Tax Loss Harvesting specific questions

[saildawg]

After doing a lot of researching in this forum and others, it seems I still have some questions about TLH.  I have my taxable account at Vanguard, both myself and wife’s Roth IRA @ Vanguard.  My 401k offers Schwab Index funds; my wife’s 401k offers Vanguard index funds, HSA (soon to be invested).  Here is what I have learned

1) Do I need to worry about 401k triggering Wash sale rules? –No clear answer from IRS, but probably would consider it to be on the safe side

2) Do I need to worry about HSA triggering wash sale rule? –Once again no clear answer, but probably would consider it to be on the safe side

3) What constitutes substantially identical? –an ETF with corresponding mutual fund would be considered substantially identical.

4) What precautions should I have to avoid Wash sale rule?- in taxable account turn off automatic reinvestment of dividends and sweep them to money market to manually be reinvested.  In retirement accounts turn off automatic reinvestments.

 

My questions I have not figured out yet

1. Can an index fund from different companies be considered substantially identical? For example Schwab S&P 500 (SWPPX) and Vanguard S&P 500 VFIAX


2. How do I know if a fund tracks the same index?  Where do I find the index a certain fund tracks aside from the title/name of the index fund?


3. In 401k accounts is it even possible to turn off automatic dividend reinvestment? I have not seen that option on either of our 401k websites

My main problem is I want to be heavily invested in VTSAX in taxable.  I also want to hold it in my wife’s 401k as there are no other good options.  Additionally I have VG S&P 500 VFIAX in taxable and Schwab S&P 500 SWPPX in my 401k with not a whole lot of good options.  If I am unable to stop auto reinvesting in 401ks I am weary I would be in violation of Wash sale rule.  I am emailing both 401k companies (CMC interactive and Lincoln financial group) but have not heard back.  Thanks for any help!!

[ITEngineer]

1. Yes

2. A quick Google search should answer this in seconds. I assume you already tried this.....feel free to post the actual funds you are trying to compare. Group search!  

3. I wouldn't turn off, but I would direct new contributions in a "stable value fund" or something similar. That way you wouldn't be re-investing in a security you just sold. Do that for at least 30 days before and 30 days after your 'sale' if you are worried about Wash Sale rules.

Question: You have actual losses in an S&P 500 fund or a TSM fund? I find that hard to believe given how much the market has risen in the past 5 years (and even the past 6 months). Just asking, not trying to be rude. Someone else posted a similar question earlier this month.

 

[saildawg]

ITEngineer wrote:

1. Yes

2. A quick Google search should answer this in seconds. I assume you already tried this…..feel free to post the actual funds you are trying to compare. Group search!

3. I wouldn’t turn off, but I would direct new contributions in a “stable value fund” or something similar. That way you wouldn’t be re-investing in a security you just sold. Do that for at least 30 days before and 30 days after your ‘sale’ if you are worried about Wash Sale rules.

Question: You have actual losses in an S&P 500 fund or a TSM fund? I find that hard to believe given how much the market has risen in the past 5 years (and even the past 6 months). Just asking, not trying to be rude. Someone else posted a similar question earlier this month.

 

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I am just planning for the future trying to set up between all my accounts to make for simple planning.

For #2 I still do not see where you find this.  I found this https://www.thebalance.com/major-market-indexes-list-2466397

and https://www.bogleheads.org/wiki/Stock_market_indexing#Index_types

But I dont see for example what index VGTSX tracks for example.  Really I want to know if VFIAX and SWPPX track the same index?  Do VTIAX and SWISX track the same index?  Do VFWAX and SWISX track the same index?

I feel like this info should be easy to find, but infuriatingly it has not proven to be that way 

[StarTrekDoc]

Also careful with mutual funds <6months hold too.  That is one advantage of ETFs (eg ishares) over mutual funds in TLH

[childay]

saildawg wrote:

But I dont see for example what index VGTSX tracks for example.  Really I want to know if VFIAX and SWPPX track the same index?  Do VTIAX and SWISX track the same index?  Do VFWAX and SWISX track the same index?

Click to expand...

http://www.marketwatch.com/investing/fund/vfiax

http://www.marketwatch.com/investing/fund/swppx

See under "investment policy"  You could also check the prospectus for the fund.  Or various other websites.

In this case yes they both track the S&P500 index.

Edit: If I were you I would invest in VTSMX or similar rather than S&P fund, since you have S&P in your other accoutns

[saildawg]

childay wrote:

saildawg wrote:

But I dont see for example what index VGTSX tracks for example.  Really I want to know if VFIAX and SWPPX track the same index?  Do VTIAX and SWISX track the same index?  Do VFWAX and SWISX track the same index?

Click to expand…

http://www.marketwatch.com/investing/fund/vfiax

http://www.marketwatch.com/investing/fund/swppx

See under “investment policy”  You could also check the prospectus for the fund.  Or various other websites.

In this case yes they both track the S&P500 index.

Edit: If I were you I would invest in VTSMX or similar rather than S&P fund, since you have S&P in your other accoutns

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Thanks so much this is very helpful and exactly what I was looking for!

Ideally I would hold VTSAX in taxable only, but my wife's 401k has it as there large cap index, my 401k has S&P 500 as large cap index.  So either way I would need to avoid wash sale.

