Bonds or Stocks in IRA account?

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klobar
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Joined: Mon Oct 22, 2012 8:33 pm

Bonds or Stocks in IRA account?

Post by klobar » Tue Mar 12, 2019 1:33 pm

I'm 73 and retired. Is it a standard rule that at my age my IRA account should have Bonds and brokerage account Stocks?

ExitStageLeft
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Re: Bonds or Stocks in IRA account?

Post by ExitStageLeft » Tue Mar 12, 2019 1:44 pm

klobar wrote:
Tue Mar 12, 2019 1:33 pm
I'm 73 and retired. Is it a standard rule that at my age my IRA account should have Bonds and brokerage account Stocks?
Generally bonds should be in the tax-deferred accounts because they aren't tax efficent. There are exceptions of course, but if you have affordable bond fund options in your IRA that would be the best place to keep them.

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bertilak
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Re: Bonds or Stocks in IRA account?

Post by bertilak » Tue Mar 12, 2019 1:50 pm

klobar wrote:
Tue Mar 12, 2019 1:33 pm
I'm 73 and retired. Is it a standard rule that at my age my IRA account should have Bonds and brokerage account Stocks?
The important thing is that you have a reasonable allocation of stocks and bonds -- that's another issue.

Once you are satisfied with that, the next decision becomes where to put them. The ideal locations are bonds in tax-advantaged accounts and stocks in taxable accounts, but that is secondary to the allocation decision. Put things where they fit and don't worry about it if not everything fits just where you prefer.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker, the Cowboy Poet

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dratkinson
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Re: Bonds or Stocks in IRA account?

Post by dratkinson » Tue Mar 12, 2019 2:37 pm

Since:
--$1 in tax-free (Roth) is worth more than $1 in taxable.
--$1 in taxable is worth more than $1 in tax-deferred.
--Everything withdrawn from tax-deferred is taxed as ordinary income---QDI/LTCG benefit lost.

The general advices is:
--Put taxable bonds in tax-deferred, since their tax treatment is unchanged---taxed as ordinary income.
--Put stocks in tax-free, since tax-preferred treatment of QDI/LTCG is preserved, and all growth is tax-free.
--Put tax-efficient stocks (high percentage QDI) and bonds (municipal if appropriate) in taxable.

There are lots of tweaks to above advice....

Bottom line. After weighting our options, our choices depend upon our financial situation and preferences.



Better advice requires more information.

Is your IRA traditional or Roth?

Do you spend everything every year? Or do you have enough left over to be reinvesting some money?

What are your fed/state tax brackets?

What is your state of residency?
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

StandingRock
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Re: Bonds or Stocks in IRA account?

Post by StandingRock » Tue Mar 12, 2019 2:55 pm

dratkinson wrote:
Tue Mar 12, 2019 2:37 pm

--Put stocks in tax-free, since tax-preferred treatment of QDI/LTCG is preserved, and all growth is tax-free.
That's a little bit misleading - there will be taxes when you realize gains.

ExitStageLeft
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Re: Bonds or Stocks in IRA account?

Post by ExitStageLeft » Tue Mar 12, 2019 3:33 pm

StandingRock wrote:
Tue Mar 12, 2019 2:55 pm
dratkinson wrote:
Tue Mar 12, 2019 2:37 pm

--Put stocks in tax-free, since tax-preferred treatment of QDI/LTCG is preserved, and all growth is tax-free.
That's a little bit misleading - there will be taxes when you realize gains.
As noted in the comment, tax-free refers to a Roth account. There will be no taxes imposed on gains in a Roth IRA or a Roth 401k.

Topic Author
klobar
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Re: Bonds or Stocks in IRA account?

Post by klobar » Thu Mar 14, 2019 10:42 am

Thank you all.
I have a reasonable allocation in my total bond and brokerage and accounts.
Vanguard personal adviser recommended that I should re-balance my accounts to have more bonds in my IRA account, and also since this money is basically my inheritance to my kids.
So my question remains whether my IRA account should be heavier on bonds rather than stocks.
Resident of NJ.
My IRA is traditional.
My income is about $50,000 per year from various sources. I’m satisfied with this.

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Ketawa
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Re: Bonds or Stocks in IRA account?

Post by Ketawa » Thu Mar 14, 2019 10:48 am

ExitStageLeft wrote:
Tue Mar 12, 2019 3:33 pm
StandingRock wrote:
Tue Mar 12, 2019 2:55 pm
dratkinson wrote:
Tue Mar 12, 2019 2:37 pm

--Put stocks in tax-free, since tax-preferred treatment of QDI/LTCG is preserved, and all growth is tax-free.
That's a little bit misleading - there will be taxes when you realize gains.
As noted in the comment, tax-free refers to a Roth account. There will be no taxes imposed on gains in a Roth IRA or a Roth 401k.
It's still misleading though, because Roth accounts are not a magical place where higher returns can be had with less risk compared to a Traditional account. The wiki on tax-adjusted asset allocation goes into this. However, it's off topic for the OP's question, which is about IRA vs taxable. For that question, tax efficiency of bonds vs stocks is the relevant factor.

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dratkinson
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Re: Bonds or Stocks in IRA account?

Post by dratkinson » Thu Mar 14, 2019 4:53 pm

klobar wrote:
Thu Mar 14, 2019 10:42 am
Thank you all.
I have a reasonable allocation in my total bond and brokerage and accounts.
Vanguard personal adviser recommended that I should re-balance my accounts to have more bonds in my IRA account, and also since this money is basically my inheritance to my kids.
So my question remains whether my IRA account should be heavier on bonds rather than stocks.
Resident of NJ.
My IRA is traditional.
My income is about $50,000 per year from various sources. I’m satisfied with this.
Since
--your traditional IRA is earmarked for your kids,
--and they will get a stepped up cost basis when they inherit,
--and stocks are expected to grow more than bonds,
then I'd be tempted to skew toward stocks... as you are doing.


Since Vanguard recommends more bonds and you are in NJ, I was hoping you could add a muni bond fund to your taxable account. But it looks like you are in the 10% fed tax bracket (assumed marital status: single, 36.7K = 50K income from various sources - 13.3K deduction), so munis are not recommended.
d.r.a, not dr.a. | I'm a novice investor, you are forewarned.

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