Help with asset allocation across multiple accounts

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Pobre
Posts: 28
Joined: Fri Jan 22, 2016 11:29 am

Help with asset allocation across multiple accounts

Postby Pobre » Thu May 18, 2017 8:57 am

Hello, dear bugleheads!

Emergency funds: Three to six months of expenses
Debt: None. Mortgage paid off.
Tax Filing Status: Married Filing Jointly
Tax Rate: 25% Federal, 0% State
State of Residence: TN
Age: His: 45, Hers: 35
Desired Asset allocation: 67% stocks / 33% bonds
Desired International allocation: 49% of stocks

Current retirement assets

Taxable
0.0% cash (for investing – do not include emergency funds)
0.0% fund name (ticker symbol) (expense ratio)
0.0% stock company name (ticker symbol)

His 401k
xx% fund name (ticker symbol) (expense ratio)
31% Principal LargeCap S&P 500 Index Inst Fund (PLFIX) (0.16%)
13% Principal MidCap R5 Fund (PMBPX) (0.85%)
3% Principal SmallCap R5 Fund (PSBPX) (1.04%)

Company match? 50% up to 6%

His Roth IRA at Vanguard
4% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (0.04%)
11% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05%)
10% Vanguard Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11%)

His Rollover IRA at Vanguard
12% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05%)

Her 401K
3% Northern Trust S&P 500 Index (no ticker symbol) (0.02%)
2% Northern Trust Extended Equity Market Index (no ticker symbol) (0.05%)
2% Northern Trust ACWI ex-US IMI Index (no ticker symbol) (0.10%)

Her 401K Roth
2% Northern Trust S&P 500 Index (no ticker symbol) (0.02%)

Company match? 50% up to 5%

Her Roth IRA at Vanguard
3% Vanguard Total Stock Market Index Fund Investor Shares (VTSAX) (0.15%)
4% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05%)

Contributions

New annual Contributions
$5,903 his 401k (plus $2,952 employer matching contributions)
$3,500 her 401k (plus $1,750 employer matching contributions)
$0 her 401k Roth
$5,500 his Roth IRA
$0 his IRA
$5,500 her Roth IRA
$0 taxable

Available funds

Funds available in his 401(k)
Coming soon:
BlackRock US Total Bond Index Investor A Fund (BMOAX) (0.35%)
BlackRock Large Cap Index Investor A Fund (BRGAX) (0.38%)
Principal MidCap S&P 400 Index Inst Fund (MPSIX) (0.20%)
Principal SmallCap S&P 600 Index Inst Fund (PSSIX) (0.21%)
Principal International Equity Index R5 Fund (PIIQX) (0.60%)

Funds available in her 401(k)
Northern Trust Aggregate Bond Index (no ticker symbol) (0.04%)
Vanguard Target Retirement 2040 Inv (VFORX) (0.16%)

Questions:
1. How should I achieve my desired asset allocation across all of these accounts while keeping it simple? I have already read "Asset allocation in multiple accounts" in the bogleheads wiki. The information there is very helpful, but overwhelming at the same time. I can probably figure this out on my own, but since I'm new to the bogglehead investing philosophy, I want to make sure I get buggleheads' input before I make any serious mistakes if I go at it on my own.

a. As others here have recommended, I would like to concentrate on stocks in Roth. So should I exchange my bonds in Roth for US and International stocks?
b. Should I exchange my Total US Stock index fund in Roth for an Extended market index fund to compliment my 401K's S&P 500 Index fund?
c. Should I keep only S&P 500 Index fund and a bond index fund in my 401K instead of what I have now? Currently I have a mid cap and small cap actively managed funds, but plan on getting rid of those soon because more index funds will finally be added to our plan soon. See above.

2. Since I am looking at mine and my wife's accounts as one single portfolio, how would we do "Your age in bonds" if we are 10 years apart in age?

Thank you very much in advance!
Last edited by Pobre on Fri May 19, 2017 10:21 am, edited 1 time in total.

dbr
Posts: 22515
Joined: Sun Mar 04, 2007 9:50 am

Re: Help with asset allocation across multiple accounts

Postby dbr » Thu May 18, 2017 9:09 am

Pobre wrote:
2. Since I am looking at mine and my wife's accounts as one single portfolio, how would we do "Your age in bonds" if we are 10 years apart in age?



I would suggest that you don't. I would read in a couple of Larry Swedroe's books and apply the concept of need/ability/willingess to take risk to arrive at an asset allocation.

rkhusky
Posts: 3973
Joined: Thu Aug 18, 2011 8:09 pm

Re: Help with asset allocation across multiple accounts

Postby rkhusky » Thu May 18, 2017 9:11 am

What do you expect your tax bracket in retirement will be? Do you expect a significant pension?

Since you have some reasonable choices in your 401K plans, if your tax rate in retirement is expected to be more than 5% lower than you are paying now, you should consider maxing your Traditional 401K before doing the Roth IRA or Roth 401K.

I would look at trying to make your and your wife's portfolios similar in terms of both having US, Int'l and bond funds at the requisite allocation. If your wife wants to have a bit more stock than you, that is fine. Or you could split the difference and have the same allocation.

