What to do with monthly surplus?

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peterwantstosave
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What to do with monthly surplus?

Post by peterwantstosave »

Friends,

Thanks in large part to the Bogleheads, I have a regular monthly surplus for the first time ever.

After maxing out retirement accounts, what's the Boglehead thing to do?

I believe it is Total Market Index Fund in Taxable. Is that correct?

This board has helped me get there, so I feel lots of gratitude.

Peter
403b: 54% VTSAX, 36% BTMKX 10% QCBMRX | GSRA: 100% Money Market (100% QCBMRX on Dec 11, 2020) | Roth IRA: 100% FIPFX | Taxable: 100% FSKAX
000
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Re: What to do with monthly surplus?

Post by 000 »

Tax efficient index funds in taxable seems like a good plan.
retired@50
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Re: What to do with monthly surplus?

Post by retired@50 »

peterwantstosave wrote: Mon Aug 31, 2020 5:43 pm After maxing out retirement accounts, what's the Boglehead thing to do?

I believe it is Total Market Index Fund in Taxable. Is that correct?
Yes it is correct. Although I personally use the S&P 500 index fund. However, that's because I started investing before the total market fund existed.

Regards,
This is one person's opinion. Nothing more.
BoglePablo
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Re: What to do with monthly surplus?

Post by BoglePablo »

Yes; invest according to my IPS and desired asset allocation.

IPS plan also includes additional cash savings for a large future purchase in the near term; but investment-wise, my plan says to put after tax extra cash into broad based low cost no load index funds for backdoor Roth and, if still surplus available, after tax account. I use S&P 500, which is similar enough to Total Market for me.
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dogagility
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Re: What to do with monthly surplus?

Post by dogagility »

peterwantstosave wrote: Mon Aug 31, 2020 5:43 pm After maxing out retirement accounts, what's the Boglehead thing to do?
Max an HSA, if you can.
All children spill milk. Learn to smile and wipe it up. -- A Farmer's Wife
sailaway
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Re: What to do with monthly surplus?

Post by sailaway »

Just when we would have had a regular surplus, we found the mega backdoor Roth, instead. Have you looked into that?

Does your workplace have any other opportunities that you passed up on in the past because you weren't ready to hear about them?
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arcticpineapplecorp.
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Re: What to do with monthly surplus?

Post by arcticpineapplecorp. »

peterwantstosave wrote: Mon Aug 31, 2020 5:43 pm Friends,

Thanks in large part to the Bogleheads, I have a regular monthly surplus for the first time ever.

After maxing out retirement accounts, what's the Boglehead thing to do?

I believe it is Total Market Index Fund in Taxable. Is that correct?

This board has helped me get there, so I feel lots of gratitude.

Peter
read up on tax loss harvesting if you plan on investing in taxable so you understand what to do (create specific i.d. and don't reinvest dividends and understand qualified vs. nonqualified dividends if you should sell/exchange within 61 days of a dividend payout and if you should create a wash sale how that works:

https://www.bogleheads.org/wiki/Wash_sale
https://www.bogleheads.org/wiki/User:La ... _beginners
viewtopic.php?t=25268
viewtopic.php?t=172568
viewtopic.php?t=179414
https://www.bogleheads.org/wiki/Qualified_dividend
https://www.bogleheads.org/wiki/Non-qualified_dividends

that should keep you busy for a while!
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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willthrill81
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Re: What to do with monthly surplus?

Post by willthrill81 »

Buy VTI in taxable and call it a day.
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DSInvestor
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Re: What to do with monthly surplus?

Post by DSInvestor »

Are you maxing out work place plans and IRAs? If you're married, make sure spouse is doing same. If spouse has no compensation, and you file taxes as married filing jointly, spousal IRA contributions are permitted based on your income.

If all retirement plans maxed out, it may be good to consider investing in taxable accounts and/or making accelerated payments on mortgage, student loans, car loans etc.
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NewMoneyMustBeSmart
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Re: What to do with monthly surplus?

Post by NewMoneyMustBeSmart »

peterwantstosave wrote: Mon Aug 31, 2020 5:43 pm After maxing out retirement accounts, what's the Boglehead thing to do?

I believe it is Total Market Index Fund in Taxable. Is that correct?
Makes sense to me IF you have maxed out work pre-tax, work post-tax (if you have it), you and wife's Roth IRA; kid's 529 to limit of state tax benefit (if exists), and charitable contributions are met.

X%/Y% VTSAX/VBTLX might make sense as well.
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novemberrain
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Re: What to do with monthly surplus?

Post by novemberrain »

If you are married with 2 kids, this could be

two 401k accounts (bonds can be placed here)
two IRA accounts (bonds can be placed here)
two 529 accounts
one HSA account to invest in stocks
one taxable account
CardioMD
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Re: What to do with monthly surplus?

