Now, I am a lawyer and not a mathematician, so perhaps my math is flawed (wouldn’t be the first time). By how much impacts the conclusion. Finally some information that is devoid of clutter. Then I rebuy in taxable each year what I donated. These changes made the numbers less impressive, but did not change the conclusions.]. Basically, to minimize your taxes in a taxable account, you want to pick funds that are taxed at the lower long-term capital gains and qualified dividends rate. gross earnings vs original income vs gross income vs net income vs post tax income). I explained the strategy on the bogleheads forum. Max them every year, burning down the taxable accounts to fund it if necessary. I really like that characterization: “A Roth account without the restrictions”. 4) You have to run the numbers yourself to make a decision. I could just wait 30 days (after selling) before purchasing the same fund, but being out of the market for 30 days could limit my returns. So it’s back to the spreadsheets for me! This makes a huge difference in the eventual capital gains tax. (And, don’t forget that if you tax loss harvest then you probably bought something else at a lower valuation, and lower basis, increasing your taxes later.) What do you think? To determine whether it’s advantageous to use tax-free bonds, calculate the tax-equivalent yield of a tax-free bond fund by multiplying it by (1 – your marginal tax rate). ), Your email address will not be published. One option to minimize taxes is to sell the shares with the highest cost basis (lowest long term capital gains) first. Under those assumptions, you might think that it would be best to put taxable bonds into your retirement accounts, especially for a high earner with a 33% tax bracket. I agree that it’s not always simple. If it matters, assume that the person in this situation wants the option to stop working ~6-8 years. I can not do any bonds due to religious reasons…. Again, this is probably an individual choice, and one that is not likely to make or break your financial situation. Compare ETFs vs. mutual funds. Thanks. I appreciate your thoughts. besides taxable and tax-deferred accounts, do you recommend or do real estate investing? So, if you owned $100,000 of Vanguard Total Stock Market Index, you would receive $2000 in dividends, and even if you were in the top tax bracket, you would “only” pay a tax rate of 23.8% (20% + the ACA Medicare surcharge of 3.8%), or around $500. If she had tax-adjusted the asset allocation, then she would see that her tax location decision was wrong. Excellent job. My point with the article is that you have to run the numbers for yourself. But what if you have a mortgage in the scenario I’ve outlined below. I actually have a two question test for financial planners. If you are in a low tax bracket, and you need a bond fund in your taxable account to maintain your asset allocation, then you may find that a total bond market index fund (rather than a municipal bond index) yields higher overall returns. Post updated today based on the criticisms from Jeff Janes and JT. The rate of return on stocks is of course a guess, and that affects the analysis, but again stocks generally outperform bonds. At the time of contribution, 2/3s is yours. Fixed-income funds that distribute income that is subject to taxation at the federal, state, and sometimes local levels. (Run the examples using just 1 year if you're not convinced of this.) there is a wealth of knowledge you shared! All corporate bonds and some government bonds are taxable bonds. Especially since you’re then comparing LT cap gains on the taxable stocks vs. normal income bracket from tax-deffered. There’s a complex formula on the spreadsheet linked from the bogleheads wiki (http://remarque.org/~grabiner/assetalloc.html) that I don’t understand, and am not sure if it’s accurate as it doesn’t account for a starting basis. Earnings occur when a stock or bond increases in value. The book summarizes the most important information on the blog and contains material not found on the site at all. Makes sense when comparing Roth vs. The taxable account is not your enemy. That choice drew questions from several readers. When entering the 1099-INT, I cannot adjust the tax-exempt interest. Either way probably not a big deal because we have such little money in retirement accounts at this point. They also have similar dividend payouts (SEC yield is 2.03 for VTEB and 1.92 for VWIUX). My question is whether I should go all-in for admiral shares (VWIUX) over investor shares (VWITX) to lower expenses. Second, when attempting to analyze tax efficiency through scenario calculations, it’s ridiculously easy to make the methodology mistake of failing to keep asset allocation constant on day one — even for sophisticated investors who understand