I would go with the S&P 500 and the Total or Agg Bond funds in both your accounts. Your Int'l option looks expensive, so If you really want Int'l, I would go with 20-30%, rather than the 50%. Her Int'l looks good, so you could go 50% there. (Another option is to just put the VG 2040 in her account. )

If you want to fine tune with Mid Cap and Small Cap, wait until you have more than $100K in the account.

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Peter Foley
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Location: Lake Wobegon

Re: Help with asset allocation across multiple accounts

Postby Peter Foley » Thu May 18, 2017 9:40 am

I would concur with some of the earlier advice to fund the 401ks more so than the Roths. With your difference in ages it is possible that you will retire before your wife and create a few lower income years where 401k funds could be withdrawn while in the 15% bracket. (This is just a guess as you don't mention any retirement plans in your post.)

I would also agree to your point of holding your bond allocations in your 401ks rather than your Roth. You could simplify a bit by holding just one fund in each of your Roth accounts - total stock market would be my choice. It appears you will have access to lower cost funds in the near future so that you can achieve your AA targets with relatively low cost index funds.

So far you have done a good job at diversification and keeping costs low. I would consider the suggestions being made as tweaking a good plan to make it better.

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telemark
Posts: 1939
Joined: Sat Aug 11, 2012 6:35 am

Re: Help with asset allocation across multiple accounts

Postby telemark » Thu May 18, 2017 10:29 am

This part bothers me
His 401k
xx% fund name (ticker symbol) (expense ratio)
31% Principal LargeCap S&P 500 Index Inst Fund (PLFIX) (0.16%)
13% Principal MidCap R5 Fund (PMBPX) (0.85%)
3% Principal SmallCap R5 Fund (PSBPX) (1.04%)

The expenses for the mid cap and small cap funds are far too high. You can either switch them to less expensive funds in the same plan or increase your allocation to those asset classes in one of the other plans.

Pobre
Posts: 28
Joined: Fri Jan 22, 2016 11:29 am

Re: Help with asset allocation across multiple accounts

Postby Pobre » Fri May 19, 2017 6:52 am

dbr wrote:
Pobre wrote:
2. Since I am looking at mine and my wife's accounts as one single portfolio, how would we do "Your age in bonds" if we are 10 years apart in age?



I would suggest that you don't. I would read in a couple of Larry Swedroe's books and apply the concept of need/ability/willingess to take risk to arrive at an asset allocation.


Thanks very much, dbr! I will look up Larry Swedroe's books and read them as soon as I get a chance. Until then, I will stick to the suggestion I read in the book "If you Can...": us bonds/us stocks/int.stocks divided equally.

Pobre
Posts: 28
Joined: Fri Jan 22, 2016 11:29 am

Re: Help with asset allocation across multiple accounts

Postby Pobre » Fri May 19, 2017 7:00 am

rkhusky wrote:What do you expect your tax bracket in retirement will be? Do you expect a significant pension?

Since you have some reasonable choices in your 401K plans, if your tax rate in retirement is expected to be more than 5% lower than you are paying now, you should consider maxing your Traditional 401K before doing the Roth IRA or Roth 401K.

I would look at trying to make your and your wife's portfolios similar in terms of both having US, Int'l and bond funds at the requisite allocation. If your wife wants to have a bit more stock than you, that is fine. Or you could split the difference and have the same allocation.

I would go with the S&P 500 and the Total or Agg Bond funds in both your accounts. Your Int'l option looks expensive, so If you really want Int'l, I would go with 20-30%, rather than the 50%. Her Int'l looks good, so you could go 50% there. (Another option is to just put the VG 2040 in her account. )

If you want to fine tune with Mid Cap and Small Cap, wait until you have more than $100K in the account.


rkhusky,

I'm not sure what my tax bracket in retirement will be. How do I calculate/estimate that?

No, neither my wife nor I expect a significant pension...what's a pension? :D

As of today, I am not opposed to the idea of working a part-time, low stress job. I might change my mind as I get older a just not work at all in retirement.

I like your idea to stay away from my 401K's expensive Int'l option and instead go with the cheaper Int'l option in my wife's 401K. I also like your idea to include all three bonds, us stock and Int'l in both my wife and my accounts.

Thank you very much!

Pobre
Posts: 28
Joined: Fri Jan 22, 2016 11:29 am

Re: Help with asset allocation across multiple accounts

Postby Pobre » Fri May 19, 2017 7:20 am

Peter Foley wrote:I would concur with some of the earlier advice to fund the 401ks more so than the Roths. With your difference in ages it is possible that you will retire before your wife and create a few lower income years where 401k funds could be withdrawn while in the 15% bracket. (This is just a guess as you don't mention any retirement plans in your post.)


Thanks very much, Peter Foley! I am now seriously considering stopping our Roth contributions and instead contributing more to our 401Ks. We can't max the $18,000 per spouse right now, but we can approach it and hopefully reach it in the near future, then we'll start contributing to Roth, if we haven't met the salary limits by then.

