|
|
05-10-2019, 04:00 PM
|
#1
|
Thinks s/he gets paid by the post
Join Date: May 2007
Posts: 1,577
|
Vanguard After Tax funds
Our after tax fund Wellesley threw off a lot of CG & dividends last year and expect our after tax fund to grow over the years so I am thinking of changing to something more tax efficient for the long term.
Plan on doing roth conversions the next few years followed by RMD's so would like to keep our taxes as low as possible.
Our spending is low so only expect to make withdrawals if we are making a major purchase. I realize if we go with an all equities fund we will have to balance that with changes in our ira to keep the same overall percent of equities vs bonds.
What are others using for your after tax funds and how is it working out for you?
|
|
|
|
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!
|
05-10-2019, 04:26 PM
|
#2
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Location: Boise
Posts: 7,866
|
VTSAX. Works very well for me. I take and spend the quarterly dividends. Beyond that I realize some capital gains to meet spending needs and then do some Roth conversions up to my chosen AGI.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
|
|
|
05-10-2019, 04:26 PM
|
#3
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,011
|
To optimize your tax efficiency, it's recommended to be all stocks in taxable accounts and keep interest bearing and high turnover funds in IRA/401K/ROTH.
I'm trying to do this, selling stock and buying interest things in IRA , while keeping stocks in taxable accounts.
As for the taxable accounts, I tend toward ETF's as they don't throw off as much in surprise capital gains.
__________________
Fortune favors the prepared mind. ... Louis Pasteur
|
|
|
05-10-2019, 05:42 PM
|
#4
|
Thinks s/he gets paid by the post
Join Date: Nov 2011
Posts: 3,877
|
+1 on Sunset's approach. I don't arrange assets 100% in that manner but do lean that direction.
|
|
|
05-10-2019, 09:06 PM
|
#5
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
|
I prefer international equities and domestic equities in my taxable accounts.
For the international equities most dividends are qualified dividends and I get the foreign tax credit that more than offset the ordinary income tax on any non-qualified dividends.
For domestic equities all dividends are qualified.
Since I manage our income to be in the 0% qualified income/LTCG bracket all of our taxable account income has a 1% effective tax rate.
__________________
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
|
|
|
05-11-2019, 05:43 AM
|
#6
|
Thinks s/he gets paid by the post
Join Date: Dec 2015
Posts: 1,166
|
Take a look at Vanguard Tax Managed Balanced (VTMFX). ~50% VG Tax-Managed Capital Appreciation and ~50% VG Interm-Term Tax Exempt fund. .09 ER and managed to minimize taxable distributions. Has not paid a taxable cap gain since inception. FANTASTIC performance (top 10%) in it's category over every period..see attached.
If you run a performance comparison chart for Wellesley and VTMFX on M* or elsewhere, you can see that it tracks Wellesley very closely. Beats Wellesley in the 3, 5 and 10 year periods which is not unexpected given the slightly higher exposure to equities (50% to VWIAX's 30'ish%). Wellesley does slightly edge out VTMFX over the 15 year period, but only by a quarter percent or so.
I'd never hold Wellesley in a taxable account, but in my experience VTMFX is as "Wellesley-like" as you can find for a fund that fits well in taxable.
|
|
|
05-11-2019, 10:54 AM
|
#7
|
Thinks s/he gets paid by the post
Join Date: May 2007
Posts: 1,577
|
Quote:
Originally Posted by 24601NoMore
Take a look at Vanguard Tax Managed Balanced (VTMFX). ~50% VG Tax-Managed Capital Appreciation and ~50% VG Interm-Term Tax Exempt fund. .09 ER and managed to minimize taxable distributions. Has not paid a taxable cap gain since inception. FANTASTIC performance (top 10%) in it's category over every period..see attached.
If you run a performance comparison chart for Wellesley and VTMFX on M* or elsewhere, you can see that it tracks Wellesley very closely. Beats Wellesley in the 3, 5 and 10 year periods which is not unexpected given the slightly higher exposure to equities (50% to VWIAX's 30'ish%). Wellesley does slightly edge out VTMFX over the 15 year period, but only by a quarter percent or so.
I'd never hold Wellesley in a taxable account, but in my experience VTMFX is as "Wellesley-like" as you can find for a fund that fits well in taxable.
|
Thanks missed that one, that looks promising and wouldn't throw my portfolio way out of balance.
|
|
|
05-12-2019, 09:29 AM
|
#8
|
Full time employment: Posting here.
Join Date: Nov 2009
Posts: 592
|
Quote:
Originally Posted by 24601NoMore
Take a look at Vanguard Tax Managed Balanced (VTMFX). ~50% VG Tax-Managed Capital Appreciation and ~50% VG Interm-Term Tax Exempt fund. .09 ER and managed to minimize taxable distributions. Has not paid a taxable cap gain since inception. FANTASTIC performance (top 10%) in it's category over every period..see attached.
