Update: Taxable Portfolio Complete; Need Roth IRA Help

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Topic Author
NBSteel7
Posts: 26
Joined: Sun May 03, 2020 4:29 pm

Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by NBSteel7 »

Hello again!

In my first post on Bogleheads https://www.bogleheads.org/forum/viewt ... 1&t=313877, I gave my portfolio as a 21-year-old who is still in college and will soon graduate and become a full-time teacher. The overall thoughts from everyone who responded were that the taxable account I have is way too complicated and that I need to be simple. Here is the update with this.

First off, I am keeping Charles Schwab as my platform. Many might disagree with my decision but I have some reasons as to why -- but that is not the focus of this posting today. My original taxable brokerage positions were: (italics is old brokerage content).

MY OLD Taxable Account (Brokerage with Charles Schwab): Index, ETF & Mutual Funds --

Schwab U.S. Dividend ETF -- SCHD -- 5.80% Percent of Position in Portfolio
Schwab Fundamental International Large Company Index Fund -- SFNNX | 0.25% Gross E Ratio | 16.08% Percent of Position in Portfolio
Schwab S&P 500 Index Fund -- SWPPX | 0.02% Gross E Ratio | 60.49% Percent of Portfolio
Schwab Small-Cap Index Fund -- SWSSX | 0.04% Gross E Ratio | 13.70% Percent of Portfolio
T. Rowe Price International Disciplined Equity Fund Investor Class -- PRCNX | 1.24% Gross E Ratio | 2.10% of Portfolio
Wasatch Ultra Growth Fund -- WAWCX | 1.25% Gross E Ratio | 1.83% of Portfolio


---------------------------

HERE IS THE NEW SIMPLE TAXABLE ACCOUNT: (BOLDED)

Schwab Total Stock Market Index -- SWTSX -- 0.03% Gross E Ratio | 80% of Position in Portfolio
Schwab International Index Fund -- SWISX -- 0.06% Gross E Ratio | 20% of Position in Portfolio


Please Note: I am 21-years-old. This is just a taxable brokerage account. My old taxable account with Schwab that has all of the extra funds that are not necessary, I plan on just leaving it and pretending it does not exist. In 30 or more years down the road, it will be a little surprise for me. Overall, that old portfolio I do not want to sell anything. I have time in the market - dividends and capital gains reinvested -- I think it's best to just leave it alone and leave it be.

Quick Question: How does this new taxable brokerage account look? It's 80% Total Stock Market (TSM) and 20% International. I have compared these two Schwab funds to the TSM of Vanguard and honestly, they are very similar with many different aspects of the fund. The main question I have is... since I am 21, does 80% TSM and 20% international for a taxable brokerage sound solid? Does just having two index funds such as these two and dollar-cost averaging each month look like a solid plan just from a standpoint of a taxable brokerage account?

Thank you!

----------------- ROTH IRA TALK and HELP Please: -------------------

Now that we have discussed the taxable brokerage account, I want to discuss my Roth IRA. I am stuck with the Roth IRA portion and have read many different things in my last post regarding this. It was clear to me that my financial advisor with Ameriprise clearly just wanted to collect money for the institution she works for. The fees were incredibly HIGH. I don't want that moving forward.

I plan on moving my Roth IRA with Ameriprise to Schwab BUT I plan on not doing that right away. I have stopped all contributions with her and already opened the Roth with Schwab. I want to begin by buying into something that seems smart with me as a long term investor with a good time horizon. Then when the market is steady again, I can move that Ameriprise money invested over to Schwab. I don't want to do that at this moment since I "lost" a decent amount. I do however want to get started contributing to this new Roth with Schwab but need a solid plan.

Ideas:

I have heard many talk about a Target Date Retirement Fund. The only problem with this is that I don't know when I am going to retire. I can set a date of when I am 67 which will be in the year 2065, but what if I retire when I am 55 years old? How does that work then? I also have been researching Target Date funds and there are a lot of negatives that come up that I have seen.

Another person suggested that I do a S&P 500 Index Fund and a Large Cap Index Fund and call it a day. It's aggressive but that is exactly what I am looking for in an account due to my young age. When I get older I can add some bonds and target allocate my portfolio accordingly.

Questions:

1. What are some ideas for a young individual who wants to have a good Roth IRA that is simple yet aggressive?

2. International in a Roth?

3. Are target-date funds okay to own? I have heard a lot of negative things and I am curious about the thoughts of this from others.

