Where to Store Savings? Taxable account vs High Interest Savings Account

[MajinVegeta]

Hello Everyone,

I am a 29-year-old graduating student and new to investing. In the later part of this year I will be acquiring a job that will increase my income well into the triple figures (300k+)

I currently have:

1. 230k in personal student loans which are currently deferred (Due to the Biden Covid administration pause)
2. Vanguard Roth IRA account with 80% VTSAX, 10% VTIAX, and 10% BND (70k)
3. Employer Roth 403b with 100% FXAIX (1.5k)
4. High interest Savings Account (11k)

My plan, once I acquire this high-income job, is to

1. Build up 6 months Emergency Fund
2. Max out all of my tax advantage accounts (Employer 401k etc, Backdoor Roth)
3. Transfer my old employer Roth 403b into my Vanguard Roth Account.
4. Defer on paying down loans for now

Now I plan to save money to eventually pay off this student loan/start paying off the student loan once the pause of student loans ends (whenever the government decides)

My question is whether I should store the money for future student loan repayment in a high interest savings account (Marcus Goldman Sachs) or should I put the money in a taxable brokerage account. If I invest in a taxable brokerage account I plan to invest in VTSAX & VTIAX. In order to keep my desired overall asset allocation as 80% VTSAX, 10% VTIAX, and 10% BND, I will make adjustments in the Roth IRA account (increasing BND and lowering VTSAX/VTIAX) etc. etc.

I would appreciate any advice or if anyone sees any holes in my financial strategy etc. etc.

Thank you in advanced.

[GMCZ71]

I would drop bnd off the Roth at your age and use it in tax def. Also you would benefit by using a tax loss partner in taxable. We have vtsax in Roth and Ira/401 but use sp500 in taxable.

[rkhusky]

Second to the advice to use different funds in your taxable account compared to your tax-advantaged accounts (see wash sale).

Looks like you will have plenty of income to cash flow student loan debt, so I would just invest in stocks in a brokerage account, unless the stay at your new job is uncertain.

Note that a Roth IRA can serve as an emergency fund since you can pull contributions out at any time tax and penalty free (or you could reduce the e-fund to 1 or 2 months worth and use the Roth as a second tier backup).

[tashnewbie]

Unless you're currently employed by the employer where you have the Roth 403b, you can transfer that money into your Roth IRA now. No need to wait until later in the year. You would be out of the market for some time, possibly up to a few weeks, depending on where the 403b and Roth IRA are held.

I agree that at your age it definitely doesn't make sense to keep bonds in Roth accounts. I would put desired bonds in your tax-deferred/traditional 401k after you start the new job.

I also agree that it's best not to use the same funds in taxable as you have in other accounts. Because your employer-sponsored plan generally will have a limited selection of funds but will typically have an S&P 500 fund, I find it easier to use S&P 500 in 401k/403b/etc., HSA, and Roth IRA. Then you can use total/large cap funds in taxable (e.g., VTSAX, VLCAX).

I think you can cash flow the student loans and could even afford to pay more than the minimum, if you want to pay them off more quickly. I would just do that. Depending on the interest rate on the loans, I would either put all extra money towards payoff or do a split with taxable investing (after maxing all available tax-advantaged accounts, of course).

[MajinVegeta]

Unless you're currently employed by the employer where you have the Roth 403b, you can transfer that money into your Roth IRA now. No need to wait until later in the year. You would be out of the market for some time, possibly up to a few weeks, depending on where the 403b and Roth IRA are held.

I agree that at your age it definitely doesn't make sense to keep bonds in Roth accounts. I would put desired bonds in your tax-deferred/traditional 401k after you start the new job.

I also agree that it's best not to use the same funds in taxable as you have in other accounts. Because your employer-sponsored plan generally will have a limited selection of funds but will typically have an S&P 500 fund, I find it easier to use S&P 500 in 401k/403b/etc., HSA, and Roth IRA. Then you can use total/large cap funds in taxable (e.g., VTSAX, VLCAX).

I think you can cash flow the student loans and could even afford to pay more than the minimum, if you want to pay them off more quickly. I would just do that. Depending on the interest rate on the loans, I would either put all extra money towards payoff or do a split with taxable investing (after maxing all available tax-advantaged accounts, of course).

Can u please explain why its not good to have Bond funds in Roth accounts but instead have them in tax deferred/traditional 401k?

Also why is it best to not put the same funds in taxable as I have in other accounts?

[retiredjg]

Savings should not be invested at all.

Savings should be in HYSA or high paying money market.

[tashnewbie]

Can u please explain why its not good to have Bond funds in Roth accounts but instead have them in tax deferred/traditional 401k?

The general idea is that it's preferable to put assets with highest expected returns (i.e., stocks) in Roth accounts, because the growth and withdrawals are tax-free, if you follow the rules.

See this wiki for more information about tax-efficient fund placement: https://www.bogleheads.org/wiki/Tax-eff ... _placement

Also why is it best to not put the same funds in taxable as I have in other accounts?

