I looked at my wife's work 401K, and the options are pretty lousy. She cannot get either of the two options you suggested (VFAIX or VBTLX), ; she could get the Blackrock Equity Index (a S&P 500 type fund which isn't as good as VOO), and a generic "stable value fund" mishmash of all kinds of bonds, or Blackrock US Debt index (approximating the Bloomberg U.S. Aggregate Bond Index), or Blackrock 0-5 year TIPS fund.
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Here's a look at what you have, as best I can tell, and a suggestion for simplifying that adheres to Tax-Efficient Fund Placement and avoids Wash Sale issues.
Even though you currently say you want 0% in international, the actively managed funds are holding some of that. I'll recommend that you hold at least 20% of stocks in international (so 75/25 -> 60% US stocks, 15% Int'l stocks, and 25% bonds). You're currently holding a number of funds that are over an ER of 0.30%, which are highlighted in red; you should strive to ditch all of these as Costs Matter. You're also holding S&P-500 in Taxable and two of the retirement accounts (highlighted in light-yellow), which can inadvertently lead to wash sales. In the proposed layout, I've suggested that S&P-500 fund be held in retirement accounts while Total Stock Market (VTI) be held in Taxable to avoid wash sales. That's going to incur a capital gains tax-bill for cleaning up the Taxable account, so you have to weigh if simplification and future tax-efficiency now is worth the immediate tax bill to setup for that better future. That's also driven in part by many 401k plans not offering a Total Stock Market fund and only having access to S&P-500 (and sometimes an extended market fund to more closely resemble total market when held together). If you wife's 401k has a total market stock market offering (perhaps one of the Blackrock funds?), then I'd flip the S&P-500 and Total Market holding in the proposed section to eliminate the LTCG tax on selling S&P-500 from Taxable.
Blackrock funds tend to be low-cost index funds & ETFs, so I'm not sure why you avoid doing business with them (perhaps you're confusing them with the Blackwater military defense company?)
About the best option I see is to direct all her work 401K money into the Blackrock Equity Index (S&P 500 type fund), and house the bond funds in our traditional IRA accts. And then start putting money = to 25% of what were going to invest for the year into a Roth and purchase bond funds there. Not sure the best option. Putting the bonds in the traditional IRAs now would work, but not sure how to handle future purchases given that the work 401k options aren't great.
Statistics: Posted by Bill 5431 — Fri Aug 16, 2024 4:58 pm — Replies 37 — Views 2439
