Author Topic: Wealthfront - IRA vs Individual Investment Account  (Read 240 times)

leeboy4130

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Wealthfront - IRA vs Individual Investment Account
« on: September 18, 2020, 10:55:30 AM »
Hello all. Want to confirm where I should be putting my investment money. I do not currently have an employee 401k, but did roll over a previous 401k to a traditional IRA in Wealthfront. My current situation:

All at Wealthfront:
Traditional IRA $70k
Roth IRA  $2k
Individual Investment Account $1k

I should do the annual max of $6k into one of the IRA accounts first, then put the rest in individual investment account correct? I want to start dumping money into Wealthfront, but not sure if I should put in either one of the IRAs or put straight in the individual investment account to eliminate any early withdrawal issues if I retire at 40.

Is it better if all of my money is in one type of account vs spread out between 3 different types of accounts?

Should my wife have her own investment account?

Wealthfront IRA has returned about 20% over two years btw.

Thanks
« Last Edit: September 18, 2020, 11:15:45 AM by leeboy4130 »

Telecaster

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Re: Wealthfront - IRA vs Individual Investment Account
« Reply #1 on: September 18, 2020, 11:31:59 AM »
Here is the obligatory investment order link:

https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153

However, you may wish to reconsider having your IRAs with Wealthfront, here's why:  Wealthfront is designed to automate tax loss harvesting, which they charge a 0.25% fee for.  Since you can't tax loss harvest in your IRAs there is zero benefit to using Wealthfront for those accounts but you still have to pay the costs.  So you are getting no benefit, why bother?

If, after you followed the investment order, wife may wish to have her own account, but since you're married I can't think of any advantage to doing so other than personal preference.  That is, if she'd like to have her own account, then she should get one.   But it is an additional thing you have to mange when it comes to taxes and rebalancing, so I'd recommend it against it, all things be equal. 


terran

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Re: Wealthfront - IRA vs Individual Investment Account
« Reply #2 on: September 18, 2020, 12:15:56 PM »
I came here to say basically what @Telecaster said, although I might make an even stronger statement to say the 0.25% fee isn't worth it at all, especially if you're not in a very high tax bracket where some extra losses could be written off against ordinary income at a high rate (and you won't get losses that large with a relatively large balance.

However, one counterpoint to Telecaster's comment is that if you DO want to keep the taxable account at Wealthfront then also keeping the IRAs there might make sense if they will coordinate the accounts because that would avoid issues with negating the losses they harvest when you invest (or reinvest dividends) in the IRAs. If you move the IRAs then read up on the wash sale rule and either invest your IRAs in investments that Wealthfront doesn't use or turn off automatic dividend reinvesting and be very careful with what/when you buy in the IRAs.

Again, I'd ditch wealthfront for Vanguard, Fidelity, Schwab, or Etrade (roughly in that order) though.