Brokerage Account - Rebalancing
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Brokerage Account - Rebalancing
Recently retired (or at least paused working for now) and trying to rebalance my portfolio to 70/30 from an 80/20 portfolio (eventually to 60/40 but trying to crawl before running)
I already have 25% in bonds (VBTLX and STIP) in my IRA account. I am trying to add 5% BNDs to my taxable brokerage account by selling my Value and Growth index funds. I do not need money this year but may need to take money out of my brokerage account next year for my yearly expense.
I am wondering if I should buy BND ETF or VMFXX (Money market fund). Or just leave the brokerage taxable account as is to have a better growth and instead, rebalance my IRA account seeling stock funds and buying bonds?
Any thoughts? Much appreciated.
Thanks
I already have 25% in bonds (VBTLX and STIP) in my IRA account. I am trying to add 5% BNDs to my taxable brokerage account by selling my Value and Growth index funds. I do not need money this year but may need to take money out of my brokerage account next year for my yearly expense.
I am wondering if I should buy BND ETF or VMFXX (Money market fund). Or just leave the brokerage taxable account as is to have a better growth and instead, rebalance my IRA account seeling stock funds and buying bonds?
Any thoughts? Much appreciated.
Thanks
Re: Brokerage Account - Rebalancing
Not enough information to give an informed answer. A general rule is that bonds belong in retirement accounts. Otoh, if you are going to be spending from the taxable account having some bonds/cash is prudent.
Re: Brokerage Account - Rebalancing
And on your third hand, there is this technique: https://www.bogleheads.org/wiki/Placing ... ed_account which means you probably don't need some bonds/cash in the taxable account because one can use the bonds/cash in a tax-deferred account for that purpose by using "one weird trick."
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Re: Brokerage Account - Rebalancing
Third hand is a good trick in principal. Though looks complicated. I need to think through it.
My concern is market going down and not able to take the cash when in need from the non IRA brokerage account
My concern is market going down and not able to take the cash when in need from the non IRA brokerage account
Re: Brokerage Account - Rebalancing
That article excludes EF from AA when EF is one third of total .... hmmm not confusing at all.livesoft wrote: ↑Sun Jun 04, 2023 4:16 pmAnd on your third hand, there is this technique: https://www.bogleheads.org/wiki/Placing ... ed_account which means you probably don't need some bonds/cash in the taxable account because one can use the bonds/cash in a tax-deferred account for that purpose by using "one weird trick."
It also glosses over the fact you just sold stocks in a taxable account generating tax liability. Then it goes no to note this an advantage. Because of course incurring a tax liability at a time when you need to dip into your EF, is obviously an advantage.
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Re: Brokerage Account - Rebalancing
'Third hand' method (mentioned by Livesoft) works great in practice, as well as in principal.Juice3 wrote: ↑Tue Jun 06, 2023 5:43 amThat article excludes EF from AA when EF is one third of total .... hmmm not confusing at all.livesoft wrote: ↑Sun Jun 04, 2023 4:16 pmAnd on your third hand, there is this technique: https://www.bogleheads.org/wiki/Placing ... ed_account which means you probably don't need some bonds/cash in the taxable account because one can use the bonds/cash in a tax-deferred account for that purpose by using "one weird trick."
It also glosses over the fact you just sold stocks in a taxable account generating tax liability. Then it goes no to note this an advantage. Because of course incurring a tax liability at a time when you need to dip into your EF, is obviously an advantage.
Been using it for years, and I don't have an emergency fund (early-retired, not yet age 59.5).
Saves me money on taxes too.
One of the many things I learned from bogleheads.org.
Age < 59.5. Early-retired. AA ~55/45. Taxable account and Roth IRA and HSA ... all 100% equities. 100% fixed income in tax-deferred. I spend from taxable and re-balance in tax-deferred.
Re: Brokerage Account - Rebalancing
Two questions:sundartrajan wrote: ↑Sun Jun 04, 2023 11:32 am I already have 25% in bonds (VBTLX and STIP) in my IRA account. I am trying to add 5% BNDs to my taxable brokerage account by selling my Value and Growth index funds. I do not need money this year but may need to take money out of my brokerage account next year for my yearly expense.
I am wondering if I should buy BND ETF or VMFXX (Money market fund). Or just leave the brokerage taxable account as is to have a better growth and instead, rebalance my IRA account seeling stock funds and buying bonds?
1. What tax liability will you face if you reallocate in your taxable account?
2. Why focus on a particular allocation in an individual account vs the portfolio as a whole? Some of this may have to do with age and access to retirement accounts (IRA, 401k, etc.) but we don't know this in your case.
Re: Brokerage Account - Rebalancing
I guess the article doesn't mention all the tax-loss harvesting that one previously did along with Specific Identification so that one sells the shares with the smallest gains or largest losses and incurs no tax liability. Also it is not as if the interest paid by a money market fund or CD used for one's EF has no tax liability.
But I do get that people have anxieties and fears that mess them up when thinking about money.
Last edited by livesoft on Tue Jun 06, 2023 8:15 am, edited 1 time in total.
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Re: Brokerage Account - Rebalancing
I am 65 and I am fairly in a good tax bracket for this year and next. Not much income. I plan to do some ROTH conversions next year.
Some of my brokerage funds have a loss and so reallocation will not trigger any capital gain, so I can reallocate.
I generally look at the whole portfolio for allocation. Now all my Bonds are in my IRA account.
My concern is when I need to take money out, I believe I will be drawing from my brokerage account first then an IRA account. So I want to have some liquidity in my brokerage account and not worry about the market going down and not being able to take money out.
I do not have any cash for next year.
I can manage this year from my savings.
Thanks
Some of my brokerage funds have a loss and so reallocation will not trigger any capital gain, so I can reallocate.
I generally look at the whole portfolio for allocation. Now all my Bonds are in my IRA account.
My concern is when I need to take money out, I believe I will be drawing from my brokerage account first then an IRA account. So I want to have some liquidity in my brokerage account and not worry about the market going down and not being able to take money out.
I do not have any cash for next year.
I can manage this year from my savings.
Thanks