devinjameskenzie wrote:I have some really basic questions. By way of background, I intentionally max out my 401(k) each year through my job; however, because of regulations on the 401k plan, I end up being refunded 5-6K from the administrator at the end of the year. My accountant says thats because others at job don't contribute enough and plan fails IRS regulations. So, I have money that I would like to invest ( and also add some other funds too through the year). My Wife and I also have Roth's through Vanguard that we max out each year. I have read the Boglehead books and ( I think) I am ready to open a taxable Vanguard Account. We have no debt and a well funded emergency fund. I want to know how to open a Vanguard taxable account and what is required if you know? Can I use the Account that my Roth's are through or must I open a new and separate account? Also, I understand that I should choose mutual funds with low/qualified dividends, low turn over(such as tax efficient index funds and/or tax managed funds.) The book suggests Vanguard Total Stock Market Index Fund and Tax managed International Funds. Are these still the best funds or would you suggest another fund(s)? Also, which is better the TSM index fund or the tax managed fund, or should I open both funds in the taxable account? Finally, my wife works a pt job and only makes about 1-2k per year, can she open a taxable account too? Please help! Thanks
Hello and welcome to the forum!
You can open a Vanguard taxable account direct using Vanguard.com or calling them on the phone for a prospectus and application form. You can not use a ROTH IRA account to open a taxable account - Individual Retirement Accounts (IRA) are specifically for retirement only - you must open a new separate account, however when you log on to Vanguard.com, you will see all of your accounts housed under one umbrella or screen that lists all accounts held by you either individually or jointly with your wife - you wife's IRA will not appear under your name - it's her account, even if you are listed as beneficiary.
Have you and your wife developed an asset allocation plan? - % Equity/%Fixed Income totals 100%
Domestic Equity % + International Equity totals 100% of Equity % selected. A typical example might be a 70/30 Equity Fixed Income split, you might select 75% Domestic Equity and 25% in International.
For simplicity purposes we suggest the use of Total Stock Market Index, Total International Index and depending on tax bracket you are in - either a taxable bond index fund or a tax-free bond fund.
If you list your tax bracket in a follow-up post, we can advise what bond fund may be appropriate to hold in a taxable account.
Finally, you and your wife may open a taxable account with a joint registration with rights of survivorship, as tenants in common (equal owners but not with rights of survivorship) or you may each own your own account - individually in your own names.
Hope that helps.