Domestic V international in Roth/Taxable

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SpartanBull
Posts: 131
Joined: Fri Jun 06, 2014 12:31 am

Domestic V international in Roth/Taxable

Post by SpartanBull »

Hello,
For all intents and purpose here are the types of accounts I have
1) Taxable account
2) personal Roth IRA
3) Solo 401k (roth portion)
The allocation I go with currently is 100% equities, with 2/3 to VTSAX (domestic) and 1/3 to VTIAX (international). If I'm able to choose, is it any better to A) balance each fund to 2/3, 1/3 or B) Jam as much international as possible into the Roth portion, while maintaining an overall 2/3 balance between everything or C) Jam international into taxable, with more domestic in the roth, while maintaining an overall 2/3 balance?
Maybe the answer is that it doesnt make a difference. I just wanted to see if there was a particular way that is best for where the international fund should go (keeping in mind that I want it to be 33% of the pie no matter what). Thanks!
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retiredjg
Posts: 53989
Joined: Thu Jan 10, 2008 11:56 am

Re: Domestic V international in Roth/Taxable

Post by retiredjg »

There is probably little difference. Even if there is a difference, it would not be knowable ahead of time. All things, such as cost, being equal, just do what is convenient.

The best way to improve your portfolio would be to add an allocation to bonds. :happy
DSInvestor
Posts: 11647
Joined: Sat Oct 04, 2008 11:42 am

Re: Domestic V international in Roth/Taxable

Post by DSInvestor »

Probably not much difference. TSM VTSAX is very tax efficient and dividends are pretty much 100% QDI. TISM (VTIAX) dividends are something like 65% QDI but some of that can be offset by the foreign tax credit.

Note that Solo 401k Roth only applies to the employee salary deferral contributions (18K/yr limit). Employer profit share contributions must be traditional. If your solo 401k is Roth only, that implies that you're NOT making any employer contributions and investing in taxable instead. If this is the case, I would suggest maxing out all tax advantaged contribution space including Solo 401k employer profit share to get substantial fed and state tax savings before adding to taxable accounts.

I would suggest placing 1 fund in the smaller accounts (like Roth IRA). In largest tax advantaged account, possibly your Solo 401k hold all asset classes so you can rebalance the entire portfolio without tax consequences by trading in this account.

Look for the simplest solution. This may mean TSM only in taxable, TSM only in Roth IRA and mix of TSM/TISM in Solo 401k assuming Solo 401k is large for entire TISM allocation with room for some TSM.
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