US stock, non-US stock, or total bond in ROTH?
US stock, non-US stock, or total bond in ROTH?
For someone with a traditional IRA (~$250,000) and Roth (~$25,000), using a BH 3-fund (TSM, TISM, TBM) with each part of the allocation greater than $25,000, which one should fill up the Roth first?
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
Re: US stock, non-US stock, or total bond in ROTH?
Here's a thought I picked up from reading this forum.
Roth IRAs are the last source of income that one ought to tap in retirement. That gives them the longest investing horizon...perhaps even to be left to heirs. To that end, perhaps Roth IRAs & Roth 401ks ought to have 100% growth opportunity, ie - equity funds only.
I like and subscribe to that notion and all my Roths are 100% Total Stock Market Index. My regular IRA and traditional 401k have enough stock and bond assets to allow for easy rebalancing as needed.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
Re: US stock, non-US stock, or total bond in ROTH?
i would put a portion of whatever makes up the biggest part of your portfolio into the Roth and do the rebalancing in the traditional IRA, just for simplicity sake. so for example if your AA was 50% TSM, 25% TISM, 25% TBM
Traditional:
$113k TSM
$69k TISM
$69k TBM
Roth:
$25k TSM
Traditional:
$113k TSM
$69k TISM
$69k TBM
Roth:
$25k TSM
Re: US stock, non-US stock, or total bond in ROTH?
Ah, good info here, thanks.
Also, if the Roth is large enough, I was thinking that during withdrawal I might be able to take a portion from the Roth if I'm getting near the next bracket for taxation of SS.
Also, if the Roth is large enough, I was thinking that during withdrawal I might be able to take a portion from the Roth if I'm getting near the next bracket for taxation of SS.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
Re: US stock, non-US stock, or total bond in ROTH?
It doesn't matter that much; see Tax-adjusted asset allocation on the wiki.
But if all else is equal, I would prefer stock in the Roth IRA. With a large traditional IRA, if the stock market rises, you will have RMDs you don't need, and putting stock in the Roth reduces those RMDs.
US versus foreign stock doesn't matter, as they have about the same expected returns.
But if all else is equal, I would prefer stock in the Roth IRA. With a large traditional IRA, if the stock market rises, you will have RMDs you don't need, and putting stock in the Roth reduces those RMDs.
US versus foreign stock doesn't matter, as they have about the same expected returns.
Re: US stock, non-US stock, or total bond in ROTH?
I thought you would want Bonds in a Roth since interest payment is taxed at a higher rate (for most folks) than capital gains and dividends?
Re: US stock, non-US stock, or total bond in ROTH?
It is a debate across tax exampt/tax deferred choices where that tax rate difference does not apply. If your choice is between a taxable account and tax protected accounts you would be right.