Post by CardioMD »

FXAIX
“The stock market is a giant distraction from the business of investing.” -Jack Bogle
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badbreath
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Re: What to do with monthly surplus?

Post by badbreath »

I sorta agree with this but some small changes
by novemberrain

If you are married with 2 kids, this could be

two 401k accounts (bonds can be placed here) If you both have 401ks if not see next line
two IRA accounts (bonds can be placed here) a Roth may be better down the line. If your wife is a SAHM a tIRA may lower your taxes
two 529 accounts up to an amount that will sufficiently fund college the fund can be transferred between kids
one HSA account to invest in stocks
one taxable account Yes but all accounts would be thought of as one account
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HomeStretch
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Re: What to do with monthly surplus?

Post by HomeStretch »

Another option to consider is I-Bonds.
Topic Author
peterwantstosave
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Re: What to do with monthly surplus?

Post by peterwantstosave »

thank you all

lots of good things to think about here

P
403b: 54% VTSAX, 36% BTMKX 10% QCBMRX | GSRA: 100% Money Market (100% QCBMRX on Dec 11, 2020) | Roth IRA: 100% FIPFX | Taxable: 100% FSKAX
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Googliebear
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Re: What to do with monthly surplus?

Post by Googliebear »

If you have tax deferred retirement accounts and you have the room (within your tax bracket) to convert some assets to Roth, you may consider doing some Roth Conversions and using your excess cashflow for taxes if it would be advantageous for you from a tax perspective. It's beneficial to do Roth Conversions while the market is down but it may be worth doing it regardless.
nix4me
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Re: What to do with monthly surplus?

Post by nix4me »

willthrill81 wrote: Mon Aug 31, 2020 9:14 pm Buy VTI in taxable and call it a day.
This. I do this.
kajukenbo
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Re: What to do with monthly surplus?

Post by kajukenbo »

Any reason for VTI over VTSAX?
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ruralavalon
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Re: What to do with monthly surplus?

Post by ruralavalon »

peterwantstosave wrote: Mon Aug 31, 2020 5:43 pm Friends,

Thanks in large part to the Bogleheads, I have a regular monthly surplus for the first time ever.

After maxing out retirement accounts, what's the Boglehead thing to do?

I believe it is Total Market Index Fund in Taxable. Is that correct?

This board has helped me get there, so I feel lots of gratitude.

Peter
Yes.

This is a great problem to have :) .

kajukenbo wrote: Sat Sep 12, 2020 11:58 am Any reason for VTI over VTSAX?
Not really, it's mostly personal preference.

But use the ETF if your account is not at Vanguard and trades in the ETF are commission free but a fee is charged for the regular mutual fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Keenobserver
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Re: What to do with monthly surplus?

Post by Keenobserver »

000 wrote: Mon Aug 31, 2020 5:44 pm Tax efficient index funds in taxable seems like a good plan.
This is what I have been doing. Simple, yes and one feels as if it should more complicated. Nope. Invest in dervisified index and hold.
MJS
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Re: What to do with monthly surplus?

Post by MJS »

arcticpineapplecorp. wrote: Mon Aug 31, 2020 9:11 pm
peterwantstosave wrote: Mon Aug 31, 2020 5:43 pm Friends,

Thanks in large part to the Bogleheads, I have a regular monthly surplus for the first time ever.

After maxing out retirement accounts, what's the Boglehead thing to do?

I believe it is Total Market Index Fund in Taxable. Is that correct?

This board has helped me get there, so I feel lots of gratitude.

Peter
read up on tax loss harvesting if you plan on investing in taxable so you understand what to do (create specific i.d. and don't reinvest dividends and understand qualified vs. nonqualified dividends if you should sell/exchange within 61 days of a dividend payout and if you should create a wash sale how that works:

https://www.bogleheads.org/wiki/Wash_sale
https://www.bogleheads.org/wiki/User:La ... _beginners
viewtopic.php?t=25268
viewtopic.php?t=172568
viewtopic.php?t=179414
https://www.bogleheads.org/wiki/Qualified_dividend
https://www.bogleheads.org/wiki/Non-qualified_dividends

that should keep you busy for a while!
+1.
If you include an international total market in your portfolio, put it the taxable account so you can deduct the dividends foreign taxes on your income taxes.


Edited to show correction.
Last edited by MJS on Sun Sep 13, 2020 12:46 pm, edited 1 time in total.
pasadena
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Re: What to do with monthly surplus?

Post by pasadena »

What exactly do you include in "retirement accounts". Are you sure that you are using all of the account types that you'd potentially have access to? If so, and assuming you have a fully funded emergency fund and all your other savings goals are met, taxable. What exactly to invest in depends on your bigger pictures. Generally speaking, "according to your IPS" would be the correct answer.

