Please help--Maxing ROTH w/ $$ from taxable acct or savings from home purchase?

[Mrs. Healthywealth]

Hello mustachians,
I need feedback on how to go about funding my ROTH with the money I have, while also trying to get to my target international stocks allocation. I like to max out both ROTHs in the first 4 mos just to get it over with.  Below is the info on the money I want to focus on, it doesn’t acct for all our retirement accts or savings.

Tax Bracket 25%, California

TAXABLE ACCOUNT:
$11,000 in Vanguard Total International (VTIAX) w/ a loss of $1400 total. 
$9,800 in VTSAX w/ a $53 loss total. 

SAVINGS ACCOUNT FOR HOME PURCHASE
$47,000---No plan to purchase a home for at least 4yrs, and would like to have 100k saved.  Been saving over $24,000/yr.

CURRENT AA:        color=red]TARGET AA:[/color]
Large Cap 45%          Large Cap 40%
Med Cap 17%            Med Cap 15%
Small Cap 14%          Small Cap 10%
International 7%       International 15%    
Bonds 17%               Bonds 20%

Currently, I only have 7% of my portfolio in VTIAX.  I want to make this 15%, which I hope to eventually keep in our taxable account due to foreign tax credit.

How should I shift my money around to max out our ROTHs for 2016? Options:
a) Take $9800 from VTSAX in taxable acct and put in ROTH towards VTIAX, then add cash from paycheck to make up the $1200 difference in the ROTHs (to equal $11,000). For remaining year, use $$ from paycheck to increase VTIAX in taxable account so I can get it to 15% taxable acct.  I can readjust my allocation in the middle of the year so that the majority of the 15% is in the taxable acct.  The amount in ROTH can be adjusted to the VTSAX I carry in my ROTH.  It may take me 12-18 months to get my portfolio to 15% VTIAX in Taxable acct only.

b) Take money out of the "home bucket" to fund the ROTH, then use paycheck and tax return to replenish home bucket. This would mean I don't put any money in my taxable account for most likely the remaining year.

c) You're a hot mess, hand this over to a financial planner (i'll keep my fingers crossed it's not this one).

Side question, am I off base that I want to put all my VTIAX in taxable account?  I did get the foreign tax credit last year, which is the main reason why I wanted to keep it like that. Taxable accounts and  International stocks are a little more complex for me, I just keep reading about it. I won’t pay any capital gains b/c I lost money in the taxable acct, not sure I have a ton in the VTSAX and VTIAX to make much of a difference even if I had to pay something—correct me if I’m wrong.


Thank you as always!

[harshalpatel]

A few questions:

1) Does your asset allocation include your retirement accounts that are not shown here?

2) I assume you are fairly young. Why do you want to have 20% in bonds?

3) I would do option B as long as your job is stable. Invest the money now from savings where it likely earns no interest.

Side notes:
For your home purchase, short term government bonds may be better. You may earn more interest and still be safe.

[Mrs. Healthywealth]

1) Does your asset allocation include your retirement accounts that are not shown here?

Yes, I did not post all my retirement accounts since I didn't think it matters--we have a 457b, 401k, the 2 ROTHs, and the taxable account. We max out my 457b and the 2 ROTHS, and put about $10k in the 401k (my spouse works per diem only).

2) I assume you are fairly young. Why do you want to have 20% in bonds?

I'm 37y/o.  I prefer 10% bonds, but my spouse is 40 y/o and prefers a little more in the bond dept.  We met in the middle.  I have a COLA pension that will cover all our liabilities and 80% of our healthcare when i'm 65y/o.  I'm saving for the years in btw. 

3) I would do option B as long as your job is stable. Invest the money now from savings where it likely earns no interest.

Job is stable.  My interest rate is .75% in the savings account. 

I looked into the Vanguard Short Term Admiral Funds, and its less risk with a much higher yield than my savings account.  If I put this in a taxable account, I wonder what the tax ramifications would be? I also know that it may not be as stable as my savings acct, I keep reading about "bond bubbles".

[harshalpatel]

If I put this in a taxable account, I wonder what the tax ramifications would be?

Same as having a savings account; interest in a savings account is taxable as capital gains.
Dividends from Vanguard would be as well.

bond bubble

Bonds do fall when interest rates rise. That's partly why short term bonds are better.