Help with Tax-Efficient Portfolio for Taxable account

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ottto
Posts: 3
Joined: Mon Jul 25, 2016 8:36 am

Help with Tax-Efficient Portfolio for Taxable account

Post by ottto » Sat Jan 13, 2018 3:33 pm

Hello Bogleheads,
So far I've contributed as much as I can to my Principal 401k / Vanguard Roth IRA and I'm looking to invest money (~15,000) in a taxable account (don't worry I have emergency cash funds). I've opened an individual account via Vanguard and am looking for guidance on selecting tax-efficient stock/bonds from the Vanguard mutual funds list. I'd like the allocation to be distributed around 80% stocks/20% bonds. This is my first time investing in a taxable account so I'd like it to be relatively basic and simple at first.

After browsing Bogleheads / reading the Bogleheads book, I'm wondering if the following would be a good starting set of funds for a taxable account:
(VTSMX) Vanguard Total Stock Market Index: $12,000
(VWITX) Vanguard Intermediate-Term Tax-Exempt Fund $3,000

-- General Information --
Age: 29
Tax Bracket: 24%
Occupation: Software Engineer
Income: 120,000

-- Principal 401k -- (need to change up)
Principal LifeTime Hybrid 2050 CIT (57.14%)
Principal LifeTime Hybrid 2055 CIT (42.86%)
Total: $45,307.05

-- Vanguard Roth IRA --
Vanguard Target Retirement 2060 Fund Investor Shares
Total: $12,625.22

livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: Help with Tax-Efficient Portfolio for Taxable account

Post by livesoft » Sat Jan 13, 2018 3:37 pm

Do you really need to have 80/20 in taxable? I ask because many investors put the bond fund in their 401(k) and leave taxable at 100% stocks. That is, they don't need the same asset allocation in all of their separate accounts as long as the asset allocation for all of them together is where they want it to be.

So VTSMX (really VTSAX) in taxable seems fine for what you want to accomplish, but move $3,000 of your 401(k) into a bond fund, too.
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whodidntante
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Re: Help with Tax-Efficient Portfolio for Taxable account

Post by whodidntante » Sat Jan 13, 2018 3:48 pm

100% stock in taxable, fixed income in tax-deferred.

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cfs
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Re: Help with Tax-Efficient Portfolio for Taxable account

Post by cfs » Sat Jan 13, 2018 4:29 pm

My vote is for 100% equities in the taxable account, and that is exactly what I do with my taxable account (by the way this is my largest account). Good luck with your decision and thanks for reading ~cfs~
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sambb
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Re: Help with Tax-Efficient Portfolio for Taxable account

Post by sambb » Sat Jan 13, 2018 4:57 pm

The wiki on tax efficient investing is flawed according to numerous threads herein, and is very dependent on capital gains and other tax rates at a later date. Do we know what those rates will be in 10 or 20 years? Consider that before taking any advice on it.

retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: Help with Tax-Efficient Portfolio for Taxable account

Post by retiredjg » Sat Jan 13, 2018 5:27 pm

Do you want 80/20 specifically in the taxable account or overall? If you want 80/20 overall, you have picked the wrong target funds to achieve that. Those are probably all at least 90% stock and maybe more.

jimmieg
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Joined: Sun Feb 26, 2012 8:25 am

Re: Help with Tax-Efficient Portfolio for Taxable account

Post by jimmieg » Fri Feb 02, 2018 5:31 pm

sambb wrote:
Sat Jan 13, 2018 4:57 pm
The wiki on tax efficient investing is flawed according to numerous threads herein, and is very dependent on capital gains and other tax rates at a later date. Do we know what those rates will be in 10 or 20 years? Consider that before taking any advice on it.
Does a low tax bracket (10%) make a difference in the advice?

I am in retirement now, just beginning to withdraw RMD IRA funds, have enough cash in taxable for my needs. My overall AA is 50/50.

Since I am in the lowest tax bracket (10%) for the foreseeable future, am I still wise to follow the general consensus of investing taxable funds 100% in a total stock market fund like VTI? Would a balanced fund be OK? What about a fund like Wellesley since my tax rate is low?
Thanks!

retiredjg
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Re: Help with Tax-Efficient Portfolio for Taxable account

Post by retiredjg » Fri Feb 02, 2018 6:00 pm

Being in a low tax bracket could make a lot of difference.
am I still wise to follow the general consensus of investing taxable funds 100% in a total stock market fund like VTI?
Not necessarily and probably not if it is inconvenient.

It's not really possible to give good suggestions without knowing your big picture. If your taxable account is 5% of your portfolio, the advice would be different then if your taxable account is 50% of your portfolio.

Also some people do not like to have balanced funds (a fund containing both stocks and bonds...like Wellington) in taxable because it means you cannot sell bonds without selling stocks and vice versa. But all of this depends on many things, none of which we really know yet.

jimmieg
Posts: 48
Joined: Sun Feb 26, 2012 8:25 am

Re: Help with Tax-Efficient Portfolio for Taxable account

Post by jimmieg » Fri Feb 02, 2018 6:16 pm

"It's not really possible to give good suggestions without knowing your big picture. If your taxable account is 5% of your portfolio, the advice would be different then if your taxable account is 50% of your portfolio. "

FWIW, my taxable account is 14% of my overall assets, a portion coming from profits after sale of residence and downsizing. Mostly MMF, online savings and CD's. As I add some of our RMD's it may grow a bit, but probably will be consumed at the rate of RMD withdrawals from tax-advantaged. No Roth. AGI projected to stay low.

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