How Are You Currently Splitting PP Assets Across Roth, Tax Deferred, and Taxable

[TripleB]

There's very few decisions to be made with the PP once you have it set up and decide on using it. The one thing that you can play with is how you split your assets across types of accounts. Most of us have some portion of our money in Roth IRA/401ks, Tax Deferred IRA/401ks, and Taxable Accounts. I like to revisit this on an annual or biannual basis because there's no hard and fast rule so it lets me tinker without the possibility for screwing too much up

The goal is to maximize overall after-tax return. You want to keep tax inefficient assets out of taxable accounts, and you want to keep the asset class with the highest potential for gains within the Roth IRA due to being tax-free upon withdrawal.

My current split is:

Roth IRA: All of the Gold, All of the Stocks, ~1/2 of the Bonds
Tax Deferred: ~1/2 of the Bonds, ~1/2 of the Cash
Taxable: ~1/2 of the Cash

My rationale for this is cash is the asset class with the likelihood to earn the least over the long run. Thus, I keep it out of my Roth IRA. I can still rebalance between asset classes completely within my Tax Sheltered Accounts without any taxable event occurring.

I keep the cash in taxable because of the low interest rates in today's market. I'm penalized by paying taxes on the interest, but the interest rate is low so the taxes are low. If interest rates rise, I can easily "sell" the cash to buy stocks in taxable while simultaneously selling stocks in my Roth IRA to "buy" cash to maintain the correct 4x25 split. However, the reverse is not true. Once I keep any asset other than cash in my taxable account, there's a strong likelihood of a capital gains taxable event to occur if I decide to switch out.

Further, I have access to some specialty vehicles only available in a taxable account such as iBonds and Rewards Checking Accounts, which give a significantly greater than market value return in interest at the expense of tax inefficiency. Also, the iBonds create an additional tax deferred space that is not available otherwise. The overall after-tax return is still much greater than what I have available if I kept the money in a Tax Deferred account.

Finally, my financial life has a lot of uncertainty in it and I may need to live off my portfolio for periods of time. Having cash in the taxable account serves as my "6 months living expenses" buffer, which doesn't require me to liquidate stocks and incur a capital gains event. Because of the uncertainty of employment in my line of work, that is not an "emergency" fund and the likelihood of needing the money is higher than average.

My biggest regret and downside of using this plan is not having enough taxable asset space to purchase gold coins and stocks. Gold coins are superior to ETFs but my taxable space is only around 10% of my total portfolio value because I like to max out my available tax shelters. I'd like to have some stocks in taxable accounts for the option to tax loss harvest in times of market decline. However, my savings rate relative to available tax shelters is such that I am unlikely to grow my taxable account to be much more than 10% of the total portfolio over the next decade so I'm "stuck" with most of my assets in tax shelters

Please critique my strategy and also post yours.

[barrett]

TripleB,

Thanks for sharing this. I'd love to see more "case studies" on here.

I am happy to write up my allocations up, but first a couple of quick questions...

About how long do you have before you start drawing from these accounts?

Also, have you decided in what order you will draw them down?

[barrett]

TripleB,

My first thought (apart from my two questions above) is that you have a large percentage (roughly 62.5%) of your PP in Roth accounts which is great. I was a little late in really understanding the overall value of Roth IRAs for retirement planning. For example, there were years when I made a regular IRA contribution just to save myself a few hundred bucks in taxes. I put some of the blame on my accountant (Mistakes Were Made, But Not By Me). Anyway, my wife and I are trying to beef up our Roths over the new few years.

I am almost 56, she is 47 and we both are self-employed and working in jobs that are physically demanding. For the sake of planning, I figure we can both work another 3-6 years. After that point we will still have some income but not what full-time jobs would generate. Our daughter will start college in 2016.

We have roughly 10% of investible assets in Roths, 50% in regular IRAs and 40% in taxable. The current plan is to delay taking SS payouts as long as we can. We'll withdraw first from taxable accounts, second from regular IRAs and lastly from our Roths (which will by then be the envy of all!).

Our overall direction is to continue to tweak our accounts so that we are following Pointedstick's philosophy of a PP in every account. Because of the order in which we will draw down accounts, that can be done over the next ten years or more. What I really like about that approach is that it allows one to draw down an account without selling stocks, bonds and gold all the time. We can give ourselves a monthly payout and then rebalance when necessary or, in the case of taxable accounts, when it is advantageous to do so.

