401k is already 100% full of bonds, but my AA calls for more bonds. Put in taxable or Roth IRA?
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401k is already 100% full of bonds, but my AA calls for more bonds. Put in taxable or Roth IRA?
I'm doing a 70/30 AA (with equity as 75% VTSAX / 25% VTIAX)
52.5% VTSAX
17.5% VTIAX
30% VBTLX
Total assets $3 mm
My 401k is currently 100% VBTLX ($260,000)
My Roth IRA has room for $170k
My HSA has room for $25k
I read that putting bonds in Roth IRA is bad because your highest growth should go there (VTSAX)
But I also read putting bonds in Taxable is bad too.
Where should I put the extra $640,000 for VBTLX?
Also does this AA make sense for me? I'm 35 and retiring this year, planning a 3-3.5% withdrawal rate ($90k - $105k)
52.5% VTSAX
17.5% VTIAX
30% VBTLX
Total assets $3 mm
My 401k is currently 100% VBTLX ($260,000)
My Roth IRA has room for $170k
My HSA has room for $25k
I read that putting bonds in Roth IRA is bad because your highest growth should go there (VTSAX)
But I also read putting bonds in Taxable is bad too.
Where should I put the extra $640,000 for VBTLX?
Also does this AA make sense for me? I'm 35 and retiring this year, planning a 3-3.5% withdrawal rate ($90k - $105k)
Last edited by firefighter973 on Mon May 10, 2021 9:33 am, edited 1 time in total.
- retired@50
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- Location: Living in the U.S.A.
Re: 401k is already 100% full of bonds, but my AA calls for more bonds. Put in taxable or Roth IRA?
Since the Roth IRA isn't big enough to hold all the bonds you want to hold, it appears you'll have to use the taxable account (at least partially). Depending on your tax bracket, you might want to consider a municipal bond fund (or two) for the taxable account.firefighter973 wrote: ↑Mon May 10, 2021 9:26 am I'm doing a 70/30 AA (with equity as 75% VTSAX / 25% VTIAX)
52.5% VTSAX
17.5% VTIAX
30% VBTLX
Total assets $3 mm
My 401k is currently 100% VBTLX ($260,000)
My Roth IRA has room for $170k
I read that putting bonds in Roth IRA is bad because your highest growth should go there (VTSAX)
But I also read putting bonds in Taxable is bad too.
Where should I put the extra $640,000 for VBTLX?
Also does this AA make sense for me? I'm 35 and retiring this year, planning a 3-3.5% withdrawal rate ($90k - $105k)
Some folks like the Vanguard Limited Term Tax Exempt fund, or the Intermediate Term Tax Exempt Fund. Check out VMLUX and/or VWIUX.
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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- Posts: 53
- Joined: Wed Jun 24, 2020 12:55 pm
Re: 401k is already 100% full of bonds, but my AA calls for more bonds. Put in taxable or Roth IRA?
I'm in 22% bracket with 0% state.retired@50 wrote: ↑Mon May 10, 2021 9:33 amSince the Roth IRA isn't big enough to hold all the bonds you want to hold, it appears you'll have to use the taxable account (at least partially). Depending on your tax bracket, you might want to consider a municipal bond fund (or two) for the taxable account.firefighter973 wrote: ↑Mon May 10, 2021 9:26 am I'm doing a 70/30 AA (with equity as 75% VTSAX / 25% VTIAX)
52.5% VTSAX
17.5% VTIAX
30% VBTLX
Total assets $3 mm
My 401k is currently 100% VBTLX ($260,000)
My Roth IRA has room for $170k
I read that putting bonds in Roth IRA is bad because your highest growth should go there (VTSAX)
But I also read putting bonds in Taxable is bad too.
Where should I put the extra $640,000 for VBTLX?
Also does this AA make sense for me? I'm 35 and retiring this year, planning a 3-3.5% withdrawal rate ($90k - $105k)
Some folks like the Vanguard Limited Term Tax Exempt fund, or the Intermediate Term Tax Exempt Fund. Check out VMLUX and/or VWIUX.
Regards,
Would you max out Roth IRA with bonds, then put the extra in taxable? Or keep VTSAX in Roth IRA and just do the bonds in taxable?
