Please critique my strategy for a simple, tax-efficient hands-off portfolio

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techdad123
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Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by techdad123 »

Basic Information:

Emergency funds: Emergency fund fully covered
Debt: Have large mortgage (2.375%)
Tax Filing Status: Married Filing Jointly
Tax Rate: 35%-37% Federal, 11.3%-12.3% CA
State of Residence: CA
Age: Me; Early 50's Retired. Spouse late 40's. Spouse planning to work until 60.
Children: Have two middle school children. We have 529's and UTMAs for them that cover decent % of college. Omitted for simplicity
Desired Asset allocation: Flexible. Somewhere 80%/20% - 85%/15%
Desired International allocation: Flexible. 20-25%
Total Portfolio Size High 7 figures
Pension/Social Security should comfortably cover most of our retirement expenses.

Hi All

I recently diversified some large concentrated positions + sold off some holdings with low cost basis to simplify my portfolio. I'm trying to re-build a portfolio that is

A) Simple
B) Tax-efficient in brokerage accounts/maximizes long term portfolio value.
C) Frugal/has reasonable fees
D) Broadly diversified using best boglehead practices
E) Offloads the need for me to make critical decisions on the portfolio. I don't mind putting in the effort. In fact I've really been enjoying reading through all the boglehead forums + watching Boglehead related YouTube videos. However, my desire to find the "best" solution gets in the way. Results in analysis-paralysis.

Aborted Idea 1) I considered using a robo-advisor (Wealthfront or tax-coordinated capable Betterment). I have a portion of my funds at Wealthfront and have been happy with the performance + tax-lost harvesting + peace-of-mind it has given me for 0.25%. However, fellow bogleheads talked some sense into me. viewtopic.php?p=7696624 I'm now planning to cancel/consolidate my wealthfront holdings into one of my other brokerage accounts. Planning to sell off wealthfront funds with low cost basis (to simplify/reduce holdings). Will keep the rest. The tax harvesting was great the first several years, but has slowed down.

Aborted Idea 2) I considered trying to implement my own 3-5 fund portfolio. However, I'm probably my worst enemy. I end up going in endless circles/rabbit-holes trying to research the optimal asset asset mix + allocation, fund selection, tax placement for my scenario. I research endless model portfolios (e.g. Ferri, Bogleheads, Merriman, Morningstar) but don't have an intuition about which one is better for me. I've also been watching the market going up and reluctant to jump back in (especially since it is potentially costlier to undo changes in a brokerage account). Everything I read tells me that I can not time the market + need to think long term. However, my emotion/intuition gets in the way and can't help waiting for a dip. I've decided it is better for me to delegate lower level investing responsibilities.

Aborted Idea 3) I was attracted to the idea of buying a TDF or LifeStrategy fund across brokerage+ retirement accounts. I read the interesting discussion here viewtopic.php?t=287967&start=650. Ultimately, I'm frugal and decided I'm not willing to pay the tax penalty

Latest idea/strategy:

BROKERAGES (56.25%)
-KEEP (21.94%) Keep existing US stocks/low cost index funds with significant capital gains
-INVEST (34.31%) Buy 75% VTI (ER: 0.03%) , 25% VXUS (ER: 0.07%)

IRAS (21.15%) Sell everything -> Invest in VSMGX (Vanguard LifeStrategy Moderate Growth Fund) 60/40 (ER: 0.13%). Picked the moderate growth option so that the combined Brokerage + IRA stock:bond mix end up at 85%:15%

ROTH (0.99%) Sell everything -> Buy 75% VTI (0.03%) , 25% VXUS (0.07%)

Spouse 401k(21.61%) Sell everything -> Invest in LIPKX Blackrock LifePath Index 2050 Fund K Shares (0.09%). Intentionally picked 2050, which is 10 years later than planned retirement date (~2040). The K Shares have lower fees. Morningstar Gold rated. The 2050 TDF currently has a low percentage of bonds. %Bonds will grow over time. We will continue to contribute to this 401k

The idea is to be hands-off and not make any changes for 20-30 years. Hopefully just let it keep growing. Let the fund managers do their thing. Probably won't bother rebalancing.

