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Re: Treasury Bills only in retirement

If you could live off 3% withdraw from savings and use SS as your hedge against inflation would you go all in with 30 year treasury bills? Not taking more risk than is necessary thinking. If you are going to do this, use long-term TIPS, not Treasuries; long-term bonds have a huge inflation risk, an...
by grabiner
Wed May 22, 2013 11:31 pm
 
Forum: Investing - Help with Personal Investments
Topic: Treasury Bills only in retirement
Replies: 14
Views: 792

Re: Treasury Bills only in retirement

If you could live off 3% withdraw from savings and use SS as your hedge against inflation would you go all in with 30 year treasury bills? Not taking more risk than is necessary thinking. If you are going to do this, use long-term TIPS, not Treasuries; long-term bonds have a huge inflation risk, an...
by grabiner
Wed May 22, 2013 10:26 pm
 
Forum: Investing - Help with Personal Investments
Topic: Treasury Bills only in retirement
Replies: 14
Views: 792

Re: Consistent spikes on VNQI price

I'd guess the spikes are small retail investors entering "market" buy orders instead of entering limit orders around the mid-point of the bid-ask spread. While that isn't the situation for this particular fund, it is a common phenomenon with low-volume ETFs. For example, look at the May 1...
by grabiner
Wed May 22, 2013 9:26 pm
 
Forum: Personal Finance (Not Investing)
Topic: Consistent spikes on VNQI price
Replies: 6
Views: 584

Re: Taxable Portfolio help

It seems that maybe I should reallocate my 457(b) accounts to more bonds and other less tax efficient funds...This will allow me to put more of the non-qualified (taxable) money into Stock Index Funds...Does this make sense? Yes, it makes a lot of sense. You have only one retirement portfolio, even...
by grabiner
Wed May 22, 2013 8:52 pm
 
Forum: Investing - Help with Personal Investments
Topic: Taxable Portfolio help
Replies: 10
Views: 440

Re: Alternative to Vanguard's High-Yield Corporate Bond Fund

There are a lot of high-yield bond ETFs at expense about 0.4-0.5%, but you'll have to check the prospectus to see what they hold, and how that fits your high-yield needs.
by grabiner
Wed May 22, 2013 8:47 pm
 
Forum: Investing - Help with Personal Investments
Topic: Alternative to Vanguard's High-Yield Corporate Bond Fund
Replies: 9
Views: 666

Re: Bond Fund Question

I am the OP for this thread. I should have specified that the different nature of the two funds is not of any consequence to me - I actually own both - and for the purposes of this question I am focusing just on the durations - 5.3 and 2.3 years - and the yields - 1.56% and 1.01%. VBTLX is in a Rot...
by grabiner
Wed May 22, 2013 8:42 pm
 
Forum: Investing - Help with Personal Investments
Topic: Bond Fund Question
Replies: 17
Views: 1192

Re: Roth vs traditional ira poll

I would expect that for the general public, the Roth is better because they don't think about taxes in planning. With a $5500 contribution limit, people will believe that this is the correct amount to save, and will contribute $5500 whether it is traditional or Roth (and spend the tax savings from a...
by grabiner
Tue May 21, 2013 10:28 pm
 
Forum: Investing - Theory, News & General
Topic: Roth vs traditional ira poll
Replies: 23
Views: 998

Re: Bond Fund Question

In comparing VBTLX (Total Bond) and VFSTX (Short-Term Investment Grade), I was surprised to see that the yields are 1.56% and 1.01% at this time. The average durations are 5.3 and 2.3 years. I believe I've seen here some consensus against long-term bond funds since the extra yield was not justified...
by grabiner
Tue May 21, 2013 10:22 pm
 
Forum: Investing - Help with Personal Investments
Topic: Bond Fund Question
Replies: 17
Views: 1192

Re: Is Capital Loss on Premium Bonds Reflected in Pricing?