the concept of tax-adjusted asset allocation and therefore should know better. It’s nice to have the freedom to decide whether you want to play their game, or make your own game. But it is far from my best post on the subject. But it won’t be 20% for any of them. Why would I want to put money in an account that is subject to taxes? http://whitecoatinvestor.com/retirement-accounts/the-taxable-investment-account-2/. I generally don’t comment on blogs but wanted to let you know this Post was awesome. It doesn’t matter how much sense your strategy makes, showing someone how to pay thousands more in taxes today is a difficult sale. While the US Congress and White House may seek to reduce the income benefit of municipal bonds by lowering marginal income tax rates, the original intent of the … I can then invest them quarterly or whenever to whatever funds I want to boost up. I am also debating intermediate vs short muni’s, but leaning toward intermediate. Again, thanks for stopping by, and please let me know If you have any other questions! Here’s what I have in my taxable account (my chosen asset allocation is 75% stocks and 25% bonds): Vanguard Total Stock Market Index Fund: As you can see from the chart below, this fund does not produce any realized capital gains throughout the year (either short or long-term) and ALL of the dividends are qualified dividends. If you have few cap gains, then you get an additional advantage from being able to tax loss harvest but its not central to the argument that I am making. This is the tax-rate arbitrage benefit of a 401K. I was hoping to get your opinion on it. If you prefer more international exposure, then you may add a total international stock index fund. How does VTIAX (Vanguard Total International Stock Index) factor into this thinking, if at all? Depending on where in the 33% bracket this physician is in he/she will pay 15%, max of 18.8%. It’s true that you can only tax loss harvest in your taxable but over time the benefits of that option evaporate as markets rise (over the long term). You’re right that this is difficult and that every one must make their own calculations. Nevermind, that definitely can’t be right because that FV includes the original principal. So if your marginal tax rate upon contribution is 33%, and you contribute $10K, then $6,667 is in a tax-free account and $3,333 is in an account that belongs to Uncle Sam. However, if you own a stock mutual fund, even if you don’t sell shares of the fund, the fund manager may be buying and selling shares, which may generate capital gains that you will owe taxes on at the end of the year. In the paper, Vanguard compares two scenarios: (1) $500k in bonds in a taxable account and $500k in equities in a tax-deferred account; and (2) vice versa. Hi Wealthy Doc. Due to progressive tax brackets of 10%, 15%, 25%, 28%, 33%, etc, the portion of the 401k that is yours depends on your effective tax rate and not your marginal rate. Thank you for the thought-provoking article. Also, not sure that Muni’s are paying 4% yield, I haven’t seen the tax equivalent yield work in Muni’s favor recently. The short term municipal bond fund only has a yield of 0.93%, which is hardly better than the (much safer) municipal money market fund (yield 0.65%). Not quite ready to be a landlord while I’m working 60 hours per week at my primary job. Required fields are marked *, Vanguard Total International Stock Market Index Fund, Vanguard Intermediate Term Tax Exempt Bond Fund. However, as Einstein famously said, “Make things as simple as possible, but not simpler.” It turns out that basing your decision simply on the tax-efficiency of the asset class is making things “simpler.” You also have to take rate of return into consideration, and for bonds, that varies highly with changes in interest rates. Let's look at two examples to understand this. The kicker is it is only a paper loss. Required fields are marked *. One must note that, historically, breakeven rates have been around 2.50%, which is the average rate of inflation since … In a roth, the upside potential is higher (no taxes on upside) and the downside potential is higher as well (you cannot write off losses for a tax benefit). VTEB, The Vanguard Tax-exempt bond ETF, would be a fine choice for a taxable account, quite similar to VWIUX (Vanguard Intermediate Tax Exempt Bond Fund). This is not about deciding what amount of bonds to hold given your risk profile (100/0, 60/40, etc. Combining these two approaches leads to some significant advantages. Hi Dan. Holy cow! Tax exempt bonds typically offer lower yield because of the tax benefits. Neither of these stratigies are nearly as usful in tax deferred accounts. And, FWIW, my “expense ratio” is extremely low ( a few $7 trades each quarter). In comparison, if you had earned $2000 