Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Not a shining example of brilliance, VWIAX
Old 11-17-2022, 10:43 PM   #1
Recycles dryer sheets
 
Join Date: May 2018
Posts: 110
Not a shining example of brilliance, VWIAX

Over the last couple of years I have been adding to a Vanguard Wellesley taxable position for a total sum of 290k invested. As of today, my cost basis 314k and account value 280k. I just saw that the year end estimated distribution will be approx $2.65/share on 4513 shares or approx 12k.

Our 2022 income will be in the 220-230k range w/o this gain. My goal is the leave w*rk 1st quarter 2023 resulting in substantially lower taxable annual income from there on out, or at least until RMDs start.

I am considering selling the entire account but don't know if I should do it before the capital gain distribution or after. I will probably try to replicate the allocation using a stock etf and cds/bonds. This money is part of my taxable dollars that will allow for income flexibility to qualify for lower ACA costs. At 56yo now, the dollars needed for 23, 24, 25, 26 are in treasuries. The Wellesley dollars were tasked to supplement pretax account withdrawals from age 60ish to 65yo.

I really do not want to pay additional taxes on an account this is already underwater. Taking the capital loss to offset gains seems like a good idea. What say you?


**A bonus of selling will be that I can move the dollars into Fidelity to further simplify my accounts.
monte1022 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-17-2022, 10:52 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2016
Posts: 6,300
Don’t have managed funds in taxable accounts. Why do people continually do this?
Sell, enjoy the tax loss harvest and do tax efficient investing in your taxable account from here on out.
COcheesehead is offline   Reply With Quote
Old 11-18-2022, 01:04 AM   #3
Recycles dryer sheets
 
Join Date: May 2018
Posts: 110
In retrospect, it was a boneheaded move. Should I sell before or after the distribution or does it matter?
monte1022 is offline   Reply With Quote
Old 11-18-2022, 06:28 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 32,885
It doesn't matter if OP sells before or just after CG distribution since NAV will go down by the amount of the distribution which will result in a larger loss that offsets the CG distribution.

So OP can sell now and have $34k loss or sell after receiving the $12k CG distribution at a $46k loss and report a $34k net loss on his tax return.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is online now   Reply With Quote
Old 11-18-2022, 06:35 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 33,888
Quote:
Originally Posted by monte1022 View Post
Over the last couple of years I have been adding to a Vanguard Wellesley taxable position for a total sum of 290k invested. As of today, my cost basis 314k and account value 280k. I just saw that the year end estimated distribution will be approx $2.65/share on 4513 shares or approx 12k.

Our 2022 income will be in the 220-230k range w/o this gain. My goal is the leave w*rk 1st quarter 2023 resulting in substantially lower taxable annual income from there on out, or at least until RMDs start.

I am considering selling the entire account but don't know if I should do it before the capital gain distribution or after. I will probably try to replicate the allocation using a stock etf and cds/bonds. This money is part of my taxable dollars that will allow for income flexibility to qualify for lower ACA costs. At 56yo now, the dollars needed for 23, 24, 25, 26 are in treasuries. The Wellesley dollars were tasked to supplement pretax account withdrawals from age 60ish to 65yo.

I really do not want to pay additional taxes on an account this is already underwater. Taking the capital loss to offset gains seems like a good idea. What say you?


**A bonus of selling will be that I can move the dollars into Fidelity to further simplify my accounts.
If any of my funds shows a capital loss I definitely sell it before the distribution and then decide what to do. Usually put it in something(s)more tax efficient.
__________________
Retired since summer 1999.
audreyh1 is online now   Reply With Quote
Old 11-18-2022, 06:37 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 33,888
Quote:
Originally Posted by COcheesehead View Post
Donít have managed funds in taxable accounts. Why do people continually do this?
Sell, enjoy the tax loss harvest and do tax efficient investing in your taxable account from here on out.
If most of your nest egg is in taxable accounts it can be challenging.
__________________
Retired since summer 1999.
audreyh1 is online now   Reply With Quote
Old 11-18-2022, 06:41 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 33,888
Quote:
Originally Posted by monte1022 View Post
In retrospect, it was a boneheaded move. Should I sell before or after the distribution or does it matter?
Quote:
Originally Posted by pb4uski View Post
It doesn't matter if OP sells before or just after CG distribution since NAV will go down by the amount of the distribution which will result in a larger loss that offsets the CG distribution.

So OP can sell now and have $34k loss or sell after receiving the $12k CG distribution at a $46k loss and report a $34k net loss on his tax return.
An important reason to sell before is some of your distributions could be short term cap gains distributions and/or unqualified dividends which don’t get the better tax treatment of a long-term capital gain. If you are absolutely sure the distribution is only long-term cap gains and qualified dividends then it doesn’t matter. But if that fund is a balanced type fund it would pay some unqualified dividends I’m thinking.

