Recurring investments in taxable account

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sapper1371
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Recurring investments in taxable account

Post by sapper1371 » Tue Jul 10, 2018 7:35 pm

I am fortunate enough to have excess income after reaching the $18,500 IRS limit on my 401k as well as maxing out my HSA. I also have a healthy rainy day fund so I am looking for my next investment vehicle which seems to point towards a taxable account.

I have read that VTSMX is a pretty tax friendly fund do to low turnover so I opened up a new account at TD Ameritrade where I also have a Roth IRA and threw $15k in there to start with the plan to add about $1-2k a month moving forward. The problem seems to be that TDA is hitting me with a healthy trade fee because it’s a Vanguard fund. I read that in this case it’s better to go with the VTI ETF because it’s pretty much the same and doesn’t carry the mutual fund fee however unfortunately it is not a commission free ETF so I think I will get stuck paying a commission each month.

Is there a Comission free ETF at TDA that meets my needs or should I open a new account at vanguard if I want to use their fund? I know there is no free lunch, just looking for a cost effective lunch :happy

Thanks in advance for any advice!

jacoavlu
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Re: Recurring investments in taxable account

Post by jacoavlu » Tue Jul 10, 2018 8:21 pm

Presume you have already funded the Roth?

Personally I’d not want to pay trade fees. Can trade VTI free at Vanguard or E*TRADE. Schwab has excellent ETFs as well that trade free at Schwab. Ditto Fidelity. Don’t know about TDA. There’s probably an equivalent you can get for free.

sapper1371
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Re: Recurring investments in taxable account

Post by sapper1371 » Wed Jul 11, 2018 8:46 am

jacoavlu wrote:
Tue Jul 10, 2018 8:21 pm
Presume you have already funded the Roth?

Personally I’d not want to pay trade fees. Can trade VTI free at Vanguard or E*TRADE. Schwab has excellent ETFs as well that trade free at Schwab. Ditto Fidelity. Don’t know about TDA. There’s probably an equivalent you can get for free.
I was funding the Roth previously but my income now makes me ineligible.

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TomatoTomahto
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Re: Recurring investments in taxable account

Post by TomatoTomahto » Wed Jul 11, 2018 8:49 am

sapper1371 wrote:
Wed Jul 11, 2018 8:46 am
jacoavlu wrote:
Tue Jul 10, 2018 8:21 pm
Presume you have already funded the Roth?

Personally I’d not want to pay trade fees. Can trade VTI free at Vanguard or E*TRADE. Schwab has excellent ETFs as well that trade free at Schwab. Ditto Fidelity. Don’t know about TDA. There’s probably an equivalent you can get for free.
I was funding the Roth previously but my income now makes me ineligible.
Welcome to the forum.

You might still be able to Fund a backdoor Roth. Look at the wiki.
Zero Net Carbon by 2019.

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goingup
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Re: Recurring investments in taxable account

Post by goingup » Wed Jul 11, 2018 9:00 am

I wouldn't like paying trading fees. Your taxable account will grow and you'll likely at least one other fund. Monthly fees will add up. If you prefer using mutual funds and not ETFs, it would be cheaper to be at Vanguard. If ETFs are OK, I'd move to a broker that doesn't charge trading fees for Vanguard ETFs.

Jordan4FI
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Re: Recurring investments in taxable account

Post by Jordan4FI » Wed Jul 11, 2018 9:05 am

If TD has an all market index as well, that would be ok if you prefer to stay with them. Any full market low cost fund will act about the same as VTSMX/S&P500.. and similar funds.

MotoTrojan
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Re: Recurring investments in taxable account

Post by MotoTrojan » Wed Jul 11, 2018 9:27 am

TomatoTomahto wrote:
Wed Jul 11, 2018 8:49 am
sapper1371 wrote:
Wed Jul 11, 2018 8:46 am
jacoavlu wrote:
Tue Jul 10, 2018 8:21 pm
Presume you have already funded the Roth?