If you ever want to tax loss harvest (TLH) in the taxable account, it's easier not to have the same funds in other accounts, because you can more easily avoid the wash sale rule. If you use different funds in taxable, you wouldn't have to think about the funds in other accounts when you're trying to navigate the wash sale rule, only what's in taxable.

TLH isn't something you need to worry about now, but it's easy enough to structure your portfolio so that it's set up for easy TLH in the future, if you ever want to do it when there's an opportunity.

See this wiki for more information about TLH: https://www.bogleheads.org/wiki/Tax_loss_harvesting

[jakehefty17]

My plan, once I acquire this high-income job, is to

1. Build up 6 months Emergency Fund
2. Max out all of my tax advantage accounts (Employer 401k etc, Backdoor Roth)
3. Transfer my old employer Roth 403b into my Vanguard Roth Account.
4. Defer on paying down loans for now

Now I plan to save money to eventually pay off this student loan/start paying off the student loan once the pause of student loans ends (whenever the government decides)

My question is whether I should store the money for future student loan repayment in a high interest savings account (Marcus Goldman Sachs) or should I put the money in a taxable brokerage account. If I invest in a taxable brokerage account I plan to invest in VTSAX & VTIAX. In order to keep my desired overall asset allocation as 80% VTSAX, 10% VTIAX, and 10% BND, I will make adjustments in the Roth IRA account (increasing BND and lowering VTSAX/VTIAX) etc. etc.

I would appreciate any advice or if anyone sees any holes in my financial strategy etc. etc.

Thank you in advanced.

Congrats on the job opportunity. Hope everything works out as planned!

The two links tashnewbie provided are great, particularly the tax efficiency one. I wanted to add in the prioritizing investments page as well: https://www.bogleheads.org/wiki/Priorit ... nvestments

Storing money for future student loan repayment... I'd say stick to a HYSA. Or you could start your taxable account and worry about payments when the time comes. I wouldn't co-mingle the two categories though.

Personally, paying off my student loans was priority #1 when I got my job. I wasn't maxing out my tax-advantaged space yet (I was contributing significantly though). I didn't discover Bogleheads until after the loans were repaid. I don't regret it.

Besides that I don't see any big holes in your plan. Tax efficiency can be improved but isn't a major issue. Generally, follow the suggestions from the prioritizing investments page and tax efficiency page. That's what I did starting out and it's working out well so far. I'm 31, started lurking on Bogleheads around 6-7 years ago.

[MajinVegeta]

Can u please explain why its not good to have Bond funds in Roth accounts but instead have them in tax deferred/traditional 401k?

The general idea is that it's preferable to put assets with highest expected returns (i.e., stocks) in Roth accounts, because the growth and withdrawals are tax-free, if you follow the rules.

See this wiki for more information about tax-efficient fund placement: https://www.bogleheads.org/wiki/Tax-eff ... _placement

Also why is it best to not put the same funds in taxable as I have in other accounts?

If you ever want to tax loss harvest (TLH) in the taxable account, it's easier not to have the same funds in other accounts, because you can more easily avoid the wash sale rule. If you use different funds in taxable, you wouldn't have to think about the funds in other accounts when you're trying to navigate the wash sale rule, only what's in taxable.

TLH isn't something you need to worry about now, but it's easy enough to structure your portfolio so that it's set up for easy TLH in the future, if you ever want to do it when there's an opportunity.

See this wiki for more information about TLH: https://www.bogleheads.org/wiki/Tax_loss_harvesting

Thank you so much. This was extremely helpful!

[MajinVegeta]

My plan, once I acquire this high-income job, is to

1. Build up 6 months Emergency Fund
2. Max out all of my tax advantage accounts (Employer 401k etc, Backdoor Roth)
3. Transfer my old employer Roth 403b into my Vanguard Roth Account.
4. Defer on paying down loans for now

Now I plan to save money to eventually pay off this student loan/start paying off the student loan once the pause of student loans ends (whenever the government decides)

My question is whether I should store the money for future student loan repayment in a high interest savings account (Marcus Goldman Sachs) or should I put the money in a taxable brokerage account. If I invest in a taxable brokerage account I plan to invest in VTSAX & VTIAX. In order to keep my desired overall asset allocation as 80% VTSAX, 10% VTIAX, and 10% BND, I will make adjustments in the Roth IRA account (increasing BND and lowering VTSAX/VTIAX) etc. etc.

I would appreciate any advice or if anyone sees any holes in my financial strategy etc. etc.

Thank you in advanced.

Congrats on the job opportunity. Hope everything works out as planned!

The two links tashnewbie provided are great, particularly the tax efficiency one. I wanted to add in the prioritizing investments page as well: https://www.bogleheads.org/wiki/Priorit ... nvestments

Storing money for future student loan repayment... I'd say stick to a HYSA. Or you could start your taxable account and worry about payments when the time comes. I wouldn't co-mingle the two categories though.

