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Re: Long Bond ETF Tax

While a general bond fund is OK in a taxable account at current yields, an extra-long-term fund such as TLT is still very tax-inefficient. The long-term bonds have higher yields than most bonds, resulting in more taxable income. In addition, if rates fall, the fund will have a capital gain as it sel...
by grabiner
Thu Feb 26, 2015 9:54 pm
 
Forum: Investing - Theory, News & General
Topic: Long Bond ETF Tax
Replies: 9
Views: 476

Re: Holding bond funds to average duration

If you hold a bond fund to its average duration, regardless of rate changes, you should at least break even on your initial investment (correct?) Break-even is actually not the correct measure. If you hold to the duration, you are indifferent to rate changes today . For example, if you hold a fund ...
by grabiner
Thu Feb 26, 2015 9:48 pm
 
Forum: Investing - Theory, News & General
Topic: Holding bond funds to average duration
Replies: 12
Views: 675

Re: Estimate capital gains

The tax owed is based on your capital gain, which is the difference between what you paid and what you received. If you have held the shares for more than a year, the gain is usually taxed at 15% federal (0% in the 10% and 15% federal tax brackets, 20% in the 39.6% federal bracket); it is also taxed...
by grabiner
Thu Feb 26, 2015 9:25 pm
 
Forum: Investing - Help with Personal Investments
Topic: Estimate capital gains
Replies: 4
Views: 169

Re: Need advice on placement in Tax Deferred Assets

For similar reasons, while 60% stock is aggressive for investors over 70, it may be right for you because it isn't all your money. If half the money is for your own retirement and you want that money to be 40% stock, and the other half is for your 40-year-old children and you want that money to be ...
by grabiner
Thu Feb 26, 2015 9:10 pm
 
Forum: Investing - Help with Personal Investments
Topic: Need advice on placement in Tax Deferred Assets
Replies: 4
Views: 359

Re: Vasgx vanguard life strategy growth - performance questi

ps I also believe Vanguard is ripe to open a Balanced Fund which can reside in a taxable account with optimal tax implications. Vanguard has one, Tax-Managed Balanced Fund. Part of the problem is that muni interest is taxable unless the fund has more than 50% of its holdings invested in munis. Thus...
by grabiner
Thu Feb 26, 2015 9:08 pm
 
Forum: Investing - Help with Personal Investments
Topic: Vasgx vanguard life strategy growth - performance question
Replies: 10
Views: 950

Re: Vasgx vanguard life strategy growth - performance questi

Where can I get reliable performance information for vanguard funds that: A) Includes dividend reinvestment B) Is longer term (something like 20 yrs) for funds that have been around C) is by calendar year not just 1 yr or 5 yrs from today Morningstar http://www.morningstar.com is the standard refer...
by grabiner
Wed Feb 25, 2015 10:41 pm
 
Forum: Investing - Help with Personal Investments
Topic: Vasgx vanguard life strategy growth - performance question
Replies: 10
Views: 950

Re: How T-C members & family get TREA outside of employer pl

can anyone explain why the TIAA-CREF Real Estate account is so attractive? The ER is 0.87%, which is high. The expense ratio of TIAA Real Estate doesn't have the same meaning as the expense ratios on other funds. If you buy a fund which holds REITs, you pay management fees to the fund, but the REIT...
by grabiner
Wed Feb 25, 2015 9:30 pm
 
Forum: Investing - Theory, News & General
Topic: How T-C members & family get TREA outside of employer plans
Replies: 20
Views: 1821

Re: If TIPS yield curve is flatter than nominal curve...

There is no particular reason that the liquidity premium should make the TIPS yield curve steeper. Treasuries are more liquid than TIPS, and thus TIPS do have some liquidity premium. However, long-term TIPS are not particularly illiquid, so there is no reason that they should command a higher liquid...
by grabiner
Wed Feb 25, 2015 9:15 pm
 
Forum: Investing - Theory, News & General
Topic: If TIPS yield curve is flatter than nominal curve...
Replies: 1
Views: 234

Re: Help me decide which asset class to sell

If you have a tax-deferred account, you don't need to change your asset allocation, regardless of what you sell in your taxable account. If you want to sell stock, you can sell the muni fund, and move an equal amount from stock to bonds in your IRA.
by grabiner
Wed Feb 25, 2015 8:45 pm
 