Personally I’d not want to pay trade fees. Can trade VTI free at Vanguard or E*TRADE. Schwab has excellent ETFs as well that trade free at Schwab. Ditto Fidelity. Don’t know about TDA. There’s probably an equivalent you can get for free.
I was funding the Roth previously but my income now makes me ineligible.
Welcome to the forum.

You might still be able to Fund a backdoor Roth. Look at the wiki.
Yup. Wiki has more info but as long as you have no tIRA pre-tax assets (401k rollover, etc) you can contribute the full Roth amount regardless of income.

Maybe time to switch to a lower cost provider or use TD’s broad market fund.

sapper1371
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Re: Recurring investments in taxable account

Post by sapper1371 » Wed Jul 11, 2018 12:30 pm

Will the back door Roth contributions apply to my $18500? If so I think that I might want to stick to my 401k at this point as I suspect my retirement income will be less than my current income (but can’t be sure of course).

retiredjg
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Re: Recurring investments in taxable account

Post by retiredjg » Wed Jul 11, 2018 12:50 pm

If you want Vanguard mutual funds, you should buy them at Vanguard. Other brokerages will charge a transaction fee (commission) and you cannot get the lower cost Admiral share class at other places either.

It used to be possible to buy some Vanguard ETFs at TDA without a commission, but that has gone away. The commission for ETFs should be less than mutual funds, but I still don't suggest it.

I feel sure that TDA has some kind of Total Stock Index on their NTF list though. If you can't find one, call and ask them. Other funds should be just as good although they may be a little less tax-efficient because of Vanguard's unique mutual fund/ETF structure.

sapper1371
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Re: Recurring investments in taxable account

Post by sapper1371 » Wed Jul 11, 2018 6:45 pm

I tried to create a screener for only NTF funds and found FSTVX listed but when I look at the summary it doesn’t have the “NTF” icon that I expect to see. Can anyone suggest something at TD Ameritrade that meets my needs?

sapper1371
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Re: Recurring investments in taxable account

Post by sapper1371 » Wed Jul 11, 2018 7:08 pm

I’m not having any luck finding a NTF and NL total stock market index fund with a comparable expense ratio to the VTSAX so it seems that I should just open a Vanguard fund...

emlowe
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Re: Recurring investments in taxable account

Post by emlowe » Wed Jul 11, 2018 7:09 pm

SPDR® Portfolio Total Stock Market ETF (SPTM) - ER: 0.03

If you want a mutual fund, it looks like at TDA you have less then great choices.

SSgA S&P 500 Index Fund N Class (SVSPX) - ER: 0.16

And a few others with higher ER

CrazyCatLady
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Re: Recurring investments in taxable account

Post by CrazyCatLady » Wed Jul 11, 2018 7:34 pm

sapper1371 wrote:
Wed Jul 11, 2018 12:30 pm
Will the back door Roth contributions apply to my $18500? If so I think that I might want to stick to my 401k at this point as I suspect my retirement income will be less than my current income (but can’t be sure of course).
No, you can do $18,500 to your 401(k) and $5,500 to an IRA each year. A backdoor Roth does not affect your 401(k) - you may be thinking about a mega-backdoor Roth where you convert after tax 401(k) contributions from your 401(k) to your Roth IRA. The pro-rata rule is what you need to worry about. I believe it only comes into play when you have a traditional IRA (including a former traditional 401(k) that you rolled over to a rollover IRA.). If your only accounts are your 401(k), taxable brokerage and a Roth IRA, you should be good to do a backdoor Roth IRA. Just make sure you file a Form 8606 with the IRS. I didn't originally know about that requirement. :oops:

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vineviz
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Re: Recurring investments in taxable account

Post by vineviz » Wed Jul 11, 2018 7:35 pm

emlowe wrote:
Wed Jul 11, 2018 7:09 pm
SPDR® Portfolio Total Stock Market ETF (SPTM) - ER: 0.03
This is your solution.

https://research.tdameritrade.com/grid/ ... ymbol=SPTM

A total stock market index fund, dirt cheap, and available commission-free.
Last edited by vineviz on Wed Jul 11, 2018 7:51 pm, edited 1 time in total.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

mortfree
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Re: Recurring investments in taxable account

Post by mortfree » Wed Jul 11, 2018 7:37 pm

Did you look for ITOT?

sapper1371
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Re: Recurring investments in taxable account

Post by sapper1371 » Wed Jul 11, 2018 8:37 pm

mortfree wrote:
Wed Jul 11, 2018 7:37 pm
Did you look for ITOT?
Took a look and it has an 8% turnover which seems like a negative for a taxable account?

