Which Assets in Roth IRA?

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eufo
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Which Assets in Roth IRA?

Post by eufo » Sun May 20, 2018 8:48 am

Up until very recently, I have held what look like equivalent holdings in both my Roth IRA and standard margin account. Each had 20% MCB, 20% SCB, 20% LTT (ETFs), 20% Cash (fucking pointless), 20% Gold (ETFs).

As interest rates have started to make online money market accounts attractive again, I'd like my cash to do a lot more for me.

I'm contemplating dividing my assets based on their location and want to know if anyone is doing this and what caveats there are that I might be missing.

I'd like my Roth IRA to house ALL of my equites and treasuries. On the other side, I'll hold cash in online money markets, and convert all my paper gold into physical gold.

There are some limitations to what I can add to my Roth each year, obviously, so if both equities and treasuries collapse, it will be difficult to rebalance. This is my biggest concern.

I'm still working, so new funds are always flowing in with each paycheck.

I appreciate any and all input on this. Maybe I'm missing something else big. I hate for all that cash to earn literally 0.01% when it could be earning 1.75%. I also hate paying taxes on the dividends and capital gains from my margin account. This would solve both problems, but it's a big move. What do you guys think? How do you divide things up?
Don't agree with me too strongly or I'm going to change my mind
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Re: Which Assets in Roth IRA?

Post by barrett » Sun May 20, 2018 9:23 am

eufo wrote:
Sun May 20, 2018 8:48 am
Up until very recently, I have held what look like equivalent holdings in both my Roth IRA and standard margin account. Each had 20% MCB, 20% SCB, 20% LTT (ETFs), 20% Cash (fucking pointless), 20% Gold (ETFs).

As interest rates have started to make online money market accounts attractive again, I'd like my cash to do a lot more for me.

I'm contemplating dividing my assets based on their location and want to know if anyone is doing this and what caveats there are that I might be missing.

I'd like my Roth IRA to house ALL of my equites and treasuries. On the other side, I'll hold cash in online money markets, and convert all my paper gold into physical gold.

There are some limitations to what I can add to my Roth each year, obviously, so if both equities and treasuries collapse, it will be difficult to rebalance. This is my biggest concern.

I'm still working, so new funds are always flowing in with each paycheck.

I appreciate any and all input on this. Maybe I'm missing something else big. I hate for all that cash to earn literally 0.01% when it could be earning 1.75%. I also hate paying taxes on the dividends and capital gains from my margin account. This would solve both problems, but it's a big move. What do you guys think? How do you divide things up?
I have been pondering posting something similar ever since a friend who is in finance told me a few weeks ago that he "swings for the fences" in his Roth account. His reasoning is that one is not going to be taxed on that money so that is where the biggest gains should be. Alas, I don't think I agree as I believe an aggressive strategy in a Roth account is just as likely to backfire.

For now I am trying to keep the AA in all accounts fairly similar because I want to be able to pull from them without thought of performance when the time comes. But I don't claim to know too much.
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Re: Which Assets in Roth IRA?

Post by KevinW » Wed Jul 18, 2018 3:15 pm

There are two schools of thought, either "one big PP spread among all accounts" or "one separate 4x25 in each account."

When I started out I did "one big PP" but later changed to "separate 4x25". Both approaches work fine and have their merits, so I think this is really a personal preference thing.

Benefits of "one big PP":
- when you have a mix of taxable and tax-advantaged accounts, you can optimize the sheltering benefit by putting less tax-efficient assets in the sheltered accounts
- or, you can put the assets with the best growth prospects (stocks) in Roth accounts to maximize the size of your Roth
- likely involves fewer individual holdings, so fewer transactions to deal with or pay fees on
- you can work around inflexible accounts, such as 401k's with no gold vehicle
- this is what Harry Browne suggested

Benefits of "separate 4x25":
- conceptually simpler
- rebalancing can be done on an account-by-account basis, so does not involve any portfolio-wide optimization, which is easier for you, and more straightforward if someone else had to do it on your behalf
- asset-positioning decisions do not involve predicting the future (which is impossible per PP philosophy), or influence from government programs
- moreover, minimizes regret in the event that your asset-positioning scheme backfires (e.g. stocks underperform in your holding period, leaving your Roth smaller than it could've been)
- no "seismic shift" rebalancing events when one asset gets too big/small to fit in one of your accounts so you need to move everything else around at once
- likewise no "seismic shift" when you rollover accounts or change employers

Personally I was persuaded by the "minimize-regret" argument to separate out the accounts. But I think this can really go either way.
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Re: Which Assets in Roth IRA?

