Portfolio Review (Phew!)

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Topic Author
CodiStang21
Posts: 13
Joined: Sun Oct 10, 2021 6:53 pm

Portfolio Review (Phew!)

Post by CodiStang21 »

Overview:
1.I was hoping to get another pair of eyes on my current portfolio versus my proposed portfolio since I left my advisor.

2. Any recommendations/feedback to make adjustments to be more tax efficient/avoid wash sales during TLH/rebalancing ease. Contributing to a balanced fund bi-weekly and auto dividend reinvestment seems like this will cause issues.

3. With #2 in mind, should I break apart my (Codi) 401k to match Henry’s 401k



Emergency funds: Six+ months of expenses (likely more than I need)

Debt: Only Mortgage (3.5%)

Tax Filing Status: Married Filing Jointly

Tax Rate: 24% Federal, 6.37% State

State of Residence: NJ

Age: 34 & 34

Desired Asset allocation: 85% stocks / 15% bonds
Desired International allocation: 32% of stocks

Total portfolio: mid six-figures


Current retirement assets

Taxable at Vanguard
58.7% cash to be invested (just closed with a financial advisor.)
1% VG Total Int’l Stock (VTIAX) (.11%)
5% VG Total US Stock (VTSAX) (.04)
.3% VG Retirement 2040 (VFORX) (.14) (I know I need to get rid of this)
[65% total]

Codi 401k
28% VG Retirement 2055 (VFFVX) (.15)
Company match:4%

Codi Roth IRA at Vanguard
NONE. Not eligible, may try a backdoor IRA?

Henry Rollover IRA at Vanguard
1.7% VG Total Int'l Stock (VTIAX) (.11%)
.7% VG Total Bond (VBTLX) (.05%)
2.6% VG Total US Stock (VTSAX) (.04)
.8% VG Mid-Cap (VIMAX) (.05)
.8% VG Sm-Cap (VSMAX) (.05)
.5% VG REIT VFORX (VGSLX) (.12)
[~7.1% total] Advisor recommended this asset blend for Codi’s 401k also, but I haven’t made the change.

Overall asset allocation across portfolio:
2.3% Intl Bond
5.7% US Bond
32% Intl Stock
56.4% US Stock
3.6% Alternatives

+++
PROPOSED retirement assets

Taxable at Vanguard
0% cash to be invested
20.8% VG Total Int’l Stock (VTIAX) (.11%)
34.4% VG Total US Stock (VTSAX) (.04)
9.7% VG Total Bond (VBTLX) (.05%)
[65% total]

[No change in other accounts]

Future asset allocation across portfolio:
.9% Intl Bond
12.7% US Bond
32% Intl Stock
53% US Stock
1.3% Alternatives

+++

Contributions

New annual Contributions
$19,500 Codi 401k (plus employer match of approx $4,500)
$0 Henry since he is self employed and is above Roth IRA limits
$3,000 taxable
$22,000 extra toward mortgage (I know I could make more in the market, but I feel this is a safe 3.5% rate of return if we sell/upgrade our house in 5-7 years [approx 7 years to pay off house with this extra payment])

Available funds

Funds available in Codi’s 401(k)
Most Vanguard funds (i.e. Total Stock Market, Total Bond, Total International, Large Cap, Small Cap, etc.)

If you read through all of this and are considering giving me advice, THANK YOU!!!!

-Codi
Exchme
Posts: 575
Joined: Sun Sep 06, 2020 3:00 pm

Re: Portfolio Review (Phew!)

Post by Exchme »

Good job firing your advisor, you clearly know enough already to do it yourselves, so no reason to pay the fees. Your overall proposed asset allocation looks reasonable for young folks like yourselves. You have to decide if 85% stocks fit with your personalities. Will you avoid panic selling when the world seems to be spinning out of control and your money is melting away like an ice cream cone on a hot sidewalk?

I don't see a reason to add the complexity your advisor was suggesting in the IRAs, I would just stick with the basic 3 fund portfolio. Complexity often does not buy you anything but more headaches.

Was the 0.9% international bonds intentional or just a byproduct of something else? If it was separate, I wouldn't hold 1% of anything, it doesn't move the needle.
Topic Author
CodiStang21
Posts: 13
Joined: Sun Oct 10, 2021 6:53 pm

Re: Portfolio Review (Phew!)

