Hi everybody, thanks for reading this message.
I need to sell a bunch of high expense ratio mutual funds so that I can put that money into low-cost funds. But I’m debating about when exactly I should sell, trying to understand the trade-offs between high ERs and capital gains taxes.
Here’s a bit more info. I’m in the 25% income tax bracket now. I’m already FI, and expect to be RE in three years maximum. (I’m still working because I’m interested in my job.) When I retire, I expect to be in the 0% tax bracket for long-term capital gains. I’ve provided below the list of funds I need to sell, their amounts, ERs, and unrealized capital gains. They’re all in my taxable account, and represent about 1/4th of my portfolio.
Do you think it makes more sense to sell sooner rather than later and pay the higher capital gains tax in order to get away from these high ERs? Or should I wait a couple years, put up with the high ERs, and sell when I won’t pay long-term capital gains?
I've had a look at Betterment's "switching cost calculator," which is useful, but I'm interested in what you would do in my situation.
Thanks very much for thinking about this. Any advice appreciated!
Fund ER Amount Unrealized cap gains
SGENX 1.10 $216k $65k
SGOVX 1.14 $90k $18k
FKINX .61 $18k $3k
HFCSX 1.50 $59k $11k