Author Topic: Asset location -- where do bonds go?  (Read 1166 times)

jpdx

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Asset location -- where do bonds go?
« on: January 06, 2018, 01:31:17 AM »
I have read up on this topic elsewhere and it's making my head spin! I have the following accounts:

Taxable
Traditional IRA
Roth IRA

Where is the best location for bonds? (VBTLX Total Bond Market fund). I currently keep them all in my taxable account, but this increases my ordinary income and also increases AGI which slightly decreases the ACA subsidy. I am in my 30's.


flyersman

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Re: Asset location -- where do bonds go?
« Reply #1 on: January 06, 2018, 07:34:25 AM »
I have read up on this topic elsewhere and it's making my head spin! I have the following accounts:

Taxable
Traditional IRA
Roth IRA

Where is the best location for bonds? (VBTLX Total Bond Market fund). I currently keep them all in my taxable account, but this increases my ordinary income and also increases AGI which slightly decreases the ACA subsidy. I am in my 30's.

Don't hold Bonds in your Taxable account as they throw off a lot of taxable dividends. They should go in tax advantaged accounts like 401k, IRA, Roth. Read the below wiki it will explain everything. If you in your 30's you should be heavily weighted in equities however and i suggest putting Total US/Total Intl in your Taxable. I linked to a 3 fund portfolio wiki.

Determine what you asset allocation will be and then execute that plan. Lets say you have 100K and want to be 80% Stock and 20% bond, you would fill up your tax sheltered accounts with bonds ($20K) then fill in the remaining space in tax sheltered with equities then the rest in taxable. Now lets say you only have room for $15K of the bonds before maxing out tax sheltered accounts, you can then look to put an intermediate Tax Exempt Muni in your taxable ($5K) to even out allocation. Here is a good Vanguard one VWIUX

https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

https://www.bogleheads.org/wiki/Three-fund_portfolio