Post by CodiStang21 »

Exchme, thanks for taking a look. While I don't know how I'd feel in a 2008 situation, mid-March of 2020, I was adding more money into my taxable account hoping to capitalize on the downturn, so I hope I would be able to weather the storm in the future when it could last years...

Yeah the 1% intl holder was a part of me not knowing what I was doing a few years back. Once I implement my new portfolio, I don't plan to purposely have that small of a holding.

Thanks again
HomeStretch
Posts: 6988
Joined: Thu Dec 27, 2018 3:06 pm

Re: Portfolio Review (Phew!)

Post by HomeStretch »

Welcome to the forum!

You could simplify your portfolio by holding:
1) Taxable account - just VTSAX and VTIAX for tax efficiency
2) One target date fund in the 401k and Rollover IRA that gets you to your overall asset allocation
3) Future Roth IRAs - 100% equity (such as VFIAX, S&P 500 fund) for highest expected growth, tax free.

A backdoor Roth in 2021 for you makes sense plus you’ll start the 5-year clock on your initial Roth IRA. A backdoor Roth for your spouse does not make sense as the Rollover IRA will cause pro-rated taxes. If you have a lower income year where your spouse can make a direct Roth IRA contribution, consider doing so to get the 5-year clock started on spouse’s initial Roth IRA.

Have you considered a no-cost refinancing to lower the rate on your 3.5% mortgage? Search the forum for the Mega Refinancing thread and check the more recent posts to see lenders/rates from other posters.
ivgrivchuck
Posts: 883
Joined: Sun Sep 27, 2020 6:20 pm

Re: Portfolio Review (Phew!)

Post by ivgrivchuck »

CodiStang21 wrote: Sun Oct 10, 2021 6:59 pm
If you read through all of this and are considering giving me advice, THANK YOU!!!!
Consider if i-bonds are for you. You and your spouse could by $20k now and $20k in Jan.

Consider investing the cash in taxable to VTSAX/VTIAX.

Mortgage refi?
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
tashnewbie
Posts: 2050
Joined: Thu Apr 23, 2020 12:44 pm

Re: Portfolio Review (Phew!)

Post by tashnewbie »

HomeStretch wrote: Sun Oct 10, 2021 8:35 pm Welcome to the forum!

You could simplify your portfolio by holding:
1) Taxable account - just VTSAX and VTIAX for tax efficiency
2) One target date fund in the 401k and Rollover IRA that gets you to your overall asset allocation
3) Future Roth IRAs - 100% equity (such as VFIAX, S&P 500 fund) for highest expected growth, tax free.

A backdoor Roth in 2021 for you makes sense plus you’ll start the 5-year clock on your initial Roth IRA. A backdoor Roth for your spouse does not make sense as the Rollover IRA will cause pro-rated taxes. If you have a lower income year where your spouse can make a direct Roth IRA contribution, consider doing so to get the 5-year clock started on spouse’s initial Roth IRA.

Have you considered a no-cost refinancing to lower the rate on your 3.5% mortgage? Search the forum for the Mega Refinancing thread and check the more recent posts to see lenders/rates from other posters.
+1.

You can probably sell the target date fund you have in taxable and owe very little tax (because it is only 0.3% of your portfolio).

Henry should look into opening a solo 401k or SEP IRA (a solo 401k that accepted an incoming transfer of the Rollover IRA would open the way for him to do easy backdoor Roth, but I've heard solo 401ks have more complicated recordkeeping and administration requirements).

Link to Refinance Mega Thread (check the most recent posts to see rates people have been getting): viewtopic.php?t=289559
retiredjg
Posts: 45717
Joined: Thu Jan 10, 2008 12:56 pm

Re: Portfolio Review (Phew!)

Post by retiredjg »

Welcome to the forum. :happy

A taxable bond like a total bond index is not a good choice in the taxable account for people in your tax bracket. It is not a fatal flaw either. Consider using a tax-exempt bond in taxable (possibly a NJ specific fund) or do not hold bonds in taxable at all.

Somehow Henry's 401k is not on the list.... Then you say that Henry is self employed but you show no contributions for any kind of work account for Henry....what's going on with Henry's accounts?

If you hold total stock and total international in the taxable account and wish to easily avoid wash sales - then don't hold either of those funds in the other accounts. For example, use 500 index instead of total stock or use target funds in the other accounts. If you use 500 index in the other accounts, don't tax loss harvest into 500 index in the taxable account.
Topic Author
CodiStang21
Posts: 13
Joined: Sun Oct 10, 2021 6:53 pm

Re: Portfolio Review (Phew!)

Post by CodiStang21 »

Thanks for the feedback everyone. I think I am starting to dig myself into a hole with all of the information bouncing around in my head...

1. Total Stock and Total Intl in taxable is definitely want I'd be happy to do!

2. I am wary of using a mani bond (VNJTX) since it seems to have a high risk/more correlated with equities. Am I overreacting?

3. If I was to only hold my bonds in my 401k, I'm not sure how I'd do that via a target date fund long term because I need to keep it to 53% of it bond and my contributions would probably through that out of wack quickly.

I could hold told bond/total stock/total intl in 401k (but, I think this complicates TLH unless I get a little riskier in taxable and hold S&P 500). I just spent an hour trying to figure out how I would calculate the proper allocations between taxable and 401k (i.e. the amount I need in my taxable US stock vs the amount I need in my 401k US stock to get to a 53% allocation) and couldn't figure out the right formula. Are there any websites where I could input the amounts so I can figure out how to properly allocate the funds?
3a. Once I figure this out, would I be able to keep things balanced (without rebalancing monthly) since almost 90% of my yearly contributions are to my 401k?

4. TIPS feels riskier to me vs doing an overall bond fund since I don't know enough about inflation to judge if this is an appropriate choice

5. Henry had a 401k at his old employer (before he was self employed). After he left and went on his own, I rolled it over to a IRA. He doesn't contribute to any retirement funds now since I don't know how to do it tax free. Instead, I just max out my 401k.

6. I will look into solo 401k - haven't read much about this, but I fear I may be going outside too far outside of my comfort zone...

7. I took a peak at Better mortgage and see I can reduce my rate, but I still want to pay it off ASAP and I don't know if I will have enough time to make up the savings on interest to offset the closing costs. I need to look further into this.
HomeStretch
Posts: 6988
Joined: Thu Dec 27, 2018 3:06 pm

Re: Portfolio Review (Phew!)

Post by HomeStretch »

CodiStang21 wrote: Mon Oct 11, 2021 8:53 pm
7. I took a peak at Better mortgage and see I can reduce my rate, but I still want to pay it off ASAP and I don't know if I will have enough time to make up the savings on interest to offset the closing costs. I need to look further into this.
Check the rates on no-cost refi’s.
tenkuky
Posts: 1670
Joined: Sun Dec 14, 2014 4:28 pm

Re: Portfolio Review (Phew!)

Post by tenkuky »

HomeStretch wrote: Mon Oct 11, 2021 9:25 pm
CodiStang21 wrote: Mon Oct 11, 2021 8:53 pm
7. I took a peak at Better mortgage and see I can reduce my rate, but I still want to pay it off ASAP and I don't know if I will have enough time to make up the savings on interest to offset the closing costs. I need to look further into this.
Check the rates on no-cost refi’s.
+1
Third Federal offers low ($295) cost refis in NJ.
Check them out.
I used them in the past, quite pleased with rate and cost.
Nohbdy
Posts: 83
Joined: Mon May 10, 2021 12:48 pm

Re: Portfolio Review (Phew!)

Post by Nohbdy »

CodiStang21 wrote: Mon Oct 11, 2021 8:53 pm Thanks for the feedback everyone. I think I am starting to dig myself into a hole with all of the information bouncing around in my head...

3. If I was to only hold my bonds in my 401k, I'm not sure how I'd do that via a target date fund long term because I need to keep it to 53% of it bond and my contributions would probably through that out of wack quickly.

I could hold told bond/total stock/total intl in 401k (but, I think this complicates TLH unless I get a little riskier in taxable and hold S&P 500). I just spent an hour trying to figure out how I would calculate the proper allocations between taxable and 401k (i.e. the amount I need in my taxable US stock vs the amount I need in my 401k US stock to get to a 53% allocation) and couldn't figure out the right formula. Are there any websites where I could input the amounts so I can figure out how to properly allocate the funds?
3a. Once I figure this out, would I be able to keep things balanced (without rebalancing monthly) since almost 90% of my yearly contributions are to my 401k?

4. TIPS feels riskier to me vs doing an overall bond fund since I don't know enough about inflation to judge if this is an appropriate choice

5. Henry had a 401k at his old employer (before he was self employed). After he left and went on his own, I rolled it over to a IRA. He doesn't contribute to any retirement funds now since I don't know how to do it tax free. Instead, I just max out my 401k.

6. I will look into solo 401k - haven't read much about this, but I fear I may be going outside too far outside of my comfort zone...
Here are some things for you to consider, and hopefully adjust:

If you pause mortgage prepay and divert that and taxable contributions to I-bonds your asset location can make sense. In less than a year you could have about 8% bonds in taxable, US total market equities in taxable, intnl in codi 401k, bonds in henry 401k. I think the overall allocation would be in the ballpark.

Then future 401k contributions go: 58% S&P, 15% bond, 27%intnl. Adjust from there to line up AA with other contributions.

You may want to use ETF’s in taxable.

I think it would be worth it to set up the solo 401k, if you can fund it.
tashnewbie
Posts: 2050
Joined: Thu Apr 23, 2020 12:44 pm

Re: Portfolio Review (Phew!)

Post by tashnewbie »

I would keep using VTSAX and VTIAX in taxable at Vanguard. They're just as efficient as exchange traded funds (ETFs) but in my opinion they're more convenient to use (you can set up automatic investments, don't have to deal with fractional shares, etc).

It might be easier not to use TDFs. Using individuals funds might help with rebalancing. You probably shouldn't need to rebalance more than once a year (a lot of people seem to do it around their birthday) or if your desired allocations are off by more than 5%.

You said you want 60% US stock, 25% int'l stock, and 15% bonds (I rounded int'l to 30% of stock).

Sample portfolio:

Taxable at Vanguard
15% VG Total Int’l Stock (VTIAX) (.11%)
50% VG Total US Stock (VTSAX) (.04)

Codi 401k -- you said you have an assortment of VG funds available; I'm assuming you have these
8% VG Total Bond (VBTLX)
10% VG Total Int'l (VTIAX)
10% VG Total US Stock (VTSAX)

Henry Rollover IRA at Vanguard
7% VG Total Bond (VBTLX) (.05%)

You should be able to do all rebalancing within Codi's 401k. Will mostly consist of buying more VBTLX (probably).

I would look into doing Backdoor Roth for Codi. Make sure you understand how to fill out Form 8606, which will need to be filed with your tax return, properly. The 2 steps of the backdoor process are easy enough, but a lot of people get tripped up with the paperwork, and even many tax professionals don't understand the need for Form 8606 or how to complete it. So you'll need to own this and understand how to do it yourself. Search the forum for tons of threads on this topic. This tutorial from White Coat Investor may be helpful: https://www.whitecoatinvestor.com/how-t ... -vanguard/ and this one has info about Form 8606: https://www.whitecoatinvestor.com/backd ... -tutorial/. If you don't feel comfortable with this process, that's okay, and you should just invest that money (max is $6k to IRA) in your taxable Vanguard account instead.

I would definitely look into Henry using a solo 401k or SEP IRA (he should probably be the driver of this, since it relates to his self-employment, and he would need to be familiar with and put his name on all the documentation that's needed to start this stuff). See these wikis for more info: Solo 401(k) plan and SEP
retiredjg
Posts: 45717
Joined: Thu Jan 10, 2008 12:56 pm

Re: Portfolio Review (Phew!)

Post by retiredjg »

I like this variation if tashnewbie's idea because it does not have the same funds in taxable and the other accounts (easier to avoid wash sales).


Taxable at Vanguard
25% VG Total Int’l Stock (VTIAX) (.11%)
40% VG Total US Stock (VTSAX) (.04)

Codi 401k -- you said you have an assortment of VG funds available; I'm assuming you have these
8% VG Total Bond (VBTLX)
20% S&P 500 Index

Henry Rollover IRA at Vanguard
7% VG Total Bond (VBTLX) (.05%)

There are literally hundreds of variations that should all do about the same....just figure out your personal preference.
Topic Author
CodiStang21
Posts: 13
Joined: Sun Oct 10, 2021 6:53 pm

Re: Portfolio Review (Phew!)

