I've been struggling with the concept of tax efficient placement and bonds (http://ift.tt/1LatCG1). Here's my current situation
In brokerage:
- $5,000 VBMFX (Total Bond Index Fund)
- various other funds
In Roth:
- $4,600 VBMFX (Total Bond Index Fund)
- $22,000 VTSAX (Total US Stock Market Index Fund)
- $6,000 VGSIX (REIT Fund)
In general, it seems like "put bonds in Roth IRA" is recommended and my understand for that is because any returns from bonds (dividends) are taxed at the full income rate (25%), as opposed to stocks where they can be held for the lower long term capital gains rate (15%).
However, currently bonds have very low returns because of low interest rates and the stock market has been growing and growing. I would assume that because of this, the amount the advantage of the 10% gap is decreased. Perhaps it's even more beneficial to have stocks in tax advantage right now?
I'm wondering, since my bonds are already split, if there is an even more tax-efficient way to break down my bond investments, or if I'm just over-complicating things. My entire line of thinking revolves around this assumption: A Total Bond Market Index Fund VBMFX includes bonds that are tax exempt. If that is true, could I split out the tax exempt bonds, for example VWITX, put those in the Brokerage account and invest in non-tax exempt bonds within my Roth VGSIX and/or a Corporate Bond fund. My hope would be the result gives me similar coverage as a total bond index, but with better tax efficiency.
Submitted August 04, 2017 at 04:20PM by moneythrough123 http://ift.tt/2uc0meK