And note that Vanguard hasn’t published their year end dividend distribution estimates yet AFAIK.
__________________
Retired since summer 1999.
audreyh1 is online now   Reply With Quote
Old 11-18-2022, 08:44 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2016
Posts: 6,300
Quote:
Originally Posted by audreyh1 View Post
If most of your nest egg is in taxable accounts it can be challenging.
I have millions in a taxable account and not a single managed fund. It’s not that hard.
If you start out that way and realize the error of your ways, you can use down markets to get out of them.
There are so many great instruments to use in taxable accounts so that the tax monster doesn’t eat you, but yet you still get nice gains.
COcheesehead is offline   Reply With Quote
Old 11-18-2022, 11:59 AM   #9
Thinks s/he gets paid by the post
 
Join Date: Jul 2007
Location: St. Louis
Posts: 1,563
Count it as a blessing you can get out with a loss. Many pay big tax bills to get out.
FANOFJESUS is offline   Reply With Quote
Old 11-18-2022, 02:25 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 9,062
Slightly OT, but I don't think you're being fair to Wellesley here. It's primarily a bond fund (2/3) and a dividend equity fund. Neither tranche has done well in the past couple of years, so no surprise Wellesley has not done well either. Over an investor's horizon of 5+ years I think it has been a solid citizen.

That said, IMO a balanced fund is not a good idea except for maybe the ultimate hands-off investor. The performance of the fund is like a glass of Kool-Aid where someone has mixed green and red. You have no idea where the color came from or the taste. Sticking with single-purpose funds, especially with equities, makes benchmarking easy. From a tax standpoint, too, you can't sell just the equity or just the income components of a balanced fund, making rebalancing and tax decisions more straightforward.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 11-18-2022, 03:58 PM   #11
Thinks s/he gets paid by the post
 
Join Date: Jul 2003
Location: Pasadena CA
Posts: 3,194
What about VTMFX VG tax managed balanced fund as a single holding?
__________________
T.S. Eliot:
Old men ought to be explorers
yakers is online now   Reply With Quote
Old 11-18-2022, 04:13 PM   #12
Recycles dryer sheets
 
Join Date: Jun 2017
Location: Cincinnati
Posts: 329
Quote:
Originally Posted by COcheesehead View Post
Donít have managed funds in taxable accounts. Why do people continually do this?
Sell, enjoy the tax loss harvest and do tax efficient investing in your taxable account from here on out.
I was not as financially savvy 35 to 40 years ago when I bought many of the managed funds I still hold today. I'm less ignorant now
CincyDave is offline   Reply With Quote
Old 11-18-2022, 09:10 PM   #13
Recycles dryer sheets
 
Join Date: Aug 2018
Posts: 103
Quote:
Originally Posted by FANOFJESUS View Post
Count it as a blessing you can get out with a loss. Many pay big tax bills to get out.
Isn't that sort of the purpose of investing is to make lots of money resulting in tax payments (assuming its not in a ROTH). I'd much rather pay lots of taxes (meaning I made lots of $) than "count it as a blessing" to get out with a loss.
SALTedOut is offline   Reply With Quote
Old 11-18-2022, 10:27 PM   #14
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 2,493
Quote:
Originally Posted by OldShooter View Post
Slightly OT, but I don't think you're being fair to Wellesley here. It's primarily a bond fund (2/3) and a dividend equity fund. Neither tranche has done well in the past couple of years, so no surprise Wellesley has not done well either. Over an investor's horizon of 5+ years I think it has been a solid citizen.

That said, IMO a balanced fund is not a good idea except for maybe the ultimate hands-off investor. The performance of the fund is like a glass of Kool-Aid where someone has mixed green and red. You have no idea where the color came from or the taste. Sticking with single-purpose funds, especially with equities, makes benchmarking easy. From a tax standpoint, too, you can't sell just the equity or just the income components of a balanced fund, making rebalancing and tax decisions more straightforward.
Dunno, using portfolio visualizer it seems Wellesley comes out ahead over a 40% VFINX 60% VBMFX in just about every time period I looked at with less volatility. Of course, This predicts nothing of the future but even with the dismal results for 2022, Wellesley (-12.3%) is ahead of our 2 fund index darlings (-16.6%). I drank the Wellesley Kool- aid starting in about 1987 and still think it tastes just fine even if red and green are mixed together. I do agree however that this fund in a taxable account can certainly throw capital gains and dividends that can create tax problems vs the 2 index fund approach used for comparison.
ejman is offline   Reply With Quote
Old 11-18-2022, 10:39 PM   #15
Recycles dryer sheets
 
Join Date: May 2018
Posts: 110
My original goal was to be out of w*rk by now, therefore softening the tax blow by having a very low taxable income. As life goes, that plan got delayed a bit and here we are with a tax bill due on an account with an overall loss. These dollars will be heading for cds and an amount corresponding the the equity portion of VWIAX will go into stocks in my 401k to keep 55/45.

