Multiple Retirement Account Strategies...

[ChemEng]

Are there any strategies for how to balance a retirement portfolio that includes different types of retirement account with different taxation rules? I am trying to figure out is some strategy for how to work my accounts to maximize these differences.

For instance, my Roth has tax free withdrawals for contributions and growth in retirement. That would lead me to think that it would not be advantageous to use it to invest in tax advantaged funds as that would defeat the tax free benefit of the Roth.

I think that the primary consideration should be how I invest my Roth simply because it has soooooo many more options to invest with (including options). But then there is the secondary effect of where to park my TSP based on my Roth allocation.

Are there any other resources that talk about this online? How does everyone else work this issue?

Thanks in advance!

 

[Spaf]

I can't speak for all, but here is what I did.

I found out that it's best to manage your own funds. Mutual companies had their own interest as 1st priority. So.....

I visited my CPA and she set me on a retirement path!

1st all tax deferred contributions went to TSP.

2nd all tax paid contributions went to a reputable internet broker, who had funds that mirrowed TSP. You can get about the same thing as mutuals, but you control it. And, You don't get a nasty letter from the company saying that you are moving too many funds.

3rd an emergency fund was created between 2 banks, of which the minimum balance is 10K (total). My funds were hit by the SOB that destroyed the Federal building in Oklahoma City (please excuse the wording).

What needs to be done is an upfront personal analysis of what you want to do in retirement. Where do you want to live? What do you like doing? I just bought a golf cart! Do I play golf>>>>No!,....but it's a great way to get around the neighborhood, my dog loves it, and it makes a super margarita holder.

Medical analysis is another thing. This is a biggie! Things can go down hill real fast! Been there, done that.

Have a good one!
Spaf

Are there any strategies for how to balance a retirement portfolio that includes different types of retirement account with different taxation rules? I am trying to figure out is some strategy for how to work my accounts to maximize these differences.

For instance, my Roth has tax free withdrawals for contributions and growth in retirement. That would lead me to think that it would not be advantageous to use it to invest in tax advantaged funds as that would defeat the tax free benefit of the Roth.

I think that the primary consideration should be how I invest my Roth simply because it has soooooo many more options to invest with (including options). But then there is the secondary effect of where to park my TSP based on my Roth allocation.

Are there any other resources that talk about this online? How does everyone else work this issue?

Thanks in advance!

 

[ChemEng]

What needs to be done is an upfront personal analysis of what you want to do in retirement.

Thanks for the advice Spaf. I think you hit the nail on the head. I have no idea what I want to do with retirement. Its still 30 years out for me. (Im almost at the 29 year out mark though.)

If I were to answer the question now though it would be "to do what I want to do when I retire." Hows that for an answer?

What I am trying to do is use the versatility of the Roth to cover some of the holes in the TSP. I can use it to invest in DRIPs, options, CD, bonds, et al. But maybe thats the wrong way to think about it.

Oh well Ive got 30 more years to figure it out and plenty of new topics to talk about on my blog as I figure things out.

 

[ChemEng]

I found an interesting article on the topic here:

http://www.efficientfrontier.com/ef/704/where.htm

Good read that talks about the issue to some depth.

 

[Frixxxx]

I found an interesting article on the topic here:

http://www.efficientfrontier.com/ef/704/where.htm

Good read that talks about the issue to some depth.

You're right, nice read, but why can't a formula for EXACTLY aligning asset classes be formulated?

X+Y≈ Z

X= taxed investments
Y= taxed-deferred
Z= an approximation of what the total will be worth.

Then the same formula can be applied AFTER you retire for maintaining least taxable rate. For my example I have assets across the classes that allow me to enjoy tax deferments and others that are taxable. When I plan for a retirement where should my money be getting to retirement and then move it (with least penalties) to least "taxable attractable" (I just made that up). It doesn't have to be exact, but

 

[ChemEng]

You're right, nice read, but why can't a formula for EXACTLY aligning asset classes be formulated?

X+Y≈ Z

X= taxed investments
Y= taxed-deferred
Z= an approximation of what the total will be worth.

I would think that it could theoretically--especially before you retire. All it would take is an estimate of your taxable %age. Given the strength of your estimate, it may or may not be worth much.

But it gets much more involved once you hit retirement. Then you got to consider the allocation after each distribution to compensate for both the withdrawal and the market moves in addition to the taxable %age to keep it balanced. Thats a good bit of effort that would be required after every withdrawal.

 

[Spaf]

Wow!.....30 years

30 years ago!
Did we have personal computers's then?
Al Gore hadn't invented the internet.
The stock market was found in the news paper.
What were you guys doing in 1977..........

Thanks for the advice Spaf. I think you hit the nail on the head. I have no idea what I want to do with retirement. Its still 30 years out for me. (Im almost at the 29 year out mark though.)

 

[Frixxxx]

Wow!.....
What were you guys doing in 1977..........

Mrs. Hayes class, 3rd grade. She was nice, taught me a lot about math. Had a crush on a blonde girl who went on to be Valedictorian in High School. Memories,,,,gotta love 'em!

 

[ChemEng]

What were you guys doing in 1977..........

I was still a twinkle in my parents eyes in 77.

Theres a lot to learn still though! The TSP makes everything easy, the function is put stuff in, move it around if you want, simmer it for awhile and it easily maps to profit!

Once you get outside of the walled TSP garden, its gets much more complex. Not that any part of it is particularly difficult to understand in theory, but the number of options that are available is astronomical!

Oh well. Got plenty of time to figure it all out I suppose.

 

[James48843]

CHemeng:

If you are a USAA member, you can get a free finanical planning session that takes into account what you have, and offers to give you dieas on what options you have. If you want a detailed planning session, USAA can do it, but they charge some for that. It's worth talking to them for at least the free session to get an idea of where you stand, what your family situaiton is, and what you should be doing. They are not high pressure sales people and I learned quite a bit from them.

Anyone in uniform can become a member.

http://www.usaa.com

personally, I have my on-line banking, my home and auto insurance, and did a home loan and an auto loan from them. I learned about them back when I was active duty in the ealry 80's, when you had to be an officer to get their stuff. Now they are open to enlisted also. They do on-line trading, but I have my stock accounts elsewhere.

Just one idea to think about.

 

[ChemEng]

Ive never worn the green suit, so USAA doesnt apply. Although I hear the recommendation all the time. It may be worth giving them a paid visit though.

 

[Birchtree]

In 1977 I believe I was riding my first October massacre. That was only the first of three in the following three years. Talk about deep dark wells.