Our retirement plans are to be financially independent ASAP, realistically in our 50s. We won't necessarily quit our jobs as soon as we have enough to retire, but we believe the stress from work will likely decrease significantly just knowing we no longer depend on them. We also want to be prepared for forced retirement due to health problem, career decline, etc., just in case.

I would also agree to your point of holding your bond allocations in your 401ks rather than your Roth. You could simplify a bit by holding just one fund in each of your Roth accounts - total stock market would be my choice. It appears you will have access to lower cost funds in the near future so that you can achieve your AA targets with relatively low cost index funds.


I am now also seriously considering just this. Total stock market would be your choice for Roth accounts? What about Extended Market in Roth to compliment S&P 500 in Roth? Or should I stick with Total stock market in Roth and add Mid/Small cap index funds to 401K?

So far you have done a good job at diversification and keeping costs low. I would consider the suggestions being made as tweaking a good plan to make it better.


Thank you! It gives me peace of mind you think I've done a good job. It is the result of trying to implement what I learned from the book "If you Can..." In practice though, I've found it would be so much easier to implement those allocations and keep them if we had just one retirement account instead of five. :)

Thanks again for your valuable advice and suggestions!

rkhusky
Posts: 3973
Joined: Thu Aug 18, 2011 8:09 pm

Re: Help with asset allocation across multiple accounts

Postby rkhusky » Fri May 19, 2017 7:27 am

Pobre wrote:I'm not sure what my tax bracket in retirement will be. How do I calculate/estimate that?

One way is to use your current savings rate and see how much you expect to have saved up by retirement. Or you may have a target retirement goal, such that if you reach that goal you will retire. It is useful if you can estimate either of these in broad terms - i.e. $500K, $1M, $2M

The baseline safe withdrawal rate is 4% of your portfolio, which would mean $20K/yr, $40K/yr, $80K/yr for the previous three portfolio sizes. Are any of these sufficient for your to live on? If not, you will need to supplement with part time work and/or SS. Have you looked at what you can expect from SS?

Once you have an estimate for your sources of income - portfolio withdrawal, part-time income and SS, you can plug them into your tax software or something like TaxCaster (https://turbotax.intuit.com/tax-tools/c ... taxcaster/) to see what your tax bracket might be.

Or you can just look at your expected expenses. How much income will you need in retirement? $50K/yr, $100K/yr, $200K/yr? The boundary between the 15% and 25% brackets for a married couple is about $100K. So, if you expect to be living on $75K/year, you will likely be in the 15% bracket.

Pobre
Posts: 28
Joined: Fri Jan 22, 2016 11:29 am

Re: Help with asset allocation across multiple accounts

Postby Pobre » Fri May 19, 2017 7:38 am

telemark wrote:This part bothers me
His 401k
xx% fund name (ticker symbol) (expense ratio)
31% Principal LargeCap S&P 500 Index Inst Fund (PLFIX) (0.16%)
13% Principal MidCap R5 Fund (PMBPX) (0.85%)
3% Principal SmallCap R5 Fund (PSBPX) (1.04%)

The expenses for the mid cap and small cap funds are far too high. You can either switch them to less expensive funds in the same plan or increase your allocation to those asset classes in one of the other plans.


Thanks very much, telemark! Originally I had all of my 401K in just one fund, the only Index fund available, Principal LargeCap S&P 500 Index Inst Fund (PLFIX) (0.16%).

However, Vanguard's Portfolio Watch warned me that my domestic stock holdings were not well diversified among large-, mid-, and small-capitalization companies. So I reluctantly added those two funds to my 401K since they had the lowest expense ratio of all funds in those classes.

Fortunately, our 401K plan will soon be adding these:

Principal MidCap S&P 400 Index Inst Fund (MPSIX) (0.20%)
Principal SmallCap S&P 600 Index Inst Fund (PSSIX) (0.21%)

I will definitely add these as soon as they're available and get rid of the two actively managed funds.

Thank you very much for your valuable input!

Pobre
Posts: 28
Joined: Fri Jan 22, 2016 11:29 am

Re: Help with asset allocation across multiple accounts

Postby Pobre » Fri May 19, 2017 8:38 am

rkhusky wrote:
Pobre wrote:I'm not sure what my tax bracket in retirement will be. How do I calculate/estimate that?

One way is to use your current savings rate and see how much you expect to have saved up by retirement. Or you may have a target retirement goal, such that if you reach that goal you will retire. It is useful if you can estimate either of these in broad terms - i.e. $500K, $1M, $2M

The baseline safe withdrawal rate is 4% of your portfolio, which would mean $20K/yr, $40K/yr, $80K/yr for the previous three portfolio sizes. Are any of these sufficient for your to live on? If not, you will need to supplement with part time work and/or SS. Have you looked at what you can expect from SS?

Once you have an estimate for your sources of income - portfolio withdrawal, part-time income and SS, you can plug them into your tax software or something like TaxCaster (https://turbotax.intuit.com/tax-tools/c ... taxcaster/) to see what your tax bracket might be.

