Fund for taxable account

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Lovey
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Fund for taxable account

Post by Lovey » Tue Jan 28, 2020 3:34 pm

I have a some money (about $6,000 total) to split between my boys (high school and college).
Both work part time but did not open Roth as to not impact financial aid. I want to invest it for them as it was gifted to them.
A taxable account in our name would be favorable, I think or will the small amount not be significant enough to impact them if I do a Roth?

Options considered for taxable account:
Vanguard Total World Stock Idx Adm (VTWAX)
Vanguard Total Stock Mkt Idx Adm (VTSAX)
Vanguard Mid-Cap Index Fund Adm (VIMAX)

pkcrafter
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Re: Fund for taxable account

Post by pkcrafter » Tue Jan 28, 2020 4:33 pm

Of those 3 choices, total stock market, VTSAX, would be my recommendation. If the money is to be used in the next 8-10 years, then perhaps Vanguard tax-managed balanced (50/50) would be a good choice, or some combination of the two.


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Lovey
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Re: Fund for taxable account

Post by Lovey » Wed Jan 29, 2020 8:25 am

pkcrafter wrote:
Tue Jan 28, 2020 4:33 pm
Of those 3 choices, total stock market, VTSAX, would be my recommendation. If the money is to be used in the next 8-10 years, then perhaps Vanguard tax-managed balanced (50/50) would be a good choice, or some combination of the two.


Paul
Thank you. Not sure if the money will be used in 8-10 years. It may or it may be sold (from under our name) to fund their first Roth.

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1789
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Re: Fund for taxable account

Post by 1789 » Wed Jan 29, 2020 10:27 am

Just VTSAX - 100% would be what i choose
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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anon_investor
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Re: Fund for taxable account

Post by anon_investor » Wed Jan 29, 2020 10:57 am

1789 wrote:
Wed Jan 29, 2020 10:27 am
Just VTSAX - 100% would be what i choose
+1.

lostdog
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Re: Fund for taxable account

Post by lostdog » Wed Jan 29, 2020 10:57 am

Lovey wrote:
Tue Jan 28, 2020 3:34 pm
I have a some money (about $6,000 total) to split between my boys (high school and college).
Both work part time but did not open Roth as to not impact financial aid. I want to invest it for them as it was gifted to them.
A taxable account in our name would be favorable, I think or will the small amount not be significant enough to impact them if I do a Roth?

Options considered for taxable account:
Vanguard Total World Stock Idx Adm (VTWAX)
Vanguard Total Stock Mkt Idx Adm (VTSAX)
Vanguard Mid-Cap Index Fund Adm (VIMAX)
If you like the Total World stock allocation, you can use:

VTSAX 55% Vanguard Total Stock
VTIAX 45% Vanguard Total International

You won't need to re-balance in the taxable. It will float with the Total World allocation. When you add money to it, just add the money based on the current allocation.
World market cap equity.

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abuss368
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Re: Fund for taxable account

Post by abuss368 » Wed Jan 29, 2020 11:09 am

Lovey wrote:
Tue Jan 28, 2020 3:34 pm
I have a some money (about $6,000 total) to split between my boys (high school and college).
Both work part time but did not open Roth as to not impact financial aid. I want to invest it for them as it was gifted to them.
A taxable account in our name would be favorable, I think or will the small amount not be significant enough to impact them if I do a Roth?

Options considered for taxable account:
Vanguard Total World Stock Idx Adm (VTWAX)
Vanguard Total Stock Mkt Idx Adm (VTSAX)
Vanguard Mid-Cap Index Fund Adm (VIMAX)
Welcome to the forum!

I would consider Vanguard Total Stock Market Index. This one fund can be bought and held forever.

Keep investing simple.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success." || Buy Total Stock until it hurts. Then find a way to buy even more!

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abuss368
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Re: Fund for taxable account

Post by abuss368 » Wed Jan 29, 2020 11:10 am

At their ages you are definitely on the right track. I would consider 100% stocks only. Bonds can be later down the road.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success." || Buy Total Stock until it hurts. Then find a way to buy even more!

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anon_investor
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Re: Fund for taxable account

Post by anon_investor » Wed Jan 29, 2020 11:49 am

abuss368 wrote:
Wed Jan 29, 2020 11:09 am
Lovey wrote:
Tue Jan 28, 2020 3:34 pm
I have a some money (about $6,000 total) to split between my boys (high school and college).
Both work part time but did not open Roth as to not impact financial aid. I want to invest it for them as it was gifted to them.
A taxable account in our name would be favorable, I think or will the small amount not be significant enough to impact them if I do a Roth?

Options considered for taxable account:
Vanguard Total World Stock Idx Adm (VTWAX)
Vanguard Total Stock Mkt Idx Adm (VTSAX)
Vanguard Mid-Cap Index Fund Adm (VIMAX)
Welcome to the forum!