Post by Kriegsspiel » Wed Jul 18, 2018 6:41 pm

Right now my Roth is 5% cash, 22% TSM, and 73% long bonds.

I haven't contributed to it in a long time, but when I did I was putting money into lagging assets, so that's how that came about.
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Re: Which Assets in Roth IRA?

Post by ochotona » Wed Jul 18, 2018 10:32 pm

One thing you want to avoid is putting equities in a traditional IRA, because you will end up converting capital gains into ordinary income in the future, which is taxed at a higher rate. So your traditional IRA will end up being a repository for cash, bonds.

After I turn 59.5 I'm going to get rid of all bank cash in taxable accounts, and only keep it in IRAs. Because if I have an emergency I can always take a distribution from my IRA.
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Re: Which Assets in Roth IRA?

Post by ochotona » Thu Jul 19, 2018 4:59 am

Oh yeah any IRA is good for gold because you avoid the Collectibles Tax.

I have physical gold in a Roth... GoldStar Trust Company, Canyon TX. Only works for near $100k otherwise fees eat you up.
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Re: Which Assets in Roth IRA?

Post by Kriegsspiel » Thu Jul 19, 2018 11:19 am

ochotona wrote:
Wed Jul 18, 2018 10:32 pm
One thing you want to avoid is putting equities in a traditional IRA, because you will end up converting capital gains into ordinary income in the future, which is taxed at a higher rate. So your traditional IRA will end up being a repository for cash, bonds.
I plan on converting my traditional IRA assets into a Roth to avoid income tax on them.
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Re: Which Assets in Roth IRA?

Post by ochotona » Thu Jul 19, 2018 11:47 am

Kriegsspiel wrote:
Thu Jul 19, 2018 11:19 am
ochotona wrote:
Wed Jul 18, 2018 10:32 pm
One thing you want to avoid is putting equities in a traditional IRA, because you will end up converting capital gains into ordinary income in the future, which is taxed at a higher rate. So your traditional IRA will end up being a repository for cash, bonds.
I plan on converting my traditional IRA assets into a Roth to avoid income tax on them.
Yes, that too!
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Re: Which Assets in Roth IRA?

Post by ochotona » Thu Jul 19, 2018 12:56 pm

MangoMan wrote:
Thu Jul 19, 2018 12:31 pm
ochotona wrote:
Thu Jul 19, 2018 4:59 am
Oh yeah any IRA is good for gold because you avoid the Collectibles Tax.
That tax only applies if Gold goes UP. Is this a problem we even need to worry about? O0
ROTFLMAO. Well, over the entire span of my retirement, maybe. In 30 years I'll be 87, I really shudder to think what the fiscal position of the USA will be in 30 years, and what the US Currency will be like. Maybe the New Dollar by then, or the Dolar Fuerte, or the сильный доллар or whatever.

$1.1 trillion deficit next fiscal year? Ah, just fu** me!
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Re: Which Assets in Roth IRA?

Post by Hal French » Sat Aug 11, 2018 7:26 pm

To the OP's question, I too am starting to feel that parts of my PP may be better served outside of my Roth. I hold physical gold in a safe deposit box, but the balance of my PP is in an ETrade Roth- 33% IWV, 33% TLT and 33% SHY + SCHO, rebalanced annually. Like the OP, I'm less than thrilled with the cash component making microscopic gains yet swallowing up a lot of capital to stay on par with the other asset classes. I know cash's importance, but would it be better to grow this outside of the Roth, perhaps in a CD or something actually making noticeable gains while being more liquid?

I'm a long time reader of this forum, and had the great pleasure of meeting and corresponding directly with Harry Browne- I told him the PP singlehandedly brought my crash- ravaged portfolio back from the brink- but this is my first posting. What does the board think?
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Re: Which Assets in Roth IRA?

Post by ochotona » Sun Aug 12, 2018 5:23 am

Buy a CD inside the Roth. You can buy them at Schwab
barrett
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Re: Which Assets in Roth IRA?

Post by barrett » Sun Aug 12, 2018 8:34 am

Welcome to the board, Hal.