Forum: Investing - Help with Personal Investments
Topic: Help me decide which asset class to sell
Replies: 9
Views: 462

Re: Need advice on placement in Tax Deferred Assets

If you have RMDs you don't need, you don't need to change your asset allocation; take the RMD from Total Stock Market in the IRA and add it to Total Stock Market in your taxable account. Putting stock indexes in a taxable account is a particularly good deal in your situation. Since you have RMDs you...
by grabiner
Wed Feb 25, 2015 8:42 pm
 
Forum: Investing - Help with Personal Investments
Topic: Need advice on placement in Tax Deferred Assets
Replies: 4
Views: 359

Re: Vanguard's New Index Fund of Municiples

What are your thoughts on this new index fund? I don't hold munis myself (my bonds are all in my employer plan), so I haven't thought that much about the funds. However, I would expect this fund to be a natural alternative to Long-Term Tax-Exempt. With both funds having about the same expenses and ...
by grabiner
Wed Feb 25, 2015 8:34 pm
 
Forum: Investing - Theory, News & General
Topic: New Vanguard AMT-free National Municipal Bond Fund
Replies: 79
Views: 6985

Re: 401k/Roth IRA and taxes

Actually, you want the fund with the lowest growth to be in a high-fee 401(k). The reason is that the expense ratio applies to the entire balance and not just new contributions. So if your 401(k) grows to $100K or even $500K, then the fees sucked out will be even larger if it only grew to $50K. OTO...
by grabiner
Tue Feb 24, 2015 11:46 pm
 
Forum: Investing - Help with Personal Investments
Topic: 401k/Roth IRA and taxes
Replies: 6
Views: 332

Re: Tax Withholding Question

You're making it too complicated and hard to follow. Your payroll folks can tell you how much each withholding allowance changes your weekly paycheck. Adjust it to get around $150 more take home pay each week, hence $7800 less tax withheld over 52 weeks... It's actually a simple formula. One allowa...
by grabiner
Tue Feb 24, 2015 11:29 pm
 
Forum: Personal Finance (Not Investing)
Topic: Tax Withholding Question
Replies: 3
Views: 432

Re: Tax bill killing me on 401K to Roth in 2014

I am also in a similar situation. But what turned out to be the limiting factor of NOT be able to take a old 401K plan (with NO Roth contributions - only after tax). Was the "401K Plan Documents" do NOT allow a "rollover" into a ROTH IRA. The ONLY rollover allowed was into a &qu...
by grabiner
Tue Feb 24, 2015 11:21 pm
 
Forum: Personal Finance (Not Investing)
Topic: Tax bill killing me on 401K to Roth in 2014
Replies: 27
Views: 3333

Re: 529 Breakeven math; quick question

Some recent posts and a revisit of the Wiki have me thinking... Let's assume a high ER state plan that has a nice state tax deduction. When deciding whether to invest in this plan or the cheaper no state tax benefit alternative, shouldn't breakeven calculations grow the annual state tax savings? So...
by grabiner
Tue Feb 24, 2015 11:18 pm
 
Forum: Personal Finance (Not Investing)
Topic: 529 Breakeven math; quick question
Replies: 4
Views: 660

Re: Foreign Tax Credit and State Taxes

These are the IRS instructions, and they don't always make sense, but it is best to follow them. (Usually, it won't make a difference; you'll get to deduct the full foreign tax.) In your example, since the state taxes less income than the US income taxed by the federal government, you can assume tha...
by grabiner
Tue Feb 24, 2015 11:03 pm
 
Forum: Personal Finance (Not Investing)
Topic: Foreign Tax Credit and State Taxes
Replies: 3
Views: 360

Re: Do most active managers outperform index before expense?

