Transfer BND from vanguard taxable account to ira/i401k

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Topic Author
ebeb
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Joined: Sat Dec 23, 2017 2:18 pm

Transfer BND from vanguard taxable account to ira/i401k

Post by ebeb »

Hello,

Can I move some funds say 25k of BND from my vanguard taxable account to contribute to ira/i401k in Vanguard taxdeferred account same amount of BND without incurring capital gains tax by selling in the taxable account.
Thanks :confused
70% VOO | 30% BND
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David Jay
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Re: Transfer BND from vanguard taxable account to ira/i401k

Post by David Jay »

No. Contributions must be in cash, "In kind" contributions are not permitted.
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Re: Transfer BND from vanguard taxable account to ira/i401k

Post by placeholder »

If your ira or 401k is traditional then you wouldn't want to do that as it would turn deferred capital gains into deferred ordinary income and result in unnecessary taxes but as noted you can't do that anyway.
Topic Author
ebeb
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Re: Transfer BND from vanguard taxable account to ira/i401k

Post by ebeb »

ok thanks that makes sense. Will just need to sell the BND in taxable and put in the cash in ira/401k.
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tomsense76
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Re: Transfer BND from vanguard taxable account to ira/i401k

Post by tomsense76 »

Not entirely sure I understand the question. Is it...

1. I'd like to contribute more to my 401k/IRA and am wanting to do that without outside funds. How do I do that?
2. Or is it I'd like to own more bonds in my 401k/IRA and not own them in taxable. How do I do that?

If 1, yes one can only contribute cash. With an IRA, one just adds cash up to the contribution limit. With a 401k, one can only do this via withholding. However one can aggressively bump their withholding to put more away and spend down outside funds (like selling BND in taxable or tapping savings). Some things to keep in mind. First increasing withholding for 401k too much may affect other withholding for benefits, etc. So check with HR about how these affect one another. In some cases they may have a spreadsheet they can share so you can run your own numbers. If not, one can build their own spreadsheet for modeling. Second some employer matches have a vesting schedule. So if you aren't contributing or are under contributing in some paychecks, one may lose some of the match. Again this is something to check with HR about.

If 2, yes this can be done. Basically this is just a matter of rebalancing. One can sell bonds in taxable and buy VTI, VXUS, etc. in taxable. In one's 401k or IRA, one can then sell stocks and buy bonds. Main thing is to make sure you are keeping your intended asset allocation. A little work in a spreadsheet or your preferred tooling should yield the answer about how much money to move where.

There may be some capital gains tax when selling BND in taxable. Though this should be pretty minimal as bonds mainly distribute income via coupon payments. Growth is not a major factor here unlike stocks. It's worth getting a sense of what the tax just to make sure it is covered.
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pahkcah
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Re: Transfer BND from vanguard taxable account to ira/i401k

Post by pahkcah »

ebeb wrote: Fri Sep 10, 2021 1:44 pm ok thanks that makes sense. Will just need to sell the BND in taxable and put in the cash in ira/401k.
If you are going to sell anything and move to an IRA, move it to a Roth IRA as you will already have paid tax on the money. Also, there are a number of threads that recommend having bonds in taxable accounts for tax efficiency. Check out this Bogleheads' wiki on Tax Efficient Fund Placement - https://www.bogleheads.org/wiki/Tax-eff ... _placement
Topic Author
ebeb
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Re: Transfer BND from vanguard taxable account to ira/i401k

Post by ebeb »

Good advice, since I only have emergency cash in hand so to contribute new funds to ira, roth etc, need to get hold of some cash from my taxable accounts. So only way is to sell some of the BND there. Most of the advice for tax-efficient fund placement talks about keeping BND in taxdeferred as much as possible and stocks in taxable.
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retiredjg
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Re: Transfer BND from vanguard taxable account to ira/i401k

Post by retiredjg »

If you need to sell something in taxable in order to have money to put into an IRA, there is nothing inherently good or bad about putting that money into either tIRA or Roth IRA.

The fact that "the money is already taxed" is irrelevant. If you are eligible to deduct a tIRA contribution, you can deduct it, reducing your taxable income by $6k (or whatever you contribute).

If you are not eligible to deduct a tIRA contribution, it is likely that you should use Roth IRA instead. However, there is not nearly enough information in your post to suggest one thing over another thing.

Yes, in general, bonds belong in tax-deferred. There are some exceptions.
Topic Author
ebeb
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Re: Transfer BND from vanguard taxable account to ira/i401k

Post by ebeb »

Now that I sold the taxable BND I need to transfer the cash to tax-deferred accounts. Looks like we need to move the money to a bank checking account and then contribute to the IRA account. Anyone know a direct way within Vanguard to move money from taxable to tax-deferred account without using external bank.
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exodusNH
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Re: Transfer BND from vanguard taxable account to ira/i401k

Post by exodusNH »

ebeb wrote: Mon Sep 13, 2021 9:58 pm Now that I sold the taxable BND I need to transfer the cash to tax-deferred accounts. Looks like we need to move the money to a bank checking account and then contribute to the IRA account. Anyone know a direct way within Vanguard to move money from taxable to tax-deferred account without using external bank.
You should be able to fund it from your settlement account. It might take a day or two for the funds to clear before you can move it to the IRA.
Topic Author
ebeb
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Re: Transfer BND from vanguard taxable account to ira/i401k

Post by ebeb »

You are right it does allow transfer directly from settlement funds to IRA or Roth IRA but unfortunately not to solo401k it seems so may need to withdraw funds to my checking account and contribute to solo401k:

Individual 401(k)
Exchanging money between these accounts isn't permitted.
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aristotelian
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Re: Transfer BND from vanguard taxable account to ira/i401k

Post by aristotelian »

You can sell BND in taxable and then sell stocks and buy bonds in 401k.
Topic Author
ebeb
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Re: Transfer BND from vanguard taxable account to ira/i401k

Post by ebeb »

aristotelian wrote: Tue Sep 14, 2021 10:55 am You can sell BND in taxable and then sell stocks and buy bonds in 401k.
That will help changing AA within 401k between stocks/bonds ratio but not for contributing new funds to solo401k.
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tibbitts
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Re: Transfer BND from vanguard taxable account to ira/i401k

Post by tibbitts »

ebeb wrote: Thu Sep 09, 2021 9:51 pm Hello,

Can I move some funds say 25k of BND from my vanguard taxable account to contribute to ira/i401k in Vanguard taxdeferred account same amount of BND without incurring capital gains tax by selling in the taxable account.
Thanks :confused
You do realize that any money you take from any taxable account or your bank account and place in your IRA or individual 401k is subject to annual income-dependent contribution limits? That might be where you came up with the $25k amount, of course.
Topic Author
ebeb
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Joined: Sat Dec 23, 2017 2:18 pm

Re: Transfer BND from vanguard taxable account to ira/i401k

Post by ebeb »

yes aware of income limits and that max to i401k is $64,500 depends on age. The latest issue was Vanguard doesnt provide an easy way to directly transfer from taxable settlement funds to i401k without first moving the settlement funds to external bank checking and then contributing to i401k from checking.
70% VOO | 30% BND
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