Post by CodiStang21 »

Hi all. This has been extremely helpful, thank you. I am going to think about this a bit more, but I'm likely going to go with your recommendations. I will also be reading the provided links more closely, but I think I will be able to figure out a back door Roth IRA. In that case, I suppose I would also use VG Total Bond (VBTLX) and/or VG Large-Cap Index (VFIAX) to match my 401k and not have to worry about wash sales.

I don't have a VG 500 in my 401k, but I do have VG Large-Cap (VLCAX). I took a look and it has mostly similar holdings to VG 500 - correct me if I'm wrong though!


Taxable at Vanguard
25% VG Total Int’l Stock (VTIAX) (.11%)
39.5% VG Total US Stock (VTSAX) (.04)

401k
7.5% VG Total Bond (VBTLX)
20% VG Large-Cap Index (VLCAX)

Rollover IRA at Vanguard
7% VG Total Bond (VBTLX) (.05%)

Future Backdoor
.5% Total Bond (VBTLX)
.5 VG Large-Cap Index (VLCAX)

Please share any final thoughts!
Last edited by CodiStang21 on Wed Oct 13, 2021 10:31 pm, edited 1 time in total.
HomeStretch
Posts: 6988
Joined: Thu Dec 27, 2018 3:06 pm

Re: Portfolio Review (Phew!)

Post by HomeStretch »

CodiStang21 wrote: Wed Oct 13, 2021 8:45 pm … I don't have a VG 500 in my 401k, but I do have VG Large-Cap (VFIAX). I took a look and it has mostly similar holdings to VG 500 - correct me if I'm wrong though! …
Do you mean your 401k offers VLCAX, which is the VG Large Cap fund? VFIAX is the VG S&P 500 fund. Yes, the two funds are similar and either is good to hold.

Edit - consider holding 100% VLCAX in your future Roth IRA and hold VBTLX instead in your 401k.
Last edited by HomeStretch on Wed Oct 13, 2021 10:57 pm, edited 1 time in total.
Topic Author
CodiStang21
Posts: 13
Joined: Sun Oct 10, 2021 6:53 pm

Re: Portfolio Review (Phew!)

Post by CodiStang21 »

Yes, thanks for catching that. I updated my post. And great, thanks for confirming what I thought.
retiredjg
Posts: 45717
Joined: Thu Jan 10, 2008 12:56 pm

Re: Portfolio Review (Phew!)

Post by retiredjg »

CodiStang21 wrote: Wed Oct 13, 2021 8:45 pm I don't have a VG 500 in my 401k, but I do have VG Large-Cap (VLCAX). I took a look and it has mostly similar holdings to VG 500 - correct me if I'm wrong though!
Is there something called "institutional index"? That is a 500 index.

There is no reason not to use Large Cap Index in the 401k, but it means you cannot use it as the tax loss harvest partner for total stock index in taxable. I suppose you could use 500 index for that though.


Are you aware that your rollover IRA will interfere with your intention to use the backdoor Roth IRA process?
Topic Author
CodiStang21
Posts: 13
Joined: Sun Oct 10, 2021 6:53 pm

Re: Portfolio Review (Phew!)

Post by CodiStang21 »

It sounds like I need to read more about tlh because I dont follow what you mean. Unless you are saying that when I sell a position ie 4% of total stock, I would buy 4% of S&P to stay in the same AA?

Oh no. How will Henry’s Roll over IRA interfere if I do a back door ira for myself?

List of 401k funds (minus the bond options). I dont think I have the one you mentioned.

Name/Inception Date
AF FUNDMNTL INV R6 (RFNGX)
08/01/1978
AF GRTH FUND AMER R6 (RGAGX)
11/30/1973
AF WASH MUTL INV R6 (RWMGX)
07/31/1952
VANG LG CAP IDX ADM (VLCAX)
01/27/2004
VANG TOT STK MKT ADM (VTSAX)
04/27/1992
FID LOW PRICED STK (FLPSX)
12/27/1989
VANG MIDCAP IDX ADM (VIMAX)
05/21/1998
VANG SM CAP IDX ADM (VSMAX)
10/03/1960
AF CAP WORLD G&I R6 (RWIGX)
03/26/1993
AF EUROPAC GROWTH R6 (RERGX)
04/16/1984
AF NEW WORLD R6 (RNWGX)
06/17/1999
FID PACIFIC BASIN (FPBFX)
10/01/1986
VANG EURO STK IDX AD (VEUSX)
06/18/1990
VANG TOT INTL STK AD (VTIAX)
04/29/1996
TRP HEALTH SCIENCES (PRHSX)
12/29/1995
TRP NEW ERA (PRNEX)
01/20/1969
VAN REAL EST IDX ADM (VGSLX)
05/13/1996
VAN FTSE SOC IDX ADM (VFTAX)
01/14/2003
AF BALANCED R6 (RLBGX)
07/25/1975
VAN LS CONSERV GRTH (VSCGX)
09/30/1994
VAN LS MODERATE GRTH (VSMGX)
09/30/1994
VANG TARGET RET 2015 (VTXVX)
10/27/2003
VANG TARGET RET 2020 (VTWNX)
06/07/2006
retiredjg
Posts: 45717
Joined: Thu Jan 10, 2008 12:56 pm

