Author Topic: Advise on investing 20k in Taxable funds at Vanguard  (Read 542 times)

loav0001

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Advise on investing 20k in Taxable funds at Vanguard
« on: May 07, 2019, 04:21:28 PM »
Hello,

Question on investing some cash in Taxable funds. Appreciate your feedback , critique, suggestions! Thanks,

Single, 40 years old: At least 15 years till retirement
Marginal Tax rate : Federal 24% , State 4.63%
Maxing out all 401K/Roth/HSA- yearly
Total 401K balance = 300K invested in 2045 fund(TRRKX)
Total ROTH balance = 50K invested in 2045 fund (VTIVX)
Desired allocation goal for Non retirement portfolio (Emergency cash/Taxable) : Solid growth with relative fluctuation.
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Taxable Investments at Vanguard : I have 20K in emergency funds in savings account and have another 20K ready for investing .

Question #1: Would 40% stocks/60% Stocks be a good approach? Assuming a scenario of - long bear market and need to access some liquid funds occasionally?

Question#2 : (or) would you recommend more conservative (30/70) or aggressive (80/20) allocation? And some reasoning' s for that choice?

Question #3: Here are some of the top recommendations for Taxable funds i have read. Would you suggest any particular one fund/allocation suitable for my scenario? Pros/cons?

100% VBIAX ( which is 60% stocks/40% bonds)
60/40 (VTSAX/VXIUX)
60/40 (VTSAX/VBTLX)
40/60 ??? any suggestions
30/70 ??? any suggestions

Question 4: I keep reading over and over that bonds are just not good to include in "Taxable Investments. When are some scenarios where inclusion of bonds and type of bonds are beneficial? How does one calculate whether bonds are beneficial or not in taxable accounts?

DaveSch

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Re: Advise on investing 20k in Taxable funds at Vanguard
« Reply #1 on: May 07, 2019, 05:46:38 PM »
Hello,
I think that 30/70 is way to conservative for someone who is 40 years old. I would go with 70/30 or so, as long as you aren't tempted to sell on the bad days.

Your asset allocation distribution should be treated differently. Fill up the 401k with your bond allocation. This can be a total bond fund if you like.

Your Roth should be only in stock funds, maybe the total stock market fund. Some international is ok too, depending on your tastes.

Your taxable account should be an index stock fund. No bonds.

Fund your 401k to the match for sure. If you are going to retire at around 55, you want more in your taxable. Later on, do some Roth conversions if you can.

Watch your tax bracket and fund less in the 401k each year, up to the point that you would end up in a higher bracket. This will cause more taxes now, but could save you a lot more later. The "you'll be in a lower bracket when retired" saying isn't always true.

At 70.5, you will have to start your required minimum distributions from your 401k, and it  might not be a good  time to do it. You may find yourself in that higher tax bracket.

A few thoughts from an guy on the cusp of 70.
I am at 60/8/32 (32% cash) and am comfy with that asset allocation. I don't expect to spend much of my nest egg as I saved quite a bit more than I had to. I behaved myself during 08 too.
Dave

Buffalo Chip

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Re: Advise on investing 20k in Taxable funds at Vanguard
« Reply #2 on: May 07, 2019, 06:26:05 PM »
You didnít mention if you had kids and your state. Or any debts/ mortgage? An underreported/ under appreciated investment is 529 plans where sometimes the state tax deduction or credit is quite nice. And of course, paying down debt is a tax free return in the percentage rate of the loan.