IRA Account Strategy - Spouse Overlap

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aramv
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IRA Account Strategy - Spouse Overlap

Post by aramv » Wed Feb 01, 2017 4:00 pm

Hello,
I wanted to get some advice on how to manage my account and my wife's account.
I'm 38 and my wife is 36. We are in separate Vanguard IRA ROTH accounts.
The access allocation isn't important as much as the mutual fund picks. However,we are 90% Stocks / 10% Bonds
I would like to set up a strategy where there minimal overlap. What are your thoughts?

(HUSBAND)

STOCKS
Vanguard 500 Index (VFINX)
Vanguard Small Cap Value Index (VISVX)

Vanguard International Value (VTRIX)
Vanguard In’t Emerging Markets Stock Index (VEIEX)

BONDS
Vanguard High Yield Corporate (VWEHX)
Vanguard GNMA Bonds (VFIIX)
Vanguard Total Int’l Bond Index Investor (VTIBX)
Vanguard Inflation Protection Securities Fund (VIPSX)
_________________________________________________

(WIFE)

STOCKS
Vanguard Total Stock Market (VTSMX)
Vanguard Mid Cap Index (VIMSX)

Vanguard Int’l Developed Markets (VDVIX)
Vanguard REIT Index (VGSIX)

BONDS
Vanguard Intermediate Term Treasury (VFITX)
Vanguard Inflation Protection Securities Fund (VIPSX)
___________________________________________________

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willthrill81
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Re: IRA Account Strategy - Spouse Overlap

Post by willthrill81 » Wed Feb 01, 2017 4:03 pm

aramv wrote:Hello,
I'm new here and wanted to get some advice on how to manage my account and my wife's account.
I'm 38 and my wife is 36. We are in separate Vanguard IRA ROTH accounts.
The access allocation isn't important as much as the mutual fund picks. However,we are 90% Stocks / 10% Bonds
I would like to set up a strategy where there minimal overlap. Why? As a risk reduction strategy? If you're in 90% equities, you won't be able to separate risks between the two IRAs much unless one of you is U.S. and the other is international. What are your thoughts?

(HUSBAND)

STOCKS
Vanguard 500 Index (VFINX) What are the percentages in each?
Vanguard Small Cap Value Index (VISVX)

Vanguard International Value (VTRIX)
Vanguard In’t Emerging Markets Stock Index (VEIEX)

BONDS
Vanguard High Yield Corporate (VWEHX)
Vanguard GNMA Bonds (VFIIX)
Vanguard Total Int’l Bond Index Investor (VTIBX)
Vanguard Inflation Protection Securities Fund (VIPSX)
_________________________________________________

(WIFE)

STOCKS
Vanguard Total Stock Market (VTSMX)
Vanguard Mid Cap Index (VIMSX)

Vanguard Int’l Developed Markets (VDVIX)
Vanguard REIT Index (VGSIX)

BONDS
Vanguard Intermediate Term Treasury (VFITX)
Vanguard Inflation Protection Securities Fund (VIPSX)
___________________________________________________
Both of your AAs look very reasonable to me.

If you want to make it easy to visually compare where you are in total, use Personal Capital's free tracking feature. It's very useful and easy.
Last edited by willthrill81 on Wed Feb 01, 2017 4:09 pm, edited 1 time in total.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Easy Rhino
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Re: IRA Account Strategy - Spouse Overlap

Post by Easy Rhino » Wed Feb 01, 2017 4:07 pm

The relative size of the IRAs might matter.

how about this:

since bonds are only a small position, keep all bonds in only one account. Maybe keep all REIT in another account.

Besides that, exactly mirror the stock holdings between both account. That way it's easy to know if the ratio is about right.

Also, you already have unnecessary duplication going on. you don't need to have the triplet of SP500, mid cap, and small value and ALSO total stock market. Also, since your bond holding are small, you can probably simplify instead of having 6 bond funds, go with total bond index and forget about it.

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aramv
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Re: IRA Account Strategy - Spouse Overlap

Post by aramv » Thu Feb 02, 2017 9:02 pm

Easy Rhino wrote:The relative size of the IRAs might matter.

how about this:

since bonds are only a small position, keep all bonds in only one account. Maybe keep all REIT in another account.

Besides that, exactly mirror the stock holdings between both account. That way it's easy to know if the ratio is about right.

Also, you already have unnecessary duplication going on. you don't need to have the triplet of SP500, mid cap, and small value and ALSO total stock market. Also, since your bond holding are small, you can probably simplify instead of having 6 bond funds, go with total bond index and forget about it.

