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Scott,

In your article you advised:

"Assuming your wife is somewhat younger than you are, it would be reasonable to put more of the fixed-income assets in your account and more of the equities in her account simply because she is further from required minimum withdrawals.

The same applies to asset-class selections for 401k/IRA rollover accounts versus Roth IRA accounts. Since the Roth accounts have no required withdrawals and you may choose to draw sparingly from them, they can be weighted with more of the equity asset classes, while the traditional IRA accounts can be weighted with more of the fixed-income asset classes."

Would you advise a similar approach to handling multiple Asset Builder accounts? For example, AB14 for the younger wife's IRA and a more conservative AB10 for the husband nearer to retirement. Similarly, a more aggressive porfolio might be used for a Roth IRA, and a less aggressive portfolio for the traditional IRA.

Does the current Asset Builder structure allow for different portfolios to be used for different account types held by a given client?

Thanks,

Eric

We actually do that (depending on the amounts in each acct type), but mainly to avoid any short term tax treatments on the dividends and distributions. For instance, we would put fixed income and REIT holdings in the IRA and the equities in the Roth or Taxable accounts.

But remember we look at your total wealth picture and manage to a standard deviation risk level, so to put your wife in a 10 and you in a 14 really puts your total wealth at a 12 level and is not as efficient since you would be purchasing the same funds in both accounts. There are cases where it would need to be a separate Model per account eg. custodial

I believe the point that Scott was making in his article is that one ought to have a different risk tolerance for the two accounts. If you were to leave the Roth IRA untouched for a long period of time you might accept a higher degree of volatility in hope of maximizing return. Since you are required to take distributions from the ordinary IRA you would want lower volatility close to and during the withdrawal phase.

I would therefore want different AB portfolios for the two accounts. Using the same risk level in this case would not be the best course.

 I'd like to stand firmly on both sides of this. Bruce is correct about our attention to the overall portfolio and its broad risk level. That's the big picture for your nest egg.

    But having two accounts rather than one creates an opportunity to reduce risk in the short term (for the portfolio that will be drawn down first) while shifting risk to the long term where it may, repeat MAY, result in higher returns for that portion of the portfolio.

    Basically, we're dealing with two very different hazards here. The first is what might be called "redemption risk"--- the risk that we will have to sell shares of a volatile investment at an inopportune time.  I think this is one of the big hazards for individual investors. So the more we can reduce volatility/risk in the account being used for regular distributions, the more we can diminish this hazard.

    The second hazard is more complicated. When we shift risk to the longer term portfolio we are increasing the odds that it will turn out closer to its long term return but it is imperative that we reduce the risk level later when it becomes a distributing portfolio. If we don't, we'll increase the probability that the investors long term standard of living will be reduced by future market action.

Scott