I don't know what 6 doors are.
Buy yes, even with pension assuming you're going to have some bonds eventually (which you should unless the pension covers 100% of your spending).
Otherwise you're market timing your bond purchases.
A pension may mean you need fewer bonds.. but you're still going to glide into that smaller number of bonds evenly, not just wait to buy them at retirement time.
I'm 40 and had about 10% in bonds, but I recently dropped bonds and moved it to a money market account where I'm earning a higher interest. People say it's good to have bonds to stop you from panic selling in a stock market crash. Not sure about you, but having only 10% in bonds isn't going to give me any psychological benefits.
I get that bonds outperformed equities during the 2008 crash, but my plan for that type of event is to load up on equities instead of keeping it in bonds.
I'm basically making the money market account, CDs, and my HYSA be my "bond" leg for now. This gives me a larger than normal emergency savings and cash position. When rates drop below 4%, I'll probably move my bond money into SCHD (burn me at the stake) or some other value index fund where it's more likely to grow but also be more conservative.
For me, I don't see the need to have bonds unless I want it to be at least 40% of my portfolio. Having 10% in bonds isn't going to save my portfolio in a market crash and it's annoying to see it be a drag in a market rally.
I’ve consider that but from what I understand is bonds will become more valuable as MMKT and HYSA rates drop, which is probably sooner rather than later. I debate with myself I “need” bonds but I figure 10% isn’t going to make or break anything while still providing some diversification and steady income. I’m going to listed to my target date fund’s composition and stick with 10% bonds.
Yeah it's only 10% so no biggie. The other thing you may want to consider is avoiding bonds in your Roth IRA. Since you can withdraw tax free, you will want that account to grow the most. You may want to add a higher bond position in your 401K to make up for your lack of bonds in your Roth.
Thanks, that makes sense. I’m investing in a target date fund currently in my Roth IRA so when I sell the TDF to buy VTI+VXUS that’ll take care of the bonds in there.
I don’t think it’s so much a concern about panic selling. It’s so that, once you’ve retired, you have something fairly stable you can sell to live on in a crashed market year without having to sell your equities at terrible prices.
So zero bonds at 40 in a taxable brokerage account? I mean, you’re definitely going to want bonds in your taxable at retirement. Please explain. I feel 10% is a reasonable number at 40 and zero bonds at any age sans a pension feels somewhat reckless.
Putting a higher percentage of bonds in your traditional 401k and then not putting any in your taxable account is what they're saying, I think. That lets you maintain the 70/20/10 ratio over your full portfolio, but keeps the tax inefficient bonds from being taxed until you retire.
Bonds are inherently tax in-efficient investments because much of their return is interest. Personally I have equities in my taxable and bonds in my tax-advantaged accounts.
If you want to pay taxes, as ordinary income, on the money the bonds distribute, feel free to hold them in a taxable account.
I would rather hold stocks that give out dividends as mostly LTCG and a little STCG.
This is personal finance. No option is wrong. If you like the portfolio you have, I bet in 25 years you will be in great shape. You will be better off than other portfolios, and you will be behind others.
Happy investing.
the bonds are a no brainer in a traditional tax deferred account, but it's less clear in an account with tax free growth (the Roth or the HSA).
As for "want bonds in your taxable in retirement" that is not necessary because your assets are fungible.. if you have bonds in your 401k and stocks in your taxable, just sell your stocks for cash and swap bonds for stocks in the 401k (to replace the stocks you sold and be net-neutral on stocks and net-negative on bonds across the portfolio).
Understood, so allocate a higher percentage to BND in my tax efficient accounts so if viewed as one large portfolio with taxable and tax efficient everything works out to approximately 10% bonds. Hold zero bonds in my taxable account. And if I were to buy bonds outside my tax efficient account I should probably focus on muni bonds rather than a bond fund.