I would consider Vanguard Total Stock Market Index. This one fund can be bought and held forever.

Keep investing simple.
Just an FY, another thread indicated that VT did not offer a foreign tax credit this year, because it's foreign holdings were less than 50%. So if you want to get international equities for them, it may be better to get separate US/International funds (VTSAX/VTIAX), the over all expense ratio will be a little lower too.

As your boys are older (and not little kids), the future tax implications should be considered.

As I mentioned before, I would recommend 100% VTSAX, but personally I hold no international, so I may be biased.

sycamore
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Re: Fund for taxable account

Post by sycamore » Wed Jan 29, 2020 12:06 pm

I can't resist thinking of this as a "teachable moment" so what about getting your sons involved in researching the funds and understanding the pros and cons of each?

If they're not really interested, yeah VTSAX is a great choice :)

L82GAME
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Re: Fund for taxable account

Post by L82GAME » Wed Jan 29, 2020 12:12 pm

Lovey wrote:
Tue Jan 28, 2020 3:34 pm
I have a some money (about $6,000 total) to split between my boys (high school and college).
Both work part time but did not open Roth as to not impact financial aid. I want to invest it for them as it was gifted to them.
A taxable account in our name would be favorable, I think or will the small amount not be significant enough to impact them if I do a Roth?

Options considered for taxable account:
Vanguard Total World Stock Idx Adm (VTWAX)
Vanguard Total Stock Mkt Idx Adm (VTSAX)
Vanguard Mid-Cap Index Fund Adm (VIMAX)
VTSAX inside of a ROTH. Why no ROTH? Won’t count against fin aid. What am I missing?

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abuss368
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Re: Fund for taxable account

Post by abuss368 » Wed Jan 29, 2020 12:21 pm

anon_investor wrote:
Wed Jan 29, 2020 11:49 am
abuss368 wrote:
Wed Jan 29, 2020 11:09 am
Lovey wrote:
Tue Jan 28, 2020 3:34 pm
I have a some money (about $6,000 total) to split between my boys (high school and college).
Both work part time but did not open Roth as to not impact financial aid. I want to invest it for them as it was gifted to them.
A taxable account in our name would be favorable, I think or will the small amount not be significant enough to impact them if I do a Roth?

Options considered for taxable account:
Vanguard Total World Stock Idx Adm (VTWAX)
Vanguard Total Stock Mkt Idx Adm (VTSAX)
Vanguard Mid-Cap Index Fund Adm (VIMAX)
Welcome to the forum!

I would consider Vanguard Total Stock Market Index. This one fund can be bought and held forever.

Keep investing simple.
Just an FY, another thread indicated that VT did not offer a foreign tax credit this year, because it's foreign holdings were less than 50%. So if you want to get international equities for them, it may be better to get separate US/International funds (VTSAX/VTIAX), the over all expense ratio will be a little lower too.

As your boys are older (and not little kids), the future tax implications should be considered.

As I mentioned before, I would recommend 100% VTSAX, but personally I hold no international, so I may be biased.
That makes sense and could be another strategy if international is desired.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success." || Buy Total Stock until it hurts. Then find a way to buy even more!

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cap'n crunch
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Re: Fund for taxable account

Post by cap'n crunch » Wed Jan 29, 2020 9:00 pm

VTSAX is the way id go 100%...and sleep well at night.

nix4me
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Re: Fund for taxable account

Post by nix4me » Wed Jan 29, 2020 10:08 pm

None of the above - i would use VTI in a taxable account.

Topic Author
Lovey
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Joined: Tue Jul 15, 2008 9:23 pm

Re: Fund for taxable account

Post by Lovey » Thu Jan 30, 2020 6:52 am

nix4me wrote:
Wed Jan 29, 2020 10:08 pm
None of the above - i would use VTI in a taxable account.
Did not opt for an ETF because due to my job, every trade has to be approved prior to purchase (even if its in their name). Do not want the hassle.
Mutual funds do not need any approval.

Topic Author
Lovey
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Re: Fund for taxable account

Post by Lovey » Thu Jan 30, 2020 7:10 am

L82GAME wrote:
Wed Jan 29, 2020 12:12 pm
Lovey wrote:
Tue Jan 28, 2020 3:34 pm
I have a some money (about $6,000 total) to split between my boys (high school and college).
Both work part time but did not open Roth as to not impact financial aid. I want to invest it for them as it was gifted to them.
A taxable account in our name would be favorable, I think or will the small amount not be significant enough to impact them if I do a Roth?

Options considered for taxable account:
Vanguard Total World Stock Idx Adm (VTWAX)
Vanguard Total Stock Mkt Idx Adm (VTSAX)
Vanguard Mid-Cap Index Fund Adm (VIMAX)
VTSAX inside of a ROTH. Why no ROTH? Won’t count against fin aid. What am I missing?
Yes, Roth doesn't impact financial aid until you make withdrawals. At the time, we were not sure if we would be using it, so we opted out.
After discussing more, we decided that we would make up any additional shortfalls needed. We are going to do the Roth IRAs for the boys. They only have enough for 1 fund in each Roth. Both have part time jobs to show earned income.

