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Taxable accounts. Never owned one,...what funds should I buy to be tax-smart?

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  • Taxable accounts. Never owned one,...what funds should I buy to be tax-smart?

    We've maxed out our Roth and 401k contributions for the year and I'd still like to put about 15K away for retirement. Suggestions for taxable accounts?

    Background: I own a small business, so I was able to set up the business 401k with index fund options the way I chose. I can easily re-balance or alter contribution percentages between the 5 low-cost index funds I've chosen.

    Currently

    401k = 75% stock index funds and 25% bonds

    Roth = 100% stock index funds (VTSAX)

    Total retirement = $125K

    So, we've maxed out our 401k and Roth buckets for the year. What would you do with 15k and a brokerage account? More VTSAX or Tax-exempt muni bonds?

    If so, can  you explain the tax consequences or either? Like I mentioned above, if one is better than the other in a taxable account...I have the ability to balance my portfolio back to target by altering my 401k percentages.

    I guess it comes down to I don't really get the world of taxable brokerage accounts and am nervous about making a tax mistake. Any insight? Thanks

  • #2
    More info needed:

    Asset allocation as per your IPS

    Combined federal and state tax marginal tax bracket.  Are you also subject to the NIIT?

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    • #3
      I believe your portfolio should be made up of an appropriately-diversified, well-balanced equity fund portfolio, regardless of the tax status of the account. Many on this forum differ and you are sure to get some interesting opinions.

      Regarding:


      I guess it comes down to I don’t really get the world of taxable brokerage accounts and am nervous about making a tax mistake. Any insight?
      Click to expand...


      You are simply investing for the long term, whether within or without a tax-blessed investment vehicle. Saving for the future is about a plan and how much, not whether you get a deduction for it. This post, 11 reasons you need a taxable investment account, may be helpful.
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4
        If for retirement yes buy total US or INTL. Increase your FI in the 401k to compensate.
        Add munis once your 401k is all bonds.
        Repeat monthly with cash flow

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        • #5
          I would not add Munis yet.  Vtsax is fine.  You will pay tax on the dividend.  It will not be much in the near future.

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          • #6
            I'd put some in the VG total international stock fund.....owning that may force you to pay taxes to foreign governments but you can get $300 back at tax time via the foreign tax credit

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            • #7
              it depends on how you want to use that money - i keep part of it liquid (like a hi interest checking/savings account or maybe saving for downpayment) with tax exempt funds and part of it long term in etf indices (for retirement, TLH).  Right now, I think treasuries and hi interest savings accounts are good and should be considered before going into taxable.
              It's psychosomatic. You need a lobotomy, I'll get a saw.

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