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Taxable Account vs HSA

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  • Avatar H_FIRE 
    Participant
    Status: Physician
    Posts: 92
    Joined: 02/18/2018

    I am 34 yo attending and wife is 30 yo resident (graduating next year). We began investing into our retirement this Jan 2018. Huge thanks to WCI and this forum.

    We are maxing out my 403(b) & 457 and wife’s 403(b) with backdoor roth for both. I have attached screenshot of my asset allocation below (82% U.S Stocks, 12% international stocks and 6% U.S bonds)

    We are contributing 20% of our annual income to retirement saving this year.

    Not planning to consider HSA account this year, instead planning to divide rest of the money to high yield saving account (1.65% apy) and to a joint taxable account.

    I have following questions regarding this joint taxable account:

    1. Which joint taxable account is preferred: Looks like Vanguard joint taxable account is not recommended, so likely will go with Fidelity.
    2. Which stocks are preferred for joint taxabale accounts- U.S vs International stocks. We have VTSAX in our roth accounts. what are some good examples of mutual funds for taxable accounts.
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    #129339 Reply
    Avatar Dusn 
    Participant
    Status: Physician
    Posts: 199
    Joined: 01/02/2018

    What’s wrong with vanguard?

    Both US and international index funds should be fine in a taxable account. Broad index funds (like total stock market) are probably more tax efficient but if doing small cap vanguard has a “tax efficient” small cap fund.

    #129343 Reply
    Avatar H_FIRE 
    Participant
    Status: Physician
    Posts: 92
    Joined: 02/18/2018

    What’s wrong with vanguard?

    Click to expand…

    Vanguard do not offer the option to add beneficiaries to joint accounts.

    #129344 Reply
    Avatar hightower 
    Participant
    Status: Physician
    Posts: 1498
    Joined: 12/07/2016

    I wouldn’t skip the HSA if you have access to one.  They are triple tax advantaged and at your age very valuable.  Now is the time (when you’re likely healthy) to be loading them up with money each year (to the limit).  It’s always best to maximize all tax advantaged space first, before contributing to a taxable.

    #129346 Reply
    Avatar H_FIRE 
    Participant
    Status: Physician
    Posts: 92
    Joined: 02/18/2018

    I wouldn’t skip the HSA if you have access to one.  They are triple tax advantaged and at your age very valuable.  Now is the time (when you’re likely healthy) to be loading them up with money each year (to the limit).  It’s always best to maximize all tax advantaged space first, before contributing to a taxable.

    Click to expand…

    I don’t have access to HSA (low deductible health insurance through employer). Feeling conflicted if I should change to high deductible health insurance & apply for HSA.

    #129347 Reply
    Avatar Johnny RN 
    Participant
    Status: Other Professional, Spouse
    Posts: 53
    Joined: 02/02/2018

    Does it make sense to have the hi deductible and hsa if you are planning on another child in the next year or is this something you should wait until your done with these kind of things before you enroll in a hi deductible hsa plan?

    #129385 Reply
    Avatar H_FIRE 
    Participant
    Status: Physician
    Posts: 92
    Joined: 02/18/2018

    Does it make sense to have the hi deductible and hsa if you are planning on another child in the next year or is this something you should wait until your done with these kind of things before you enroll in a hi deductible hsa plan?

    Click to expand…

    Hi Johnny. We are in similar situation with planning child by next year. I am concerned that switching to high deductible plan may result in high cost with wife’s pregnancy. We have decided to wait and invest in taxable account for now. Not sure if we are making the right decision.

    #129386 Reply
    Avatar Johnny RN 
    Participant
    Status: Other Professional, Spouse
    Posts: 53
    Joined: 02/02/2018

    Yeah sounds like the same. You never know how pregnancy goes, it could be simple or a ton of mfm visits followed by a nicu stay and months of therapy. I guess it rather hold off on some tax free money and pay my $25 copays than having to hit a hi premium if you ended up in said situation but maybe I am misunderstanding the whole process.

    #129392 Reply
    Avatar hightower 
    Participant
    Status: Physician
    Posts: 1498
    Joined: 12/07/2016

    I wouldn’t skip the HSA if you have access to one.  They are triple tax advantaged and at your age very valuable.  Now is the time (when you’re likely healthy) to be loading them up with money each year (to the limit).  It’s always best to maximize all tax advantaged space first, before contributing to a taxable.