Thank you for your help. What do you think of this Portfolio below and how would you split it between 2 IRA Roth Accounts?

Vanguard Inflation-Protected Securities VIPSX 10%
Vanguard GNMA Bonds VFIIX 10%
Vanguard Total International Bond Fund VTIBX 20%
Vanguard Small Cap Index NAESX 10%
Vanguard Small Cap Value VISVX 10%
Vanguard International Value VTRIX 10%
Vanguard Emerging Market Index VEIEX 10%
Vanguard REIT Index VGSIX 10%
Vanguard Energy Fund Investor VGENX 10%

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Peter Foley
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Re: IRA Account Strategy - Spouse Overlap

Post by Peter Foley » Thu Feb 02, 2017 11:56 pm

aramv wrote:
Vanguard Inflation-Protected Securities VIPSX 10%
Vanguard GNMA Bonds VFIIX 10%
Vanguard Total International Bond Fund VTIBX 20%
Vanguard Small Cap Index NAESX 10%
Vanguard Small Cap Value VISVX 10%
Vanguard International Value VTRIX 10%
Vanguard Emerging Market Index VEIEX 10%
Vanguard REIT Index VGSIX 10%
Vanguard Energy Fund Investor VGENX 10%
Personal preference, but this is too many funds for me.
I don't mind the diversification in the bonds funds, but I would limit stock funds to Total stock market, small cap value - if you want that tilt, and total international.

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aramv
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Re: IRA Account Strategy - Spouse Overlap

Post by aramv » Fri Feb 03, 2017 12:21 am

Peter Foley wrote:aramv wrote:
Vanguard Inflation-Protected Securities VIPSX 10%
Vanguard GNMA Bonds VFIIX 10%
Vanguard Total International Bond Fund VTIBX 20%
Vanguard Small Cap Index NAESX 10%
Vanguard Small Cap Value VISVX 10%
Vanguard International Value VTRIX 10%
Vanguard Emerging Market Index VEIEX 10%
Vanguard REIT Index VGSIX 10%
Vanguard Energy Fund Investor VGENX 10%
Personal preference, but this is too many funds for me.
I don't mind the diversification in the bonds funds, but I would limit stock funds to Total stock market, small cap value - if you want that tilt, and total international.
Thank you Peter,
How would you distribute the funds between 2 IRA Roth accounts? (me and my wife)? or would you just mirror the funds?

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willthrill81
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Re: IRA Account Strategy - Spouse Overlap

Post by willthrill81 » Fri Feb 03, 2017 12:52 am

aramv wrote:Thank you for your help. What do you think of this Portfolio below and how would you split it between 2 IRA Roth Accounts?

Vanguard Inflation-Protected Securities VIPSX 10%
Vanguard GNMA Bonds VFIIX 10%
Vanguard Total International Bond Fund VTIBX 20%
Vanguard Small Cap Index NAESX 10%
Vanguard Small Cap Value VISVX 10%
Vanguard International Value VTRIX 10%
Vanguard Emerging Market Index VEIEX 10%
Vanguard REIT Index VGSIX 10%
Vanguard Energy Fund Investor VGENX 10%
I personally think that you're too far from retirement to worry about using TIPS (VIPSX, by definition, this gives you a 0% real rate of return), and I don't see much value in VFIIX over VTIBX, so I would just go with VTIBX. If you don't mind a 70/30 AA, I would move the 10% in VIPSX into a large cap value fund like VVIAX. Also, I wouldn't recommend a sector specific fund like VGENX. I would probably move half of that into each of the two small cap funds. That would leave you with a seven fund portfolio, which is perfectly easy to manage in Excel and/or Personal Capital.

I would mirror the two IRAs.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Peter Foley
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Re: IRA Account Strategy - Spouse Overlap

Post by Peter Foley » Fri Feb 03, 2017 2:49 pm

I would mirror the funds in each account as well. If you had a lot of funds and were employing a slice and dice approach, I would not try to mirror the funds. In your case it is manageable.

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Aptenodytes
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Re: IRA Account Strategy - Spouse Overlap

Post by Aptenodytes » Fri Feb 03, 2017 3:12 pm

You have to explain your motivation for maximizing the difference between the two accounts before we can answer you. We can't help you achieve your goal if we don't know what it is.

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aramv
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Re: IRA Account Strategy - Spouse Overlap

Post by aramv » Sun Feb 05, 2017 12:30 pm

Aptenodytes wrote:You have to explain your motivation for maximizing the difference between the two accounts before we can answer you. We can't help you achieve your goal if we don't know what it is.
Thank you for your comment.
My main motivation is with the diversification, our portfolios would react differently. example: my portfolio is up, when hers is down; and her portfolio is up when mine is down.

