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target date funds always confused me, b/c they don't account for the rest of my portfolio. My IRA/401(k) actually has close to 100% cash/bonds to minimize annu
by itake 2mo ago
target date funds always confused me, b/c they don't account for the rest of my portfolio.
My IRA/401(k) actually has close to 100% cash/bonds to minimize annual taxable impact and the rest of my portfolio is equities.
- khuey 2mo agoMany people don't have a "rest of their portfolio".
- eudamoniac 2mo agoThere is no annual taxable impact in a 401k nor IRA
- itake 2mo agoexactly, which is why your 401k/IRA include your bond allocations and your taxable account house your equities. Assuming a portfolio with $100k in 401k and $100k in taxable and targeting 80/20 stock/bonds, your 401k should be 60/40k and taxable should be 100/0. Target date funds would have 80/20 in both 401k and taxable accounts. Target date funds assume your 401k is your only retirement savings vehicle.
- eudamoniac 2mo agoI understand why you'd say bonds in tax-advantaged accounts and equities outside, but I don't know why you would put cash in the former. Unless by cash you mean money market funds or similar. But even still, qualified equity dividends are yielding more these days than bond interest to the extent that the total tax is usually higher, so you might still prefer to reverse what you said.
- itake 2mo agoMy equities are highly concentrated in tech (which tends to either not pay dividends or prefers stock buy backs). The rest of my equities is VTI (~1% dividend) and VXUS (~2.3% dividends). When I say cash, I meant value stored in money market and $SGOV. I'm actually experimenting with using my 401k/ira to invest in private equity (VC) funds, so I am holding cash (money market and $SGOV) in those accounts to ensure I have the capital for capital calls.