Military Vet looking for advice on where to invest cash in Joint Taxable account

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Topic Author
behumble
Posts: 134
Joined: Tue Nov 14, 2017 5:43 pm

Military Vet looking for advice on where to invest cash in Joint Taxable account

Post by behumble »

hello:

Current situation:

married couple ages: 42 and 45

No children (no intention of having any)

Federal Tax bracket: 24%

Debts: None; own home (but we live in a HCOL area)

Emergency Funds: we have 6-9 months

Current investments:

her 401(k): $205K (all in VBIAX Vanguard Balanced Index Fund)
his 401(k): $65K (all in Vanguard S&P Stock Market Index Fund)
Roth IRA: approx $85K ($60k in VTI ETF- Vanguard Total Stock Market Index ETF; $13k in TESLA and $12K in VGT Vanguard Tech. Sector Fund)
Roth IRA: approx $85K ($60k in VTI ETF- Vanguard Total Stock Market Index ETF; $13k in TESLA and $12K in VGT)
Emerg Funds: have 6-9 months worth

Taxable Account: $55K sitting in sweep account (default)

We are looking to invest the $55K sitting in our Joint Brokerage Taxable account. Long-term time horizon. Would like to keep our investments as simple (set it and forget it) as possible.

Any suggestions or thoughts on how can should invest the cash in our taxable account and if we should make any changes in our existing investments as we plan for 2021?
Last edited by behumble on Sun Oct 18, 2020 5:45 pm, edited 2 times in total.
retired@50
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Re: Where to invest cash in Taxable account?

Post by retired@50 »

behumble wrote: Thu Oct 15, 2020 1:33 pm ...
Taxable Account: $55K sitting in sweep account (default)

We are looking to invest the $55K sitting in our Joint Brokerage Taxable account. Long-term time horizon. Would like to keep our investments as simple (set it and forget it) as possible.

Any suggestions or thoughts on how can should invest the cash in our taxable account and if we should make any changes in our existing investments as we plan for 2021?
I didn't see any international stock holdings in your post.

Maybe you could consider branching out by holding either the Vanguard total international stock market index (VTIAX) or the Vanguard developed markets index (which excludes emerging markets) (VTMGX). Either would be considered a tax-efficient international fund suitable for a taxable account.

Or, of course, you could continue with Vanguard total stock market fund (VTSAX) which is also tax-efficient and suitable for a taxable account.

Regards,
This is one person's opinion. Nothing more.
Topic Author
behumble
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Re: Where to invest cash in Taxable account?

Post by behumble »

retired@50 wrote: Thu Oct 15, 2020 1:40 pm
behumble wrote: Thu Oct 15, 2020 1:33 pm ...
Taxable Account: $55K sitting in sweep account (default)

We are looking to invest the $55K sitting in our Joint Brokerage Taxable account. Long-term time horizon. Would like to keep our investments as simple (set it and forget it) as possible.

Any suggestions or thoughts on how can should invest the cash in our taxable account and if we should make any changes in our existing investments as we plan for 2021?
I didn't see any international stock holdings in your post.

Maybe you could consider branching out by holding either the Vanguard total international stock market index (VTIAX) or the Vanguard developed markets index (which excludes emerging markets) (VTMGX). Either would be considered a tax-efficient international fund suitable for a taxable account.


Or, of course, you could continue with Vanguard total stock market fund (VTSAX) which is also tax-efficient and suitable for a taxable account.

Regards,

Thank you. Is VTI (Vanguard Total Stock Market Index) ETF also tax efficient ?
retired@50
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Re: Where to invest cash in Taxable account?

Post by retired@50 »

behumble wrote: Thu Oct 15, 2020 1:42 pm

Thank you. Is VTI (Vanguard Total Stock Market Index) ETF also tax efficient ?
Yes.

At Vanguard, the ETF share class of the fund has the same tax-efficiency as the mutual fund share class. In other words, VTSAX and VTI are the SAME FUND (just two different share classes). VTSAX trades using mutual fund rules (NAV at end of day), while VTI trades using ETF rules (market price during trading day).

VTMGX is the same as VEA ETF

VTIAX is the same as VXUS ETF

Regards,
This is one person's opinion. Nothing more.
Topic Author
behumble
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Re: Where to invest cash in Taxable account?

Post by behumble »

retired@50 wrote: Thu Oct 15, 2020 1:46 pm
behumble wrote: Thu Oct 15, 2020 1:42 pm

Thank you. Is VTI (Vanguard Total Stock Market Index) ETF also tax efficient ?
Yes.

At Vanguard, the ETF share class of the fund has the same tax-efficiency as the mutual fund share class. In other words, VTSAX and VTI are the SAME FUND (just two different share classes). VTSAX trades using mutual fund rules (NAV at end of day), while VTI trades using ETF rules (market price during trading day).

