I've been pondering in my head for almost 2 years now how to approach Bonds in my taxable. My current portfolio looks like this:
--> Taxable Account: 100% in VT + A good chunk of I-Bonds as that's where I have my emergency fund and I sort of use it "instead of" a HYSA
--> Post Tax Roth: 100% in Schwab Target Date Fund (Passive Index Version)
--> 401K: 100% in T Rowe Price Target Date Fund (my choices are limited at my company, I'd much prefer Vanguard's but T Rowe Price seems pretty good all things considered albeit with a higher ER and also dumb company 401K fees).
My aim is to keep things dead simple. I don't want to use more than one fund for stocks and one fund for bonds if I can help it (ideally if one were hyper optimizing they'd likely do the ole VTI + VXUS + BND + BNDX portfolio I imagine then use the foreign tax credits). For Bonds the "top choices" tend to be BNDW, BND, VGIT/GOVT, BND + BNDX. Technically one should tax optimize and have their bonds in a retirement account, but I like to mirror my holdings between accounts as it's just easier for me mentally that way, I don't have a rational reason really beyond that.
At first I was leaning towards VGIT since it has the state/local tax efficiency advantage, but on paper I really like the idea of BNDW and my state doesn't have huge state/local tax costs (Indiana) so I expect the typical BND would "probably" have higher total return over a long time horizon. BNDW is very cool, but what I'm very worried about is having to pay a truckload in taxes as their are foreign withholding taxes and the US taxes the yield too.
The trouble is, I can't really figure out how to calculate what exactly the bite out of returns would be. E.g. If BNDW yields a hypothetical 5% and my salary is 70K USD, what is the expected yield after all taxes? Ideally I'd like to compare that against the tax rate adjusted VGIT yield, but this seems less straight forward than I'd hoped. Obviously these aren't set in stone and would just give an approximate value subject to change, but I'm fairly new to this and trying to work out how to determine such a thing.
Thank you for your time and assistance, I appreciate it.
--> Taxable Account: 100% in VT + A good chunk of I-Bonds as that's where I have my emergency fund and I sort of use it "instead of" a HYSA
--> Post Tax Roth: 100% in Schwab Target Date Fund (Passive Index Version)
--> 401K: 100% in T Rowe Price Target Date Fund (my choices are limited at my company, I'd much prefer Vanguard's but T Rowe Price seems pretty good all things considered albeit with a higher ER and also dumb company 401K fees).
My aim is to keep things dead simple. I don't want to use more than one fund for stocks and one fund for bonds if I can help it (ideally if one were hyper optimizing they'd likely do the ole VTI + VXUS + BND + BNDX portfolio I imagine then use the foreign tax credits). For Bonds the "top choices" tend to be BNDW, BND, VGIT/GOVT, BND + BNDX. Technically one should tax optimize and have their bonds in a retirement account, but I like to mirror my holdings between accounts as it's just easier for me mentally that way, I don't have a rational reason really beyond that.
At first I was leaning towards VGIT since it has the state/local tax efficiency advantage, but on paper I really like the idea of BNDW and my state doesn't have huge state/local tax costs (Indiana) so I expect the typical BND would "probably" have higher total return over a long time horizon. BNDW is very cool, but what I'm very worried about is having to pay a truckload in taxes as their are foreign withholding taxes and the US taxes the yield too.
The trouble is, I can't really figure out how to calculate what exactly the bite out of returns would be. E.g. If BNDW yields a hypothetical 5% and my salary is 70K USD, what is the expected yield after all taxes? Ideally I'd like to compare that against the tax rate adjusted VGIT yield, but this seems less straight forward than I'd hoped. Obviously these aren't set in stone and would just give an approximate value subject to change, but I'm fairly new to this and trying to work out how to determine such a thing.
Thank you for your time and assistance, I appreciate it.
Statistics: Posted by BlindBison — Fri Jan 12, 2024 4:23 pm — Replies 0 — Views 50