memoryleokk wrote: Sun Feb 02, 2025 11:18 am
Given that this 401(k) represents less than 5% of our portfolio, my conclusion is to stay the course and reevaluate when the account hits some threshold (e.g., 10% of our portfolio). Anything I'm missing in this chain of reasoning?
I would not stay the course on a moderately-high cost TDF when it's only 5% of your total portfolio; you should likely dump the entire balance into a single
low-cost pure stock fund (either US or int'l but not a split). I entirely agree with @retiredjg that splitting up one account that's only 5% of total is lots of work for no reward. You should assess
all accounts as a whole portfolio and then try to minimize the number of funds across accounts rather than mirroring your asset allocation in each account (as that tends to lead to tiny slices with duplication which is clutter, not diversification).
As an example of a
Current portfolio balance of $1M split among 80/20 with 40% of stocks in int'l (much like a far-off TDF or Van's LifeStrategy Growth) that has a "New Trad 401k" that is only 5% of the total ($50K). The AA is
Mirrored in every account, which can lead to bonds in Taxable and Roth (which is contrary to
Tax-Efficient Fund Placement) as well as holding "substantially identical" funds (in IRS lingo) in Taxable and IRAs opens you up to issues with
Wash Sales. Plus there's the clutter of splitting up the New 401k into three components when it's so tiny to begin with leading to a 12 holdings (more than necessary).
Contrast that with a holistic rebalance across
all accounts in the
Proposed portfolio which eliminates the wash sale and tax-inefficiencies as well as the clutter reducing holdings from 12 down to 6 (half as many funds to still meets the AA; fewer is better).
"Simplicity is the master key to financial success." -- John C. Bogle
A template spreadsheet to help with asset allocation assessment and rebalance planning is linked below. Make a copy in your local GoogleSheets space to edit (or download to your local machine if you have Excel).
Asset Allocation Sheet
AA Current and Proposed
Don't do what Bogleheads tell you. Listen to what we say, consider other sources, and make your own decisions, since you have to live with the risks & rewards (not us or anyone else).