Help me with this "mess" of taxable accounts

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OnTrack2020
Posts: 89
Joined: Mon Mar 20, 2017 10:24 am

Help me with this "mess" of taxable accounts

Post by OnTrack2020 » Sun Jul 16, 2017 5:13 pm

My husband is planning to retire in about 4 years at age 62. The taxable accounts listed below are roughly 14% of our retirement portfolio. Upon his retirement, we would like either 50/50 or 55/45.

I feel pretty comfortable with our non-taxable portion in regards to asset allocation, but continue to work on slowly reallocating our stock portion. I do not, however, like that we hold so many stock funds in our taxable accounts, and I am just "stuck" on trying to figure out what to do with these. If he decides to wait until age 66, or FRA, to take SS, we will need to draw from these taxable accounts first to gap the years until SS. We will, more than likely, need to draw down and use all of these funds in order to meet expenses from age 62 until FRA.

I really like all of these funds and BRK_B, but really need to do something so they are not all in stock. (We did sell a portion of BRK_B this summer to start an emergency fund, which is just sitting.) We are in the 15% bracket, and CPA mentioned that I needed to put more into retirement (I'm a stay-at-home mom) and to make sure it goes into traditional IRA, as we are close to the next tax bracket.

Do I just leave these accounts in some sort of taxable account, but an account with more bonds? Or should I move some of these into an IRA or something else? Sometimes, in an emergency, we've needed to draw from these taxable accounts--like when we needed a new roof. Also, we use some of the dividends at year-end to assist our son with college tuition. Plus, we need a good, used car for our daughter.

They are as follows (each account holds from anywhere from $3,500 to $25,000):

Berk_B (Berkshire Hathaway) - ~1% (am trying to sell all within the next few years)
VG High Div. Yld Index (VHDYX - .15% ER) - <1%
VG Wellington (VWELX - .25% ER) - <1%
Vanguard Global Equity (VHGEX - .51% ER) - ~2%
Vanguard Growth and Income (VQNPX - .34% ER) - ~2%
Vanguard Dividend Growth (VDIGX - .30% ER) - ~2%
T Rowe Pr/Global Technology (PRGTX - .90% ER) - ~2%
Trowe Price/New Horizons (PRNHX - .79% ER) - ~2% (If we sell, we can't get back in--closed)
Dodge & Cox/Balanced Fund (DODBX -.53% ER) - ~2%

I also have another question. What do you all do with the "cash reserve/stable investment" portion of your 401k. Do you hold a portion in this, or just invest in strictly stocks and bonds within the 401k?

Thanks,

Uniballer
Posts: 53
Joined: Thu Apr 20, 2017 9:55 am

Re: Help me with this "mess" of taxable accounts

Post by Uniballer » Sun Jul 16, 2017 6:06 pm

I'm afraid I don't really see the "problem". It is not necessary to have your desired asset allocation in every account; it is more important to meet your asset allocation across all of your accounts. A unified portfolio, if you will.

Stock index funds are generally more tax-efficient than bond funds when held in taxable accounts. Many of the Bogleheads are holding mostly/all stock funds in taxable with all bonds held in tax-deferred (tIRA or 401k). Wiki article on Tax-efficient Fund Placement.

I suggest that if you want advice, submit all of your info in the standard portfolio advice format.

mhalley
Posts: 4984
Joined: Tue Nov 20, 2007 6:02 am

Re: Help me with this "mess" of taxable accounts

Post by mhalley » Sun Jul 16, 2017 6:45 pm

The stable value fund in the 401k can be a valuable addition to your fixed income portfolio. I have read several posts on the forum where the stable value fund had a great yield accompanied by less risk than some bond funds. My 401k on the other hand had a very mediocre svf.
If you post more details about the fund, the you could get better advice on whether to use the fund. They can be somewhat to evaluate, here is an old post on them.
viewtopic.php?t=144325

In the meantime, money needed within five years should not be in stocks, so with the market at all time highs it would be reasonable to sell some of the stock funds (paricularly the high er ones) for safer investments.
At higher tax brackets, you might also want to get rid of the balanced funds.

dwickenh
Posts: 687
Joined: Sun Jan 04, 2015 9:45 pm
Location: Illinois

Re: Help me with this "mess" of taxable accounts

Post by dwickenh » Sun Jul 16, 2017 7:48 pm

OnTrack2020 wrote:My husband is planning to retire in about 4 years at age 62. The taxable accounts listed below are roughly 14% of our retirement portfolio. Upon his retirement, we would like either 50/50 or 55/45.

I feel pretty comfortable with our non-taxable portion in regards to asset allocation, but continue to work on slowly reallocating our stock portion. I do not, however, like that we hold so many stock funds in our taxable accounts, and I am just "stuck" on trying to figure out what to do with these. If he decides to wait until age 66, or FRA, to take SS, we will need to draw from these taxable accounts first to gap the years until SS. We will, more than likely, need to draw down and use all of these funds in order to meet expenses from age 62 until FRA.

I really like all of these funds and BRK_B, but really need to do something so they are not all in stock. (We did sell a portion of BRK_B this summer to start an emergency fund, which is just sitting.) We are in the 15% bracket, and CPA mentioned that I needed to put more into retirement (I'm a stay-at-home mom) and to make sure it goes into traditional IRA, as we are close to the next tax bracket.

Do I just leave these accounts in some sort of taxable account, but an account with more bonds? Or should I move some of these into an IRA or something else? Sometimes, in an emergency, we've needed to draw from these taxable accounts--like when we needed a new roof. Also, we use some of the dividends at year-end to assist our son with college tuition. Plus, we need a good, used car for our daughter.

They are as follows (each account holds from anywhere from $3,500 to $25,000):

Berk_B (Berkshire Hathaway) - ~1% (am trying to sell all within the next few years)
VG High Div. Yld Index (VHDYX - .15% ER) - <1%
VG Wellington (VWELX - .25% ER) - <1%
Vanguard Global Equity (VHGEX - .51% ER) - ~2%
Vanguard Growth and Income (VQNPX - .34% ER) - ~2%
Vanguard Dividend Growth (VDIGX - .30% ER) - ~2%
T Rowe Pr/Global Technology (PRGTX - .90% ER) - ~2%
Trowe Price/New Horizons (PRNHX - .79% ER) - ~2% (If we sell, we can't get back in--closed)
Dodge & Cox/Balanced Fund (DODBX -.53% ER) - ~2%



I also have another question. What do you all do with the "cash reserve/stable investment" portion of your 401k. Do you hold a portion in this, or just invest in strictly stocks and bonds within the 401k?

Thanks,

I agree with mhalley on this one.

I have been retired about 1 year with the same(50/50) allocation. My IRA(50%of assets) is 20% stocks, 80% fixed income.
My taxable account(50%of assets) is 80% stocks and 20% short term bonds for spending as I am also holding off on SS at this time.

I would also create an emergency cash fund to cover unexpected expenses without selling stocks.

I hold enough cash and short term bonds to cover 2-3 years of expenses. I do not want to draw from my IRA at this time to keep my income low for possible health Ins subsidies or Roth conversions.

Best to you,

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

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