“Optimizing” the Roth IRA

One thing I’ve learned from 30 years of investing and DIY money management is that there is always another way — and often the other way is more “optimized” than the current way.

I put optimized in quotes because the opinion of what is better or perfect is based on history, not a crystal ball.

And since past performance is not indicative of future results, saying one financial maneuver or investment is optimized over another is often subject to the unknown future.

For example, stocks are likely to outperform bonds over the next 10 years. We can say that confidently based on history.

But it’s not definitely true. Bonds may outperform stocks. We don’t know for sure.

When we don’t perfectly align our decisions with the most optimized or highest-likelihood option, that doesn’t mean it’s wrong or bad.

A 45-year-old with a conservative risk tolerance could invest with a classic 60/40 stock-to-bond ratio portfolio, and it would be just fine.

“Optimized” for a lifespan that lasts until age 90?

No.

But better than not investing at all, and sufficient, even if a 55-year-old who is 100% invested in stocks says it’s stupid.

My latest video about how to allocate an IRA contribution is another example.

The main objective of the video was to show how to determine your ideal asset allocation and make an IRA contribution aligned with it using just three funds.

I shared the three funds I use (and equivalents), which are all relatively common and well-known in DIY investing circles.

But this video was more about the process, not the funds (despite my editor’s thumbnail design) or optimizing retirement accounts.

I wanted to make it relevant for all IRAs, even though I’m contributing to a Roth this year.

A few viewers chimed in, saying I wasn’t optimized and “recommended” an alternative strategy.

That strategy is simple and logical — invest 100% of Roth contributions in stocks, and use a traditional IRA to buy bond funds, balancing the asset allocation.

Since the Roth IRA is usually held for the longest (the last mile of retirement and to pass off as an inheritance), and those years are hopefully decades long, it is best to optimize the Roth with stocks.

I agree.

Mrs. RBD’s Roth IRA is in ~75% U.S. stocks (FSKAX) and ~25% international stocks (FSGGX).

My Roth IRA is about the same, 100% stocks (though I will likely contribute at 90/10 and record it as a new video).

My traditional IRA has a higher percentage of bond allocation to offset the Roth. And for that matter, those bonds also offset my wife’s traditional IRA, which is 100% stocks for simplicity’s sake (we combine our finances).

Regardless, contributing at a 90/10 stock-to-bond ratio to a Roth as a 50-year-old isn’t wrong.

Was it a suboptimal suggestion?

I suppose for a Roth, yes, for a meticulous investor. But that wasn’t the topic or main point of the video.

So was this a classic case of do-as-I-say-and-not-as-I-do?

That’s not how I see it.

When creating content like this, the goal is to help a wide range of people gain the confidence to make financial decisions and take action on their own.

Saying to put 100% of the contribution into stocks would have been misleading guidance for those contributing to a traditional IRA and for people with a more conservative risk tolerance or who are older.

Contributing to the age-appropriate allocation is preferred for most contributions.

I could have added some nuance, mentioning the “optimal way” of using the Roth for 100% stocks and the traditional for refining the asset allocation with bonds.

But that would complicate the video and confuse some people (even though it’s fairly simple in practice), and most people don’t watch the whole video or absorb everything with total focus (this is 2026, after all).

You might not be surprised to learn that people consume videos and blog posts because they struggle with the basics.

I get emails from people terrified to invest their money. Yet, they’re even more terrified of advisors!

So I try to keep things simple and approachable to a wide audience, even if it sometimes veers from the absolute most optimal way to proceed.

Over the years, I’ve shared less and less about my personal portfolio and financial plans because it’s what some people are most interested in, yet my exact plans and actions are not appropriate for most.

Moreover, there’s always an anonymous commenter who has nothing better to do than, after watching for 30 seconds, spit off their own recommendations under what took several hours of planning and hard work, while conveniently not sharing their own financial dirty laundry.

I’ve developed thicker skin over the years as a non-anonymous human on the internet, so it doesn’t bother me too much anymore.

Some creators just stop reading the comments altogether (I’m not there yet).

But it can be exhausting, tweaking content for perfection vs. 98% good enough for 99% of viewers.

So yes, if you have both a Roth IRA and a traditional IRA, go ahead and allocate 100% to stocks in the Roth, and balance the bond allocation on the traditional IRA side.

A guy in the comments said so.

If you haven’t seen it yet, here’s the video.