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Posted by learnfpga@gmail.com on January 11, 2008, 7:13 pm
Hello All,
I have a taxable account with Vangaurd with diversified portfolio of
index funds. Now I want to open an roth IRA and rollover my 401K into
IRA both at Vangaurd.
My question is should the assets in roth IRA and rollover IRA be
considered part of my overall portfolio or should my taxable portfolio
be kept separate.
I am leaning towards treating all IRA's (Trad IRA, roth IRA or
rollovers) as separate entity and invest that money in lifestyle
funds. This is because of the limitation of how much I can put in IRA
every year. That way my taxable account has its own portfolio and non
taxable its own.
Any suggestions would be great. I know this is a personal preference
but still would love to hear your thoughts. Thanks
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Posted by joetaxpayer on January 11, 2008, 9:12 pm
learnfpga@gmail.com wrote:
> My question is should the assets in roth IRA and rollover IRA be
> considered part of my overall portfolio or should my taxable portfolio
> be kept separate.
You have one portfolio. You can partition it how you will, but you need
to consider the total picture and should pay some attention to what goes
where.
For example, I have a retired woman, whose funds are about 50/50
pre-tax/post tax money. Interest on CDs is taxed as ordinary income, but
dividends are tax favored. So, even though it's counter intuitive, her
post tax money is where the index funds are and the CDs are in the IRAs.
The tax tail doesn't wag the portfolio dog, but it does help determine
which accounts hold which assets.
It may seem a bit of a stretch, but for some it makes sense to view
their social security benefit as a bond or annuity. If you receive say
$20K/yr in SS, it's approximately valued as $500K in the portfolio for
purposes of balancing stock/bonds/etc.
JOE
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Posted by Sandra Loosemore on January 11, 2008, 9:31 pm
> My question is should the assets in roth IRA and rollover IRA be
> considered part of my overall portfolio or should my taxable portfolio
> be kept separate.
You should consider the overall asset allocation of all your retirement
assets, whether they are held in IRA, 401(k), or taxable accounts. It
makes sense to split things up so you hold tax-efficient investments like
index funds and muni bonds in your taxable account, and less tax-efficient
investments like REITs, a core bond fund, and actively-managed stock
funds in your tax-advantaged accounts. When you get closer to retirement
you also get to start worrying about what accounts to draw upon first and
juggling your asset allocation between accounts correspondingly. :-P
OTOH, if you have other savings for non-retirement purposes (child's
college fund, new house fund, etc) you should manage those separately
than your long-term savings. Typically anything for a goal <5 years
away should be in cash or a conservative bond fund.
-Sandra
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Posted by Andrew Koenig on January 12, 2008, 9:38 am
> My question is should the assets in roth IRA and rollover IRA be
> considered part of my overall portfolio or should my taxable portfolio
> be kept separate.
I don't think you have a choice in the matter. If you have taxable and IRA
money at Vanguard, then each one will be in a different portfolio, with its
own list of funds. Even if you have taxable money and IRA money in the same
mutual fund, they will have different account numbers because they're in
different portfolios.
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Posted by joetaxpayer on January 12, 2008, 12:55 pm
Andrew Koenig wrote:
> I don't think you have a choice in the matter. If you have taxable and IRA
> money at Vanguard, then each one will be in a different portfolio, with its
> own list of funds. Even if you have taxable money and IRA money in the same
> mutual fund, they will have different account numbers because they're in
> different portfolios.
Not to split hairs, but we are likely using the word 'portfolio' to mean
different things. I use it to mean the total listing of one's investment
assets. The pie chart with everything in it. The number of accounts it's
spread across and its pre or post tax status shouldn't really change
that. The actual asset classes contained within are part of the
allocation process.
The only time I'd refer to an individual having more than one portfolio
is, as Sandra suggested, when a subset of accounts are for a completely
different purpose. My child's college savings is not consider part of my
own portfolio.
JOE
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