Skierajs
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Re: Recurring investments in taxable account

Post by Skierajs » Wed Jul 11, 2018 8:45 pm

If you are planning to buy only Vanguard funds you are probably better off opening an account there. However TD will allow you to set up an automatic investment plan to add funds to any position you already have and charge no commissions. You could, say, buy an additional $2k per month that way and pay no trading fees. To set this up and for any changes to the plan you may have to call them or submit a form.

sapper1371
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Re: Recurring investments in taxable account

Post by sapper1371 » Wed Jul 11, 2018 8:57 pm

vineviz wrote:
Wed Jul 11, 2018 7:35 pm
emlowe wrote:
Wed Jul 11, 2018 7:09 pm
SPDR® Portfolio Total Stock Market ETF (SPTM) - ER: 0.03
This is your solution.

https://research.tdameritrade.com/grid/ ... ymbol=SPTM

A total stock market index fund, dirt cheap, and available commission-free.
This might be a winner since it also has a very low turnover

mhalley
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Re: Recurring investments in taxable account

Post by mhalley » Wed Jul 11, 2018 9:09 pm

The wiki has a section on tda that might be helpful (note that it recommends the above spdr etf)
https://www.bogleheads.org/wiki/TD_Ameritrade
But I agree that if you want funds instead of etfs, open a vanguard account and transfer the tda money there.

sapper1371
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Re: Recurring investments in taxable account

Post by sapper1371 » Thu Jul 12, 2018 8:51 am

mhalley wrote:
Wed Jul 11, 2018 9:09 pm
The wiki has a section on tda that might be helpful (note that it recommends the above spdr etf)
https://www.bogleheads.org/wiki/TD_Ameritrade
But I agree that if you want funds instead of etfs, open a vanguard account and transfer the tda money there.
If I plan to just have the one total market fund/etf, is there really and disadvantage of the spdr ETF vs the actual vanguard fund?

H-Town
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Re: Recurring investments in taxable account

Post by H-Town » Thu Jul 12, 2018 8:55 am

sapper1371 wrote:
Tue Jul 10, 2018 7:35 pm
I am fortunate enough to have excess income after reaching the $18,500 IRS limit on my 401k as well as maxing out my HSA. I also have a healthy rainy day fund so I am looking for my next investment vehicle which seems to point towards a taxable account.

I have read that VTSMX is a pretty tax friendly fund do to low turnover so I opened up a new account at TD Ameritrade where I also have a Roth IRA and threw $15k in there to start with the plan to add about $1-2k a month moving forward. The problem seems to be that TDA is hitting me with a healthy trade fee because it’s a Vanguard fund. I read that in this case it’s better to go with the VTI ETF because it’s pretty much the same and doesn’t carry the mutual fund fee however unfortunately it is not a commission free ETF so I think I will get stuck paying a commission each month.

Is there a Comission free ETF at TDA that meets my needs or should I open a new account at vanguard if I want to use their fund? I know there is no free lunch, just looking for a cost effective lunch :happy

Thanks in advance for any advice!
Go to Vanguard to buy Vanguard mutual funds/ETF commission free.

retiredjg
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Re: Recurring investments in taxable account

Post by retiredjg » Thu Jul 12, 2018 9:01 am

sapper1371 wrote:
Thu Jul 12, 2018 8:51 am
If I plan to just have the one total market fund/etf, is there really and disadvantage of the spdr ETF vs the actual vanguard fund?
If there is a disadvantage, it is probably not much of one. If you prefer to stay at TDA, that is what you should do. If you prefer the Vanguard fund, buy it at Vanguard.