Currently we have mostly gold ETFs, stocks and LTTs in our retirement accounts. All of those account also have a little bit of cash. Most of our cash is in taxable and a lot of that is in savings bonds. We also have a bit of physical gold designated as taxable, though our plan is to just hang onto that for as long as we can.

So, our PP is a work in progress (we just converted this year to Brown(e)ian gyroscopic asset motion) but I also like the idea of reviewing it yearly so that we can give ourselves every possible tax advantage.

[barrett]

MangoMan,

Aren't you self-employed? Not sure why I thought that might be the case, but as such you would be eligible for an Individual 401(k) Roth contribution, I believe. I only found out about those last year. They are sometimes called something different but it's an account that allows self-employed workers to put a bunch of $ into a Roth. No tax advantages up front on these as far as I know.

[Tyler]

My accounts are 60/40 taxable/deferred. As I plan to live off of the taxable for many years before touching the tax deferred funds, I have separate PPs in each. And FWIW, because my early retirement expenses and taxable income will drop me into the lowest tax brackets, I'll pay no federal taxes most years even on the taxable money.  So over thinking the allocation between accounts doesn't buy me anything.

[dualstow]

BBB, I think my only critique is the same as the regret that you put in your final paragraph.
---
As for me,

Situation / Rationale:
- Very small tax-deferred space so far. 401(k) is about a tenth of the size of taxable and Roth is less than a third of the 401(k)'s size. I definitely don't have room to have a separate pp in each account.
- Also, I have a large vp, larger than the pp, which dictates some things.
- I'm in a low tax bracket so I usually pay $0 on dividends, but I still try to put bonds in tax-deferred and my vp does have tax-exempt bonds.
- I want some physical gold held in a safe deposit box or some place where it isn't held for me. (I'm not ruling out using Perth Mint in the future, but I don't think I would do something like gold coins held by Fidelity).

Asset split:
- All stocks are in taxable where they were bought pre-pp.
- Treasury bonds are in 401(k), with some spillover in taxable. (Roth is full of corporate bonds)
- Some IAU in 401(k) -- can't wait to get rid of gold ETFs in taxable.
- All gold coins - taxable.
- cash and short-term notes - taxable.

I haven't done a ton of rebalancing, but in a pinch I could sell some vp assets to make things smooth (make room, create cash) for pp holdings.

---
Barrett's questions:

About how long do you have before you start drawing from these accounts?

Twenty years at least.

Also, have you decided in what order you will draw them down?

Nope.

[TripleB]

I have decided what order I will draw them down. It's elaborate and intricate. The strategy involves Roth IRA Laddering whereby I take the bulk of my money needed to live on each year from the Roth IRA. Then I perform a Roth IRA conversion, up to the limit of the standard deduction and personal exemption (currently $10k/year) with Tax-Deferred Retirement Assets.

Assuming a 3% to 4% real growth of each account annually, it works out amazingly well, in theory, such that the Tax Deferred Accounts grow each year equal to the Roth IRA conversion amount, meaning the inflation-adjusted amount of the Tax Deferred Account never changes, in spite of taking out $10k each year.

The beauty of the strategy is the $200k+ of Tax Deferred Retirement accounts that will never be taxed. They weren't taxed when investing them, and if you can avoid taking more than $10k (adjusted for inflation) out each year, you won't be taxed taking the money out.

This requires having 30%+ of your assets in a Roth IRA at retirement, which will only be possible for me because I started when I was 18 and also performed several large Roth IRA conversions, tax-free, while in graduate school. I currently have 60% of my assets in my Roth IRA, but that ratio will slowly go down each year and I max out my Solo 401k (due to being in a high tax bracket) and only backdoor Roth $5.5k each year.

You'll need at least 30% of assets in a Roth because of the 5-year vesting period involved in a Roth IRA Conversion Ladder. Once you convert your annual standard deduction/personal exemption amount from 401k into Roth IRA, it takes 5 years before that money "seasons" into being considered a Roth IRA principal contribution, allowing one to remove it tax and penalty free at any time for any reason.

I plan to restart my blog eventually and I'll give specifics on my plan at that time.

[TripleB]

MangoMan,

Aren't you self-employed? Not sure why I thought that might be the case, but as such you would be eligible for an Individual 401(k) Roth contribution, I believe. I only found out about those last year. They are sometimes called something different but it's an account that allows self-employed workers to put a bunch of $ into a Roth. No tax advantages up front on these as far as I know.

