Any other tax advantaged investments I'm missing?

[NYCtoER]

Hi long time reader first post. I have a high paying job in a crazy high COLA (NYC) and therefore a very high effective tax rate. I have a Roth and tIRA but haven't contributed to the Roth in 15 years and the tIRA was a 401k rollover from an old job. I have never made non-deductible contributions to the tIRA as I assume at some point my tax rate will be lower (even if its just lower city/state taxes).

I max out my 401k for 18,000 every year and get the company match. As a "highly compensated employee", I am not allowed to make after-tax contributions above that (I looked into moving the tIRA into my 401k and then doing a backdoor Roth).

My question is... is there anything else I can be doing? I am not putting away much in tax advantaged accounts and thus the majority is going into taxable. In the future will have a 529 I'm sure as well but no need for that yet.

Please let me know your thoughts. Thank you!

NYCtoER

 

[RockyMtn]

NY State Tax free Municipals would be an option.

 

[NYCtoER]

Good point -- should have mentioned that. A Nuveen triple tax exempt muni bond fund is my largest holding alongside SPY in taxable account. Wish I owned even more though given how they have performed...

 

[pb4uski]

Equities in a taxable account my be a good option for you.

 

[ABQ2015]

If you are okay with a High Deductible Health Plan (HDHP) and your employer offers this option, a Health Savings Account (HSA) is a great tax advantaged investment to invest a few thousand a year.

 

[ESRwannabe]

Vanguard has some tax advantaged funds. My favorite is the tax-managed balanced fund which is 50% muni bonds and 50% tax-managed us stocks.

https://personal.vanguard.com/us/funds/snapshot?FundIntExt=INT&FundId=0103

You can also get very tax efficient if you buy stocks that don't pay any dividends. A good example would be Berkshire Hathaway.

https://www.google.com/finance?q=NYSE:BRK.B

Going back to municipal bonds, you could add some municipal bonds CEFs (closed end funds). Most of my taxable investments are in these. Since you are familiar with Nuveen, here are there CEFs.

https://www.nuveen.com/CEF/Default.aspx

I personally own both NAD and NZF. In addition I own four more CEFs from Blackstone and Invesco.

https://www.nuveen.com/CEF/Product/Overview.aspx?FundCode=NAD

https://www.nuveen.com/CEF/Product/Overview.aspx?FundCode=NZF

Now to get a little off the beaten path, you could also add some MLPs (master limited partnerships) which are primarily oil/gas pipeline companies structured so that what they pay out to you is ROC (return of capital) which is federal tax free until you have 100% of capital returned at which point the payments get taxed like dividends at 15%.

Probably the easiest way to buy MLPs is with an ETF. If you buy individual MLPs you will need to fill out K-1 tax stuff which I hear is not that hard to do.

Alerian MLP ETF (AMLP)

Infracap

I own both AMLP and AMZA.

Now sticking with the ROC idea and going back to CEFs, you could look into Covered Call CEFs which return mostly ROC and are thus tax-efficient. Since you are familiar with Nuveen here are a few they have:

https://www.nuveen.com/CEF/Product/Overview.aspx?FundCode=SPXX

https://www.nuveen.com/CEF/Product/Overview.aspx?FundCode=QQQX

https://www.nuveen.com/CEF/Product/Overview.aspx?FundCode=DIAX

So, that's about it as far as I know. Of course you will also want to add plain old index funds like S&P 500, which you have already done. So no need to go into that.

If there are any other tax-advantaged investments I'm missing I'd love to add them to my collection...

 

[Blue Collar Guy]

Hi long time reader first post. I have a high paying job in a crazy high COLA (NYC) and therefore a very high effective tax rate. I have a Roth and tIRA but haven't contributed to the Roth in 15 years and the tIRA was a 401k rollover from an old job. I have never made non-deductible contributions to the tIRA as I assume at some point my tax rate will be lower (even if its just lower city/state taxes).

I max out my 401k for 18,000 every year and get the company match. As a "highly compensated employee", I am not allowed to make after-tax contributions above that (I looked into moving the tIRA into my 401k and then doing a backdoor Roth).

My question is... is there anything else I can be doing? I am not putting away much in tax advantaged accounts and thus the majority is going into taxable. In the future will have a 529 I'm sure as well but no need for that yet.

Please let me know your thoughts. Thank you!

NYCtoER

Im in NYC too, do you plan on dying here? otherwise when you pack it in move to a tax free state, you avoid the nyc and nys taxes thats a 12.696 % hit right there.

 

[NYCtoER]

Do not plan on dying here. Yes moving to a low or tax free state would be a pleasant change. For the intermediate-term I am here though. My work is here and I prefer having an easy commute. At some point that will change though.

Some of the funds listed above are very helpful I will look into them. I have used NRK as my muni allocation given its totally tax free in NY. Never thought about adding other munis but maybe I should.

 

[ESRwannabe]

Do not plan on dying here. Yes moving to a low or tax free state would be a pleasant change. For the intermediate-term I am here though. My work is here and I prefer having an easy commute. At some point that will change though.

Some of the funds listed above are very helpful I will look into them. I have used NRK as my muni allocation given its totally tax free in NY. Never thought about adding other munis but maybe I should.

I would highly suggest it. Putting it all into one state it too risky. Maybe 50% NY and 50% national.

Also don't forget that US Treasury bonds are state-tax exempt (fed agrees not to tax munis and states agree not to tax treasury bonds). So, you might want to add some US Treasury bonds as well.

 

[NYCtoER]

Is the main reason you suggest that to add diversity to the muni bond portfolio? All things equal if the credit quality is the same and the yield is the same, my tax effected yield will be higher on the NY muni obviously.

I have always viewed Treasury bonds as a bit to safe for my taste at this age (NRK yields 4.85% tax free -- uses leverage). That said I have too much cash right now that I have been hesitant to deploy into equity (whoops) and a safe bond fund could be a good alternative.

 

[pb4uski]

The reason for geographic diversification is if some issue affected NY and/or the Northeast but not other parts of the country then you would be protected.... same reasoning as for diversifying real estate investments.

 

[ESRwannabe]

Is the main reason you suggest that to add diversity to the muni bond portfolio? All things equal if the credit quality is the same and the yield is the same, my tax effected yield will be higher on the NY muni obviously.

I have always viewed Treasury bonds as a bit to safe for my taste at this age (NRK yields 4.85% tax free -- uses leverage). That said I have too much cash right now that I have been hesitant to deploy into equity (whoops) and a safe bond fund could be a good alternative.

You are correct. I only suggest it for diversification. Look at Illinois as an example, they have been rated junk now. Its not inconceivable the same could happen to NY.