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Need to increase taxable investments. Where?
Old 06-04-2008, 11:42 AM   #1
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Need to increase taxable investments. Where?

We're to a point now where we have our cash reserves built back up, are on track with our savings goals, and want to start investing more money. Tax-advantaged accounts are maxed out between my contributions to a Roth 401(k) and my wife's contributions to her 401(k).

I'm also putting money in a 401(k) post-tax. I like my fund options but I don't know if this strategy makes sense.

Taxable only makes up 6% of our portfolio right now and it's losing ground fast. It's roughly divided between Vanguard TSM and Dodge & Cox International.

So, should I just bump up the TSM and international and call it good? I've toyed with the idea of Wellesely but I assume that's not a really smart play for a taxable account.

Oh, yeah, I'm 30. Wife is 29. Our AA is:

Bond - 22%
Lg Cap - 39%
Mid Cap - 5%
Sm Cap - 7%
International - 27%
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Old 06-04-2008, 11:54 AM   #2
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TSM is definitely tax efficient. Can't beat that much.

I recently added VG tax managed small cap fund to my taxable portfolio because I can't add any more funds to tax-deferred accounts and I was underweight in Sm Cap.

How tax efficient is your D & C international?
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Old 06-04-2008, 12:33 PM   #3
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How tax efficient is your D & C international?
It hurt a bit this year but they had to realize quite a few gains to cover payouts with people fleeing equity positions. I'm going to hold it through this year and then re-evaluate going to Vanguards FTSE ex-US fund or moving the International part of the AA into a 401(k).
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Old 06-04-2008, 12:50 PM   #4
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I have VG Europe, VG Pacific, and VG Emerging Mkts in my taxable account. These funds have been pretty tax efficient and I expect them to continue to be. I keep the int'l value fund in tax advantaged accounts because it pays out a lot of CG's.
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Old 06-04-2008, 12:54 PM   #5
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It would be very hard to beat Vanguard TSM and FTSE ex-USA in taxable - probably the most common recomendation at the Bogleheads site. I use the ETF versions as that works better for me long term the way I invest. If you move your International to your 401k you will lose the foreign tax deduction.

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Old 06-04-2008, 03:17 PM   #6
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I own PRPFX in a taxable account and it is extemely tax efficient and an excellent diversifier. It is on moderate side of risk spectrum.
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Old 06-04-2008, 08:37 PM   #7
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Quote:
Originally Posted by Marquette View Post
We're to a point now where we have our cash reserves built back up, are on track with our savings goals, and want to start investing more money. Tax-advantaged accounts are maxed out between my contributions to a Roth 401(k) and my wife's contributions to her 401(k).

I'm also putting money in a 401(k) post-tax. I like my fund options but I don't know if this strategy makes sense.
You might find this thread I started helpful: http://www.early-retirement.org/foru...ons-23469.html

We decided to go with a taxable account instead of putting money into a 401K post-tax. Almost all of our taxable is in Vanguard Total Stock Market Index.
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Old 06-09-2008, 08:05 PM   #8
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Marquette,

Do you have IRAs? We contribute to a traditional IRA now in addition to our 401ks, and then kick into taxable accounts. If you can do an IRA, I'd do it before a taxable account.

You may have covered this already, sorry if so.

BTW, your dog persuasion pictures worked. We picked up a Lab at the humane society a couple of weeks ago... happy us!
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Old 06-09-2008, 08:09 PM   #9
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Urchina, congrats on the new furry addition!... and I couldn't be happier about your choice of venues.

We don't get the tax benefit of the IRA, but I think we could contribute after tax dollars and then let them grow tax-deferred. However, I believe I was told to pursue the after-tax 401(k) instead last time I asked that question.

I think at this point I want to pad the taxable a bit just to give us some options down the road (heaven forbid they change the 72(t) tax code before I can take advantage of it!). We've doubled our Vanguard TSM savings rate for now while we figure the rest out.
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Old 06-10-2008, 08:48 AM   #10
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Marquette - I contribute a set % to my 401k and once the IRS limit is reached, my 401k admin automatically switches over my contributions to after tax. So, over time, I have accumulated about $2k worth of after tax contributions. Anyway, I called my 401k administration to find out what happens to those after tax contributions when I leave my job and roll over the rest to TIRA.

She (the rep) said they can cut me a (tax free) check for after tax contributions (not gains) or I can roll them into a non-deductible TIRA. Upon further prodding, she shared two additional tidbits: (1) I could then roll that non-deductible TIRA to ROTH (2010 and later, income limitation goes away), (2) depending on the HR set-up I may be allowed to do yearly in-service after tax contribution rollovers to non-deductible TIRAs. This would work great in my case, since I currently have no IRAs of any kind.

Word of caution!!!!!! I have to say, she did not give out a great aura of confidence, so this option may or may not be viable. My plan is to follow-up on this with my HR and another rep. However, if this is indeed doable, starting with next year I may up my after tax contributions as a way of funding ROTH.
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