Shifting money for house from stock funds

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raptor9118
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Shifting money for house from stock funds

Post by raptor9118 » Tue Jun 12, 2018 8:32 am

Hi,

The conventional wisdom is to put money that is needed in the short term in cash or more conservative investments. Our time horizon is now 7 years and we have about $500K+ in after tax money split between the Vanguard Total Stock Market and Total International Stock Market funds. Is there a tax efficient strategy for shifting money from these funds into a money market fund or something more conservative? Of the $500K, the cost basis is about $400K, short term gains are about 10K and long term are about 90K. We're still investing $500 every two weeks into these funds.

Thanks in advance for any advice.

Grt2bOutdoors
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Re: Shifting money for house from stock funds

Post by Grt2bOutdoors » Tue Jun 12, 2018 8:36 am

Stop investing in the stock funds, start shifting into more conservative funds like a high yield savings account, cd's, money market funds OR use tax loss harvesting to shift out of stock funds when available.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

sport
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Re: Shifting money for house from stock funds

Post by sport » Tue Jun 12, 2018 8:44 am

I would say that your main concern should be when to change to more conservative investments regardless of the tax impact. You don't want your 500K to become 300K when you are ready to use it. I would consider a strategy to get the money out of stocks completely within 2 years. In fact, some say you should not have money in stocks you will need within 10 years. The stock market has been very good to us for quite some time. How far do you want to push your luck? One possible approach would be to take half of the money out now, another 25% in one year, and the rest in two years. Alternatively, you could go to all CDs now. It will be interesting to see how others respond.

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goingup
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Re: Shifting money for house from stock funds

Post by goingup » Tue Jun 12, 2018 10:34 am

How much of the $500K is needed for the downpayment? If that time frame is a true 7 years I personally would leave it as is. Why not also start saving in a muni bond fund, too? Either short or intermediate term.

We kept our taxable funds as is until about 3 months before the payment was needed. Used a combination of muni bond funds, money market funds and stock funds. Never had a special "house downpayment" account because it was just a taxable account that had enough in it to weather a downturn and still make a downpayment.

I think having additional funds (bond and money market) to draw upon in 7 years would give you flexibility, regardless of the market environment. Personally, I wouldn't sell your stock funds now, so far in advance of when the money is required.

PFInterest
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Re: Shifting money for house from stock funds

Post by PFInterest » Tue Jun 12, 2018 2:56 pm

raptor9118 wrote:
Tue Jun 12, 2018 8:32 am
Hi,

The conventional wisdom is to put money that is needed in the short term in cash or more conservative investments. Our time horizon is now 7 years and we have about $500K+ in after tax money split between the Vanguard Total Stock Market and Total International Stock Market funds. Is there a tax efficient strategy for shifting money from these funds into a money market fund or something more conservative? Of the $500K, the cost basis is about $400K, short term gains are about 10K and long term are about 90K. We're still investing $500 every two weeks into these funds.

Thanks in advance for any advice.
tax efficient, yes. stop adding money, hope for a crash. sell and TLH.

basspond
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Re: Shifting money for house from stock funds

Post by basspond » Tue Jun 12, 2018 3:53 pm

When I was in accumulating stage I adjusted my contributions into the different buckets to "balance" my funds. Since you have 7 years I would do the same in your position.

aristotelian
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Re: Shifting money for house from stock funds

Post by aristotelian » Tue Jun 12, 2018 3:55 pm

Make sure dividends aren't being reinvested. Use Spec ID and sell shares with losses or fewest gains.

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Re: Shifting money for house from stock funds

Post by aristotelian » Tue Jun 12, 2018 3:58 pm

PFInterest wrote:
Tue Jun 12, 2018 2:56 pm
raptor9118 wrote:
Tue Jun 12, 2018 8:32 am
Hi,

The conventional wisdom is to put money that is needed in the short term in cash or more conservative investments. Our time horizon is now 7 years and we have about $500K+ in after tax money split between the Vanguard Total Stock Market and Total International Stock Market funds. Is there a tax efficient strategy for shifting money from these funds into a money market fund or something more conservative? Of the $500K, the cost basis is about $400K, short term gains are about 10K and long term are about 90K. We're still investing $500 every two weeks into these funds.

