Author Topic: front load Roth IRA or split with taxable?  (Read 406 times)

s0198362

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front load Roth IRA or split with taxable?
« on: February 04, 2021, 04:34:15 PM »
I am in the fortunate position of aiming to invest $500 per month into my Roth IRA, as well as $500 p/m into a taxable.  The taxable is almost exclusively bonds for efficiencies (don through betterment).

Should I actually do $1,000 p/m to the IRA for 6 months, and then $1,000 p/m to the taxable for the remaining 6 months of the year?

My wife, or rather her financial adviser (me), is doing a similar thing.

FYI, I have followed this
Establish an emergency fund to your satisfaction           
1. Contribute to your 401k up to any company match DOING THIS
2. Pay off any debts with interest rates ~5% or more above the current 10-year Treasury note yield.  ~8K STUDENT LOAN CURRENTLY at 0%           
3. Max Health Savings Account (HSA) if eligible.  DOING THIS
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level ROTH OBVIOUSLY           
5. Max 401k (if
    - 401k fees are lower than available in an IRA, or
    - you need the 401k deduction to be eligible for (and desire) a tIRA deduction, or
    - you earn too much for an IRA deduction and prefer traditional to Roth, then
    swap #4 and #5)           
6. Fund a mega backdoor Roth if applicable.   (NOT AVAILABLE)
7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield. MORTGAGE @ 2%   
8. Invest in a taxable account and/or fund a 529 with any extra.   I AM HERE!!!

EvenSteven

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Re: front load Roth IRA or split with taxable?
« Reply #1 on: February 04, 2021, 05:31:50 PM »
I would do the Roth first, but there is not going to be much difference between the two.

I notice you didnít make a comment for step 5, so if you arenít doing that I would do that before taxable.

MustacheAndaHalf

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Re: front load Roth IRA or split with taxable?
« Reply #2 on: February 05, 2021, 11:44:12 AM »
For investment placement, total stock market funds/ETFs are very efficient in taxable.  You might look at tax-exempt bonds versus regular bond funds in taxable.  Vanguard offers some state-specific tax-exempt bond funds (like CA, NY) as well.

As to (5), Have you looked at the expense ratios of your 401(k) choices?

mntnmn117

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Re: front load Roth IRA or split with taxable?
« Reply #3 on: February 05, 2021, 04:15:35 PM »
The way I understand the question its "you are both contributing 6k to an Roth IRA and 6k to a taxable account, which do I actually fund first."  I believe the answer is Front load the Roth IRA.  Whichever one you fund first will see more gain, so make it the Roth IRA and not pay taxes on the gain.

Some people max their 401k and HSA as early as they can in the year for the same reason. (careful how your company administers match on 401k)

I typically fund IRA's as soon as I can in the year. Then I'm kinda lazy with the taxable account transfers, the oh crap there's 10k in the checking account moments.

s0198362

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Re: front load Roth IRA or split with taxable?
« Reply #4 on: February 07, 2021, 07:15:36 PM »
Thanks all for your responses.

To clarify, we are both maxing out our 401kís (Lowe fees too).
So Iíll go the front loading option and by august should have met the Roth limits.