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Starting taxable account

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  •  cpotter638 
    Participant
    Status: Physician
    Posts: 5
    Joined: 01/03/2019

    Starting a taxable account.  I prefer Vanguard funds.  May look at funds external to Vanguard, but only if doing TLH.

    We currently have TransAmerica / Schwab PCRA 403b and 457b.  Also will be doing backdoor ROTH for both myself and my wife.

     

    AA:

    25% VSMAX (Vanguard Small Cap Index Admiral)

    25% VFIAX (Vanguard 500 Index Admiral)

    25% VTIAX (Vanguard Total International Index Admiral)

    25% VBIRX (Vanguard Short-Term Bond Index Admiral)

    I predominantly invest in mutual funds, but in order to keep costs down, use Vanguard ETF’s in the 403b account.

     

    Which of the above funds should I be investing in the taxable account?  From the posts I’ve read here, my thinking:

    • Invest in Vanguard 500 and Vanguard Total International (for Foreign tax credit).
    • Avoid Vanguard Bond Fund and (if possible) avoid Vanguard Small Cap.

    Above thinking correct?  Thanks for the help.

     

     

     

    #179251 Reply
     JBME 
    Participant
    Status: Spouse
    Posts: 236
    Joined: 03/26/2018

    bond allocation should be tilted in your 403b. I’d put all of the small cap in your roth IRA (your most volatile investments should go here). If you haven’t hit 25% small cap just with you Roth, allocate some in your 403b or 457b. keep taxable to just your 500 index fund (although you should consider using the VG Total stock market fund instead) and VG Totl Intl fund in order to take advantage of the foreign tax credit. If you need more space for international, put it in the Roth IRA since international is more volatile

    #179258 Reply
     cpotter638 
    Participant
    Status: Physician
    Posts: 5
    Joined: 01/03/2019

    bond allocation should be tilted in your 403b. I’d put all of the small cap in your roth IRA (your most volatile investments should go here). If you haven’t hit 25% small cap just with you Roth, allocate some in your 403b or 457b. keep taxable to just your 500 index fund (although you should consider using the VG Total stock market fund instead) and VG Totl Intl fund in order to take advantage of the foreign tax credit. If you need more space for international, put it in the Roth IRA since international is more volatile

    Click to expand…

    TransAmerica 403b / Schwab PCRA: limited in fund choices if I want to stay with Vanguard and keep fees low.  Can’t buy ETF’s in Schwab PCRA portion.  Can get Vanguard Total International with no fees in TransAmerica portion.  Other Vanguard mutual funds cost $49 a trade.  As such, makes sense to me to invest 100% in Vanguard Total International in 403b.

    TransAmerica 457b / Schwab PCRA: Highest balance in this account (2X to 3X other accounts).  Can buy Vanguard ETF’s for $9.  Can get Vanguard Total International mutual fund with no fees.

    So, tilt bonds to 457b? Will have to be an ETF.

    Can put all of small cap into ROTH, and overflow into 457b.

    Why Vanguard Total Stock Market fund over Vanguard 500 Index?  Started (and have stuck with) this AA for a decade based on Bernstein’s Simpleton Portfolio.

    #179265 Reply
     JBME 
    Participant
    Status: Spouse
    Posts: 236
    Joined: 03/26/2018

    if you’ve been doing VG 500 index for decades, fine to stick with that. TSM is a little more diverse but not so much that it’s worth making a change.

    I’m really not understanding why you have to pay for trades in your 403b/457. Are you using a brokerage account within those accounts to get VG funds, because VG funds aren’t otherwise available to you? Schwab should have mutual funds very similar to the VG funds you listed…their expense ratios *might* be a tiny bit higher, but it really shouldn’t be that much higher. I’d keep things simple and go with low expense mutual funds that you have access to in these accounts immediately rather than through a brokerage account within your retirement accounts.

    #179266 Reply
     cpotter638 
    Participant
    Status: Physician
    Posts: 5
    Joined: 01/03/2019
    if you’ve been doing VG 500 index for decades, fine to stick with that. TSM is a little more diverse but not so much that it’s worth making a change.

    Click to expand…

    Planned on sticking with VG 500.  Thought I’d TLH into Vanguard TSM if the opportunity arises.

     

    I’m really not understanding why you have to pay for trades in your 403b/457. Are you using a brokerage account within those accounts to get VG funds, because VG funds aren’t otherwise available to you? Schwab should have mutual funds very similar to the VG funds you listed…their expense ratios *might* be a tiny bit higher, but it really shouldn’t be that much higher. I’d keep things simple and go with low expense mutual funds that you have access to in these accounts immediately rather than through a brokerage account within your retirement accounts.

    Click to expand…

    Both 403b and 457b are at TransAmerica.  With TransAmerica, I have access to VG Total International Admiral with no fees.  There are 10-15 other options, most of which are crap.  To get any other reasonable options, I have to use a Schwab PCRA brokerage account via TransAmerica (at a cost of $50 per account per year).  With Schwab PCRA, I can buy Schwab mutual funds for no fees.  Expense ratio of Vanguard vs. Schwab are very similar (Schwab may be a tiny bit less actually).  I feel more comfortable with Vanguard Index funds because I’ve been using them for a long time.  AA changes some (albeit not a ton) if I switch to Schwab index funds.  If buying other Vanguard funds via Schwab PCRA:

    403b Schwab PCRA – Can’t buy ETF’s.  Vanguard mutal funds cost $49 per trade.  This doesn’t make financial sense.  Would be better off buying Schwab Index funds.  Options are: 1) Keep 403b 100% invested in VG Total International.  This also saves $50 Schwab PCRA fee. OR 2) Have access to VG Total International and Schwab Index funds.  Preferred to do this option only if allows for better taxation in taxable account.  403b will always have the smallest balance (currently 1/3 balance of 457b and 1/2 balance of planned taxable).  With income, taxable account will have much larger balance over time.

    457b Schwab PCRA – Can buy Vanguard ETF’s at $9 / trade.  For the entire year, going with Vanguard ETF over Schwab Mutual funds only costs me $145.

    #179275 Reply
     Peds 
    Participant
    Status: Physician
    Posts: 2409
    Joined: 01/08/2016
    Which of the above funds should I be investing in the taxable account?

    Click to expand…

    either total US or total INTL.

     

    once you get the hang of it then many other things.

    #179278 Reply
     cpotter638 
    Participant
    Status: Physician
    Posts: 5
    Joined: 01/03/2019

    For the most part, have assigned which funds are going into which account.  To keep my AA:

    • Need to invest $215K more in VFIAX
    • Need to invest $103K more in VTIAX
    • Have $168K of available cash in 457b
    • Have $150K of available cash in taxable account

    Am I better tilting taxable account towards VFIAX or VTIAX?  By approximately what percentage?  Or does it not really matter?

    #179727 Reply

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