Lafder
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Re: Recurring investments in taxable account

Post by Lafder » Thu Jul 12, 2018 9:07 am

You know the 18,500 is employee only, any employer match is in addition, right?

How old are you? Max contribution goes up the year you turn 50.

Does your employer allow post tax contributions? Do they allow in plan distributions of just the post tax portion? If so you may be eligible for a mega back door Roth. (Few employers have all conditions required to do this, but it is worth checking).

Others beat me to talking about the back door Roth. You make a non deductible IRA contribution, which is ok at any income. Then you convert this post tax contribution to a Roth. But you can not have any other IRAs or it effects the tax calculations. A 401k is not considered an IRA. So if you have any old IRAs, Rollover IRAs you can move them into your 401k so you are clear to do a back door Roth.

If your user name is your real name, contact a moderator to change it, you can flag your own post. As you post personal $$ info here, posts are searchable by anyone on the internet. Only members can post but anyone can read here.

You might post all of your holdings like this to be sure you are maximizing what you do have viewtopic.php?f=1&t=6212

lafder

sapper1371
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Re: Recurring investments in taxable account

Post by sapper1371 » Thu Jul 12, 2018 12:35 pm

Lafder wrote:
Thu Jul 12, 2018 9:07 am
You know the 18,500 is employee only, any employer match is in addition, right?

How old are you? Max contribution goes up the year you turn 50.

Does your employer allow post tax contributions? Do they allow in plan distributions of just the post tax portion? If so you may be eligible for a mega back door Roth. (Few employers have all conditions required to do this, but it is worth checking).

Others beat me to talking about the back door Roth. You make a non deductible IRA contribution, which is ok at any income. Then you convert this post tax contribution to a Roth. But you can not have any other IRAs or it effects the tax calculations. A 401k is not considered an IRA. So if you have any old IRAs, Rollover IRAs you can move them into your 401k so you are clear to do a back door Roth.

If your user name is your real name, contact a moderator to change it, you can flag your own post. As you post personal $$ info here, posts are searchable by anyone on the internet. Only members can post but anyone can read here.

You might post all of your holdings like this to be sure you are maximizing what you do have viewtopic.php?f=1&t=6212

lafder

Aware that my company match doesn’t count
I am 38
Company does allow after tax. What are in plan distributions?
No others IRA so will need to look at backdoor Roth
Will post the more detailed picture of my assets/options and change name as suggested


Thanks!

Lafder
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Re: Recurring investments in taxable account

Post by Lafder » Thu Jul 12, 2018 10:03 pm

Some company plans allow after tax 401k contributions. And keep track of the amount and growth. And allow you to do an in plan distribution (allow you to move those specified funds from the plan while you are still "in plan" and employed). And that is a perfect set up for a mega back door Roth where you put post tax money into your 401k account, then move the pretax money and growth into a Roth and never pay tax on it again.

If there has been growth, you will pay income tax on that small growth number when you move it to a Roth.

Read about a mega back door Roth. Few companies have all of the pieces needed. You can do a back door Roth and a mega back door Roth the same year if the possibility is there. There are no IRS limits on Roth conversions per year. But you do pay income tax on the money. Which is not an issue for back door Roths since they are post tax anyway.

lafder

retiredjg
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Re: Recurring investments in taxable account

Post by retiredjg » Sun Jul 15, 2018 9:07 am

sapper1371 wrote:
Thu Jul 12, 2018 12:35 pm
Company does allow after tax.
Note that "after-tax employee contributions" are not the same thing as Roth contributions. With that in mind, do you really have the option to make after-tax contributions?

What are in plan distributions?
I've more often seen this as "in-service" distributions meaning a distribution while still in service (working there).

drk
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Re: Recurring investments in taxable account

Post by drk » Sun Jul 15, 2018 10:04 am

sapper1371 wrote:
Tue Jul 10, 2018 7:35 pm
Is there a Comission free ETF at TDA that meets my needs or should I open a new account at vanguard if I want to use their fund? I know there is no free lunch, just looking for a cost effective lunch :happy
Somebody mentioned SPTM in this thread, but for future reference the wiki has details on Boglehead-style funds at TDA.

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