Move Total International from Roth IRA to 401k/403b?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
mc2
Posts: 163
Joined: Wed Jan 13, 2016 10:27 am

Move Total International from Roth IRA to 401k/403b?

Post by mc2 » Wed May 20, 2020 3:36 pm

Greetings everyone-

I've been doing a little thinking about asset location and wonder if it wouldn't be better to shift my Total US SM and Total Intl. SM funds. Currently, I have my international holdings in my 401k, Roth IRA. I have the option to maintain my allocation, but shift asset classes. My reasoning is that I might enjoy greater returns from the US market and enjoy the tax-free Roth IRA withdrawals, vs. taxed withdrawals from my 401k. I elected to keep a bit of us and intl in each account for rebalancing convenience. Now I don't seem to be intimidated/interested in that factor.

What would you suggest?

Thanks-
mc2

asif408
Posts: 1958
Joined: Sun Mar 02, 2014 8:34 am
Location: Florida

Re: Move Total International from Roth IRA to 401k/403b?

Post by asif408 » Wed May 20, 2020 3:43 pm

mc2 wrote:
Wed May 20, 2020 3:36 pm
My reasoning is that I might enjoy greater returns from the US market and enjoy the tax-free Roth IRA withdrawals, vs. taxed withdrawals from my 401k.
What is your reasoning based on? For instance, does the last 10 years performance play a role in it?

deltaneutral83
Posts: 1596
Joined: Tue Mar 07, 2017 4:25 pm

Re: Move Total International from Roth IRA to 401k/403b?

Post by deltaneutral83 » Wed May 20, 2020 3:45 pm

Intl for me is in taxable to get the foreign tax credit. As far as the Roth, the expected return on Intl is much higher than domestic if you believe in that whole reversion to the mean, but again, foreign tax credit. In fact, Intl could outperform domestic by a lot and still not catch up over the next 10 years because of how badly it's been beaten down the last decade. For those who tilt to SCV, that would be a holding I'd keep in Roth as well because the dividend rate is higher (taxes if in taxable) and less qualified, and those folks believe it should outperform over the long run, no guarantees though of course.

Topic Author
mc2
Posts: 163
Joined: Wed Jan 13, 2016 10:27 am

Re: Move Total International from Roth IRA to 401k/403b?

Post by mc2 » Wed May 20, 2020 3:53 pm

asif408 wrote:
Wed May 20, 2020 3:43 pm
mc2 wrote:
Wed May 20, 2020 3:36 pm
My reasoning is that I might enjoy greater returns from the US market and enjoy the tax-free Roth IRA withdrawals, vs. taxed withdrawals from my 401k.
What is your reasoning based on? For instance, does the last 10 years performance play a role in it?
Yes, and despite the current downturn in the us/world economy, I do think that US companies-driven by US consumers-will continue to stay ahead of other markets. I'm not anti-international, but I think in the long-run, most of my equity returns will come from the US market, and I would not likely ever have greater than 30% of equities in INTL. Currently, I'm about 22% INTL in a 65/35 3 fund.

retired@50
Posts: 2661
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Move Total International from Roth IRA to 401k/403b?

Post by retired@50 » Wed May 20, 2020 3:56 pm

mc2 wrote:
Wed May 20, 2020 3:53 pm
asif408 wrote:
Wed May 20, 2020 3:43 pm
mc2 wrote:
Wed May 20, 2020 3:36 pm
My reasoning is that I might enjoy greater returns from the US market and enjoy the tax-free Roth IRA withdrawals, vs. taxed withdrawals from my 401k.
What is your reasoning based on? For instance, does the last 10 years performance play a role in it?
Yes, and despite the current downturn in the us/world economy, I do think that US companies-driven by US consumers-will continue to stay ahead of other markets. I'm not anti-international, but I think in the long-run, most of my equity returns will come from the US market, and I would not likely ever have greater than 30% of equities in INTL. Currently, I'm about 22% INTL in a 65/35 3 fund.
If this is what you believe, that US will out-perform international, then I'd suggest putting the International in the 401k. You may or may not be correct, but nobody knows for sure.

Regards,
This is one person's opinion. Nothing more.

MrJedi
Posts: 61
Joined: Wed May 06, 2020 11:42 am

Re: Move Total International from Roth IRA to 401k/403b?

Post by MrJedi » Wed May 20, 2020 4:14 pm

When shifting assets between pretax/traditional and Roth, you simply must remember that part of your Traditional balance belongs to the government (taxes). Thus if you have 100% equities, and 50% is international all in Traditional and 50% is US all in Roth, your asset allocation is not really 50/50. This setup is really a tilt toward US, the level of tilt depends on your eventual Traditional balance taxation.

You can assume some tax rate to tax adjust your allocations on a post tax basis or choose to assume that your taxation will be low enough to not make a meaningful difference in the end.

Topic Author
mc2
Posts: 163
Joined: Wed Jan 13, 2016 10:27 am

Re: Move Total International from Roth IRA to 401k/403b?