Personally, paying off my student loans was priority #1 when I got my job. I wasn't maxing out my tax-advantaged space yet (I was contributing significantly though). I didn't discover Bogleheads until after the loans were repaid. I don't regret it.

Besides that I don't see any big holes in your plan. Tax efficiency can be improved but isn't a major issue. Generally, follow the suggestions from the prioritizing investments page and tax efficiency page. That's what I did starting out and it's working out well so far. I'm 31, started lurking on Bogleheads around 6-7 years ago.

Thank you so much for the advice. Great links as well. This was helpful

[Oddball]

What is the %APR for the student loans once they go back into repayment?

[MajinVegeta]

What is the %APR for the student loans once they go back into repayment?

About 6.5% I believe

[dratkinson]

Idea. Use a tiered structure for your savings/emergency fund structure.
--1st-tier EFs: checking, savings, CDs,...
--Extended-tier EF: muni bond fund in taxable, justified by your future income. (Not a stock fund.)


Just went though this drill, see: viewtopic.php?p=7069631#p7069631
--For thoughts on using the "ABP by CC technique" to boost the yield on your 1st-tier EFs.
--For choosing a muni fund.


Generally we should match our savings vehicle to our need horizon. If our need is within:
--0-5yrs: Use insured accounts (checking, savings, CDs,...).
--5-10yrs: Safe bond funds.
-->10yrs: Safe stock funds.

But with your income potential, you could easily/quickly have many years of living expenses in a muni fund, so maybe no need to set aside small pools of cash for individual goals.


During a crash:
--Stocks can lose 50-90%. (Lost 40% in 2008-9, recovered in ~3yrs; lost 90% during great depression, recovered in ~10yrs.)
--Bonds can lose 5-15%.
--Typically stock/bond crashes are not coincidental.
--Most crashes recover within 4yrs.

Bottom line. It might not be wise to save your student loan repayments in stock funds.
A bond fund would be safer, and should, in more normal interest-rate environments, pay more than HY savings/5yr CDs. (I plan for normal interest-rate environments, and ignore exceptions so I don't whipsaw my investments.)


The major component of bond fund total return comes from dividends, but don't believe we can expect 6.5% yield from bonds.

Bond prices fluctuate with (federal reserve board) interest-rate changes, so over the short-term you could lose money. (Not a terrible thing since the capital loss is tax deductible. You can also intentionally TLH stock/bond losses in taxable to reduce your annual tax bill.)

So the biggest, guaranteed bang-for-your-buck might be to set aside 1yr of livings expenses (more if you like)---to take care of your needs---but direct the excess to paying off your student loan, before the repayment holiday ends. That would be a guaranteed way to get/save 6.5%.

[MajinVegeta]

Idea. Use a tiered structure for your savings/emergency fund structure.
--1st-tier EFs: checking, savings, CDs,...
--Extended-tier EF: muni bond fund in taxable, justified by your future income. (Not a stock fund.)


Just went though this drill, see: viewtopic.php?p=7069631#p7069631
--For thoughts on using the "ABP by CC technique" to boost the yield on your 1st-tier EFs.
--For choosing a muni fund.


Generally we should match our savings vehicle to our need horizon. If our need is within:
--0-5yrs: Use insured accounts (checking, savings, CDs,...).
--5-10yrs: Safe bond funds.
-->10yrs: Safe stock funds.

But with your income potential, you could easily/quickly have many years of living expenses in a muni fund, so maybe no need to set aside small pools of cash for individual goals.


During a crash:
--Stocks can lose 50-90%. (Lost 40% in 2008-9, recovered in ~3yrs; lost 90% during great depression, recovered in ~10yrs.)
--Bonds can lose 5-15%.
--Typically stock/bond crashes are not coincidental.
--Most crashes recover within 4yrs.

Bottom line. It might not be wise to save your student loan repayments in stock funds.
A bond fund would be safer, and should, in more normal interest-rate environments, pay more than HY savings/5yr CDs. (I plan for normal interest-rate environments, and ignore exceptions so I don't whipsaw my investments.)


The major component of bond fund total return comes from dividends, but don't believe we can expect 6.5% yield from bonds.

Bond prices fluctuate with (federal reserve board) interest-rate changes, so over the short-term you could lose money. (Not a terrible thing since the capital loss is tax deductible. You can also intentionally TLH stock/bond losses in taxable to reduce your annual tax bill.)

So the biggest, guaranteed bang-for-your-buck might be to set aside 1yr of livings expenses (more if you like)---to take care of your needs---but direct the excess to paying off your student loan, before the repayment holiday ends. That would be a guaranteed way to get/save 6.5%.

Thank you for this wonderful detailed response!!

[aristotelian]

One option that hasn't been mentioned is I Bonds. There are lots of threads on them if you want to do a search. They are guaranteed to beat inflation and tax deferred. They were a big thing when HYSA rates were zero and inflation was 10%. That situation may not happen again but it is good to have some for diversification.