I would love to hear honest critique feedback about this approach. Thanks in advance
123
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by 123 »

techdad123 wrote: Mon Feb 12, 2024 12:22 am ...-KEEP (21.94%) Keep existing US stocks/low cost index funds with significant capital gains...

IRAS (21.15%) Sell everything -> Invest in VSMGX (Vanguard LifeStrategy Moderate Growth Fund) 60/40 (ER: 0.13%). Picked the moderate growth option so that the combined Brokerage + IRA stock:bond mix end up at 85%:15%...
If you're keeping positions with significant capital gains do yourself a favor and turn off automatic reinvestment so those holdings don't continue to grow. If you can live without international components in your IRAs you could use Vanguard Balanced Index (VBIAX) which is 60/40 as well. VBIAX has an expense ratio of 0.07% so its somewhat less expensive. VBIAX follows the same indexes as VTI and BND for stocks and bonds but it has its own portfolio of holdings, it is not a fund-of-funds like LifeStrategy.
The closest helping hand is at the end of your own arm.
WeakOldGuy
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by WeakOldGuy »

I think your plan is reasonable and should be pretty hands off.

One thing you may want to consider is to use something other than VXUS in your taxable account. I believe it only distributes about 60% of its dividends as qualified, so that will create a marginally larger tax hit. There are other ex-US funds that may be better in your taxable, but still give you the set-and-forget that you are looking for. Schwab SCHF is an ETF that distributes about 95% of its dividends as qualified. No emerging market exposure. It has an ER of .06 compared with VSUS's .07, so essentially the same. IEFA is an iShares x-US ETF that distributes 100% of its dividends as qualified. It only invests in developed markets in Europe, Australia, Asia and the far East. It has an ER of .07.

I am sure there are others but those are the ones that I'm familiar with. I have VXUS in my Roth and have SCHF and IAFE in my taxable.
On investing; I have lots of questions, many opinions, and little knowledge. A dangerous combination. Be warned.
bonesly
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by bonesly »

techdad123 wrote: Mon Feb 12, 2024 12:22 am A) Simple
B) Tax-efficient in brokerage accounts/maximizes long term portfolio value.
C) Frugal/has reasonable fees
D) Broadly diversified using best boglehead practices
E) Offloads the need for me to make critical decisions on the portfolio.
A) The choice of VTI+VXUS plus some balanced funds seems relatively simple on the surface, but rebalancing requires slightly more effort when a balanced fund (e.g., LifeStrategy and Target Date Fund) is used with pure-asset classes like Total US Stock & Total Int'l Stock. However you said your desired AA is flexible as is your % of stocks in int'l so probably still simple enough.

B) Bonds in tax-deferred is the key part of Tax-Efficient Fund Placement, so check here. LifeStrategy (60/40) iand TDF 2050 are your only funds that include bonds and they're placed in an IRA and 401K respectively. 123 brought up a good point about taxable/tax-advantaged pairs to avoid Wash Sale issues. Consider replacing VTI+VXUS in taxable with VOO+VEA... very similar but not "substantially identical" so no chance of a Wash Sale.

C) Vanguard funds & ETFs are low-cost and the Blackrock 2050 is also reasonable (<0.20%).

D) Use of Total US Stock, Total Int'l Stock and Total Bond meets the fully diversified check mark.

E) As noted in discussion of A) above, I think this portfolio will eventually require rebalancing so it's not fully offloaded. The TDF and LifeStrategy are not a majority stake of the portfolio (about 43%?), so you might still have to monitor annually, but 15 minutes to check the overall allocation across all accounts and make required changes doesn't seem like an unreasonable effort. You can set it up in a spreadsheet, which might take 20 minutes in year-1 and only 5 minutes in subsequent years.

This is probably the biggest flag I saw in your entire post:
"my emotion/intuition gets in the way and can't help [tinkering with the plan]"

You have a solid plan, it meets your first four criteria 100% and criterion E) "mostly," but it's all useless if the plan goes out the window the moment you see an optimization/opportunity/issue that can't be ignored. If you're pretty sure you'll stay hands-off, other than annual rebalancing, then I think you're set.
Topic Author
techdad123
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by techdad123 »

Thanks for the feedback @123, @bonesly, @weakoldguy

1) The underlying target date fund and lifestrategy funds would automatically get rebalanced inside the funds. In my proposal, I was naively thinking of just leaving things alone and not bothering with rebalancing. Is that too naive/reckless?