Post by mc2 » Wed May 20, 2020 4:28 pm

comment deleted-duplicate of below
Last edited by mc2 on Wed May 20, 2020 4:29 pm, edited 1 time in total.

Topic Author
mc2
Posts: 163
Joined: Wed Jan 13, 2016 10:27 am

Re: Move Total International from Roth IRA to 401k/403b?

Post by mc2 » Wed May 20, 2020 4:29 pm

MrJedi wrote:
Wed May 20, 2020 4:14 pm
When shifting assets between pretax/traditional and Roth, you simply must remember that part of your Traditional balance belongs to the government (taxes). Thus if you have 100% equities, and 50% is international all in Traditional and 50% is US all in Roth, your asset allocation is not really 50/50. This setup is really a tilt toward US, the level of tilt depends on your eventual Traditional balance taxation.

You can assume some tax rate to tax adjust your allocations on a post tax basis or choose to assume that your taxation will be low enough to not make a meaningful difference in the end.
Currently in 24% tax bracket, likely to be in 22 upon retirement (15 years).

Triple digit golfer
Posts: 5157
Joined: Mon May 18, 2009 5:57 pm

Re: Move Total International from Roth IRA to 401k/403b?

Post by Triple digit golfer » Wed May 20, 2020 4:31 pm

Most "experts" feel that international will outperform U.S. equities over the next decade.

lakpr
Posts: 5075
Joined: Fri Mar 18, 2011 9:59 am

Re: Move Total International from Roth IRA to 401k/403b?

Post by lakpr » Wed May 20, 2020 5:09 pm

For what it is worth -- I am of the opinion too that international equities are NOT likely to outperform US equities in the near future. All my international stocks are held in the 401k plan. I confessed in other previous posts too, that my international allocation is only 20% of my stocks allocation, and even that's due to the FOMO (fear of missing out) factor.

Expecting that international equities under-perform, I am holding ALL of them in my pre-tax 401k plan, along with bonds. This is the principle of holding slow-growth assets in 401k, making the government share your pain. Roth IRA and MBR in my 401k plan are the mainstay for my US equities allocation, and only the spill over allocation is added into 401k plan. If you look at my 401k plan assets only in isolation, it is 12:35:53 domestic equities / international equities / bonds. My overall allocation is 55:15:30.

Topic Author
mc2
Posts: 163
Joined: Wed Jan 13, 2016 10:27 am

Re: Move Total International from Roth IRA to 401k/403b?

Post by mc2 » Wed May 20, 2020 7:59 pm

Thanks for the tangible reply.

Would any other posters comment on what they do with their intl equities?

retired@50
Posts: 2661
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Move Total International from Roth IRA to 401k/403b?

Post by retired@50 » Wed May 20, 2020 8:47 pm

mc2 wrote:
Wed May 20, 2020 7:59 pm
Thanks for the tangible reply.

Would any other posters comment on what they do with their intl equities?
I'm at 20% of equity. I hold some in taxable, Roth IRA, and Rollover IRA.

Regards,
This is one person's opinion. Nothing more.

Topic Author
mc2
Posts: 163
Joined: Wed Jan 13, 2016 10:27 am

Re: Move Total International from Roth IRA to 401k/403b?

Post by mc2 » Wed May 20, 2020 9:14 pm

retired@50 wrote:
Wed May 20, 2020 8:47 pm
mc2 wrote:
Wed May 20, 2020 7:59 pm
Thanks for the tangible reply.

Would any other posters comment on what they do with their intl equities?
I'm at 20% of equity. I hold some in taxable, Roth IRA, and Rollover IRA.

Regards,
Thanks for sharing. Are you diversifying you’re tax strategies, or do you think that trying to put intl in Roth vs trad is not that crucial?

dru808
Posts: 830
Joined: Sat Oct 15, 2011 2:42 pm
Location: mid pac

Re: Move Total International from Roth IRA to 401k/403b?

Post by dru808 » Wed May 20, 2020 9:27 pm

What are total US SM and total international SM?
60% US equity | 25% International equity | 15% US Treasury bonds

User avatar
LilyFleur
Posts: 1174
Joined: Fri Mar 02, 2018 10:36 pm

Re: Move Total International from Roth IRA to 401k/403b?

Post by LilyFleur » Wed May 20, 2020 9:47 pm

Had my international (4.5%) and my Russell 2000 (4.5%) index funds been in taxable instead of 401k, I would have had the ability for five-figure tax loss harvesting. That's not the whole picture, for sure, just looking in the rearview mirror. My Roth is kind of weird--it sort of sits in my 401k as X dollars, but I don't seem to have the ability to invest it in specific funds. I am new to Roth, just did a sizable conversion near the end of 2019.

gr7070
Posts: 1037
Joined: Fri Oct 28, 2011 10:39 am

Re: Move Total International from Roth IRA to 401k/403b?

Post by gr7070 » Wed May 20, 2020 10:36 pm

No one knows how they'll perform.

Do what's easiest to manage.

absolute zero
Posts: 262
Joined: Thu Dec 29, 2016 4:59 pm

Re: Move Total International from Roth IRA to 401k/403b?