Or you can just look at your expected expenses. How much income will you need in retirement? $50K/yr, $100K/yr, $200K/yr? The boundary between the 15% and 25% brackets for a married couple is about $100K. So, if you expect to be living on $75K/year, you will likely be in the 15% bracket.


rkhusky,

I will definitely check that out as soon as I get a chance and come back here with an answer, and probably more questions. :happy

Thank you very much!

pingo
Posts: 2569
Joined: Sat Sep 19, 2009 8:24 pm

Re: Help with asset allocation across multiple accounts

Postby pingo » Fri May 19, 2017 6:31 pm

I realize you may have wanted to abbreviate the process and choose only the winners we'd choose based on costs, but we should have all the information. In fact, I've been studying your portfolio and realized I cannot proceed without knowing if I have all the 401k information.

1. Have you listed all available funds in the 401ks?
2. Please confirm: are you both contributing to Roth 401ks or Traditional (pre-tax) 401k accounts?
3. Please indicate the size of the entire portfolio combined. It's okay to be vague by saying "5 figures", or "6 figures". I simply need to know how much new contributions will influence account growth.

pingo
Posts: 2569
Joined: Sat Sep 19, 2009 8:24 pm

Re: Help with asset allocation across multiple accounts

Postby pingo » Mon May 22, 2017 5:58 pm

I suddenly had some time I may not have for a while, so I thought I'd work something out the best I can. Hopefully it is helpful. You can always ask for adjustments to my suggestions. The hardest part is over.

Pobre wrote:Tax Rate: 25% Federal, 0% State
Age: His: 45, Hers: 35
Desired Asset allocation: 67% stocks / 33% bonds
Desired International allocation: 49% of stocks
Pobre wrote:2. Since I am looking at mine and my wife's accounts as one single portfolio, how would we do "Your age in bonds" if we are 10 years apart in age?


There's nothing inherently wrong with 67/33, but I'll assume that it's not your desired asset allocation because of your follow-up question. (Let me know if I'm mistaken.)

A compromise between your "ages-in-bonds" results in 60/40, which is a great place to start and is considered a classic growth portfolio you needn't be in a rush to make more conservative. I encourage you to read the venerable Peter Bernstein's 60/40 Solution. Also, dbr's suggestion to read up on adjusting your asset allocation to meet your willingness, need and tolerance for risk is an excellent one.

60/40 stocks-bonds translates into 30% US, 30% Int'l and 40% Bonds.

His 401k (47%)
25% BlackRock Large Cap Index Investor A Fund (BRGAX) .38 <--$5313/yr or 60% of his 401k contributions.
03% Principal MidCap S&P 400 Index Inst Fund (MPSIX) .20 <--$1505/yr or 17% of his 401k contributions.
02% Principal SmallCap S&P 600 Index Inst Fund (PSSIX) .21 <--$708/yr or 8% of his 401k contributions.
17% BlackRock US Total Bond Index Investor A Fund (BMOAX) .35 <--$1328/yr or 15% of his 40k contributions.

Her 401K Roth (2%)
02% Northern Trust ACWI ex-US IMI Index (no ticker symbol) .10

Her Roth IRA @ Vanguard (7%)
07% Vanguard Total International - Admiral (VTIAX) .11 <--$5500/yr.

His Roth IRA @ Vanguard (25%)
21% Vanguard Vanguard Total International - Adm (VTIAX) .11 <--$2031/yr.
04% Vanguard Total Bond - Inv (VBTLX) .05 <--$3469/yr.

His Rollover IRA @ Vanguard (12%)
12% Vanguard Total Bond - Adm (VBTLX) .05

Her 401K (7%)
07% Northern Trust Aggregate Bond Index (no ticker symbol) .04 <--$5250/yr.

* Weighted ER = 0.14% 0.21% vs.0.22% of the other portfolio.
* Rebalancing can be accomplished through only 2 accounts.
* To rebalance, move in/out of international in His Roth IRA to keep combined international at 30%; afterward, adjust His 401k to keep bonds at 40% combined. What's left is 30% U.S. stocks in His 401k which need merely at a ratio of Lg 83:Md 11:Sm 6. (Doesn't have to be perfect.)

The above can easily be adjusted to match a different asset allocation, if you wish. Just let me know. :thumbsup
Last edited by pingo on Fri May 26, 2017 11:10 am, edited 1 time in total.

Pobre
Posts: 28
Joined: Fri Jan 22, 2016 11:29 am

Re: Help with asset allocation across multiple accounts

Postby Pobre » Tue May 23, 2017 12:34 pm

pingo wrote:I realize you may have wanted to abbreviate the process and choose only the winners we'd choose based on costs, but we should have all the information. In fact, I've been studying your portfolio and realized I cannot proceed without knowing if I have all the 401k information.

1. Have you listed all available funds in the 401ks?
2. Please confirm: are you both contributing to Roth 401ks or Traditional (pre-tax) 401k accounts?
3. Please indicate the size of the entire portfolio combined. It's okay to be vague by saying "5 figures", or "6 figures". I simply need to know how much new contributions will influence account growth.


Hi pingo! Thank you very much for taking the time to study my portfolio and thank you for responding.

