NFT: Investing Question: Diversifying between account types

With a 5 year window you want ordinary income in the deferred accounts and the capital gain assets in the taxable. With a 25 year window you've got the potential for the tax free appreciation of the capital gain assets. This is particularly true with mutual funds, where you might get distributions of capital gain income annually.

Sound like you have a pretty good handle on things, however.

talk to a financial planner, that will get you set up. You are missing the biggest benefits available to you. But you already know that, right?

In comment 12049194 Coughlin's Rules said:

Quote:

talk to a financial planner, that will get you set up. You are missing the biggest benefits available to you. But you already know that, right?

This is pretty cryptic. I dont know what you're talking about.

to ask people who have no idea what your financial situation is like for financial advice. Talk to a financial planner.

In comment 12049320 Gman11 said:

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to ask people who have no idea what your financial situation is like for financial advice. Talk to a financial planner.

Not helpful. I have spoken to financial planners and have gotten 3 different answers to this question. Moreover, I'm asking a very narrow question, and not "what should I invest in". There is no reason that a personal relationship with a financial planner is necessary to answer this question.

and a third guy that I would really classify as a broker who manages accounts for people.

You have the same info available to you as any financial planner would have.

And, you care about your money/financial future much more than they ever will.

Worry first about your asset allocation, how much you put into each of the funds your considering. Then put the most tax inefficient asset classes and products in the tax deferred Accra and the most tax efficient ones in your taxable account. Both the stock products you mentioned are very tax efficient so they should go in your taxable account and the bond fund in
Your tax deferred.

You can't move assets out of your tax deferred acct so it's lkkely that you're going to have some of all your products in the tax deferred account for a while while you build up
Your taxable account

First let me say that the very fact you are asking this question means that you are focused and have a plan. Congrats, I am pretty sure you are on your way to building a formidable portfolio. Patience, diversification and time is all you need. Now to your questions, some simple ideas:

(1) Dividends are taxed as regular income, so bonds and large cap stocks are probably better off in tax sheltered accounts.

(2) Capital gains taxes (long -term) are capped at 15%, so assuming that you are a buy and hold guy and are not constatntly churning stock and generating capital gains, smaller cap stocks (less likely to pay dividends) would be your best bet for the taxable account.

(3) It's best to also hold your cash accounts (like money markets) in taxable so you have access to the cash when you need it without the restrictions/penalties of withdrawing early from tax sheltered investments.

Hope that helps.

I think this confirms what I was going to do. I have the allocation more or less down.

Power of tax deferred growth. Your getting bad advice here. Go talk to a CFP. Good luck.

First, there should be good advice online. I recommend BogleHeads as a resource.

Secondly, there are some general rules of thumb. You fill your pre-tax retirement accounts with high dividend investments. That usually means fixed income and REITS.

Third, you have to weigh the pros and cons of holding stocks in pre-tax retirement accounts. You will get the benefit of a tax deduction and, in theory, will put more dollars to work. In theory that's true but not necessarily in practice. I find myself deciding to save X amount of dollars regardless of whether it goes into a pre-tax, ROTH, or taxable account.

More importantly, however, is that two identical investments into Vanguard Total Stock held for 30 years and then liquidated - one held in pre-tax and the other in taxable - the pretax is taxed as regular income, losing all benefits of capital gain treatment and is subject to mandatory minimum withdrawal requirements. This may or may not be a problem depending upon your financial needs and tax rates at the time. On the other hand the taxable account in theory can have taxes deferred forever so long as you don't sell and, when you do, will receive favorable tax treatment lost inside a pretax retirement account (subject of course to the unknown changes in the tax code re capital gains).

My personal opinion is to put as much into ROTH as I can. IMO it cannot be beaten by pretax or taxable. If I have pretax and Roth (which I do), stocks first into ROTH to take advantage of their high growth tax free.

But, my best advice remains - go to the BogleHeads forum. And good luck. It sounds like you are on the right track using index funds and Vanguard.