Same Index Strategy for 401k and Taxable Account

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Topic Author
westcoastsaver
Posts: 4
Joined: Mon Feb 11, 2019 1:21 pm

Same Index Strategy for 401k and Taxable Account

Post by westcoastsaver » Mon Feb 11, 2019 1:55 pm

New to the forum and am looking to simplify my holdings to something like the three fund portfolio (or honestly even one...VT). Tying to get rid of currently management fees and high expense funds, looking to transfer out to Fidelity or Vanguard.

Real question is at 40 years old with about 400k in my taxable account and 300k in 401k, would it be crazy to do the same investment for both accounts by going all into the VT? Not retiring for 20+ years, and will not mind not checking these more than once a year. Have little interest in making changes once it is set in motion, and understand it could be a bumpy ride until needing to shift to bond/stock mix).

Have spend a lot of time on this site and the various resources online, but would truly appreciate insight from others who have this mindset.

Thanks,
Ricky

retiredjg
Posts: 35097
Joined: Thu Jan 10, 2008 12:56 pm

Re: Same Index Strategy for 401k and Taxable Account

Post by retiredjg » Mon Feb 11, 2019 4:27 pm

It is probably not your best idea to have the same strategy in taxable and in a 401k. This is because bonds are not tax-efficient.

If you are in a very high tax bracket, you could hold tax-exempt bonds in taxable and do OK. If you are in a medium tax bracket, I don't think this your best idea, but it could be done.

If all you plan to hold is Vanguard's Total World, it doesn't matter, but it does not seem wise to me to not hold any bonds or other fixed assets at age 40. Maybe you could hold VT in taxable and VT and some bonds in the 401k.

Welcome to the forum.

Topic Author
westcoastsaver
Posts: 4
Joined: Mon Feb 11, 2019 1:21 pm

Re: Same Index Strategy for 401k and Taxable Account

Post by westcoastsaver » Mon Feb 11, 2019 8:48 pm

Thanks, retiredjg- sounds like at most put bonds (perhaps BND?) in the 401k, maybe 10-20% along with the VT? And could do just 100% VT in the taxable and let it ride.

Thank you-really enjoying this forum.

tarmangani
Posts: 126
Joined: Thu Dec 28, 2017 10:14 am

Re: Same Index Strategy for 401k and Taxable Account

Post by tarmangani » Mon Feb 11, 2019 8:53 pm

Two separate issues here.

First, how to establish an asset allocation. Sounds like you want to be 100% equities. Only you can settle on that. I'm not wild about that level of aggression, even at 40, but some people do it.

Second, you're wondering how to divvy up your assets by accounts. If you're 100% equities it obviously doesn't matter, but if you do want fixed income/bonds, then those should go into the 401(k). See this page for more information on tax efficiency,

https://www.bogleheads.org/wiki/Tax-eff ... _placement

Topic Author
westcoastsaver
Posts: 4
Joined: Mon Feb 11, 2019 1:21 pm

Re: Same Index Strategy for 401k and Taxable Account

Post by westcoastsaver » Mon Feb 11, 2019 10:18 pm

Thank you Tarmangani, appreciate the insight and the link which was very helpful.

After a decade of paying high fees for management of my investments, I am excited to simplify my holdings and reduce overall costs. I am not risk averse so the 100% equity route is palatable for the next 10-15 years, and I like the idea of an all world ETF like VT based on all that I have read here. I do not contribute anything to the taxable account at this point, but do max out the 401k each year as well as 529s for the kids. Wondering if worth funding the Roth IRA each year possibly from the taxable account. I will probably do a 90/10 VT/bond ETF (BND or similar) in the 401k and just leave it alone.

Thanks for the replies!

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