What to invest in after 401k and Roth maxed?

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EricLThomp
Posts: 42
Joined: Tue Sep 18, 2018 10:10 pm

What to invest in after 401k and Roth maxed?

Post by EricLThomp » Sat Feb 09, 2019 2:52 pm

What do you put in your taxable account once all other vehicles are maxed?
Who do you use and how are they?

suemarkp
Posts: 198
Joined: Sun Nov 12, 2017 8:18 pm

Re: What to invest in after 401k and Roth maxed?

Post by suemarkp » Sat Feb 09, 2019 4:30 pm

I'd favor stocks in the taxable account since you can take advantage of long term capital gains rates and long term dividend rates in a taxable account, unlike in a 401K or IRA. You can also tax loss harvest (be sure to read and understand the rules about wash sales and not to have similar investments in 401K/IRA accounts). So bias your 401K to the bonds portion of your asset allocation which probably means moving more and more to bonds as your taxable account grows. The Roth should probably be stocks also, and perhaps heavier on the international ones since they can be less tax favored.

You may want to look for tax managed stock funds to minimize unwanted taxable capital gains distributions. Vanguard funds seem to have low churn, so most aren't bad in taxable. But Vanguard does offer some tax managed stock funds where they are cognizant about generating unwanted taxes.

If you need to have bonds in taxable, then look at municipal bonds if you're in a higher tax bracket. Vanguard also has a 50/50 balanced fund that is tax managed (VTMFX Tax Managed Balanced Fund) which I have been happy with.
Mark | Kent, WA

MadDad
Posts: 9
Joined: Fri Feb 08, 2019 11:40 am

Re: What to invest in after 401k and Roth maxed?

Post by MadDad » Sat Feb 09, 2019 6:14 pm

Consider an HSA if you have access. If you have kids, look at 529’s.

mortfree
Posts: 1780
Joined: Mon Sep 12, 2016 7:06 pm

Re: What to invest in after 401k and Roth maxed?

Post by mortfree » Sat Feb 09, 2019 7:02 pm

I have a taxable account at Vanguard where I invest in VTI (Total US Stock ETF).

I also have another taxable account at a different company that is invested in individual stocks (established around 15 years ago).

Smk18
Posts: 28
Joined: Tue Sep 11, 2018 4:16 pm

Re: What to invest in after 401k and Roth maxed?

Post by Smk18 » Sat Feb 09, 2019 7:10 pm

Three fund portfolio in taxable account is a popular investment choice . Fidelity, Vanguard , Schwab all have good investment selection. you can use low cost index funds or etf's.
There are various posts in this forum discussing them in detail .

pdavi21
Posts: 1203
Joined: Sat Jan 30, 2016 4:04 pm

Re: What to invest in after 401k and Roth maxed?

Post by pdavi21 » Sat Feb 09, 2019 7:10 pm

If you can hang out in the 12% bracket, foreign stocks will generally have negative tax on dividends and no tax on cap gains. If you hang out in 22-24, foreign stocks and US are great, municipal/tax efficient bonds could take a look. If you are 32+, US stocks are going to be more efficient than foreign, and municipal bonds become more attractive too.

Of course, you need to look at how your state taxes LTCG, QDI, Bonds, etc. to further personalize your optimal solution.
"We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity." -Stephen Hawking

3dream3
Posts: 111
Joined: Wed Jul 26, 2017 2:53 pm

Re: What to invest in after 401k and Roth maxed?

Post by 3dream3 » Sun Feb 10, 2019 1:44 am

After 401k/403b/Backdoor Roths... we contribute to 529s up to the max state deduction. Wish we could do mega backdoor roths but neither of our workplaces allow it which is a big bummer. So in taxable, we currently contribute to VTSAX and VTIAX with Vanguard. We also have another brokerage from prior to discovering BH. This just has SPY and a couple of other stocks that all just sits there.

bltn
Posts: 558
Joined: Mon Feb 20, 2017 9:32 pm

Re: What to invest in after 401k and Roth maxed?

Post by bltn » Sun Feb 10, 2019 5:56 am

Consider putting 2/3 of your savings in the Total Stock Market Index Fund and 1/3 in a money market account. As the cash account builds, you ll have the flexibility to use it for other investment opportunities, new car purchases, 529 plans, mortgage prepayments, etc.

lakpr
Posts: 2811
Joined: Fri Mar 18, 2011 9:59 am

Re: What to invest in after 401k and Roth maxed?

Post by lakpr » Sun Feb 10, 2019 9:36 am

Check out if your 401-k plan has After Tax contribution provisions. If so, contribute the max then do an in-plan Roth conversions. Very unlikely that any HR software that allows an after-tax contribution would be without a provision for in-plan Roth conversion. It may not allow an in-service distribution to an external Roth IRA, if it does that's a bonus cherry on the top.

You will then have an opportunity to save up to $62K per year (6K Roth IRA backdoor and $56K within the 401k plan in a combination of regular/Roth contributions, after-tax contributions turned into Roth within the plan). If you are able to save even more than $62K per person per year, then yeah, taxable is the only alternative.

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