Single Portfolio Asset Allocation

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Joined: Wed Feb 04, 2015 10:25 pm

Single Portfolio Asset Allocation

Post by mybogledhead » Thu Mar 03, 2016 4:49 pm


My wife and I (Age 34yrs) have spent the last several years changing jobs, the most of recent of which for me did not offer a retirement plan (I was a physician in training). I have tried to save as much as possible over the years, which meant a four-fund portfolio in taxable. I only recently wisened up enough to utilize a backdoor Roth, but was able to make a max contribution.

I was looking at my portfolio on Person Capital and realized that, taken as a whole, I didn't have as much small cap as my plan called for and more cash than I wanted. This is largely because, as of now, our tax-advantaged accounts are invested in 2045 target funds. It got me thinking...why don't i get out of the target funds and replicate my taxable account to eliminate the cash and have more control over the amount of small cap equities? Which got me thinking...if I'm going to make a change then it's time to start looking at this as a single portfolio and start to utilize more strategies to maximize tax efficiency.

Of note, my wife's current plan has terrible choices, but she is leaving that job in two weeks, and I hope the next job has better choices. That being said, here's what we have so far, with target allocation 90% equity/10% bonds:

My 401(k)
100% TIAA-CREF Target 2045

My Voluntary Plan
100% TIAA-CREF Target 2045

My Roth
100% Vanguard Target 2045

Wife's 401(k)
60% S&P 500 Index
20% International Growth Fund
10% Small-Cap Index
10% Bond Index

Wife's Roth
100% Vanguard Target 2045

Vanguard Taxable Account
50% S&P 500 Index
20% International Index
20% Small-Cap Index
10% Total Bond Index

First, is the glaring deviation I made from my own plan in my wife's 401(k). I don't remember why I did that.

Obviously, I can sell the target funds in my tax-advantaged accounts and buy other funds to meet my goals pretty easily. But I don't know where to put my bond funds considering the current low-yield, and that will affect what fund choices I make in each type of account. The follow-up is, if I decide to focus my bonds in a certain type of account, should I sell funds in the taxable account and incur the tax consequences, or just let what I have sit there and ride it out until retirement.


Posts: 5726
Joined: Tue Nov 20, 2007 6:02 am

Re: Single Portfolio Asset Allocation

Post by mhalley » Thu Mar 03, 2016 6:56 pm

I don't think I would sell at a cap gain in taxable to move to bonds. I would either adjust the aa to achieve the bond aa by selling stock funds in tax deferred or by using new money to buy bonds.
Whether you should have bonds in taxable is a personal decision. It used to be no one liked them in taxable due to the tax treatment. It is more acceptable these days. ... n-taxable/
Whether to go with individual funds in the 401k would depend on the ers of the available funds.

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Joined: Thu Jan 10, 2008 12:56 pm

Re: Single Portfolio Asset Allocation

Post by retiredjg » Thu Mar 03, 2016 7:01 pm

If you like target funds, the only thing wrong with your current portfolio is the Total Bond Market in taxable. It seems likley that you are in a higher tax bracket and therefore should exchange the Total Bond Market into an intermediate term tax-exempt bond. There should be little tax cost to do that.

If you are wanting to stop using target funds, we need information about what is available in both 401k's and the size of each account and the expected annual contributions.

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