Assets in tIRA, Roth, and brokerage

[RetireBy90]

Trying to understand once again. I have 3 accounts. Regular after tax account, tIRA, and Roth. If I put stocks and higher appreciation assets into the Roth there will be no tax due on the appreciation. Bonds into the tIRA as I will have to declare any return as regular income. However, cap gains and qualified dividends can qualify for special tax rates in my after tax account so there is a case to be made for putting them into the after tax account.

What is the conventional wisdom for which assets in which type of account ? What do you do ?

Thanks.

 

[pb4uski]

The conventional wisdom is to NOT convert tax preferenced capital gains and qualified dividends into ordinary income if possible which is what happens with equity returns in a tax-deferred account like a 401k or an IRA.

International equities are best in taxable accounts because the foreign tax credit for fireign taxes paid can only be used for taxable account investments... it goes to waste in tax-deferred or tax-free accounts. Bonds are best in a tIRA since investment income is ordinary income as are tIRA withdrawals.

Domestic equities are best in either tax-free Roth/HSAs or in taxable accounts.

However, as a practical reality for many people their tax-deferred accounts as a percentage of total exceed their target bond allocation perentage so some equities end up in their tax-deferred accounts.

Also see: https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

 

[RetireBy90]

The conventional wisdom is to NOT convert tax preferenced capital gains and qualified dividends into ordinary income if possible which is what happens with equity returns in a tax-deferred account like a 401k or an IRA.

International equities are best in taxable accounts because the foreign tax credit for fireign taxes paid can only be used for taxable account investments... it goes to waste in tax-deferred or tax-free accounts. Bonds are best in a tIRA since investment income is ordinary income as are tIRA withdrawals.

Domestic equities are best in either tax-free Roth/HSAs or in taxable accounts.

However, as a practical reality for many people their tax-deferred accounts as a percentage of total exceed their target bond allocation perentage so some equities end up in their tax-deferred accounts.

Also see: https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

Thanks for the response. So equities in Roth and then taxable account, and bonds in tIRA, if I understand your comments. At least as much as I can given the size of the tIRA compared to AA figure for bonds.

 

[pb4uski]

Yes, so if your tIRA is 70% of your total and your target AA is 60/40 then all your 40% bond allocation would be in your tIRA, along with 30% of your equities (except internatonal equities which would be in taxable accounts).

 

[PaunchyPirate]

Back to the OPs original topic, here is my alignment (pretty much what was recommended above). My target overall asset allocation is 55/45 stocks/bonds.

Traditional (Rollover) IRA - 100% Bonds (a US and International Mix)

Roth IRA - currently empty, ready-and-waiting conversions from my TIRA if I decide to do that. If/when I do put funds here, it will be 100% Stock mutual funds. I will adjust the taxable account to hold more bonds, if needed, to keep my target asset allocation.

Taxable Account - Mostly stocks (mutual funds and some legacy individual stocks) and some bonds. This account is much larger than my TIRA, so I have to put bonds here to meet my 55/45 allocation goal. When I had a higher income, the bonds were tax-free muni bonds. Now that I'm retired and living off retirement income and due to COVID fears on municipalities' viability, I switched the muni bonds to the broader Total Bond Market Fund from Vanguard.

 

[RunningBum]

I just retired in April. Talking to an investor about moving my 401 from the company I worked for. He is talking about Barkley Trail Blazer 5 index fund.
Does anyone know anything about this find?

Start your own thread, don't threadjack, please, especially with a topic that isn't at all related. Suggest you introduce yourself here https://www.early-retirement.org/forums/f26/ and you can ask your question in that post.

 

[Gotadimple]

You know you can move your 401k from whatever Investment firm manages it to a brokerage firm like Vangard, Fidelity, or Schwab. And they will help you do the move, and then once the funds are there they will help you - at no cost - decide what which index funds or index ETFs to use to get the results you want.

You have educated yourself on the allocation, just have the $$ moved and follow through on the allocation. It doesn't take many funds to get what you need set up.