How to rebalance

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corn18
Posts: 2867
Joined: Fri May 22, 2015 6:24 am

How to rebalance

Post by corn18 »

My target AA is 50/50, 25% international. I am at 56/44 and want to rebalance back to target. My problem is which account to use.

Taxable account is 100% stock with large capital gains. I am in the top tax bracket this year subject to NIIT. I also have 3 years cash in my taxable account.

401k is all stable value

Roths are 100% stock

Don't want to sell from taxable this year due to the very high taxes. I retired this year, so next year I can sell in my taxable account and have 0% LTCG tax.

401k is useless for this rebalance.

I could do it in my Roth. Don't like to hold bonds in my Roth.

Maybe I could rebalance in the Roth and next year use the 0% LTCG tax on my taxable to get back to 100% stock in my Roth.

Am I missing something or is the Roth the best way to go?

Thanks, Corn
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iceport
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Joined: Sat Apr 07, 2007 4:29 pm

Re: How to rebalance

Post by iceport »

corn18 wrote: Mon Aug 02, 2021 4:12 pm I could do it in my Roth. Don't like to hold bonds in my Roth.

Maybe I could rebalance in the Roth and next year use the 0% LTCG tax on my taxable to get back to 100% stock in my Roth.

Am I missing something or is the Roth the best way to go?
That seems like a fine way to go. You might not like to hold bonds in the Roth, but wouldn't that be better than taking a tax hit by realizing capital gains in the taxable account? I am fine with holding a small bond allocation in my Roth indefinitely, but all the better for you if you can trim your taxable equity holdings next year with little or no tax consequences.

Buy some time. You might get "lucky" and see the market crash sometime soon. :)
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
livesoft
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Joined: Thu Mar 01, 2007 7:00 pm

Re: How to rebalance

Post by livesoft »

Given your criteria, selling equities in your Roth is the only way to go unless you have a ton of money to contribute to your 401(k) or you want to donate a ton of your taxable account to charity and get a tax deduction, too.
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