International in Taxable or transition it to 401K?

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LiveItUpBySaving
Posts: 40
Joined: Mon Oct 31, 2016 11:06 am

International in Taxable or transition it to 401K?

Post by LiveItUpBySaving »

International in Taxable or transition it to 401K?

Hello, I'm extremely thankful for the collective wisdom of all the folks on this site.

Very specific question today. I have about 10% of my portfolio invested in Vanguard Total International Index in a Taxable Account spitting out dividends that I have to pay taxes on. I also get a small Foreign Tax Credit every year for this.

My question is whether it's worth it to sell the Taxable 10% invested in International and then buy the equivalent investment in my 401K? I would wait for 30 + 1 day to avoid the Wash Rule. I would maintain my current asset allocation through all my accounts. I will have sufficient short term losses to cover the long term gains in the Taxable Account as well.

Anything else I'm forgetting or not aware of?

Thanks for your time.

LIUBS
tashnewbie
Posts: 4230
Joined: Thu Apr 23, 2020 12:44 pm

Re: International in Taxable or transition it to 401K?

Post by tashnewbie »

This issue comes up fairly often.

I think the general consensus view, if there is any, is that it doesn't really matter where you hold int'l stock funds.

I've seen a general rule of thumb posted by @Grabiner that if your combined tax brackets are =>24%, then int'l stock funds are more tax-efficient in tax-advantaged accounts than taxable. The difference gets larger with increases in the brackets.

I think White Coat Investor or Physician on Fire has a blogpost about this topic that might be helpful for you to read.

I wouldn't sell anything in taxable just to make this type of change. I'd prefer to shift my int'l fund investing from taxable to the 401k instead. But if I had unrealized losses in the int'l fund, then I would probably want to tax loss harvest and realize those losses (depending on how much they are). Then you can readjust as you've described. You wouldn't need to wait 31 days if the fund in the 401k is not substantially identical to the one you sell at a loss in taxable.
Triple digit golfer
Posts: 10430
Joined: Mon May 18, 2009 5:57 pm

Re: International in Taxable or transition it to 401K?

Post by Triple digit golfer »

I've given up caring about this because there doesn't seem to be a consensus, which generally means it probably doesn't matter much. I hold both U.S. and international equity index funds in all three account types: taxable, tax-deferred, and tax-free. I let convenience be my guide.
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avenger
Posts: 963
Joined: Mon Dec 02, 2013 11:11 am

Re: International in Taxable or transition it to 401K?

Post by avenger »

Holding it in taxable has allowed me to harvest a huge number of losses up until now. :annoyed
cheers ... -Mark | "Our life is frittered away with detail. Simplify. Simplify." -Henry David Thoreau | [VTI, VXUS, BND, VTEB, SV fund]
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