Since this now going into a Roth, would you still choose VTSAX over VTWAX?

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Wiggums
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Re: Fund for taxable account

Post by Wiggums » Thu Jan 30, 2020 7:41 am

Lovey wrote:
Thu Jan 30, 2020 7:10 am
Since this now going into a Roth, would you still choose VTSAX over VTWAX?
Either would be a good choice. Personally, I would go VTSAX

L82GAME
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Re: Fund for taxable account

Post by L82GAME » Thu Jan 30, 2020 8:20 am

Wiggums wrote:
Thu Jan 30, 2020 7:41 am
Lovey wrote:
Thu Jan 30, 2020 7:10 am
Since this now going into a Roth, would you still choose VTSAX over VTWAX?
Either would be a good choice. Personally, I would go VTSAX
+1

Topic Author
Lovey
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Joined: Tue Jul 15, 2008 9:23 pm

Re: Fund for taxable account

Post by Lovey » Thu Jan 30, 2020 9:24 am

FYI, their part time job offers 401k in which they are invested in T Rowe Price Retirement 2060.

sycamore
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Re: Fund for taxable account

Post by sycamore » Thu Jan 30, 2020 11:07 am

Lovey wrote:
Thu Jan 30, 2020 9:24 am
FYI, their part time job offers 401k in which they are invested in T Rowe Price Retirement 2060.
That's great! I'd still use VTSAX for the taxable account, meaning the overall portfolio (the TRP 2060 fund plus taxable) is virtually 100% equities, which is appropriate for their ages.

On a different note, assuming that each son files his own taxes and the marginal tax rate is low (10%, or even 0% if income is below the standard deduction), it's worth considering a Roth 401k (if available in their plan). Low marginal rate now and likely higher rate in the future is one case where a Roth IRA or Roth 401k is preferred over traditional/deductible-type plans.

Topic Author
Lovey
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Re: Fund for taxable account

Post by Lovey » Thu Jan 30, 2020 11:12 am

sycamore wrote:
Thu Jan 30, 2020 11:07 am
Lovey wrote:
Thu Jan 30, 2020 9:24 am
FYI, their part time job offers 401k in which they are invested in T Rowe Price Retirement 2060.
That's great! I'd still use VTSAX for the taxable account, meaning the overall portfolio (the TRP 2060 fund plus taxable) is virtually 100% equities, which is appropriate for their ages.

On a different note, assuming that each son files his own taxes and the marginal tax rate is low (10%, or even 0% if income is below the standard deduction), it's worth considering a Roth 401k (if available in their plan). Low marginal rate now and likely higher rate in the future is one case where a Roth IRA or Roth 401k is preferred over traditional/deductible-type plans.
Its going to be the taxable account or the Roth, not both. Only enough for one fund to start.
Job does not have a Roth 401k.

Topic Author
Lovey
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Joined: Tue Jul 15, 2008 9:23 pm

Re: Fund for taxable account

Post by Lovey » Fri Feb 14, 2020 12:39 am

We opted for a Roth for both boys.
We decided on Total World Stock since they can only afford one fund over the next couple years.
Other than being slightly cheaper, it there any other advantage of having the the EFT vs the fund?
I am leaning towards the fund because if my next job is with an investment firm, the EFT contributions would have to be approved each and every time, same as if buying/selling stocks. No restrictions on purchasing mutual funds.
My last job (I was laid off recently) was an investment company and I stuck to all funds to avoid the hassle.

Now I have to fill out a long application (fax or mail in) since minor Roth IRAs cannot be filled out online.

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guwop
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Re: Fund for taxable account

Post by guwop » Fri Feb 14, 2020 8:48 am

Lovey wrote:
Tue Jan 28, 2020 3:34 pm
I have a some money (about $6,000 total) to split between my boys (high school and college).
Both work part time but did not open Roth as to not impact financial aid. I want to invest it for them as it was gifted to them.
A taxable account in our name would be favorable, I think or will the small amount not be significant enough to impact them if I do a Roth?

Options considered for taxable account:
Vanguard Total World Stock Idx Adm (VTWAX)
Vanguard Total Stock Mkt Idx Adm (VTSAX)
Vanguard Mid-Cap Index Fund Adm (VIMAX)
Roth in the kids' names should be fine - it doesn't have as much of an impact as other accounts, such as UTMA/UGMA, etc.

MotoTrojan
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Re: Fund for taxable account

Post by MotoTrojan » Fri Feb 14, 2020 8:50 am

nix4me wrote:
Wed Jan 29, 2020 10:08 pm
None of the above - i would use VTI in a taxable account.
How is this better than VTSAX?

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