I also think short term Treasuries or STT ETF would be a fine choice if your brokerage doesn't have a good money market fund.

[MajinVegeta]

One option that hasn't been mentioned is I Bonds. There are lots of threads on them if you want to do a search. They are guaranteed to beat inflation and tax deferred. They were a big thing when HYSA rates were zero and inflation was 10%. That situation may not happen again but it is good to have some for diversification.

I also think short term Treasuries or STT ETF would be a fine choice if your brokerage doesn't have a good money market fund.

Thanks for this additional info

[ruralavalon]

Welcome to the forum .

Congratulations on finishing school and on your new job.

Hello Everyone,

I am a 29-year-old graduating student and new to investing. In the later part of this year I will be acquiring a job that will increase my income well into the triple figures (300k+)

I currently have:

1. 230k in personal student loans which are currently deferred (Due to the Biden Covid administration pause)
2. Vanguard Roth IRA account with 80% VTSAX, 10% VTIAX, and 10% BND (70k)

Hold your bond allocation in the new employer's 401k plan if a good bond fund with a low expense ratio is offered there.

Wiki article, Tax-efficient fund placement.

3. Employer Roth 403b with 100% FXAIX (1.5k)
4. High interest Savings Account (11k)

My plan, once I acquire this high-income job, is to

1. Build up 6 months Emergency Fund
2. Max out all of my tax advantage accounts (Employer 401k etc, Backdoor Roth)
3. Transfer my old employer Roth 403b into my Vanguard Roth Account.

The rollover of the old 403b account is a good idea if the new employer's 401k plan offers similar or better funds with similar or lower expense ratios than your old employer's 403b plan.

4. Defer on paying down loans for now

Now I plan to save money to eventually pay off this student loan/start paying off the student loan once the pause of student loans ends (whenever the government decides)

My question is whether I should store the money for future student loan repayment in a high interest savings account (Marcus Goldman Sachs) or should I put the money in a taxable brokerage account. If I invest in a taxable brokerage account I plan to invest in VTSAX & VTIAX. In order to keep my desired overall asset allocation as 80% VTSAX, 10% VTIAX, and 10% BND, I will make adjustments in the Roth IRA account (increasing BND and lowering VTSAX/VTIAX) etc. etc.

Instead I suggest either a federally insured savings account (for interest rates see this) or a taxable brokerage account using money market fund such as Vanguard Cash Reserves Federal Money Market Fund Admiral Shares(VMRXX), current SEC Yield = 4.28%, link.

[dratkinson]

Depending upon where your new employer holds its 401k, it might be more convenient if you hold your personal accounts (taxable, IRA,...) there too.

** Fidelity and Charles Schwab are recommended brokerages for their low cost and customer service, ...if your new employer's brokerage is less customer friendly.



When choosing a muni fund for your taxable account, it will probably be an ETF (exchange-traded fund), meaning the "IRS 6mo holding period requirement"* comes into play.

* If selling muni shares at a loss (TLH), you must own those shares for >6mos, to claim the full loss. You must remember/do this ...to avoid the IRS paperwork reporting hassle. "An ounce of prevention...." (This IRS rule does not apply if selling for a profit.)

See "Loss on mutual fund shares held 6 months or less" : https://www.bogleheads.org/wiki/Tax_los ... harvesting


Simple Action Step* to manage your taxable investments: hold all (short-term: owned <1yr) shares for >6mos before selling. Why? This takes care of IRS holding period requirements for: TE dividends (>6mos requirement) and QDI (qualified dividend income,>120day requirement): ~100% of total stock market index fund, >70% of total international stock market index fund). (* Investing can get complicated, so I look for Simple Action Steps to help keep things simple.)


Vanguard does have some daily-accrual muni funds (IRS 6mo holding period does not apply), but they can only be purchased cheaply in a Vanguard account. But Vanguard's customer service is not what it was, which means you'll probably have your personal brokerage elsewhere, which means you'll be purchasing a muni ETF (rule does apply). What does owning Vanguard daily-accrual munis get me? Not much: I can buy shares today, sell them next week for a small loss, and all prorated dividends earned on the sold shares remain TE and are not used to offset the TLH ...which means I don't have a paperwork hassle at tax time.


Simple Action Steps to simplify the management of your taxable investments ...and avoid IRS paperwork reporting hassle.
--Use tax-efficient discrete funds/ETFs that differ from those in your TA accounts. (Helps with TLHing.)
--Set all investments to use Specific ID cost basis method. (So you can sell only the shares you want, to minimize tax owed on sale.)
--Redirect all distributions to settlement fund/bank. (Helps with TLHing, prevents inadvertent purchase of replacement shares.)
--Hold all ST shares for >6mos before selling. (Helps with TLHing, recharacterizations of LTCG as ST, QDI holding period.)