[ITEngineer]

saildawg wrote:

I am just planning for the future trying to set up between all my accounts to make for simple planning.

For #2 I still do not see where you find this.  I found this https://www.thebalance.com/major-market-indexes-list-2466397

and https://www.bogleheads.org/wiki/Stock_market_indexing#Index_types

But I dont see for example what index VGTSX tracks for example.  Really I want to know if VFIAX and SWPPX track the same index?  Do VTIAX and SWISX track the same index?  Do VFWAX and SWISX track the same index?

I feel like this info should be easy to find, but infuriatingly it has not proven to be that way

Click to expand...

There are a lot of great articles on TheBalance. The ones by Joshua Kennon are great to read.

CHILDAY has a good idea: You could shift from S&P500 to TSM fund and that would protect you from the Wash Sale rules (or vice versa). Remember they only apply to securities sold from the Taxable account (though you can't replace the securities you sold from the Taxable account in an IRA account and take the capital loss from your Taxable account)

VTSMX and VGSMX are two funds that are 'Total stock market' on the surface but VTSMX is USA only and VGSMX is International based. Some research is required but this isn't hard. A few minutes of google searching and some careful reading and you should find the answer you need. If not (or if you are unsure/uncomfortable) I would post a question to this forum. I take it you do not have a financial advisor to run these questions by?

 

[PhysicianOnFIRE]

You're on the right track with your thinking and guidance from the responses.

Are you sure there are no other decent options in the 401(k)s. Small cap or mid cap stocks? I ask because you can't change what you have now in taxable without taking (probably significant) gains, but you can swap out of TSM and S&P 500 easily in the 401(k)s.

I solved the issue by holding only small & midcaps & bonds in my 401(k) and 457(b). I have good Vanguard options for those indexes in the retirement accounts, so I consider myself lucky. Like you, I have TSM and S%P 500 in taxable.

Best,

-PoF

 

[saildawg]

PhysicianOnFIRE wrote:

You’re on the right track with your thinking and guidance from the responses.

Are you sure there are no other decent options in the 401(k)s. Small cap or mid cap stocks? I ask because you can’t change what you have now in taxable without taking (probably significant) gains, but you can swap out of TSM and S&P 500 easily in the 401(k)s.

I solved the issue by holding only small & midcaps & bonds in my 401(k) and 457(b). I have good Vanguard options for those indexes in the retirement accounts, so I consider myself lucky. Like you, I have TSM and S%P 500 in taxable.

Best,

-PoF

 

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There are some small cap options in my 401k, I just dont want a huge tilt to small cap.  Ideally I would like a simple 3 fund portfolio.  I think I will look into adding small cap/midcap in the future to avoid problems with TLH.  However right now my retirment accounts outweigh my taxable investment accounts (I am just 2 years out of residency).  As my taxable accounts outpaces my 401k and Roth IRA I will probably employ this startegy as I want the bulk of my portfolio to be VTSAX.

 

[ENT Doc]

StarTrekDoc wrote:

Also careful with mutual funds <6months hold too.  That is one advantage of ETFs (eg ishares) over mutual funds in TLH

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What is the < 6 month concern?

[saildawg]

I think Vanguard will not let you sell and buy back the same fund in <60 days, this may be only if you originally have not held that share sold for >1yr but I am not sure.

[ENT Doc]

saildawg wrote:

I think Vanguard will not let you sell and buy back the same fund in <60 days, this may be only if you originally have not held that share sold for >1yr but I am not sure.

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Really?  Link to that?  I know a few of their funds have redemption fees if you buy/sell within 90 days, but this still wouldn't explain the 6 month statement, right?

[saildawg]

ENT Doc wrote:

saildawg wrote:

I think Vanguard will not let you sell and buy back the same fund in <60 days, this may be only if you originally have not held that share sold for >1yr but I am not sure.

Click to expand…

Really?  Link to that?  I know a few of their funds have redemption fees if you buy/sell within 90 days, but this still wouldn’t explain the 6 month statement, right?

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They may have reduced it to 30?

 

https://www.bogleheads.org/wiki/Frequent_trading_policy

 

https://personal.vanguard.com/pdf/vbsfreq.pdf

[saildawg]

POF, thanks for the suggestions.  This is what I have come up with.  Please feel free to critique.

Taxable- VTSAX, will swap with LACXV, or VFIAX.  Hopefully will not have to hold onto either for significant amount of time and trade back in 30 days.  If I do have to hold VFIAX that may create a problem.  I am going to put all my international index here as well as foreign tax credit.

 

wife's 401k- 81% VFIAX (sp 500), 4% VIMAX (mid cap), 15% VSMAX (small cap)

of 82% VFIAX and 18% VSMAX

I believe these percentages will match TSM pretty well https://www.bogleheads.org/wiki/Approximating_total_stock_market

my 401k- SWPPX (sp 500) +/- SWSSX (small cap)

 

Her's and My Roth IRA- VTSAX (but will turn off auto reinvesting)

I believe this will give me the ability to harvest VTSAX easier with less worry about wash sale rules and simplify my life.  Any thoughts?

[StarTrekDoc]

BH ref

https://www.bogleheads.org/wiki/Tax_loss_harvesting#Fine_points_about_tax_loss_har vesting