What % of Bond ETF's Should I "Move" From Joint to IRA Account?

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Sammy123
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What % of Bond ETF's Should I "Move" From Joint to IRA Account?

Post by Sammy123 »

I wrote a question a few months back and received some very good advice in return. It had to do with my plan to get from a portfolio containing 6 accounts and something like 25 different funds to a portfolio containing less then 6 accounts (but learned that was not possible) and something more like 4 ETF's (VTI, VXUS, BND, BNDX)? We are on our way to implementing that plan and now I just want to re-check and ask a more specific question.

Part of the plan was to move all (100%) of the bond ETF funds from our taxable joint account to my rollover IRA account. We have now “moved” about 70% of the bond funds (so 30% remain in our Joint account). Can you think of any reason that I should keep some bond ETF money in the joint account or should I just proceed to “move” the remaining bond ETFs from our joint account to my rollover IRA?
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retired@50
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Re: What % of Bond ETF's Should I "Move" From Joint to IRA Account?

Post by retired@50 »

Have you seen the tax-efficient fund placement wiki page?
Link: https://www.bogleheads.org/wiki/Tax-eff ... _placement

It can seem unsettling to some people not to have a little bit of each type of investment (stocks / bonds / cash) in each account, but that isn't usually ideal from a tax perspective.

However, ideal, and what you can live with might be two different things.

Personally, I hold all my bond funds in my retirement accounts, and none in my taxable account. I just hold some small percentage of cash in my taxable space, along with some 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
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Sammy123
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Re: What % of Bond ETF's Should I "Move" From Joint to IRA Account?

Post by Sammy123 »

Thanks for the informative concise reply. I will proceed to move all bond funds into my Rollover IRA. It's nice just to get your confirmation.
Statistical
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Re: What % of Bond ETF's Should I "Move" From Joint to IRA Account?

Post by Statistical »

Yeah just be aware that if you have no bonds in taxable (and I agree you shouldn't) that at time to get money out you may need to sell equities at a loss.

Now at the same time you could sell bonds in your tax sheltered account and use the cash there to buy equities. That means you can avoid reducing equity asset allocation by shifting assets in other accounts. However some people get paralyzed by the idea of selling the specific shares they are selling are "down". It doesn't matter but it ends up being a psychological hurdle.

So you should start getting your mind right that if your taxable account is 100% equities and at times equities will be down and you need to pull money from taxable from time to time it will mean sometimes selling equities (from that account) while they are down.
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bertilak
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Re: What % of Bond ETF's Should I "Move" From Joint to IRA Account?

Post by bertilak »

You can't arbitrarily move money or other assets into an IRA. There needs to be matching earned income on the year's 1040. I assume the Joint Account is not a tax-advantaged account.

Not having followed this from the beginning (other thread), I don't know if we are already past that consideration.
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sycamore
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Re: What % of Bond ETF's Should I "Move" From Joint to IRA Account?

Post by sycamore »

bertilak wrote: Thu Jul 07, 2022 10:25 am You can't arbitrarily move money or other assets into an IRA. There needs to be matching earned income on the year's 1040. I assume the Joint Account is not a tax-advantaged account.

Not having followed this from the beginning (other thread), I don't know if we are already past that consideration.
I was going to post the same concern, but it appears it was covered in the other thread with this:
HomeStretch wrote: Fri May 20, 2022 7:52 am ...
...Question 1 - We will follow your suggestions of moving bond funds from our taxable joint account to our conventional IRAs. Let me ask a dumb question in the form of a statement. We can’t simply just “move” the bond funds from our taxable joint account to one if of our IRA accounts. We need to sell the bond funds in our joint account and separately purchase bond funds in our IRA account. Correct? And the funds to use to purchase bond funds in the IRA account must be from cash or from the sale of funds that are already in the IRA account (aside from the $7,000 allowable annual contribution). Correct? ...
Correct, you must separately sell in the Taxable account and buy in His Rollover IRA to "move' the bonds from Taxable to tax deferred. Selling the bonds in the Taxable account will have tax consequences (although, per below, the bonds have unrealized capital losses which means you will not pay taxes on the sale). In the tax deferred accounts, bonds can be exchanged for equity without tax consequences.
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bertilak
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Re: What % of Bond ETF's Should I "Move" From Joint to IRA Account?

Post by bertilak »

sycamore wrote: Thu Jul 07, 2022 11:14 am
bertilak wrote: Thu Jul 07, 2022 10:25 am You can't arbitrarily move money or other assets into an IRA. There needs to be matching earned income on the year's 1040. I assume the Joint Account is not a tax-advantaged account.

Not having followed this from the beginning (other thread), I don't know if we are already past that consideration.
I was going to post the same concern, but it appears it was covered in the other thread with this:
HomeStretch wrote: Fri May 20, 2022 7:52 am ...
...Question 1 - We will follow your suggestions of moving bond funds from our taxable joint account to our conventional IRAs. Let me ask a dumb question in the form of a statement. We can’t simply just “move” the bond funds from our taxable joint account to one if of our IRA accounts. We need to sell the bond funds in our joint account and separately purchase bond funds in our IRA account. Correct? And the funds to use to purchase bond funds in the IRA account must be from cash or from the sale of funds that are already in the IRA account (aside from the $7,000 allowable annual contribution). Correct? ...
Correct, you must separately sell in the Taxable account and buy in His Rollover IRA to "move' the bonds from Taxable to tax deferred. Selling the bonds in the Taxable account will have tax consequences (although, per below, the bonds have unrealized capital losses which means you will not pay taxes on the sale). In the tax deferred accounts, bonds can be exchanged for equity without tax consequences.
My point was more along the lines of what is "allowable" in "$7,000 allowable annual contribution."
It is only allowed to the extent there is earned income to cover it. Just having $7000 cash available does not cut it.

It is probably a moot point, but it was something that seemed to have been taken for granted and was a bigger point than some of the fine points being discussed.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
123
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Re: What % of Bond ETF's Should I "Move" From Joint to IRA Account?

Post by 123 »

A portion of an investor's fixed-income allocation may represent their emergency fund and they may prefer to have it readily available in a taxable account so sometimes it's not reasonable to put it all in a tax-deferred account. But it can come down to mincing words, some folks might view the cash and fixed income they hold in their taxable accounts as their emergency fund and not part of their investment portfolio.
The closest helping hand is at the end of your own arm.
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