- retired@50
- Posts: 12821
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: 401k is already 100% full of bonds, but my AA calls for more bonds. Put in taxable or Roth IRA?
Personally, I'd probably put a sprinkle of bonds in the Roth IRA, maybe $25k or so, just to help with re-balancing without tax consequences if it becomes necessary. Then, I'd put the remainder of the bonds in the taxable account. At the 22% bracket you're probably better off using VBTLX in taxable given the current yield (when compared to VWIUX).firefighter973 wrote: ↑Mon May 10, 2021 9:35 amI'm in 22% bracket with 0% state.retired@50 wrote: ↑Mon May 10, 2021 9:33 amSince the Roth IRA isn't big enough to hold all the bonds you want to hold, it appears you'll have to use the taxable account (at least partially). Depending on your tax bracket, you might want to consider a municipal bond fund (or two) for the taxable account.firefighter973 wrote: ↑Mon May 10, 2021 9:26 am I'm doing a 70/30 AA (with equity as 75% VTSAX / 25% VTIAX)
52.5% VTSAX
17.5% VTIAX
30% VBTLX
Total assets $3 mm
My 401k is currently 100% VBTLX ($260,000)
My Roth IRA has room for $170k
I read that putting bonds in Roth IRA is bad because your highest growth should go there (VTSAX)
But I also read putting bonds in Taxable is bad too.
Where should I put the extra $640,000 for VBTLX?
Also does this AA make sense for me? I'm 35 and retiring this year, planning a 3-3.5% withdrawal rate ($90k - $105k)
Some folks like the Vanguard Limited Term Tax Exempt fund, or the Intermediate Term Tax Exempt Fund. Check out VMLUX and/or VWIUX.
Regards,
Would you max out Roth IRA with bonds, then put the extra in taxable? Or keep VTSAX in Roth IRA and just do the bonds in taxable?
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Re: 401k is already 100% full of bonds, but my AA calls for more bonds. Put in taxable or Roth IRA?
With only 170K in Roth (compared to many times that amount in taxable), I would protect the Roth and put the additional bonds in taxable.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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- Posts: 53
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Re: 401k is already 100% full of bonds, but my AA calls for more bonds. Put in taxable or Roth IRA?
Thanks.
Do you agree with the other poster that VBTLX in taxable is better than a tax-exempt bond fund?
22% tax bracket and 0% state.
Re: 401k is already 100% full of bonds, but my AA calls for more bonds. Put in taxable or Roth IRA?
Will you still be in a 22% bracket after you retire? If not I'd definitely put the bonds in taxable.firefighter973 wrote: ↑Mon May 10, 2021 9:35 amI'm in 22% bracket with 0% state.retired@50 wrote: ↑Mon May 10, 2021 9:33 amSince the Roth IRA isn't big enough to hold all the bonds you want to hold, it appears you'll have to use the taxable account (at least partially). Depending on your tax bracket, you might want to consider a municipal bond fund (or two) for the taxable account.firefighter973 wrote: ↑Mon May 10, 2021 9:26 am I'm doing a 70/30 AA (with equity as 75% VTSAX / 25% VTIAX)
52.5% VTSAX
17.5% VTIAX
30% VBTLX
Total assets $3 mm
My 401k is currently 100% VBTLX ($260,000)
My Roth IRA has room for $170k
I read that putting bonds in Roth IRA is bad because your highest growth should go there (VTSAX)
But I also read putting bonds in Taxable is bad too.
Where should I put the extra $640,000 for VBTLX?
Also does this AA make sense for me? I'm 35 and retiring this year, planning a 3-3.5% withdrawal rate ($90k - $105k)
Some folks like the Vanguard Limited Term Tax Exempt fund, or the Intermediate Term Tax Exempt Fund. Check out VMLUX and/or VWIUX.
Regards,
Would you max out Roth IRA with bonds, then put the extra in taxable? Or keep VTSAX in Roth IRA and just do the bonds in taxable?
Re: 401k is already 100% full of bonds, but my AA calls for more bonds. Put in taxable or Roth IRA?
+1
Global stocks, US bonds, and time.
