Based on your agreement above, you are looking for a 50:25:25 split between US/ex-US/fixed income.
I would rather split it this way instead.
$23k max for 401k
$7k max for Roth IRA
$10k max for purchases of I-bonds
The Roth IRA I would hold only FSKAX. One single fund, no need to mirror your asset allocation in every account. Or FZROX, if you are certain you will never need to leave Fidelity (Zero funds are not portable to other brokerages).
Within the 401(k), I would split between Fidelity 500 Index fund and Fidelity Global Ex-US Index fund: $13k for US equities and $10k for ex-US equities
So now you will have $13k + $7k for US equities ($20k), $10k for ex-US equities, $10k for fixed income.
20:10:10, or 50:25:25.
There are two main reasons why I suggest following this approach.
1) I-bonds are guaranteed to never ever lose value, by the full faith of the US government. They are also yielding not-too-bad 5.2% if you buy them before April 30th right now. Unlike FXNAX, which lost 13% in 2022. No guarantees that such a scenario will not happen again between now and the next 30 years (at the end of which these I-bonds will mature, and until then you do not need to pay taxes on the growth)
Edit: The current yield from I-bonds at 5.2% is substantially better than 4.5% yield from FXNAX. Currently. Of course, if the rates fall, the yield from FXNAX also will fall as with the I-bonds. Meaning, I am expecting the yield from I-bonds to be pretty consistent with the yield from FXNAX, if not outright better.
2) Your 401k will be down to just two funds instead of 3, rebalancing will be / should be that much easier.
I would rather split it this way instead.
$23k max for 401k
$7k max for Roth IRA
$10k max for purchases of I-bonds
The Roth IRA I would hold only FSKAX. One single fund, no need to mirror your asset allocation in every account. Or FZROX, if you are certain you will never need to leave Fidelity (Zero funds are not portable to other brokerages).
Within the 401(k), I would split between Fidelity 500 Index fund and Fidelity Global Ex-US Index fund: $13k for US equities and $10k for ex-US equities
So now you will have $13k + $7k for US equities ($20k), $10k for ex-US equities, $10k for fixed income.
20:10:10, or 50:25:25.
There are two main reasons why I suggest following this approach.
1) I-bonds are guaranteed to never ever lose value, by the full faith of the US government. They are also yielding not-too-bad 5.2% if you buy them before April 30th right now. Unlike FXNAX, which lost 13% in 2022. No guarantees that such a scenario will not happen again between now and the next 30 years (at the end of which these I-bonds will mature, and until then you do not need to pay taxes on the growth)
Edit: The current yield from I-bonds at 5.2% is substantially better than 4.5% yield from FXNAX. Currently. Of course, if the rates fall, the yield from FXNAX also will fall as with the I-bonds. Meaning, I am expecting the yield from I-bonds to be pretty consistent with the yield from FXNAX, if not outright better.
2) Your 401k will be down to just two funds instead of 3, rebalancing will be / should be that much easier.
Statistics: Posted by lakpr — Wed Mar 27, 2024 11:43 am — Replies 10 — Views 698