Help with 401K and BDA IRA [Beneficiary Distribution Account IRA]

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Help with 401K and BDA IRA [Beneficiary Distribution Account IRA]

Post by Petorius » Sun Apr 22, 2018 7:24 pm

Hi everyone, new guy here with a new guy question. I am holding 100% of my 401K balance in a Vanguard Target 2055 Trust Plus fund that is currently ~90% equity, ~10% bonds with a gross ER of .06. My only other investment account of significance is an inherited IRA established in 2017 that will likely be subject to the 5 year rule (I did something dumb, waiting to discuss with CPA). The inherited IRA is 100% FSTVX (Fidelity equivalent of VTSAX) at .035 ER; it is currently ~25% of my total investment portfolio value.

I recently got some new options in the 401K, so I am considering changing it up a bit. The new options include an S&P500 index at .013, S/MID cap index at .05, international stock index at .08, and total bond market index at .033. These would allow me to recreate the same allocation as the target fund at a weighted average ER of .042 (vs .06 for the current target fund).

So, do I:
1) leave it as is, the difference in ER is not large enough to justify the extra effort rebalancing once a year
2) mimic the target fund with the 4 individual index funds and save a bit of ER, rebalance once a year
3) do something different, like going 90/10 between the S&P500 and total bond funds for a weighted avg ER of .015.

Also, with the regard to the BDA IRA, should I bother considering it for the total portfolio allocation since it will likely be subject to the 5-year rule? If so, what should it substitute for in the 401K, given that it will represent ~25% of the total portfolio value? The RMDs will go straight back into the 401K to repay a 401K loan I took for a down payment on my house. I would also like to leave this one in a single fund to simplify the RMDs.

Thanks in advance!

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