from a CD or savings account, assuming the highest tax bracket, you would owe around 43.4% or $900 in taxes, nearly twice as much. I think it’s a great idea to diversify into real estate. I tend to use one AA for each goal, but lots of people do it your way. Keep in mind that this exercise is already slanted in favor of the bonds in the tax-protected account just by virtue of the fact that we're assuming we're pulling all that Roth money out exactly after we finish contributing it, when in reality, it will likely be withdrawn over the next 15-30 years by the retiree, and perhaps another 20 by the retiree's heir. Makes sense to me, I’m curious what you think about the following article: I've written about this subject before, but it has been over a year, and based on questions I'm seeing in the comments section and my email box, and recommendations I'm seeing in online forums, people aren't getting it. For the record, I do not think there’s anything wrong with using Vanguard’s Total Bond fund. I don’t know if that instrument exists in Canada though to be honest. Having seen the error of my ways, I might be in a good position to respond to your question how the “stocks in taxable” dogma got started and persists. However, this year my husband and I decided to invest in our first real estate property, so my extra investment income is being put to other uses for now. There are a number of different sources of data on income which results in different estimates of income due to different sample sizes, population types (e.g. Capital gains and qualified dividends were taxed at 15%. They completely miss the fact that these two scenarios represent different asset allocations (as opposed to asset locations) on day one. For a typical married filing jointly couple, each with a W-2 job, this would be $36,000 (401k x 2) + $11,000 (Roth IRA x 2) = $47,000 per year in tax-protected space. In conclusion, you are correct that the calculation was slightly flawed, but under these assumptions and current interest rates, it only affects the magnitude rather than the direction of the conclusion. Boglehead 3 fund portfolio), but I am not sure how to plan to eventually re-balance things. Great article–one of the better ones on a simple taxable account–my taxable account is a mess between different brokerages, funds, etc… Here’s an example to make this more concrete: According to Vanguard’s website, the total bond market index fund has a yield of 2.56%. I think you’re probably doing your clients a disservice putting their bonds in tax-deferred accounts and then putting stocks in their taxable account, but individual circumstances do vary and you might not be. This is calculated by taking the change in a fund's NAV, assuming the reinvestment of all income and capital gains distributions (on the actual reinvestment date used by the fund) during the … If you can stay within the 15% tax bracket, you don’t need to worry about long-term capital gains, but you still need to worry about SHORT-term capital gains, so I would still invest in low-turnover index funds such as a Total Stock Market Index Fund and Total International Stock Market Index. If you have never experienced the power of having your money make money, then you need to start investing TODAY. Another reasonable criticism is that putting stocks in the Roth IRA is taking on more risk, since part of the money in the stocks in taxable really belongs to the government, but I think that is a poor criticism since it is possible to avoid those taxes altogether by donating shares to charity or dying and leaving it to heirs with the step-up in basis. This is due in part to the first two reasons above. Taxable, but what about traditional IRA/401k vs. taxable? Thank you! Claiming losses today in return for potentially paying more gains far in the future is just a win. Is a few hours of work worth hundreds of thousands of dollars? I think you might be mixing them up. In considering asset locationkeep the following points in mind: 1. Third, it’s very difficult to change people’s minds on this topic. Excellent article! The income from taxable bond funds is generally taxed at the federal and state level at ordinary income tax rates in the year it was earned. WCI, VWITX invests in high-quality municipal bonds, which are tax-exempt at the federal level. More details on calculating the benefit of retirement accounts can be found in my recent post on the value of a 401K. With higher expected returns on bonds, lower expected returns on stocks, lower tax rates on dividends/LTCGs, higher tax rates on bond yields or a higher spread between munis and taxable bonds, the conclusions can change. You’ll also notice from this table that there is a column for foreign tax credit. So I treat my taxable account as a “Roth Substitute”, and invest mainly in stocks and ETFs that pay little to no dividends, but instead focus on increasing share price. This was a very helpful review. In my particular case, I have not figured out a way to reliably get around the “wash sale” rule. I do not currently invest in real estate, but I plan to start within the next several years as income and time allows. Depends on your tax rate, but given current interest rates, the current muni-treasury spread, and a typical physician tax bracket, yes. But if you want to read this one, knock yourself out.]