Thanks in advance for any advice.
tax efficient, yes. stop adding money, hope for a crash. sell and TLH.
I hope that is sarcasm. It is much better to have gains and pay taxes than to lose money and realize losses for a small tax deduction.

PFInterest
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Re: Shifting money for house from stock funds

Post by PFInterest » Tue Jun 12, 2018 5:21 pm

aristotelian wrote:
Tue Jun 12, 2018 3:58 pm
PFInterest wrote:
Tue Jun 12, 2018 2:56 pm
raptor9118 wrote:
Tue Jun 12, 2018 8:32 am
Hi,

The conventional wisdom is to put money that is needed in the short term in cash or more conservative investments. Our time horizon is now 7 years and we have about $500K+ in after tax money split between the Vanguard Total Stock Market and Total International Stock Market funds. Is there a tax efficient strategy for shifting money from these funds into a money market fund or something more conservative? Of the $500K, the cost basis is about $400K, short term gains are about 10K and long term are about 90K. We're still investing $500 every two weeks into these funds.

Thanks in advance for any advice.
tax efficient, yes. stop adding money, hope for a crash. sell and TLH.
I hope that is sarcasm. It is much better to have gains and pay taxes than to lose money and realize losses for a small tax deduction.
didnt say it was better. it is the most tax efficient.

aristotelian
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Re: Shifting money for house from stock funds

Post by aristotelian » Tue Jun 12, 2018 7:26 pm

PFInterest wrote:
Tue Jun 12, 2018 5:21 pm
aristotelian wrote:
Tue Jun 12, 2018 3:58 pm
PFInterest wrote:
Tue Jun 12, 2018 2:56 pm
raptor9118 wrote:
Tue Jun 12, 2018 8:32 am
Hi,

The conventional wisdom is to put money that is needed in the short term in cash or more conservative investments. Our time horizon is now 7 years and we have about $500K+ in after tax money split between the Vanguard Total Stock Market and Total International Stock Market funds. Is there a tax efficient strategy for shifting money from these funds into a money market fund or something more conservative? Of the $500K, the cost basis is about $400K, short term gains are about 10K and long term are about 90K. We're still investing $500 every two weeks into these funds.

Thanks in advance for any advice.
tax efficient, yes. stop adding money, hope for a crash. sell and TLH.
I hope that is sarcasm. It is much better to have gains and pay taxes than to lose money and realize losses for a small tax deduction.
didnt say it was better. it is the most tax efficient.
Well, when you say "hope for a crash" because it is most tax efficient, that is a massively backward way of thinking and unhelpful to OP.

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grabiner
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Re: Shifting money for house from stock funds

Post by grabiner » Tue Jun 12, 2018 7:53 pm

If your taxable account is much larger than you need for your down payment, you can do the switching in your employer plan. If you need a $200K down payment, you can have $200K in an intermediate-term bond fund (now) and a short-term bond fund (within 3 years), leaving the taxable account all stock. Then, when you are actually ready to make the down payment, you sell $200K in stock, paying capital-gains tax only once; simultaneously, you move $200K from bonds to stock in your employer plan.

The reason this works is that the taxable account is more than twice the amount you plan to spend from it. Even if the stock market loses half its value (in which case you would presumably sell anyway to harvest the losses), you will still have enough to make the down payment from your taxable account without penalty.
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livesoft
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Re: Shifting money for house from stock funds

Post by livesoft » Tue Jun 12, 2018 7:58 pm

Personally, with such a large taxable account, I don't see any reason to bother switching. If equities drop 10%, so what? Will that kill any house deal? What if stocks go up 20% from here over the next 2 years? Would a drop of 15% still let you have more money than switch now? I would think so.

What if stocks go up 30%? Then drop 20%? You would probably still have more money for the house.
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whodidntante
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Re: Shifting money for house from stock funds

Post by whodidntante » Tue Jun 12, 2018 8:17 pm

I wouldn't sell any of it. Stay invested because you don't have a specific plan. With rates where the are a larger mortgage isn't a bad idea either.

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