1. No. I listed only the ones that are Index funds, except for the two mid/small cap actively managed funds I currently(not for much longer) invest in. The rest of 401K available funds are a multitude of actively managed funds I'm not interested in touching.

2. We both contribute up to the employer match, 6% and 5%, to Traditional (pre-tax) 401k. We don't contribute to Roth 401K. We had been contributing to our individual Roth accounts, and we had just recently started maxing out those up to $5,500 each. However, based on the advice I have received here, we are considering stopping all contributions to individual Roth and instead contribute more to 401K, possibly doubling what we contribute now. We aren't yet able to max to the limit, $18,000 each, but I think we might be able to soon.

3. The size of our entire, combined retirement portfolio is 6 figures, about 85% of it is in my accounts and more than half of that is in my 401K. The rest is in my wife's accounts.

I hope this helps. Please let me know if you need more information. Thanks again!
Last edited by Pobre on Tue May 23, 2017 6:25 pm, edited 1 time in total.

Pobre
Posts: 28
Joined: Fri Jan 22, 2016 11:29 am

Re: Help with asset allocation across multiple accounts

Postby Pobre » Tue May 23, 2017 6:16 pm

pingo wrote:I suddenly had some time I may not have for a while, so I thought I'd work something out the best I can. Hopefully it is helpful. You can always ask for adjustments to my suggestions. The hardest part is over.

Pobre wrote:Tax Rate: 25% Federal, 0% State
Age: His: 45, Hers: 35
Desired Asset allocation: 67% stocks / 33% bonds
Desired International allocation: 49% of stocks
Pobre wrote:2. Since I am looking at mine and my wife's accounts as one single portfolio, how would we do "Your age in bonds" if we are 10 years apart in age?


There's nothing inherently wrong with 67/33, but I'll assume that it's not your desired asset allocation because of your follow-up question. (Let me know if I'm mistaken.)

A compromise between your "ages-in-bonds" results in 60/40, which is a great place to start and is considered a classic growth portfolio you needn't be in a rush to make more conservative. I encourage you to read the venerable Peter Bernstein's 60/40 Solution. Also, dbr's suggestion to read up on adjusting your asset allocation to meet your willingness, need and tolerance for risk is an excellent one.

60/40 stocks-bonds translates into 30% US, 30% Int'l and 40% Bonds.

His 401k (47%)
25% BlackRock Large Cap Index Investor A Fund (BRGAX) .38 <--$5313/yr or 60% of his 401k contributions.
03% Principal MidCap S&P 400 Index Inst Fund (MPSIX) .20 <--$1505/yr or 17% of his 401k contributions.
02% Principal SmallCap S&P 600 Index Inst Fund (PSSIX) .21 <--$708/yr or 8% of his 401k contributions.
17% BlackRock US Total Bond Index Investor A Fund (BMOAX) .35 <--$1328/yr or 15% of his 40k contributions.

Her 401K Roth (2%)
02% Northern Trust ACWI ex-US IMI Index (no ticker symbol) .10

Her Roth IRA @ Vanguard (7%)
07% Vanguard Total International - Admiral (VTIAX) .11 <--$5500/yr.

His Roth IRA @ Vanguard (25%)
21% Vanguard Vanguard Total International - Adm (VTIAX) .11 <--$2031/yr.
04% Vanguard Total Bond - Inv (VBTLX) .05 <--$3469/yr.

His Rollover IRA @ Vanguard (12%)
12% Vanguard Total Bond - Adm (VBTLX) .05

Her 401K (7%)
07% Northern Trust Aggregate Bond Index (no ticker symbol) .04 <--$5250/yr.

* Weighted ER = 0.14% vs.0.22% of the other portfolio.
* Rebalancing can be accomplished through only 2 accounts.
* To rebalance, move in/out of international in His Roth IRA to keep combined international at 30%; afterward, adjust His 401k to keep bonds at 40% combined. What's left is 30% U.S. stocks in His 401k which need merely at a ratio of Lg 83:Md 11:Sm 6. (Doesn't have to be perfect.)

The above can easily be adjusted to match a different asset allocation, if you wish. Just let me know. :thumbsup


pingo, thank you so much for using your spare time to work on this portfolio allocations for me. I am going to read over it more carefully and come back with a longer response.

LeeMKE
Posts: 1531
Joined: Mon Oct 14, 2013 9:40 pm

Re: Help with asset allocation across multiple accounts

Postby LeeMKE » Tue May 23, 2017 8:30 pm

1. How should I achieve my desired asset allocation across all of these accounts while keeping it simple? I have already read "Asset allocation in multiple accounts" in the bogleheads wiki. The information there is very helpful, but overwhelming at the same time. I can probably figure this out on my own, but since I'm new to the bogglehead investing philosophy, I want to make sure I get buggleheads' input before I make any serious mistakes if I go at it on my own.


