retiredjg wrote: ↑Thu Sep 16, 2021 7:25 pm
Bond dividends are never qualified and always taxed at your marginal tax rate. Those ETFs contain bonds.
I should have been clearer. When I say dividend, that would be stock dividends. The thing we get from stocks are coupons and I realize that those are fully taxed at my marginal tax rate.
retiredjg wrote: ↑Thu Sep 16, 2021 7:25 pm
And strangely, the 20% bond ETF tax-efficiency is not much different from the 70% bond ETF. Not sure what that is about.
Look under performance. Subtract "after-tax pre-liq" from "Total return'. If the numbers consistently come out in different time periods at .5% or thereabouts, that is pretty tax efficient. If they come out .8% or .9%...not so much.
Thanks! That's very useful. So, for example, AOK comes to 0.8% so it's not very good.
retiredjg wrote: ↑Thu Sep 16, 2021 7:25 pm
If you just want one fund in taxable, it should be an equity ETF for the most tax-efficiency. Add a little more bonds in one of the other accounts.
Or do what you have in mind. If the taxable account is small enough, in the 22% tax bracket it will not hurt you too much. Or the two ETF solution you mention which will be easier to unravel down the road.
I will try to keep the bonds in taxable to a minimum (I haven't bought any yet). But I also can't easily get around the fact that near-future purchases need to come from taxable. I think I'm leaning toward the two-fund solution for the reason that you gave. Using your guideline for tax efficiency, I see that AGG comes to 1.24% (!!!!!!) while ITOT comes to 0.41%.
Man... I wonder how other people deal with this. Bonds obviously belong in a tax advantaged account, but you can't save for houses, cars, vacations, etc with a 100% stock allocation. If you don't mind me asking, how do you save for short-term goals?
On the other hand, current yields are so low I wonder why I even bother. It seems like I might as well stash the "bond" portion in a savings account.