I'm 28 years old and going to start my 403(b) retirement investment.

My investment contributions will be 5% by me and 5% by my employer.

  1. I'm planning to invest 8% in pretax and 2% in Roth.
  2. The investment company I'm going to select is Vanguard (choices are Vanguard, Fidelity, TIAA)

I'm stuck on deciding how to allocate my pretax and Roth investments.

Can anyone help me build a good tax efficient portfolio?

  • Do you have access to all of the Vanguard products (mutual funds and ETFs), or a limited subset? – Chris W. Rea Dec 13 '10 at 18:48
  • 3
    Also, note: If you are investing in a 403(b), you shouldn't care whether your portfolio is tax efficient, or not. Your pre-tax gains are sheltered (but taxable on withdrawal) and your Roth gains are tax-free (if held until retirement). Tax efficiency (reduced turnover, etc.) typically matters when you are investing outside of a retirement account, and not when you are invested entirely inside one. – Chris W. Rea Dec 13 '10 at 18:49
  • I'm not sure that i have access to everything, but what i see in the list is different stocks and bonds option, link tinyurl.com/28ens79, this has all the options available for me – rs. Dec 13 '10 at 19:05
  • There's an Investor Questionnaire they have there; it'll suggest an asset mixture and particular funds. Have you completed it? – user296 Dec 13 '10 at 22:59

The Vanguard STAR® Fund is a favorite of Clark Howard. Balanced and nothing for you to worry about. Just feed it with your automatic deposits.


Not sure what fund options you have. You are young, so avoid fixed income should be 70-90% in Equities, with the remainder in good quality bonds (like the Vanguard GNMA) and cash.

For the equity portion, I'd suggest an allocation like this:

  • 40-60% Large-cap growth stocks
  • 30-50% Small-cap
  • 20-30% Value
  • 10-20% international

Spend some time on the Vanguard website and understand the differences between the various model portfolios. Understanding what you are doing is the most important thing to do -- try "investing" an hour a week into researching your investments.

Also, make sure you look at the other options as well -- Fidelity and TIAA offer excellent investment options as well.

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