What are you invested in? Target date funds, ETFs, individual stocks? Do you think of your portfolio as aggressive, neutral, or conservative?
It occured to me the other day in a discussion about lifestyle creep that a lot of discussions about retirement assume you earn at the 10- or 20-year historical average returns of the S&P500, but it would be very unusual to be 100% in the S&P500 for your entire working life. So, the effect of small changes in cash infusions (i.e. splurging on large but infrequent purchases) is lessened when you consider that most people will be invested more conservatively and real returns will be lower.
So what do you have setup?
Currently about 70% of my retirement account value is in a 401k, which is 100% in FFLDX, a Fidelity target retirement 2055 fund. I'm not as pleased with the returns on this. It says I'm up 11% 1Y but I frankly don't believe it because it's worth barely more than the cash that's been put in to it in that time. Our fund picks for our 401k are kind of crap. The other 30% account value is in a Roth IRA, which I have distributed as:
55% FXAIX (FID S&P 500 ETF)
20% FSPSX (FID international ETF)
15% FSMAX (FID domestic whole market ETF)
10% FXNAX (FID bond ETF)
I would consider this overall rather neutral, maybe even conservative considering my age (31). What do you think?
This is correct. S&P 500 and whole market funds are nearly identical. I'd choose the lower cost fund, and throw in a small allocation to small cap value, but that's just me.
I'm pushing 60, so I've collected accounts at Vanguard, Fidelity, Schwab and a couple credit unions. I've got too many individual funds and ETFs to list, but my allocation is:
45% domestic stocks
25% international stocks
25% US bonds
5% short term/cash
My stocks are nearly all index with a slight small-value tilt.
I think your math is assuming FFLDX is 100% domestic stock, but according to the Fidelity research page it's ~55% domestic stock, ~35% foreign stock, ~10% bonds so it actually very closely mirrors my Roth distribution (totally accidentally however... I actually hadn't looked at it before today, I just knew the returns were only about half of the S&P500 over any given period of time).
I think your math is assuming FFLDX is 100% domestic stock, but according to the Fidelity research page it's ~55% domestic stock, ~35% foreign stock, ~10% bonds so it actually very closely mirrors my Roth distribution (totally accidentally however... I actually hadn't looked at it before today, I just knew the returns were only about half of the S&P500 over any given period of time).
My only bonds are in my efund, which makes my portfolio quite aggressive.
So mine looks pretty similar to yours, but I have a little more international and no bonds. I'm guessing our portfolios perform similarly.
Edit: tax strategy
My after tax accounts are in international funds for the foreign tax credit, my Roth accounts are in US stocks (highest expected growth), and my pre-tax accounts fill in the gaps.
I don't make enough to max 401k + Roth but if I ever get there I'll have to remember the foreign vs. domestic note. From reading this thread I think I definitely need to phase out contributing to bonds for a while.
Bonds should reflect your risk tolerance and time horizon to retirement. The closer you are to retirement or the more nervous you'd get if the market has a significant downturn (say, >30% losses in a single year), the more bonds you should have.