If you run a performance comparison chart for Wellesley and VTMFX on M* or elsewhere, you can see that it tracks Wellesley very closely. Beats Wellesley in the 3, 5 and 10 year periods which is not unexpected given the slightly higher exposure to equities (50% to VWIAX's 30'ish%). Wellesley does slightly edge out VTMFX over the 15 year period, but only by a quarter percent or so.
I'd never hold Wellesley in a taxable account, but in my experience VTMFX is as "Wellesley-like" as you can find for a fund that fits well in taxable.
|
+1 VTMFX performance is in the ballpark with WELS. I read Wellesley and Wellington threw off an unusually high amount of CGs do to a tweaking of strategy this year. As I understand it, municipal bond DIVs are not taxed Federally (for your future RMDs), but added back to ones income for determining Federal tax on Social Security. VTMFX DIVs are taxed in my state as ordinary income - only specific state muni bonds are tax exempt. Vanguard Tax Managed Capital Appreciation (VTCLX) performs well, as does their Total Stock and S&P 500 indexes for minimizing taxes.
__________________
“Believe me, my young friend, there is nothing - absolutely nothing - half so much worth doing as simply messing about in boats.” Kenneth Grahame, The Wind in the Willows
|
|
|
05-12-2019, 03:11 PM
|
#9
|
Thinks s/he gets paid by the post
Join Date: May 2007
Posts: 1,577
|
Ran the numbers for last year and Vanguard Tax Managed Balanced (VTMFX) would have saved us about $600 in federal taxes and probably a little in state too. Leaning towards moving funds to VTMFX. Wondering what magic Wellesley does to get almost the same returns with 30% equities vs 50% for VTMFX. I guess this makes VTMFX riskier during bad years.
Thanks for all the replies
|
|
|
05-12-2019, 03:53 PM
|
#10
|
Full time employment: Posting here.
Join Date: Nov 2009
Posts: 592
|
Quote:
Originally Posted by homestead
Ran the numbers for last year and Vanguard Tax Managed Balanced (VTMFX) would have saved us about $600 in federal taxes and probably a little in state too. Leaning towards moving funds to VTMFX. Wondering what magic Wellesley does to get almost the same returns with 30% equities vs 50% for VTMFX. I guess this makes VTMFX riskier during bad years.
Thanks for all the replies
|
Compare VTMFX to Wellington's performance as well...
__________________
“Believe me, my young friend, there is nothing - absolutely nothing - half so much worth doing as simply messing about in boats.” Kenneth Grahame, The Wind in the Willows
|
|
|
05-12-2019, 04:45 PM
|
#11
|
Thinks s/he gets paid by the post
Join Date: May 2007
Posts: 1,577
|
Quote:
Originally Posted by fritz
Compare VTMFX to Wellington's performance as well...
|
Wellington put out even more CG and dividends than Wellesley did.
|
|
|
05-12-2019, 06:06 PM
|
#12
|
Thinks s/he gets paid by the post
Join Date: Feb 2007
Location: Upstate
Posts: 2,948
|
Quote:
Originally Posted by homestead
Ran the numbers for last year and Vanguard Tax Managed Balanced (VTMFX) would have saved us about $600 in federal taxes and probably a little in state too. Leaning towards moving funds to VTMFX. Wondering what magic Wellesley does to get almost the same returns with 30% equities vs 50% for VTMFX. I guess this makes VTMFX riskier during bad years.
Thanks for all the replies
|
If you "move funds" you will trigger a capital gain/loss. Before doing so, you should calculate what that is.
|
|
|
05-12-2019, 06:47 PM
|
#13
|
Thinks s/he gets paid by the post
Join Date: May 2007
Posts: 1,577
|
Quote:
Originally Posted by copyright1997reloaded
If you "move funds" you will trigger a capital gain/loss. Before doing so, you should calculate what that is.
|
Yeah that could get complicated as I've had it for a long time and have added to it over the years plus it has done very well during that time. Is there an easy way to do this?
After looking, Thankfully Vanguard says about $2400 in unrealized gains.
|
|
|
05-13-2019, 10:47 AM
|
#14
|
Full time employment: Posting here.
Join Date: Nov 2009
Posts: 592
|
Quote:
Originally Posted by homestead
Ran the numbers for last year and Vanguard Tax Managed Balanced (VTMFX) would have saved us about $600 in federal taxes and probably a little in state too. Leaning towards moving funds to VTMFX. Wondering what magic Wellesley does to get almost the same returns with 30% equities vs 50% for VTMFX. I guess this makes VTMFX riskier during bad years.
Thanks for all the replies
|
Quote:
Originally Posted by fritz
Compare VTMFX to Wellington's performance as well...
|
Quote:
Originally Posted by homestead
Wellington put out even more CG and dividends than Wellesley did.
|
I wasn't suggesting you move from Wellesley to Wellington, I was suggesting you compare Wellington's performance to VTMFX, based on your comparison post (included above) about Wellesley and VTMFX. VTMFX performance is in the ballpark with Wellesley as well as Wellington, but VTMFX is tax efficient for a balanced fund.
