which bond fund in taxable?

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rajinvestor
Posts: 5
Joined: Mon Sep 25, 2017 9:59 am

which bond fund in taxable?

Post by rajinvestor » Fri Aug 10, 2018 9:29 am

This question might be asked many a times, i tried to read through most of the results but i cannot find an answer specific to my situation.

income in 24% bracket
live in missouri
700K+ in my taxable account with 65% of them are invested in VTSAX and VTIAX
350K in 401k
60K in Roth IRA
25K cash in emergency
150k company stocks vests in 3 years
target AA 80-20
41 and planning to work for another 15 years.

Looking to add some bonds in my taxable, VWITX a good choice?

Thanks and appreciate any help.

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cheese_breath
Posts: 7700
Joined: Wed Sep 14, 2011 7:08 pm

Re: which bond fund in taxable?

Post by cheese_breath » Fri Aug 10, 2018 9:48 am

I guess if you're going to have a bond fund in taxable a tax exempt one is the better choice. But why do you want a bond fund in taxable?
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dcabler
Posts: 560
Joined: Wed Feb 19, 2014 11:30 am

Re: which bond fund in taxable?

Post by dcabler » Fri Aug 10, 2018 9:59 am

I understand that sometimes your mix of tax advantaged dollars and taxable dollars aren't such that you can 100% place assets in places to take full advantage of tax efficiency while meeting your desired AA. If that's the case, then you probably haven't much choice but to use some sort of tax-exempt bonds for your taxable account. Myself, I'm currently fortunate that 60% of my assets are in tax advantaged accounts and 40% are in taxable accounts with a stock/bond allocation of 50/50. So taxable is all stock and tax deferred is mostly bond with some stock. Gives me some wiggle room when rebalancing time comes around....

livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: which bond fund in taxable?

Post by livesoft » Fri Aug 10, 2018 10:17 am

rajinvestor wrote:
Fri Aug 10, 2018 9:29 am
700K+ in my taxable account with 65% of them are invested in VTSAX and VTIAX
[...]
Looking to add some bonds in my taxable, VWITX a good choice?

Thanks and appreciate any help.
VWITX is the Vanguard intermediate-term tax-exempt bond fund. It is probably a good choice if one is forced to have a bond fund in a taxable account.

But as asked before, why do you think you need a bond fund in a taxable account? It does look like you have plenty of room in the 401(k) to have a bond fund and you are not in a particular high income tax bracket where a bond fund in taxable might be compelling. And the 401(K) would still have room left for equities such that all rebalancing could be done tax-efficiently in the 401(k).

Plus, your taxable account has 35% of something else besides VTSAX and VTIAX in it which you didn't detail. You know Bogleheads, they want to know what that 35% is. For instance, if it is a REIT fund, then we would be scratching our heads on that one.
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gostars
Posts: 320
Joined: Mon Oct 09, 2017 7:53 pm

Re: which bond fund in taxable?

Post by gostars » Fri Aug 10, 2018 9:02 pm

In a 24% federal tax bracket, VBTLX has a slight edge at the current published rates on the Vanguard website. The break-even tax bracket can be calculated as 1-(muni_yield/taxable_yield), or 1-(2.33/3.14)==25.8%. Anything below that is probably better in a taxable bond fund, anything higher is probably better in munis. State taxes affect this if a state-specific muni is used, primarily in states like CA with high state taxes. All that said, you have more than enough 401k space available to hold your entire desired bond allocation in the 401k and would probably be best off using that before even considering holding bonds in taxable, even if your 401k only has something less than optimal like PIMCO Total Return (PTTRX), as is the case in many 401ks. I would absolutely use that in a 401k ahead of putting any bonds in taxable.

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