What kind of bonds in taxable accounts?

[Stephaniekb]

I have some money to put into a taxable account, and I'm trying to figure out how to allocate it. Both my husband and I already have 401Ks with a variety of funds, mostly Large Cap US stocks with some small, mid-cap, and international. I'm trying to simplify our investments a bit, and have read the Boggleheads forum to learn about the simplified portfolio they recommend. I also understand that bonds aren't advisable for taxable accounts pre-retirement, because of the dividend payments. So, to get a total portfolio with adequate representation of bonds, should I move some of our 401K money to bonds and invest the taxable money solely in stock funds (VTMAX, for example)? Or should I put some of the taxable money in tax-exempt bond funds at Vanguard (like VWLTX)?
Thanks!

[Cheddar Stacker]

Either method is fine. The only problem with tax-exempt bond funds are the returns. With interest rates so low you aren't likely to make much money.

I would tend to put bonds (and/or REITs) in the 401k's, then go with stock funds in the taxable account. If they are kicking off any taxable income you want to make sure it's qualified for the lower cap gain rates.

[RyeWhiskey]

It really depends on your current (and future) tax bracket. Tax-exempt bonds are really meant for high-income earners. Generally speaking you want you bonds in a tax shelter as they are not very tax efficient and your index stocks in taxable as they are highly tax efficient.

In your situation, I suggest you do as you mentioned:

So, to get a total portfolio with adequate representation of bonds, should I move some of our 401K money to bonds and invest the taxable money solely in stock funds (VTMAX, for example)?

Here's the Bogleheads wiki on fund placement: http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement

[Left]

I keep bonds in my taxable, I don't mind the tax hit because I don't get much from it right now anyways to make a difference on taxes. Once I FI, I plan on having about 30-40k/year with maybe 12-15k from bonds so the tax hit still wouldn't be much to me since I'd be within the 15% capital gains rate still. But I prefer having a monthly deposit from them instead of selling stocks each month (or can this be automated? like sell X shares per month).

[Le Barbu]

Make it even more simple selling off 1 fund from your sheltered account to replace with bonds. Buy that same fund in your taxable one. Choose something that is tax efficient and voilà !

Make a spreadsheet with all accounts, funds, AA etc and try to make a neet & simple plan.