2) Wash Sale-- I would only have direct VTI/VXUS in brokerage accounts. The retirement accounts would have lifepath/lifestrategy. How does the wash-sale apply in my scenario? Does buying/selling of VTI within the Vanguard LifeStrategy somehow impact me?

3) I'm trying to picture how tax-efficient rebalancing would work if I'm not adding new funds to the brokerage + IRA. How does occasional rebalancing typically work in my scenario? I imagine it would take a tiny bit more work to figure out the current US/Foreign or Stock/Bond mix. I could figure that out. I'm also assuming it would not be worth selling in taxable account just to rebalance.

Thank you
bonesly
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by bonesly »

techdad123 wrote: Mon Feb 12, 2024 2:29 pm 1) The underlying target date fund and lifestrategy funds would automatically get rebalanced inside the funds. In my proposal, I was naively thinking of just leaving things alone and not bothering with rebalancing. Is that too naive/reckless?
Eventually, the stock-only accounts (Taxable and Roth IRA) will grow faster than the IRA & 401K, which will then require rebalancing (if it's off by more than 5% from your desired AA).
techdad123 wrote: Mon Feb 12, 2024 2:29 pm 2) Wash Sale-- I would only have direct VTI/VXUS in brokerage accounts. The retirement accounts would have lifepath/lifestrategy. How does the wash-sale apply in my scenario? Does buying/selling of VTI within the Vanguard LifeStrategy somehow impact me?
You said "ROTH (0.99%) Sell everything -> Buy 75% VTI (0.03%) , 25% VXUS (0.07%)", so you have VTI/VXUS in both taxable and tax-advantaged, which creates the potential for Wash Sales.
techdad123 wrote: Mon Feb 12, 2024 2:29 pm 3) I'm trying to picture how tax-efficient rebalancing would work if I'm not adding new funds to the brokerage + IRA. How does occasional rebalancing typically work in my scenario? I imagine it would take a tiny bit more work to figure out the current US/Foreign or Stock/Bond mix. I could figure that out. I'm also assuming it would not be worth selling in taxable account just to rebalance.
As noted in 1) above, it's likely the stock-only accounts will grow faster than the accounts that have some portion in bonds. The rebalancing should be done in the tax-advantaged accounts where possible if you need to add bonds to get back to your desired AA. This is where a pure triplet of funds would be advantageous over a mix of pure funds + TDF/Balanced, but as you said it can be done.

Here's an example of what I think you'll end up with if you execute as planned, along with an alternate proposal that better matches 80/20 with 20% of stocks in int'l.
Image

Edit: Oops, the first three lines should all say "Taxable"... "His IRA" is just a label error. Hopefully you see how pure funds would be easier to rebalance compared to a mix of pure and TDF/balanced.

A further simplification would be to put all 16% for int'l stock in the taxable account to maximize the value of the foreign tax credit on your future tax returns. That eliminates VXUS from the all the tax-advantaged accounts so you could use that in taxable instead of VEA.
Topic Author
techdad123
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by techdad123 »

Thanks again @bonesly. I wanted to comment that I'm still overwhelmed/super appreciative of how generous the boglehead group is with sharing their detailed finance knowledge. I can't believe @bonesly went to the effort of mocking up a spreadsheet for me with my funds. Thank you :happy

2) :oops: You are totally right. I completely totally forgot about the proposed Roth component. I'm hoping to never touch the Roth and will leave it for legacy. I like the suggestion to just take VXUS out of my ROTH.

