"Pssst!! Wellesley"

[ziggy29]

One might wonder, "Why?" In my case, I am trying to get my portfolio into its ER configuration in advance. Wellesley dividends will just get plowed back in along with some of my salary, since I still invest a lot of what I earn.

I can see that. Unfortunately, with Wellesley many of the dividends come from bond interest instead of stock dividends and are thus taxable at ordinary income tax rates. But I guess for a short time, assuming these will be taxed at a lower rate in a retirement that's not at all far away, no biggie.

In any event, I'm trying to do the same thing eventually -- configure my portfolio to be a "three legged stool" between conventional 401K/IRAs, Roth investment accounts and taxable accounts. I figure having the maximum flexibility to "engineer" my own distribution mix to keep taxes down is a good thing (i.e. withdraw all I can from the 401K/IRA until I bump the top of what is now the 15% bracket, and then tap Roths).

If you put all the eggs in one basket without distributing them this way, it's a lot harder to avoid bumping up into higher tax brackets.

 

[W2R]

I can see that. Unfortunately, with Wellesley many of the dividends come from bond interest instead of stock dividends and are thus taxable at ordinary income tax rates. But I guess for a short time, assuming these will be taxed at a lower rate in a retirement that's not at all far away, no biggie.

In any event, I'm trying to do the same thing eventually -- configure my portfolio to be a "three legged stool" between conventional 401K/IRAs, Roth investment accounts and taxable accounts. I figure having the maximum flexibility to "engineer" my own distribution mix to keep taxes down is a good thing (i.e. withdraw all I can from the 401K/IRA until I bump the top of what is now the 15% bracket, and then tap Roths).

If you put all the eggs in one basket without distributing them this way, it's a lot harder to avoid bumping up into higher tax brackets.

Sounds like a good plan! My 401K (TSP) account is all bonds, since I need a lot of them for my 45:55 equities:fixed asset allocation. I plan to withdraw 3% from that account during ER, to feed that taxable money into my income as gradually as I can. Since most of my portfolio is taxable, and my Roth is very small, the rest is pretty well self-explanatory from a tax standpoint. Taxable income from Wellesley won't raise my taxes on my present income, since it will just raise my marginal tax bracket. So, I will probably be fine for this one year while I have Wellesley in taxable (though it may not be the best choice for a working person's taxable account in the long term).

Luckily, Missouri (where I intend to ER) is phasing out taxes on social security. I am so glad they have seen the light!

 

[RustyShackleford]

This may have been mentioned in this thread already ...

But it seemed to me like a lot of the folks in the Vanguard forums
weren't crazy on Wellesley when I asked. Their rationale was simply
that it was easy to emulate - with some sort of large-cap equity fund
plus a total/intermediate bond fund - and therefore why lock yourself
into not being able to separate these components into taxable vs
nontaxable accounts, and not being able to shift the ratios (re-balance).

 

[W2R]

This may have been mentioned in this thread already ...

But it seemed to me like a lot of the folks in the Vanguard forums weren't crazy on Wellesley when I asked. Their rationale was simply that it was easy to emulate - with some sort of large-cap equity fund plus a total/intermediate bond fund - and therefore why lock yourself into not being able to separate these components into taxable vs nontaxable accounts, and not being able to shift the ratios (re-balance).

I believe that negative thread on Wellesley was indeed brought up (though not amplified on) on page one of this very same thread.

I would recommend that anybody thinking of buying Wellesley should go to the Bogleheads forum and do a search on Wellesley, and read not one, but ALL of the posts that come up as part of the decision making process. I did, anyway, and what I read strongly encouraged me to buy Wellesley.

 

[ziggy29]

This may have been mentioned in this thread already ...

But it seemed to me like a lot of the folks in the Vanguard forums
weren't crazy on Wellesley when I asked. Their rationale was simply
that it was easy to emulate - with some sort of large-cap equity fund
plus a total/intermediate bond fund - and therefore why lock yourself
into not being able to separate these components into taxable vs
nontaxable accounts, and not being able to shift the ratios (re-balance).

For my own portfolio I'd rather have the control of my asset allocation. But for my mom's Vanguard IRA where she has me in control of her investments, I'm slowly DCAing her money market funds into a combination of 2/3 Wellesley and 1/3 Wellington and letting it ride. She doesn't need the income (she's 73 and taking about $8500 in RMDs this year that go into a taxable VG account she doesn't tap either) and can therefore assume more risk than a money market fund -- and I don't really want to micromanage or reallocate it regularly.