Conclusion:

Ultimately I just want an aggressive portfolio that I will not touch until I am legally allowed due to the Roth IRA rules/ guidelines. Thank you for your time and for reading over my update along with some Roth IRA questions I had. I appreciate each and every one of you who commented.

- NB
dru808
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Location: mid pac

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by dru808 »

1. An s&p 500 or total stock fund and a international fund.

2. you’d have to research tax efficient placement to get a better idea.

3. Target funds are fine products, they aren’t the best if you’re doing the above tax efficient placement.
60% SCHK | 25% VIGI | 15% ILTB
lakpr
Posts: 6066
Joined: Fri Mar 18, 2011 9:59 am

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by lakpr »

NBSteel7 wrote: Fri May 08, 2020 5:04 pm My old taxable account with Schwab that has all of the extra funds that are not necessary, I plan on just leaving it and pretending it does not exist. In 30 or more years down the road, it will be a little surprise for me. Overall, that old portfolio I do not want to sell anything. I have time in the market - dividends and capital gains reinvested -- I think it's best to just leave it alone and leave it be.
This is a mistake, especially with the expense ratios being 1.25% or so on the funds you have. Your "new brokerage account" plan sounds good, you are investing in the whole US market and the whole International market. Why not sell those old funds and re-deploy the funds into the new brokerage account? By keeping the money in the old funds and not selling them, you are essentially giving up 20% of your returns every year to fees.

30 years down the line, when those accounts have grown much more, the capital gains that you would incur by selling them would be an order of magnitude higher than selling now when those gains are, relatively speaking, modest.
Topic Author
NBSteel7
Posts: 26
Joined: Sun May 03, 2020 4:29 pm

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by NBSteel7 »

lakpr wrote: Fri May 08, 2020 6:16 pm
NBSteel7 wrote: Fri May 08, 2020 5:04 pm My old taxable account with Schwab that has all of the extra funds that are not necessary, I plan on just leaving it and pretending it does not exist. In 30 or more years down the road, it will be a little surprise for me. Overall, that old portfolio I do not want to sell anything. I have time in the market - dividends and capital gains reinvested -- I think it's best to just leave it alone and leave it be.
This is a mistake, especially with the expense ratios being 1.25% or so on the funds you have. Your "new brokerage account" plan sounds good, you are investing in the whole US market and the whole International market. Why not sell those old funds and re-deploy the funds into the new brokerage account? By keeping the money in the old funds and not selling them, you are essentially giving up 20% of your returns every year to fees.

30 years down the line, when those accounts have grown much more, the capital gains that you would incur by selling them would be an order of magnitude higher than selling now when those gains are, relatively speaking, modest.
Response:

These two funds that you are talking about:

T. Rowe Price International Disciplined Equity Fund Investor Class -- PRCNX | 1.24% Gross E Ratio | 2.10% of Portfolio
Wasatch Ultra Growth Fund -- WAWCX | 1.25% Gross E Ratio | 1.83% of Portfolio

Are only 2.10% and 1.83% of my portfolio. My portfolio is roughly $9,000 so I think I have like $250 in the one and $220 in the other. I just bought a few shares and then decided to stop immediately. If I sell these two and get it out of that old portfolio and into the new, I just have to wait 90 days since it has a short term redemption fee associated with it. Therefore, I don't think a few hundred on the two high mutual funds that I bought (in a not smart manner) will hurt me that much. I could be wrong though and would like to hear your response. The other positions in the OLD portfolio are mainly index funds with about 60% into the S&P 500 which has an expense ratio of 0.02%. That is why I would like to leave the account alone. Thoughts?

Thank you for your time.

NB
lakpr
Posts: 6066
Joined: Fri Mar 18, 2011 9:59 am

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by lakpr »

NBSteel7 wrote: Fri May 08, 2020 6:26 pm Response:
These two funds that you are talking about:

T. Rowe Price International Disciplined Equity Fund Investor Class -- PRCNX | 1.24% Gross E Ratio | 2.10% of Portfolio
Wasatch Ultra Growth Fund -- WAWCX | 1.25% Gross E Ratio | 1.83% of Portfolio

Are only 2.10% and 1.83% of my portfolio. My portfolio is roughly $9,000 so I think I have like $250 in the one and $220 in the other. I just bought a few shares and then decided to stop immediately. If I sell these two and get it out of that old portfolio and into the new, I just have to wait 90 days since it has a short term redemption fee associated with it. Therefore, I don't think a few hundred on the two high mutual funds that I bought (in a not smart manner) will hurt me that much. I could be wrong though and would like to hear your response. The other positions in the OLD portfolio are mainly index funds with about 60% into the S&P 500 which has an expense ratio of 0.02%. That is why I would like to leave the account alone. Thoughts?

