Asset Placement Question -- Where to put the REIT fund?

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tsplinter
Posts: 31
Joined: Sun Jun 29, 2008 7:30 pm

Asset Placement Question -- Where to put the REIT fund?

Post by tsplinter »

I am working on a reallocation that will result in TIPS funds -- Vanguard Inflation Protection Securities Fund (VIPSX) or equivalent -- filling my 401(k), my Roth IRA, and my wife's Traditional IRA. The only other investment I need to squeeze into one of these three accounts is Vanguard REIT Fund. The REIT allocation will fit into any of the three accounts with room left over for some of the TIPS money.

My question is where should the REIT money go? I will fall short of the number for Admiral shares except in the 401(k) which does not offer Vanguard funds as an option, so Expense Ratio is not relevant. So far as I can understand, the whole thing comes down to the different tax status of these three types of retirement account. I am guessing that, as between the 401(k) and the traditional IRA, there is no difference, but that the Roth is a different story. The Boglehead's "Principles of Tax-Efficient Fund Placement" is very helpful in planning asset placement but does not distinguish among various tax-deferred accounts.
robert2008
Posts: 20
Joined: Thu Oct 16, 2008 4:55 pm

Post by robert2008 »

Between a Roth and a traditional tax-deferred account, you want the asset with the higher expected return in the Roth. That's because you won't own tax on the gains. So, I'd suggest the REIT in the Roth and the TIPS in the Trad. IRA/401k.
Topic Author
tsplinter
Posts: 31
Joined: Sun Jun 29, 2008 7:30 pm

Post by tsplinter »

Thanks, Robert. That makes good sense.
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