New 4 Fund Investor Allocation and other Q's - $325,000

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laotzu
Posts: 6
Joined: Fri Apr 08, 2016 3:13 am

New 4 Fund Investor Allocation and other Q's - $325,000

Post by laotzu » Fri Apr 08, 2016 3:34 am

Do you have any advice for the following scenario.

Considering using the following portfolio classic 4 fund investment plan:

$325,000 total investable funds

80% Stocks (70% US/30% International) - $260,000 ($182,000/$78,000)
20% Bonds (70% US/30% International) - $65,000 ($45,500/$19,500)

Overall:
56% US Stock - $182,000
24% Int'l Stock - $78,000
14% US Bond - $45,500
6% Int'l Bond - $19,500

Accounts/Allocation
* Vanguard IRA: $50,000 total
__* VTABX $19,500 (100% of Int'l Bond)
__* VBLTX $18,500 (41% of US Bond)
__* VTSAX $12,000 (7% of US Stock)

* Vanguard Roth IRA: $55,000 total
__* VBLTX $27,000 (59% of US Bond)
__* VTSAX $28,000 (15% of US Stock)

* Vanguard Taxable: $130,000
__* VTIAX $78,000 (100% of Int'l Stock)
__* VTSAX $52,000 (29% of US Stock)

TIAA-Cref 403b (R3 Investor Account): $90,000
__* TIEIX $90,000 (49% of US Stock)

Notes:

* [Subject to taxes in a foreign country where capital gains are taxed at 15% unless the security has been held for 3 or more years.
* Subject to US Tax, but lives overseas so no earned income is taxed, just unearned - desire is to keep the amount below standard deduction/personal exemption to eliminate tax. Initially has only Personal Exemption because MFS.
* Single 43 year old male (divorcing)
* TIAA seems to offer no other low cost index funds

Additional question: I haven't found a wiki page exploring whether the international bond slice really helps when it is this small. Does anyone have a reference?

If it helps my thought process was to shield the bond earnings in tax advantaged account; provide room for easy rebalancing; prevent falling below admiral shares fund limits; avoid non-index and high-ER funds in the TIAA account.

Thank you in advance for your advice.

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in_reality
Posts: 4529
Joined: Fri Jul 12, 2013 6:13 am

Re: New 4 Fund Investor Allocation and other Q's - $325,000

Post by in_reality » Fri Apr 08, 2016 6:20 am

Do you have a decent bond fund in the 403(b)?

I'd only put stocks in the ROTH (you want it to grow the most) as there's no tax on distributions. The tIRA and the 403(b) will both be taxed right?


Accounts/Allocation
* Vanguard IRA: $50,000 total

__* VTABX $19,500 (Int'l Bond)
__* VBLTX $18,500 (US Bond) + $12k

* Vanguard Roth IRA: $55,000 total
__* VTSAX ( US Stock)

* Vanguard Taxable: $130,000
__* VTIAX $78,000 ( Int'l Stock)
__* VTSAX $52,000 (US Stock)

TIAA-Cref 403b (R3 Investor Account): $90,000
__* TIEIX $75,000
+US bond ($15k )


To rebalance the stock/bond ratio, adjust the 403(b).
To rebalance the US/Int'l ration, adjust taxable preferably via new contributions and dividend reinvestment.

laotzu
Posts: 6
Joined: Fri Apr 08, 2016 3:13 am

Re: New 4 Fund Investor Allocation and other Q's - $325,000

Post by laotzu » Fri Apr 08, 2016 9:18 am

in_reality wrote:Do you have a decent bond fund in the 403(b)?
I don't feel like I do. The only option I see is CREF Bond Market Account (R3) QCBMIX which has an ER of .37% and is partially actively managed. It has mostly trailed the Barclays U.S. Aggregate Bond Index but according to their prospectus they will deviate when they wish.
in_reality wrote:I'd only put stocks in the ROTH (you want it to grow the most) as there's no tax on distributions. The tIRA and the 403(b) will both be taxed right?
The IRA and 403(b) will both be subject to regular taxation under the US tax system.

My understanding is that everything will be treated as a normal account under the foreign tax law, however I haven't been able to confirm that. The foreign tax situation also depends on where I am during distribution. Foreign taxation of US retirement schemes is a fairly opaque subject that seems to not have been explored greatly anywhere :(.

Either way, I understand your point about the ROTH. That is why I had split it up the way I had. I was also trying avoid the TIAA Bond fund option. I guess the question really is, am I worried about the possible active management and the extra .3% in ER versus the ROTH gains.
in_reality wrote:To rebalance the stock/bond ratio, adjust the 403(b).
To rebalance the US/Int'l ration, adjust taxable preferably via new contributions and dividend reinvestment.
To rebalance between International and US Bond adjust across 403(b) and tIRA in your allocation example?

Thank you for your feedback and future responses.

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