ROTH IRA /Bonds Investment Advice

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
sk005
Posts: 8
Joined: Sun Jan 13, 2019 11:27 pm

ROTH IRA /Bonds Investment Advice

Post by sk005 » Fri Apr 12, 2019 1:50 pm

Hi All,
Thank you for your valuable advice . I am a newbie to investment & learning a lot on this site.

My details:
age :38
Fed: 22% tax bracket
state:0% (Texas)
tax status: MFJ
Taxable acct: $50k in VTSAX.
401k/pension/HSAs: None.
EF: $50k(in a fixed CD 1.5% at local bank)
desired AA: 80% stocks, 20% bonds
debt: None
529s: $11k(No tax benefit in Texas)
ROTH IRA( will be avaliable by 17th Apr) : $16k
debt : None
retirement contribution: 2k/month(based on current salary)
not planning to withdraw either ROTH IRA or taxable account for next 25yrs.


1) How do I invest My ROTH IRA? should I buy VTSAX for ROTH too?
I am looking into VTIAX but need to study foreign tax credit further.

2) How do I get bonds in my portfolio?
desired AA: 80% stocks, 20% bonds.
is it wise to buy municipal bonds for taxable account? what are my other options for bonds?

TIA!

lakpr
Posts: 1144
Joined: Fri Mar 18, 2011 9:59 am

Re: ROTH IRA /Bonds Investment Advice

Post by lakpr » Fri Apr 12, 2019 2:27 pm

Bonds usually belong in 401k type tax deferred accounts. Seeing that you have none, you can simply go ahead and buy the fund Vanguard Total Bond Index Fund (VBTLX) for now. In the absence of 401k type account, go ahead and use Roth IRA for this. There is a $3000 minimum though.

In taxable account, if you buy bond funds, the interest paid by the fund yearly will become taxable income to you. In that sense it is no different than buying a CD. The interest accumulated, whether you redeemed it or not, gets added to your income and becomes part of “Adjusted Gross Income”.

No municipal bonds necessary for 22% tax bracket. They are better for folks in 32% or more cumulative tax bracket, think unfortunate folks in California. The after tax yield on municipal bonds is less than what you could earn in a straight up bond fund.

User avatar
Eagle33
Posts: 131
Joined: Wed Aug 30, 2017 3:20 pm

Re: ROTH IRA /Bonds Investment Advice

Post by Eagle33 » Fri Apr 12, 2019 5:40 pm

sk005 wrote:
Fri Apr 12, 2019 1:50 pm
1) How do I invest My ROTH IRA? should I buy VTSAX for ROTH too?
I am looking into VTIAX but need to study foreign tax credit further.
Foreign tax credit claiming only comes into play in taxable account, not IRAs.
Rocket science is not “rocket science” to a rocket scientist, just as personal finance is not “rocket science” to a Boglehead.

Topic Author
sk005
Posts: 8
Joined: Sun Jan 13, 2019 11:27 pm

Re: ROTH IRA /Bonds Investment Advice

Post by sk005 » Mon Apr 15, 2019 2:09 pm

Thank you lakpr & Eagle33.

Post Reply