Help moving investments around in taxable accounts

[MikeK]

Having recently decided to transfer my assets into the PP allocation, I'm finding that while I've been buying for a long time (I 37 and still in accumulation mode...), I have little experience selling/trading them.

Moving money around in tax advantaged accounts (401k, etc) is a easy (one might say too easy...).  Just point and click and the money goes from here to there with little fanfare.

My tax disadvantaged accounts on the other hand....well, there transaction fees and *gasp* tax considerations to take into account, plus a bunch of other things I'm probably not even aware of.  Which is where I hope someone here can help.

Are there any good starting places for someone to look when considering when/what to sell in order to rearrange assets in taxable accounts?  Or are fees and taxes just a part of the game and there's not much i can do to minimize them?

mike

ps. if this is too off topic, feel free to remove.

[craigr]

It's not off-topic. But I think more specifics are needed. What kinds and percentages in the allocations do you have and how are you looking to split things up?

Sometimes you have to pay the piper, but often you can delay it a long time or do other creative things to prevent taxable events.

[moda0306]

MikeK,

Make sure you use Individual Security Selection basis recognition method, and choose the highest price shares to be the ones you sell.

Loss-harvest if you can.

Those should help a lot.

[MikeK]

It's not off-topic. But I think more specifics are needed. What kinds and percentages in the allocations do you have and how are you looking to split things up?

Of the total I've allocated to my PP, here's how I'm looking to break things down.

Stocks
* 401k 12.5%
* 457b 12.5%

Bonds
* 401k 12.5%
* roth1 8.5%
* roth2 4%

Gold
* roth2  6%
* NQ    19%

Cash
* 401k 6%
* roth1 6%
* roth2 3.5%
* NQ 9.5%

I'm out of space in my roth accounts.  Am using ~33% of my 401k and 60% of the 457b (which does not have a lot of options to pick from...) and ~80% of my NQ accounts.  Should I be nervous about only holding gold/cash in my taxable accounts?

Sometimes you have to pay the piper, but often you can delay it a long time or do other creative things to prevent taxable events.

I suppose having to pay taxes could be seen as a good thing, as that means I'm making money instead of losing it.  And it's those creative things I'm on the lookout for!

[MikeK]

Make sure you use Individual Security Selection basis recognition method, and choose the highest price shares to be the ones you sell.

OK, so that'd be one of the choices I have when I go to sell?  Or is that some global setting I make with the brokerage service?

Loss-harvest if you can.

That means trying to sell shares that have lost money to offset any gains?  Unfortunately, I don't think I have any at this time (again, suppose that's a good problem to have...).  I also noticed that one can carry over capital losses from year to year if they exceed ~3000$?  (I think from the Schedule D instructions?)

Anyway, I'm guessing this is a whole 'nother world I'll have to learn about?

[KevinW]

Should I be nervous about only holding gold/cash in my taxable accounts?

I don't think so.  I think it's a good idea to keep a chunk of cash in a liquid taxable account for emergencies. And gold is generally the most tax-efficient of the assets.

Questions:
- Can you merge your two Roth accounts into one?
- Does the 457 have viable fund options for anything besides stocks?
- Does the 401(k) have viable fund options for anything besides stocks and bonds?
- Are you contributing more to the tax-advantaged or tax-deferred accounts?

[MikeK]

- Can you merge your two Roth accounts into one?

No. One each for myself and my wife.

- Does the 457 have viable fund options for anything besides stocks?

It definitely doesn't have gold.  I'll look and see if it has anything for cash/bonds, but I'm not optimistic...

- Does the 401(k) have viable fund options for anything besides stocks and bonds?

Again, no gold.  It's got http://www.google.com/finance?q=vfirx, would that be good for cash?

- Are you contributing more to the tax-advantaged or tax-deferred accounts?

Until now, I've been maxing them out, but I'm hoping to reduce my contributions to those accounts (down to my employer 401k match) and instead put the money towards the taxable accounts.  I believe I've got enough saved there to cover my traditional retirement needs.

[KevinW]

Yes, I think the Vanguard Short Term Treasury fund is OK for cash. As has been discussed, it has slightly more interest rate risk than a money market fund, and may hold up to 20% in non-Treasury bonds, yet it's still probably close enough.

Let us know what you find in the 457.

[MikeK]

Let us know what you find in the 457.

Appears my choices in the 457 are

VantageTrust PLUS Fund
VantageTrust Cash Management (Dreyfus Cash Management money market fund (Participant Shares))
VT BoA MMDA (1,3,5 Year CD)

[kobe1]

Stocks
* 401k 12.5%
* 457b 12.5%

Bonds
* 401k 12.5%
* roth1 8.5%
* roth2 4%

Gold
* roth2  6%
* NQ    19%

Cash
* 401k 6%
* roth1 6%
* roth2 3.5%
* NQ 9.5%

Mike,

Switching asset allocation strategies is stressful and not very cost efficient.  So it is not something to be done lightly or often.  I recommend doing enough research that you feel confident that you will stick with your new allocation for a number of years.  If you are at that point, then I would bite the bullet and shuffle your assets to match your new allocation model.  Whatever you lose in taxes and transaction fees you will make up in slow and steady gains.
I think your layout above seems like a good start and will give you a good base to build upon in the future.  I do hope that some of your gold allocation will be physical gold.

Good Luck!

[MikeK]

Switching asset allocation strategies is stressful and not very cost efficient.  So it is not something to be done lightly or often.  I recommend doing enough research that you feel confident that you will stick with your new allocation for a number of years.  If you are at that point, then I would bite the bullet and shuffle your assets to match your new allocation model.  Whatever you lose in taxes and transaction fees you will make up in slow and steady gains.

Thank you (and others!) for the words of wisdom, I very much appreciate the opportunity to learn from those who've traveled the road before....

I do hope that some of your gold allocation will be physical gold.

Yes, my plan is to obtain physical gold as I add to my portfolio over time.

[KevinW]

Hi,

My general process for this is

(1) Decide on an amount of cash to keep taxable and liquid for emergency purposes.
(2) Prioritize sheltering the remaining assets in this order: cash, bonds, stock, gold.
(3) When possible, try to hold growth assets in Roth accounts vs. traditional. Stocks and to a lesser extent bonds.

Looks like you're doing OK on (1) and (2). Depending on the size of the portfolio 9.5% liquid cash might be overkill. If that's the case you could hold less cash and more gold in taxable. Making that change would be a good opportunity to buy some physical bullion.

For (3), it seems the 457 and 401k have acceptable cash options. So I think you can shift things around to have all the stocks in Roth accounts.

That's the only change I'd make. You actually have things pretty close to my approach already.

IIRC others approach this differently, we'll see if they chime in.