How often to rebalance retirement accounts?

[TrustTheMarket]

I have seen William Bernstein state that rebalancing every few years is the safest route.

But if you wait a few years, what if your portfolio moves so drastically that it no longer matches your risk tolerance?

I know many here do rebalancing “bands.” But I do not like watching the accounts that often. Too manual. Would prefer a more hands off approach.

[ondarvr]

Not something I stress about, I randomly adjust when I remember or it's obvious.

You can find something that will do it all for you though, set your desired AA and forget about, it will always stay there.

[delamer]

I rebalance annually, in the Fall. But I do pay attention to the stock markets, and if there have been big swings in equities I will do an “off cycle” rebalancing.

[rkhusky]

Use bands, but check only once a month. That’s not so burdensome.

Or put most everything into a target date fund.

[Mike Scott]

A balanced fund will rebalance with no input or action needed.

[GoldStar]

How does he feel every few years is safest?
Yearly seems okay - quarterly is better. Monthly may be overkill. My opinion.
As stated above - if you want hands-off go with a balanced fund and the work is done for you.

[KlangFool]

I know many here do rebalancing “bands.” But I do not like watching the accounts that often. Too manual. Would prefer a more hands off approach.

TrustTheMarket,

I disagreed. With 5/25 band based rebalancing, I only have to rebalance when the stock market move up or down more than 30%. This happened once every few years. Except in 2020. When it happened twice.

When the stock market move up or down 30%, you do not have to watch the account or anything. People/TV/Media will scream at you when it happened, you cannot avoid it.

Are you telling me that you do not know the stock market crashes in 2020 during COVID?

You may want to spend more time learning and understanding how 5/25 band based rebalancing works.

Please take a look at the following thread.
viewtopic.php?t=335902

I do both 5/25 and annual rebalancing. For most years, I do not have to do anything during rebalancing time. My new contribution keep the percentage in check.

KlangFool

[wan2gro]

I, too, recently had this question.

Some web-searching produced a "white paper" written by some Vanguard advisors in October 2022. I found it very interesting as they asked the question also incorporating sub-topics like "how much can you let your AA slide", and "is it different at different stocks/bonds ratios.
https://corporate.vanguard.com/content/ ... ancing.pdf

My takeaway was the optimal rebalancing (for me) will likely be yearly or if there is an obvious "black day" in markets. The incremental impacts of reward-per-risk is subtle as AAs fluctuate, but any tax costs are not-so-subtle.

More thinking about "what will make me rebalance" got me to actually write up an investment policy statement (IPS).
https://www.bogleheads.org/wiki/Investm ... _statement

In the end, the act of self-introspection needed to commit to paper an IPS has helped me sleep better.

[MnD]

I have seen William Bernstein state that rebalancing every few years is the safest route.

But if you wait a few years, what if your portfolio moves so drastically that it no longer matches your risk tolerance?

I know many here do rebalancing “bands.” But I do not like watching the accounts that often. Too manual. Would prefer a more hands off approach.

My approach (rebalance to 70%/30% when fixed income drops under 25% or goes above 35%) results in "rebalancing every few years" on average.
It prevents the portfolio from getting drastically away from my desired AA of 70/30.
It takes a big divergence of stocks and fixed income performance to exceed these thresholds.
So I do not have to "watch accounts" that closely.

Rebalance dates since retirement:
December 26, 2018
Jan 18, 2020
Aug 28, 2020
October 15, 2024

[JakeyLee]

Once a year. Week of my birthday. This year, it was this past Monday. I like to keep things simple. The less tinkering, the better.

[White Coat Investor]

I have seen William Bernstein state that rebalancing every few years is the safest route.

But if you wait a few years, what if your portfolio moves so drastically that it no longer matches your risk tolerance?

I know many here do rebalancing “bands.” But I do not like watching the accounts that often. Too manual. Would prefer a more hands off approach.

The data suggests the ideal interval is 1-3 years. Above that, you're likely to get burned. Below that, you're hurting your returns more than you need to in order to control your risk adequately. 5/25 sounds smart, but it requires you to check every now and then and if you don't want to do that, it's fine to use a time based interval.

Personally, I try to avoid EVER realizing a capital gain to rebalance, but also put new contributions toward whatever hasn't been doing all that well lately. So I never really do any sort of formal rebalancing procedure. So I'm not sure if I rebalance never or monthly.

I do rebalance my parents' portfolio once a year though. We switched from April to December (when RMDs get taken, for simplicity) this year though, which worked out well.

[retiredjg]

I know many here do rebalancing “bands.” But I do not like watching the accounts that often. Too manual. Would prefer a more hands off approach.

Rebalance once a year if you don't like looking.

If the market is moving a lot you will probably know it. Then you know to check your bands. Other than times of major market movement, the 5% bands are not likely to be breached in a year.