I believe it's possible for the average fund manager to beat the index by 0.12% because of the number of non-manager market players who can underperform by 0.12%. However, I highly doubt any fund manager can reduce fees for an active fund below 0.12% without simply becoming a closet index. Vanguard...
by grabiner
Tue Feb 24, 2015 10:36 pm
 
Forum: Investing - Theory, News & General
Topic: Active managers outperform the index by 0.12% before fees?
Replies: 22
Views: 1684

Re: Vanguard's New Index Fund of Municiples

This fund's portfolio (based on MUB, which tracks the same index), will be similar to VWLTX (long term), not VWITX (intermediate term). One advantage this fund will have is a lower threshold for low cost shares--Vanguard's current TE funds, because they're "active", have a $50K admiral mi...
by grabiner
Tue Feb 24, 2015 10:25 pm
 
Forum: Investing - Theory, News & General
Topic: New Vanguard AMT-free National Municipal Bond Fund
Replies: 79
Views: 6985

Re: Asset Location [3-Funds]

What is your tax bracket? If you have a taxable account, are in a 28% or higher bracket, and do need to hold bonds there, you probably wouldn't use Total Bond Market Index; muni funds are likely to provide better after-tax returns for the same risk level. It doesn't matter much what goes in the 401(...
by grabiner
Tue Feb 24, 2015 10:21 pm
 
Forum: Investing - Help with Personal Investments
Topic: Asset Location [3-Funds]
Replies: 3
Views: 356

Re: Convert Etf to Index Fund

An alternative (in an IRA) would be to use mutual funds from the start, but build a more complex portfolio over time. With just $1000, you can invest in a Vanguard Target Retirement fund, choosing one which has the correct stock/bond allocation for your needs. When your portfolio is large enough, yo...
by grabiner
Tue Feb 24, 2015 10:10 pm
 
Forum: Investing - Help with Personal Investments
Topic: Convert Etf to Index Fund
Replies: 3
Views: 363

Re: Beginner Investor - Selling Mutual Fund to start Roth IR

1. Since I can't purchase all three of my desired indexes up front ( VTSMX, VGTSX, and VBMFX ), would VASGX (Vanguard LifeStrategy Growth Fund Investor Shares) be a good choice for my first funding until I can afford to have all three of the indexes I want at the proper AA? That is a great way to g...
by grabiner
Tue Feb 24, 2015 10:06 pm
 
Forum: Investing - Help with Personal Investments
Topic: Beginner Investor - Selling Mutual Fund to start Roth IRA
Replies: 9
Views: 676

Re: 401k/Roth IRA and taxes

I cannot get passed the tax section of the Bogleheads book though. It seems to be suggesting that your tax deferred account should be the one with the greater percentage of bonds. It isn't entirely clear if this advice applies to the two types of retirement accounts or just when comparing tax advan...
by grabiner
Tue Feb 24, 2015 9:58 pm
 
Forum: Investing - Help with Personal Investments
Topic: 401k/Roth IRA and taxes
Replies: 6
Views: 332

Re: Vasgx vanguard life strategy growth - performance questi

The returns depend on the time period you are considering. Your choice of 15 years gives relatively low returns, because 15 years ago was a market peak just before the Internet bubble. 8% is a reasonable expectation for stock returns in the very long run, but the variability of returns means that th...
by grabiner
Tue Feb 24, 2015 9:47 pm
 
Forum: Investing - Help with Personal Investments
Topic: Vasgx vanguard life strategy growth - performance question
Replies: 10
Views: 950

Re: Foreign Stocks in Taxable - Gotcha w/ foreign tax credit

2. It certainly could be characterized as letting the tax tail wag the investment dog, but for those of us who are below but very near the $300/600 threshold, does it make sense to adjust our AA, or consider holding some foreign equity in non-taxable accounts, to avoid having this issue in the near...
by grabiner
Tue Feb 24, 2015 9:39 pm
 
Forum: Investing - Theory, News & General
Topic: Foreign Stocks in Taxable - Gotcha w/ foreign tax credit
Replies: 55
Views: 6317

Re: is there such "3 fund portfolio at VALIC"?

