Easyallocator.com

[rokid]

Some Vanguard DieHards recommended this site. It's free and very easy to use. It provides allocation advice based on your risk tolerance, annual contributions, and years to retirement. Not a 1-1 correspondence with the TSP funds, but close enough. Finally, it provides an estimate of your final account value and an estimate of your worst one year return.

http://easyallocator.com/calculator.aspx

 

[Mike]

Why does it consistently recommend that I use my Roth IRA to fund bond investments rather than the tax deferred account?

Wouldn't it make sense to invest in the funds that produce the highest returns (stock funds) with the Roth? Or is the allocator recommending this due to the volatility of those funds and its impact on a smaller account?

 

[rokid]

I have no idea.

I don't have a Roth so I didn't notice that "feature". However, when I put a small amount in for the Roth,e.g. $30K, the AssetAllocator recommends all of it be in TIPs. I'm guessing that TIPS have some weird tax consequence. However, as you increase the Roth amount, e.g. $1M for Roth and $25K for the 401K, other asset classes start appearing in the Roth.

Why don't you send the AssetAllocator's creator some feedback and share his response with us?

 

[Mike]

I sent them an email. I also asked about why they recommended multiple mutual funds / ETF's (which means more transaction fees to buy/sell all these things) when similar allocations could be accomplished through target retirement funds / balanced funds such as Vanguard's 2040 fund or their Star fund among others.

It should be interesting to see what is said about these.

 

[Mike]

He finally got back to me. Here's the email, verbatim - the second part deals with the question I asked him about dealing with so many specific funds / ETFs rather than just investing in a target retirement fund or balanced fund to obtain the diversification:

I've released an new EA version that does favor the TIRA first for bonds, and tax adjusts your AA. It actually doesn't matter whether you put bonds in the Roth or TIRA as long as you tax adjust, but people were confused, so I changed it.

Diversified funds can give you a "B" portfolio, and they're fine, especially if you only have IRAs. Easy Allocator is supposed to give an "A" portfolio- tax optimized, tailored to your risk tolerance, not tied to one fund family, etc.

Nick

 

[rokid]

I've released an new EA version that does favor the TIRA first for bonds, and tax adjusts your AA. It actually doesn't matter whether you put bonds in the Roth or TIRA as long as you tax adjust, but people were confused, so I changed it.

What does he mean by "tax adjust". I'm confused!:cheesy: