Municipal Funds in a Traditional IRA?
Municipal Funds in a Traditional IRA?
Is it wise to put a Municipal Fund in a Traditional IRA?
I was thinking of investing in Vanguard Intermediate-Term Tax-Exempt Fund (VWITX) in a Traditional IRA
But not sure...what the benefits would be.
I would appreciate any help
Thanks
I was thinking of investing in Vanguard Intermediate-Term Tax-Exempt Fund (VWITX) in a Traditional IRA
But not sure...what the benefits would be.
I would appreciate any help
Thanks
Re: Municipal Funds in a Traditional IRA?
There is no benefit. In fact, all income would come to you as taxable ordinary income.
Gill
Gill
Cost basis is redundant. One has a basis in an investment |
One advises and gives advice |
One should follow the principle of investing one's principal
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Re: Municipal Funds in a Traditional IRA?
It is a terrible idea. You get less interest in exchange for a tax exemption you won't be using. The only reason to ever hold a municipal in an IRA is if it is fully defaulted, you bought low and you are waiting for settlement of partial principal. Vanguard won't touch those sorts of bonds. So a clear cut, no never on your question.aramv wrote:Is it wise to put a Municipal Fund in a Traditional IRA?
I was thinking of investing in Vanguard Intermediate-Term Tax-Exempt Fund (VWITX) in a Traditional IRA
- neurosphere
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Re: Municipal Funds in a Traditional IRA?
I'm curious how/why the thought of investing in municipal bonds in an IRA became something you were considering enough to ask a question about.aramv wrote:I was thinking...
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
Re: Municipal Funds in a Traditional IRA?
Hi, Its a long story, but I'm trying to figure out what to do with my dads pension when he turns 70 1/2 and gets a sum of 1.2 million dollars.neurosphere wrote:I'm curious how/why the thought of investing in municipal bonds in an IRA became something you were considering enough to ask a question about.aramv wrote:I was thinking...
I got a few recommendations online on what do with a taxable portfolio, but this pension is going to be rolledover to a tradtional ira.
viewtopic.php?f=1&t=225383
Do you have any suggestions?
- ruralavalon
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Re: Municipal Funds in a Traditional IRA?
A tax-exempt fund in a tax-advantaged account? This is like wearing a raincoat or using an umbrella indoors. Not useful.aramv wrote:Is it wise to put a Municipal Fund in a Traditional IRA?
I was thinking of investing in Vanguard Intermediate-Term Tax-Exempt Fund (VWITX) in a Traditional IRA
But not sure...what the benefits would be.
I would appreciate any help
Thanks
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
Re: Municipal Funds in a Traditional IRA?
Thank you for that description. Very helpfulruralavalon wrote:A tax-exempt fund in a tax-advantaged account? This is like wearing a raincoat or using an umbrella indoors. Not useful.aramv wrote:Is it wise to put a Municipal Fund in a Traditional IRA?
I was thinking of investing in Vanguard Intermediate-Term Tax-Exempt Fund (VWITX) in a Traditional IRA
But not sure...what the benefits would be.
I would appreciate any help
Thanks
Re: Municipal Funds in a Traditional IRA?
You want taxable bonds in the IRA, not tax exempt.
Gill
Gill
Cost basis is redundant. One has a basis in an investment |
One advises and gives advice |
One should follow the principle of investing one's principal
Re: Municipal Funds in a Traditional IRA?
I actually own a few individual muni bonds in my ira paying around 4%
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Re: Municipal Funds in a Traditional IRA?
It's worse then that, actually, it's harmful. Holding these in a tax-advantaged account creates a future tax liability where there was none before since all withdrawals from traditional IRA are taxed as regular income.ruralavalon wrote: A tax-exempt fund in a tax-advantaged account? This is like wearing a raincoat or using an umbrella indoors. Not useful.
You'll owe tax on the entire value of the bond (purchase price, coupon payments and capital gains) when you make withdrawals. The coupon payments would be tax-exempt in a taxable account.Kennyt7 wrote:I actually own a few individual muni bonds in my ira paying around 4%
Re: Municipal Funds in a Traditional IRA?
