Any reason for equities in tIRA, if there is space for Total Equity Allocation in Taxable and Roth Accounts

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OffGridder
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Any reason for equities in tIRA, if there is space for Total Equity Allocation in Taxable and Roth Accounts

Post by OffGridder » Sun Feb 18, 2018 11:21 pm

This question pertains to the period when you are making Roth conversions until age 70 and then RMDs.

If my total portfolio allocation to equities can be fulfilled by my allocations in my taxable and Roth accounts, is there any reason to carve out a minimum percentage to maintain some equities in my tIRA? The rationale for zero equities in the tIRA would be to minimize growth of the tIRA while doing conversions and minimize growth of subsequent RMDs. Of course there could be some years when there is a correction in equities, in which case that would temporarily suppress growth of of the tIRA. The latter situation might be a reason to maintain a minimal allocation to equities in the tIRA, even if the overall allocation to equities could be met by the taxable and Roth account space. Thoughts?

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Dale_G
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Re: Any reason for equities in tIRA, if there is space for Total Equity Allocation in Taxable and Roth Accounts

Post by Dale_G » Sun Feb 18, 2018 11:31 pm

No reason at all for those that pay taxes.

Dale
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harmony
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Re: Any reason for equities in tIRA, if there is space for Total Equity Allocation in Taxable and Roth Accounts

Post by harmony » Mon Feb 19, 2018 12:49 am

We used a balanced fund for that purpose. Recall that bonds funds have been unpredictable during the last few years, so a balanced fund gave us more predictability. Since we were doing rollovers steadily during those years, we didn’t want to deplete the tIRA so rapidly so that it couldn’t later be used as our single source of annual tax withholding. In addition, we wanted to make use of the standard deduction to continue smaller rollovers after RMDs began. The balanced fund could regenerate enough to allow for this.

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jeffyscott
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Re: Any reason for equities in tIRA, if there is space for Total Equity Allocation in Taxable and Roth Accounts

Post by jeffyscott » Tue Feb 20, 2018 8:17 am

OffGridder wrote:
Sun Feb 18, 2018 11:21 pm
Of course there could be some years when there is a correction in equities, in which case that would temporarily suppress growth of of the tIRA.
With stock prices where they are, maybe keep equities in tIRA and convert after they crash :( :wink: .
press on, regardless - John C. Bogle

JW-Retired
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Re: Any reason for equities in tIRA, if there is space for Total Equity Allocation in Taxable and Roth Accounts

Post by JW-Retired » Tue Feb 20, 2018 9:26 am

OffGridder wrote:
Sun Feb 18, 2018 11:21 pm
If my total portfolio allocation to equities can be fulfilled by my allocations in my taxable and Roth accounts, is there any reason to carve out a minimum percentage to maintain some equities in my tIRA? The rationale for zero equities in the tIRA would be to minimize growth of the tIRA while doing conversions and minimize growth of subsequent RMDs.
I think we need some context......... like your tax bracket, AA, and retirement income situation. Will you have so much other retirement income that you don't want the RMDs?

If you are in a high tax bracket, muni-bonds in taxable are said to be as good or better than taxable bonds in tIRAs.
JW
Retired at Last

OffGridder
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Re: Any reason for equities in tIRA, if there is space for Total Equity Allocation in Taxable and Roth Accounts

Post by OffGridder » Tue Feb 20, 2018 2:01 pm

JW-Retired wrote:
Tue Feb 20, 2018 9:26 am
OffGridder wrote:
Sun Feb 18, 2018 11:21 pm
If my total portfolio allocation to equities can be fulfilled by my allocations in my taxable and Roth accounts, is there any reason to carve out a minimum percentage to maintain some equities in my tIRA? The rationale for zero equities in the tIRA would be to minimize growth of the tIRA while doing conversions and minimize growth of subsequent RMDs.
I think we need some context......... like your tax bracket, AA, and retirement income situation. Will you have so much other retirement income that you don't want the RMDs?

If you are in a high tax bracket, muni-bonds in taxable are said to be as good or better than taxable bonds in tIRAs.
JW
Current marginal tax bracket is 15%. Projected will be well into the 22% bracket at age 70 when delayed SS and RMDs start, if I do not do Roth conversions over the next 9 years.

AA is 50/50 stock/bonds. Stock to decrease 1% per year until it reaches 30% and stay there for rest of life.

Would need at most 25% of projected RMD, but no problem pulling that same amount from Roth, if we maximize conversions to top of 12% tax bracket over next 9 years.

Projected marginal tax bracket including SS will be be zero for MFJ and 12% for surviving spouse if we convert 75% of tIRA Of course these projections are based on current tax law.

Not managing for heirs at this time. Will reassess in 15-20 years depending on our situation then.

Hope this provides the added context you were looking for.

Thanks,
Dave
"Goodness is the only investment that never fails." | H.D. Thoreau

randomguy
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Re: Any reason for equities in tIRA, if there is space for Total Equity Allocation in Taxable and Roth Accounts

Post by randomguy » Tue Feb 20, 2018 2:33 pm

jeffyscott wrote:
Tue Feb 20, 2018 8:17 am
OffGridder wrote:
Sun Feb 18, 2018 11:21 pm
Of course there could be some years when there is a correction in equities, in which case that would temporarily suppress growth of of the tIRA.
With stock prices where they are, maybe keep equities in tIRA and convert after they crash :( :wink: .
Ignoring the market timing aspects of waiting for a crash that might not happen at the right time, this is a solid reason. The assumption is always that stocks outperform bonds which doesn't always hold true for short 10-15 year periods. But in general we are talking pretty minimal benefits or disadvantages either way in most cases.

software
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Re: Any reason for equities in tIRA, if there is space for Total Equity Allocation in Taxable and Roth Accounts

Post by software » Tue Feb 20, 2018 2:38 pm

randomguy wrote:
Tue Feb 20, 2018 2:33 pm
jeffyscott wrote:
Tue Feb 20, 2018 8:17 am
OffGridder wrote:
Sun Feb 18, 2018 11:21 pm
Of course there could be some years when there is a correction in equities, in which case that would temporarily suppress growth of of the tIRA.
With stock prices where they are, maybe keep equities in tIRA and convert after they crash :( :wink: .
Ignoring the market timing aspects of waiting for a crash that might not happen at the right time, this is a solid reason. The assumption is always that stocks outperform bonds which doesn't always hold true for short 10-15 year periods. But in general we are talking pretty minimal benefits or disadvantages either way in most cases.
Again, ignoring the market timing aspect, the market goes up more often than it goes down, even over short time periods. So historically you would have been more likely to be on the losing side of that bet.

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