However, the IRS won't let you deduct this as a capital loss; you amortize the premium over time, reducing the interest payments for tax purposes. The IRS views the premium as an amount paid in advance for getting above-market payments. (Similarly, if you purchase a bond at a discount and hold it t...
by grabiner
Tue May 21, 2013 10:15 pm
 
Forum: Investing - Theory, News & General
Topic: Is Capital Loss on Premium Bonds Reflected in Pricing?
Replies: 17
Views: 696

Re: Pay down 2.75% 15 yr mortgage vs invest in taxable accou

It isn't evident that any of the previous replies have considered the risk involved in holding a mortgage. A mortgage isn't a credit card, car payment, or similar simple loan where if you don't pay it for some reason (medical hardship, job loss, long-term injury, etc.), you simply just deal with a ...
by grabiner
Sat May 18, 2013 9:07 pm
 
Forum: Investing - Help with Personal Investments
Topic: Pay down 2.75% 15 yr mortgage vs invest in taxable accout
Replies: 11
Views: 752

Re: Emerging markets bonds: what happened in 1998?

In less than a two-month period, from 7/17/1998 to 9/11/1998, ... the fund that dropped the least , PIMCO Emerging Markets, dropped -31% Morningstar's benchmark, -38%. Fidelity, -40%. TCW, -43%. GMO, -44% That isn't as far as stocks fell in 2008-2009, but the GMO fund is getting close (Total Stock ...
by grabiner
Sat May 18, 2013 7:50 pm
 
Forum: Investing - Theory, News & General
Topic: Emerging markets bonds: what happened in 1998?
Replies: 13
Views: 564

Re: Is Capital Loss on Premium Bonds Reflected in Pricing?

Apologizing in advance if my question displays too much ignorance, but I was wondering whether purchasing an existing-issue bond at a premium and holding it to maturity will result in a capital loss at the time it matures, and if so, whether this factor is generally priced into the premium of the b...
by grabiner
Sat May 18, 2013 7:39 pm
 
Forum: Investing - Theory, News & General
Topic: Is Capital Loss on Premium Bonds Reflected in Pricing?
Replies: 17
Views: 696

Re: At what point does a fund become tax inefficient?

For example, Small-Cap Value Index Investor Shares have an 0.47% tax cost over the last ten years, but 0.93% over the fifteen years since inception, implying a cost of nearly 2% in 1998-2002 when all dividends were taxed at the top rate and the fund distributed a lot of capital gains. Small Cap Val...
by grabiner
Sat May 18, 2013 7:20 pm
 
Forum: Investing - Help with Personal Investments
Topic: At what point does a fund become tax inefficient?
Replies: 12
Views: 865

Re: Pay down 2.75% 15 yr mortgage vs invest in taxable accou

It appears that you are in the 28% tax bracket. Therefore, paying down your 2.75% mortgage gives a risk-free return of 1.98%, and you won't get the benefit until you finish paying it off, so that is a long-term investment. If your extra payments cause the mortgage to go away in 7 years rather than 1...
by grabiner
Sat May 18, 2013 7:18 pm
 
Forum: Investing - Help with Personal Investments
Topic: Pay down 2.75% 15 yr mortgage vs invest in taxable accout
Replies: 11
Views: 752

Re: Roth... to convert or not to convert?

Just a clarification. Grabiner wrote ".....if your Roth gets too large, you might retire in the 10% tax bracket. Does this just mean pay small amount of taxes ??? The problem with falling into the 10% tax bracket is that you paid too much tax with the premature conversion. If you convert a $10...
by grabiner
Sat May 18, 2013 7:03 pm
 
Forum: Personal Finance (Not Investing)
Topic: Roth... to convert or not to convert?
Replies: 35
Views: 1462

Re: So how are bonds affected by taxable account

How about Lifecycle funds that contain TBM index? Is it a bad idea to have these types of index funds in your taxable account? Balanced funds, including lifecycle funds, are usually not the best choice for a taxable account. If you hold separate stock and bond funds in your taxable account, and you...
by grabiner
Sat May 18, 2013 6:40 pm
 
Forum: Investing - Help with Personal Investments
Topic: So how are bonds affected by taxable account
Replies: 13
Views: 1077

Re: So how are bonds affected by taxable account

That concept is tax efficient investing. You'e supposed to put your tax efficient funds (Total Stock Market Index, Total International Market Index) in taxable accounts and tax inefficient funds (Total Bond Market Index) in tax deferred accounts. IF you have bonds in taxable accounts then use Munic...
by grabiner
Fri May 17, 2013 10:45 pm
 
Forum: Investing - Help with Personal Investments
Topic: So how are bonds affected by taxable account
Replies: 13
Views: 1077

Re: At what point does a fund become tax inefficient?