For cash in my Fidelity tIRA account I have just been managing a one-year, four-rung T-Bill ladder. For anything less than a year, T-Bills are paying more than CDs. It's only for periods longer than a year that CDs currently have a slight edge.

I've also used both SHY and SCHO for smaller positions (for example, solo 401(k) at TDA) just because it's easier to not have to deal in chunks of $1,000 as one must do with T-Bills. But I just checked both funds again and I see that SCHO's ER is only .06%. SHY is still at .15%. Otherwise they look to be almost identical in terms of holding treasuries, having similar average duration, etc.

Where one holds what assets and in what percentages probably depends on a lot of factors. I recently retired and have a big cash position in my taxable accounts as I'll be drawing from that for a few years while trying to do tIRA to Roth conversions. And I hold no long bonds in taxable as I have to fold in a big batch of EE and I-Bonds. In other words, I have enough deflation protection in that quadrant and don't want to go too low on either gold or stocks.

I think most posters on here (and there are precious few of them at the moment) have pretty much reached the conclusion that as long as one has some protection in all economic environments, the exact percentages are not sacred. With that being said, a 33% cash stake in a Roth sounds a bit high... at least to me.
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Re: Which Assets in Roth IRA?

Post by Tyler » Sun Aug 12, 2018 10:09 am

ochotona wrote:
Thu Jul 19, 2018 4:59 am
Oh yeah any IRA is good for gold because you avoid the Collectibles Tax.
I've always thought "collectibles tax" is a misnomer, as it implies a separate tax on top of what you'd normally owe. However, gains from gold are taxed as ordinary income at whatever tax bracket you fall in but with preferential treatment that the tax is capped at 28%. You also have control over when and how much you need to sell. Compare that to bond interest that is also taxed as ordinary income but with no such cap and no choice but to pay it every year.

In any case, I've personally come to the conclusion that the simplicity, predictability, and flexibility of just having separate complete portfolios in each account more than makes up for any theoretical tax savings from over-thinking where to store every last penny. But obviously YMMV.
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Re: Which Assets in Roth IRA?

Post by boglerdude » Mon Aug 13, 2018 12:16 am

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ochotona
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Re: Which Assets in Roth IRA?

Post by ochotona » Mon Aug 13, 2018 7:28 am

Desert wrote:
Mon Aug 13, 2018 5:57 am
boglerdude wrote:
Mon Aug 13, 2018 12:16 am
Achieva 4% 5 year IRA CD

https://www.bogleheads.org/forum/viewto ... ?p=4063141
And 4.2% for $75,000+
If we get a 5% CD, I'm selling all of my stocks.
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Re: Which Assets in Roth IRA?

Post by ochotona » Mon Aug 13, 2018 12:25 pm

I bought an 11% ? CD from Imperial Savings and Loan in California back in the day.
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Re: Which Assets in Roth IRA?

Post by vnatale » Sun Jan 26, 2020 6:59 pm

Kriegsspiel wrote:
Wed Jul 18, 2018 6:41 pm
Right now my Roth is 5% cash, 22% TSM, and 73% long bonds.

I haven't contributed to it in a long time, but when I did I was putting money into lagging assets, so that's how that came about.
Is there any other conclusion that from the last time you contributed until you wrote the above that long bonds had to have greatly outperformed TSM?

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Which Assets in Roth IRA?

Post by vnatale » Sun Jan 26, 2020 7:01 pm

ochotona wrote:
Thu Jul 19, 2018 4:59 am
Oh yeah any IRA is good for gold because you avoid the Collectibles Tax.

I have physical gold in a Roth... GoldStar Trust Company, Canyon TX. Only works for near $100k otherwise fees eat you up.
Still doing this and recommending this?

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Which Assets in Roth IRA?

Post by Kriegsspiel » Sun Jan 26, 2020 8:04 pm

vnatale wrote:
Sun Jan 26, 2020 6:59 pm
Kriegsspiel wrote:
Wed Jul 18, 2018 6:41 pm
Right now my Roth is 5% cash, 22% TSM, and 73% long bonds.

I haven't contributed to it in a long time, but when I did I was putting money into lagging assets, so that's how that came about.
Is there any other conclusion that from the last time you contributed until you wrote the above that long bonds had to have greatly outperformed TSM?

Vinny
Stocks did better, I started with a higher % of long bonds in the Roth.
You there, Ephialtes. May you live forever.
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Re: Which Assets in Roth IRA?

