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Due to an inheritance I now have a need for a taxable account to invest monies in. The questions is for those that have both taxable and tax deffered do you manage them different and how?
Such as do you use index funds in the taxable or muni funds? Preffered fund house for taxable accounts?
Generally speaking, if the gains from a fund (any kind of fund) are tax-free, you'd want those funds in your taxable account, as this of course avoids paying tax on those gains.
It's been years since I've had a brokerage account, although at the moment I am looking at Schwab with respect to that. All of my dealings for many years have been directly with fund families themselves, so I can't be of much help on a brokerage house, but I'm sure you'll hear from lots of others on that issue.
Ameritrade has consistently terrific customer service, but I don't like the 180 day holding period for NTF and $49.99 fee for TF funds. Otherwise, good selection of funds and really first-rate CS.
I would suggest to putt tax-free income investments and low turn-over equities in your taxable account, and put your bond funds in your retirement accounts. Check the capital loss carryforwards (or gains exposure) for your equity funds. Many still have large losses that they are carrying so cap gains may not be an issue for a while.
Do you have a brokerage account for your retirement funds? If you're happy with them, keep it simple and stick with them. Many brokerages also have various fee breakpoints or premium service for meeting certain combined asset levels, so putting all the money in once place could be advantageous.
I have accounts at both Fidelity and Schwab and am very happy with both. Their websites are useful and easy to use, and their customer service is good. Scottrade has a good NTF mutual fund selection and their transaction fees for the non-ntf is reasonable, but their website isn't great.
I had the same thing to deal with a few years back. I configured the taxable account to hold a good portion of tax advantaged income producting assets and the tax deferred accounts, ira and 401k, to hold the other as much as I could. The CD ladder was held in the taxable account and there were still taxes to pay on the interest income it generated and the dividends form stocks along with some capital gains associated with profits form the sale of securities. You can somewhat reduce taxes form the type of assets you hold in the taxable account; but, at some point in time you are going to have to most likely pay the tax man. I sold some tax free munis off at a profit and had to pay taxes on the profits from the sale ... and, I had some called at a premium ... and, I still had to pay.
Have a good day ... and, I wish you the very best at sorting this out.
Always a tough decision, either make money and pay taxes or defer making money and little taxes. Other than using index funds and letting them ride and using closed end muny funds, not much else I like. If you are in the 10- 15% bracket and close to paying on 85% of Social security, it can make a big difference if you can keep taxable SS much lower than 85%. In 2011 I was able to keep my taxable SS at only 14% by not taking CG or using any income producing investments. The question is how to figure if earning little or nothing is better than something.
With inheritance I might suggest sitting down with an estate planner who could evaluate your goals and needs. There may be missing pieces such as, a 529 plan for educational expenses, annuities, Long term care insurance; hell, even a small life insurance policy that pays burial expenses for you or you loved ones. Many of these would either defer taxes or eliminate taxes while at the same time reduce capital risk in your portfolio.
As this experience of settling your loved one's estate "settles", maybe you have learned some things that were done well and some that you could improve on for your estate.
Good suggestions here already: munis and low-turnover stock in taxable, higher yielding/total return bonds in tax advantaged (Pimco & DoubleLine being two of the poster children on that score) is a standard suggestion for investors a ways from retirement, but if taking out income from bond funds is or ever becomes a need, then things can get a little murkier, and you may want some of the higher yielding bonds in a taxable account for easy access.
I was in the same situation about two years ago, and it took a while to get the inheritance positioned in a reasonable way. All I can offer from that experience is pretty much the obvious stuff: study up, consider multiple strategies before committing, and don't rush too much getting to a "final" solution.
Good luck, AJ
P.S. On brokerages, we went with Vanguard for reasonably cheap & low-minimum access to Pimco funds, integration with Vanguard fund holdings (Vwiax and muni funds, primarily), low trading costs, and free trading on V. etf's.
However, we've kept a few separate accounts too. To put everything under one roof, I think I'd probably go with Fidelity: they have a good selection of non-Fido funds, good muni funds of their own, they've cut the brokerage holding period to 60 days instead of the usual 180, and I don't hear any major complaints from their customers.
I'm sure there are others that would work well too - brokerages are complex animals, and it's hard for any one investor to know very many of them, especially when the rules, the deals, and the inventory change frequently.
Comments
It's been years since I've had a brokerage account, although at the moment I am looking at Schwab with respect to that. All of my dealings for many years have been directly with fund families themselves, so I can't be of much help on a brokerage house, but I'm sure you'll hear from lots of others on that issue.
Do you have a brokerage account for your retirement funds? If you're happy with them, keep it simple and stick with them. Many brokerages also have various fee breakpoints or premium service for meeting certain combined asset levels, so putting all the money in once place could be advantageous.
I have accounts at both Fidelity and Schwab and am very happy with both. Their websites are useful and easy to use, and their customer service is good. Scottrade has a good NTF mutual fund selection and their transaction fees for the non-ntf is reasonable, but their website isn't great.
I had the same thing to deal with a few years back. I configured the taxable account to hold a good portion of tax advantaged income producting assets and the tax deferred accounts, ira and 401k, to hold the other as much as I could. The CD ladder was held in the taxable account and there were still taxes to pay on the interest income it generated and the dividends form stocks along with some capital gains associated with profits form the sale of securities. You can somewhat reduce taxes form the type of assets you hold in the taxable account; but, at some point in time you are going to have to most likely pay the tax man. I sold some tax free munis off at a profit and had to pay taxes on the profits from the sale ... and, I had some called at a premium ... and, I still had to pay.
Have a good day ... and, I wish you the very best at sorting this out.
Skeeter
Sorry for your loss.
With inheritance I might suggest sitting down with an estate planner who could evaluate your goals and needs. There may be missing pieces such as, a 529 plan for educational expenses, annuities, Long term care insurance; hell, even a small life insurance policy that pays burial expenses for you or you loved ones. Many of these would either defer taxes or eliminate taxes while at the same time reduce capital risk in your portfolio.
As this experience of settling your loved one's estate "settles", maybe you have learned some things that were done well and some that you could improve on for your estate.
I was in the same situation about two years ago, and it took a while to get the inheritance positioned in a reasonable way. All I can offer from that experience is pretty much the obvious stuff: study up, consider multiple strategies before committing, and don't rush too much getting to a "final" solution.
Good luck, AJ
P.S. On brokerages, we went with Vanguard for reasonably cheap & low-minimum access to Pimco funds, integration with Vanguard fund holdings (Vwiax and muni funds, primarily), low trading costs, and free trading on V. etf's.
However, we've kept a few separate accounts too. To put everything under one roof, I think I'd probably go with Fidelity: they have a good selection of non-Fido funds, good muni funds of their own, they've cut the brokerage holding period to 60 days instead of the usual 180, and I don't hear any major complaints from their customers.
I'm sure there are others that would work well too - brokerages are complex animals, and it's hard for any one investor to know very many of them, especially when the rules, the deals, and the inventory change frequently.