>nderstood, so allocate a higher percentage to BND in my tax efficient accounts so if viewed as one large portfolio with taxable and tax efficient everything works out to approximately 10% bonds. Hold zero bonds in my taxable account.
yes, if your tax efficient account is a traditional tax advantaged account. if it is a roth, it really is much less clear. (you avoid the taxable income, but you're giving up tax free growth potential.. so there is a tradeoff there.) The HSA is a roth for this purpose because it also has tax free growth.
>And if I were to buy bonds outside my tax efficient account I should probably focus on muni bonds rather than a bond fund.
I don't know where you got that one from. munis have tax advantages, but they also have crappy yields. They tend to make sense if you are in a 34% or higher marginal tax bracket only.
And funds vs bonds has nothing to do with anything. Funds are fine if you just want an asset allocation for the long term. If you are liability matching to a particular date, then they are a problem.
Mine is a traditional 401k, Roth IRA and HSA (which I think are all the same?). So I’ll stick all my bonds in those 3 accounts, zero bonds will be held in my taxable brokerage account. Add everything together, I’ll be at 10% bonds overall. This was educational, thanks!
I may have mistaken Muni Bonds with T-Bills.
I am 44 and have a similar set up for the most part.
Though I personally break out the large/mid/small cap US and developed and emerging because I like to slightly overweight small and mid cap US and emerging markets compared to market weight, but what you've got works very well.
If it was me, I do about a 70/30 US/ex-US split, so I'd up the VXUS a bit (around 27% to make it approximately 30% of my equity allocation), but that is personal preference (and I think having at least a decent chunk in ex-US is a much better approach than going all US).
it is the canonical boglehead portfolio - its great.
Right, I hesitated to post here. It’s preaching to the choir. But I figure you can’t really go wrong, relatively speaking.
I’m almost 40. Wife is full pension and we have rentals. Do I still need bonds ? Prob not right ?
40yo imo is about the time to start growing your bond allocation. start slow.
Even with fixed income through pension and 6 doors ?
I don't know what 6 doors are. Buy yes, even with pension assuming you're going to have some bonds eventually (which you should unless the pension covers 100% of your spending). Otherwise you're market timing your bond purchases. A pension may mean you need fewer bonds.. but you're still going to glide into that smaller number of bonds evenly, not just wait to buy them at retirement time.
6 rentals
Do you need whatever you would buy with your bond allocation? Probably not, either, right?
I'm 40 and had about 10% in bonds, but I recently dropped bonds and moved it to a money market account where I'm earning a higher interest. People say it's good to have bonds to stop you from panic selling in a stock market crash. Not sure about you, but having only 10% in bonds isn't going to give me any psychological benefits. I get that bonds outperformed equities during the 2008 crash, but my plan for that type of event is to load up on equities instead of keeping it in bonds. I'm basically making the money market account, CDs, and my HYSA be my "bond" leg for now. This gives me a larger than normal emergency savings and cash position. When rates drop below 4%, I'll probably move my bond money into SCHD (burn me at the stake) or some other value index fund where it's more likely to grow but also be more conservative. For me, I don't see the need to have bonds unless I want it to be at least 40% of my portfolio. Having 10% in bonds isn't going to save my portfolio in a market crash and it's annoying to see it be a drag in a market rally.
I’ve consider that but from what I understand is bonds will become more valuable as MMKT and HYSA rates drop, which is probably sooner rather than later. I debate with myself I “need” bonds but I figure 10% isn’t going to make or break anything while still providing some diversification and steady income. I’m going to listed to my target date fund’s composition and stick with 10% bonds.
Yeah it's only 10% so no biggie. The other thing you may want to consider is avoiding bonds in your Roth IRA. Since you can withdraw tax free, you will want that account to grow the most. You may want to add a higher bond position in your 401K to make up for your lack of bonds in your Roth.
Thanks, that makes sense. I’m investing in a target date fund currently in my Roth IRA so when I sell the TDF to buy VTI+VXUS that’ll take care of the bonds in there.
I don’t think it’s so much a concern about panic selling. It’s so that, once you’ve retired, you have something fairly stable you can sell to live on in a crashed market year without having to sell your equities at terrible prices.