Thank you for your time.

NB
Oh, in that case exchange them after the 90-day holding period has passed. I was concerned about the 30-year time frame you have posted. Given that you already have the S&P 500 index fund in the "old brokerage account", why not use that same account and purchase additional funds? Why this distinction between a "old brokerage account" and "new brokerage account" ?

Consolidation of everything at Schwab is good, it's a well-respected brokerage firm on par with Vanguard and Fidelity (in contrast with other firms like Ameriprise, Raymond James, etc.). Just curious as to why having two accounts?

I'd also suggest exchanging these two funds into Schwab S&P 500 fund:
Schwab U.S. Dividend ETF -- SCHD -- 5.80% Percent of Position in Portfolio
Schwab Fundamental International Large Company Index Fund -- SFNNX | 0.25% Gross E Ratio | 16.08% Percent of Position in Portfolio
Topic Author
NBSteel7
Posts: 26
Joined: Sun May 03, 2020 4:29 pm

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by NBSteel7 »

lakpr wrote: Fri May 08, 2020 6:32 pm
NBSteel7 wrote: Fri May 08, 2020 6:26 pm Response:
These two funds that you are talking about:

T. Rowe Price International Disciplined Equity Fund Investor Class -- PRCNX | 1.24% Gross E Ratio | 2.10% of Portfolio
Wasatch Ultra Growth Fund -- WAWCX | 1.25% Gross E Ratio | 1.83% of Portfolio

Are only 2.10% and 1.83% of my portfolio. My portfolio is roughly $9,000 so I think I have like $250 in the one and $220 in the other. I just bought a few shares and then decided to stop immediately. If I sell these two and get it out of that old portfolio and into the new, I just have to wait 90 days since it has a short term redemption fee associated with it. Therefore, I don't think a few hundred on the two high mutual funds that I bought (in a not smart manner) will hurt me that much. I could be wrong though and would like to hear your response. The other positions in the OLD portfolio are mainly index funds with about 60% into the S&P 500 which has an expense ratio of 0.02%. That is why I would like to leave the account alone. Thoughts?

Thank you for your time.

NB
Oh, in that case exchange them after the 90-day holding period has passed. I was concerned about the 30-year time frame you have posted. Given that you already have the S&P 500 index fund in the "old brokerage account", why not use that same account and purchase additional funds? Why this distinction between a "old brokerage account" and "new brokerage account" ?

Consolidation of everything at Schwab is good, it's a well-respected brokerage firm on par with Vanguard and Fidelity (in contrast with other firms like Ameriprise, Raymond James, etc.). Just curious as to why having two accounts?
---

That is a good question. Honestly, I was told that to keep things simple with taxes then owning two main funds is better than owning the many I had in that "old brokerage account". Therefore, I just want a fresh start where my portfolio on Schwab has the two funds and call it a day. The "old brokerage account" can be "hidden" on the website. Therefore, I don't have to see all of those old positions in that account.

To be honest, I just want a fresh start with this and I think it is good psychologically to just see the two funds and buy the two each month (dollar cost average) and have the other brokerage just sit on the sideline "hidden". If that makes sense. Also starting over with a new brokerage on the same website I was told separates itself from taxes. So one brokerage has the taxes, then the next, then the next. (From what I understand). So I thought it would be smarter to do it the way I did.

Lastly, I will sell the two funds with high expense ratios after the 90 days. It gives me an extra close to $500 to put into that new brokerage. I see how that can be a solid idea. I am consolidating everything with Schwab. So everything will be on my one login account and easy for me to hide or unhide if I so need/want. Like I plan on doing with the fresh start.

Thank you
petulant
Posts: 1901
Joined: Thu Sep 22, 2016 1:09 pm

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by petulant »

Why are you resistant to selling the existing taxable holdings and moving the money to your new plan?

Also, there is no reason to have a different plan for your Roth IRA at this point. You can pick the exact same funds.

There is also not a good reason to delay moving assets from the Ameriprise account. The only thing that can make those funds go up is market performance. You can capture the same performance with less fees moving it to your Schwab Roth IRA.

