Over the last few years as we’ve been working together and I’ve been sharing our progress on Couple Money, you may have noticed a few constant themes coming across in several posts, two of them being automate your finances when possible and save for retirement.
I think that one of the most helpful things we have done as a couple is creating a financial system that basically takes care of the essentials so we are freed up to spend more time on people and activities that matter to us. As working parents, we would honestly rather do other things than looking over everything continually.
Stressing over finances can take a toll any family, so automating our finances is both a way to reduce needless noise and build our net worth. Our retirement accounts are pretty much on autopilot and it has made things much easier to manage. For those interested in looking under the hood, I want to share what we use.
Set It and Forget It
I know everyone is different, so what works for us may not work for you. There are some people who love to constantly track every peak and valley of the market, getting alerts on all the news of the day.
Neither of us are like that.
We are the type who have no problem reading books, articles, and talking with others to come up with an investing plan. From there we want to be able to have automated contributions based on our plan and have access to check on our accounts as needed (which is hopefully once a quarter).
When we were devising our plans for the 401(k) and the Roth IRAs, we were looking at passive investing and in particular index funds. My husband’s job offers a match with their 401(k) so we made sure to max his contributions to take advantage of this wonderful benefit. The down side is the 401(k) has limited options, so we choose a few solid funds.
With the Roth IRAs, we have a bit more freedom so we are able to get the accounts to our desired asset allocation. In general, I based mine on David Swensen’s model. The general asset allocation Swensen recommends includes:
- Domestic Equity (30 percent)
- Real Estate Investment Trusts (20 percent)
- Foreign Developed Equity (15 percent)
- U.S. Treasury Notes and Bonds (15 percent)
- Emerging Market Equity (5 percent)
- U.S. Treasury Inflation-Protection Securities (TIPS) (15 percent)
Since I have decades before I expect to draw money from this account, I don’t really have much in the way of bonds and the more conservative investments so I have a bit more in foreign developed equity than in treasury bonds.
Using Vanguard and Betterment for Our Roth IRAs
I’ve written the process of open an IRA with both Betterment and Vanguard so if you are thinking about using either please check out my reviews. I highly recommend both companies as we’ve been happy with both their services. So far we haven’t had any problems, which has made investing that much easier. Both of these companies suit our personalities and allow us to painlessly sock away money.
Betterment is great for my husband as everything is automated for him, including rebalancing his portfolio. For those just starting out or with low balances, you may want to try Betterment as most of Vanguards fund have a minimum of $3,000 (the big exception are their target funds).
I love Vanguard because they have numerous funds that have low fees, meaning more of your money goes towards growing for your benefit. They also are considered the leader in their field, offering a ton of resources and research on investing.
Either one you choose, you can easily grow your portfolio by signing up for automated contributions. If you’re interested, you can sign up for a new account at Betterment * here or Vanguard here. It will probably take you 20 minutes to set up and open.
Thoughts on Setting Up Your Retirement Portfolio
Like I mentioned earlier, what works for us may not be your cup of tea so I’d like to know how you two manage your retirement accounts? How did you set it up? What companies do you use? How often do you check your accounts?
Disclaimer – I am an affiliate of Betterment.