Post by absolute zero » Wed May 20, 2020 11:05 pm

MrJedi wrote:
Wed May 20, 2020 4:14 pm
When shifting assets between pretax/traditional and Roth, you simply must remember that part of your Traditional balance belongs to the government (taxes). Thus if you have 100% equities, and 50% is international all in Traditional and 50% is US all in Roth, your asset allocation is not really 50/50. This setup is really a tilt toward US, the level of tilt depends on your eventual Traditional balance taxation.

You can assume some tax rate to tax adjust your allocations on a post tax basis or choose to assume that your taxation will be low enough to not make a meaningful difference in the end.
+1

There isn’t any sort of “free lunch” here. It’s like when people favor putting their bonds in their 401k instead of their Roth IRA because they want the high growth asset (stocks) to be tax free upon withdrawal. This is a fallacy (unfortunately it’s promoted by the boglehead wiki). 30% bonds held in a Roth IRA is not the same as 30% bonds held in a 401k. One is slightly riskier than the other.

Put another way - if you feel that US stock will outperform, and you value this expected outperformance more than the potential diversification of international, then just increase your US stock exposure.

retired@50
Posts: 2661
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Move Total International from Roth IRA to 401k/403b?

Post by retired@50 » Wed May 20, 2020 11:31 pm

mc2 wrote:
Wed May 20, 2020 9:14 pm
retired@50 wrote:
Wed May 20, 2020 8:47 pm
mc2 wrote:
Wed May 20, 2020 7:59 pm
Thanks for the tangible reply.

Would any other posters comment on what they do with their intl equities?
I'm at 20% of equity. I hold some in taxable, Roth IRA, and Rollover IRA.

Regards,
Thanks for sharing. Are you diversifying you’re tax strategies, or do you think that trying to put intl in Roth vs trad is not that crucial?
Personally, I don't have a strong opinion about locating international stock in Roth IRA or Traditional IRA. Up until recently my entire traditional IRA was bonds, but I needed to re-balance a bit, so I'm using my monthly bond interest payments to buy international stock.

Regards,
This is one person's opinion. Nothing more.

Topic Author
mc2
Posts: 163
Joined: Wed Jan 13, 2016 10:27 am

Re: Move Total International from Roth IRA to 401k/403b?

Post by mc2 » Fri May 22, 2020 3:02 pm

deltaneutral83 wrote:
Wed May 20, 2020 3:45 pm
Intl for me is in taxable to get the foreign tax credit. As far as the Roth, the expected return on Intl is much higher than domestic if you believe in that whole reversion to the mean, but again, foreign tax credit.
Does the benefit of having the foreign tax credit apply when it's time to liquidate intl from the 401k, or is the foreign tax credit only something that applies in a purely non-retirement account?

Currently, we have approx 15% of our total stock holdings in VTIAX, held in Roth IRAs, and another 5% in my 401k, VTIAX. Approx 20% of our total stock portfolio is VTIAX/intl. My wife's 403b plan does not have any low ER international index funds, so if anything, the shuffle would be in my roth and 401k accounts.

Would those details change anything?
Thanks for your reply-
mc2
Last edited by mc2 on Fri May 22, 2020 3:13 pm, edited 2 times in total.

lakpr
Posts: 5075
Joined: Fri Mar 18, 2011 9:59 am

Re: Move Total International from Roth IRA to 401k/403b?

Post by lakpr » Fri May 22, 2020 3:05 pm

mc2 wrote:
Fri May 22, 2020 3:02 pm
deltaneutral83 wrote:
Wed May 20, 2020 3:45 pm
Intl for me is in taxable to get the foreign tax credit. As far as the Roth, the expected return on Intl is much higher than domestic if you believe in that whole reversion to the mean, but again, foreign tax credit.
Does the benefit of having the foreign tax credit apply when it's time to liquidate intl from the 401k, or is the foreign tax credit only something that applies in a purely non-retirement account?

Thanks for your reply-
mc2
Only for taxable (non-retirement accounts). Tax credits are not applicable for funds/investments held in tax-advantaged accounts (either pre-tax or Roth)

retiredjg
Posts: 40483
Joined: Thu Jan 10, 2008 12:56 pm

Re: Move Total International from Roth IRA to 401k/403b?

Post by retiredjg » Fri May 22, 2020 4:34 pm

mc2 wrote:
Wed May 20, 2020 7:59 pm
Would any other posters comment on what they do with their intl equities?
International equity can be put in any kind of account. Create your portfolio based on cost and convenience. Much of the other stuff is unimportant details.

Do not create a taxable account to hold international. But if all your tax-advantaged accounts are getting filled up, and you do have a taxable account anyway, that is where I would put it. But I'd put it there because of the good opportunities to tax loss harvest, not anything else.

The decision of where to hold international is usually best based on how you can create the lowest cost portfolio. Low cost international funds are less common in 401k accounts so putting it there may not be your best choice. Trying to figure out whether US stocks or foreign stocks will outperform over your investing career is a waste of your time.

Post Reply