I think that there is a very rare (maybe once a generation case) to be made for buying muni bonds in a tax advantaged account: If you are willing to market time and and believe that municipal bonds are cheap relative to taxable bonds. In the last decade, (POST MEREDITH WHITNEY) the muni/treasury ratio has been greater than 100%. Given the historical default rate of muni bonds, this should never happen. There were pundits at the time who were screaming that an arbitrage bet on munis was a good call. They were right. Again this is a market timing type situation.
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Re: Municipal Funds in a Traditional IRA?
I like your list of funds. Nice and diversified. You don't need 20 funds which are kinda close. From your list I'd add international stock and then just split 50/50.aramv wrote: Do you have any suggestions?
50% Vanguard Wellington Fund (VWENX) (60/40)
30% international stock (Vanguard International Value)
20% Vanguard Emerging Markets Government Bond (VGAVX)
I'd recommend something like Schwab Intelligent Portfolio for of Betterment. Those 30 basis points will be well spent. But if not that's what I'd do.
Re: Municipal Funds in a Traditional IRA?
Is your father going to be comfortable with the risk of substantial loss in the equity portion of his IRA? Has he sought out your advice for investing this money?
Gill
Gill
Cost basis is redundant. One has a basis in an investment |
One advises and gives advice |
One should follow the principle of investing one's principal
Re: Municipal Funds in a Traditional IRA?
Gill,Gill wrote:Is your father going to be comfortable with the risk of substantial loss in the equity portion of his IRA? Has he sought out your advice for investing this money?
Gill
My father has trusted me to manage the 1.2 million dollar pension that will be given to him when he turns 70 1/2 in 2021. So I have until then to come up with a plan. I'm 1 of 4 siblings and trying to find a way for this money to help us while my father is alive. I apprecaite any and all help.
Re: Municipal Funds in a Traditional IRA?
Thank you jbolden. So you'd put it in Schwab IP or Betterment?jbolden1517 wrote:I like your list of funds. Nice and diversified. You don't need 20 funds which are kinda close. From your list I'd add international stock and then just split 50/50.aramv wrote: Do you have any suggestions?
50% Vanguard Wellington Fund (VWENX) (60/40)
30% international stock (Vanguard International Value)
20% Vanguard Emerging Markets Government Bond (VGAVX)
I'd recommend something like Schwab Intelligent Portfolio for of Betterment. Those 30 basis points will be well spent. But if not that's what I'd do.
Re: Municipal Funds in a Traditional IRA?
My father doesn't need this $. This is our inheritance.Gill wrote:Is your father going to be comfortable with the risk of substantial loss in the equity portion of his IRA? Has he sought out your advice for investing this money?
Gill
He is fine with a little terbulance . How would you invest it?
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Re: Municipal Funds in a Traditional IRA?
Yes. My recommendation is Schwab. You have siblings here. Schwab will put you in a very good portfolio supporting a high draw that will grow. They have a lot of services you can buy. SIP is free so no one will get upset about money going sideways. And the specific allocation is Schwab's which will avoid a lot of lifetime resentment. Whatever you pick will not in retrospect been the best choices you could have made. Let Schwab be the one that picks. Don't go crazy with the bonds though. The Schwab portfolios sustain a draw pretty well. Schwab can also handle some of the problems regarding taxes on the basics.aramv wrote:Thank you jbolden. So you'd put it in Schwab IP or Betterment?jbolden1517 wrote:I like your list of funds. Nice and diversified. You don't need 20 funds which are kinda close. From your list I'd add international stock and then just split 50/50.aramv wrote: Do you have any suggestions?
50% Vanguard Wellington Fund (VWENX) (60/40)
30% international stock (Vanguard International Value)
20% Vanguard Emerging Markets Government Bond (VGAVX)
I'd recommend something like Schwab Intelligent Portfolio for of Betterment. Those 30 basis points will be well spent. But if not that's what I'd do.
If you want support beyond investing, like on the taxes and transfers and... these guys will put you in an even better portfolio though they are not free or even inexpensive: http://buckinghamadvisor.com/ .