As an example, here's my money flow. Some of those may or may not be available to you. In [brackets] the options for a couple

Paycheck --> max-out pre-tax 401(k)* [x2] --> max-out mega-backdoor Roth [x2] --> Max-out backdoor Roth* [x2] --> max-out HSA** [family] --> Top off Emergency Fund if needed --> Save for bigger expected short term expenses --> taxable

If you have kids, maybe add investing in a 529 for them, somewhere in there.

* including catch-up contribution if 50 or older.
** I know, most people would tell me to max-out my HSA first but it makes more sense that way due to my unique situation and retirement plans. Besides, so far I've been able to do all of it.
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wander
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Re: What to do with monthly surplus?

Post by wander »

Do you still have debt? If yes, that needs to go first.
retired@50
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Re: What to do with monthly surplus?

Post by retired@50 »

MJS wrote: Sat Sep 12, 2020 6:03 pm
+1.
If you include an international total market in your portfolio, put it the taxable account so you can deduct the dividends on your income taxes.
I think you mean deduct the foreign taxes paid, not the dividends.

See link: https://www.bogleheads.org/wiki/Foreign_tax_credit

Regards,
This is one person's opinion. Nothing more.
MJS
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Re: What to do with monthly surplus?

Post by MJS »

retired@50 wrote: Sun Sep 13, 2020 10:00 am
MJS wrote: Sat Sep 12, 2020 6:03 pm
+1.
If you include an international total market in your portfolio, put it the taxable account so you can deduct the dividends on your income taxes.
I think you mean deduct the foreign taxes paid, not the dividends.

See link: https://www.bogleheads.org/wiki/Foreign_tax_credit

Regards,
Thanks! Yes, I meant foreign taxes. Although deducting dividends would be very nice indeed!
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grabiner
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Re: What to do with monthly surplus?

Post by grabiner »

retired@50 wrote: Sun Sep 13, 2020 10:00 am
MJS wrote: Sat Sep 12, 2020 6:03 pm
+1.
If you include an international total market in your portfolio, put it the taxable account so you can deduct the dividends on your income taxes.
I think you mean deduct the foreign taxes paid, not the dividends.

See link: https://www.bogleheads.org/wiki/Foreign_tax_credit
Check your own tax situation. International funds are eligible for the foreign tax credit, but they tend to have higher dividend yields and more non-qualified dividends, so they may have a comparable tax cost to US funds. In particular, if you are in a high-tax state, the higher dividend yield on foreign stocks makes them less attractive in a taxable account.
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DesertMan
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Re: What to do with monthly surplus?

Post by DesertMan »

Vanguard Target Retirement X Fund in taxable, where X is the year you expect to need the money.
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grabiner
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Re: What to do with monthly surplus?

Post by grabiner »

DesertMan wrote: Sun Sep 13, 2020 9:00 pm Vanguard Target Retirement X Fund in taxable, where X is the year you expect to need the money.
I don't recommend this fund in taxable.

Given your tax situation, you might prefer to hold bonds or stocks in taxable. In a high tax bracket, if you hold bonds in taxable, they should be munis. And even if you do want to hold both bonds and stocks in taxable, holding stock and bond funds separately allows you to sell bonds (to spend the money or change your allocation) at little or no tax cost.
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TheDDC
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Re: What to do with monthly surplus?

Post by TheDDC »

wander wrote: Sun Sep 13, 2020 9:50 am Do you still have debt? If yes, that needs to go first.
+1. Address debt first. After that, keep buying (on a schedule) VTSAX monthly.

-TheDDC
Rules to wealth building: 90-100% VTSAX piled high and deep, 0-10% VIGAX tilt, 0% given away to banks, minimize amount given to medical-industrial complex
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dratkinson
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Re: What to do with monthly surplus?

Post by dratkinson »

Can also consider adding a muni bond fund to taxable. (A quick search of your old posts suggests you could use munis.)

--Bonds in taxable can perform multiple duties: extended-tier EF, home projects, new car, dry powder, and retirement bonds.

--With bonds in taxable, you can skew tax-free accounts to equities to maximize growth.

--With both equities and bonds in taxable, it will be easier to maintain your AA.

Taxable, suggestion.
--VTSAX
--VWITX (IT national)

VWITX is recommended because IT is said to be on the sweet spot of the risk-reward yield curve.

But since dividends are the major component of bond total return, I prefer VWLTX (LT national) for increased dividends. I TLH the additional risk.

Your choice.
d.r.a., not dr.a. | I'm a novice investor, you are forewarned.
Topic Author
peterwantstosave
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Re: What to do with monthly surplus?

Post by peterwantstosave »

thank you all :)
403b: 54% VTSAX, 36% BTMKX 10% QCBMRX | GSRA: 100% Money Market (100% QCBMRX on Dec 11, 2020) | Roth IRA: 100% FIPFX | Taxable: 100% FSKAX
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