Vanguard MinTax method

[cbo111]

I received an email from my Vanguard friends encouraging me to log in and select "MinTax" method for future withdrawals. "Our enhanced cost basis method—"MinTax"—may help you save on taxes when you sell shares, by attempting to sell lots with losses before lots with taxable gains."
Since starting with Vanguard about 8 years ago, we have been in the accumulation phase and to date, have never withdrawn anything, so I am unclear if this MinTax method is advisable. Is there a downside to this?

 

[pb4uski]

I think I do much the same thing by just selecting lots or portions of lots to sell by eye.

 

[HI Bill]

Depends on your age and future income. Do you want to even out taxes throughout your retirement, or are you trying to leave an inheritance? If you want to leave the largest inheritance possible, then by all means, use Min Tax. If you want to pay less taxes now, and aren't worried about higher tax rates later when RMDs and/or SS kicks in, then you may want to choose Min Tax. If you want to pay taxes to fill in a trax bracket, another option may better suit you.

All of that said, I don't see this option in my VG brokerage account.

 

[RunningBum]

I don't see this option in either the description of cost basis methods, or my options if I try to change them.

I googled and don't see too much of this, though I do see a Bogleheads thread where someone asked about Mintax and HiFo (Highest in, first out). Neither of these are available to me now.

When you say "my Vanguard friends" do you mean Vanguard, or a friend who has Vanguard and might be grandfathered into an old method?

I like full control and verification. I would probably stick with Spec ID unless I could be assured it would show me which shares it was picking, and I could verify those are the ones I want. I probably always want the loss or least gain, but perhaps there is some scenario where I wouldn't.

 

[cbo111]

Sorry, I meant my VG advisor. I have not selected the MinTax option yet. I am a Voyager Select client, if that means anything. I will be speaking with my advisor in a couple weeks, but was just interested in the general feedback from this educated group.

 

[samclem]

I think I do much the same thing by just selecting lots or portions of lots to sell by eye.

I agree. It sounds like "MinTax" just selects the shares with the highest basis (probably disregarding shares that don't qualify for LTCG treatment). It's easy enough to do this yourself by just choosing the "Specific Identification" method and picking from the list.

Yes, there are plenty of times I've deliberately sold shares with the >highest< accrued gains. Someone might do this if they were in the 12% tax bracket (so, zero % taxes on cap gains) and wanted to take some money out for spending. Selecting these "low basis" shares then makes sense, before they move into a higher tax bracket in a few years (or the laws change).

Unless MinTax does something more sophisticated, I'd prefer to have more control over things.

 

[Chuckanut]

Not everybody is among the financial cognoscenti here. A service like this could be of value to a person who simply wants to 'set it' and 'forget it'. I can see the more financially literate half of a couple doing this for his/her partner.

 

[RunningBum]

Not everybody is among the financial cognoscenti here. A service like this could be of value to a person who simply wants to 'set it' and 'forget it'. I can see the more financially literate half of a couple doing this for his/her partner.

Sure, it's a good choice if you really don't want to deal with it, or don't feel capable. OP asked for downfalls. What some of us are saying, if you do stay on top of these things, do you fully trust that they'll sell the ones you should?