    Click to expand…

    I don’t have access to HSA (low deductible health insurance through employer). Feeling conflicted if I should change to high deductible health insurance & apply for HSA.

    Click to expand…

    Definitely at your age IMHO.  Unless you or your wife have health issues already that need a lot of coverage.  As far as planning for children goes, my wife and I just went through some fertility treatments and all the prenatal care (she’s 24 weeks), so far it has not been expensive at all.  I would look closely at what your plans cover before deciding.

    #129393 Reply
    Liked by H_FIRE
    Avatar H_FIRE 
    Participant
    Status: Physician
    Posts: 92
    Joined: 02/18/2018

    Two follow up questions:

     

    (1) Vanguard do not offer the option to add beneficiaries to joint accounts. Should I be concerned about this fact.

    (2) I am planning to open this joint taxable account at vanguard with 10k investment into VTCLX (Vanguard Tax-Managed Capital Appreciation Fund Admiral Shares with Expense ratio of 0.09%). Is this fund appropriate for taxable account. 

     

    #129404 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4646
    Joined: 01/08/2016

    Two follow up questions:

     

    (1) Vanguard do not offer the option to add beneficiaries to joint accounts. Should I be concerned about this fact.

    (2) I am planning to open this joint taxable account at vanguard with 10k investment into VTCLX (Vanguard Tax-Managed Capital Appreciation Fund Admiral Shares with Expense ratio of 0.09%). Is this fund appropriate for taxable account. 

     

    Click to expand…

    1- no. it passes to the remaining survivor. if you both die it becomes part of the estate and once you have kids should be put in a trust anyways.

    2- thats fine, probably unnecessary. whats wrong with just VTSAX (total US stock)?

    #129461 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8330
    Joined: 01/09/2016

    HSAs are second from the top of the pyramid for tax benefits and, in most circumstances, I would recommend you prioritize over a taxable account. However, when you have predictable health costs in the near future – planned pregnancy being one of the more predictable – I’d skip the HSA until you are stabilized with health care costs. It’s not worth it to me to get a $6,900 tax deduction at thousands of dollars of potential added expense. I don’t necessarily know I’m right because I haven’t run calculations and don’t plan to – this is more of a shoot from the hip opinion because, no matter what you choose, there will always be an element of guesswork involved.

    Johanna Fox Turner, CPA, CFP: I am not your financial advisor; any responses are for general purposes only
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #129463 Reply
    Liked by H_FIRE, jhwkr542
    Avatar H_FIRE 
    Participant
    Status: Physician
    Posts: 92
    Joined: 02/18/2018

    2- thats fine, probably unnecessary. whats wrong with just VTSAX (total US stock)?

    Click to expand…

    Thanks. I have VTSAX in mine and wife’s Roth accounts. I have attached the screenshot of my asset allocation below. Planning to diversify these allocations.

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    #129511 Reply
    Rogue Dad, M.D. Rogue Dad, M.D. 
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    Status: Physician
    Posts: 975
    Joined: 03/07/2016

    There should not be significant guesswork required — the premiums, deductible, copays, OOP max, etc are all available for you to see.  In my case, even maxing out the costs at worst generally makes me even when the HSA tax benefit is taken into account.

    Make a very basic spreadsheet to see the “true” cost of each plan with minimal, max, and some in between expenses.

    High on High Deductibles

    If your “low deductible” plan is extremely cheap then it may never make sense to do a HDHP when you know you will have high utilization.  But if the HDHP is sufficiently cheap, and the deductible/OOP max not extremely high, then the HDHP can make complete sense even with high utilization.

    http://www.RogueDadMD.com

    An alt-brown look at medicine, money, faith, and family

    #129515 Reply
    Liked by H_FIRE
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4646
    Joined: 01/08/2016

    2- thats fine, probably unnecessary. whats wrong with just VTSAX (total US stock)?

    Click to expand…

    Thanks. I have VTSAX in mine and wife’s Roth accounts. I have attached the screenshot of my asset allocation below. Planning to diversify these allocations.

    Click to expand…

    what are you defining diversification as? VTSAX by all means covers the US market.

    #129518 Reply

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