Bonds and IRAs

Discussion of the Bond portion of the Permanent Portfolio

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sophie
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Re: Bonds and IRAs

Post by sophie » Wed Jan 16, 2019 7:53 am

Ah ha, another NYC denizen...you might be surprised to know that this city is fairly tax-friendly to retirees, and they're trying to position themselves . No tax on SS or the 1st $20K of pensions/tax-deferred account withdrawals (not sure if it's $40K for a couple or still $20K).

Also a comment about the tax situation outlined by InsuranceGuy. You need a chunk of savings in Roth or taxable to give yourself wiggle room to avoid getting stuck with a realized high income. One way to arrange this is to defer social security and, if possible, pension income as long as possible after retirement, while spending down tax-deferred accounts and Roth-converting as much as you can tolerate.

As far as the PP goes, I have mine sprawled out among various types of accounts. Works fine. Within this structure I hold some amount of all four assets in each account, but even if I didn't there's no issue with rebalancing. Just sell asset A in account B and buy asset C, as per plan. It definitely helps to follow tax-efficient placement strategies, like holding bonds and cash in tax-advantaged accounts. I also differ with conventional wisdom on gold; any gold that has to be held in tax-advantaged accounts goes into tax-deferred rather than the Roth. It effectively lets you tax loss harvest (you won't pay income tax on losses) and any gains would be taxed at 28% anyway.
gull1
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Re: Bonds and IRAs

Post by gull1 » Sun Sep 08, 2019 7:14 am

In Craig's PP book it says p245 - tax deferred accounts (401k/IRAs) should be used for lease tax-efficient assets first (those that produce interest and dividends). Assets should go into tax sheltered accounts int he following order: bonds, cash, stocks, gold.

Do folks generally agree with that? Complications from juggling multiple PPs and challenges gaging after tax performance aside?
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pugchief
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Re: Bonds and IRAs

Post by pugchief » Sun Sep 08, 2019 7:33 am

gull1 wrote:
Sun Sep 08, 2019 7:14 am
In Craig's PP book it says p245 - tax deferred accounts (401k/IRAs) should be used for lease tax-efficient assets first (those that produce interest and dividends). Assets should go into tax sheltered accounts int he following order: bonds, cash, stocks, gold.

Do folks generally agree with that? Complications from juggling multiple PPs and challenges gaging after tax performance aside?
Bonds yes, cash no. At least for me. I want my cash accessible. I guess if you're talking about deep cash that actually threw off substantial interest (I don't believe in cash any deeper than a year, and rates are so low now anyway) maybe you could make a case for putting some in tax deferred.
pmward
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Re: Bonds and IRAs

Post by pmward » Sun Sep 08, 2019 2:10 pm

Yeah I also keep cash taxable. Maybe I'll change my mind if we ever go through another Volcker type of situation, but at these rates I would rather keep my cash reachable in taxable. Of course, I also have more taxable assets than tax advantaged due to a high savings rate so that has to be brought into account, as more than one asset needs to be held taxable (currently I also have all my gold and a good chunk of my stocks taxable as well).
KodoCastle
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Re: Bonds and IRAs

Post by KodoCastle » Tue Sep 10, 2019 4:44 pm

For me it depends on how much space I'll have in my IRA. I definitely try to use all $6000 for bonds if I can, but if I can't I don't see the issue in keeping some cash in there for a bit and protecting the interest from taxation. That's all with the plan to use the cash in the IRA to eventually fund a bond purchase in the future.

On a similar note, I realized my previous comment about needing bonds outside the IRA isn't really true. If bonds get above the 35% band, then I can sell them and convert that portion to cash assets within the IRA, and at the same time use my cash assets outside the IRA to purchase the lagging asset (if it wasn't cash). No need for all that algebra and more complex planning I thought I needed before. So there's no reason to have bonds outside a tax-deferred account, unless you've already contributed $6,000 that year (and if that's your problem, good for you!).
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