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  • First taxable account

    I think I am nearing the need for my first taxable account. I am a partner in my practice. I max out my 401k, my and my husband's Roth IRA (backdoor), my two kids' 529 (maxed out for stat tax benefit), and my solo 401k for my consulting revenue. I have saved significant cash to put towards a massive remodel of our home (I will do a cash out refinance for about half the cost so will still have a small mortgage). I think I am nearing readiness for taxable account - anything in particular I need to keep in mind? I have my 401k at fidelity, my Roth at Vanguard, and my solo k at E-trade. I think I'll do my taxable at Vanguard. Any thoughts? (I already have my plan for allocation stock/bond so not looking for advice there, but rather general advice regarding opening first taxable). I'm a bit nervous since I feel somewhat "protected" by the pre-tax efficiency of what I already have. (A little over 400k annual income if that makes a difference in recommendations).

  • #2
    Depends on what you want to do in your taxable. Vanguard is not very user friendly IMO. It’s like the windows 95 of brokers. If all you’re doing is buying index funds it’s fine but if you change in the future and decide to do something else then vanguard is way behind the curve again IMO.

    it’ll probably be seen as heresy to say anything negative about vanguard. I also don’t like how vanguard just arbitrarily decides to not let you invest in certain funds.

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    • #3
      It seems pretty common for people to complain about customer service and user experience at Vanguard.

      You don’t have to choose vanguard, just because it’s vanguard. You already have accounts at other brokerages. I would just choose which one you have liked the best in your own experience. You can get low cost index funds at all of them.

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      • #4
        Anything you wish you had known before contributing to your taxable account? (The location of my account doesn't worry me, doing things taxably smart does)

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        • #5
          A taxable account is pretty boring. You typically put money in and that's it. I have yet to have to call Vanguard to discuss anything with regards to our taxable accounts.

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          • #6
            We live in the post-ETF world with free trading. It does not matter where you go.

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            • #7
              Have you read the bonds go in taxable blog post, or the other asset location posts? Those are a good start.

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              • #8
                I don't tax loss harvest but if you want to but don't want to diy, you might consider betterment. We're at vanguard and sometimes I wonder if we should switch. I'm pretty lazy so probably won't, but it doesn't keep me from wondering;-)

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                • #9
                  I definitely need to learn more about tax loss harvesting for the taxable. I'm pretty diy but certainly not an expert. willing to learn.

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                  • #10
                    I'm in pretty much the same boat as you. I just opened a taxable account at VG. It took me a long time to pull the trigger since changes mean tax implications. I have my other accounts (Roths, kids investing, 401k options are VG funds) at VG so I just decided to go there for ease. I agree that the website is outdated, but it hasn't been a big issue for me yet. If you are doing simple index investing, you shouldn't have to mess with it much as CordMcNally said.
                    I have not done TLH yet, but my plan is to use
                    S&P 500 Index VFIAX
                    Large Cap Index VLACX
                    and
                    Total International Index VTIAX
                    FTSE All World ExUS VFWAX
                    as TLH partners. I got that from somewhere on WCI. I don't have these in any other of my accounts to avoid wash sales. TLH makes me nervous, but I'm not there yet... I'll probably research again before it's actually time for me to do it.


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                    • #11
                      We have our taxable account and 529s at Vanguard and it suits our needs. I have called them two times over the last ten years to re-title an account and once to change the cost basis method right after I put a sell order in. Both interactions were clear, efficient and seamless They also helped with an in kind transfer of accounts from a somewhat recalcitrant local firm several years ago along with the rollover of my wife’s IRA, whose custodian had misspelled her name and inexplicably used my date of birth. All in all, we are very satisfied.

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                      • #12
                        I'll put in a vote for ETrade.

                        Customer service is great. Web interface is great. No complaints.

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                        • #13
                          I have been researching this recently, make sure to consider

                          1.) Will you be wanting to do an auto-contribution and auto-invest into your taxable account on a monthly basis?
                          • if so, look at how the different brokerages can do that
                          • most brokerages don't allow this for ETF but only mutual funds. In taxable that means you want vanguard mutual funds for their proprietary tax efficient hybrid structure. That means a taxable account at Vanguard OR Etrade (they give you free access to the major vanguard MF)

                          2.) Plan in advance what funds will allow for TLH, in light of wash sale rules. In my mind, ideally your default position for each asset class in taxable account would be a fund you are not using a "substantially similar" fund in any of your or your spouse's other accounts (HSA, IRA/roth, 401k/403b/457b/SEP etc), because you could have an auto-invest in them or reinvested dividends, often on a q30day or more frequent basis if a employer retirement account, which would preclude a TLH unless you went into each account, cancelled the auto invest, and waited 30 days since the last time you invested in them... Finding a fund for a good default position that meets those requirements can get challenging if you have various accounts that each have a limited but different selection for international/us equity funds...
                          • for international you can probably use VFWAX (FTSE all world ex-US) as your default investment. VTIAX (FTSE Globall All Cap ex US) seems to be more commonly offered in employer/HSA accounts, but could be used as your TLH partner rather than default position.
                            • for some reason a few years ago I thought VTIAX was a better fund for my 401k default position, not sure why, I think maybe it had small cap or else china shares and the other didn't, but can't get morningstar to work at the moment to check
                          • for US look at
                            • VTSAX (CRSP US Total Market 100%)
                            • VLCAX (CRSP US Large Cap 85%)
                            • VFIAX (S&P 500)
                          • if you are not planning to have a set and forget auto-draft and auto-invest into your taxable account, or are willing to manually invest them on a recurring basis, then it opens up more options because you can start looking at ETFs as your default position, of which there is larger variety and many good options

                          You will want to get this right initially in taxable as exchanging to correct an error would likely result in taxable earnings.

                          And make sure to de-select auto re-invest dividends when buying in taxable, at least from what I've read.

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                          • #14
                            It’s not that complicated. Learn about tax loss harvesting. Read about tax efficiency of different classes and then come up with a plan of which investments you want in your taxable accounts versus tax protected. Also agree with turning off automatic investments just to minimize your tax lots.

                            Too many people in my opinion are afraid of taxable accounts and end up saving less over the long run because of it. Open one up at any brokerage and don’t look back.

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                            • #15
                              If you already have your written investment plan then it doesn't matter where you open the brokerage. Just Do It. In 10 years you will be all: "woah"

                              Fidelity >> Vanguard for ease of use

                              I invest quarterly to keep the tax lots simple and simplify TLH.

                              I also use our taxable to fund our DAF and TLH and don't really sell any gains so the tax implications have been negligible.

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