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  • Drop it into MD Drop it into MD 
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    Status: Physician
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    Joined: 09/20/2018
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    I am going to be starting up a taxable account and I was hoping to get some advise from the community.

    I am an employed family physician in NY state.  I am 3 years out of residency.  I finished paying off my student loans and consumer debt last year. We saved for and are closing on a house soon with 20% down and a 15 year fixed @4.375 mortgage.  I am maxing all tax deferred accounts (403B, 457, and Rothx2).  I am contributing to 529 accounts to above the tax benefit amount and I do not feel I need to put any more here. Everything is in Vanguard index funds. I have 2-3K more a month I would like to invest now that we are done saving for our down payment.

    We are selling our current house and with that windfall and my extra savings I feel it is time to start a taxable account.  I am currently at 100% equity.  I aim for 60%US stock, 30% international and 10% alternatives.  I would like to keep this ratio going forward.

    So my question is when I open the taxable account should I make it domestic or international stock?  Does the tax efficiency of VTSAX outweigh the foreign credit?  I would like to tax loss harvest so I would like to use an unique fund.  I can move things around in my tax advantaged accounts if need be (instead of total stock market I can do the 500 index and the extended market)  I feel like I am making too big of a deal out of this but since I can go either way I figured it was worth seeing if there was a significant advantage.

    #152133 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4666
    Joined: 01/08/2016

    total US is still more tax efficient than total INTL after accounting for the FTC. so take your pick. whatever you have worse access to in the 403 i would therefore put in taxable.

    you technically only need to worry about your IRA re: wash sale.

    #152137 Reply
    Avatar AlexxT 
    Participant
    Status: Physician
    Posts: 897
    Joined: 01/13/2016
    So my question is when I open the taxable account should I make it domestic or international stock?

    Click to expand…

    Perhaps I’m misunderstanding your question, but when you open a brokerage account at Vanguard or Fidelity, or most anywhere, your account allows you to have any number of types of accounts under that large umbrella account.

    That account will contain a checking and savings account.  You will also have a brokerage account, which is what we are calling a taxable account.   This account can contain any number of mutual funds, index funds, individual stocks, bonds, etc, within it.  So feel free to buy whichever funds or other investments that you wish to buy.

    In addition, your account can contain within it  an IRA, Roth, solo 401k, etc., . Any of these accounts  in turn will allow you to have almost any fund or investment within it.

    You don’t need to use a unique fund to tax loss harvest.   You can have the same fund in the taxable account and a 401k.  You just can’t buy back the same fund that you sold within 30 days before and after you sell.  For example, you can sell the S&P 500 and buy back the total market index fund, both in the taxable account, if you wish.

     

    #152155 Reply
    Drop it into MD Drop it into MD 
    Participant
    Status: Physician
    Posts: 440
    Joined: 09/20/2018

    AlexxT –  Sorry if I was not clear.  I have the choice to choose any fund I would like in my brokerage account.  The only twp funds that I am interested in is the total market and the total international market accounts. My question is which one placed in the taxable account would make the most sense tax wise?  Foreign tax credit vs fund tax efficiency.

    Thanks to a self directed brokerage option my 403 b  allows me to basically get anything as well but if I want to use it some of the funds have a low fee to purchase.  For example if I wanted to get the total international fun there It would cost $35 to open the fund but further contributions are free.  Unless I make a manual adjustment.

     

    you technically only need to worry about your IRA re: wash sale.

    Click to expand…

    Really only the IRA?  It does not matter what I have in my 403B or 457?  What about the 529?

    #152162 Reply
    Vagabond MD Vagabond MD 
    Participant
    Status: Physician
    Posts: 3486
    Joined: 01/21/2016
    So my question is when I open the taxable account should I make it domestic or international stock?  Does the tax efficiency of VTSAX outweigh the foreign credit?  I would like to tax loss harvest so I would like to use an unique fund.  I can move things around in my tax advantaged accounts if need be (instead of total stock market I can do the 500 index and the extended market)  I feel like I am making too big of a deal out of this but since I can go either way I figured it was worth seeing if there was a significant advantage.

    Click to expand…

    Any potential advantage is small and choosing wrong will not derail your efforts to obtain financial independence. You could do either or split the difference.

    #152164 Reply
    Liked by Peds
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4666
    Joined: 01/08/2016

    AlexxT –  Sorry if I was not clear.  I have the choice to choose any fund I would like in my brokerage account.  The only twp funds that I am interested in is the total market and the total international market accounts. My question is which one placed in the taxable account would make the most sense tax wise?  Foreign tax credit vs fund tax efficiency.

    Thanks to a self directed brokerage option my 403 b  allows me to basically get anything as well but if I want to use it some of the funds have a low fee to purchase.  For example if I wanted to get the total international fun there It would cost $35 to open the fund but further contributions are free.  Unless I make a manual adjustment.

     

    you technically only need to worry about your IRA re: wash sale.

    Click to expand…

    Really only the IRA?  It does not matter what I have in my 403B or 457?  What about the 529?

    Click to expand…

    Go read IRS publication 550.

    #152167 Reply
    Avatar AlexxT 
    Participant
    Status: Physician
    Posts: 897
    Joined: 01/13/2016

     

    Go read IRS publication 550.

    Click to expand…

    I tried to read it, but couldn’t find the relevant part.  However, Mike Piper wrote that he doesn’t recommend doing it, that although the ruling only refers to buying back the same fund in  IRAs, he thinks they would probably rule against the 401k if it came up.   Do you have more specific information?

    Wash Sales in a 401k and Wash Sales with Mutual Funds

    #152171 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4666
    Joined: 01/08/2016

     

    Go read IRS publication 550. 

    Click to expand…

    I tried to read it, but couldn’t find the relevant part.  However, Mike Piper wrote that he doesn’t recommend doing it, that although the ruling only refers to buying back the same fund in  IRAs, he thinks they would probably rule against the 401k if it came up.   Do you have more specific information?

    https://obliviousinvestor.com/wash-sales-in-a-401k-and-wash-sales-with-mutual-funds/

    Click to expand…

    only IRAs are specifically mentioned. no 401k plan has ever been tried. there is not even a way for your custodian to report it.

    #152174 Reply
    Liked by AlexxT

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