[alluringreality]

The following is pretty in depth. I don't think it mentions Adaptive Asset Allocation Policies by William Sharpe, but it touches on many items that I've considered regarding rebalancing. Overall I still agree more with Bogle (once a year or less) than Swensen (daily drift is passive market timing) for personal importance.
viewtopic.php?t=446262

[jeff1968]

I rebalance when it feels right. Used to be 95/5 with heavy growth funds but once the Nasdaq went over 20k I felt that was too aggressive and wanted to take some money off...so adjusted down to 87/13. May go back to 90/10 if the market continues downward (say Nasdaq going to 18.5k) and if I feel like being more aggressive. So its a sliding scale:)

[ROIGuy]

Being only a couple years away from retiring, I usually look at how much our portfolio has gained (dollar wise) and if it about equals one year of living expenses I will exchange (in our 401k) the equity fund dollars to our bond fund. This usually equals about a 5% swing in our asset allocation.

[Peter Foley]

I update my portfolio holdings only a couple times a year. If they are outside the bands I rebalance. That seems often enough to satisfy my risk tolerance.

[NatureBoy]

My IPS says to rebalance twice a year, March and September, along with 5/20 bands. We'll see if I can stick to that, with retirement just 2 months away, I check the market every day.

[AlwaysLearningMore]

A balanced fund will rebalance with no input or action needed.

Indeed. We find that a very valuable feature of balanced funds.

[rkhusky]

I have smaller bands and rebalance more frequently than many, because I don’t like making big transactions. $30K has been my upper limit for rebalances, with the average between $15-$20K. I also like to keep my AA where I’ve set it. It takes a few minutes to calculate the rebalance and a few minutes to implement.

[nyejos11]

I’ve been lump sum investing into our Roths IRAs at the beginning of the year and then rebalancing accordingly. Then during the year adjusting the monthly additions to taxable account to help keep balance.

[livesoft]

I think all the data is all over the place and it really suggests that there are a lot things that probably don't work. As long as you are not selling low and buying high, then I think you will be OK. For instance, if you want equity/fixed income 60/40 asset allocation and notice that you are 50/50, please do not sell equities and buy fixed income. Or if you want 60/40 and notice that you are 75/25, then please do not sell fixed income and buy more equities.

So if you really "Would prefer a more hands off approach", then do that. May I suggest you simply re-post to this thread whenever you look and rebalance? Your posts might be instructive to readers. After all, if you don't look and are hands off, then you probably won't even care nor have any anxieties what the actual asset allocation of your portfolio is.

[kd2008]

At the start of my career I tried it annually. I hated it - maybe because I was not familiar with it. After that experience, I just chose go with Vanguard target retirement fund as it became available in the plan for me then.

I haven't looked back since. Less stress, more staying the course.

[celia]

Why are you focusing only on retirement accounts? You should be looking at your entire portfolio including accounts at multiple custodians (if that applies). And you don't have to do it often. But big changes in the stock market (up or down) are a sign you might want to log in and rebalance. If the markets aren't moving much, once a year is enough.

Rebalancing can be as simple as changing new contributions to whatever asset is under-funded.

[RetiredAL]

I am retired and in RMD withdrawal mode from my IRAs for spending money.The automatic withdrawals are always from the fixed income Money Markets. I re-balance 2x a year to maintain the desired IRA Asset Allocations.

In taxable, I use bands to determine if re-balancing is necessary.

[Bama12]

never

[Garco]

I rarely rebalance. I don't follow any formula of time or balance. I can't recall when I last did something I regarded as a rebalance. But I keep track of outliers on positive and negative side. I have generally let positive momentum ride without my interference. That has led to my having a sort of "winners" group; but I may intervene on "losers" on occasion, including possibly displacing a particular holding but not necessarily "rebalancing" my overall port.

[BirdFood]

I have seen William Bernstein state that rebalancing every few years is the safest route.

But if you wait a few years, what if your portfolio moves so drastically that it no longer matches your risk tolerance?

I know many here do rebalancing “bands.” But I do not like watching the accounts that often. Too manual. Would prefer a more hands off approach.

Well, bands don’t necessarily have to be checked often. You could check once or twice a year, and only rebalance if you’re out of the band.

[TheGreyingDuke]

never

+1

[BackToSchoolDad]

Are you in accumulation or retirement? I'm in accumulation and if one thing looks out of wack, I just contribute more, but most of our investments are in target date funds or VT.

If in retirement, just withdraw from what's gotten too high.

[Kbg]

I did some backtesting on annual rebalancing. It was interesting.

1 Nov, 1 Jan, 1 Apr were consistently the best months. Accordingly, I just stayed with end of year. Nov and Apr were intuitive if you know a little market history. The other thing was some of the other months were sometimes a significant CAGR hit.

But it's backtesting, so grain of salt.

As noted...taxes are a key component.

[bynomial]

I did some backtesting on annual rebalancing. It was interesting.

1 Nov, 1 Jan, 1 Apr were consistently the best months.

Interesting. April fool's day

[jdibber]

Feb 29th

nice article
https://www.kitces.com/blog/how-rebalan ... nt-anyway/

[123]

We direct new contributions/funding toward portfolio areas that need to be strengthened. Similarly if we need to raise cash or adjust holdings we
do it with the aim of moving toward our desired asset allocation.

We don't generate taxable events solely for the purpose of rebalancing.