Re: 401k is already 100% full of bonds, but my AA calls for more bonds. Put in taxable or Roth IRA?
Most likely, yes. A 30+ percent (federal + state) marginal tax rate is where a tax exempt “state” muni fund shows a clear advantage.firefighter973 wrote: ↑Mon May 10, 2021 9:50 amThanks.
Do you agree with the other poster that VBTLX in taxable is better than a tax-exempt bond fund?
22% tax bracket and 0% state.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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- Posts: 53
- Joined: Wed Jun 24, 2020 12:55 pm
Re: 401k is already 100% full of bonds, but my AA calls for more bonds. Put in taxable or Roth IRA?
Yes 22% Federal and 0% state in retirement also.MrBobcat wrote: ↑Mon May 10, 2021 9:54 amWill you still be in a 22% bracket after you retire? If not I'd definitely put the bonds in taxable.firefighter973 wrote: ↑Mon May 10, 2021 9:35 amI'm in 22% bracket with 0% state.retired@50 wrote: ↑Mon May 10, 2021 9:33 amSince the Roth IRA isn't big enough to hold all the bonds you want to hold, it appears you'll have to use the taxable account (at least partially). Depending on your tax bracket, you might want to consider a municipal bond fund (or two) for the taxable account.firefighter973 wrote: ↑Mon May 10, 2021 9:26 am I'm doing a 70/30 AA (with equity as 75% VTSAX / 25% VTIAX)
52.5% VTSAX
17.5% VTIAX
30% VBTLX
Total assets $3 mm
My 401k is currently 100% VBTLX ($260,000)
My Roth IRA has room for $170k
I read that putting bonds in Roth IRA is bad because your highest growth should go there (VTSAX)
But I also read putting bonds in Taxable is bad too.
Where should I put the extra $640,000 for VBTLX?
Also does this AA make sense for me? I'm 35 and retiring this year, planning a 3-3.5% withdrawal rate ($90k - $105k)
Some folks like the Vanguard Limited Term Tax Exempt fund, or the Intermediate Term Tax Exempt Fund. Check out VMLUX and/or VWIUX.
Regards,
Would you max out Roth IRA with bonds, then put the extra in taxable? Or keep VTSAX in Roth IRA and just do the bonds in taxable?
Re: 401k is already 100% full of bonds, but my AA calls for more bonds. Put in taxable or Roth IRA?
The interest rates on bonds today mean that bonds in taxable are not the tax problem they once were, for better or worse.
Re: 401k is already 100% full of bonds, but my AA calls for more bonds. Put in taxable or Roth IRA?
Bonds are tax efficient now. Low yield thus low income thus low tax.
Re: 401k is already 100% full of bonds, but my AA calls for more bonds. Put in taxable or Roth IRA?
Calls for i-Bonds. For a married filing jointly couple you can load up to $45k per year. $10k per person, $10k per each person's living trust, plus $5k through deliberately paying estimated taxes higher by that amount than necessary.
You get the "tax deferred" nature of tax advantaged accounts with i-Bonds, as you can defer the interest until you actually redeem them. Which can be up to 30 years.
$640k will take 20 years, is there a hurry that you must do that rebalancing right now? You are only 35 .... You do have that 20 years ramp time.
It does require a bit of planning, setting up living trusts, and dealing with the clunky Treasury Direct website. But on the positive side, they are going to yield 3.54% for the next 6 months, higher yield than any bond fund. Then guaranteed to never lose value to inflation, on the full faith and credit of Uncle Sam.
<< All this to say, no bonds in Roth IRA >>
You get the "tax deferred" nature of tax advantaged accounts with i-Bonds, as you can defer the interest until you actually redeem them. Which can be up to 30 years.
$640k will take 20 years, is there a hurry that you must do that rebalancing right now? You are only 35 .... You do have that 20 years ramp time.
It does require a bit of planning, setting up living trusts, and dealing with the clunky Treasury Direct website. But on the positive side, they are going to yield 3.54% for the next 6 months, higher yield than any bond fund. Then guaranteed to never lose value to inflation, on the full faith and credit of Uncle Sam.
<< All this to say, no bonds in Roth IRA >>