Opening a Vanguard Taxable Account

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cbr shadow
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Opening a Vanguard Taxable Account

Post by cbr shadow »

My wife and I are considering opening a taxable investment account with Vanguard. Already our 401k's and Roth IRA's are through Vanguard. I figure a taxable account is the next step in saving - am I right? Below is our info

Both of us are 29 y.o.

No debt except mortgage
Mortgage = $197k @ 3.25% for 15yr

Both maxing our 401k's which we started doing this year
Combined 401k = ~$50k <Both in Target 2050 retirement fund>

Both max Roth IRA's
Combined Roth IRA's = ~$24k <Both in VTSAX>

Wife has a couple old IRA's worth about $6k right now

Net Worth = ~$120k

Savings/checking = ~$26k

If I'm doing calculations right, I believe our savings rate is roughly 55%.

Anyways I'd like to take some of our "Savings/Checking" and open a Vanguard taxable account. Is that referred to as a Money Market account? I'd probably put it mostly in VTSMX (probably start with $5000) until we got up to $10k and could switch to the admiral fund VTSAX.

Does this sound reasonable? What things should I consider when doing this? We were thinking just 1 account for now with ~$5k.

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Re: Opening a Vanguard Taxable Account

Post by mhc »

A taxable account is reasonable. In the taxable account you can get many different funds to include a Money Market Fund, VTSAX, .... I have dividends go to my MMF so that I can allocate them as necessary. The thing to do is link your bank account directly with the taxable account. This way you do not have to use the MMF if you don't want to. It also makes moving money around easy.

Another option would be to use an HSA as an additional retirement account if that option is available to you. Otherwise, your plan is reasonable.

Once you hit $100k, you may want to stop over-weighting the US market. Figure out your AA and make sure you follow it.

It looks like you are off to a good start.
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Re: Opening a Vanguard Taxable Account

Post by golfallday »

You are to be congratulated on your discipline in being able to save 55% of your income. Truly remarkable. I would not tap in to the checking account to invest in taxable TSM fund. I suspect the checking account is your emergency fund as well as your daily expense fund. I would get the checking account up to $50k before starting the taxable account. That's my comfort zone for an emergency fund; $25k is a bit thin for me. Once you start investing in VTSMX, Vanguard will automatically graduate your holdings to VTSAX when your account hits $10k.

I also max my 457 and IRA, but I do not allocate a static amount of money to a taxable account as every week has different expenses. At the end of the month, whatever money is left in my checking account I split between my emergency fund held in a money market account and SWTSX.
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Re: Opening a Vanguard Taxable Account

Post by Cash »

If you invest in foreign funds in your taxable account, you can get the foreign tax credit. Since you already have TSM in your IRA, I would probably go that route.

No, a money market account is not a Vanguard taxable account. Go to Vanguard's website, click on open an account, select the option for general savings, and follow the instructions. Choose the fund you want to invest in and transfer the money. You can have dividends and such sweep into a money market fund if you wish. I don't do that, but instead send mine to a savings account at my online bank and roll them into my next contribution.
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