3) I do see how 3-4 pure funds would be much simpler to rebalance. I'll gladly pay the cost of a slightly more complicated rebalancing exercise knowing that a large portion of our holdings are being invested in well-regarded, reasonably priced professionally managed all-in-one funds.
BackToSchoolDad
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by BackToSchoolDad »

techdad123 wrote: Mon Feb 12, 2024 5:31 pm Thanks again @bonesly. I wanted to comment that I'm still overwhelmed/super appreciative of how generous the boglehead group is with sharing their detailed finance knowledge. I can't believe @bonesly went to the effort of mocking up a spreadsheet for me with my funds. Thank you :happy

2) :oops: You are totally right. I completely totally forgot about the proposed Roth component. I'm hoping to never touch the Roth and will leave it for legacy. I like the suggestion to just take VXUS out of my ROTH.

3) I do see how 3-4 pure funds would be much simpler to rebalance. I'll gladly pay the cost of a slightly more complicated rebalancing exercise knowing that a large portion of our holdings are being invested in well-regarded, reasonably priced professionally managed all-in-one funds.
Why not use VT Vanguard total world stock in the Roth?
Topic Author
techdad123
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by techdad123 »

Thanks for the suggestion. I'm actively trying to simplify and reduce the number of tickers I own/track. I already own VTI, VXUS, but not VT yet.
BackToSchoolDad wrote: Mon Feb 12, 2024 10:43 pm
Why not use VT Vanguard total world stock in the Roth?
BackToSchoolDad
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by BackToSchoolDad »

techdad123 wrote: Tue Feb 13, 2024 8:38 am Thanks for the suggestion. I'm actively trying to simplify and reduce the number of tickers I own/track. I already own VTI, VXUS, but not VT yet.
Understandable, but using VT in the Roths would allow you to avoid any wash sale issues (simpler overall), and would also let you completely ignore the Roth accounts as VT will rebalance itself. So it would arguably simplify your portfolio even though it is technically a separate holding.

In terms of tracking, VT isn't going to behave any differently than a mix of VTI/VXUS.
bonesly
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by bonesly »

techdad123 wrote: Tue Feb 13, 2024 8:38 am Thanks for the suggestion. I'm actively trying to simplify and reduce the number of tickers I own/track. I already own VTI, VXUS, but not VT yet.
BackToSchoolDad wrote: Mon Feb 12, 2024 10:43 pm
Why not use VT Vanguard total world stock in the Roth?
VT is fine if you want the world allocation of int'l stocks (just under 40%), but if it's held in a Roth, then you don't get the foreign tax credit, which is why I suggested all 16% of your total allocation to Int'l stocks be held in the taxable account (VXUS) and just hold domestic stocks in the tax-advantaged accounts, which also eliminates the Wash Sale concern (as long as you hold VOO in taxable and VTI in tax-advantaged or vice-versa, if you still need some domestic stock in the taxable account). If you want a lesser exposure to int'l stock, then VT is likely not the best choice.
ThankYouJack
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by ThankYouJack »

bonesly wrote: Tue Feb 13, 2024 12:30 pm
techdad123 wrote: Tue Feb 13, 2024 8:38 am Thanks for the suggestion. I'm actively trying to simplify and reduce the number of tickers I own/track. I already own VTI, VXUS, but not VT yet.
BackToSchoolDad wrote: Mon Feb 12, 2024 10:43 pm
Why not use VT Vanguard total world stock in the Roth?
VT is fine if you want the world allocation of int'l stocks (just under 40%), but if it's held in a Roth, then you don't get the foreign tax credit, which is why I suggested all 16% of your total allocation to Int'l stocks be held in the taxable account (VXUS) and just hold domestic stocks in the tax-advantaged accounts, which also eliminates the Wash Sale concern (as long as you hold VOO in taxable and VTI in tax-advantaged or vice-versa, if you still need some domestic stock in the taxable account). If you want a lesser exposure to int'l stock, then VT is likely not the best choice.
Wouldn't VTI be better than VXUS in taxable for dividend tax purposes?
bonesly
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by bonesly »

ThankYouJack wrote: Tue Feb 13, 2024 12:50 pm Wouldn't VTI be better than VXUS in taxable for dividend tax purposes?
That's a good question! Since the OP's in the top tax bracket, we can use the after-tax returns posted on Vanguard's site.