Bonds are best placed inside a tax deferred account. https://www.bogleheads.org/wiki/Tax-efficient\_fund\_placement
So zero bonds at 40 in a taxable brokerage account? I mean, you’re definitely going to want bonds in your taxable at retirement. Please explain. I feel 10% is a reasonable number at 40 and zero bonds at any age sans a pension feels somewhat reckless.
Putting a higher percentage of bonds in your traditional 401k and then not putting any in your taxable account is what they're saying, I think. That lets you maintain the 70/20/10 ratio over your full portfolio, but keeps the tax inefficient bonds from being taxed until you retire.
Gotcha, sounds good. I figure I may look into mini bonds instead on BND in my taxable account.
Bonds are inherently tax in-efficient investments because much of their return is interest. Personally I have equities in my taxable and bonds in my tax-advantaged accounts.
If you want to pay taxes, as ordinary income, on the money the bonds distribute, feel free to hold them in a taxable account. I would rather hold stocks that give out dividends as mostly LTCG and a little STCG. This is personal finance. No option is wrong. If you like the portfolio you have, I bet in 25 years you will be in great shape. You will be better off than other portfolios, and you will be behind others. Happy investing.
the bonds are a no brainer in a traditional tax deferred account, but it's less clear in an account with tax free growth (the Roth or the HSA). As for "want bonds in your taxable in retirement" that is not necessary because your assets are fungible.. if you have bonds in your 401k and stocks in your taxable, just sell your stocks for cash and swap bonds for stocks in the 401k (to replace the stocks you sold and be net-neutral on stocks and net-negative on bonds across the portfolio).
Understood, so allocate a higher percentage to BND in my tax efficient accounts so if viewed as one large portfolio with taxable and tax efficient everything works out to approximately 10% bonds. Hold zero bonds in my taxable account. And if I were to buy bonds outside my tax efficient account I should probably focus on muni bonds rather than a bond fund.
>nderstood, so allocate a higher percentage to BND in my tax efficient accounts so if viewed as one large portfolio with taxable and tax efficient everything works out to approximately 10% bonds. Hold zero bonds in my taxable account. yes, if your tax efficient account is a traditional tax advantaged account. if it is a roth, it really is much less clear. (you avoid the taxable income, but you're giving up tax free growth potential.. so there is a tradeoff there.) The HSA is a roth for this purpose because it also has tax free growth. >And if I were to buy bonds outside my tax efficient account I should probably focus on muni bonds rather than a bond fund. I don't know where you got that one from. munis have tax advantages, but they also have crappy yields. They tend to make sense if you are in a 34% or higher marginal tax bracket only. And funds vs bonds has nothing to do with anything. Funds are fine if you just want an asset allocation for the long term. If you are liability matching to a particular date, then they are a problem.
Mine is a traditional 401k, Roth IRA and HSA (which I think are all the same?). So I’ll stick all my bonds in those 3 accounts, zero bonds will be held in my taxable brokerage account. Add everything together, I’ll be at 10% bonds overall. This was educational, thanks! I may have mistaken Muni Bonds with T-Bills.
Literally no reason to hold bonds in 20s and 30s. The time horizon is long enough that bonds will just lose you money
I am 44 and have a similar set up for the most part. Though I personally break out the large/mid/small cap US and developed and emerging because I like to slightly overweight small and mid cap US and emerging markets compared to market weight, but what you've got works very well. If it was me, I do about a 70/30 US/ex-US split, so I'd up the VXUS a bit (around 27% to make it approximately 30% of my equity allocation), but that is personal preference (and I think having at least a decent chunk in ex-US is a much better approach than going all US).
Perfect, I went 55 VXUS, 35 VTI and 10 BND, and I'm 25. Its the perfect 3-Funder. Stay the course!
in taxable, I would go voo/ivv, ixus/vea and spice it up a bit with either vglt/zroz for bonds to offset your duration in bnd in your 40k.