A simple first-look at determining a muni's acceptability is to compute its TEY (taxable-equivalent yield).
--National muni fund/ETF TEY = SEC yield / (1 -your fed tax bracket). Dividends are fed tax exempt, but state taxable.
--Single-state muni fund/ETF TEY = SEC yield / (1 -your fed tax bracket -your state tax bracket). Dividends are fed, state, city tax exempt. (This formula assumes you don't deduct mortgage interest on your fed tax return. The other formula---you do deduct mortgage interest---is left as a student exercise to find.)

It's safer to start with a national muni fund (no single-state default risk). But as you gain knowledge/experience managing your investments, and if you have the option to do so, adding a single-state muni will make those dividends triple tax exempt: fed, state, city. Some Vanguard-client BHs living in CA/NY use Vanguard single-state munis to take advantage of this option. (BH advice: allocate no more that 50% of munis to a single-state muni---beware of single-state default risk.)



Initial search of national muni ETF candidates.
--Vanguard does have one muni ETF, VTEB: https://investor.vanguard.com/investmen ... ofile/vteb
--I've read other BHs recommending MUB: https://www.ishares.com/us/products/239 ... i-bond-etf
--There may be other muni options, but I don't know them so you'll need to find them for yourself.


You'll want to compare your candidate muni's TEY against the taxable options: bond fund/ETF 30-day SEC yield, savings/CD APY.
I've read BHs recommending these 2 taxable bond ETFs: BND and AGG.
--BND SEC yield: 4.05%. See: https://investor.vanguard.com/investmen ... rofile/bnd
--AGG SEC yield: 3.85%. See: https://www.ishares.com/us/products/239 ... market-etf
--VTEB TEY = 3.26% / (1-.35) = 5.02%
--MUB TEY = 3.06% / .65 = 4.71%

I've assumed your expected salary ($300K+) puts you in the 35% fed tax bracket: https://taxfoundation.org/2023-tax-brackets/



A more complete second-look at determining a muni's acceptability is to produce sample tax returns for each. Why? The TEY calculation misses all of the tax code effects---the right hand giveth, the left hand taketh away---which a sample tax return will reveal. (You're looking for investments that are expected to produce the most: after-tax income = total income - total fed tax - total state tax.)

How did I produce sample tax returns for my bond candidates in taxable?
--Assume total annual dividends produced by bonds = bond principal * SEC yield.
--Assume any AMT (alternative minimum tax) income is a percentage of total annual dividends. (Percentage listed in prospectus.)

I then produced sample tax returns for all my bond candidates: ST/IT/LT, treasury/muni/TBM/corporate, before/after SS.

I went through this exercise after retirement, but before taking SS. I learned that I could select one set of investments that was expected to produce more after-tax income before/after taking SS. The rest just became “Stay the course.”


You also must read the prospectus for each muni candidate. Why? You want to avoid candidates that have high fees, front/back loads, leverage, AMT exposure, ...other things that seem too risky, or make you uncomfortable.



Once you done your due diligence*---read the prospectus to avoid unnecessary risk, produced sample tax returns to wag the effects on after-tax income---you've done all you can. Then set up your investments, and ignore the market noise that wants to whipsaw your emotions. This too shall pass. (* Could also call the state attorney general and better business bureau to check out a small/unknown investment firm/manager, but if you are doing this as a novice investor, then that investment should probably be avoided …for now.)



Recommended library books.
--The Only Investment Guide You'll Ever Need, Tobias. General personal finance topics.
--The Bogleheads' Guide to Investing. Investing for retirement.
--Date ...or Soul Mate, Warren. Priceless if you avoid the expense of a bad relationship/marriage/divorce.



After you start working, return for a full review of your employer’s investment options.
--Copy/paste the sticky "Asking Portfolio Questions" onto your PC as a Word document: viewtopic.php?t=6212
--Edit/overwrite the sticky with your information.
--Post it as a new topic when done.
--And we'll resume from there.

[MajinVegeta]

Depending upon where your new employer holds its 401k, it might be more convenient if you hold your personal accounts (taxable, IRA,...) there too.

** Fidelity and Charles Schwab are recommended brokerages for their low cost and customer service, ...if your new employer's brokerage is less customer friendly.



When choosing a muni fund for your taxable account, it will probably be an ETF (exchange-traded fund), meaning the "IRS 6mo holding period requirement"* comes into play.

* If selling muni shares at a loss (TLH), you must own those shares for >6mos, to claim the full loss. You must remember/do this ...to avoid the IRS paperwork reporting hassle. "An ounce of prevention...." (This IRS rule does not apply if selling for a profit.)

See "Loss on mutual fund shares held 6 months or less" : https://www.bogleheads.org/wiki/Tax_los ... harvesting


Simple Action Step* to manage your taxable investments: hold all (short-term: owned <1yr) shares for >6mos before selling. Why? This takes care of IRS holding period requirements for: TE dividends (>6mos requirement) and QDI (qualified dividend income,>120day requirement): ~100% of total stock market index fund, >70% of total international stock market index fund). (* Investing can get complicated, so I look for Simple Action Steps to help keep things simple.)