The lowest-cost options are the Vanguard LifeStrategy funds, which could be your whole portfolio. LifeStrategy Growth is 56% US stock, 24% foreign stock, 20% bonds. You could hold the same fund in your IRA for simplicity, or hold more stock there to get your allocation up to your 90% target. maybe ...
by grabiner
Tue Feb 24, 2015 9:37 pm
 
Forum: Investing - Help with Personal Investments
Topic: is there such "3 fund portfolio at VALIC"?
Replies: 16
Views: 1178

Re: On line product reviews vs Consumers Reports

I have purchased two appliances in the last few years that were highly recommended by Consumer Reports and then had problems. A washing machine went out after 4 1/2 years. A refrigerator needed a new part for the ice maker and water dispenser after two years. And this is actually why CR is useful. ...
by grabiner
Tue Feb 24, 2015 9:30 pm
 
Forum: Personal Consumer Issues
Topic: On line product reviews vs Consumers Reports
Replies: 37
Views: 2527

Re: is there such "3 fund portfolio at VALIC"?

If you list the funds available to you and their ERs, someone might help you. Here I list the available funds and their net ERs, and would you please recommend some funds for my 401A and 403b at VALIC? I hope my portfolio has 6:3:1 (stock, international stock, bond). Here are the lowest-cost option...
by grabiner
Tue Feb 24, 2015 12:29 am
 
Forum: Investing - Help with Personal Investments
Topic: is there such "3 fund portfolio at VALIC"?
Replies: 16
Views: 1178

Re: Would This Be An Unreasonable Asset Allocation?

Thanks grabiner. That explanation using the fractions is very helpful. I hadn't seen it laid out like that before, and it's much easier for me to wrap my head around. I use the fractions myself, because my overall allocation to US stock changes over time, while the fractions remain intact. 3/8 of m...
by grabiner
Sun Feb 22, 2015 9:37 pm
 
Forum: Investing - Help with Personal Investments
Topic: Would This Be An Unreasonable Asset Allocation?
Replies: 11
Views: 725

Re: Hsa payroll tax

If you do save Social Security tax by using payroll deduction, this reduces your Social Security benefits. My best estimate is that it is close to break-even if you have high income.
by grabiner
Sun Feb 22, 2015 9:16 pm
 
Forum: Personal Finance (Not Investing)
Topic: Hsa payroll tax
Replies: 7
Views: 635

Re: Please help me understand Bond ETFs...

A bond index fund tracks all bonds within its index. It may sell bonds before maturity if the index does not include very short bonds; indexes which include short-term bonds normally sell a year from maturity, while an intermediate-only index would sell bonds when they become short-term. The index a...
by grabiner
Sun Feb 22, 2015 9:08 pm
 
Forum: Investing - Theory, News & General
Topic: Please help me understand Bond ETFs...
Replies: 6
Views: 804

Re: how to find similar funds

You don't need a fund similar to each individual fund you have, only a portfolio similar to the portfolio. You can put your portfolio into Morningstar's Portfolio X-Ray and see how much you have in US stock, and how much of that is large-cap value, then compare that to your replacement portfolio (us...
by grabiner
Sun Feb 22, 2015 8:57 pm
 
Forum: Investing - Help with Personal Investments
Topic: how to find similar funds
Replies: 4
Views: 312

Re: Vguard tax exempt bond fund

I started to put some extra cash that was in taxable in VWAHX (Vanguard High-Yield Tax-Exempt Inv) some time ago, I kind of like it, seems to let me get away with bonds in taxable in a nice and diversified manner, correct me if I seem delusional! High-Yield Tax-Exempt is a fine fund if you hold bon...
by grabiner
Sun Feb 22, 2015 8:51 pm
 
Forum: Investing - Help with Personal Investments
Topic: Vguard tax exempt bond fund
Replies: 3
Views: 705

Re: Question about foreign bond and foreign Real Estate fund

Here is Vanguard's link to Foreign tax credit information ; this shows how much you would get back from the foreign tax credit for Vanguard funds. For Total International Bond Index, the foreign tax is 0.5% of the dividend; most of the bonds are exempt from withholding. For Global Ex-US Real Estate,...
by grabiner
Sun Feb 22, 2015 8:45 pm
 
Forum: Investing - Help with Personal Investments
Topic: Question about foreign bond and foreign Real Estate funds
Replies: 5
Views: 453

Re: Vanguard Wellesley Income Fund a Buy?

I think that Wellesley and Wellington will become my only 2 funds until I move my TSP in 6-9 years, but am certainly considering moving it into Wellesley as well (taxable acct) If you have the TSP, this is a good reason not to use Wellesley and Wellington, because the TSP G fund has lower risk than...
by grabiner
Sun Feb 22, 2015 8:37 pm
 
Forum: Investing - Help with Personal Investments
Topic: Vanguard Wellesley Income Fund a Buy?
Replies: 36
Views: 3115

Re: Max out 403b or Use Taxable Account?

