Advice on Asset Allocation when starting out Taxable Account (Other retirements maxed)

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Topic Author
gofarhaveacigar
Posts: 35
Joined: Sun Dec 26, 2010 4:20 pm

Advice on Asset Allocation when starting out Taxable Account (Other retirements maxed)

Post by gofarhaveacigar »

Emergency funds: Have this - Have about $120k in checking/savings. 6 months emergency fund is about $60k at most (conservatively speaking).

Debt: $9k car loans (0%), $360k Mortgage (2.75%)

Tax Filing Status: MFJ

Tax Rate: 24% Federal, 7% State

State of Residence: RI

Age: Me - 34, Wife - 35

Desired Asset allocation: 80% stocks / 20% bonds (I think?)
Desired International allocation: 50% of stocks (I think?)

Treating all accounts as joint (i.e. there's his and hers, but asset allocation is combined, since various accounts make up overall holdings)

Taxable - $20k (Up to 80k if extra checking/savings is moved here)
1.2% cash (can be significantly more, up to 7% if taken from checking/savings)
1.2% VT (0.08)

His 401k - $260k Balance
15.6% F Fund (0.017)
3.8% C Fund (0.038)
10.8% I Fund (0.04)
Company match? 5%

His Roth IRA at Fidelity - $106k Balance
2.1% FTIHX (0.06)
10.1% VTIAX (0.11)

His HSA - $11k Balance (To be used for investment purposes only)
1.4% IAGG (0.09 ER)

Her 401k - $355k Balance
40.8% RUA (Russel 3000 Index) - (0.05 ER)
Company match? 6%

Her Roth IRA at Fidelity - $80k Balance
2.8% FTIHX (0.06)
6.2% VTIAX (0.11)

Her HSA - $38k (To be used for investment purposes only)
4.4% BDOKX (0.14)


_______________________________________________________________
Note: Total percentage of all the above accounts together (not each account individually) should equal 100%.

Contributions

New annual Contributions
$19500 his 401k + $6k employer contributions (also specify any employer matching contributions)
$19500 her 401k + $7k employer contributions
$6000 his IRA/Roth IRA
$6000 her IRA/Roth IRA
$7200 HSA contributions
$15000 taxable (for retirement, not short term goals)

Available funds

Funds available in his 401(k) -
TSP Funds

Funds available in her 401k
Russell 3000 is the one that makes the most sense. Theres a few other proprietary blends of US Mid Cap and Intl Large cap funds, but nothing spectacular and with higher ER than the Russell 3000 Index


Questions:
1. We're at a point where we're maxing out retirement accounts (401k, HSA, Roth IRA, and tax advantaged 529s). The rest of the investment needs to go in a taxable accounts and after pushing it off a few years and saving up for some house projects, were' in a position of too much cash. I'd like dump the excess (about $60k) into a taxable account, but struggling to figure out how to allocate it. I think our AA is about where it needs to be (~83 equities, 17% bonds). The taxable account is for retirement (hopefully early, in our 50s)

Is there a resource to check into on what one should invest a taxable account into, based on a traditional AA allocation of 80/20?
dafioram
Posts: 89
Joined: Sat Jan 02, 2021 7:31 pm

Re: Advice on Asset Allocation when starting out Taxable Account (Other retirements maxed)

Post by dafioram »

Mega backdoor? 529?
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retired@50
Posts: 12825
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Location: Living in the U.S.A.

Re: Advice on Asset Allocation when starting out Taxable Account (Other retirements maxed)

Post by retired@50 »

gofarhaveacigar wrote: Thu Apr 22, 2021 7:37 pm
Is there a resource to check into on what one should invest a taxable account into, based on a traditional AA allocation of 80/20?
Yes, there is a resource in the wiki.
https://www.bogleheads.org/wiki/Tax_eff ... _placement

The general idea expressed in the wiki page is to put all your bonds in the tax-deferred accounts (like 401k or Trad. IRA) and use the Roth and taxable accounts for stock index funds.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Topic Author
gofarhaveacigar
Posts: 35
Joined: Sun Dec 26, 2010 4:20 pm

Re: Advice on Asset Allocation when starting out Taxable Account (Other retirements maxed)

Post by gofarhaveacigar »

dafioram wrote: Thu Apr 22, 2021 7:44 pm Mega backdoor? 529?
529s are being contributed to at $1k/year (that's the max that comes with tax savings in Rhode Island). I don't see the point in contributing additional funds to it from there as opposed to other investment vehicles - unless I'm missing something?

Mega Backdoor is actually just something I realized my wife's work allows (i think). Very quickly getting more familiar with it - it seems like it would be a great option, but her 401k is currently a hodge podge of different types of funds due to switching from a post-tax contribution to pre-tax a few years back. Trying to get it straightened out.
Last edited by gofarhaveacigar on Thu Apr 22, 2021 8:05 pm, edited 1 time in total.
Topic Author
gofarhaveacigar
Posts: 35
Joined: Sun Dec 26, 2010 4:20 pm

Re: Advice on Asset Allocation when starting out Taxable Account (Other retirements maxed)

Post by gofarhaveacigar »

retired@50 wrote: Thu Apr 22, 2021 7:44 pm
gofarhaveacigar wrote: Thu Apr 22, 2021 7:37 pm
Is there a resource to check into on what one should invest a taxable account into, based on a traditional AA allocation of 80/20?
Yes, there is a resource in the wiki.
https://www.bogleheads.org/wiki/Tax_eff ... _placement

The general idea expressed in the wiki page is to put all your bonds in the tax-deferred accounts (like 401k or Trad. IRA) and use the Roth and taxable accounts for stock index funds.

Regards,
Thanks - will check that out and it obviously makes sense.
dafioram
Posts: 89
Joined: Sat Jan 02, 2021 7:31 pm

Re: Advice on Asset Allocation when starting out Taxable Account (Other retirements maxed)

Post by dafioram »

gofarhaveacigar wrote: Thu Apr 22, 2021 8:03 pm
dafioram wrote: Thu Apr 22, 2021 7:44 pm Mega backdoor? 529?
529s are being contributed to at $1k/year (that's the max that comes with tax savings in Rhode Island). I don't see the point in contributing additional funds to it from there as opposed to other investment vehicles - unless I'm missing something?

Mega Backdoor is actually just something I realized my wife's work allows (i think). Very quickly getting more familiar with it - it seems like it would be a great option, but her 401k is currently a hodge podge of different types of funds due to switching from a post-tax contribution to pre-tax a few years back. Trying to get it straightened out.
Yeah, more into 529 makes more sense if you are more confident your kids will be going to college and its farther away in time.

Maybe you can convert the after tax in plan to a roth 401k and if not maybe you can split the after tax into a roth ira and after tax gains into a traditional ira (which may block your roth backdoor).

At some point you will have excess to go into taxable. At that point you can just VT and chill. If it goes down you can just TLH to another total world.
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