Download the spreadsheet on the Wiki:
Rebalancing
Boglehead rebalance.xls on Google Drive, by forum member LeeMKE. Rebalance your portfolio across multiple accounts. Includes space to keep notes.
https://drive.google.com/file/d/0B8VSNcUR-B6IR0hoQTBLMW9fZEU/view

This is what I use to manage 8 accounts, 4 of my own and 4 of DH. I split the accounts using separate sheets in the excel file so I have a place to record any differences between investment strategy (i.e. one person is younger than the other, with different dates for pension, social security, etc.)
The mightiest Oak is just a nut who stayed the course.

Pobre
Posts: 28
Joined: Fri Jan 22, 2016 11:29 am

Re: Help with asset allocation across multiple accounts

Postby Pobre » Wed May 24, 2017 3:23 am

LeeMKE wrote:
1. How should I achieve my desired asset allocation across all of these accounts while keeping it simple? I have already read "Asset allocation in multiple accounts" in the bogleheads wiki. The information there is very helpful, but overwhelming at the same time. I can probably figure this out on my own, but since I'm new to the bogglehead investing philosophy, I want to make sure I get buggleheads' input before I make any serious mistakes if I go at it on my own.


Download the spreadsheet on the Wiki:
Rebalancing
Boglehead rebalance.xls on Google Drive, by forum member LeeMKE. Rebalance your portfolio across multiple accounts. Includes space to keep notes.
https://drive.google.com/file/d/0B8VSNcUR-B6IR0hoQTBLMW9fZEU/view

This is what I use to manage 8 accounts, 4 of my own and 4 of DH. I split the accounts using separate sheets in the excel file so I have a place to record any differences between investment strategy (i.e. one person is younger than the other, with different dates for pension, social security, etc.)


LeeMKE, thank you very much! I will definitely download it and use it.

Pobre
Posts: 28
Joined: Fri Jan 22, 2016 11:29 am

Re: Help with asset allocation across multiple accounts

Postby Pobre » Wed May 24, 2017 9:40 am

pingo wrote:I suddenly had some time I may not have for a while, so I thought I'd work something out the best I can. Hopefully it is helpful. You can always ask for adjustments to my suggestions. The hardest part is over.

Pobre wrote:Tax Rate: 25% Federal, 0% State
Age: His: 45, Hers: 35
Desired Asset allocation: 67% stocks / 33% bonds
Desired International allocation: 49% of stocks
Pobre wrote:2. Since I am looking at mine and my wife's accounts as one single portfolio, how would we do "Your age in bonds" if we are 10 years apart in age?


There's nothing inherently wrong with 67/33, but I'll assume that it's not your desired asset allocation because of your follow-up question. (Let me know if I'm mistaken.)

A compromise between your "ages-in-bonds" results in 60/40, which is a great place to start and is considered a classic growth portfolio you needn't be in a rush to make more conservative. I encourage you to read the venerable Peter Bernstein's 60/40 Solution. Also, dbr's suggestion to read up on adjusting your asset allocation to meet your willingness, need and tolerance for risk is an excellent one.

60/40 stocks-bonds translates into 30% US, 30% Int'l and 40% Bonds.

His 401k (47%)
25% BlackRock Large Cap Index Investor A Fund (BRGAX) .38 <--$5313/yr or 60% of his 401k contributions.
03% Principal MidCap S&P 400 Index Inst Fund (MPSIX) .20 <--$1505/yr or 17% of his 401k contributions.
02% Principal SmallCap S&P 600 Index Inst Fund (PSSIX) .21 <--$708/yr or 8% of his 401k contributions.
17% BlackRock US Total Bond Index Investor A Fund (BMOAX) .35 <--$1328/yr or 15% of his 40k contributions.

Her 401K Roth (2%)
02% Northern Trust ACWI ex-US IMI Index (no ticker symbol) .10

Her Roth IRA @ Vanguard (7%)
07% Vanguard Total International - Admiral (VTIAX) .11 <--$5500/yr.

His Roth IRA @ Vanguard (25%)
21% Vanguard Vanguard Total International - Adm (VTIAX) .11 <--$2031/yr.
04% Vanguard Total Bond - Inv (VBTLX) .05 <--$3469/yr.

His Rollover IRA @ Vanguard (12%)
12% Vanguard Total Bond - Adm (VBTLX) .05

Her 401K (7%)
07% Northern Trust Aggregate Bond Index (no ticker symbol) .04 <--$5250/yr.

* Weighted ER = 0.14% vs.0.22% of the other portfolio.
* Rebalancing can be accomplished through only 2 accounts.
* To rebalance, move in/out of international in His Roth IRA to keep combined international at 30%; afterward, adjust His 401k to keep bonds at 40% combined. What's left is 30% U.S. stocks in His 401k which need merely at a ratio of Lg 83:Md 11:Sm 6. (Doesn't have to be perfect.)

The above can easily be adjusted to match a different asset allocation, if you wish. Just let me know. :thumbsup


Pingo,

Again, thank you so much for spending your spare time working on this portfolio allocations for me. I really appreciate it.

I only asked that question about "Your age in bonds" because I was always curious as to how couples implement this when one spouse is younger than the other and they want to combine their retirement portfolios in their retirement planning.

67/33 is my desired allocation, and for me it's actually almost too conservative. I believe I have a high risk tolerance. My 401K was invested in 100% stocks for 15 years.