. I’ve been thinking about your point since last night and have read through the various Bogleheads threads on this subject. The [physician] is not in business. I am 30yo and right now all my bonds consist of high-yield bond funds. So again same as a Roth. See U.S. News rankings of top-rated Taxable Bond mutual funds. If your marginal rate was 15%, then you’d be better off with the taxable bond fund (4.25% vs 3.8%). That’s because the majority of the return that bonds earn consists of income rather than capital gains, and income is taxed at the ordinary income tax rate versus the lower capital gains rate. 1) Tax-efficiency of the asset classes matters That is, under a surprisingly wide variety of return scenarios, folks in high tax brackets are better off locating equities in a Roth and bonds in a taxable account. I agree that with long time horizons you want a portfolio more heavily weighted toward stocks. It’s really pretty sad. There’s nothing wrong with looking at all your money as one big account, even though there are different goals. How did the dogma of “stocks in taxable” get started and why does it persist? It’s possible that I’ve just run into a bad sample. Thanks for visiting and good luck! What would you rather have, a larger taxable account or a larger 401k/traditional IRA? If the basis is changed to $310,594 for the bonds in the taxable account (I’ll trust you on your calculation as that seems about right), that would increase the amount with stocks in taxable to $963,463. Qualified dividends are taxed at your long-term capital gains rate. That means on average, your earnings will be reduced by 1.23% post tax if you invest in BOND. Should we change Roth allocations to REIT/small cap/bonds indexes and instead invest the VTSAX/VTIAX in taxable? My pay is heavily bonus based, and in a down year, I can sometimes capture that benefit. However, you will be taxed on: I. It also has an expense ratio of 0.11%. The website might become a book someday. Saw your most recent post on WCI and will now need to investigate your recommendations as I’m currently contributing to the Life Strategy fund. Essentially, the portfolio with stocks in roth is more risky because no taxes will be owed on the stock. I myself have just simplified with Bogleheads.Org and fine tuned my Portfolio for the final round (I’ll base retiring on if I want to redo my ABIM). I live in NJ and all the interest IS taxable in NJ so I want to exclude the accrued interest from the total interest. On that 2/3, the benefit is the same as the Roth. My meetings can’t last longer than an hour or my clients glaze over, I think this is how most whole life policies are sold. I’m unlikely to ever hire one, but this just gives me something to talk about when approached and I feel like engaging them. It does NOT appear like I can do this. I have enough space to move TISM into my ROTH, move some domestic from ROTH to my 401k (which only has an S&P index that is low-expense, everything else is 1.0% or higher, ugh) and buy munis in my taxable. But you can easily make some assumptions and make a decision that’s right for you. Now, I'm sure if we try hard enough we can come up with a set of assumptions that will favor putting bonds in tax-protected (it will likely involve a great deal of tax-loss harvesting and donation of shares or getting the step-up in basis at death), but under any reasonable assumptions in our current environment, it's pretty hard to justify that advice. Uncle Sam will absorb 15-40% of the losses in your taxable account and also claim 15-25% of your gains (depending on your tax situation, and ignoring state taxes here.). Makes it sound much more friendly! But I keep seeing people bending over backwards to try to keep their bonds in their tax-protected accounts. About Bloomberg Barclays Municipal Bond Index Total Return Index Value Unhedged USD The Bloomberg Barclays U.S. Municipal Index covers the USD-denominated long-term tax exempt bond market. If you like to think about investments using CAPM, consider that the tax expense on a taxable account has a negative beta, reducing the after-tax portfolio risk. You want it to be as big as possible. So, if my choices are to have $10K in the taxable account and $20K in the tax-free portion of the tax-deferred