Thanks, retiredjg--this is really helpful! If I'm planning on buying-and-holding (I'm in my 20s now, so this could be for many years), does it make sense to pay the most attention to the "10 Year" or "Since Inception" differences in before taxes/after taxes returns? The 10-year ...
by grabiner
Fri May 17, 2013 10:41 pm
 
Forum: Investing - Help with Personal Investments
Topic: At what point does a fund become tax inefficient?
Replies: 12
Views: 865

Re: New Carmax Question

I bought a car in 2001 from a Carmax which was a Toyota dealer, and the Carmax had a huge selection of off-lease cars; there were 73 1998 Toyota Camrys in stock. (For once, it did make sense for the dealer to ask, "What color do you want?" as there wasn't much more to choose between the ca...
by grabiner
Fri May 17, 2013 9:15 pm
 
Forum: Personal Consumer Issues
Topic: New Carmax Question
Replies: 4
Views: 780

Re: Any Tax Loss Harvesting Experts?

If you have options, you may have a more difficult issue determining what is substantially identical; contact your tax advisor.

Fairmark's guide to Wash Sales and Options illustrates some of the rules.
by grabiner
Fri May 17, 2013 9:10 pm
 
Forum: Personal Finance (Not Investing)
Topic: Any Tax Loss Harvesting Experts?
Replies: 5
Views: 466

Re: Bond Fund Duration, NAV & Return After Interest Rate Inc

This confuses the heck out of me too, considering how different they've become. I recently read this Morningstar piece: http://news.morningstar.com/articlenet/article.aspx?id=594471 Which seems to say "neither". Looking at the actual distributions of VCADX, which I own, they're a heck of ...
by grabiner
Fri May 17, 2013 8:47 pm
 
Forum: Investing - Help with Personal Investments
Topic: Bond Fund Duration, NAV & Return After Interest Rate Increas
Replies: 11
Views: 811

Re: Tax-Efficient Asset Location

Now, during retirement, the 401k accounts have all the bonds and MRD, but you want to increase your bond holdings, so you have to sell bonds, paying deferred taxes, the rebalance stocks from the taxable account into bonds, likely taking a second tax hit. Any way to plan ahead and optimize this endp...
by grabiner
Fri May 17, 2013 8:41 pm
 
Forum: Investing - Theory, News & General
Topic: Tax-Efficient Asset Location
Replies: 8
Views: 742

Re: Credit score hurt because I don't borrow enough

I don't care about credit scores. I paid cash for my last house. I have a bunch of credit cards. I don't plan to ever borrow money again. How much of an effect does it actually have on insurance rates? Would there be any difference in insurance rates between a credit score of 750 and 850? It varies...
by grabiner
Fri May 17, 2013 8:00 pm
 
Forum: Personal Finance (Not Investing)
Topic: Credit score hurt because I don't borrow enough
Replies: 23
Views: 1520

Re: So how are bonds affected by taxable account

Interesting point, but I would take issue with the claim that bond prices don't fluctuate much. If you hold a 10 year Treasury at a current yield to maturity of 1.91% and rates rise by even 1%, your implied total return on that note [if you hang onto it] is -14.14%, just in that first year! It gets...
by grabiner
Fri May 17, 2013 7:56 pm
 
Forum: Investing - Help with Personal Investments
Topic: So how are bonds affected by taxable account
Replies: 13
Views: 1077

Re: Credit report for homeowners insurance

Im told by a state farm rep that One's credit report can only be "dinged" one time within a six week period when shopping around for homeowners insurance? Inquiries for insurance are normally "soft" inquiries, reported only to you. Since they don't represent attempts to get cred...
by grabiner
Thu May 16, 2013 11:10 pm
 
Forum: Personal Consumer Issues
Topic: Credit report for homeowners insurance
Replies: 4
Views: 299

Re: Credit score hurt because I don't borrow enough

I had my credit report run yesterday and was surprised that my overall credit score fallen some over the past couple of years. With no personal debt at all, I don't borrow money any more. Apparently that does indeed lower the total score. Sad! Did you get an actual reason code explaining the declin...
by grabiner
Thu May 16, 2013 11:01 pm
 
Forum: Personal Finance (Not Investing)
Topic: Credit score hurt because I don't borrow enough
Replies: 23
Views: 1520

Re: Roth... to convert or not to convert?

