5 Yr Plan - Tax Efficient Fund Help

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5 Yr Plan - Tax Efficient Fund Help

Postby ER2023 » Sun Sep 01, 2013 6:38 pm

I plan on paying off all debt (house and car) within a couple months. Right now, I can afford to allocate just $3k to open a VG fund. The purpose is to fund early retirement - once debt is paid, I will put approx $6k/month in it for 5-6 years - and then retire (somewhat) early - and live off of that for a couple years (as long as possible) until we can start tapping other resources (we max out both 401ks and have an emergency fund).

We are in the 33% tax bracket, so I know I have to select a tax efficient fund. I read the Wiki article for Tax Efficient Funds - thanks to this forum - and just have a couple questions:

Is the Total Stock Market Index a good choice right now? I'm willing to take the risk - would be able to "sleep at night" if market crashes again.

There is also a fund called Pennsylvania Long Term Tax Exempt (holds Pennsylvania muni bonds with average duration 6-10 years) - would that be better?

There is also a Pennsylvania Tax Exempt Money Market - which may be the best way to go since it's a 5-6 year plan?

Appreciate any guidance. Thank you.
ER2023
 
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Re: 5 Yr Plan - Tax Efficient Fund Help

Postby BolderBoy » Sun Sep 01, 2013 7:59 pm

ER2023 wrote:I plan on paying off all debt (house and car) within a couple months. Right now, I can afford to allocate just $3k to open a VG fund. The purpose is to fund early retirement - once debt is paid, I will put approx $6k/month in it for 5-6 years - and then retire (somewhat) early - and live off of that for a couple years (as long as possible) until we can start tapping other resources (we max out both 401ks and have an emergency fund).

We are in the 33% tax bracket, so I know I have to select a tax efficient fund. I read the Wiki article for Tax Efficient Funds - thanks to this forum - and just have a couple questions:

Is the Total Stock Market Index a good choice right now? I'm willing to take the risk - would be able to "sleep at night" if market crashes again.

There is also a fund called Pennsylvania Long Term Tax Exempt (holds Pennsylvania muni bonds with average duration 6-10 years) - would that be better?

There is also a Pennsylvania Tax Exempt Money Market - which may be the best way to go since it's a 5-6 year plan?

Appreciate any guidance. Thank you.

Yes, total stock market index is considered "tax efficient". And you are thinking correctly to put tax-exempt bond-type funds in a taxable account. But you are asking either/or. What is your planned asset allocation across all your accounts (retirement and non-retirement?) Look at them all as one big pie and invest your taxable side (stock/bond) accordingly.
BolderBoy
 
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