Allocation Question

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Topic Author
mmicha
Posts: 28
Joined: Wed Feb 13, 2013 8:13 pm

Allocation Question

Post by mmicha »

Hello,

I have most of my investments in a good place. However, someone recently pointed out that I am currently holding onto bonds in a Roth IRA account, and that isn't the best approach to take. It probably would be better to move them into my 401k, and let the Roth IRA grow greater tax-free. My wife and I make to much currently to contribute to a Roth IRA.

Below is the layout of my investments-

Taxable:
VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares) - $173,500
VTIAX (Vanguard Total International Stock Index Fund Admiral Shares) - $50,564

Tax Free: (Roth IRA)
VBTLX (Vanguard Total Bond Market Index Fund Admiral Shares) - $57,390
VTIAX (Vanguard Total International Stock Index Fund Admiral Shares) - $4,706
VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares) - $55,180

Tax Deferred: (401k) - Management Fee - 0.48:

Current Allocation:
LIPKX (LifePath Index 2050 Fund Class K Shares) - $125,100
Appears to be allocated 97% equities
Expense Ratio: 0.15

Possible changes I'm thinking are a good move:

Switch from the LifePath target fund, and move into Fidelity 500 index for stocks. Buy an equal amount of bonds in the New York Life Anchor fund in 401k. Sell the Vanguard Total Bond Market Index in my Roth IRA, and shift into either VTSAX and/or VTIAX in the Roth IRA.

Details are below on the funds in the 401k...

Tax Deferred:
FXAIX (Fidelity 500 Index)
Expense Ratio: 0.02

New York Life Anchor CIT - Class 0
Expense Ratio: 0.47

Description:
The primary investment objective of the Fund is to seek to
preserve principal and maintain a stable crediting rate that is
responsive to changes in interest rates. The Fund seeks to
invest in securities that are constituents in the New York Life
Anchor Fund established 1/3/1995. The Fund seeks to
provide participants with a low risk stable option that offers
competitive yields and limited volatility by investing in a
group annuity contract issued by New York Life Insurance
Company. Principal and accumulated interest guarantees are
provided by New York Life, subject to the terms of the group
annuity contract. The Fund crediting rate is subject to change
daily.

Thanks!
User avatar
mhc
Posts: 5307
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Location: NoCo

Re: Allocation Question

Post by mhc »

I think it is a good idea to move bonds from Roth to 401k. New York Life Anchor CIT does not appear to be a bond fund. What are your bond options in your 401k?

Since you hold the same funds in your Roth as so taxable account, be aware of wash sales if you ever Tax Loss Harvest (TLH).
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
Topic Author
mmicha
Posts: 28
Joined: Wed Feb 13, 2013 8:13 pm

Re: Allocation Question

Post by mmicha »

mhc wrote: Mon Apr 01, 2024 3:16 pm I think it is a good idea to move bonds from Roth to 401k. New York Life Anchor CIT does not appear to be a bond fund. What are your bond options in your 401k?

Since you hold the same funds in your Roth as so taxable account, be aware of wash sales if you ever Tax Loss Harvest (TLH).
Apparently there are only 4 actual bond funds in the plan. I'm having a hard time finding tickers for them. The rest are the Blackrock LifePath target funds.

What I can figure out is:
Short Bonds / Stable / MMkt
Reliance Trust/New Yor Life Anchor Account CI 0 (Can't find ticker, Expense Ratio: 0.47)

Interm./Long Term Bonds
PGIM Total Return Bond Fund CIT (Can't find ticker, Expense Ratio: 0.27)

Aggressive Bonds
Fidelity Capital & Income (FAGIX) - Expense Ratio: 0.93
Templeton Global Bond R6 (FBNRX) - Expense Ratio: 0.61
User avatar
retired@50
Posts: 13098
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Allocation Question

Post by retired@50 »

mmicha wrote: Mon Apr 01, 2024 3:44 pm
mhc wrote: Mon Apr 01, 2024 3:16 pm I think it is a good idea to move bonds from Roth to 401k. New York Life Anchor CIT does not appear to be a bond fund. What are your bond options in your 401k?

Since you hold the same funds in your Roth as so taxable account, be aware of wash sales if you ever Tax Loss Harvest (TLH).
Apparently there are only 4 actual bond funds in the plan. I'm having a hard time finding tickers for them. The rest are the Blackrock LifePath target funds.

What I can figure out is:
Short Bonds / Stable / MMkt
Reliance Trust/New Yor Life Anchor Account CI 0 (Can't find ticker, Expense Ratio: 0.47)

Interm./Long Term Bonds
PGIM Total Return Bond Fund CIT (Can't find ticker, Expense Ratio: 0.27)

Aggressive Bonds
Fidelity Capital & Income (FAGIX) - Expense Ratio: 0.93
Templeton Global Bond R6 (FBNRX) - Expense Ratio: 0.61
The initials CIT are the clue...

