Three Fund Questions

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AMG79
Posts: 46
Joined: Wed Mar 07, 2018 11:50 am

Three Fund Questions

Post by AMG79 » Thu Oct 18, 2018 3:15 pm

I just finished the Three-Fund Portfolio guide... another excellent book! Thank you!

Question #1) Should we consider anything else beyond stock and bond investments when setting up our three funds? For example, should we account for home equity as part of the bond allocation?

Question #2) We have a Roth 401k, Roth & Trad IRA and an HSA that is maxed out annually without withdrawal. Any reason we would want to allocate differently within those? Example being would it make sense to withdraw from one before the other in retirement?

Thank you all!
AMG79

Living Free
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Joined: Thu Jul 19, 2018 7:31 pm

Re: Three Fund Questions

Post by Living Free » Thu Oct 18, 2018 3:43 pm

AMG79 wrote:
Thu Oct 18, 2018 3:15 pm


Question #2) We have a Roth 401k, Roth & Trad IRA and an HSA that is maxed out annually without withdrawal. Any reason we would want to allocate differently within those? Example being would it make sense to withdraw from one before the other in retirement?
General guide is to withdraw from taxable account, then traditional retirement account, then roth account. HSA won't be able to be withdrawn till age 65 and will then be just like a traditional retirement acct (ie, tax deferred). So given you'd presumably plan to withdraw from the roth last, you might want to put stocks (or reits or junk bonds if you do those) more heavily in those accounts. also no RMDs on the roth accounts.

BogleMelon
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Re: Three Fund Questions

Post by BogleMelon » Thu Oct 18, 2018 3:49 pm

AMG79 wrote:
Thu Oct 18, 2018 3:15 pm


Question #1) Should we consider anything else beyond stock and bond investments when setting up our three funds? For example, should we account for home equity as part of the bond allocation?
If you can partially sell/buy your house whenever you need to, to rebalance, then yes! Otherwise no (so the serious answer is no)!
AMG79 wrote:
Thu Oct 18, 2018 3:15 pm
Question #2) We have a Roth 401k, Roth & Trad IRA and an HSA that is maxed out annually without withdrawal. Any reason we would want to allocate differently within those? Example being would it make sense to withdraw from one before the other in retirement?

Thank you all!
AMG79
Yes, if you think your tax bracket will be lower in retirement than now, then it would make more sense to contribute more to Trad's, and vise versa
One common way is to max out a traditional account so you can use the tax savings to increase your contributions into the Roth account.
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

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ruralavalon
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Re: Three Fund Questions

Post by ruralavalon » Thu Oct 18, 2018 4:26 pm

AMG79 wrote:
Thu Oct 18, 2018 3:15 pm
Question #1) Should we consider anything else beyond stock and bond investments when setting up our three funds? For example, should we account for home equity as part of the bond allocation?
No. Do not include home equity as part of your investment portfolio.


AMG79 wrote:Question #2) We have a Roth 401k, Roth & Trad IRA and an HSA that is maxed out annually without withdrawal. Any reason we would want to allocate differently within those? Example being would it make sense to withdraw from one before the other in retirement?
In general it's often better to treat all accounts together as a single unified portfolio, in other words coordinate investments among all accounts, rather than try to have all parts of the asset allocation in each account. This let's you avoid use of less desirable funds found in many 401k plans.

There is no general rule for priority in withdrawal from different accounts. It's sometimes better to withdraw first from a taxable account, second from a traditional tax-deferred account, and third from a Roth account. There is a lot of variability in this depending on tax brackets, income needs in retirement, and whether you delay taking Social Security until age 70 but retire earlier.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

AMG79
Posts: 46
Joined: Wed Mar 07, 2018 11:50 am

Re: Three Fund Questions

Post by AMG79 » Fri Oct 19, 2018 8:10 am

Boglemelon - if you were to max out a trad, wouldn't you then be unable to contribute the tax savings to your Roth since you would have reached the max allowable for the year?

Thanks for all the answers, everyone.

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