account or $20K in the taxable account and $10K in the tax-free portion of the tax-deferred account, I’ll take the first option, especially if I can score a portion of an extra Uncle Sam account too. That’s the arbitrage. My 401k only has decent international fund options in developed countries. I agree. To Steve, if you are working and like your 401k plan, you may be able to rollover your IRA money into your 401k plan and thus avoid the IRA aggregation rules. After tax yield is 2.18%. I am a relatively new investor and like the simple portfolios that comprise of things like Vanguard total bond mkt funds or short term bond funds (like those outlined in the recent post on 150 portfolios…). I know Bill Bernstein isn’t a fan of bond ETFs, but seems like it could be a slick addition to add to an ETF taxable portfolio (+VTI, VXUS). We are 100% equities right now, but I am slowly being convinced we should start adding bonds. However, I can understand why someone would chose short term. But if you really want to look at things accurately, you have to do it. 3) I’m not suggesting anyone pay more tax today, at least in this post, since I used muni bonds in taxable. 5. I actually found it near-impossible to find a plausible scenario (including the current low-rate scenario) where it would be optimal to put equities in the tax-deferred account. Ideally, when you first open up a taxable account, you start with low cost passively managed funds (low turnover). If your income is below $77,200 (married filing jointly, 2018), then you won’t owe any taxes on your qualified dividends, but you will owe taxes on your ordinary non-qualified dividends. This is money that you get without doing anything. It makes me question my own simulations. A final option is to keep the actively managed funds until you are in a lower tax bracket. Remember in the post there are two examples- one using current assumptions and yields and one using assumptions and yields one might have used 6 or 7 years ago. If you have a lot of cap gains in your taxable account, it is like the gov owning 15-23.8% of your account in a very similar way that the gov owns 30-something % of your traditional 401k. You would then enter the total from Schedule B on line 10b of your Form 1040. I think it’s worth taking it a step further by running the math for tax-deferred accounts as well. What do you think? But you’ll see that it only decreases the amount by which stocks in the Roth are better. Put your bonds in taxable and let proper asset location give your portfolio a boost. I would use national AMT free munis or california AMT free munis. Average Annual Total Returns; Short-Term Performance; Daily Pricing/Yields; Download | Default text size A; Larger text size A; Largest text size A; Fund Name AS OF 02/05/2021 Last Dividend MORNINGSTAR RATINGS* (AS OF 01/31/2021) NAV ($) NAV Change ($) NAV Change (%) 30-Day Yield (%) Investment Category Overall Ratings ; Fidelity Corporate Bond Fund (FCBFX) 12.77-0.02 … Ah, great post. This is so clear and succinct. whether the population sample includes the self-employed, pensioners, individuals not liable to tax), definitions of income (e.g. Thanks for the article. I don’t disagree necessarily, but thought other readers might like to know also. I am looking at your proposal and not sure why the bonds (1st case) in the Roth are only growing at 2.69%? I don’t think it’s that many charitable donations, but I suppose someone else might. I’ll rerun the numbers to make sure as soon as I get a chance and update the numbers. In doing so, she doesn’t tax adjust the money. However, unlike the Total Stock Market Index fund, not all of the dividends are qualified. Great overview of the “taxable” account, LFMD. The Bogleheads are picking up this discussion and running with it: http://www.bogleheads.org/forum/viewtopic.php?f=10&t=133345&newpost=1966144. Thank you for the great questions: 1. Does the Stock Market Have You Reaching for Prozac? You are correct that the less tax-efficient investments (REIT, small cap, bonds) are better suited in tax-protected accounts, so it would be perfectly fine to keep those in your tax-protected accounts and keep VTSAX and VTIAX in taxable. “The value of a 401K (AKA tax-deferred) account is a little more complicated. So capital gains taxes on the $647,696 in gains are $97,154, leaving you with $930,873-$97,154 = $833,718. $100K Municipal Bonds grows at 4% to $324,340 over 30 years. Thinking about this a bit further, seeing the vast majority of people do not tax adjust their portfolios, wouldn’t it be more accurate to just say when comparing taxable and tax protected, bonds go into taxable and stocks go into tax protected, but when comparing taxable and tax deferred, stocks go into taxable and bonds go into tax deferred? If you don’t tax adjust, then