100% VT
10y return: before taxes = 8.07%, after-tax = 7.45%, tax efficiency = after/before = 92.3%
- - - - -
60% VTI
10y return: before taxes = 11.44%, after-tax = 10.96%, tax efficiency = after/before = 95.8%
40% VXUS
10y return: before taxes = 4.06%, after-tax = 3.28%, tax efficiency = after/before = 80.8%
Weighted avg tax efficiency = 60%x95.8% + 40%x80.8% = 89.8%

On first-look it seems more tax-efficient to use VT rather than VTI+VXUS (92.3% > 89.8%), but you're still stuck with the 40% int'l as % of stocks (if that's what you want it's a good fit). That tax efficiency for VT is probably a little lower because it doesn't qualify for the foreign tax credit on the annual tax return, which VTI+VXUS does qualify for, but I'm not sure that credit buys you a 2.5% gain in efficiency or not.

Edit: OP said total portfolio in the high 7s, so if we assume $8M, then the 34% we're talking about for VT vs VTI+VXUS is about $2.7M. Distributions based on the last four quarters and current share price for VT would be $55.5K, after tax = $51.3K. Distributions for VTI+VXUS would be VTI = $22.5K , after tax = $21.6K plus VXUS = $35.8K, after tax = $28.9K; after tax total = $50.5K. The after tax difference of $51.3K - $50.5K is only $741.95 (without the foreign tax credit) which hardly seems worth giving up the flexibility for an international exposure other than 40% of stocks.

I'm not a CPA, so the premise of my comparison may be flawed.
ThankYouJack
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by ThankYouJack »

bonesly wrote: Tue Feb 13, 2024 4:03 pm
ThankYouJack wrote: Tue Feb 13, 2024 12:50 pm Wouldn't VTI be better than VXUS in taxable for dividend tax purposes?
That's a good question! Since the OP's in the top tax bracket, we can use the after-tax returns posted on Vanguard's site.

100% VT
10y return: before taxes = 8.07%, after-tax = 7.45%, tax efficiency = after/before = 92.3%
- - - - -
60% VTI
10y return: before taxes = 11.44%, after-tax = 10.96%, tax efficiency = after/before = 95.8%
40% VXUS
10y return: before taxes = 4.06%, after-tax = 3.28%, tax efficiency = after/before = 80.8%
Weighted avg tax efficiency = 60%x95.8% + 40%x80.8% = 89.8%

On first-look it seems more tax-efficient to use VT rather than VTI+VXUS (92.3% > 89.8%), but you're still stuck with the 40% int'l as % of stocks (if that's what you want it's a good fit). That tax efficiency for VT is probably a little lower because it doesn't qualify for the foreign tax credit on the annual tax return, which VTI+VXUS does qualify for, but I'm not sure that credit buys you a 2.5% gain in efficiency or not.

Edit: OP said total portfolio in the high 7s, so if we assume $8M, then the 34% we're talking about for VT vs VTI+VXUS is about $2.7M. Distributions based on the last four quarters and current share price for VT would be $55.5K, after tax = $51.3K. Distributions for VTI+VXUS would be VTI = $22.5K , after tax = $21.6K plus VXUS = $35.8K, after tax = $28.9K; after tax total = $50.5K. The after tax difference of $51.3K - $50.5K is only $741.95 (without the foreign tax credit) which hardly seems worth giving up the flexibility for an international exposure other than 40% of stocks.

I'm not a CPA, so the premise of my comparison may be flawed.
How are the after tax returns estimated on Vanguard's site? I'm guessing they don't factor in the OP's state taxes and are just a generalization.

My thinking is that VTI should be in taxable and not VXUS. Comparing VT in the mix muddies the water. Dividend taxes will be significantly more on VXUS than VTI for the OP considering the high tax bracket (including state), higher dividend yield for VXUS, and more non-qualified dividends.