Re: Portfolio Review (Phew!)

Post by retiredjg »

CodiStang21 wrote: Thu Oct 14, 2021 6:43 am It sounds like I need to read more about tlh because I dont follow what you mean. Unless you are saying that when I sell a position ie 4% of total stock, I would buy 4% of S&P to stay in the same AA?
When you do tax loss harvesting, to avoid a wash sale you can have your money sit on the sidelines for a month or you can buy a similar (but not substantially identical) fund right away. In your case, it looks like total stock index and 500 index would be the TLH "partners" in taxable.
Note that selling only 4% of something will result in holding both funds in taxable at the same time...which will complicate the next sale.

Oh no. How will Henry’s Roll over IRA interfere if I do a back door ira for myself?
Sorry. Was only looking at that last post and did not realize the rollover was Henry's. No, his rollover will not affect your backdoor process.
HomeStretch
Posts: 6988
Joined: Thu Dec 27, 2018 3:06 pm

Re: Portfolio Review (Phew!)

Post by HomeStretch »

Based on the 401k plan choices you listed in your last post, your diversified US equity funds available are VLCAX or VTSAX. As you already hold VTSAX in your Taxable account, consider using VLCAX in your 401k account. If a tax loss harvesting (TLH) opportunity for your Taxable holdings occurs, VFIAX (S&P 500) is a good TLH partner for VTSAX.

Edit - the BH wiki has a TLH page you may find helpful:
https://www.bogleheads.org/wiki/Tax_loss_harvesting
Topic Author
CodiStang21
Posts: 13
Joined: Sun Oct 10, 2021 6:53 pm

Re: Portfolio Review (Phew!)

Post by CodiStang21 »

Got it. If I was to TLH in taxable and sell all of my total stock market and buy an SP 500 index, I should be fine because I have a large cap fund in my 401k (which I contribute to biweekly) and won’t create a wash?
retiredjg
Posts: 45717
Joined: Thu Jan 10, 2008 12:56 pm

Re: Portfolio Review (Phew!)

Post by retiredjg »

Yes. :D
Topic Author
CodiStang21
Posts: 13
Joined: Sun Oct 10, 2021 6:53 pm

Re: Portfolio Review (Phew!)

Post by CodiStang21 »

:sharebeer thanks!
Topic Author
CodiStang21
Posts: 13
Joined: Sun Oct 10, 2021 6:53 pm

Re: Portfolio Review (Phew!)

Post by CodiStang21 »

Sorry one other question. And if I should ask in another form I can.

If I only own total stock market VTSAX (for equity allocation) in taxable and 401k and I want to sell to TLH, can I just sell both in taxable and 401k and buy S&P/large cap? I know I can’t get a tax loss from 401k, but just to keep thing simple/the same between accounts. And of course avoid the wash sale.
HomeStretch
Posts: 6988
Joined: Thu Dec 27, 2018 3:06 pm

Re: Portfolio Review (Phew!)

Post by HomeStretch »

In the scenario you presented, you would also have to change your 401k contribution from VTSAX to VLCAX for the 30 days after the TLH.
Topic Author
CodiStang21
Posts: 13
Joined: Sun Oct 10, 2021 6:53 pm

Re: Portfolio Review (Phew!)

Post by CodiStang21 »

Great that’s what I was planning. When I need to do TLH, simultaneously I would:
Taxable VTSAX > VLCAX
401k VTSAX > VLCAX

Thanks again
HomeStretch
Posts: 6988
Joined: Thu Dec 27, 2018 3:06 pm

Re: Portfolio Review (Phew!)