Re: Municipal Funds in a Traditional IRA?
Thank you jbolden,jbolden1517 wrote:Yes. My recommendation is Schwab. You have siblings here. Schwab will put you in a very good portfolio supporting a high draw that will grow. They have a lot of services you can buy. SIP is free so no one will get upset about money going sideways. And the specific allocation is Schwab's which will avoid a lot of lifetime resentment. Whatever you pick will not in retrospect been the best choices you could have made. Let Schwab be the one that picks. Don't go crazy with the bonds though. The Schwab portfolios sustain a draw pretty well. Schwab can also handle some of the problems regarding taxes on the basics.aramv wrote:Thank you jbolden. So you'd put it in Schwab IP or Betterment?jbolden1517 wrote:I like your list of funds. Nice and diversified. You don't need 20 funds which are kinda close. From your list I'd add international stock and then just split 50/50.aramv wrote: Do you have any suggestions?
50% Vanguard Wellington Fund (VWENX) (60/40)
30% international stock (Vanguard International Value)
20% Vanguard Emerging Markets Government Bond (VGAVX)
I'd recommend something like Schwab Intelligent Portfolio for of Betterment. Those 30 basis points will be well spent. But if not that's what I'd do.
If you want support beyond investing, like on the taxes and transfers and... these guys will put you in an even better portfolio though they are not free or even inexpensive: http://buckinghamadvisor.com/ .
I just got off the phone with Schwab Costumer Service. They were extremely helpful.
I told them my whole situation; they understood me, informed me of all the tax rules and gave me great advice on allocation.
The RMD can be automatically deducted and put into a separate brokerage account that can be linked to 4 bank accounts and distribute the RMD to my siblings bank accounts directly. I'm sure Vanguard has a RMD program as well, but I do love the auto robo portfolio that Schwab provides. I'm going to continue doing research, but Schwab Intelligent Portfolio is definetly on my top choices.
You mentioned Betterment. I have a tax Betterment account . Do they also deal with Traditional IRA's and RMD like Schwab? Do you recommend one over the other?
Thank you for your help
A
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Re: Municipal Funds in a Traditional IRA?
Vanguard doesn't own a bank. Of course they can work with a bank. But again if something goes wrong between the account and the 4 bank accounts it is Schwab that gets the phone call not you. It is their robo-advisor, their brokerage account for your siblings if they get one, their bank, their line of credit... You picked Schwab but that's it. All the questions about why XYZ electric company didn't get their $53 payment from the account when it was working last month goes to Schwab. Schwab has all sorts of documents about their asset allocation theory.aramv wrote:Thank you jbolden,
I just got off the phone with Schwab Costumer Service. They were extremely helpful.
I told them my whole situation; they understood me, informed me of all the tax rules and gave me great advice on allocation.
The RMD can be automatically deducted and put into a separate brokerage account that can be linked to 4 bank accounts and distribute the RMD to my siblings bank accounts directly. I'm sure Vanguard has a RMD program as well, but I do love the auto robo portfolio that Schwab provides. I'm going to continue doing research, but Schwab Intelligent Portfolio is definetly on my top choices.
Yes Betterment has IRAs. They also do trusts. They have an inexpensive advisor arm as well. I think they have slightly worse services and slightly worse asset allocation. But it is slightly worse. They wouldn't be a terrible choice if you like them more or are more comfortable with them. Again they don't own a bank.aramv wrote: You mentioned Betterment. I have a tax Betterment account . Do they also deal with Traditional IRA's and RMD like Schwab? Do you recommend one over the other?
As far as reviews of the alternatives I'm doing a review thread now: viewtopic.php?f=10&t=223465&newpost=3487055
My overall recommendation is Schwab. Especially for you because no question you need the extras like banking. I can see reasons for going up in cost / service level to someone like Buckingham but I definitely don't think you should drop the service level below Schwab's.
