Dip into taxable account to fund Roths and medical expenses?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
doss
Posts: 272
Joined: Tue Nov 01, 2011 9:52 am

Dip into taxable account to fund Roths and medical expenses?

Post by doss » Sat Jan 12, 2019 3:35 pm

Hi all,
We have 30k saved in a taxable brokerage account with Vanguard (Total Stock market). I haven't funded both Roths yet for 2019 -- and I don't want to touch our savings account at the moment because we are saving for some big purchases in the coming year(s). I was treating the taxable account as part of my retirement funds. I have and still plan to max out my 401k, as well as contribute max to HSA every year.

Question in regards to the 30k brokerage account:

- Anything wrong with dipping into it and funding both my Roth and Spousal Roth right now?

- Good idea to use some of the money in the 30k to pay medical expenses (about 2k needed)? We will keep contributing to our HSA fo tax benefits

- After the above is completed, can I think of the rest of the taxable account as an "Emergency Fund" ? Our annual expenses are about 40k/yr in a LCOL area.

Thank you,

bloom2708
Posts: 6675
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Dip into taxable account to fund Roths and medical expenses?

Post by bloom2708 » Sat Jan 12, 2019 3:44 pm

If you do not have big gains, moving a taxable dollar of Total US to a Roth dollar of Total US is a good trade.

The medical bill needs to be paid. I would pay that from savings/emergency fund.

100% stocks for emergency fund is questionable.
"We are not here to agree with you; we are here to provoke thoughtfulness." Unknown Boglehead

User avatar
FiveK
Posts: 7367
Joined: Sun Mar 16, 2014 2:43 pm

Re: Dip into taxable account to fund Roths and medical expenses?

Post by FiveK » Sat Jan 12, 2019 6:39 pm

doss wrote:
Sat Jan 12, 2019 3:35 pm
1. - Anything wrong with dipping into it and funding both my Roth and Spousal Roth right now?

2. - Good idea to use some of the money in the 30k to pay medical expenses (about 2k needed)? We will keep contributing to our HSA fo tax benefits

3. - After the above is completed, can I think of the rest of the taxable account as an "Emergency Fund" ? Our annual expenses are about 40k/yr in a LCOL area.
1. No. It is a fine idea.
2. Yes.
3. You can, but note that an emergency may coincide with a large stock market drop, so only some fraction of the current balance (50%?) should be counted toward whatever amount you want for an emergency fund.

User avatar
grabiner
Advisory Board
Posts: 24999
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Dip into taxable account to fund Roths and medical expenses?

Post by grabiner » Sat Jan 12, 2019 9:23 pm

bloom2708 wrote:
Sat Jan 12, 2019 3:44 pm
If you do not have big gains, moving a taxable dollar of Total US to a Roth dollar of Total US is a good trade.
Even if you do have big gains, it's still worth doing. You will pay tax on the gains in your taxable account at some time, but by moving the money to a Roth IRA, you avoid the tax on future dividends and capital gains.
Wiki David Grabiner

CRTR
Posts: 232
Joined: Sat Apr 11, 2015 1:15 pm

Re: Dip into taxable account to fund Roths and medical expenses?

Post by CRTR » Sat Jan 12, 2019 11:44 pm

grabiner wrote:
Sat Jan 12, 2019 9:23 pm
bloom2708 wrote:
Sat Jan 12, 2019 3:44 pm
If you do not have big gains, moving a taxable dollar of Total US to a Roth dollar of Total US is a good trade.
Even if you do have big gains, it's still worth doing. You will pay tax on the gains in your taxable account at some time, but by moving the money to a Roth IRA, you avoid the tax on future dividends and capital gains.
+1

CRTR
Posts: 232
Joined: Sat Apr 11, 2015 1:15 pm

Re: Dip into taxable account to fund Roths and medical expenses?

Post by CRTR » Sat Jan 12, 2019 11:47 pm

Keeping 100% stocks in a taxable account, as emergency fund, is not unreasonable if it is part of a larger strategy. I can think of a couple ways to do it safely. Here is one example:

https://www.bogleheads.org/wiki/Placing ... ed_account

Post Reply