It's possible to move the funds from Wellesley to VTMFX and avoid capital gains taxes if you stay slightly under the 12% tax bracket (under $39375 single and $78,750 married filing jointly). I'm moving money like this now in our taxable accounts in anticipation of RMDs in two years.
https://thecollegeinvestor.com/23577...-tax-brackets/
__________________
“Believe me, my young friend, there is nothing - absolutely nothing - half so much worth doing as simply messing about in boats.” Kenneth Grahame, The Wind in the Willows
|
|
|
05-13-2019, 11:02 AM
|
#15
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
|
While it's generally good to keep funds that generate "taxable events" in an IRA, one thing to be careful of is that if you have funds that generate a lot of long term cap gains and dividends is that when they are in an IRA, those gains will effectively be taxed at ordinary income tax rates instead of at preferential rates when withdrawn. Funds generating a lot of short term gains and taxable interest income, of course, are best in an IRA.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
|
|
|
05-13-2019, 04:31 PM
|
#16
|
Thinks s/he gets paid by the post
Join Date: May 2007
Posts: 1,577
|
Generally we pay very low taxes and since the market hit today the unrealized gains dropped to $1770 so I will go ahead and sell and buy VTMFX. The gains will not cause us to pay taxes but will cut the amount we can convert to roth tax free.
The last 10 years my funds have averaged 9.3%. About 50% equities.
|
|
|
05-13-2019, 04:49 PM
|
#17
|
Thinks s/he gets paid by the post
Join Date: May 2007
Posts: 1,577
|
Quote:
Originally Posted by ziggy29
While it's generally good to keep funds that generate "taxable events" in an IRA, one thing to be careful of is that if you have funds that generate a lot of long term cap gains and dividends is that when they are in an IRA, those gains will effectively be taxed at ordinary income tax rates instead of at preferential rates when withdrawn. Funds generating a lot of short term gains and taxable interest income, of course, are best in an IRA.
|
Ziggy how do you avoid long term cap gains and dividends within an IRA? I don't buy individual stocks only MF's.
|
|
|
05-13-2019, 05:44 PM
|
#18
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,202
|
Quote:
Originally Posted by homestead
Ziggy how do you avoid long term cap gains and dividends within an IRA? I don't buy individual stocks only MF's.
|
There is no tax on any gains within a tIRA. Whatever you take out gets taxed at your regular income, whether it was a contribution , LTCG, dividend, or STCG. Since LTCGs are usually at a more favorable tax rate than regular income, you'd want to put anything heavy on LTCGs outside the tIRA if possible, and investments that generate more non-qualified dividends and STCGs that would be taxed at regular income rates anyway in a tIRA.
Mutual funds can generate capital gains through distributions, and when you sell a mutual fund any increase over the basis is taxed as a capital gain.
|
|
|
05-13-2019, 07:52 PM
|
#19
|
Thinks s/he gets paid by the post
Join Date: May 2007
Posts: 1,577
|
That is what I thought, I must have misunderstood what he was saying.
|
|
|
05-13-2019, 09:46 PM
|
#20
|
Full time employment: Posting here.
Join Date: Nov 2009
Posts: 592
|
Quote:
Originally Posted by fritz
I wasn't suggesting you move from Wellesley to Wellington, I was suggesting you compare Wellington's performance to VTMFX, based on your comparison post (included above) about Wellesley and VTMFX. VTMFX performance is in the ballpark with Wellesley as well as Wellington, but VTMFX is tax efficient for a balanced fund.
It's possible to move the funds from Wellesley to VTMFX and avoid capital gains taxes if you stay slightly under the 12% tax bracket (under $39375 single and $78,750 married filing jointly). I'm moving money like this now in our taxable accounts in anticipation of RMDs in two years.
https://thecollegeinvestor.com/23577...-tax-brackets/
|
I should have said stay within the 12% tax bracket (for the zero capital gains tax bracket), but the amounts I stated sort of corrected my comment. My RMD actually starts in the year I turn 71, as I don't turn 70.5 until after January of the following year (gives me three more years to move money around).
We have been using taxable accounts, social security, and a little Roth (when needed) for living expenses the last ten years since we retired early. We've been manipulating income for ACA and taxes. I look to minimize any taxable account income once my RMD starts (wife's start 2 years later). I will pull RMD and then look to do additional withdrawals in the form of Roth conversions up to the 22% tax bracket. Our investments are spread out over TIRA, Taxable Accounts, and Roths (in that order of amounts). No pensions
Wanted to let you know, as I am somewhat walking in your shoes, and implementing pretty much what your asking about here. When our RMDs start - have no need to utilize taxable accounts for income (but maybe emergencies as they will inevitably come up). Our goal is to hopefully pass the taxable accounts on to our daughters - who will inherit them with a stepped up basis (no tax). Really worried about the ever changing Federal Govt. and their money grab attempt with them looking to eliminate the Legacy IRA (stretch IRA). If that scenario should ever come to pass - going to be a real big headache for us (and others in our situation).
__________________
“Believe me, my young friend, there is nothing - absolutely nothing - half so much worth doing as simply messing about in boats.” Kenneth Grahame, The Wind in the Willows
|
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|