During the Great Recession, it was easy for me to listen to those who said "do nothing" and that's what I did, and I didn't freak out.

I actually considered the silly idea to spend down all or part of my emergency fund to buy more stocks during those days. I didn't do that out of fear of possibly losing my job like many did back then, and no longer having an emergency fund when I most need it.

I decided to go 67/33 after reading "If You Can" and following up with the other readings recommended in that book. 67/33 makes most sense to me right now, and I believe it's something I can stick with long term.

Is there a reason you recommend the BlackRock Large Cap Index fund over the Principal LargeCap S&P 500 Index fund? BlackRock's has a higher expense ratio of 0.35%, while Principal's has a lower expense ratio of 0.16%. Is BlackRock's better than Principal's despite the higher expense ratio?

I entered your suggested allocations into the spreadsheet, adjusting to match my desired 67/33 allocation. This is what I came up with. It doesn't seem much different to me than what you suggested. What do you think?

His 401k (47%)
24.8% Principal LargeCap S&P 500 Index Inst Fund (PLFIX) .16
6.4% Principal MidCap S&P 400 Index Inst Fund (MPSIX) .20
2.3% Principal SmallCap S&P 600 Index Inst Fund (PSSIX) .21
13.5% BlackRock US Total Bond Index Investor A Fund (BMOAX) .35

Her 401K Roth (1.6%)
1.6% Northern Trust ACWI ex-US IMI Index (no ticker symbol) .10

Her Roth IRA @ Vanguard (7.4%)
7.4% Vanguard Total International - Admiral (VTIAX) .11

His Roth IRA @ Vanguard (24.7%)
24.5% Vanguard Vanguard Total International - Adm (VTIAX) .11
0.2% Vanguard Total Bond - Inv (VBTLX) .05

Note: The 0.2 % above is the only reason I did one decimal point on percentages. This amount is 3 figures and necessary to achieve 33% bonds without messing up the percentages in my 401K.

His Rollover IRA @ Vanguard (11.7%)
11.7% Vanguard Total Bond - Adm (VBTLX) .05

Her 401K (7.6%)
7.6% Northern Trust Aggregate Bond Index (no ticker symbol) .04

* Weighted ER = 0.15%

My desired US and International stock allocation is 50/50.

My desired US stock allocation is:
74% Large Cap
19% Mid Cap
7% Small Cap

Again, thank you very much for your time!

pingo
Posts: 2569
Joined: Sat Sep 19, 2009 8:24 pm

Re: Help with asset allocation across multiple accounts

Postby pingo » Fri May 26, 2017 11:18 am

67/33 is a great asset allocation and you appear to have given it the thought it deserves.

Pobre wrote:Is there a reason you recommend the BlackRock Large Cap Index fund over the Principal LargeCap S&P 500 Index fund? BlackRock's has a higher expense ratio of 0.35%, while Principal's has a lower expense ratio of 0.16%. Is BlackRock's better than Principal's despite the higher expense ratio?

My mistake. When I saw this...

Pobre wrote:Coming soon:
BlackRock US Total Bond Index Investor A Fund (BMOAX) (0.35%)
BlackRock Large Cap Index Investor A Fund (BRGAX) (0.38%)
Principal MidCap S&P 400 Index Inst Fund (MPSIX) (0.20%)
Principal SmallCap S&P 600 Index Inst Fund (PSSIX) (0.21%)
Principal International Equity Index R5 Fund (PIIQX) (0.60%)


...I thought that the original Lg, Md and Sm funds would be replaced by the 401k provider. :oops:

If they are being added to the 401k, you should definitely use the cheaper Large Cap fund!

Pobre wrote:His 401k (47%)
24.8% Principal LargeCap S&P 500 Index Inst Fund (PLFIX) .16
6.4% Principal MidCap S&P 400 Index Inst Fund (MPSIX) .20
2.3% Principal SmallCap S&P 600 Index Inst Fund (PSSIX) .21
13.5% BlackRock US Total Bond Index Investor A Fund (BMOAX) .35

Her 401K Roth (1.6%)
1.6% Northern Trust ACWI ex-US IMI Index (no ticker symbol) .10

Her Roth IRA @ Vanguard (7.4%)
7.4% Vanguard Total International - Admiral (VTIAX) .11

His Roth IRA @ Vanguard (24.7%)
24.5% Vanguard Vanguard Total International - Adm (VTIAX) .11
0.2% Vanguard Total Bond - Inv (VBTLX) .05

Note: The 0.2 % above is the only reason I did one decimal point on percentages. This amount is 3 figures and necessary to achieve 33% bonds without messing up the percentages in my 401K.

His Rollover IRA @ Vanguard (11.7%)
11.7% Vanguard Total Bond - Adm (VBTLX) .05

Her 401K (7.6%)
7.6% Northern Trust Aggregate Bond Index (no ticker symbol) .04
Pobre wrote:I entered your suggested allocations into the spreadsheet, adjusting to match my desired 67/33 allocation. This is what I came up with. It doesn't seem much different to me than what you suggested. What do you think?