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aramv
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Re: IRA Account Strategy - Spouse Overlap

Post by aramv » Sun Feb 05, 2017 1:58 pm

Peter Foley wrote:I would mirror the funds in each account as well. If you had a lot of funds and were employing a slice and dice approach, I would not try to mirror the funds. In your case it is manageable.
Can you give me an example of "employing a slice and dice approach"?

I really appreciate your help.

Jack FFR1846
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Re: IRA Account Strategy - Spouse Overlap

Post by Jack FFR1846 » Sun Feb 05, 2017 2:28 pm

I think you're getting false security with one holding total stock, for example and the other holding S&P 500. If one goes up, the other goes up. If you put the performance charts on top of each other, you're going to find that they are nearly identical.

My accounts hold Total US Market, S&P 500 and US Broad Market funds and ETFs. As far as I'm concerned, these are identical. Why the 3 different funds? Total US market in my rollover IRA where I do all of my rebalancing and the majority or our funds lie. S&P 500 in my 401k because it's the only really low ER fund and US Broad Market (SCHB) in my Schwab taxable account because it blows away everyone, everywhere (short of $5MM minimums) for expenses. They are all equivalent funds, in my opinion.
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Peter Foley
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Re: IRA Account Strategy - Spouse Overlap

Post by Peter Foley » Sun Feb 05, 2017 6:26 pm

Here is an example of a slice and dice approach. Note that you can subdivide these even more. Perhaps you want a natural resources fund or a health care fund, maybe you want international bonds and TIPS. The more you add the more difficult it is to maintain.

Bill Bernsteins's "Coward Portfolio"

Asset Class % Allocation
Total Stock Mkt 15%
Large Value 10%
Small Blend 5%
Small Value 10%
Europe 5%
Pacific 5%
Emerging Markets 5%
REIT 5%
Short Term Bond 40%

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aramv
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Re: IRA Account Strategy - Spouse Overlap

Post by aramv » Sun Feb 05, 2017 10:55 pm

Jack FFR1846 wrote:I think you're getting false security with one holding total stock, for example and the other holding S&P 500. If one goes up, the other goes up. If you put the performance charts on top of each other, you're going to find that they are nearly identical.

My accounts hold Total US Market, S&P 500 and US Broad Market funds and ETFs. As far as I'm concerned, these are identical. Why the 3 different funds? Total US market in my rollover IRA where I do all of my rebalancing and the majority or our funds lie. S&P 500 in my 401k because it's the only really low ER fund and US Broad Market (SCHB) in my Schwab taxable account because it blows away everyone, everywhere (short of $5MM minimums) for expenses. They are all equivalent funds, in my opinion.



Thank you for your comment.
I understand the overlap of funds. My main motivation is with the diversification, our portfolios would react differently. example: my portfolio is up, when hers is down; and her portfolio is up when mine is down. How would you split it the funds or would you mirror the accounts ?

Nate79
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Re: IRA Account Strategy - Spouse Overlap

Post by Nate79 » Mon Feb 06, 2017 12:21 am

aramv wrote:
Jack FFR1846 wrote:I think you're getting false security with one holding total stock, for example and the other holding S&P 500. If one goes up, the other goes up. If you put the performance charts on top of each other, you're going to find that they are nearly identical.

My accounts hold Total US Market, S&P 500 and US Broad Market funds and ETFs. As far as I'm concerned, these are identical. Why the 3 different funds? Total US market in my rollover IRA where I do all of my rebalancing and the majority or our funds lie. S&P 500 in my 401k because it's the only really low ER fund and US Broad Market (SCHB) in my Schwab taxable account because it blows away everyone, everywhere (short of $5MM minimums) for expenses. They are all equivalent funds, in my opinion.



Thank you for your comment.
I understand the overlap of funds. My main motivation is with the diversification, our portfolios would react differently. example: my portfolio is up, when hers is down; and her portfolio is up when mine is down. How would you split it the funds or would you mirror the accounts ?
I would suggest you check out portfoliovisualizer website to see how different asset classes behave. You have a misguided understanding of the correlation of different assets. Most stock asset classes behave very similarly. When stocks are going up, whether you have small cap, large cap, TSM or S&P500, they are all going up. Same for a market downturn turn. They may go up or down a little bit more or less but not so much that one goes up and the other goes down.

user5027
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Re: IRA Account Strategy - Spouse Overlap

Post by user5027 » Mon Feb 06, 2017 8:39 am

A thought for later in life when you may want more bonds in your IRA...