Vanguard does have some daily-accrual muni funds (IRS 6mo holding period does not apply), but they can only be purchased cheaply in a Vanguard account. But Vanguard's customer service is not what it was, which means you'll probably have your personal brokerage elsewhere, which means you'll be purchasing a muni ETF (rule does apply). What does owning Vanguard daily-accrual munis get me? Not much: I can buy shares today, sell them next week for a small loss, and all prorated dividends earned on the sold shares remain TE and are not used to offset the TLH ...which means I don't have a paperwork hassle at tax time.


Simple Action Steps to simplify the management of your taxable investments ...and avoid IRS paperwork reporting hassle.
--Use tax-efficient discrete funds/ETFs that differ from those in your TA accounts. (Helps with TLHing.)
--Set all investments to use Specific ID cost basis method. (So you can sell only the shares you want, to minimize tax owed on sale.)
--Redirect all distributions to settlement fund/bank. (Helps with TLHing, prevents inadvertent purchase of replacement shares.)
--Hold all ST shares for >6mos before selling. (Helps with TLHing, recharacterizations of LTCG as ST, QDI holding period.)



A simple first-look at determining a muni's acceptability is to compute its TEY (taxable-equivalent yield).
--National muni fund/ETF TEY = SEC yield / (1 -your fed tax bracket). Dividends are fed tax exempt, but state taxable.
--Single-state muni fund/ETF TEY = SEC yield / (1 -your fed tax bracket -your state tax bracket). Dividends are fed, state, city tax exempt. (This formula assumes you don't deduct mortgage interest on your fed tax return. The other formula---you do deduct mortgage interest---is left as a student exercise to find.)

It's safer to start with a national muni fund (no single-state default risk). But as you gain knowledge/experience managing your investments, and if you have the option to do so, adding a single-state muni will make those dividends triple tax exempt: fed, state, city. Some Vanguard-client BHs living in CA/NY use Vanguard single-state munis to take advantage of this option. (BH advice: allocate no more that 50% of munis to a single-state muni---beware of single-state default risk.)



Initial search of national muni ETF candidates.
--Vanguard does have one muni ETF, VTEB: https://investor.vanguard.com/investmen ... ofile/vteb
--I've read other BHs recommending MUB: https://www.ishares.com/us/products/239 ... i-bond-etf
--There may be other muni options, but I don't know them so you'll need to find them for yourself.


You'll want to compare your candidate muni's TEY against the taxable options: bond fund/ETF 30-day SEC yield, savings/CD APY.
I've read BHs recommending these 2 taxable bond ETFs: BND and AGG.
--BND SEC yield: 4.05%. See: https://investor.vanguard.com/investmen ... rofile/bnd
--AGG SEC yield: 3.85%. See: https://www.ishares.com/us/products/239 ... market-etf
--VTEB TEY = 3.26% / (1-.35) = 5.02%
--MUB TEY = 3.06% / .65 = 4.71%

I've assumed your expected salary ($300K+) puts you in the 35% fed tax bracket: https://taxfoundation.org/2023-tax-brackets/



A more complete second-look at determining a muni's acceptability is to produce sample tax returns for each. Why? The TEY calculation misses all of the tax code effects---the right hand giveth, the left hand taketh away---which a sample tax return will reveal. (You're looking for investments that are expected to produce the most: after-tax income = total income - total fed tax - total state tax.)

How did I produce sample tax returns for my bond candidates in taxable?
--Assume total annual dividends produced by bonds = bond principal * SEC yield.
--Assume any AMT (alternative minimum tax) income is a percentage of total annual dividends. (Percentage listed in prospectus.)

I then produced sample tax returns for all my bond candidates: ST/IT/LT, treasury/muni/TBM/corporate, before/after SS.

I went through this exercise after retirement, but before taking SS. I learned that I could select one set of investments that was expected to produce more after-tax income before/after taking SS. The rest just became “Stay the course.”


You also must read the prospectus for each muni candidate. Why? You want to avoid candidates that have high fees, front/back loads, leverage, AMT exposure, ...other things that seem too risky, or make you uncomfortable.



Once you done your due diligence*---read the prospectus to avoid unnecessary risk, produced sample tax returns to wag the effects on after-tax income---you've done all you can. Then set up your investments, and ignore the market noise that wants to whipsaw your emotions. This too shall pass. (* Could also call the state attorney general and better business bureau to check out a small/unknown investment firm/manager, but if you are doing this as a novice investor, then that investment should probably be avoided …for now.)



Recommended library books.
--The Only Investment Guide You'll Ever Need, Tobias. General personal finance topics.
--The Bogleheads' Guide to Investing. Investing for retirement.
--Date ...or Soul Mate, Warren. Priceless if you avoid the expense of a bad relationship/marriage/divorce.