Post by vnatale » Tue Apr 14, 2020 6:56 pm

KevinW wrote:
Wed Jul 18, 2018 3:15 pm
There are two schools of thought, either "one big PP spread among all accounts" or "one separate 4x25 in each account."

When I started out I did "one big PP" but later changed to "separate 4x25". Both approaches work fine and have their merits, so I think this is really a personal preference thing.

Benefits of "one big PP":
- when you have a mix of taxable and tax-advantaged accounts, you can optimize the sheltering benefit by putting less tax-efficient assets in the sheltered accounts
- or, you can put the assets with the best growth prospects (stocks) in Roth accounts to maximize the size of your Roth
- likely involves fewer individual holdings, so fewer transactions to deal with or pay fees on
- you can work around inflexible accounts, such as 401k's with no gold vehicle
- this is what Harry Browne suggested

Benefits of "separate 4x25":
- conceptually simpler
- rebalancing can be done on an account-by-account basis, so does not involve any portfolio-wide optimization, which is easier for you, and more straightforward if someone else had to do it on your behalf
- asset-positioning decisions do not involve predicting the future (which is impossible per PP philosophy), or influence from government programs
- moreover, minimizes regret in the event that your asset-positioning scheme backfires (e.g. stocks underperform in your holding period, leaving your Roth smaller than it could've been)
- no "seismic shift" rebalancing events when one asset gets too big/small to fit in one of your accounts so you need to move everything else around at once
- likewise no "seismic shift" when you rollover accounts or change employers

Personally I was persuaded by the "minimize-regret" argument to separate out the accounts. But I think this can really go either way.
Another gem worth resurrecting....

Vinny
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Which Assets in Roth IRA?

Post by vnatale » Tue Apr 14, 2020 7:00 pm

Tyler wrote:
Sun Aug 12, 2018 10:09 am


I've always thought "collectibles tax" is a misnomer, as it implies a separate tax on top of what you'd normally owe.
Why should I be not surprised that "gem" creator Tyler also uses words precisely and correctly??!!

MISNOMER!

I am putting you all on notice. Pay attention the next times you hear someone say this word. More times than not they use it incorrectly. They say it when they mean "misconception". These people are not only sports related people (generally not the most intellectual or highly educated in our society) but, at first shocking to me, the highly educated also!


Vinny
Last edited by vnatale on Tue Apr 14, 2020 7:11 pm, edited 1 time in total.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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Re: Which Assets in Roth IRA?

Post by Mark Leavy » Tue Apr 14, 2020 7:05 pm

vnatale wrote:
Tue Apr 14, 2020 7:00 pm
Tyler wrote:
Sun Aug 12, 2018 10:09 am


I've always thought "collectibles tax" is a misnomer, as it implies a separate tax on top of what you'd normally owe.
Why should I be not surprised that "gem" creator Tyler also uses words precisely and correctly??!!

MISNOMER!

I am putting you all on notice. Pay attention the next times you hear someone say this word. More times than not they use it incorrectly. They say it when they mean "misconception". These people are only not sports related people (generally not the most intellectual or highly educated in our society) but, at first shocking to me, the highly educated also!


Vinny
Ah, Vinny. The grammar, punctuation, typos and misuse of parenthetical clauses in this post are downright painful.
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Re: Which Assets in Roth IRA?

Post by vnatale » Thu Sep 09, 2021 12:27 pm

Tyler wrote:
Sun Aug 12, 2018 10:09 am

ochotona wrote:
Thu Jul 19, 2018 4:59 am

Oh yeah any IRA is good for gold because you avoid the Collectibles Tax.


I've always thought "collectibles tax" is a misnomer, as it implies a separate tax on top of what you'd normally owe. However, gains from gold are taxed as ordinary income at whatever tax bracket you fall in but with preferential treatment that the tax is capped at 28%. You also have control over when and how much you need to sell. Compare that to bond interest that is also taxed as ordinary income but with no such cap and no choice but to pay it every year.

In any case, I've personally come to the conclusion that the simplicity, predictability, and flexibility of just having separate complete portfolios in each account more than makes up for any theoretical tax savings from over-thinking where to store every last penny. But obviously YMMV.


I think that this is something I could live with and would achieve the proper balance for me for doing something that makes sense and ending the endless research / thinking I would continue to do to come up with that ever elusive optimal solution.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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