@iglooo, my target is 50/50, but 10 years ago I was more like 60/40 (tbh, I didn’t track it that carefully back then, live and learn). I’m slowly ambling to 50/50, no particular rush :). I’m not a market timer, but if I have some money to invest, I like to buy whatever has had a bad few days – I enjoy a sale 
We are 55/39/6, slowly ambling toward 50/50, as well. We are not active at all, rather, we know we will have expenditures (bought a second home), and have some inflows (selling our first home in a few years), and decide how allocate both our retirement balance at a point in time with our inflows and outflows that will occur in the short term. We have a Vanguard financial plan once a year, and we did move some 401K money from stocks to bonds this past December, but the Vanguard plan is more a “point in time” look. I try to have a more holistic point of view of our allocation.
@iglooo, I just remembered that I also had purchased a bunch of TIPS (bonds, not the fund) years ago, back when hardly anyone had heard of them and when they paid much better than they do today. Unfortunately, they’ve all matured. So, even my bonds were making money If I knew then what I know now …
Do you keep tips in your taxable account?
@iglooo, I know you’re not supposed to have TIPS in your taxable accounts, but at the time I did, in part out of ignorance, and in part because I willfully decline to pay too much attention to taxes unless there’s a compelling reason. You can only buy them directly from Treasury Direct which you can’t use for anything but taxable. I no longer use the bonds themselves, but if I did, I’d buy them on the secondary market in a tax-deferred account. It’s just easier to buy Vanguard TIPS fund in any case.
ETA: since I expect that our marginal tax bracket will be roughly the same in retirement as now, it means I favor Roth, but not so much 401k. You could argue that capital gains in a 401k is worse than in taxable, since it will be treated as income when distributed.
^I agree about 401K except it is still better to have 401K than not, isn’t it? The limit to 401k contribution is much higher than to roth contribution. As annoying as it is, we still contribute to 401k.
General question; How often do you balance your portfolio? I am new to this and a bit at a loss. Do you balance it at a set time, like the first of January and all at once?
It’s better to have a 401k than not, although what to place in the 401k versus taxable is an ongoing debate over at Bogleheads. When bond yields were higher, it was a no-brainer. A bit less obvious now. If your marginal rate after retirement will be no higher than current LTCG (long term capital gains) rate, also a no-brainer.
There are people at Bogleheads who calculate this stuff to 4 decimal places. Me, I’m a bit more like a blindfolded guy trying to pin the tail on the donkey after getting really dizzy.
My “strategy” is to save the max in Roth IRA (via mega backdoor Roth, which we have recently been provided the opportunity for up to $53k/year) in 2015. In 2016, it appears that our best choice will be 401k plus backdoor Roth. Once DW finally retires, we will have taxable, Roth IRA and Roth 401k, traditional IRA, and traditional 401k assets, so we will have some flexibility in how we draw down the accounts.
@iglooo, I forgot the rebalancing question. I know people who rebalance annually, on their birthday. Other people rebalance only with new money in taxable accounts, but rebalance monthly in tax advantaged accounts.
I very seldom rebalance in taxable accounts unless I have new money to add, or am taking money out. I pick where to add/subtract money, but I won’t incur a tax just to rebalance.
In tax deferred accounts, I will periodically rebalance if things are way out of whack.
Keeping an eye on your asset allocation is important, but rebalancing is, IMO, of moderate value. It is of utmost importance, though, to stay the course and not do a “reverse rebalance” by moving out of a depressed asset and into a high priced one. It’s not a loss until you sell. Do not sell low and buy high – many people do, and the difference between that and my stubborn refusal to do so around 2008 was a 7-digit difference in outcome, which was a pretty nice “income” for a stay-at-home-Dad.
Doesn’t asset allocation and rebalancing go hand in hand? I can’t maintain the asset allocation without rebalancing. Last summer I bit the bullet and rebalanced. It is out of balance again.
For me, keeping bonds in tax advantaged accounts is right. Interest income is taxed every year while capital gains only when you trade.
^^ yes, they do go hand in hand, but you can glide to where you belong or sell and buy. My aa was more out of whack until equities were kind enough to make things better :). I usually glide unless it is more than 5% out of line.
And, capital gains are taxed (currently) at advantaged rates, most people’s LTCG are taxed at 15%.
^That, too.
Have read recommendations that rebalancing never occur more than once/year and on taxable, try to mostly rebalance using new money and dividends so you don’t have to pay capital gains taxes. We have not rebalanced and still are heavily over-weighted in cash. We are slowly moving money into index funds without a financial advisor.
Do you have that much new money coming in? Dividends are about 2%. Rebalancing takes about 5% for me.
Many have a “range” within which no rebalancing is necessary. When rebalancing, consider potential tax consequences. You can always rebalance the tax deferred funds if things get too lopsided. There are some who advocate having your preferred asset allocation in EACH ACCOUNT while others recommend having across all your accounts. It really depends on what the individual is comfortable with and how much is available for rebalancing, as well as the tax bracket the individual is in.
@iglooo, my wife’s income has grown enough over the past 5-10 years that it is a lot relative to our assets. I guess that’s good news and bad news That’s another reason I didn’t like the “8x salary to retire” heuristic; my wife would never retire
I provide the following link with good intentions. Bogleheads.org usually does a good job of presenting topics clearly. The descriptions of optimal investment location for tax purposes is probably clear to others, but I walk away and decide that my portfolio is “close enough for government work.”
Enjoy: http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement
Ixnaybob, will you point me in the direction of information about the back door roth iras? I’m going to need to make some new investment decisions soon, and maybe I should be considering that option. Thanks
@1214mom, sure. First, if your AGI allows normal Roth, don’t do a backdoor. Second, if you’ve got a large traditional IRA (ie, one whose contributions reduced your taxes, abbreviated tIRA), it’s probably more trouble than it’s worth – that’s the cautionary note in the link below.
http://www.bogleheads.org/wiki/Backdoor_Roth_IRA describes it better than I could. Happy to help if you get lost.
ETA: vanguard has a quick intro: http://www.vanguard.com/pdf/ISGIRA9.pdf
Thanks for the link. Sounds like it may not be right for us, but I will read more.
@1214mom, I forgot to mention, there are times when an existing tIRA can be rolled into a current employer’s 401k, which gets around that limitation.