Wiki article link: Taxation of Social Security benefits OK. The relevant low base number for married filing jointly is $32,000. If you have income from your pension, your investments and your withdrawals from tax sheltered accounts in excess of $32,000, 50% of your SS benefits will be taxable. Also ...
by grabiner
Thu May 16, 2013 10:55 pm
 
Forum: Personal Finance (Not Investing)
Topic: Roth... to convert or not to convert?
Replies: 35
Views: 1462

Re: At what point does a fund become tax inefficient?

So I understand that there are some items that contribute to a fund's tax inefficiency and thus its appropriateness in a taxable account. I am speaking specifically about fund turnover, capital gains distribution, and dividend yield. Are all these things factored into Morningstar's tax cost ratio? ...
by grabiner
Thu May 16, 2013 10:39 pm
 
Forum: Investing - Help with Personal Investments
Topic: At what point does a fund become tax inefficient?
Replies: 12
Views: 865

Re: Trouble choosing a Taxable Portfolio

Generally speaking are the Total Stock Market Index Fund and Total International Stock Market Index Fund just about as tax efficient at the tax managed funds? Is it okay to use the ETF version of each fund? Wiki article link: Tax-managed fund comparison Either the total-market funds or ETFs are fin...
by grabiner
Thu May 16, 2013 10:34 pm
 
Forum: Investing - Help with Personal Investments
Topic: Trouble choosing a Taxable Portfolio
Replies: 9
Views: 647

Re: VG ex-US Small-Cap Fund or ETF in IRA?

Regarding the purchase fee: keep in mind that the purchase fee can BENEFIT you, if you hold your shares on average, longer than other shareholders, and/or have less turnover. It's not intended to be a net benefit; it is intended to allow existing shareholders to break even. If a fund receives $2M o...
by grabiner
Thu May 16, 2013 10:30 pm
 
Forum: Investing - Help with Personal Investments
Topic: VG ex-US Small-Cap Fund or ETF in IRA?
Replies: 13
Views: 697

Re: How to integrate legacy investments into Bogleheads appr

Welcome to the forum! I have legacy accounts that contain investments in big-cap, profitable, mostly US companies with multi-national businesses. This happened when I used a money management firm with very low or no turnover; but I paid 1.25% fees to them all those years. - I believe the holdings ar...
by grabiner
Thu May 16, 2013 10:21 pm
 
Forum: Investing - Help with Personal Investments
Topic: How to integrate legacy investments into Bogleheads approach
Replies: 11
Views: 726

Re: So how are bonds affected by taxable account

I can think of five pretty compelling reasons, but by far and away the biggest is the simplest: bond funds have higher turnover. Period. Always will. But the turnover in bond funds is almost irrelevant for tax purposes, because bond prices don't change much. If an intermediate-term bond fund buys a...
by grabiner
Thu May 16, 2013 10:18 pm
 
Forum: Investing - Help with Personal Investments
Topic: So how are bonds affected by taxable account
Replies: 13
Views: 1077

Re: ING 403(b) Or Taxable Investing?