You are welcome.aramv wrote: Thank you for your help
Re: Municipal Funds in a Traditional IRA?
jbolden1517,jbolden1517 wrote: ↑Thu Aug 10, 2017 11:41 amVanguard doesn't own a bank. Of course they can work with a bank. But again if something goes wrong between the account and the 4 bank accounts it is Schwab that gets the phone call not you. It is their robo-advisor, their brokerage account for your siblings if they get one, their bank, their line of credit... You picked Schwab but that's it. All the questions about why XYZ electric company didn't get their $53 payment from the account when it was working last month goes to Schwab. Schwab has all sorts of documents about their asset allocation theory.aramv wrote:Thank you jbolden,
I just got off the phone with Schwab Costumer Service. They were extremely helpful.
I told them my whole situation; they understood me, informed me of all the tax rules and gave me great advice on allocation.
The RMD can be automatically deducted and put into a separate brokerage account that can be linked to 4 bank accounts and distribute the RMD to my siblings bank accounts directly. I'm sure Vanguard has a RMD program as well, but I do love the auto robo portfolio that Schwab provides. I'm going to continue doing research, but Schwab Intelligent Portfolio is definetly on my top choices.
Yes Betterment has IRAs. They also do trusts. They have an inexpensive advisor arm as well. I think they have slightly worse services and slightly worse asset allocation. But it is slightly worse. They wouldn't be a terrible choice if you like them more or are more comfortable with them. Again they don't own a bank.aramv wrote: You mentioned Betterment. I have a tax Betterment account . Do they also deal with Traditional IRA's and RMD like Schwab? Do you recommend one over the other?
As far as reviews of the alternatives I'm doing a review thread now: viewtopic.php?f=10&t=223465&newpost=3487055
My overall recommendation is Schwab. Especially for you because no question you need the extras like banking. I can see reasons for going up in cost / service level to someone like Buckingham but I definitely don't think you should drop the service level below Schwab's.
You are welcome.aramv wrote: Thank you for your help
What do you think about putting the funds in Fixed Index Annuities? I no nothing about them. I just heard about this a couple of days ago.
Re: Municipal Funds in a Traditional IRA?
A portion could go into an spia but fixed index annuities are generally a bad idea. High fees out the wazoo.
You could get a quote on an spia here.
https://www.immediateannuities.com/
https://www.cbsnews.com/news/six-questi ... d-annuity/
You could get a quote on an spia here.
https://www.immediateannuities.com/
https://www.cbsnews.com/news/six-questi ... d-annuity/
Re: Municipal Funds in a Traditional IRA?
We don't really know enough to give you a reliable answer. For example, are the heirs 12 years old or 52 years old?
A simple portfolio at 60% stocks and 40% bonds can satisfy a lot of needs. This could be done with individual funds or at Vanguard with 1 LifeStrategy Moderate Growth fund.
Whoever suggested fixed indexed annuities is more interested in making money than helping you decide on a good investment.
A simple portfolio at 60% stocks and 40% bonds can satisfy a lot of needs. This could be done with individual funds or at Vanguard with 1 LifeStrategy Moderate Growth fund.
Whoever suggested fixed indexed annuities is more interested in making money than helping you decide on a good investment.
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Re: Municipal Funds in a Traditional IRA?
Allow me to answer.
You want to AVOID all such insurance products like the plague!
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- ruralavalon
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Re: Municipal Funds in a Traditional IRA?
Fixed index annuities are a HORRIBLE idea. Don't buy one.The Wizard wrote: ↑Wed Aug 16, 2017 7:47 pmAllow me to answer.
You want to AVOID all such insurance products like the plague!
viewtopic.php?t=164205
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
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Re: Municipal Funds in a Traditional IRA?
They answered on my behalf accurately. I concur. I think that's a very bad product. But if you wanted to hold that bad product (a call on the SP500) there is no reason to hire an insurance company to buy the calls for you. You can do it yourself for about 5 basis points which is about 120-200 less than what the insurance company will charge you to buy them for you.ruralavalon wrote: ↑Thu Aug 17, 2017 9:44 amFixed index annuities are a HORRIBLE idea. Don't buy one.The Wizard wrote: ↑Wed Aug 16, 2017 7:47 pmAllow me to answer.
You want to AVOID all such insurance products like the plague!
viewtopic.php?t=164205