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  • #16
    Depends on how aggressive what one wants to be on the split 90/10- 70/30 --- you have 20-30years so depends on your risk tolerance.

    For Emergency Fund - Muni Bond Fund is a great way to balance out since you're in a high income state tax zone.

    As DMFA suggested the 10-30% nonMuni bond portion should go to a tax deferred to minimize capital gains distributions tax.   I don't know if that Roth vs deductible really makes a difference though.   -- just not in your taxable account.   Same goes with anything with distributions -- international stocks tend to have this too.

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    • #17




      Depends on how aggressive what one wants to be on the split 90/10- 70/30 — you have 20-30years so depends on your risk tolerance.

      For Emergency Fund – Muni Bond Fund is a great way to balance out since you’re in a high income state tax zone.

      As DMFA suggested the 10-30% nonMuni bond portion should go to a tax deferred to minimize capital gains distributions tax.   I don’t know if that Roth vs deductible really makes a difference though.   — just not in your taxable account.   Same goes with anything with distributions — international stocks tend to have this too.
      Click to expand...


      Thanks DMFA and StarTrekDoc. It sounds like a good idea to put emergency funds in Muni bond fund. I guess the intermediate tax-exempt funds from Vanguard or Fidelity would work well for it? Don't laugh at me for this: I should be able to take money out of this fund without much of trouble or penalty anytime when there is an emergent situation, correct? To be honest I am quite confused by so many different kinds of bonds and bond funds.

      One more question brought up by my wife: someone is suggesting us buy a whole life insurance instead of term life. I vaguely remember there was an article at WCI website that argued against this thing. Isn't it growth tax free? Any hidden trick or problem in there?

       

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      • #18
        And with your suggestion, I am planning to make my taxable account and Roth IRA 100% equity while moving the bonds to 401k and 457b, while keeping the same amount of bonds. The idea to put emergency funds into Muni bond funds can also increase my final bond allocation, just need to determine how much exactly.

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        • #19
          Avoid whole life like the plague. It will make the insurance salesman rich, not you.

          Vanguard has muni funds for most of the highly populated, high tax states. As an example, Vanguard California Intermediate-Term Tax-Exempt Fund Admiral Shares (VCADX) would be a solid choice for high income California residents.

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          • #20
            Settlement takes 3 days from move out of bond fund to cash.     An interim step that I have to bridge that 3 day is our HELOC for immediate cash needs.    We use Fidelity Intermediate Cali Muni Bonds and our BOA HELOC.

            -NO Whole life, No Universal Life.   Term life only.    Don't go to any of those free dinner sales pitches.

             

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            • #21
              Thanks a lot for the advice! I will just stick to term life then. I mostly wouldn't need to worry about the 3-day gap. I live in Midwest and the state Muni bonds has a expense ratio ranging from 0.5-0.9. I am not sure if I should go for it. Vanguard intermediate tax-exempt bond fund seems like a great choice? I also see higher morningstar rating for Vanguard high yield tax-exempt bond fund, but it is subject to AMT and has increased risk. I guess it is not worth it.

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