You nailed it. Well done, young padawan. Indeed, well done.

Pobre wrote:* Weighted ER = 0.15%


I couldn't believe that using a lower ER Large Cap fund resulted in a higher weighted ER. I checked the math and sure enough, my portfolio suggestion had a higher weighted ER than I calculated previously. I have corrected that post.

Now, altering the portfolio to a 67/33 asset allocation brings your bonds to almost 0% in "His Roth IRA". It's not a problem now, but if stocks fall off a cliff you may not have enough new contributions or bonds to put your International stock allocation into balance.

The 1st solution is to leave it alone. If stocks take a terrible dive down the road, you could use my 2nd solution below.

The 2nd solution (which is fine to use now or later) is to fill His entire Rollover IRA with Total International, instead; then, exchange an equal amount of money from Total International into the Total Bond of His Roth IRA. The downside: you no longer hold as many stocks in your Roths, as requested, but it's not cause for concern in my book.

Many happy returns, my friend!

:thumbsup
Last edited by pingo on Fri Jun 02, 2017 1:30 pm, edited 1 time in total.

Pobre
Posts: 28
Joined: Fri Jan 22, 2016 11:29 am

Re: Help with asset allocation across multiple accounts

Postby Pobre » Fri Jun 02, 2017 7:46 am

pingo wrote:67/33 is a great asset allocation and you appear to have given it the thought it deserves.

Pobre wrote:Is there a reason you recommend the BlackRock Large Cap Index fund over the Principal LargeCap S&P 500 Index fund? BlackRock's has a higher expense ratio of 0.35%, while Principal's has a lower expense ratio of 0.16%. Is BlackRock's better than Principal's despite the higher expense ratio?

My mistake. When I saw this...

Pobre wrote:Coming soon:
BlackRock US Total Bond Index Investor A Fund (BMOAX) (0.35%)
BlackRock Large Cap Index Investor A Fund (BRGAX) (0.38%)
Principal MidCap S&P 400 Index Inst Fund (MPSIX) (0.20%)
Principal SmallCap S&P 600 Index Inst Fund (PSSIX) (0.21%)
Principal International Equity Index R5 Fund (PIIQX) (0.60%)


...I thought that the original Lg, Md and Sm funds would be replaced by the 401k provider. :oops:

If they are being added to the 401k, you should definitely use the cheaper Large Cap fund!

Pobre wrote:His 401k (47%)
24.8% Principal LargeCap S&P 500 Index Inst Fund (PLFIX) .16
6.4% Principal MidCap S&P 400 Index Inst Fund (MPSIX) .20
2.3% Principal SmallCap S&P 600 Index Inst Fund (PSSIX) .21
13.5% BlackRock US Total Bond Index Investor A Fund (BMOAX) .35

Her 401K Roth (1.6%)
1.6% Northern Trust ACWI ex-US IMI Index (no ticker symbol) .10

Her Roth IRA @ Vanguard (7.4%)
7.4% Vanguard Total International - Admiral (VTIAX) .11

His Roth IRA @ Vanguard (24.7%)
24.5% Vanguard Vanguard Total International - Adm (VTIAX) .11
0.2% Vanguard Total Bond - Inv (VBTLX) .05

Note: The 0.2 % above is the only reason I did one decimal point on percentages. This amount is 3 figures and necessary to achieve 33% bonds without messing up the percentages in my 401K.

His Rollover IRA @ Vanguard (11.7%)
11.7% Vanguard Total Bond - Adm (VBTLX) .05

Her 401K (7.6%)
7.6% Northern Trust Aggregate Bond Index (no ticker symbol) .04
Pobre wrote:I entered your suggested allocations into the spreadsheet, adjusting to match my desired 67/33 allocation. This is what I came up with. It doesn't seem much different to me than what you suggested. What do you think?


You nailed it. Well done, young padawan. Indeed, well done.

Pobre wrote:* Weighted ER = 0.15%


I couldn't believe that using in a lower ER Large Cap fund resulted in a higher weighted ER. I checked the math and sure enough, my portfolio suggestion had a higher weighted ER than I calculated previously. I corrected my post.

Now, altering the portfolio to a 67/33 asset allocation brings your bonds to almost 0% in "His Roth IRA". It's not a problem now, but if stocks fall off a cliff you may not have enough new contributions or bonds to put your International stock allocation into balance.

The 1st solution is to leave it alone. If stocks take a terrible dive down the road, you could use my 2nd solution below.

The 2nd solution (which is fine to use now or later) is to fill His entire Rollover IRA with Total International, instead; then, exchange an equal amount of money from Total International into the Total Bond of His Roth IRA. The downside: you no longer hold as many stocks in your Roths, as requested, but it's not cause for concern in my book.

Many happy returns, my friend!

:thumbsup


pingo,

Glad you think I nailed it, Jedi master...LOL

I completed my 67/33 asset allocation across multiple accounts today. Because the balances had changed due to new contributions and market changes, it workout so that I didn't have to add bonds in "His Roth IRA" after all. So the allocations now look even closer to your original suggestion.

Again, thank you very much for your help! I really appreciate it.


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