Author Topic: Help moving between funds  (Read 2154 times)

Tcon77

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Help moving between funds
« on: March 25, 2015, 06:12:41 PM »
Hello all,
First time poster, but I have been reading the blog for about 6 months and have already made a lot of changes in the way I approach finances.  I have about $100K in a mutual fund (SHAPX) which I recently transferred to Vanguard from Smith Barney.  Because of the high fees with this fund I would like to eventually sell off the shares of SHAPX to buy VTSAX shares, or a combination of VTSAX: 60%, VTIAX: 30% (Total I'tl Stock Market), and VBTLX: 10% (Total Bond Mkt).  I'm looking for ideas on the best way to go about this.  It is a taxable account.  Also maybe some thoughts on allocation?

Some other information about me:
Income: Fluxes based on available overtime but made $73K last year, $60K taxable.
8.4% pre-tax paid to State Retirement System
8.8% pre-tax to deferred compensation (currently at about $40k) contributions have since been raised to 13%
$400 a month post-tax to a Betterment Emergency Fund
$250 a month post-tax into a Savings account
Current Cash/Savings around $25k

(I am putting that much money into the savings/Betterment account because I am debating returning to college and that money would help avoid loans)

Thanks in advance!

MDM

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Re: Help moving between funds
« Reply #1 on: March 25, 2015, 06:36:34 PM »
Income: Fluxes based on available overtime but made $73K last year, $60K taxable.
8.4% pre-tax paid to State Retirement System
8.8% pre-tax to deferred compensation (currently at about $40k) contributions have since been raised to 13%
$400 a month post-tax to a Betterment Emergency Fund
$250 a month post-tax into a Savings account
Current Cash/Savings around $25k

(I am putting that much money into the savings/Betterment account because I am debating returning to college and that money would help avoid loans)

Thanks in advance!
Is "deferred compensation" a 457 plan so you also have access to a 403b plan?

Tax-wise, your best bet is to put enough into pre-tax (457, 403b, tIRA) to get yourself below the top of the 15% marginal bracket.  Then you can take long term capital gains at 0% tax up to that maximum from investment sales.  That may or may not conflict with your college savings plans.

Tcon77

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Re: Help moving between funds
« Reply #2 on: March 29, 2015, 07:03:54 PM »
I'm almost positive I am not eligible for a 403b. From what I read that is for teachers and clergymen.  If I am mistaken please let me know.  So if I am understanding you correctly, if I can get my taxable income below the 15% threshold for 2015 ($37,450) via contributions, deductions, and exemptions; I can withdraw from the taxable account tax free up to the 15% threshold?


MDM

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Re: Help moving between funds
« Reply #3 on: March 29, 2015, 08:52:44 PM »
I'm almost positive I am not eligible for a 403b. From what I read that is for teachers and clergymen.  If I am mistaken please let me know.
See http://www.smart401k.com/Content/retail/resource-center/retirement-investing-basics/retirement-plan-types for why it's plausible you might have access to a 403b - but that doesn't mean you do.  Check with HR to ensure you understand all your options.

Quote
So if I am understanding you correctly, if I can get my taxable income below the 15% threshold for 2015 ($37,450) via contributions, deductions, and exemptions; I can withdraw from the taxable account tax free up to the 15% threshold?
Yes, if by "withdraw" you mean "take long term capital gains" - does that make sense?
Check one or more of the following to evaluate some "what if?" options:
http://www.paycheckcity.com/calculator/salary/ or
http://www.bankrate.com/calculators/tax-planning/1040-form-tax-calculator.aspx or
https://turbotax.intuit.com/tax-tools/calculators/taxcaster/ or
the reader case study spreadsheet.

forummm

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Re: Help moving between funds
« Reply #4 on: March 30, 2015, 06:15:37 PM »
Usually, if you have a 403b and a 457, you can max out both each year.

And even if you have to pay a little bit of tax on the capital gain, it's probably best just to take that hit and get into a cheaper fund. You'll be paying lower fees for a really long time. The Bogleheads rule of thumb is if the annual difference in taxes and costs is more than 10% of the tax you would pay, you should almost always switch.

http://www.bogleheads.org/wiki/Paying_a_tax_cost_to_switch_funds