "treat" as applied to different accounts separately. I guess I would presume that means that each of your separate accounts has the same asset allocation, which then results in the overall asset allocation coming out where you want it. That could be perfectly fine. It should not be construed to imply that you have no thought about what your total asset allocation is though on the face of it you would seem to be saying that you do not have an idea for what your overall asset allocation is. Starting with an overall concept is what people mean to say when they say "treat" the entire portfolio as one. Sorry for being pedantic, but some investors would take these issues as understood and others may actually miss some important points of understanding.
I mean that I rebalance each account on its own. It doesn't mean that every account has the same allocation, although most of them do, and it certainly doesn't mean that I have no idea what my overall allocation is. Why wouldn't I know that? It's an easy calculation.
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Re: Does anyone treat each of their accounts separately?

Post by ND Fan 1 »

Phineas J. Whoopee wrote:To the extent your taxable account is small, or its fixed income allocation is small, and your top marginal tax rate is small, it makes little difference.

If any of those conditions is not true, it can make a great deal of difference.

PJW
I'm in the same boat as the OP, opening a taxable account with around 40K which is about 17% of my total accounts. I'm at an 85/15 stock/bond split, with all my bonds in the G Fund. My marginal fed rate is 15%, if I decided to use bonds in my taxable to make re-balancing easier, could I use VG Intermediate Bond Fund? Or should I stick to Municipal Bonds? It would be about 6K total. Haven't decided, will probably avoid bonds all together in taxable based on the advice here. Think I have a plan to re-balance.
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Kevin M
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Re: Does anyone treat each of their accounts separately?

Post by Kevin M »

yolli71 wrote: <snip>
We decided on a simple 80/20 allocation and both max out the LifeStrategy Growth Fund in our Roths, and we both max out the C/S/I funds at 80% and the G fund at 20% in our TSPs.
<snip>
I'm "thinking" of doing Total Stock Market Index (60%), Total Intl Stock Index (20%), and either a tax exempt bond fund or I Bonds (20%).

Does this work well? Or would treating our entire portfolio as a whole be significantly more advantageous?
A big motivation for the one-portfolio approach is to minimize use of crappy funds in a 401k/403b plan; e.g., often there is a relatively low-cost S&P 500 index fund, but maybe no good international stock or bond funds, in which case it may be better to prefer large-cap US stocks in the 401k/403b, and prefer other asset classes in the IRAs or taxable accounts.

However, with TSP, you have excellent fund choices for the major asset classes, so your approach is fine.

Personally, I would maximize use of the TSP G fund, since the risk/return is superior to a typical bond fund, and I would not use TBM or the international bond fund held in the LS and TR (Target Retirement) funds, but simplicity is not super high on my list of objectives.

I think if simplicity is a high priority for you, then what you're proposing for your taxable account is fine.

Keep in mind that the yield on 5-year TIPS is about 0.5%, so I Bonds at 0.1% real are not particularly attractive if you plan to hold at least five years. But again, that simplicity thing is an issue for you, since you'd want to hold TIPS in the IRAs.

Kevin
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johnra
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Re: Does anyone treat each of their accounts separately?

Post by johnra »

I treat each of my accounts separately. For my one main taxable account, I have ~15% in cash, ~43% in a municipal bond fund, and ~42% in stock ETFs. I feel this account is my main savings and I don't want too much volatility (but accept some for growth). For my several retirement accounts, each one is different (I like variety): AA range from 65% stock/35% bonds in mutual funds and ETFs to 100% pure individual stocks (up 27% this year!). I feel this is my future money and for now I want growth and accumulation -- I am comfortable with more volatility.
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Re: Does anyone treat each of their accounts separately?

Post by itstoomuch »

We (65/68) do.
SS, Pension, are obviously treated as secured and protected. The deferred annuities are treated as long bond even though a good portion are Variable.
The rental condo has some variability but essentially bond like.
Only our discretionary accounts/funds are truly different and somewhat actively managed.
YMMV
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telemark
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Re: Does anyone treat each of their accounts separately?

Post by telemark »

telemark wrote:I treat my accounts separately. That's how I initially set them up, and while I periodically go through the exercise of calculating how much I would save by managing them as a single account, the answer is always "not very much" and it's simpler just to leave things the way they are.
As a follow-up on that, last week I rearranged my two 401K plans to treat them as a single portfolio--each plan has some bonds in it, but no other overlapping funds. This doesn't save me much in expenses, but it eliminates some actively managed funds that had started to annoy me. Everything is now in index funds except for one actively managed bond fund that I can't avoid using.

It also means giving up my tilt to small cap. C'est la guerre...
nolapepper
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Re: Does anyone treat each of their accounts separately?

Post by nolapepper »

I think it is better to treat everything as a one portfolio. I did it separately and thought it would be fine to just evenly choose funds and allocate accordingly. When I put everything together, I found that I could actually use all my current 401K with TIAA and use the whole amount for the fixed income and use their TIAA traditional and TIAA REIT. I am so happy to see my personal rate return there was 7% last year. It was 4.5% before that.
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SeeMoe
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Re: Does anyone treat each of their accounts separately?

Post by SeeMoe »

In my case I had a Vanguard Investment Services planner , for a fee, back in mid 2001 do an in depth work-up of our investments . It changed our scatter-shot folios big time and was well worth the fee in tax savings and huge returns following "9-11"; when we were buying stock funds cheap . That good service is history now that VPAS takes its place . Speak(for free) to a Vanguard advisor about your plan, maybe ? Keep investing no matter,...
SeeMoe.. :mrgreen:
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kaudrey
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Re: Does anyone treat each of their accounts separately?

Post by kaudrey »

I look at the portfolio as a whole. My TSP is about 1/2 of our investment portfolio (which also consists of an IRA, a Roth, my DH's solo 401(k), and our taxable account). All of our bond allocation is in the TSP, since we can use the G Fund.

Once a quarter I use a simple spreadsheet to check our AA in total and see if I need to rebalance. It takes about 10 minutes, maybe.
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Re: Does anyone treat each of their accounts separately?

Post by Tamahome »

OP: What is easiest for you? Do that. There is no wrong answer to whether you treat it all as one portfolio or have separate portfolios, so long as you are using the boglehead philosophy of keeping fees low.

In my case, I view the accounts together and separately. Together, I want to make sure that we have a general ballpark that makes sense, but when it comes to rebalancing or specific asset allocation, I view our accounts individually.
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john94549
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Re: Does anyone treat each of their accounts separately?

Post by john94549 »

While I am sure we are in the minority, we do treat our IRA CDs as "don't touch" money. We've squirreled away enough in IRA CDs to cover our first fifteen years of retirement, age 70 - 85 (above and beyond other sources of income). Our IRA CD ladder has bested inflation handily.

We're 68, pushing 69, and haven't yet needed to withdraw any principal from our IRA CDs. I do harvest a bit from one IRA CD (interest only) for spending money, but the lion's share keeps compounding.

As I joked to my wife, the month of January (2016) has been unkind to all but those with CD ladders.
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