Rebalancing of Retirement Accounts

[StormRichards]

How often do you rebalance? Do you have your accounts set up to do it automatically, or do you handle this manually?

When you have multiple asset classes spread across different retirement accounts, it isn't as simple as clicking a button to rebalance.

If you handle this manually, do you pick a specific time (quarterly, semi annually, etc) and proceed regardless of the current variances? Or do you only proceed if the variances are greater than a specific percentage?

[StormRichards]

Our current variance to our desired allocation

Large Cap +3.45%
Small Cap +0.60%
International +.32%
REITs -1.36%
Bonds -3.01%

Last rebalance was mid year 2016

[rennigade]

I guess it depends how much you want to re balance.

Ive always been under the impression that you should always be at an AA that you're comfortable with...so whenever it comes time to tweak your account and re balance...its simply a matter of adjusting how much you contribute to x fund.

For my 401k I decided to add more bonds. I didnt sell anything...I just upped my contribution amount for my bond fund.

Ive never sold any stocks to buy bonds...or vice versa.

[StormRichards]

Ive always been under the impression that you should always be at an AA that you're comfortable with...so whenever it comes time to tweak your account and re balance...its simply a matter of adjusting how much you contribute to x fund.

For my 401k I decided to add more bonds. I didn't sell anything...I just upped my contribution amount for my bond fund.

I think this is an easy solution when your balances are still relatively small. However, that 3% shortage in bonds is over $21k. Even if i direct 100% of our contributions to Bonds, it is going to take awhile to eliminate the shortage. Especially if the stock market continues to grow.

[StormRichards]

I think this is an easy solution when your balances are still relatively small. However, that 3% shortage in bonds is over $21k. Even if i direct 100% of our contributions to Bonds, it is going to take awhile to eliminate the shortage. Especially if the stock market continues to grow.

Actually, that $21k represents the current dollar variance that could be corrected with a shift from other asset groups. In order to correct it via contributions, it would require $28k and the other groups to remain constant.

It would take until October to contribute another $28k into our 401k accounts, and if the market remains strong it still won't achieve the goal.

The thing is, I am just not sure if 3% is enough to worry about.

[rennigade]

I think this is an easy solution when your balances are still relatively small. However, that 3% shortage in bonds is over $21k. Even if i direct 100% of our contributions to Bonds, it is going to take awhile to eliminate the shortage. Especially if the stock market continues to grow.

Thats a good point. Im not even sure how that works inside a 401k...if you can easily sell one fund to buy another...assuming the money never leaves the 401k? Im guessing thats the case since it seems a lot of people do this.

[StormRichards]

Thats a good point. Im not even sure how that works inside a 401k...if you can easily sell one fund to buy another...assuming the money never leaves the 401k? Im guessing thats the case since it seems a lot of people do this.

Yeah, the money wouldn't leave the 401k. It is a real simple process if you only have a 401k for retirement. Many plans allow you to do it automatically based on your preferences.

It just becomes tricky when you have multiple accounts. I can't do a complete rebalance by just making moves within our 401ks. I also have Roths and and a taxable account to factor in.

The way our balances are spread out into the different accounts, I can certainly improve the variances by just making moves within one account. But a full rebalance would require transactions in multiple accounts.

[StormRichards]

Our REITs are down $9.5k. Had I done this analysis sooner, I could have corrected that situation with 2017 Roth contributions. We still have $8k to go before maxing out both accounts, so I will definitely put that into REITs and bring that more in line.

[parafly]

I do it manually for investments outside of my target date fund. My general rule is to rebalance semi-annually or when one of my asset classes is off by 5% or more, whichever comes first.

I've always found it easier to rebalance and keep my asset allocation contribution percentages steady rather than continually adjusting percentages for new contributions as a means to rebalance.

[~bs]

401k automatic quarterly

Roth - I "attempt to rebalance" manually yearly when I add funds and invest. More (or all) money goes to the underperformer. I try not to sell to rebalance.

[feh]

We use 5/20 bands.

https://www.bogleheads.org/wiki/Rebalancing