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Bonds - Roth IRA or 401k?

Posted: Wed Oct 09, 2019 7:29 pm
by tactically_rich
Hello,

I need some guidance and wisdom on where to place my bonds. My asset allocation is 90/10 between stocks and bonds. I currently hold bonds in my Roth IRA as VBTLX which has an ER of 0.05%. My other option is to hold bonds in my 401k. But...I don't think the options are as good as VBTLX. My options are below:

Hotchkis & Wiley High Yield I - ER of 0.71%
Dodge & Cox Income - ER of 0.5%
Loomis Sayles Investment Grade Bond Adm - ER of 0.47%
Loomis Sayles Bond Instl - ER of 0.62%
Vanguard Short-Term Bond Index Adm - 0.23%

Should I continue to hold bonds in my Roth IRA as VBTLX or should I have them in my 401k? Any advice would be much appreciated!

Re: Bonds - Roth IRA or 401k?

Posted: Wed Oct 09, 2019 7:39 pm
by mhalley
I vote for stocks in Roth. At this point, your allocation to bonds is very small, so your overall expense ratio will still be quite low. This will allow the assets with highest growth potential to grow in the Roth, and they will never have rmds.

Re: Bonds - Roth IRA or 401k?

Posted: Wed Oct 09, 2019 7:40 pm
by lakpr
If you do not have at least $50k in your portfolio, you can safely skip bonds in both IRA and 401k for now. If you are young, that is another reason why you can skip bonds for the next few years

Re: Bonds - Roth IRA or 401k?

Posted: Wed Oct 09, 2019 9:29 pm
by sawhorse
One consideration is whether you are using your Roth contributions as an emergency fund. If so, I would leave your contributions amount in bonds so that the risk of loss is much lower. Financial emergencies are more likely to occur during market downturns.

Re: Bonds - Roth IRA or 401k?

Posted: Wed Oct 09, 2019 11:42 pm
by fujiters
What stock fund(s) are you holding in your 401k, for comparison?

Re: Bonds - Roth IRA or 401k?

Posted: Thu Oct 10, 2019 9:02 am
by tactically_rich
fujiters wrote:
Wed Oct 09, 2019 11:42 pm
What stock fund(s) are you holding in your 401k, for comparison?
Current portfolio:

401k
Securian AM S&P 500 Index - $30,480.78, ER of 0.18%
Vanguard Mid Cap Index Admiral - $30,473.74, ER of 0.21%

Taxable Account
VTSAX - $35,483.47, ER of 0.04%

Roth IRA
VBTLX - $12,262.83, ER of 0.05%
VTSAX - $13,486.10, ER of 0.04%

Re: Bonds - Roth IRA or 401k?

Posted: Thu Oct 10, 2019 9:07 am
by tactically_rich
lakpr wrote:
Wed Oct 09, 2019 7:40 pm
If you do not have at least $50k in your portfolio, you can safely skip bonds in both IRA and 401k for now. If you are young, that is another reason why you can skip bonds for the next few years
I'm 31 years old and my portfolio is $122k. I also have a little over $30k in an Ally savings account. But I planned on using a large portion of that for a down payment on a home and potentially an engagement ring.

Re: Bonds - Roth IRA or 401k?

Posted: Thu Oct 10, 2019 9:18 am
by HomeStretch
I think with your portfolio size and low Bond allocation that either Bonds in Roth and 401k is fine. Revisit if something changes significantly - portfolio size, bond allocation % or ERs of 401k Bond choices.

Re: Bonds - Roth IRA or 401k?

Posted: Thu Oct 10, 2019 9:32 am
by KlangFool
tactically_rich wrote:
Thu Oct 10, 2019 9:07 am
lakpr wrote:
Wed Oct 09, 2019 7:40 pm
If you do not have at least $50k in your portfolio, you can safely skip bonds in both IRA and 401k for now. If you are young, that is another reason why you can skip bonds for the next few years
I'm 31 years old and my portfolio is $122k. I also have a little over $30k in an Ally savings account. But I planned on using a large portion of that for a down payment on a home and potentially an engagement ring.
tactically_rich,

If you are buying a house, after paying a downpayment, you still need an emergency fund. So, depending on the price of the house that you want to buy, you may need more cash/money to prepare for the emergency fund after buying the house.

So, in my opinion, you need more bonds. I would do a 100% bond in your Roth IRA and use that as your second level emergency fund.

KlangFool

Re: Bonds - Roth IRA or 401k?

Posted: Thu Oct 10, 2019 11:11 am
by lakpr
+1 to KlangFool. Your investing horizon is much smaller than we assumed earlier ...
Yes 100% in Roth IRA for now.