The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Jacob1234098 on February 27, 2017, 09:16:57 PM
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Hey guys,
I am in the process of making some very large financial transactions. I want to make sure I optimize them! I just rolled over $160k from my 401k to IRA money markets. Now I need to rebalance it all inside Vanguard. My current target and actual allocations can be seen in the attached current_portfolio.png.
The Vanguard funds I am invested in and plan to rollover the 160k to are:
STOCKS:
Domestic VTSMX
International VTIAX
BONDS:
Domestic VBTLX
International VTIAX
Of the 160k, 72k is in a Roth IRA. 90k is in a standard IRA. I plan to do the following:
Inside Roth IRA:
sell 72k money market
buy 22.5k international stock (VTIAX)
buy 50k domestic stock (VTSMX)
Inside Standard IRA:
sell 90k money market
buy 46k domestic bonds (VBTLX)
buy 14k international bonds (VTIAX)
buy 30.5k domestic stock (VTSMX)
My main question is should I be buying the bonds inside the standard IRA like I am, or in the Roth IRA? I hear to leave the Roth IRA for higher growth tax-poor investments, but I don't know what those are or if I will ever have them (REITS, etc?).
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I keep my bond allocation in my traditional IRA. My Roth is 100% stocks.
There is a Bogleheads wiki entry on how to allocate your investments across IRAs and taxable. I am too lazy to find it and link it right now, but I bet you can google it.
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Bonds within the traditional IRA is the better of the two options. Bonds typically have lower growth than stocks and will result in less taxes* when you either take distributions from the account or rollover to a Roth. *obviously this depends on how much you take in a taxable year as well as other amounts of taxable income.
Tax-poor investments doesn't really apply when comparing the two as distributions from the IRA are all treated as ordinary income. Tax treatment of investment comes into play when you have a taxable account. And tax free growth (Roth IRA) is better for higher growth investments (like stocks)