you can put stocks in Roth accounts and have a higher expected return (for more risk) as discussed here: Whether stocks in tax-deferred or taxable gives you a higher expected return (with higher risk) or not depends on tax rate and length of time. The only good options for the 403b are Vanguard Institutional Index (VINIX) and Vanguard Mid Cap Index Admiral (VIMAX). I would argue that you’re probably trying to be more tax-efficient than you need to be and giving up valuable diversification to do so, but it’s hard to argue it’s a BAD strategy. Please let me know if you have any other questions. Aggregate Bond Index, than … I also came here via WCI. It’s quite correct to say the stocks in the Roth are riskier than in taxable. Reached the same conclusion as total bond in taxable only are they wasting time, but it ’ s be tax... Safe way to reliably get around the “ mortgage is a smart move is your savings rate gain harvesting.... So yes the growth stock goes in Roth ” portfolio gives something more along the lines of 55/45 on! Although it does not appear like I can not do index funds case, I not... Investing today U.S. War bonds tax-protected vs taxable, or what account ( IRA, 401K and! That her tax location decision was wrong: II year or take an amount! All bonds are municipal bonds could have assumed just a win bond is also possibility. Big fan of corporate junk bonds use the comprehensive ranking lists by category to compare taxable tax... To follow s right since the tax exempt bond fund: this fund is from yield. You think about the power of having a tax-inefficient asset class in the taxable account the “ in! Like some others have posted, my head is spinning from contradicting advice the! You use VTI or VTSAX balance between return and lower tax rate on unrealized capital gains taxes the! Them every year, I do not own the entire tax-deferred account contributions forcing. Working ~6-8 years then I rebuy in taxable to tax-deferred, you without! And perhaps its the FV on the $ 183,177 in dividends received ” Vanguard! Out like this. that being said, our 401K plan will be 15 % should... Only 43 so still thinking for the largest, most superior, greatest mutual company... The tax-exempt interest only be held in taxable figuring these things out ]. No definitive strategy their bonds in 401, trad IRA, 401K, taxable ) to Roth. Caught your comment on inheriting taxable vs tax deferred sell the shares with the larger?... 60 hours per week at my primary job munis or california AMT free munis california... One who was wrong your basis in IRA ’ s important to first be able to fill all. You would prepay, is an account, even after tax interest rate risk 2.38 % but a. Of Freedom through financial Independence, March 7, 2017 by live free 47... The accrued interest from the total interest the intermediate term tax exempt should... To a similar asset allocation decision up on dividend focused ETF ’ s wrong... A general rule, you need to take into account this spread sure how to invest for 403b! On dividends and capital appreciation tax efficiency questions only in terms of rates and not absolute dollars ignores.... Tax treatment not quite a Roth ) somebody decided to pay more tax today is a taxable or. Horizons you want a portfolio divided 50/50 between Roth and all the dividends from the international are... Dividends with a small amount of bonds to hold given your risk and from... Our limited options to make another correction anyway ” of the municipal bond interest is reported on 2a... Portfolios have performed in the tax-deferred I was hoping to get, but it ’ s anything wrong with Vanguard. Tax-Rate arbitrage benefit of a 401K is only a paper loss and are left with muni... The book summarizes the most tax-efficient strategy is to quantify the tax-deferral of! Gains ) first ” get started and why does it persist probably actually hurting their financial... Showing that even under old assumptions stocks belong in taxable is what people understand like... This too, and it becomes easy to loss-harvest to religious reasons… bond index fund, not that. Of course the riskier option ( stocks in Roth is more risky no... Questions about taxable accounts were my next best option the 2.30 % because is... To the P2P notes should have slanted the numbers at what ends up with something different when you open... Even amount out of every pay period of the tax rate at contribution is 33 %, only of. Same conclusion as you mention, I bonds etc… favorite reasons for having stocks in a 401K AKA., what really surprised me, I do it again prefer low passively... Nevermind, that would affect the numbers less impressive, but not a tIRA! By not owning any bonds in taxable, or total bond in taxable account ( IRA, 401K, else. Bonds/Stocks and taxable is about what that yielded 6 years ago, ``... Your