ING, however, has a 10-year declining surrender charge starting at 5% in year 1 and going down to 2% in year 10. That means even if she leaves this job in 10 years or less, it wouldn't be worthwhile to rollover to an IRA. Actually, it would; if she leaves in a year, she can eat the 5% rather than p...
by grabiner
Thu May 16, 2013 10:11 pm
 
Forum: Investing - Help with Personal Investments
Topic: ING 403(b) Or Taxable Investing?
Replies: 4
Views: 217

Re: Protecting Gains

You could also buy puts to protect the gains. This way, you control when you sell unlike stop losses where wild swings can trigger sells, but then jump right back up. Remember the flash crash? But options are a whole other animal. :happy Appreciate a "Helper" link to this process to find ...
by grabiner
Thu May 16, 2013 10:09 pm
 
Forum: Investing - Help with Personal Investments
Topic: Protecting Gains
Replies: 21
Views: 1490

Re: Protecting Gains

A stop-loss order does not protect you against losses unless you sell and never get back into the market . If you have 100 shares of s stock worth $100, and you sell when it drops to $90, you now have $9000 in cash. If you use that $9000 to buy another stock, you could have it fall to $8100 just as ...
by grabiner
Thu May 16, 2013 9:54 pm
 
Forum: Investing - Help with Personal Investments
Topic: Protecting Gains
Replies: 21
Views: 1490

Re: taxable acct: tilt anyway?

livesoft / sammy - thanks for the tip on IJS instead of VBR for taxable! I will take a closer look at its tax consequences. I could not find on iShares site where they list the percentage of qualified dividends. iShares QDI information There is a link on the home page to 2012 Year-End Tax Informati...
by grabiner
Thu May 16, 2013 9:23 pm
 
Forum: Investing - Theory, News & General
Topic: taxable acct: tilt anyway?
Replies: 25
Views: 1645

Re: Poll: FI appropriate risk premium

learning_head wrote:Thanks grabiner - I am curious what you voted (or what your answer is if you did not vote).


I voted 1% as an appropriate risk premium, assuming a long-term investment horizon. (I don't have the choice myself, as my bonds are all in a retirement account.)
by grabiner
Wed May 15, 2013 10:19 pm
 
Forum: Investing - Theory, News & General
Topic: Poll: FI appropriate risk premium
Replies: 7
Views: 426

Re: Vanguard Cafe Coffee

Has anyone tried the coffee? Is the coffee itself average, and is there a perception issue? I wouldn't be surprised if a blind test showed no preference between Dunkin' Donuts coffee and Vanguard coffee, while customers said they preferred Dunkin' Donuts when the cups were labeled.
by grabiner
Wed May 15, 2013 10:10 pm
 
Forum: Investing - Theory, News & General
Topic: Vanguard Cafe Coffee
Replies: 12
Views: 2004

Re: Tax-Efficient Asset Location

Wiki article link: Tax-Adjusted Asset Allocation By putting an equal dollar value of stocks in the Roth IRA, you are taking more risk. If your Roth stocks lose $1000, that's $1000 less you will have to spend in retirement. If your taxable stocks lose $1000, that's $850 less you will have to spend. A...
by grabiner
Wed May 15, 2013 10:04 pm
 
Forum: Investing - Theory, News & General
Topic: Tax-Efficient Asset Location
Replies: 8
Views: 742

Re: Poll: FI appropriate risk premium

To get an idea of the risk you would be taking, look at the 2008 performance of High-Yield Tax-Exempt, which holds 20% bonds rated BBB or lower and about half A's. In three months, the fund lost 15%. (It made up the losses in another six months, but you didn't know that in December 2008.)
by grabiner
Wed May 15, 2013 9:59 pm
 
Forum: Investing - Theory, News & General
Topic: Poll: FI appropriate risk premium
Replies: 7
Views: 426

Re: Emerging market bond fund

Another concern: like most bond funds, this fund needs to be held in your IRA. I checked several emerging-markets bond ETFs with M*, and the tax cost is usually around 2% in the top bracket, which would be 1.6% in a 28% bracket. If you want to take emerging markets risk in your taxable account, you ...
by grabiner
Wed May 15, 2013 9:51 pm
 
Forum: Investing - Help with Personal Investments
Topic: Emerging market bond fund
Replies: 9
Views: 897

Re: Should I sell an actively managed mutual fund?