VTMGX is the same as VEA ETF

VTIAX is the same as VXUS ETF

Regards,
I see, thank you. What do you think about putting all cash in a dividend growth ETF in the taxable account, like VIG (Vanguard Dividend Appreciation ETF)?
Topic Author
behumble
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Re: Military Vet looking for advice on where to invest cash in Joint Taxable account

Post by behumble »

Does anyone advise NOT investing in a dividend growth ETF, like Vanguard Dividend Appreciation ETF, in a taxable account? I am trying to use just 1 fund in our taxable account.
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KingRiggs
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Re: Military Vet looking for advice on where to invest cash in Joint Taxable account

Post by KingRiggs »

It will spin off lots of dividends, which will be taxable to you. Should probably be held in a tax-advantaged account, if possible. Unless you're looking for dividends to generate periodic income, I'd stick to index stock funds in taxable.
Advice = noun | Advise = verb | | Roth, not ROTH
Topic Author
behumble
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Re: Military Vet looking for advice on where to invest cash in Joint Taxable account

Post by behumble »

KingRiggs wrote: Thu Oct 15, 2020 2:42 pm It will spin off lots of dividends, which will be taxable to you. Should probably be held in a tax-advantaged account, if possible. Unless you're looking for dividends to generate periodic income, I'd stick to index stock funds in taxable.
Makes sense, thanks. What do you think of holding a dividend growth ETF, like VIG, in a Roth IRA, for long-term?
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KingRiggs
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Re: Military Vet looking for advice on where to invest cash in Joint Taxable account

Post by KingRiggs »

Search the forum to get the general Boglehead opinion of dividend-oriented investments. TL,DR: They are no better, and often worse, than a total return approach.

Your current portfolio is nice and simple. If you want to stick with equities, I'd just keep buying VTI in taxable.

If you'd like to go to a more conservative AA as you age, I'd look to add bonds to your 401ks and keep taxable and Roth all equities.
Advice = noun | Advise = verb | | Roth, not ROTH
Topic Author
behumble
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Re: Military Vet looking for advice on where to invest cash in Joint Taxable account

Post by behumble »

KingRiggs wrote: Thu Oct 15, 2020 2:54 pm Search the forum to get the general Boglehead opinion of dividend-oriented investments. TL,DR: They are no better, and often worse, than a total return approach.

Your current portfolio is nice and simple. If you want to stick with equities, I'd just keep buying VTI in taxable.

If you'd like to go to a more conservative AA as you age, I'd look to add bonds to your 401ks and keep taxable and Roth all equities.
Thank you again for your thoughts.
Topic Author
behumble
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Joined: Tue Nov 14, 2017 5:43 pm

Re: Military Vet looking for advice on where to invest cash in Joint Taxable account

Post by behumble »

What do folks think of using a one fund portfolio like the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) for someone in our case?
Fishing50
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Re: Military Vet looking for advice on where to invest cash in Joint Taxable account

Post by Fishing50 »

behumble wrote: Thu Oct 15, 2020 5:06 pm
KingRiggs wrote: Thu Oct 15, 2020 2:54 pm Search the forum to get the general Boglehead opinion of dividend-oriented investments. TL,DR: They are no better, and often worse, than a total return approach.

Your current portfolio is nice and simple. If you want to stick with equities, I'd just keep buying VTI in taxable.

If you'd like to go to a more conservative AA as you age, I'd look to add bonds to your 401ks and keep taxable and Roth all equities.
Thank you again for your thoughts.
+1

I like the tax efficiency of total market and total intl index funds in taxable.
2yrs from military pension. 80 equites / 20 bonds for life, ZERO emergency fund, 100% taxable in equities (dividends in cash). | Gone Fishing At 52yrs old!
clown
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Re: Military Vet looking for advice on where to invest cash in Joint Taxable account

Post by clown »

Do you have an emergency fund? I don't see it listed above. Many recommend 6 months worth of expenses in ready cash. I suggest looking at online savings accounts. For a vet, I recommend Navy Federal Credit Union. Their rates are better than the banks. And all military service veterans are eligible -- not restricted to Navy alone. Accounts are insured up to $250,000 per individual by the National Credit Union Administration's (NCUA) share insurance coverage -- an equivalent program to FDIC insurance which covers bank accounts. Navy Federal has been in business since 1933 and has a net worth of $14 billion (with a b) as of 6/30/2020.
Topic Author
behumble
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Re: Military Vet looking for advice on where to invest cash in Joint Taxable account

Post by behumble »

clown wrote: Fri Oct 16, 2020 7:22 pm Do you have an emergency fund? I don't see it listed above. Many recommend 6 months worth of expenses in ready cash. I suggest looking at online savings accounts. For a vet, I recommend Navy Federal Credit Union. Their rates are better than the banks. And all military service veterans are eligible -- not restricted to Navy alone. Accounts are insured up to $250,000 per individual by the National Credit Union Administration's (NCUA) share insurance coverage -- an equivalent program to FDIC insurance which covers bank accounts. Navy Federal has been in business since 1933 and has a net worth of $14 billion (with a b) as of 6/30/2020.
Thanks for your question and thoughts. We have 6-9 months of EF and use NFCU and USAA as our primary banks. That being said, what do you think about using Vanguard LifeStrategy Moderate Growth Fund (VSMGX) in either our Taxable or Roth. I'm trying to keep everything simple, in the event my wife has to handle things.
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