Sort of but not really. I am a solo dentist, but my practice is set up as a C-corp of which I am an employee. Even if I qualified for some kind of Roth, I would much rather take the tax break now while I am working and in a high tax bracket. I may be in a high bracket in retirement and/or tax rates may go up by then, but a bird in the hand...

You can do some interesting things if you are your only employee. If you have other employees in the C-Corp, you could always form a new S-Corp and subcontract from the C-Corp to the S-Corp, where you're the sole S-Corp employee.

Then you can have a Solo 401k whereby your S-Corp contributes $30k+ each year as the employer contribution to your Solo 401k. And you can set up a sweet defined benefits pension plan.

[barrett]

TripleB,

Can you please suggest a good resource (book or online) that will help me really understand the Roth IRA conversion? I am deficient in that area of investing knowhow. Seems that whenever I look into it a bit, I find that it doesn't make sense in my situation. But I hear of so many people doing it that I think I am missing something. If I can't do it now, maybe down the line somewhere?

Thanks for laying your withdrawal plan out for us. I know that it's really helpful for me to look at overall plans even if it's only in a rough sense.

Also found out today when looking up that Individual 401(k) Roth info that I can put in an additional $5500 as a "catch up contribution" because I am over 50. Now I just need to make more $!

[TripleB]

TripleB,

Can you please suggest a good resource (book or online) that will help me really understand the Roth IRA conversion? I am deficient in that area of investing knowhow. Seems that whenever I look into it a bit, I find that it doesn't make sense in my situation. But I hear of so many people doing it that I think I am missing something. If I can't do it now, maybe down the line somewhere?

Thanks for laying your withdrawal plan out for us. I know that it's really helpful for me to look at overall plans even if it's only in a rough sense.

Also found out today when looking up that Individual 401(k) Roth info that I can put in an additional $5500 as a "catch up contribution" because I am over 50. Now I just need to make more $!

Eventually I'll restart my blog and give some info. I cannot recommend any specific books. I wouldn't advise anyone to actually pay to convert their Roth IRA. I'd only recommend it if you can do it for free, because of your standard deduction/personal exemption, and/or tax loss harvesting or some other non-refundable tax credits that would otherwise go unused.

I think it's silly to pay to convert a Roth IRA given the possibility of the government changing their mind and taxing it again in the future. I believe this will not happen due to direct taxation because that would be egregious, but it would happen through an institution of a VAT (and simultaneous decrease in regular income tax rates) and/or a means testing which counts Roth IRA against your ability to collect Social Security.

In my mind, the main reasons to pay money to convert a Roth IRA if you have to pay taxes are:

1) You live in a tax-free state but plan to move to a high income tax state in retirement. The conversion will be state income tax free now, and thus avoid your future state (like California) income tax.

2) You are in a ridiculously high tax bracket and you want to squeeze as much money into your Tax Shelters as possible. But you're not quite wealthy enough to set up advanced structures like captive insurance plans. You can do a Roth IRA conversion and essentially "shield" more money from taxes, because by paying the Roth IRA Conversion taxes with your taxable investment money, you're essentially hiding those assets (by giving them to the government in the form of taxes) from future taxation.

3) You have a lot of money in taxable accounts and are concerned about creditor protection and live in a state that shields IRAs from creditors.

For the average person, I don't think it makes sense to pay taxes now to get access to a Roth IRA. Especially if:

a) You have an outstanding mortgage, since your home may be creditor protected.
b) You're not currently maxing out 401k/IRA
c) You're not currently maxing out I-Bonds and EE-Bonds
d) You're not currently forming a handful of trusts or LLCs to hold additional I-Bonds and EE-Bonds beyond the $10k annual limit
e) You're not currently using the free ~$100k of insured annuity space that you have access to (each state has different limits, with around $100k being the lowest in the country to my knowledge of annuity value that's insured)
f) You don't already have 6 months worth of stored food, a generator, stored water, etc. (i.e. a "Permanent Life")
g) You don't already have all 25% of your PP value of gold coins in physical format

If any of those above apply, I'd say you're better off doing any of those than paying taxes on the Roth IRA conversion. Specifically, the gold coins one. If you're light on taxable assets relative to Tax Sheltered, and you're holding gold as ETFs instead of coins for this reason, then you're better off keeping your IRA/401k as Tax Deferred, and investing the money you would have spent on the Roth IRA conversion taxes into buying gold coins and rebalancing those ETFs into other assets within the brokerage tax shelters.