Thanks...is there a general reason behind maxing it out instead of investing on your own? When you leave the employer, you can roll a bad 403(b) into an IRA, and keep it growing tax-deferred, while getting into a low-cost fund. (Effectively, a 403(b) grows tax-free; you do pay tax on withdrawals, b...
by grabiner
Sun Feb 22, 2015 8:34 pm
 
Forum: Investing - Help with Personal Investments
Topic: Max out 403b or Use Taxable Account?
Replies: 8
Views: 714

Re: Would This Be An Unreasonable Asset Allocation?

Regarding the tilt, I am trying to tilt toward small. So my thinking was that since the majority (about 72% according to this article, http://www.bogleheads.org/wiki/Value_tilting_-_stock), of the total US Market is held in large caps, then by investing half my money in small cap funds, and half in...
by grabiner
Sun Feb 22, 2015 8:28 pm
 
Forum: Investing - Help with Personal Investments
Topic: Would This Be An Unreasonable Asset Allocation?
Replies: 11
Views: 725

Re: Voluntary or supplemental benefits?

None of these benefits are likely to be useful. The reason to buy insurance is to cover your needs, and your medical needs are just as important regardless of the cause; if you have adequate medical insurance, you don't need extra coverage for accidents or cancer that will be worthless if you instea...
by grabiner
Sat Feb 21, 2015 11:00 pm
 
Forum: Personal Finance (Not Investing)
Topic: Voluntary or supplemental benefits?
Replies: 1
Views: 179

Re: IRA funds and ETF

More research on the Vanguard site. Here's what I'm thinking: Vanguard Consumer Discretionary ETF (VCR) Vanguard Consumer Staples ETF (VDC) Vanguard Small-Cap Growth ETF (VBK) Vanguard Mid-Cap ETF (VO) Vanguard S&P 500 ETF (VOO) Vanguard Growth ETF (VUG) Vanguard Long-Term Bond ETF (BLV) You ar...
by grabiner
Sat Feb 21, 2015 10:55 pm
 
Forum: Investing - Help with Personal Investments
Topic: IRA funds and ETF
Replies: 4
Views: 255

Re: TaxAct question: recomputation of 2103 federal tax retur

Thank you! I found that if I keep the recomputed income tax and AMT tax the same as the original income tax and AMT tax, then the system tells me that 0$ of the $600 is taxable (otherwise it will say all $600 is taxable). But it does not change the amount of federal return at all. I thought that by...
by grabiner
Sat Feb 21, 2015 10:46 pm
 
Forum: Personal Finance (Not Investing)
Topic: TaxAct question: recomputation of 2103 federal tax return
Replies: 7
Views: 443

Re: On line product reviews vs Consumers Reports

Part of the issue with Consumer Reports is the increasing number of products. I have read the magazine for years, but I now get more value out of the website, because there is more room for product details. The magazine cannot include a two-paragraph review of every one of the 300 different smartpho...
by grabiner
Sat Feb 21, 2015 10:40 pm
 
Forum: Personal Consumer Issues
Topic: On line product reviews vs Consumers Reports
Replies: 37
Views: 2527

Re: On line product reviews vs Consumers Reports

The problem with online reviews is that they are not a representative sample. If a hotel posts four good reviews and one bad review, this does not mean that 80% of the customers were satisifed; it means that 80% of the customers who chose to write a review were satisfied. In contrast, Consumer Repor...
by grabiner
Sat Feb 21, 2015 7:09 pm
 
Forum: Personal Consumer Issues
Topic: On line product reviews vs Consumers Reports
Replies: 37
Views: 2527

Re: The Distribution of Individual Stock Returns, 1983-2006

The reason for the skewed distribution is that it is capped on one end. A stock can gain the market return, or 100% more (twice the market return), or 200% more, or 500% more (six times the market return), or 100% less (going to zero), but not 200% less.
by grabiner
Sat Feb 21, 2015 7:03 pm
 
Forum: Investing - Theory, News & General
Topic: The Distribution of Individual Stock Returns, 1983-2006
Replies: 20
Views: 1703

Re: The QQQ fund?