This is not that complicated. Decide on your asset allocation, which you've done fine. Sell everything old and put it in the new strategy. Prioritize Roth contributions going forward. Then stop tinkering.
Topic Author
NBSteel7
Posts: 26
Joined: Sun May 03, 2020 4:29 pm

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by NBSteel7 »

petulant wrote: Fri May 08, 2020 7:11 pm Why are you resistant to selling the existing taxable holdings and moving the money to your new plan?

Also, there is no reason to have a different plan for your Roth IRA at this point. You can pick the exact same funds.

There is also not a good reason to delay moving assets from the Ameriprise account. The only thing that can make those funds go up is market performance. You can capture the same performance with less fees moving it to your Schwab Roth IRA.

This is not that complicated. Decide on your asset allocation, which you've done fine. Sell everything old and put it in the new strategy. Prioritize Roth contributions going forward. Then stop tinkering.
If I pick the same exact fund for both the taxable and the Roth, I just would focus on maxing out my Roth more than the taxable correct? That is what you meant by prioritizing it?

Also, picking the same two funds for both the Roth and the taxable account just scares me a little bit. Is this a safe thing to do? Have you seen many individuals do this before? Someone suggested an S&P 500 Index and a large-cap Index to really be aggressive in the Roth. Overall, I just think its a psychological thing when you have four indexes and all four are the same. (2 TSM and 2 international). If this makes sense.

Thank you for your response and everything. I truly appreciate it.

NB
petulant
Posts: 1901
Joined: Thu Sep 22, 2016 1:09 pm

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by petulant »

NBSteel7 wrote: Fri May 08, 2020 8:37 pm
petulant wrote: Fri May 08, 2020 7:11 pm Why are you resistant to selling the existing taxable holdings and moving the money to your new plan?

Also, there is no reason to have a different plan for your Roth IRA at this point. You can pick the exact same funds.

There is also not a good reason to delay moving assets from the Ameriprise account. The only thing that can make those funds go up is market performance. You can capture the same performance with less fees moving it to your Schwab Roth IRA.

This is not that complicated. Decide on your asset allocation, which you've done fine. Sell everything old and put it in the new strategy. Prioritize Roth contributions going forward. Then stop tinkering.
If I pick the same exact fund for both the taxable and the Roth, I just would focus on maxing out my Roth more than the taxable correct? That is what you meant by prioritizing it?

Also, picking the same two funds for both the Roth and the taxable account just scares me a little bit. Is this a safe thing to do? Have you seen many individuals do this before? Someone suggested an S&P 500 Index and a large-cap Index to really be aggressive in the Roth. Overall, I just think its a psychological thing when you have four indexes and all four are the same. (2 TSM and 2 international). If this makes sense.

Thank you for your response and everything. I truly appreciate it.

NB
Yes, I mean you can pick the same funds in both accounts and try to max Roth before making new taxable contributions. You got it.

Yes, many people mirror their investments across account types. The main reason BH investors would choose not to mirror their investments is because they have bonds and want to place those in traditional 401(k)/IRA accounts with stocks in taxable or Roth accounts. You are neither asking for input on a traditional account nor including bonds in your choice, so you can just mirror.

Being "aggressive" refers to having a high stock allocation compared to bonds. Your taxable strategy of 80% US stock and 20% international stock is ultimately a 100% stock portfolio, meaning it is already aggressive. You can afford to do that at a young age. Putting money in a large cap funs or S&P 500 fund is about the same aggressiveness, with the biggest difference being no international.

If it really makes you feel better, my wife and I are in our 20s. We have the exact same target AA as you right now: 80% US and 20% international. We have some accounts mirrored and some not. The reason some are not is because I don't like the international fund in my work 457(b), so we put some IRA money in a preferred one. Since all the accounts go together, that's fine with us.
Topic Author
NBSteel7
Posts: 26
Joined: Sun May 03, 2020 4:29 pm

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by NBSteel7 »

petulant wrote: Sat May 09, 2020 6:27 am
NBSteel7 wrote: Fri May 08, 2020 8:37 pm
petulant wrote: Fri May 08, 2020 7:11 pm Why are you resistant to selling the existing taxable holdings and moving the money to your new plan?

Also, there is no reason to have a different plan for your Roth IRA at this point. You can pick the exact same funds.

There is also not a good reason to delay moving assets from the Ameriprise account. The only thing that can make those funds go up is market performance. You can capture the same performance with less fees moving it to your Schwab Roth IRA.