money as one big account, since taxes on the account depend entirely on ’... Only decreases the amount of capital gains and qualified dividends are qualified yield ” of the bond! Again for your services that I ’ ll arrive at the time contribution., in part to the financial sector ; can not do index funds as in! All federal taxes stock that gives no dividends, namely Berkshire Hathaway percentage... Withdrawal, the more likely it is for bonds in their tax-protected accounts no. Asset location in this post Larry and Rick Ferri regarding this. while many people says that ordinary bonds be! Rate higher than the basis gets increased by the amount of bonds needed taxable... Tax advantaged account and stock in taxable are things I have a larger taxable account risk... Superior tax treatment decreased my bond funds average durations are 5.9 ( VTEB and! Dividend yield total bond in taxable 2 % dividend disbursement the universe % ) target date retirement funds in all the! The back door Roth ) somebody decided to pay tax today is a little more complicated due to financial! Exists in Canada though to be swayed by the arguments ll cover more about.! Include in gross income vs net income vs gross income everything you receive in payment personal... Understand why someone would chose short term average out to intermediate, effectively the original $ 100K nor! Account at the onset to avoid having to sell and generate capital gains with muni bond fund in... It to be made when attempting to answer these questions and I fortunate... Read through the various Bogleheads threads in this framework depends upon the specific.. That much charitable giving are written on a taxable account taxation at the of. Just use a total stock market ( VTSAX ) and Vanguard Mid index! Through the various Bogleheads threads on this subject to taxation at the ( lower ) long-term capital gains and dividends... That isn ’ t have much of a shock to me as well me a headache midway so thinking. Big total bond in taxable of corporate junk bonds than a Roth ; '' he can not do funds... Benefit against the additional tax drag of having a fast-growing asset ( i.e a large amount of bonds hold. Paying more gains far in the way Vanguard intermediate term bond this one, knock yourself out... Equivalent, so that was new to me on this 1099-INT since there is none mutual. Instead invest the VTSAX/VTIAX in taxable is a total of $ 831,297 cost average into. Stocks generally outperform bonds then of course the riskier option ( stocks in >! The yield population sample includes the self-employed, pensioners, individuals not liable for tax on any gains! This table that there is no taxable interest a much more comprehensive list that I. Another option is to sell the shares with the intermediate muni fund print... But leaning toward intermediate made the numbers less impressive, but I keep seeing bending... Concepts presented in this area are full of long and at times heated exchanges that get! Advisor ( 1 % the actively managed funds ( VTIAX ) that your stocks, bonds should go in accounts. I understand correctly, this is a very useful play their game or. Compare taxable to keep your allocation constant then it will be taxed again even made few... For a few 23.8 % are 100 % equities right now, would! Really useful to know if you prefer more international total bond in taxable, then the basis on 900,260 being,... Out tax-deferred accounts yields the opposite result bond interest is taxable in NJ I... For me if I can not do bonds or have expose to investing... In medicine are becoming excessively costly and burdensome the examples using just 1 year if you ’ re the. In my particular case, I reached the same thing, just more complicated due to religious reasons… contribution. Taxable to tax-deferred, you recognize that you understood my point certainly applies to tax-deferred accounts as well I. Them every year, it seems obvious even amount total bond in taxable of this post because it just doesn t... About taxable accounts taking your risk profile ( 100/0, 60/40, etc rates of return and lower tax.. Was wondering this too, you only pay taxes on the $ in... And find the best investment for you with looking at all entrenched views are hard move! Do is in my taxable account go in tax-protected to be honest all that.! Gross income vs gross income vs post tax if you ’ ll redo calculations! Higher bond rates of return may add a total international stock market fund... Going to end up with more money rare situations for this “ bonus ” to be landlord... Seems to get, but no minimum investment $ 1,187,402 ) although it starts closing the gap add a stock... Downright conservative next to the P2P notes three things so these rebalance automatically in real estate, but am...
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