Thanks to all who read/responded.
monte1022 is offline   Reply With Quote
Old 11-18-2022, 10:49 PM   #16
Full time employment: Posting here.
 
Join Date: Jan 2014
Location: Austin
Posts: 656
Quote:
Originally Posted by COcheesehead View Post
Donít have managed funds in taxable accounts. Why do people continually do this?
Sell, enjoy the tax loss harvest and do tax efficient investing in your taxable account from here on out.
I suppose when I became serious about investing around 20 years ago and most of my investing was using after-tax dollars, I had no idea that the seven figure gain I would achieve would be subject to so much tax liability.

In other words, by the time some of us realize the gains come with a penalty, it's too late.
__________________
ER'd 6/1/2014 @ age 53. Wow, is it already 2022?
Looking4Ward is offline   Reply With Quote
Old 11-19-2022, 09:59 AM   #17
Thinks s/he gets paid by the post
 
Join Date: Oct 2011
Location: Philadelphia
Posts: 1,107
Quote:
Originally Posted by SALTedOut View Post
Isn't that sort of the purpose of investing is to make lots of money resulting in tax payments (assuming its not in a ROTH). I'd much rather pay lots of taxes (meaning I made lots of $) than "count it as a blessing" to get out with a loss.
I had a friend whose father said that while he was aware of taxes he didn't really worry about them because "you only pay taxes when something good has happened."

Estate taxes notwithstanding, I think its a pretty healthy outlook.
__________________
Luck is when Preparation meets Opportunity.
Closet_Gamer is offline   Reply With Quote
Old 11-19-2022, 10:21 AM   #18
Moderator Emeritus
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 46,597
Quote:
Originally Posted by ejman View Post
Dunno, using portfolio visualizer it seems Wellesley comes out ahead over a 40% VFINX 60% VBMFX in just about every time period I looked at with less volatility. Of course, This predicts nothing of the future but even with the dismal results for 2022, Wellesley (-12.3%) is ahead of our 2 fund index darlings (-16.6%).
+1

I love Wellesley, and my portfolio is (and will remain) 30% Wellesley. I especially enjoy the way it churns out comparatively substantial yields, decade after decade.

One reason you won't see me pitifully whining about what bonds I can buy to fill that part of my AA, is that Wellington Mgmt did a lot better job of choosing bonds than I would.

Today VWIAX is $62.20/share. Back in 2019 and 2020, it spent some time down in the $55-$60/share range. Then it went up into the low 70's for a short while. OMG!! It didn't STAY there! I'm dying of shock. Get my smelling salts and lay me out on a chaise.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
W2R is online now   Reply With Quote
Old 11-19-2022, 03:12 PM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sunset's Avatar
 
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 14,819
Quote:
Originally Posted by SALTedOut View Post
Isn't that sort of the purpose of investing is to make lots of money resulting in tax payments (assuming its not in a ROTH). I'd much rather pay lots of taxes (meaning I made lots of $) than "count it as a blessing" to get out with a loss.
YES..... I'd love to pay a few Million $$$ in taxes, every year
__________________
Fortune favors the prepared mind. ... Louis Pasteur
Sunset is offline   Reply With Quote
Old 11-20-2022, 10:12 AM   #20
Thinks s/he gets paid by the post
 
Join Date: Jul 2007
Location: St. Louis
Posts: 1,563
Quote:
Originally Posted by SALTedOut View Post
Isn't that sort of the purpose of investing is to make lots of money resulting in tax payments (assuming its not in a ROTH). I'd much rather pay lots of taxes (meaning I made lots of $) than "count it as a blessing" to get out with a loss.
I would rather have a loss on a side ways move. A market to market move. Now sell to take money out of the market that is another story.
FANOFJESUS is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Helping spouse understand my brilliance Castaspey FIRE and Money 82 12-25-2019 03:06 PM
VWIAX for a beneficiary IRA seraphim FIRE and Money 8 04-08-2012 12:46 PM
VWIAX is this as safe as MM MonarchDon FIRE and Money 2 08-10-2006 01:45 PM
7-11 clerk mad that nobody notices his brilliance cute fuzzy bunny Other topics 19 05-16-2006 09:06 AM
Dangerous Real Estate Example wabmester FIRE and Money 9 05-18-2004 09:32 AM

» Quick Links

 
All times are GMT -6. The time now is 10:09 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2023, vBulletin Solutions, Inc.