What do you think of the article - The Huge Tax Bills That Came Out of Nowhere at Vanguard from the intelligent investor?
So investors were hit a 15% capital gains tax. So if you have a 1 million TDF then you would pay 150,000 in capital gains tax without selling anything…
Will this change when they merge the institutional and investor Shares in February?
The article did a good job highlighting a rather unusual situation! As far as the consequences of the share class merger, it’s somewhat TBD still. It depends on how Vanguard completes this merger which is not public knowledge, but I would be surprised if it did trigger a large cap gains event. But then again, I was very surprised at the TDF’s 15%!!
Jeremy made a great YouTube video right after Vanguard announced the high distribution last year. If you haven’t already seen it, it’s worth watching. We plan on coming out with more content on this topic shortly!
Been searching the forum for this question, and here it is! To follow up…
In 401k I have 250k in S+P 500, and 30k in 2050 TDIF. (Essentially almost the same asset allocation since I’m 42 and currently the 2050 fund is 90% stocks, albeit about 60% US based.)
In Roth IRA I have 12k in 2 different clean energy mutual funds, big mistake, they have have only lost over the last 2 years, and fees are super high. If they ever recover, I will sell them and transfer them into a low cost index fund. New money within the Roth IRA is going into S+P 500. Perhaps here it should go to TDIF instead? I know we’re never supposed to sell, but if I’m gonna get to a set it forget mode of a TDIF, I’ll have to sell/transfer these eventually.
Ok now to the big question. I am opening an individual brokerage account to put some emergency fund money into ($20-30k). I am 42 and will be making less money from here on out vs more, given I’d like to leave my career. Not sure I’ll even be able to keep contributing to the accounts. Would you say then to NOT invest in a TDIF in a taxable brokerage and instead balance out the S+Ps that are in my 401k and Roth IRA with international funds and some sort of municipal bond fund instead? (Not htat I have any clue how to find a high yield municipal bond fund in my state.) Because currently I am 99% in stocks since the TDIF part of my total 401k is tiny at about 8%.
So basically, move everything to TDIF vs all accounts OR use taxable individual brokerage to balance out what I already have in tax advantaged accounts?
THANK YOU in advance!!