Your 401k plan appears to be using collective investment trusts, so no ticker symbols.
See link: https://www.bogleheads.org/wiki/Collect ... ent_Trusts

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
User avatar
mhc
Posts: 5307
Joined: Mon Apr 04, 2011 10:18 pm
Location: NoCo

Re: Allocation Question

Post by mhc »

Looks like you have a combination of CITs and mutual funds. The CITs should have a 1 page fact sheet that says what it is. CITs do not have ticker symbols.

I would probably go with PGIM Total Return Bond Fund.
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
bonesly
Posts: 1293
Joined: Mon Dec 18, 2017 9:28 pm
Location: WA

Re: Allocation Question

Post by bonesly »

mhc wrote: Tue Apr 02, 2024 8:51 am Looks like you have a combination of CITs and mutual funds. The CITs should have a 1 page fact sheet that says what it is. CITs do not have ticker symbols.

I would probably go with PGIM Total Return Bond Fund.
+1 for this response. Your other options are have pretty high expenses that will eat away at total return.


Also, as @mhc pointed out, you have a potential for Wash Sales, that can be avoided...

Current...
Taxable:
VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares) - $173,500
VTIAX (Vanguard Total International Stock Index Fund Admiral Shares) - $50,564

Tax Free: (Roth IRA)
VBTLX (Vanguard Total Bond Market Index Fund Admiral Shares) - $57,390
VTIAX (Vanguard Total International Stock Index Fund Admiral Shares) - $4,706
VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares) - $55,180
The two identical holdings in red for taxable and tax-advantaged create the potential issue.

Future....
Tax Free: (Roth IRA)
VBTLX (Vanguard Total Bond Market Index Fund Admiral Shares) - $57,390
VTIAX (Vanguard Total International Stock Index Fund Admiral Shares) - $4,706
VFIAX (Vanguard 500 Index Fund Admiral Shares)
Swapping the Roth from TSM to S&P-500 (in blue) solves the issue with no tax-cost to switch.
Topic Author
mmicha
Posts: 28
Joined: Wed Feb 13, 2013 8:13 pm

Re: Allocation Question

Post by mmicha »

bonesly wrote: Tue Apr 02, 2024 12:36 pm
mhc wrote: Tue Apr 02, 2024 8:51 am Looks like you have a combination of CITs and mutual funds. The CITs should have a 1 page fact sheet that says what it is. CITs do not have ticker symbols.

I would probably go with PGIM Total Return Bond Fund.
+1 for this response. Your other options are have pretty high expenses that will eat away at total return.


Also, as @mhc pointed out, you have a potential for Wash Sales, that can be avoided...

Current...
Taxable:
VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares) - $173,500
VTIAX (Vanguard Total International Stock Index Fund Admiral Shares) - $50,564

Tax Free: (Roth IRA)
VBTLX (Vanguard Total Bond Market Index Fund Admiral Shares) - $57,390
VTIAX (Vanguard Total International Stock Index Fund Admiral Shares) - $4,706
VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares) - $55,180
The two identical holdings in red for taxable and tax-advantaged create the potential issue.

Future....
Tax Free: (Roth IRA)
VBTLX (Vanguard Total Bond Market Index Fund Admiral Shares) - $57,390
VTIAX (Vanguard Total International Stock Index Fund Admiral Shares) - $4,706
VFIAX (Vanguard 500 Index Fund Admiral Shares)
Swapping the Roth from TSM to S&P-500 (in blue) solves the issue with no tax-cost to switch.
So, I didn't touch anything in the taxable account.
What I did was sell the bond funds in my Roth IRA.
Purchased a mix of the VG Total Stock Market & VG Total International Stock market fund in the Roth IRA with that money from the settlement account.

Then inside my work 401k, took some of the assets and purchased the PGIM Total Bond fund, as well as the rest in a Fidelity S&P 500 fund.

Now I am at a 80/20 portfolio across everything. Of the stock investments, 80 percent of the stock in in US, and 20 percent in International.

My future 401k contributions will go to the Fidelity S&P 500 fund.
bonesly
Posts: 1293
Joined: Mon Dec 18, 2017 9:28 pm
Location: WA

Re: Allocation Question

Post by bonesly »

mmicha wrote: Wed Apr 03, 2024 3:43 pm Purchased a mix of the VG Total Stock Market ... fund in the Roth IRA...
Seems like you still have a potential for Wash Sales if you hold TSM in both Roth and Taxable; to fix that you can:
a) Swap TSM to S&P500 Index like I initially suggested; or
b) turn off automatic re-investments for TSM in Roth; or
c) Do nothing and potentially have a wash sale which isn't a crime, it's just a loss of a tax deduction.

For b) you'll need to manually re-invest the distributions that collect in the Roth, but you can intentionally not buy if you made a sale of TSM at a loss in the last 30 days (tax-loss harvesting perhaps).
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