Author Topic: Help with AA, starting taxable account  (Read 2966 times)

bikebum

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Help with AA, starting taxable account
« on: April 13, 2014, 04:44:55 PM »
Hi mustachians,

I'm starting a taxable account with Vanguard. I already have a 457 and IRA. I have some international stock in my 457. I want to keep all of my international stock in the new taxable account, because the Bogleheads say it is more tax efficient. My plan is to buy some international stock with the taxable account, and then, within the 457, transfer the international stock for total US stock. There is no transfer fee in the 457.

Anything wrong with doing this?

Catbert

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Re: Help with AA, starting taxable account
« Reply #1 on: April 14, 2014, 10:26:27 AM »
No.

bikebum

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Re: Help with AA, starting taxable account
« Reply #2 on: April 14, 2014, 06:38:23 PM »
Specifically what I'm asking is: Is there much risk selling stock in one account and buying it with another account? I don't know how long the transactions will take. Is it likely something could happen with the market if there is a gap in between the transactions and I could lose? Is there any common technique or things one should know when attempting this? Thanks :)

arebelspy

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Re: Help with AA, starting taxable account
« Reply #3 on: April 14, 2014, 06:51:24 PM »
As long as you aren't claiming a loss or anything (wash sale issues: http://www.investopedia.com/terms/w/washsalerule.asp), you should be fine.

As far as the market changing in the meantime, that will depend on how much lag time you have in between.  It's unlikely that the market will shoot up in a short time frame (and if it drops between your sale and purchase, that's good for you, you'll be able to buy more shares for the same amount of money).
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bikebum

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Re: Help with AA, starting taxable account
« Reply #4 on: April 14, 2014, 07:39:06 PM »
Thanks arebelspy.

Is there anything wrong with doing this regularly? My situation is: The 457 and Roth IRA have maximums, so it's easy to plan to contribute the max at the desired allocation. Since I am still getting raises, I'll be contributing different amounts to my taxable, which tweaks my allocation. So I'm thinking about transferring some funds in the 457 whenever I contribute to the taxable to balance the allocation. Maybe I'm over-analyzing this, haha. This just seems like a messy way to handle AA and I'd be surprised if very many people go through the trouble.

arebelspy

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Re: Help with AA, starting taxable account
« Reply #5 on: April 14, 2014, 08:34:47 PM »
Thanks arebelspy.

Is there anything wrong with doing this regularly? My situation is: The 457 and Roth IRA have maximums, so it's easy to plan to contribute the max at the desired allocation. Since I am still getting raises, I'll be contributing different amounts to my taxable, which tweaks my allocation. So I'm thinking about transferring some funds in the 457 whenever I contribute to the taxable to balance the allocation. Maybe I'm over-analyzing this, haha. This just seems like a messy way to handle AA and I'd be surprised if very many people go through the trouble.

I'm assuming the amount of total US stock you hold will be larger than the international, so you should be able to just purchase all total US in the 457, then purchase international in the taxable + whatever extra US in the taxable to make the numbers balance correctly.  No need to keep jiggling the 457 funds.
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with two kids.
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Joel

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Re: Help with AA, starting taxable account
« Reply #6 on: April 14, 2014, 09:05:35 PM »
Keep in mind when you sell stocks in the taxable account, you have to pay taxes on the gains. That's the main thing to consider when making asset allocation changes. Personally I won't sell anything unless I begin to have a 5% difference from my goal asset allocation. I try to use my normal contributions to rebalance as needed. For example , my bond allocation is currently low so my 401k contributions are going to purchase bonds.

bikebum

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Re: Help with AA, starting taxable account
« Reply #7 on: April 14, 2014, 11:05:08 PM »
Thanks arebelspy.

Is there anything wrong with doing this regularly? My situation is: The 457 and Roth IRA have maximums, so it's easy to plan to contribute the max at the desired allocation. Since I am still getting raises, I'll be contributing different amounts to my taxable, which tweaks my allocation. So I'm thinking about transferring some funds in the 457 whenever I contribute to the taxable to balance the allocation. Maybe I'm over-analyzing this, haha. This just seems like a messy way to handle AA and I'd be surprised if very many people go through the trouble.

I'm assuming the amount of total US stock you hold will be larger than the international, so you should be able to just purchase all total US in the 457, then purchase international in the taxable + whatever extra US in the taxable to make the numbers balance correctly.  No need to keep jiggling the 457 funds.

I have enough international stock in the 457 that it will take a little while to "move" it. After that I'll do what you recommend. Also have some bonds in the 457, but like Joel said, I can adjust with contributions.

Thanks guys.