Post by HomeStretch »

HomeStretch wrote: Thu Oct 14, 2021 4:57 pm In the scenario you presented, you would also have to change your 401k contribution from VTSAX to VLCAX for the 30 days after the TLH.
Sorry, I’m not sure I was clear in my post…
In your example, in addition to exchanging your 401k balance from VTSAX to VLCAX, you also need to change the allocation from VTSAX to VLCAX for any 401k contributions that are deposited into your 401k account during the 30 days following the TLH. In my 401k online account, there would be two changes I would need to do (i.e., change where the current balance is invested and change where future contributions are being invested).

It’s safest to hold different funds in the 2 accounts (for example, VTSAX in Taxable and VLCAX in 401k). Your plan to hold the same fund in both runs the risk that there is a pending dividend or contribution on the day you do a TLH that ends up in VTSAX the day after your TLH causing a wash sale. A wash sale is not the end of the world but it means you don’t get the capital loss in part or in whole to deduct on your tax return thus defeating the purpose of your TLH.
Topic Author
CodiStang21
Posts: 13
Joined: Sun Oct 10, 2021 6:53 pm

Re: Portfolio Review (Phew!)

Post by CodiStang21 »

Oh sorry, that I understood, I just didn’t mention. I guess the reason I wanted to keep them the same was for future TLH. For example, both accounts balance AND contributions go from VTSAX to VLCAX. Then say a year later I need to TLH again, I change both back from VLCAX to VTSAX.

If I was to have VTSAX in tax account and VLCAX in 401k, when I go to TLH VTSAX, I’d go to an another index that isn’t substantially similar to VTSAX OR VLCAX since I dont want to worry about a future TLH being an issue with my 401k VLCAX. I think someone said I could do that with S&P 500 VFIAX, but it seems almost exactly the same as the large cap VLCAX. I suppose I could just use an i share or fidelity ETF as a TLH substitute that is different enough to VTSAX/VFIAX/VLCAX - I just need to research what that would be. Or am I just overthinking all of this?
retiredjg
Posts: 45717
Joined: Thu Jan 10, 2008 12:56 pm

Re: Portfolio Review (Phew!)

Post by retiredjg »

You are not really overthinking - there are just a lot of unknowns. Continue to read the threads and the Wiki and you'll get the hang of it.
Topic Author
CodiStang21
Posts: 13
Joined: Sun Oct 10, 2021 6:53 pm

Re: Portfolio Review (Phew!)

Post by CodiStang21 »

I appreciate that! I thought about it overnight and I realized I can set up my portfolio as you described:

Taxable at Vanguard
25% VG Total Int’l Stock (VTIAX) (.11%)
40% VG Total US Stock (VTSAX) (.04)

Codi 401k
8% VG Total Bond (VBTLX)
VG Large-Cap Index (VLCAX)

Henry Rollover IRA at Vanguard
7% VG Total Bond (VBTLX) (.05%)

Then when I need to tax loss harvest, I can sell all of my VTSAX and buy VLCAX. 61 days later I can shift my 401k over to total stock VTSAX - this is so when I have a future TLH in my taxable I can go back to VTSAX and not have to worry about any leftover dividends go into my 401k VLCAX because I had swapped it. From my perspective, this works out for me to keep it to simply two funds (maybe a 3rd if I add in small cap) and not have to worry about a wash sale from dividend payment delays (as homestretch pointed out could happen). This is also instead of using SP VTIAX AND Large Cap VLCAX for TLH since they seem so similar (to me). Again, let me know if I’m thinking about this wrong! Thank you
retiredjg
Posts: 45717
Joined: Thu Jan 10, 2008 12:56 pm

Re: Portfolio Review (Phew!)

Post by retiredjg »

This seems like it would work, but the waiting period does not need to be 61 days. Shouldn't 31 days do it?

This is why I like to have two funds to use in taxable and go back and forth between them without even thinking about what is happening in other accounts.

I don't think your idea will work very well if you want to sell some shares, but not all shares, in taxable.
Last edited by retiredjg on Fri Oct 15, 2021 11:10 am, edited 1 time in total.
Topic Author
CodiStang21
Posts: 13
Joined: Sun Oct 10, 2021 6:53 pm

Re: Portfolio Review (Phew!)

Post by CodiStang21 »

Great, thank you for all of the feedback and guidance.
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