My wife is 3.5 years older than me, 62 vs 58 (I tell everyone she robbed the cradle). My IRA balance is 7x's hers due to a 401k rollover. Because my wife would reach 59.5 first, we put more bonds in her IRA since they are less volatile and to minimize a market drop reducing her balance, in case we needed to tap our IRA money while avoiding the 10% early withdraw penalty.

While your age difference is not as great, you may want to consider a strategy with more bonds in your (older) IRA as you approach 50.

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Re: IRA Account Strategy - Spouse Overlap

Post by Ethelred » Mon Feb 06, 2017 9:00 am

aramv wrote:Thank you for your comment.
My main motivation is with the diversification, our portfolios would react differently. example: my portfolio is up, when hers is down; and her portfolio is up when mine is down.
I think this is a bad idea, because of the difficulty it will cause with rebalancing. When the assets separate in relative value, you would normally want to rebalance to maintain your combined asset allocation. Holding different assets in each account would make this very difficult.

Of course, that assumes you combine your accounts as a couple together in a single portfolio. But if you are treating them as separate portfolios (do you think you're going to divorce?), then you really should have the accounts be similar, because the asset allocation of each account needs to be reasonable.

That said, my wife and I don't have exactly the same assets in each of our 401ks, because of fund availability. But there are enough common assets to still allow easy rebalancing.

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Aptenodytes
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Re: IRA Account Strategy - Spouse Overlap

Post by Aptenodytes » Mon Feb 06, 2017 10:55 am

I agree with Ethelred. If the 2 accounts have low correlation it could get hard to rebalance.

Moreover, you can't achieve anticorrelation (one goes up when the other goes down) without using esoteric asset categories. The normal components of a boglehead portfolio are all positively correlated with one another.

What purpose would anticorrelation even serve? Ensures that one spouse always feels bad?
Before you think too much about the solution perhaps you should think more about the objective.

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aramv
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Re: IRA Account Strategy - Spouse Overlap

Post by aramv » Tue Feb 07, 2017 8:35 am

Aptenodytes wrote:I agree with Ethelred. If the 2 accounts have low correlation it could get hard to rebalance.

Moreover, you can't achieve anticorrelation (one goes up when the other goes down) without using esoteric asset categories. The normal components of a boglehead portfolio are all positively correlated with one another.

What purpose would anticorrelation even serve? Ensures that one spouse always feels bad?
Before you think too much about the solution perhaps you should think more about the objective.

Thank you for the comment. I never saw it as making anyone feel bad ,but diversifying so that we don't miss areas. Maybe that's just you projecting.

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aramv
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Re: IRA Account Strategy - Spouse Overlap

Post by aramv » Tue Feb 07, 2017 8:37 am

Ethelred wrote:
aramv wrote:Thank you for your comment.
My main motivation is with the diversification, our portfolios would react differently. example: my portfolio is up, when hers is down; and her portfolio is up when mine is down.
I think this is a bad idea, because of the difficulty it will cause with rebalancing. When the assets separate in relative value, you would normally want to rebalance to maintain your combined asset allocation. Holding different assets in each account would make this very difficult.

Of course, that assumes you combine your accounts as a couple together in a single portfolio. But if you are treating them as separate portfolios (do you think you're going to divorce?), then you really should have the accounts be similar, because the asset allocation of each account needs to be reasonable.

That said, my wife and I don't have exactly the same assets in each of our 401ks, because of fund availability. But there are enough common assets to still allow easy rebalancing.
Thank you I think I'll do that. I'll mirror the two accounts to make things easier.

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Aptenodytes
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Re: IRA Account Strategy - Spouse Overlap

Post by Aptenodytes » Fri Feb 10, 2017 9:31 am

aramv wrote:
Aptenodytes wrote:I agree with Ethelred. If the 2 accounts have low correlation it could get hard to rebalance.

Moreover, you can't achieve anticorrelation (one goes up when the other goes down) without using esoteric asset categories. The normal components of a boglehead portfolio are all positively correlated with one another.

What purpose would anticorrelation even serve? Ensures that one spouse always feels bad?
Before you think too much about the solution perhaps you should think more about the objective.

Thank you for the comment. I never saw it as making anyone feel bad ,but diversifying so that we don't miss areas. Maybe that's just you projecting.
If your goal is to have a diversified portfolio, then you don't need to worry at all about differences between the two accounts. The key word is "we" in your statement that you aim for "diversifying so that we don't miss areas." You (plural) will capture all the asset categories equally well whether your two accounts are identical or maximally different. The only thing that matters is the AA of the overall portfolio, taking into account both accounts.

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