Is your AA given as tax-adjusted or not?

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Shaoya
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Is your AA given as tax-adjusted or not?

Post by Shaoya » Mon Dec 20, 2010 2:04 am

I've been reading with great interest the section on tax-adjusted asset allocation on the Bogleheads Wiki http://www.bogleheads.org/wiki/Tax-Adju ... Allocation

I've applied the tenets to my own AA, which - not surprisingly - make it quite different. I'm trying to understand the rationale for using/not using tax-adjusted AA, and whether I should always think in terms of tax-adjusted AA.

Two questions:

1) when you give your AA on this forum, is it tax-adjusted or not?

2) are there particular situations for not using tax-adjusted AA?

Thanks - Shaoya

letsgobobby
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Post by letsgobobby » Mon Dec 20, 2010 2:09 am

I do not, because it makes me look poorer than I want to believe I am.

GammaPoint
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Post by GammaPoint » Mon Dec 20, 2010 3:29 am

I don't at the moment, but might consider it in the future. The exact numbers of my AA are sort of arbitrary anyway, so if a proper-tax treatment modifies them somewhat then it be less than what I would care about.

Bob's not my name
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Post by Bob's not my name » Mon Dec 20, 2010 4:32 am

Prior discussion of this question: http://www.bogleheads.org/forum/viewtopic.php?t=53884

Related discussion on how not using tax-adjusted AA can lead to erroneous conclusions: http://www.bogleheads.org/forum/viewtop ... 1292710205

Note that when Group A people dismiss tax-adjusting they predict (not incorrectly) that much tax-deferred wealth will be taxed at 0%, whereas when Group B people trumpet the superiority of Roths they predict that much tax-deferred wealth will be taxed at high rates. So: if you think your federal + state tax rate on distributions will be 0% you don't have to tax-adjust, but you also shouldn't be using a Roth before your 401k/403b/tIRA opportunities are maxed out. (I believe Group A and Group B are overlapping sets :? -- not specifically in the cited threads, but in general.)

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Shaoya
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Post by Shaoya » Mon Dec 20, 2010 9:50 am

Accchhhh! I should have searched for past discussions; thanks Bob's not my name for bringing these to the surface. Much appreciated.

Tramper Al
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Post by Tramper Al » Mon Dec 20, 2010 10:22 am

Everyone's AA is tax-adjusted. It's just that many people use a tax rate of 0%.

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