Ideal Allocation Between Roth IRA, HSA, and 401k

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obaxter2107
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Joined: Sun Jun 28, 2020 5:50 pm

Ideal Allocation Between Roth IRA, HSA, and 401k

Post by obaxter2107 »

Good Afternoon,

This question is a little vague but I would like your input.

What would be an ideal asset allocation across a 3 fund portfolio consisting of a 401k, HSA, and Roth IRA? Assuming all 3 will be maxed out annually using 60/20/20 between Total Market, Total International, and Total Bond across all 3 accounts.

I am fairly new to investing but understand that certain accounts are more favorable for holding either bonds or stocks. If you started at a balance of zero and wanted to max out each account using the above allocation, how would you do it?

Thank you everyone!
000
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Re: Ideal Allocation Between Roth IRA, HSA, and 401k

Post by 000 »

I would probably put all the bonds in the 401(k) and then fill the rest of the 401(k) and the other accounts with stocks.
02nz
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Re: Ideal Allocation Between Roth IRA, HSA, and 401k

Post by 02nz »

Topic Author
obaxter2107
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Joined: Sun Jun 28, 2020 5:50 pm

Re: Ideal Allocation Between Roth IRA, HSA, and 401k

Post by obaxter2107 »

000 wrote: Sun Sep 13, 2020 5:39 pm I would probably put all the bonds in the 401(k) and then fill the rest of the 401(k) and the other accounts with stocks.
000. Why would you want the bonds in the 401k vs roth or HSA? Just want to understand your thought process behind it. Thank you
niceguy7376
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Re: Ideal Allocation Between Roth IRA, HSA, and 401k

Post by niceguy7376 »

Growth of stocks is expected to be higher than Bonds. Hence I want the stocks in HSA and Roth IRAs. I then fill out the 401k according to my Asset Allocation
pasadena
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Re: Ideal Allocation Between Roth IRA, HSA, and 401k

Post by pasadena »

obaxter2107 wrote: Mon Sep 14, 2020 12:05 pm
000 wrote: Sun Sep 13, 2020 5:39 pm I would probably put all the bonds in the 401(k) and then fill the rest of the 401(k) and the other accounts with stocks.
000. Why would you want the bonds in the 401k vs roth or HSA? Just want to understand your thought process behind it. Thank you
Gains in the 401(k) will be taxed at your marginal tax rate. Gains in the Roth will not be taxed. So you want the asset class with the higher growth potential in Roth.
Doctor Rhythm
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Re: Ideal Allocation Between Roth IRA, HSA, and 401k

Post by Doctor Rhythm »

obaxter2107 wrote: Mon Sep 14, 2020 12:05 pm
000 wrote: Sun Sep 13, 2020 5:39 pm I would probably put all the bonds in the 401(k) and then fill the rest of the 401(k) and the other accounts with stocks.
000. Why would you want the bonds in the 401k vs roth or HSA? Just want to understand your thought process behind it. Thank you
You pay less tax (keep more of the total portfolio returns) if most of the growth occurs in a tax free account like a Roth. Since stock are presumed to grow faster than bonds, the stocks should go in the Roth.
terran
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Re: Ideal Allocation Between Roth IRA, HSA, and 401k

Post by terran »

I agree with the other posters (and please do read the link 02nz posted). I would treat the HSA (assuming you're using it as an investment account, and it's not needed for current medical spending) as in between the 401(k) and the Roth. In other words, put bonds in the HSA before you put them in Roth, but after you put them in the 401(k). This is because the HSA is kind of in between in the two accounts in that distributions are tax free (like Roth) as long as you have qualified medical expenses, but taxable (like the 401(k)) if you take distributions after age 65 without qualified medical expenses.
000
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Re: Ideal Allocation Between Roth IRA, HSA, and 401k

Post by 000 »

obaxter2107 wrote: Mon Sep 14, 2020 12:05 pm
000 wrote: Sun Sep 13, 2020 5:39 pm I would probably put all the bonds in the 401(k) and then fill the rest of the 401(k) and the other accounts with stocks.
000. Why would you want the bonds in the 401k vs roth or HSA? Just want to understand your thought process behind it. Thank you
For the same reasons other posters gave above :D
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