The problem with QQQ (now QQQQ) is that it is an arbitrary index. It makes sense to invest in an index which tracks a category of stocks with an investment-related definition: large US stocks, small value US stocks, all stocks in foreign markets, large stocks in emerging markets, all US real estate ...
by grabiner
Sat Feb 21, 2015 6:57 pm
 
Forum: Investing - Help with Personal Investments
Topic: The QQQ fund?
Replies: 21
Views: 1625

Re: 401k or Taxable account in CA? + harvest gains

In CA, it is particularly valuable to contribute to the 401(k), because CA has high state taxes. If you invest in a taxable stock fund, you will owe not only 15% federal tax on the dividends, but also CA state tax, and you will continue to owe that every year. If you use the 401(k), you will owe the...
by grabiner
Sat Feb 21, 2015 6:50 pm
 
Forum: Investing - Help with Personal Investments
Topic: 401k or Taxable account in CA? + harvest gains
Replies: 6
Views: 403

Re: IRA funds and ETF

You can't use VINIX (Institutional Index) in your IRA; it is only available to investors with at least $5M. It is a common fund in large 401(k) plans. If you do want to hold that fund, you would use VFINX (500 Index Investor shares) or VFIAX (500 Index Admiral shares) or the ETF class VOO. It doesn'...
by grabiner
Sat Feb 21, 2015 6:47 pm
 
Forum: Investing - Help with Personal Investments
Topic: IRA funds and ETF
Replies: 4
Views: 255

Re: TaxAct and 1040 schedule A state income tax

Your 2013 state tax refund was paid in 2014 as an estimated state tax payment, so you deduct it in 2014. (The refund might also be taxable, if you deducted the state tax payments in 2013.) Similarly, if you made your fourth estimated state tax payment for 2014 in January 2015, that payment is not de...
by grabiner
Sat Feb 21, 2015 6:41 pm
 
Forum: Personal Finance (Not Investing)
Topic: TaxAct and 1040 schedule A state income tax
Replies: 7
Views: 478

Re: Starting a portfolio with large expenses on the horizon

Thanks for replying, grabiner! That sounds like a very reasonable alternative to cash. Regarding inflation protection, do you think TIPS would also be an alternative we could consider? Thanks again. For your situation, I-Bonds have an advantage over TIPS. I-Bonds have a guaranteed value whenever yo...
by grabiner
Sat Feb 21, 2015 6:27 pm
 
Forum: Investing - Help with Personal Investments
Topic: Starting a portfolio with large expenses on the horizon
Replies: 7
Views: 651

Re: Better with higher cost or Worse with lower cost

Unfortunately, she doesn't have an IRA and probably isn't interested in it, although I try to tell her she needs to invest more. She doesn't have to think about the 401K since it's deducted from her paycheck. But thanks for the advice. She could set up an automatic deduction from her checking accou...
by grabiner
Sat Feb 21, 2015 4:27 pm
 
Forum: Investing - Help with Personal Investments
Topic: Better with higher cost or Worse with lower cost
Replies: 4
Views: 510

Re: College Senior (21) - Asset allocation review

Gotcha. Now in regards to the 401k you mentioned, would it be wise just to contribute up to the employer's match, and funnel the rest of it in my taxable account? Or max my 401k to the full 17.5k and funnel the remainder into my taxable. If you have the 401(k) available, and you won't need the mone...
by grabiner
Sat Feb 21, 2015 2:17 pm
 
Forum: Investing - Help with Personal Investments
Topic: College Senior (21) - Asset allocation review
Replies: 6
Views: 325

Re: TaxAct question: recomputation of 2103 federal tax retur

Thanks for your reply. but I don't know how to make the refund non-taxable. After I click NO to "do you want to recompute the 2013 federal tax return", TaxAct tells me all $600 refund is taxable. What was wrong here? Thanks a lot. If you don't recompute, then you cannot know that the dedu...
by grabiner
Sat Feb 21, 2015 2:05 pm
 
Forum: Personal Finance (Not Investing)
Topic: TaxAct question: recomputation of 2103 federal tax return
Replies: 7
Views: 443
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