After you start working, return for a full review of your employer’s investment options.
--Copy/paste the sticky "Asking Portfolio Questions" onto your PC as a Word document: viewtopic.php?t=6212
--Edit/overwrite the sticky with your information.
--Post it as a new topic when done.
--And we'll resume from there.

Thank you so much!! Very helpful insight. I'll return there once I get my new job

[neurosphere]

Just an FYI that if you choose an IDR plan (specifically thinking of REPAYE here and assuming you have no intent for PSLF) your initial payments are likely to be based on your payment/income from March 2020. If your balance is high enough, you'll likely get an interest subsidy which can reduce your interest rate up to 50% from the "printed rate" of 6.5% or whatever your average balance is.

[er999]

I assume you are a doctor based on the salary details and debt so make sure to check out whitecoatinvestor.com if you don’t already know about it.

[Caleb4387]

For love of Manitowoc pay off those loans asap

[MajinVegeta]

Depending upon where your new employer holds its 401k, it might be more convenient if you hold your personal accounts (taxable, IRA,...) there too.

** Fidelity and Charles Schwab are recommended brokerages for their low cost and customer service, ...if your new employer's brokerage is less customer friendly.



When choosing a muni fund for your taxable account, it will probably be an ETF (exchange-traded fund), meaning the "IRS 6mo holding period requirement"* comes into play.

* If selling muni shares at a loss (TLH), you must own those shares for >6mos, to claim the full loss. You must remember/do this ...to avoid the IRS paperwork reporting hassle. "An ounce of prevention...." (This IRS rule does not apply if selling for a profit.)

See "Loss on mutual fund shares held 6 months or less" : https://www.bogleheads.org/wiki/Tax_los ... harvesting


Simple Action Step* to manage your taxable investments: hold all (short-term: owned <1yr) shares for >6mos before selling. Why? This takes care of IRS holding period requirements for: TE dividends (>6mos requirement) and QDI (qualified dividend income,>120day requirement): ~100% of total stock market index fund, >70% of total international stock market index fund). (* Investing can get complicated, so I look for Simple Action Steps to help keep things simple.)


Vanguard does have some daily-accrual muni funds (IRS 6mo holding period does not apply), but they can only be purchased cheaply in a Vanguard account. But Vanguard's customer service is not what it was, which means you'll probably have your personal brokerage elsewhere, which means you'll be purchasing a muni ETF (rule does apply). What does owning Vanguard daily-accrual munis get me? Not much: I can buy shares today, sell them next week for a small loss, and all prorated dividends earned on the sold shares remain TE and are not used to offset the TLH ...which means I don't have a paperwork hassle at tax time.


Simple Action Steps to simplify the management of your taxable investments ...and avoid IRS paperwork reporting hassle.
--Use tax-efficient discrete funds/ETFs that differ from those in your TA accounts. (Helps with TLHing.)
--Set all investments to use Specific ID cost basis method. (So you can sell only the shares you want, to minimize tax owed on sale.)
--Redirect all distributions to settlement fund/bank. (Helps with TLHing, prevents inadvertent purchase of replacement shares.)
--Hold all ST shares for >6mos before selling. (Helps with TLHing, recharacterizations of LTCG as ST, QDI holding period.)



A simple first-look at determining a muni's acceptability is to compute its TEY (taxable-equivalent yield).
--National muni fund/ETF TEY = SEC yield / (1 -your fed tax bracket). Dividends are fed tax exempt, but state taxable.
--Single-state muni fund/ETF TEY = SEC yield / (1 -your fed tax bracket -your state tax bracket). Dividends are fed, state, city tax exempt. (This formula assumes you don't deduct mortgage interest on your fed tax return. The other formula---you do deduct mortgage interest---is left as a student exercise to find.)

It's safer to start with a national muni fund (no single-state default risk). But as you gain knowledge/experience managing your investments, and if you have the option to do so, adding a single-state muni will make those dividends triple tax exempt: fed, state, city. Some Vanguard-client BHs living in CA/NY use Vanguard single-state munis to take advantage of this option. (BH advice: allocate no more that 50% of munis to a single-state muni---beware of single-state default risk.)



Initial search of national muni ETF candidates.
--Vanguard does have one muni ETF, VTEB: https://investor.vanguard.com/investmen ... ofile/vteb
--I've read other BHs recommending MUB: https://www.ishares.com/us/products/239 ... i-bond-etf
--There may be other muni options, but I don't know them so you'll need to find them for yourself.