This is not that complicated. Decide on your asset allocation, which you've done fine. Sell everything old and put it in the new strategy. Prioritize Roth contributions going forward. Then stop tinkering.
If I pick the same exact fund for both the taxable and the Roth, I just would focus on maxing out my Roth more than the taxable correct? That is what you meant by prioritizing it?

Also, picking the same two funds for both the Roth and the taxable account just scares me a little bit. Is this a safe thing to do? Have you seen many individuals do this before? Someone suggested an S&P 500 Index and a large-cap Index to really be aggressive in the Roth. Overall, I just think its a psychological thing when you have four indexes and all four are the same. (2 TSM and 2 international). If this makes sense.

Thank you for your response and everything. I truly appreciate it.

NB
Yes, I mean you can pick the same funds in both accounts and try to max Roth before making new taxable contributions. You got it.

Yes, many people mirror their investments across account types. The main reason BH investors would choose not to mirror their investments is because they have bonds and want to place those in traditional 401(k)/IRA accounts with stocks in taxable or Roth accounts. You are neither asking for input on a traditional account nor including bonds in your choice, so you can just mirror.

Being "aggressive" refers to having a high stock allocation compared to bonds. Your taxable strategy of 80% US stock and 20% international stock is ultimately a 100% stock portfolio, meaning it is already aggressive. You can afford to do that at a young age. Putting money in a large cap funs or S&P 500 fund is about the same aggressiveness, with the biggest difference being no international.

If it really makes you feel better, my wife and I are in our 20s. We have the exact same target AA as you right now: 80% US and 20% international. We have some accounts mirrored and some not. The reason some are not is because I don't like the international fund in my work 457(b), so we put some IRA money in a preferred one. Since all the accounts go together, that's fine with us.
Thank you so much for your comment and your experience. I truly appreciate that. Best of luck to you and your wife on your financial journey.
MJS
Posts: 582
Joined: Sat Aug 05, 2017 10:55 pm

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by MJS »

I'm with Escape from Ameriprise. Run away as soon you can! The extra 0.5-1.5% you'll save in fees & high ERs should start as soon as possible.

Do not-quite-mirroring. Someday (like 20-40 years from now) you may want to do tax loss harvesting in your taxable account, so put very similar but non-identical funds in your taxable & tax-deferred accounts. See https://www.investopedia.com/articles/e ... fa-vea.asp

[Of course, the tax loss harvesting & wash sale rules may change in the next half century.]
Direwolf14
Posts: 47
Joined: Tue Apr 03, 2018 1:40 pm

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by Direwolf14 »

Comments on your taxable portfolio:

- I'd suggest (like others here) waiting until the short-term redemption fee period has passed and then liquidating the original holdings/account. These funds will continue to generate dividends which will result in an additional 1099 to deal with every tax-year going forward (it's not as simple as just hiding the account in the settings tab).

- Schwab mutual funds are less tax efficient than ETF's (or Vanguard mutual funds with their dual share class). I'd suggest using ETF's to hold equities in your taxable portfolio (the actual 80:20 domestic/international index fund approach seems fine, though).
Topic Author
NBSteel7
Posts: 26
Joined: Sun May 03, 2020 4:29 pm

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by NBSteel7 »

Direwolf14 wrote: Sun May 10, 2020 10:03 am Comments on your taxable portfolio:

- I'd suggest (like others here) waiting until the short-term redemption fee period has passed and then liquidating the original holdings/account. These funds will continue to generate dividends which will result in an additional 1099 to deal with every tax-year going forward (it's not as simple as just hiding the account in the settings tab).

- Schwab mutual funds are less tax-efficient than ETF's (or Vanguard mutual funds with their dual share class). I'd suggest using ETF's to hold equities in your taxable portfolio (the actual 80:20 domestic/international index fund approach seems fine, though).
---

So you suggest instead of leaving the original taxable account that has around $9,000 in it as "hiding" in the settings, to sell everything when the time is right? Then with that cash, I can buy the two funds I plan on buying (80/20) and call it a day in the "new" taxable brokerage account?

I am going to stick with the Index funds instead of ETFs. Just a personal preference. I understand they are slightly less tax efficient but it's just my preference. I appreciate that suggestion though. I did some research after you said that.

