Vanguard Target Date in both 401k and IRA/taxable---any issue?

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wanderlust14
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Joined: Tue Nov 10, 2015 11:20 am

Vanguard Target Date in both 401k and IRA/taxable---any issue?

Post by wanderlust14 » Mon Mar 20, 2017 12:34 pm

Considering switching from Betterment to Vanguard due to the recent fee increase at Betterment. I have been buying their target date fund in my 401k and was considering doing the same in my taxable/IRA accounts if I switch them over to Vanguard. Any issues with this that I'm not considering?

Betterment will support in-kind transfer of funds so there should not be any tax liability, correct? Thanks for the help.

Nate79
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Joined: Thu Aug 11, 2016 6:24 pm
Location: Portland, OR

Re: Vanguard Target Date in both 401k and IRA/taxable---any issue?

Post by Nate79 » Mon Mar 20, 2017 1:20 pm

A few issues.

The taxable account and the IRA can cause wash sales if holding the same fund in each.

Target date funds are not tax efficient in taxable accounts so not the ideal choice.

wanderlust14
Posts: 49
Joined: Tue Nov 10, 2015 11:20 am

Re: Vanguard Target Date in both 401k and IRA/taxable---any issue?

Post by wanderlust14 » Mon Mar 20, 2017 1:35 pm

Nate79 wrote:A few issues.

The taxable account and the IRA can cause wash sales if holding the same fund in each.

Target date funds are not tax efficient in taxable accounts so not the ideal choice.
The wash sale only applies if one is TLH though, correct?

goingup
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Joined: Tue Jan 26, 2010 1:02 pm

Re: Vanguard Target Date in both 401k and IRA/taxable---any issue?

Post by goingup » Mon Mar 20, 2017 3:14 pm

Target date fund is fine your 401K. In your Vanguard taxable account hold only tax-efficient funds, unless you are in a very low tax bracket and plan to stay there forever.

Good funds for taxable are Total Stock, Total International. Because Blended or Target funds contain bonds and throw off bond interest (which is taxed at income tax rates) they are best in your tax-advantaged 401K or IRA account.

rkhusky
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Re: Vanguard Target Date in both 401k and IRA/taxable---any issue?

Post by rkhusky » Mon Mar 20, 2017 6:57 pm

You can put Target Retirement in 401k and IRA at a lower year than you would normally choose and put Total Stock and Total International in taxable. Or you could put normal Target Retirement in 401k and IRA and use Total Stock, Total International, and Intermediate Tax Exempt in taxable.

KT785
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Joined: Fri Jul 11, 2014 2:21 pm

Re: Vanguard Target Date in both 401k and IRA/taxable---any issue?

Post by KT785 » Mon Mar 20, 2017 7:15 pm

My wife and I both invest in the Vanguard 2050 Fund (Trust Plus) through our 401k and in the Vanguard 2050 Fund (Investor Shares) in our Roth IRAs. We don't currently invest in a taxable account but have contemplated using one as a supplement to our emergency fund and in that case, planned on leveraging either the Total Stock Market Index by itself or a combination TSM and muni-bond fund.

My rationale for using the same (essentially) target date fund across all accounts is that it I'm happy with the asset allocation and because it operates on auto-pilot, thus tamping down my desire to "tinker" with the funds and asset mix. :happy

That said, and as other posters have stated as well, I wouldn't use a TDF or other balanced fund in a taxable account.

Nate79
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Joined: Thu Aug 11, 2016 6:24 pm
Location: Portland, OR

Re: Vanguard Target Date in both 401k and IRA/taxable---any issue?

Post by Nate79 » Mon Mar 20, 2017 7:58 pm

wanderlust14 wrote:
Nate79 wrote:A few issues.

The taxable account and the IRA can cause wash sales if holding the same fund in each.

Target date funds are not tax efficient in taxable accounts so not the ideal choice.
The wash sale only applies if one is TLH though, correct?
Yes, with some planning the wash sale issue could be dealt with. The tax drag of a target fund would be of more concern to me.

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