[Tyler]

All good advice, TripleB.

This one is admittedly very niche, but here's another good situation to convert to a Roth:

4) You have low income and do not qualify for ACA subsidies, and either live in a state that did not expand Medicaid or prefer not to depend on it.  If you have money sitting in an IRA, you can convert just enough to a Roth each year to raise your reportable income to qualify.  Depending on your situation, the subsidies and cost sharing gained could greatly outweigh any taxes you pay.

[barrett]

Tyler and TripleB, you guys have Max Roth-Fu. So no need for me to go through the back door and I can keep my simple little withdrawal plan the way it is.

It's weird thinking about this stuff in a way. I mean, I would be silly not to have a plan but the only way to really know if it's a good one is to get old and then find out. And the more I find that I like my plan, the quicker I want to get old.

[TripleB]

Tyler and TripleB, you guys have Max Roth-Fu. So no need for me to go through the back door and I can keep my simple little withdrawal plan the way it is.

It's weird thinking about this stuff in a way. I mean, I would be silly not to have a plan but the only way to really know if it's a good one is to get old and then find out. And the more I find that I like my plan, the quicker I want to get old.

If you are contributing money to a non-deductible IRA and not putting into a Roth Backdoor, then you're doing it wrong. The money you put into a non-deductible IRA is not receiving a tax deduction for the contribution, nor is it receiving tax-free status upon withdrawal. It's the worst of both worlds. There's almost no reason not to do a backdoor Roth if you can.

The main reason one can't back door Roth is if you have a sizable chunk of tax-deferred IRA money sitting around already that you got tax deductions upon contributing. In other words, if the tax basis is lower (or much lower) than the current market value. This would cause you to need to pay taxes on doing the Backdoor Roth because for purposes of a Roth Conversion, you take the average tax basis of all of your non-Roth IRAs.

Thus, if doing a backdoor Roth correctly, if you have any other deductible IRA balances, it's prudent to roll those over into a 401k first, since they will not be counted towards the tax basis of your conversion.

If all of that sounds scary or doesn't make sense, then it's probably not a good strategy for you. I personally couldn't imagine not doing it, and in fact, I went through the hassle of opening my own Solo 401k that allowed for incoming Traditional IRA rollovers, such that I can reduce my Traditional IRA balance to $0, and thus contribute to a non-deductible IRA and have $0 in taxable basis gains before the conversion. Some people advocate waiting 1 year before converting so it doesn't look suspicious. I've heard the IRS has no idea what day you actually do the conversion, it's just reported by calendar year, so if you wait 1 day or 365 days, they may not know... nor care.

The letter of the law seems pretty clear on backdoor IRAs and if the IRS wanted to do something about it, they would have already. Consider the only people doing backdoor IRAs are people with lots of money, and those people can hire good lawyers and accountants. Why would the IRS waste effort to go into prolonged legal battles over trivial amounts of money? Since IRAs are capped at around $5k per year, and backdoor Roths have only been possible for a few years, the IRS would be going to a court battle for maybe a few thousand dollars of back taxes per "wealthy" taxpayer who did it.

[barrett]

TripleB,

I am hoping if I give you some percentages, you can help me work this out...

I have a low income and will for the remainder of my working years (another 3-6 years full time and then maybe some part-time work). About 88% of my IRA investments are in Regular or SEP IRAs. The rest is in a regular Roth and an Individual 401(k) Roth. Over the next few years, I will only make IRA contributions to those two Roth accounts. I even hope to do so the first couple years that I am not working (taking money from taxable accounts and getting it into tax-free accounts).

Also, the majority of the Regular and SEP IRA $ I have has been gained through investment appreciation (I don't have the actual numbers). Throughout my career I have only made deductible contributions or Roth contributions.

Hope this all makes sense. Thanks.

[barrett]

OK, so here is what I inevitably find when I do a Backdoor Roth search:

Who should consider the Backdoor Roth?

If your income is “too high”? for contributing to a Roth IRA, you should consider the Backdoor Roth. For 2014, the modified AGI phaseout starts at $114,000 for single, $181,000 for married filing jointly, and $0 for married filing separately.

If your income isn’t above those thresholds, stop reading — this article doesn’t apply to you. Instead, consider a deductible contribution to a traditional IRA if you qualify for one or contribute to a Roth IRA directly.

