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Investing Specialists

3 Retirement Saver Portfolios for Minimalists

Too busy to mind your portfolio? Three basic building blocks provide you with all the diversification you need.

Editor's note: This article was updated on June 10, 2019.

"Ugh, busy--crazy busy!" 

"Our schedules are just nuts right now." 

"We have to get together--it’s been forever!"

If you’re a working person--and especially if you’re a working person with young children--it’s a good bet that any brief text or email exchanges with friends have included some variation of those words. You’re scrambling to meet your commitments and squeeze in time for family and friends. If you have aging parents, you may be doubly crunched for time. 

If that describes your situation, "uncomplicating" your portfolio is mission-critical.

Of course, maintaining multiple accounts is a necessary evil for most of us--you might have IRAs, company retirement plans, and taxable accounts, and you can multiply those by two if your partner has accounts of his or her own. Within those accounts, however, it’s valuable to keep things as streamlined as possible. The key reason is to limit your oversight responsibilities to help you focus on the parts of your investment program that can really move the needle--namely, your savings rate and your asset allocation.

The most streamlined strategy of all is to employ a good-quality target-date fund and call it a day. Alternatively, you could employ simple index funds or exchange-traded funds as building blocks, as in the portfolios below. In contrast with an all-in-one fund strategy, employing multiple funds allows you to exert some control over your asset allocation, customizing your portfolio’s risk level to suit your situation. Employing very cheap products will help reduce your portfolio’s costs to the bare minimum and enhance your take-home return. And by using just a few funds that provide broadly diversified market exposure in a single shot, you can readily see where you need to make adjustments.

Last week I introduced three ultra-minimalist portfolios geared toward people in retirement; each included a cash sleeve alongside three basic index funds. Younger investors saving for retirement don’t need the cash; their paychecks should be meeting most of their cash flow needs. But the same long-term index funds work just as well for accumulators as they do for retirees; the allocations are the crucial differentiator.

Setting Your Stock/Bond Mix
As with all of the Saver portfolios, I’ve used Morningstar’s Lifetime Allocation Indexes to help guide the portfolio’s asset allocations to the three funds. The Aggressive portfolio is geared toward early accumulators who don’t mind the volatility that accompanies an equity-heavy portfolio. Modeled after the Aggressive 2055 Index, it invests the lion’s share in stocks, including a hefty allocation overseas. The Conservative portfolio is suitable for very risk-averse investors who are very close to retirement and know from experience that they have a limited tolerance for equity risk (and, importantly, know that their conservatism is apt to reduce their long-term returns). As such, it includes a healthy complement of bonds, as well as plenty of equity exposure to support some growth in the years leading up to and during retirement. The Moderate portfolio falls between the two.

I’ve included approximate retirement dates for each of the portfolios, but investors should bear in mind their own risk tolerances as well as their proximity to retirement when selecting an allocation mix. Young investors who are risk-averse and haven’t yet lived through a major equity downdraft may prefer to use the Moderate portfolio. Meanwhile, older investors who know they can handle some volatility and will be able to rely on a pension for most of their living expenses could reasonably use the Moderate or even Aggressive portfolio, even if retirement is close at hand. You could also craft a portfolio that falls between two of the portfolios. 

Security Selection
I used the same Vanguard Total market index funds in these portfolios as I did in last week’s Retirement Bucket portfolios. Investors can use either a traditional mutual fund or ETF; the difference comes down to personal preference. As solid as the Vanguard products are, however, it’s important to note that Fidelity, iShares, and Schwab all field worthy options that can be used in lieu of the Vanguard funds; here's a short list of Morningstar Medalist funds for each asset class.

For U.S. Stock Exposure
 Vanguard Total Stock Market Index (VTSAX)Vanguard Total Stock Market ETF (VTI)
 Fidelity Total Market Index ((FSKAX) )
 iShares Core S&P Total US Stock Market ETF (ITOT)
 Schwab US Broad Market ETF (SCHB) 

For International Stock Exposure
 Vanguard Total International Stock Index (VTIAX)Vanguard Total International Stock ETF (VXUS)Vanguard FTSE All-World ex-US Index (VFWAX)
 iShares Core MSCI Total International Stock ETF (IXUS
 Schwab International Equity ETF (SCHF)

For Bond Exposure
 Vanguard Total Bond Market Index (VBTLX)Vanguard Total Bond Market ETF (BND
 Fidelity US Bond Index (FXNAX
 iShares Core US Aggregate Bond ETF (AGG)iShares Core Total USD Bond Market ETF (IUSB
 Schwab US Aggregate Bond ETF (SCHZ)

Note that these portfolios are developed with tax-advantaged accounts in mind; in other words, they won’t be especially tax-efficient if you hold them outside of an IRA or a 401(k). However, it’s worth noting that equity index funds and ETFs are extraordinarily tax-efficient, so if you’re investing inside of a taxable account and in a higher tax bracket, you could reasonably augment them with a good-quality municipal-bond fund in place of the taxable-bond funds. Solid core options include  Vanguard Tax-Exempt Bond Index (VTEAX),  Vanguard Intermediate-Term Tax-Exempt (VWIUX), Fidelity Intermediate Muni Income (FLTMX), or  T. Rowe Price Summit Municipal Intermediate  (PRSMX) in place of the taxable-bond fund.

Aggressive Retirement Saver Portfolio for Minimalists
Estimated retirement date: 2055
Baseline asset allocation: 95% equity/5% bond
55% Vanguard Total Stock Market Index
40% Vanguard Total International Stock Market Index
5% Vanguard Total Bond Market Index 

Moderate Retirement Saver Portfolio for Minimalists
Estimated retirement date: 2035
Baseline asset allocation: 75% equity/25% bond
45% Vanguard Total Stock Market Index
30% Vanguard Total International Stock Market Index
25% Vanguard Total Bond Market Index 

Conservative Retirement Saver Portfolio for Minimalists
Estimated retirement date: 2025
Baseline asset allocation: 55% equity/45% bond
35% Vanguard Total Stock Market Index
20% Vanguard Total International Stock Market Index
45% Vanguard Total Bond Market Index 

Christine Benz has a position in the following securities mentioned above: VWIUX. Find out about Morningstar’s editorial policies.