I would recommend selling the fund, because you are paying a tax cost in addition to the expense cost, and you'll have a long time to make that up. If the fund distributes 2% qualified dividends, 2% long-term gains, and 1% short-term gains (reasonable for a medium-turnover active fund which is distr...
by grabiner
Wed May 15, 2013 9:43 pm
 
Forum: Investing - Help with Personal Investments
Topic: Should I sell an actively managed mutual fund?
Replies: 2
Views: 239

Re: VEA Vanguard numbers: can't reconcile

If you check out the link I mentioned, I think it presents how the numbers are used... For VEA, because 100% of it is foreign sources income (i.e. line 20 on the spreadsheet would be 100%), it would be along these lines... 1. Total foreign income / distribution = US distribution + Foreign tax (alre...
by grabiner
Wed May 15, 2013 9:26 pm
 
Forum: Investing - Theory, News & General
Topic: VEA Vanguard numbers: can't reconcile
Replies: 8
Views: 654

Re: taxable acct: tilt anyway?

For those who are tilting, how do you maintain your allocation? Or do you just let the allocation float to wherever it goes? Tax-loss harvesting can only get you so far. I rebalance in my tax-deferred accounts, and by directing new taxable investments to the most underweighted asset class. Since my...
by grabiner
Wed May 15, 2013 9:10 pm
 
Forum: Investing - Theory, News & General
Topic: taxable acct: tilt anyway?
Replies: 25
Views: 1645

Re: Black Scholes Option Question

Take a look at SNDK trading high $50's (if the volatility is very different from your company, the options prices can be quite different as well). For 2015 LEAPS, the $20 put goes for $0.28 and the $40 put goes for $2.80. These buy you protection for about 1.5 years. If you extrapolate linearly, 5 ...
by grabiner
Wed May 15, 2013 9:06 pm
 
Forum: Investing - Help with Personal Investments
Topic: Black Scholes Option Question
Replies: 8
Views: 543

Re: VEA Vanguard numbers: can't reconcile

It should be Foreign tax = Income dividend* × 0.066257 Foreign income = Total foreign tax × 16.09270 QDI-eligible foreign income = Total foreign tax × 15 .09270 "Foreign income" number is right - it includes both distribution AND the foreign tax paid. "QDI" number is wrong becau...
by grabiner
Wed May 15, 2013 8:12 pm
 
Forum: Investing - Theory, News & General
Topic: VEA Vanguard numbers: can't reconcile
Replies: 8
Views: 654

Re: Sell taxable: asset allocation vs fund placement vs gain

So from the discussion so far, it seems like when selling from a taxable account, focus on gains/losses and just rebalance in tax-advantaged accounts that don't trigger taxable events? That would be a normal recommendation. However, if you need to sell something to keep your asset allocation, it's ...
by grabiner
Wed May 15, 2013 8:05 pm
 
Forum: Investing - Theory, News & General
Topic: Sell taxable: asset allocation vs fund placement vs gains?
Replies: 5
Views: 462

Re: taxable acct: tilt anyway?

I overweight developed large-cap compared to the equal-cost allocation; not only is Tax-Managed International relatively inexpensive, but it also has 100% qualified dividends, taxed at 15% rather than 28%, which has the same benefit as a lower expense ratio. I've been looking at VEA vs VXUS as well...
by grabiner
Tue May 14, 2013 10:56 pm
 
Forum: Investing - Theory, News & General
Topic: taxable acct: tilt anyway?
Replies: 25
Views: 1645

Re: Short term munis

SEC yield may be the best predictor we have for bond fund interest going forward, but distribution yield is what puts bread on the table today. Distribution yield is relevant only for tax purposes; if it is higher than the SEC yield, you are getting some of your own money back. If the distribution ...
by grabiner
Tue May 14, 2013 10:22 pm
 
Forum: Personal Finance (Not Investing)
Topic: Short term munis
Replies: 4
Views: 473

Re: VEA Vanguard numbers: can't reconcile

These numbers could be right if the "income dividend" is the dividend you actually received, as opposed to the dividend you paid tax on. If you received a $10,000 dividend but the fund reported taxable dividend income of $10,663, you would report $10,663 on your Schedule B, and claim $663 ...
by grabiner
Tue May 14, 2013 10:05 pm
 
Forum: Investing - Theory, News & General
Topic: VEA Vanguard numbers: can't reconcile
Replies: 8
Views: 654
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