You'll want to compare your candidate muni's TEY against the taxable options: bond fund/ETF 30-day SEC yield, savings/CD APY.
I've read BHs recommending these 2 taxable bond ETFs: BND and AGG.
--BND SEC yield: 4.05%. See: https://investor.vanguard.com/investmen ... rofile/bnd
--AGG SEC yield: 3.85%. See: https://www.ishares.com/us/products/239 ... market-etf
--VTEB TEY = 3.26% / (1-.35) = 5.02%
--MUB TEY = 3.06% / .65 = 4.71%

I've assumed your expected salary ($300K+) puts you in the 35% fed tax bracket: https://taxfoundation.org/2023-tax-brackets/



A more complete second-look at determining a muni's acceptability is to produce sample tax returns for each. Why? The TEY calculation misses all of the tax code effects---the right hand giveth, the left hand taketh away---which a sample tax return will reveal. (You're looking for investments that are expected to produce the most: after-tax income = total income - total fed tax - total state tax.)

How did I produce sample tax returns for my bond candidates in taxable?
--Assume total annual dividends produced by bonds = bond principal * SEC yield.
--Assume any AMT (alternative minimum tax) income is a percentage of total annual dividends. (Percentage listed in prospectus.)

I then produced sample tax returns for all my bond candidates: ST/IT/LT, treasury/muni/TBM/corporate, before/after SS.

I went through this exercise after retirement, but before taking SS. I learned that I could select one set of investments that was expected to produce more after-tax income before/after taking SS. The rest just became “Stay the course.”


You also must read the prospectus for each muni candidate. Why? You want to avoid candidates that have high fees, front/back loads, leverage, AMT exposure, ...other things that seem too risky, or make you uncomfortable.



Once you done your due diligence*---read the prospectus to avoid unnecessary risk, produced sample tax returns to wag the effects on after-tax income---you've done all you can. Then set up your investments, and ignore the market noise that wants to whipsaw your emotions. This too shall pass. (* Could also call the state attorney general and better business bureau to check out a small/unknown investment firm/manager, but if you are doing this as a novice investor, then that investment should probably be avoided …for now.)



Recommended library books.
--The Only Investment Guide You'll Ever Need, Tobias. General personal finance topics.
--The Bogleheads' Guide to Investing. Investing for retirement.
--Date ...or Soul Mate, Warren. Priceless if you avoid the expense of a bad relationship/marriage/divorce.



After you start working, return for a full review of your employer’s investment options.
--Copy/paste the sticky "Asking Portfolio Questions" onto your PC as a Word document: viewtopic.php?t=6212
--Edit/overwrite the sticky with your information.
--Post it as a new topic when done.
--And we'll resume from there.

Circling back here. You mentioned the following books

Recommended library books.
--The Only Investment Guide You'll Ever Need, Tobias. General personal finance topics.
--The Bogleheads' Guide to Investing. Investing for retirement.
--Date ...or Soul Mate, Warren. Priceless if you avoid the expense of a bad relationship/marriage/divorce.


What about The Bogleheads' Guide to Retirement Planning? Or does the "Guide to investing Book" that you mentioned covered everything I need?

[dratkinson]

...
Circling back here. You mentioned the following books

Recommended library books.
--The Only Investment Guide You'll Ever Need, Tobias. General personal finance topics.
--The Bogleheads' Guide to Investing. Investing for retirement.
--Date ...or Soul Mate, Warren. Priceless if you avoid the expense of a bad relationship/marriage/divorce.


What about The Bogleheads' Guide to Retirement Planning? Or does the "Guide to investing Book" that you mentioned covered everything I need?

First things first grasshopper. Your topic sounds like you are just starting out ...so only suggested the getting-started books.


For completeness: recommended library books for planning to live in retirement.
--The Bogleheads' Guide to Retirement Planning. Living in retirement ...vs recommended books on saving for retirement.
--How to Make Your Money Last, Quinn. Ditto ...another's thoughts on same topic.
--Beyond the Grave, Condon. Stories of what can go wrong in estate planning, and ways to maybe head them off.
--American Bar Association's Guide to Wills and Estates. To pass on your estate.

Be aware that all of these may be OBE by the time you get to retirement, so there's no need to rush into reading them now. Your choice.

[MajinVegeta]

...
Circling back here. You mentioned the following books

Recommended library books.
--The Only Investment Guide You'll Ever Need, Tobias. General personal finance topics.
--The Bogleheads' Guide to Investing. Investing for retirement.
--Date ...or Soul Mate, Warren. Priceless if you avoid the expense of a bad relationship/marriage/divorce.


What about The Bogleheads' Guide to Retirement Planning? Or does the "Guide to investing Book" that you mentioned covered everything I need?

First things first grasshopper. Your topic sounds like you are just starting out ...so only suggested the getting-started books.


For completeness: recommended library books for planning to live in retirement.
--The Bogleheads' Guide to Retirement Planning. Living in retirement ...vs recommended books on saving for retirement.
--How to Make Your Money Last, Quinn. Ditto ...another's thoughts on same topic.
--Beyond the Grave, Condon. Stories of what can go wrong in estate planning, and ways to maybe head them off.
--American Bar Association's Guide to Wills and Estates. To pass on your estate.

Be aware that all of these may be OBE by the time you get to retirement, so there's no need to rush into reading them now. Your choice.

Thank you