Both tIRA and Roth investment composition

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JBTX
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Joined: Wed Jul 26, 2017 12:46 pm

Both tIRA and Roth investment composition

Post by JBTX »

For those that have accumulated funds in both Roths and Traditional IRAs / 401k (and also taxable accounts) , how do you allocate your investment classes across tax deferred vehicles, or do you? I tend to be more equity heavy in Roths and more income heavy in traditionals under the theory that equities should return more and it is better to be tax free down the road, but I do have both in both vehicles.
mega317
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Re: Both tIRA and Roth investment composition

Post by mega317 »

I think many people do as you are describing. I have all of my bonds in my 403b and the rest of my 403b, 457, 401a, Roths, and taxable are stocks.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
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Peter Foley
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Re: Both tIRA and Roth investment composition

Post by Peter Foley »

While it is somewhat dependent on from which accounts one is going to withdraw funds first, the approach usually recommended is to hold equities in one's Roth and bonds in a tax deferred account.*

The reasoning is that the Roth will grow tax free so you want to optimize the opportunity for growth in the Roth. If tax deferred grows a little more slowly, RMD's will be lower.

*Some early retirees might be planning on withdrawing Roth contributions before age 59.5 to avoid the penalty of early withdrawal from a TIRA.
Topic Author
JBTX
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Re: Both tIRA and Roth investment composition

Post by JBTX »

It doesn't seem to be a topic discussed here that much. I was just curious.


I suppose if you were really worried market was overvalued and is going to crash you could put your equities in tIRAs to reduce the tax burden, but ultimately that in itself is a form of active and speculative management.

In my case most of my stuff is in Roths and tIRAs/401ks. Approx 10% is in taxable, half of that is in ibonds and half in various bank accounts. I don't have any equity in taxable.

While it doesn't directly affect my situation I have heard two different schools of thought in taxable accounts. Some say put stocks in tax deferred since they will grow more. Others say put stocks in taxable since capital gains are lower and to some extent they can be managed.

What do most people here do? Is it just not an issue because everybody is three fund portfolio-ing it across the board?
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Earl Lemongrab
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Re: Both tIRA and Roth investment composition

Post by Earl Lemongrab »

JBTX wrote: Tue Aug 15, 2017 11:52 am I suppose if you were really worried market was overvalued and is going to crash you could put your equities in tIRAs to reduce the tax burden, but ultimately that in itself is a form of active and speculative management.
No, it's better to have the equities in taxable because you can sell at a loss and buy replacement stock funds.
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