[Looking to keep taxable yields down]

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JediMisty
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[Looking to keep taxable yields down]

Post by JediMisty » Tue Nov 06, 2018 5:33 pm

[Thread updated, see below. --admin LadyGeek]

I saw this thread asked as zero yirld and only one answer. I'm trying to minimize dividends and capital gains in my BFs taxable account to keep him eligible for ACA subsidies. Any suggestions for low cost funds at VG for his taxable account? He's 63.5, do only needs these subsidies a short time. Works in his own business. I've already set up a solo 401k to maximize his retirement deduction to lower his MAGI.

Silk McCue
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Re: Low yield mutual funds for taxable accounts

Post by Silk McCue » Tue Nov 06, 2018 6:06 pm

This active thread on zero yield has numerous responses that offer option on low yield.

viewtopic.php?p=4200358#p4200358

Cheers

JediMisty
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[Looking to keep taxable yields down]

Post by JediMisty » Tue Nov 06, 2018 6:50 pm

[Split into a new thread from: Do Bonds Go in Taxable? --admin LadyGeek]

Trying to keep taxable yields down on my BF VG taxable account to insure he will get subsidies for ACA insurance. Looking for low yield suggestions for the next couple of years until he qualifies for Medicare. There's a mix of bond funds and stock funds now. Most likely will need to sell some bond funds to TLH either this year or next, depends on the math. Already opened a solo 401k for him to max out retirement deduction as he's self employed. He's not eligible for HSA and has no personal deductions since he sold his house. So getting fewer dividends is the last piece of the puzzle.

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grabiner
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Re: [Looking to keep taxable yields down]

Post by grabiner » Tue Nov 06, 2018 7:44 pm

JediMisty wrote:
Tue Nov 06, 2018 6:50 pm
Trying to keep taxable yields down on my BF VG taxable account to insure he will get subsidies for ACA insurance. Looking for low yield suggestions for the next couple of years until he qualifies for Medicare. There's a mix of bond funds and stock funds now. Most likely will need to sell some bond funds to TLH either this year or next, depends on the math.
It's better to hold stocks in taxable (as long as you don't have to sell them for a capital gain), since stock yields are lower than bond yields.
Already opened a solo 401k for him to max out retirement deduction as he's self employed. He's not eligible for HSA and has no personal deductions since he sold his house. So getting fewer dividends is the last piece of the puzzle.
There are high-deductible plans in the ACA marketplace, which would allow him to use an HSA and take another $3500 off his income next year.
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JediMisty
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Re: [Looking to keep taxable yields down]

Post by JediMisty » Tue Nov 06, 2018 8:02 pm

I'll make sure he signs up for a high deductible plan for 2019. Which stock funds have lower yields? Growth funds?

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LadyGeek
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Re: [Looking to keep taxable yields down]

Post by LadyGeek » Tue Nov 06, 2018 8:15 pm

FYI - JediMisty had an earlier post which I've merged into here. The software sorts by time, so the post is listed first. This isn't a big deal, don't worry about it.

(Thanks to the member who reported the post. One of the reasons is "Duplicate thread".)
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grabiner
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Re: [Looking to keep taxable yields down]

Post by grabiner » Tue Nov 06, 2018 9:52 pm

JediMisty wrote:
Tue Nov 06, 2018 8:02 pm
I'll make sure he signs up for a high deductible plan for 2019. Which stock funds have lower yields? Growth funds?
Growth has lower yield than value, US lower than foreign, and small-cap slightly lower than large-cap.
Wiki David Grabiner

mhalley
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Re: [Looking to keep taxable yields down]

Post by mhalley » Wed Nov 07, 2018 12:39 am

Vanguard has a number of tax managed funds, but in general index funds are already tax effecient. This post compares taxes on index vs tax managed funds, along with the ers.
.Total Stock Market is still better than a combination of tax-managed funds, except in the top tax bracket, and even then it is just as good.
https://www.bogleheads.org/wiki/Tax-man ... comparison

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grabiner
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Re: [Looking to keep taxable yields down]

Post by grabiner » Wed Nov 07, 2018 12:44 am

mhalley wrote:
Wed Nov 07, 2018 12:39 am
Vanguard has a number of tax managed funds, but in general index funds are already tax effecient. This post compares taxes on index vs tax managed funds, along with the ers.
.Total Stock Market is still better than a combination of tax-managed funds, except in the top tax bracket, and even then it is just as good.
https://www.bogleheads.org/wiki/Tax-man ... comparison
However, that article is based only on expenses and taxes. If your marginal tax rate on dividends is much more than 15% (because of some tax or ACA phase-out), then selecting for lower dividends with Tax-managed Capital Appreciation makes sense. Conversely, if your marginal tax rate on dividends is zero (in the 12% federal bracket), then any fund with 100% qualified dividends is just as good from a tax standpoint, and there is no reason to use the tax-managed funds.
Wiki David Grabiner

bhsince87
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Re: [Looking to keep taxable yields down]

Post by bhsince87 » Wed Nov 07, 2018 5:07 pm

So the plan is to do this temporarily for 2 years, then switch back to a normal allocation?

And how much $ are we talking about?

It might make sense to pull as much out of the market and bonds as necessary and just park it into low yield bank accounts and/or CDs until he hits 65.

I'm working through a similar situation myself, and the ACA cliff requires some unusual thinking!
Retirement: When you reach a point where you have enough. Or when you've had enough.

JediMisty
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Re: [Looking to keep taxable yields down]

Post by JediMisty » Thu Nov 15, 2018 2:04 pm

bhsince87 wrote:
Wed Nov 07, 2018 5:07 pm
So the plan is to do this temporarily for 2 years, then switch back to a normal allocation?

And how much $ are we talking about?

It might make sense to pull as much out of the market and bonds as necessary and just park it into low yield bank accounts and/or CDs until he hits 65.

I'm working through a similar situation myself, and the ACA cliff requires some unusual thinking!
The problem is that if I TLH to lower MAGI, he will be in the zero percent bracket for capital gains. I'm not sure if I'm hurting his situation for the future because I'll be potentially costing him money if he sells the rebought shares while in a higher bracket in the future. I've printed out the subsidies schedule and am working hard to estimate his income from his business. It fluctuates. The solo 401k is a no brainier, but now the TLH is even more complicated.

JediMisty
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Re: [Looking to keep taxable yields down]

Post by JediMisty » Thu Nov 15, 2018 2:06 pm

bhsince87 wrote:
Wed Nov 07, 2018 5:07 pm
So the plan is to do this temporarily for 2 years, then switch back to a normal allocation?

And how much $ are we talking about?

It might make sense to pull as much out of the market and bonds as necessary and just park it into low yield bank accounts and/or CDs until he hits 65.

I'm working through a similar situation myself, and the ACA cliff requires some unusual thinking!
The plan is to sell most of the higher yielding bonds in his taxable account and replace with lower yielding stock funds. Then I'll rebalance his AA in his IRA.

The problem is that if I TLH to lower MAGI, he will be in the zero percent bracket for capital gains. I'm not sure if I'm hurting his situation for the future because I'll be potentially costing him money if he sells the rebought shares while in a higher bracket in the future. I've printed out the subsidies schedule and am working hard to estimate his income from his business. It fluctuates. The solo 401k is a no brainier, but now the TLH is even more complicated.

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