I have Intl in my taxable, but wish it was US.
bonesly
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by bonesly »

ThankYouJack wrote: Wed Feb 14, 2024 7:33 am How are the after tax returns estimated on Vanguard's site? I'm guessing they don't factor in the OP's state taxes and are just a generalization.
"Vanguard calculates after-tax returns using the highest individual federal income tax rates in effect at the time of each distribution. This calculation does not include the impact of state and local taxes."
ThankYouJack wrote: Wed Feb 14, 2024 7:33 am My thinking is that VTI should be in taxable and not VXUS. Comparing VT in the mix muddies the water. Dividend taxes will be significantly more on VXUS than VTI for the OP considering the high tax bracket (including state), higher dividend yield for VXUS, and more non-qualified dividends.
VT was only in the mix because @BackToSchoolDad suggested it in a Roth IRA account rather than using VTI+VXUS; the OP is concerned about tax-efficiency, so I thought it might be of interest to them.

The Wiki topic on Tax-Efficient Fund Placement says "If all else is equal, international funds have a small tax advantage over US funds, because they are eligible for the foreign tax credit.". That's not an either or proposition, since the figure in Step 2 Placing Least Efficient Funds shows that both US & Int'l stocks should go to a taxable account.

Image

However, as you point out the distributions for VXUS are higher than for VTI and applying the foreign tax credit presumes you are itemizing deductions. The example in the Wiki for the Foreign Tax Credit is a $1,000 dividend from an international stock fund that was reported on the 1099-DIV as "$1000 in dividends, $70 in foreign tax withheld, and $700 in qualified dividends". The foreign tax credit at the state level is only available in AL, AZ, HI, IA, MT, NC, and a limited credit in LA, but the OP is in CA.

Before Credit: $700 @ 15% qualified dividend tax-rate = $105.00; $300 at 37% Fed + 12.3% CA = $147.90; Total Tax $105.00+$147.90+$70.00 = $322.9

After Credit: The tax is simply reduced by the $70 foreign withholding; $322.9 - $70 = $252.90 (no add'l offset for CA).

Tax-Efficiency: ($1,000 - $252.90) / $1,000 = 74.7%

Even with the foreign tax-credit (assuming the OP itemizes deductions), 74.7% is pretty far below 90%, so I agree; probably better for the OP to only hold VTI in taxable and hold VXUS in a Roth (or 401k/Trad IRA if there's no room in the Roth).

If this is common for Total Int'l Stock Funds in general, I wonder if the Wiki topic on Tax-Efficient Fund Placement should be updated (it implies that Total Int'l is tax-efficient when it seems not to be for high earners and maybe not even for those at lower tax brackets).
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by grabiner »

bonesly wrote: Wed Feb 14, 2024 12:50 pm The Wiki topic on Tax-Efficient Fund Placement says "If all else is equal, international funds have a small tax advantage over US funds, because they are eligible for the foreign tax credit.". That's not an either or proposition, since the figure in Step 2 Placing Least Efficient Funds shows that both US & Int'l stocks should go to a taxable account.
And all else is no longer equal. International funds have had higher yields than US funds since 2008, so they are now often less tax-efficient, particularly if you pay high state tax. They are still fine in taxable, but if you have some room for stock in tax-deferred, you might prefer to hold the international funds there. (As usual, this depends on your options, many 401(k) plans have an S&P 500 index but no low-cost international fund.)
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techdad123
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by techdad123 »

Thanks for the detailed analysis of VT vs VTI+VXUS. The discussion was very educational for me. The back of envelope calculations were helpful to estimate rough tax-consequences. VT is too high % international stocks for me. I also like the flexibility to have separate foreign/US.

I finally made the changes a few days ago when I got alerts that the Dow dropped 700. This group's timely feedback early in the week helped give me confidence that my plan was reasonable and to pull the trigger.

This is what I ended up doing
- Brokerage - VTI + VXUS + some existing holdings
- 401k- BlackRock LifePath 2045 TDF
- IRA- BlackRock iShares AOA

I ended up buying iShares AOA instead of Vanguard LifeStrategy. I prefer ETFs. I wanted to retain the portability/option to move my IRA. (e.g. to Robinhood for the 3% transfer bonus. ) I also ended up going with a more aggressive allocation than in my original post. I was surprised to see the $75 fee that Fidelity charges to buy Vanguard LifeStrategy. In hindsight, I prefer the immediacy of buying ETFs. I bought the LifePath mutual fund in our 401k on a turbulent day and I couldn't see the purchase price/NAV until the next day.

