Author Topic: help with TLH at betterment  (Read 1137 times)

FSL

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help with TLH at betterment
« on: May 11, 2016, 11:03:50 AM »
Hello everyone! Since we are maxing out our 401ks and IRAs, my husband and I are thinking about opening a taxable account. I'm considering Betterment, given the TLH benefit (we are in a high income tax bracket), but I understand this will require wash sale management. Can anyone help me with understanding how I manage against a wash sale for all my accounts? I've listed below the funds that my accounts have. Should I switch some of these accounts to target retirement funds to avoid the wash sale issue due to 401k auto investment issues? For anyone that manages wash sales, is it annoying and should I just give up on TLH and  open a vanguard account with vtsax? I've read one of the Bogleheads books, but hadn't concerned myself too much yet with the asset allocation in my accounts because I only have non-taxable or tax deferred for now, but now with introducing a taxable account, I'd also be interested if people have some asset allocation advice as well.

Betterment ETFs: https://www.betterment.com/resources/research/tax-loss-harvesting-white-paper/?_ga=1.133717518.1877823637.1462980490#etftable

My 401k (has an option to switch to a vanguard target retirement fund):
FXAIX - SPTN 500 IDX ADV IS
VBMPX - VANG TOT BD MK IS PL
VGSNX - VANG REIT IDX INST
VIPIX - VANG INFL PROT INST
VSIIX - VANG SM VAL IDX INST
VTSNX - VANG TOT INTL STK IS

Spouse 401k (has target retirement funds):
VEMPX - Vanguard Extended Market Index Fund
VIIIX - Vanguard Institutional Index Fund
VTMNX - Vanguard Tax-Managed International Fund
VBTIX - Vanguard Total Bond Market Index Fund

My Roth IRA: FFNOX - FIDELITY FOUR IN ONE INDEX
Spouse Roth IRA: VFIFX - Vanguard Target Retirement 2050 Fund Investor Shares

NY Saves 529 Vanguard (Growth Portfolio):
Vanguard Institutional Total Stock Market Index Fund (52.5%)
Vanguard Total International Stock Index Fund (22.5%)
Vanguard Total Bond Market II Index Fund (20%)
Vanguard Total International Bond Index Fund (5%)

Interest Compound

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Re: help with TLH at betterment
« Reply #1 on: May 11, 2016, 11:19:50 AM »
Tax Loss Harvesting won't counteract the higher fees Betterment charges (about double that of Vanguard in the best case). The fees will always beat it in the long-run. This is inevitable, for the simple reason that the fees are both percentage based (so they get higher as your account grows), and forever (each and every year, for the rest of your life), while the tax loss harvesting benefit is temporary. Managing wash sales is yet another drag on your portfolio, as to avoid it you're forced to modify your allocations outside of Betterment, which likely involves choosing funds with higher fees.

That said, if you're dead-set on it, I'd move both 401k's to Target Retirement Funds, and keep the IRA and 529 as they are, just to keep thing simple.