[mortalpawn]

That sounds like a great plan, and also one that the IRS would frown on, but I will run it by my accountant and see what he thinks. Thanks for the potential advice.

Actually I can go one better - if your office is small you may be eligible for a SEP-IRA retirement plan which lets your corporation contribute the equivalent of up to 25% of your wages to a SEP-IRA (the retirement contribution is tax deductible for the business) up to a maximum of $52,000 for 2014.  They are pretty easy to set up, I have one at Fidelity.  You do have to contribute the same percentage (of income) for all employees, so that may be an issue if you have a large office.

However putting up to $52,000/year into an IRA before taxes is a pretty nice benefit if you are high income and paying a high tax rate.

[sigger]

Hi.  I'm about to start my first permanent portfolio.  Thanks to Craig for the book, the forum and the blog - they've been most helpful.  Thanks also to the forum members for all the valuable information you've shared which has also been very helpful.

I'd like to post my strategy for dividing assets between taxable and non-taxable accounts along with my reasoning.  I'd be grateful for any advice or hole-poking of my theories.  I'm very new to bonds and gold in particular, but as I've been scarfing down knowledge on the PP have come to realize I'm not nearly as knowledgeable about stocks and cash as I had thought I was.

My taxable and non-taxable accounts are about the same size as of now.

Here are the allocations I am planning:
LTT - 100% non-taxable accounts
Reasoning:  All interest is taxable.  In the event of rebalancing or selling 20 years for 30 years, I may take a gain or loss.  If it's a gain, the gains are taxable.  If it's a loss, I cannot harvest it (I'm assuming, for example, if I sell a treasury with 20 years left at a loss and turn around and buy a 30 year treasury, it would be considered a wash sale and disallowed; please let me know if I have that wrong).  For the same reason, I cannot harvest losses without waiting 31 days before rebuying.

Stocks - 50% taxable, 50% non-taxable
Reasoning:  All dividends are taxable, but by splitting it I reduce the taxes in half.  If I take a gain, I can do so in the non-taxable account and avoid the gains taxes.  By keeping some of it in taxable accounts I can also harvest losses to offset other gains.

Cash - 100% in taxable, with small exceptions to take up extra room available in non-taxable accounts
Reasoning:  about 1/3 of this I plan to hold in I Bonds, which aren't taxable unless I sell them.  A small amount will be held in savings (about 1 months expenses, to cover unexpected events like new transmission or new furnace, or if I lose my income, to keep paying bills while I sell STTs).  The bulk in STT, which have the same issues as LTT, but would have lower interest and gains that would be easier to offset with loss harvesting.

Gold - 80% taxable, 20% non-taxable
Reasoning:  keep 1/5 in non-taxable for ease of rebalancing and also to shelter gains.  As I understand it, gold is considered a collectible and not subject to wash rules (Thanks Sophie!) so taxable portion can be used to harvest losses as well.

Any feedback will be appreciated.

[sophie]

Welcome sigger, and congrats on a very well considered plan!

It sounds like your tax-advantaged accounts have plenty of PP-friendly investment options - is that true?  If you have a large stash in a typically restrictive employer 401k plan, and the bulk of your savings is going into it, you could eventually have problems maintaining a balanced PP.  For me, it was too much of a headache dealing with a big account with only 3 of the 4 PP assets available, at a time when I needed to rebalance into the 4th asset.  Several of us have given up and just run Boglehead-style portfolios in such accounts.

I'd also consider stashing at least some cash in tax-advantaged accounts.  It'll be good to have it there come rebalance time.

Otherwise your plan is perfectly fine.  Have fun setting it up and feel free to post questions as they come up.  If you want more specific advice you might detail where your accounts are and what funds are available in each.

[barrett]

I'd also consider stashing at least some cash in tax-advantaged accounts.  It'll be good to have it there come rebalance time.

I just wanted to second this. You want to have some cash in these accounts so that you can pounce on an asset when it is down. My target is 10% cash in each tax-advantaged account. That way if something drops 30-40%, you have enough liquid to make a decent move. That 10% figure is just what I consider a happy medium. In a tax-advantaged account, it hurts a bit to have an asset that - at least in the near future - is likely to remain flat. But being able to pivot and strike is important. Think 2008 when stocks got hammered.

I haven't gone through this whole thread but I sort of follow Pointedstick's preference of having a PP in every account. Ideally I prefer more stocks and bonds in tax-advantaged accounts (say, 40/40/10/10) and more gold and cash in taxable (again 40/40/10/10). When it's time to rebalance I think this approach gives you more options, though the percentages are really rough.

