17
Morningstar FundInvestor
June 2
013
To help tee up the money for
RMD
s, it makes sense to
begin positioning Ed’s
IRA
and
401
(k) more conserv-
atively. Using a version of the bucket strategy, he could
think about holding a combined one to two years’
worth of cash in his
IRA
and
401
(k) (bucket
1
). The next
segment of both
IRA
and
401
(k) accounts can be
positioned to, together, provide living expenses for
the next eight or nine years of retirement (bucket
2
).
I stairstepped this piece of the portfolio by risk level,
ranging from quite conservative (
T. Rowe Price
Short-Term Bond
PRWBX
) to the most aggressive
(
Loomis Sayles Bond
LSBRX
). The remaining
assets in Ed’s
IRA
can be held in stocks (bucket
3
).
Those adjustments should help reduce the risk level in
their total portfolio, which, after a multiyear rally in
stocks, is looking a bit equity-heavy given the couple’s
time horizon. At the same time, bonds aren’t looking
especially attractive, either, so Ed and Joanne might
consider derisking immediately by moving the bond
money into cash. They could then gradually build up
their bond stakes as interest rates trend up and the
outlook for the asset class improves.
In contrast with Ed’s tax-sheltered assets, Joanne’s
IRA
and
403
(b) won’t need to be tapped for
RMD
s
for another decade, so they’re too conservative. A
high-quality equity fund such as
Fidelity Spartan
Total Market Index
FSKTX
can supplant
Vanguard
Total Bond Market Index
VBTLX
in her
IRA
; she
also can bump up her equity holdings in her
403
(b).
Within the taxable portion of the portfolio, positions
in
Columbia Acorn
ACRNX
and
Primecap Odyssey
Aggressive Growth
POAGX
are giving the portfolio
a heavy skew toward mid-growth stocks, so I scaled
those positions back in favor of a core tax-managed
fund that focuses on a diversified basket of mega-
caps. (They should consider the tax implications before
selling, however.) Their portfolio still tilts toward
the growth side, but much of that exposure comes via
valuation-sensitive core funds like
Sequoia
SEQUX
and
Jensen Quality Growth
JENSX
. I also moved
some of their taxable equity assets into a short
intermediate-term municipal-bond fund to provide ad-
ditional liquidity.
œ
Contact Christine Benz at
Ed + Joanne After
Market Value
($)
Weighting
(%)
Star Rating
Ed’s IRA:
Cash
61,369
3.38
—
Ed’s IRA:
T. Rowe Price Short-Term Bond
PRWBX
120,000
6.60
QQQ
Ed’s IRA:
Dodge & Cox Income
DODIX
200,000
11.00
QQQQ
Ed’s IRA:
Vanguard Total Bond Market Index
VBTLX
60,000
3.30
QQQ
Ed’s IRA:
UST Inflation Indexed Bond
60,000
3.30
—
Ed’s IRA:
Loomis Sayles Bond
LSBDX
60,000
3.30
QQQQ
Ed’s IRA:
Harbor International Institutional
HAINX
100,000
5.50
QQQQ
Ed’s IRA:
Sequoia
SEQUX
150,000
8.25
QQQQQ
Ed’s IRA:
Vanguard Primecap
VPMCX
75,000
4.13
QQQQ
Ed’s IRA:
Jensen Quality
JENSX
75,000
4.13
QQQQ
Ed’s 401(k):
Stable Value Fund
50,000
2.75
—
Ed’s 401(k):
DFA Global Equity R2
DGERX
40,617
2.23
QQQ
Joanne’s IRA:
Fidelity Spartan Total Market Index
FSKTX
145,311
7.99
QQQ
Joanne’s 403(b):
PIMCO Total Return
PTRAX
100,000
5.50
QQQQQ
Joanne’s 403(b):
Vanguard Total Stock Mrkt Index
VITSX
123,487
6.79
QQQQ
Joanne’s Pension:
Principal Lrg Cap S&P 500 Index
PLFPX
68,609
3.77
QQQ
Taxable:
Vanguard Tax-Managed Grw & Income
VTGLX
100,000
5.50
QQQQ
Taxable:
Columbia Acorn Z
ACRNX
79,599
4.38
QQQ
Taxable:
Mutual Shares Z
MUTHX
58,314
3.21
QQQ
Taxable:
Primecap Odyssey Aggressive Growth
POAGX
25,000
1.38
QQQQQ
Taxable:
Fidelity Short-Intermediate Muni Income
FSTFX
65,291
3.59
QQQQ
1,817,597
100.00
Ed + Joanne Before
Market Value
($)
Weighting
(%)
Star Rating
Ed’s IRA:
Berkshire Hathway B
BRK.B
4,736
0.26
QQQQ
Ed’s IRA:
Dodge & Cox Income
DODIX
118,737
6.53
QQQQ
Ed’s IRA:
Harbor International Institutional
HAINX
136,143
7.49
QQQQ
Ed’s IRA:
Sequoia
SEQUX
87,400
4.81
QQQQQ
Ed’s IRA:
Vanguard Convertible Securities
VCVSX
40,791
2.24
QQQQ
Ed’s IRA:
Vanguard Primecap
VPMCX
66,275
3.65
QQQQ
Ed’s IRA:
UST Inflation Indexed Bond
60,201
3.31
—
Ed’s IRA:
Jensen Quality
JENSX
139,711
7.69
QQQQ
Ed’s IRA:
Scout International
UMBWX
177,613
9.77
QQQQ
Ed’s IRA:
Vanguard Wellington
VWELX
129,762
7.14
QQQQQ
Ed’s 401(k):
DFA Global Equity R2
DGERX
90,617
4.99
QQQ
Joanne’s IRA:
Vanguard Total Bond Mrkt Index
VBTLX
145,311
7.99
QQQ
Joanne’s 403(b):
PIMCO Total Return
PTRAX
223,487
12.30
QQQQQ
Joanne’s Pension:
Principal Lrg Cap S&P500 Index
PLFPX
68,609
3.77
QQQ
Taxable:
Columbia Acorn Z
ACRNX
179,599
9.88
QQQ
Taxable:
Mutual Shares Z
MUTHX
58,314
3.21
QQQ
Taxable:
Primecap Odyssey Aggressive Growth
POAGX
75,732
4.17
QQQQQ
Taxable:
Vanguard Short-Term Federal
VSGBX
14,559
0.80
QQQQ
1,817,597
100.00