Overall, I think this "new" taxable brokerage account with Schwab that has the 80/20 TSM and International is going to be way better for taxing going forward than having all of the unnecessary things such as a Dividend ETF in the last one. I learned my mistake with that and I believe this taxable account moving forward with Schwab's TSM and International 80/20 will suit me well. I just have to sell and move the cash to buy more of these two in the taxable instead of having two taxable accounts with one hiding. I think I understand why that can be a tax "problem" moving forward with the 1099 coming out each year.

Do I understand this correctly? Thank you for your response.
Saving$
Posts: 1989
Joined: Sat Nov 05, 2011 8:33 pm

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by Saving$ »

How much do you have in taxable?

How much in the Roth? (we know the total of the two is $9k)

How much are you putting in your employers 401k/403b?

1. You should not have a taxable account until you max out Roth and max out 401k/403b
2. You should not have $112 or whatever it is of a high cost fund. Just get rid of all those high cost funds. Bite the bullet. You will kick yourself in 20 years if you don't do it now.
Saving$
Posts: 1989
Joined: Sat Nov 05, 2011 8:33 pm

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by Saving$ »

deleted duplicate post
Direwolf14
Posts: 47
Joined: Tue Apr 03, 2018 1:40 pm

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by Direwolf14 »

NBSteel7 wrote: Sun May 10, 2020 11:51 am So you suggest instead of leaving the original taxable account that has around $9,000 in it as "hiding" in the settings, to sell everything when the time is right? Then with that cash, I can buy the two funds I plan on buying (80/20) and call it a day in the "new" taxable brokerage account?

I am going to stick with the Index funds instead of ETFs. Just a personal preference. I understand they are slightly less tax efficient but it's just my preference. I appreciate that suggestion though. I did some research after you said that.

Overall, I think this "new" taxable brokerage account with Schwab that has the 80/20 TSM and International is going to be way better for taxing going forward than having all of the unnecessary things such as a Dividend ETF in the last one. I learned my mistake with that and I believe this taxable account moving forward with Schwab's TSM and International 80/20 will suit me well. I just have to sell and move the cash to buy more of these two in the taxable instead of having two taxable accounts with one hiding. I think I understand why that can be a tax "problem" moving forward with the 1099 coming out each year.

Do I understand this correctly? Thank you for your response.
Any open account with taxable transactions during the year (dividends, capital gain/loss, etc.) will generate a 1099. So by opening a 2nd account, you've essentially doubled your tax paperwork (which may or may not be a big deal for you). If the new account has not actually generated any taxable transactions in 2020 yet, you could instead transfer the new account's holding to the original account (Schwab makes this really easy online if both accounts are housed there).

As far as selling the original investments goes... Once you've made up your mind that you no longer want to invest in something, I always recommend selling it ASAP assuming there are no financial penalties to doing so. Those penalties would include any fee imposed on the sale or the tax burden on a capital gain. Once the fee period is up, I recommend checking your gain/loss... If it's a loss, then seems like a no-brainer to sell. If it's a gain, then you must evaluate if it's truly worth the tax cost.
aristotelian
Posts: 8074
Joined: Wed Jan 11, 2017 8:05 pm

Re: Update: Taxable Portfolio Complete; Need Roth IRA Help

Post by aristotelian »

NBSteel7 wrote: Fri May 08, 2020 8:37 pm
If I pick the same exact fund for both the taxable and the Roth, I just would focus on maxing out my Roth more than the taxable correct? That is what you meant by prioritizing it?

Also, picking the same two funds for both the Roth and the taxable account just scares me a little bit. Is this a safe thing to do? Have you seen many individuals do this before? Someone suggested an S&P 500 Index and a large-cap Index to really be aggressive in the Roth. Overall, I just think its a psychological thing when you have four indexes and all four are the same. (2 TSM and 2 international). If this makes sense.
Assets that are tax-efficient for taxable account (i.e. stocks) are also good in Roth. However, I would not buy the exact same fund in both because purchases in your IRA (even dividend reinvestments) can interfere with tax loss harvesting and create wash sales in your brokerage account. I would suggest slightly different holdings to cut down on the chances of accidental wash sales.

Schwab is an excellent platform but they are not great for mutual funds. With all ETF's (including iShares, SPDR, and Vanguard) commission free, you are going to have a lot more options for tax loss harvesting which could be surprisingly difficult if you are limited to mutual funds.

Thus I would suggest something like Roth SCHB or Target Date and taxable VTI/VXUS according to your desired allocation.
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