[USER]

Hello all. We finally moved everything to Fidelity and away from the financial advisor we had for 10 years.

He had all of our investments and IRAs in single stocks. (Oye vey) We are trying to unwind all of this mess and shift to just index funds.

We have started buying FXAIX but should we consider other index funds. About 700k in Roths and IRAs. With about $600k in regular.

How much should we keep in cash within each fund? 10%?

We will most likely delay SS until FRA. I’m 54 and husband is 60.

What should our allocation be? We have read Simple Path to Wealth and realize the road will be bumpy with all index funds.

Should some be in bonds? Are we too young for that?

Thank you for your input! We are very happy to be saving the 1% fee but need more education on how to handle our own finances.

We have read a few John Bogel books.

[Mark]

Don’t keep cash in ur ira. Going all In on fxaix sounds like a solid plan in my book.

If it makes u feel good go 10% bonds.

But no need for complexity.

[Joel]

You asked, 𝑯𝒐𝒘 𝒎𝒖𝒄𝒉 𝒔𝒉𝒐𝒖𝒍𝒅 𝒘𝒆 𝒌𝒆𝒆𝒑 𝒊𝒏 𝒄𝒂𝒔𝒉 𝒘𝒊𝒕𝒉𝒊𝒏 𝒆𝒂𝒄𝒉 𝒇𝒖𝒏𝒅? 10%?
You don’t control the amount of cash held in a fund. And index funds generally keep little to none.

How much cash you hold in your own accounts depends on several factors.

But mainly you should hold cash or cash equivalents as an emergency fund or as part of the fixed income component of your asset allocation.

Whether you actually need a fixed income component is debatable and it depends on where you are in your FIRE journey and what your (proposed) withdrawal rate is going to be.

As for where you keep cash, most fixed income should probably go in a Traditional (Pre-tax) account. Failing that, in a Roth account.

Failing that, in a taxable account. That’s based on how the government taxes interest income earned in the various accounts.

I also keep some cash in my taxable accounts. That’s mainly just so I don’t have to do “churn” my account every time I get a dividend or need cash for an expense.

If you are still accumulating, you might want to do dividend reinvesting. Otherwise it becomes a bit of a hassle when you start drawing down your portfolio.

Also, 𝑾𝒆 𝒘𝒊𝒍𝒍 𝒎𝒐𝒔𝒕 𝒍𝒊𝒌𝒆𝒍𝒚 𝒅𝒆𝒍𝒂𝒚 𝑺𝑺 𝒖𝒏𝒕𝒊𝒍 𝑭𝑹𝑨. 𝑰’𝒎 54 𝒂𝒏𝒅 𝒉𝒖𝒔𝒃𝒂𝒏𝒅 𝒊𝒔 60. 𝑾𝒉𝒂𝒕 𝒔𝒉𝒐𝒖𝒍𝒅 𝒐𝒖𝒓 𝒂𝒍𝒍𝒐𝒄𝒂𝒕𝒊𝒐𝒏 𝒃𝒆? … 𝑺𝒉𝒐𝒖𝒍𝒅 𝒔𝒐𝒎𝒆 𝒃𝒆 𝒊𝒏 𝒃𝒐𝒏𝒅𝒔? 𝑨𝒓𝒆 𝒘𝒆 𝒕𝒐𝒐 𝒚𝒐𝒖𝒏𝒈 𝒇𝒐𝒓 𝒕𝒉𝒂𝒕?
That is partly a matter of preference.

If you are sticking to a Simple Path to Wealth approach, you should be accumulating bonds (or other fixed income assets) about now.

Collins would say add bonds to smooth the ride as you get close to retirement.

To replicate the results of something like the Trinity Study, you would want a stock/bond portfolio that was anywhere from 50/50 to 75/25 stocks/bonds.

A 60/40 portfolio is a pretty typical compromise for retirees. Given that one of you is younger, you might want to lean toward the 75/25 allocation since your portfolio needs to outlive both of you.

However, this topic can get quite complex and somewhat esoteric, especially if you are looking to beat the typical initial 4% safe withdrawal rate by mixing in other asset classes.

Search for “risk parity portfolio” for discussions on this topic.

[Ernest]

I had a very similar situation in which my FA had our assets in about 50 individual stocks and or various mutual funds, some with high fees on top of the AUM.

One thing regarding cash, as everyone has said, it is my necessary to have any cash in a IRA; however, you may be used to seeing that.

What I found out is that the FA was required to keep approximately 2% individual cash at any given time.

Untangling everything can be a bit overwhelming especially for those of us that are closer to retirement.

One thing you may want to consider(and I did this year) is hiring someone to give you some advice about your investment portfolio, especially if you think you may retire in the next few years.

You can hire a flat fee CFP for a fraction of the cost you were paying at your investment level.

They will give you solid investment advice that you can execute in fidelity on your own.

[Christopher]

Generally don’t hold cash in tax shelters. In taxable accounts, hold as much cash as you expect to need during a worst-case job loss + personal disaster (3-6 months of expenses, maybe as little as 1 month, maybe as much as 12 depending on circumstances).

Starting to buy some bonds may be prudent for your timeline, but again it depends on your situation – if SS will cover most of your expenses, you don’t really need much extra fixed-income stuff.

If you’re far above your FI number, you can get away with holding more “safe” stuff, but if you’re just barely there, you’ll want to be more careful about your overall allocation (that’s a pretty broad topic overall).

[Ron]

When are you all planning to retire? That typically is the most important factor in setting allocation.

[Author]

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