How to decide what to funds to sell

[tominboise]

We have our portfolios at Fidelity (TIRA and ROTH IRA) and Vanguard (Aftertax). I am managing our income to a level for an ACA Healthcare subsidy. I have some extra headroom between our income thus far this year and our subsidy limit. This headroom will be split between doing some ROTH conversions (in the Fido account) and replenishing our short term cash account for our living expenses going into 2022 (from the Vanguard account).

We are both retired (61/59), not drawing pensions until 65 and SS until 70.

Current asset allocation is 58/40/2 (Stocks/Bonds/Short term).

The funds in Vanguard that I would tap (for lowest LTCG in my account) are:

VBTLX - Total Bond Market Index;
VBLAX - Long Term Bond Index;
VWIAX - Wellesley

My question - which one should I tap first? Take some from all three? Exhaust one, then go to the next?

 

[willing2try]

I'm in my first year of retirement, so I'm going through a similar situation. When I need to draw funds in a few months, I'll draw a stock/bond mixture in a way that will preserve my preferred 70/30 AA.

 

[walkinwood]

Determine how much you need to realize from your sale
Sell funds so that after the sale, you have reached your target AA (or closer to it)


Or you could choose to reduce the capital gains you incur so that you can do more ROTH conversions.


Good luck.

 

[pb4uski]

We have our portfolios at Fidelity (TIRA and ROTH IRA) and Vanguard (Aftertax). I am managing our income to a level for an ACA Healthcare subsidy. I have some extra headroom between our income thus far this year and our subsidy limit. This headroom will be split between doing some ROTH conversions (in the Fido account) and replenishing our short term cash account for our living expenses going into 2022 (from the Vanguard account).

We are both retired (61/59), not drawing pensions until 65 and SS until 70.

Current asset allocation is 58/40/2 (Stocks/Bonds/Short term).

The funds in Vanguard that I would tap (for lowest LTCG in my account) are:

VBTLX - Total Bond Market Index;
VBLAX - Long Term Bond Index;
VWIAX - Wellesley

My question - which one should I tap first? Take some from all three? Exhaust one, then go to the next?

I would go with specific identification and tap any/all taxable account purchase lots with the unrealized losses and then taxable account purchase lots with the lowest unrealized gains (as a percentage of value) until the capital gains target is hit... this will maximize the proceeds considering the capital gains target constraint.

Have you factored in any December 2021 dividend and capital gains distributions from all 3 funds into your calculations? You should. It would be bad to pull the trigger and realize gains only to later get hit with distributions that put you over your ACA subsidy limit (though I'm not if or how the limit applies for 2021).

Then do your Roth conversion last.