Need tutorial on interpreting Vanguard year-end estimates

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ody10
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Need tutorial on interpreting Vanguard year-end estimates

Post by ody10 » Fri Dec 15, 2017 10:41 am

I have searched for, but have not found a tutorial on how to interpret the year-end estimates from Vanguard. Would anyone know of such a tutorial and be willing to share a link?

If not, I can post my clumsy questions here. If it helps, my goal is to get an idea of total dollars being estimated for distribution at year-end, so that I can get a good idea of our total income for 2017. That will help us to determine whether we have wiggle room in our tax bracket to move some funds from a traditional IRA into a Roth (thankfully, both are with Vanguard, so that part will be easy).

Thanks, all!

livesoft
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Re: Need tutorial on interpreting Vanguard year-end estimates

Post by livesoft » Fri Dec 15, 2017 11:04 am

Take the estimates which are per-share and multiply by the number of shares you hold in that fund. Add up all such numbers from all your funds that you consider on your tax return. Don't forget the income from the funds that you already received in 2017 each previous quarter or each previous month. That's it: You are done with estimating total income.

As a cross-check, the numbers should be similar, but slightly higher than your numbers for 2016.
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House Blend
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Re: Need tutorial on interpreting Vanguard year-end estimates

Post by House Blend » Fri Dec 15, 2017 12:26 pm

I'm not so sure that their 4th quarter estimates are particularly accurate. For example for VTSAX, their estimate for Q4 is $0.30 per share; I'm predicting something like $0.35 per share. We'll find out whose estimate is more accurate in about one week. ;-)

Also, due to withholding for foreign taxes, the amounts distributed from international funds are smaller than the amounts taxable. As a rough estimate, add 6 or 7% to the total dividend distribution for the year in any 100% international VG stock fund.
ody10 wrote:
Fri Dec 15, 2017 10:41 am
That will help us to determine whether we have wiggle room in our tax bracket to move some funds from a traditional IRA into a Roth (thankfully, both are with Vanguard, so that part will be easy).
The good news about Roth conversions is that you can afford to be sloppy. Indeed, thanks to the option to partially recharacterize a conversion, if you overshoot into the next bracket, you can fix the problem after the fact next year after your 1099s come in. So with that in mind, it makes sense to intentionally convert "too much".

ody10
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Re: Need tutorial on interpreting Vanguard year-end estimates

Post by ody10 » Fri Dec 15, 2017 3:37 pm

I'll try to be specific. I have shares in VWIAX - let's call it 100 shares. The QDI is 39%, as this is part bonds and part stocks. The net income available 12/31 is .49, and the total capital gain is .75. FWIW the NAV is 1.13%

So - do I multiply 100 times .49, and again by .75, and add those together for the estimated dollars? (And how is the NAV information used, if at all?)

You can see that I am fairly new to this, but want to educate myself. Houseblend, I will learn more about recharacterizing when I have time to process that, but want to take this baby step of once and done.

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House Blend
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Re: Need tutorial on interpreting Vanguard year-end estimates

Post by House Blend » Fri Dec 15, 2017 4:16 pm

ody10 wrote:
Fri Dec 15, 2017 3:37 pm
I'll try to be specific. I have shares in VWIAX - let's call it 100 shares. The QDI is 39%, as this is part bonds and part stocks.
The QDI percentage is relevant only for estimating how much Federal tax you will owe. For estimating how much space you have in a tax bracket, it is irrelevant.[*]
The net income available 12/31 is .49, and the total capital gain is .75. FWIW the NAV is 1.13%

So - do I multiply 100 times .49, and again by .75, and add those together for the estimated dollars?
Yes, the calculation is

Code: Select all

100 * ($0.49 + $0.75) = $124,
assuming we can trust those estimates.
(And how is the NAV information used, if at all?)
They are showing you how large the capital gain portion of the distribution is, as a percentage of the Net Asset Value on some date. Not particularly useful for your purpose.

Also, if you owned those 100 shares all year long, and did not buy, sell, or auto-reinvest any shares, then you should add another $137.50 to the above $124, to account for dividends from the previous three quarters. However, on the likelihood, that you probably did buy/sell/reinvest during the year, it would be more reliable to look up what you actually received in those three quarters. You can look that up in your online account if you navigate to the dividends tab (or is it labeled "distributions"?), and select for "YTD". I think the default is to show you "Quarter to Date", which should be $0 at the moment.

[*]Let me add that there can be circumstances where knowing the percentage of QDI matters for determining what levels of income will alter your marginal tax rate. This is not the same thing as knowing your tax bracket.

ody10
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Re: Need tutorial on interpreting Vanguard year-end estimates

Post by ody10 » Fri Dec 15, 2017 4:36 pm

Houseblend, that's very clear and very helpful. Thanks for taking the time that you did to educate me!

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