Wohoo. I now feel a tremendous sense of relief. I have agonized for many years to get to this point. (when/if to sell off highly concentrated positions, if I should hire an advisor, how to build the right portfolio. is the portfolio any good). I'm really happy with where I ended up. I'm optimistic this is a plan I can stick with for a long time. The portfolio is simple. It is reasonably tax-efficient (e.g. no bonds in brokerage). I'm not paying expensive advisor fees. There isn't much I can or need to tinker with. I'll gladly let the pros manage the balanced/target date funds. I'll occasionally rebalance US/Foreign with distributions or additional funds. If the stock/bond portfolio mix goes way off, I can trade or mix in some less aggressive LifePath/iShares funds

Thanks again to the bogleheads who commented on my thread. Thanks also to the wider Bogleheads community who share their knowledge and post invaluable resources (like youtube videos of the Bogleheads conference).

Happy Friday!
BackToSchoolDad
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by BackToSchoolDad »

techdad123 wrote: Fri Feb 16, 2024 10:47 am Thanks for the detailed analysis of VT vs VTI+VXUS. The discussion was very educational for me. The back of envelope calculations were helpful to estimate rough tax-consequences. VT is too high % international stocks for me. I also like the flexibility to have separate foreign/US.

I finally made the changes a few days ago when I got alerts that the Dow dropped 700. This group's timely feedback early in the week helped give me confidence that my plan was reasonable and to pull the trigger.

This is what I ended up doing
- Brokerage - VTI + VXUS + some existing holdings
- 401k- BlackRock LifePath 2045 TDF
- IRA- BlackRock iShares AOA

Happy Friday!
I'd say that's a great place to arrive at. One thing to mention, Blackrock and iShares by extension target market weight for US/intl in their balanced funds I believe, so if VT is too much international for you than those are too.

Personally, I've potentially got decades of investing ahead of me, so I'm not going to bet on a single country. Blackrock and Vanguard both have significant international holdings, and I'm not inclined to go against their expertise.
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Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by GaryA505 »

BackToSchoolDad wrote: Fri Feb 16, 2024 2:10 pm
techdad123 wrote: Fri Feb 16, 2024 10:47 am Thanks for the detailed analysis of VT vs VTI+VXUS. The discussion was very educational for me. The back of envelope calculations were helpful to estimate rough tax-consequences. VT is too high % international stocks for me. I also like the flexibility to have separate foreign/US.

I finally made the changes a few days ago when I got alerts that the Dow dropped 700. This group's timely feedback early in the week helped give me confidence that my plan was reasonable and to pull the trigger.

This is what I ended up doing
- Brokerage - VTI + VXUS + some existing holdings
- 401k- BlackRock LifePath 2045 TDF
- IRA- BlackRock iShares AOA

Happy Friday!
I'd say that's a great place to arrive at. One thing to mention, Blackrock and iShares by extension target market weight for US/intl in their balanced funds I believe, so if VT is too much international for you than those are too.

Personally, I've potentially got decades of investing ahead of me, so I'm not going to bet on a single country. Blackrock and Vanguard both have significant international holdings, and I'm not inclined to go against their expertise.
It's not really expertise. They are not making a bet either way, so they can't be accused of exposing their clients to any kind of country bias. Using world market cap may not, in the end, result in better results but they're not betting it will, or won't, because the truth is that nobody knows.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
Topic Author
techdad123
Posts: 9
Joined: Sun Feb 04, 2024 5:38 pm

Re: Please critique my strategy for a simple, tax-efficient hands-off portfolio

Post by techdad123 »

BackToSchoolDad wrote: Fri Feb 16, 2024 2:10 pm I'd say that's a great place to arrive at. One thing to mention, Blackrock and iShares by extension target market weight for US/intl in their balanced funds I believe, so if VT is too much international for you than those are too.
Thanks for pointing this out. I caught that the two blackrock funds had higher %foreign exposure than I ideally wanted when I was researching % international in VT. However, they were still my top single fund picks.

I didn’t want to complicate the thread, but I ended up compensating with more VTI, less VXUS. Also fit nicely with the conclusion that this is more tax efficient in the taxable accounts!
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