[sigger]

Thank you both for your advice.  I was struggling a bit to understand the benefit of cash in the non-taxable account (like I said I'm new to this) but I think it hit me this morning:  In a contrived example, if I used my entire non-taxable account to hold bonds, and interest rates rose dropping the value in half, I would be forced to purchase bonds in the taxable account to rebalance.

Similarly, in my proposed allocation using the non-taxable account almost exclusively for bonds and stocks, if the value of both go down, or one goes down significantly, without cash I would be forced to rebalance in the taxable account.

Am I grokking that correctly?

[Austen Heller]

LTT - 100% non-taxable accounts
Reasoning:  All interest is taxable.  In the event of rebalancing or selling 20 years for 30 years, I may take a gain or loss.  If it's a gain, the gains are taxable.  If it's a loss, I cannot harvest it (I'm assuming, for example, if I sell a treasury with 20 years left at a loss and turn around and buy a 30 year treasury, it would be considered a wash sale and disallowed; please let me know if I have that wrong).  For the same reason, I cannot harvest losses without waiting 31 days before rebuying.

Regarding wash sales, this is not correct.  You CAN sell a treasury with 20 years left and turn around and buy a brand new 30-year treasury, no wash sale since they have different maturity dates. 

Taken from: http://www.investinginbonds.com/learnmo ... d=6&id=390

"How to Avoid a Wash Sale
The Internal Revenue Service will not recognize a tax loss generated from the sale and repurchase within 30 days before or after the trade or settlement date of the same or a substantially identical security—typically called a “wash sale.”? While the term “substantially identical”? has not been explicitly defined in this context, two bonds have generally not been considered substantially identical if (1) the securities have different issuers, or (2) there are substantial differences in either maturity or coupon rate."

[barrett]

Thank you both for your advice.  I was struggling a bit to understand the benefit of cash in the non-taxable account (like I said I'm new to this) but I think it hit me this morning:  In a contrived example, if I used my entire non-taxable account to hold bonds, and interest rates rose dropping the value in half, I would be forced to purchase bonds in the taxable account to rebalance.

Similarly, in my proposed allocation using the non-taxable account almost exclusively for bonds and stocks, if the value of both go down, or one goes down significantly, without cash I would be forced to rebalance in the taxable account.

Am I grokking that correctly?

Yeah, you've got it. Remember that the percentages I gave are really rough. You want to have enough cash in any PP account to be able to make a significant move when the opportunity is there.

Another thing to consider... I am guessing that you are fairly young so this might not apply to you right now, but when you get close to retirement, sequence of returns is really important. With that in mind you probably don't want a tax-deferred account zigging when a taxable account is zagging because you want to have options to withdraw from both. It's thinking like this that leads some people to just set up a 4X25 PP in each account. Or you can maybe work toward that as you get older.

For example, if stocks and bonds both dive while gold is soaring AND you only hold stocks and bonds in your tax-deferred accounts, you wouldn't want to be withdrawing at that point. Do a search for "sequence of returns" and you'll know what I am talking about (if you don't already). One of the reasons the PP is such a good retirement portfolio is because it doesn't deliver many negative years. You can get slaughtered in retirement if your portfolio has a couple or three bad years right when you start to draw it down.

[sigger]

Thank you both.  Interesting point on the sequence of returns.  I grasped intuitively that bad years at the beginning of withdrawal would be hurtful, but hadn't really thought about strategies to minimize it beyond picking up additional income.  Seems like another good benefit for the PP to be able to draw down in the performing assets.

I think I may be leaning toward the 4x25 way now, thanks to two new pieces of information.  First Austen's tip on avoiding wash sales for bonds (Thanks Austen!).  Second, turns out I can have a self-directed account for my 401K, which gives me a lot more tax-advantaged space to work with.  It's still limited in what I can buy, but I could do one PP with the 401K using index funds and etfs (thinking vanguard for the stocks and ishares for the rest) and a more traditional one for the other accounts.

Thank you for all the help.

[sophie]

+1 to Barrett and the others' posts...

Thought I would mention also that a Roth IRA and HSA are both excellent places to keep cash.  Because you can withdraw Roth contributions at any time, it's a great spot for "deep" emergency fund $$.  Similarly, you can get HSA money out anytime you want as long as it's for medical expenses.  Just remember to keep good records.