5 Taxable Account Rules to Follow for Tax Efficient Investing

Are you investing your taxable or brokerage account for maximum tax efficiency? Are you implementing advanced strategies like tax loss harvesting?

In today's Wealth Wednesday, we will be discussing how to make an often-overlooked account more tax-efficient with 5 simple rules.

An ongoing problem that we see in our practice is the mismanagement of non-qualified accounts (Brokerage, Joint, Taxable).

These can be a very powerful account for investors but managing these complex vehicles is... well complicated.

Investors try to fix some of these taxable account problems with a band-aid investment like municipal bonds. Unfortunately, these aren't the tax-efficient vehicles they are marketed as...

After this training, you'll have a simple and easy way to gain more after-tax wealth out of one of your most powerful tax buckets.

You learn powerful tax efficient investing strategies to boost your after-tax return.

#taxefficientinvesting #taxableaccounts #retirementincomeplanning

- - - - - - - - - - - - - - - - -

Always remember, "You Don't Need More Money; You Need a Better Plan"

[davidfolts]

No better example of the Pareto Principle in action. Watch at least three times for maximum impact. What are the 45 minutes that you spend each time watching worth? Literally thousands of dollars. Well done Eric, another Master Class presentation!

[dwayneruss]

You can always buy stocks that pay no dividends such as Google or BRK B. Pay no taxes until you sale them, hold them over a year for long term rates.

[mikenorfleet]

Great information again from Eric and the team. One other point to consider - if you are going to make cash donations to charities anyway, you can use a donor advised fund to pull highly appreciated shares from your taxable account. You get the deduction on the appreciated value and avoid capital gains. It's a good way to rebalance if you will donate to charity anyway.

[michaelratchford]

Great content. I made so many mistakes over the years in taxable accounts because I ignored (really, wasn’t aware) of tax consequences. One biggie was I held a 2030 vanguard target date fund that took a huge tax hit when Vanguard changes the rules in an institutional fund that forced them to sell a huge amount of stock within the fund. Took a huge capital gain hit and i hadn’t taken a penny out.

[takatsu]

Very good video- worth the whole 45 minutes! About six months ago I moved all my taxable and tax-advantaged investments away from two paid managers to Fidelity (the bulk) to manage myself and Vanguard (small amount) to use the Personal Advisor Service, which costs 0.3% of AUM. I did this to learn the Vanguard way. Vanguard put all the bond ETFs in the Roth IRA's and the stock ETFs in the taxable account. They look at asset allocation across the whole portfolio so the individual Roth IRA's are not 60/40 stocks/bonds but all investments added up are 60/40. I did the same thing in the Fidelity accounts so the inherited IRA I have contains only bond funds- your explanation of "controlling taxable events" makes sense. I really wanted to put some big growers in the IRA because they'll grow tax free, but they get taken out at regular income tax rates (and not the lower long term capital gains rates) and I must take them due to RMD requirements. I did make one adjustment based on your video: I set all individual common stocks in my taxable Fidelity account to not reinvest dividends. I plan to wind down the stocks through donations to charity (no taxes and a full charitable deduction) and take the cash I would give the charity to invest in stock index ETF's; I don't like the volatility/lack of diversification of individual stocks. Not reinvesting dividends will give me cash to make the move to stock index ETF's more quickly. I went back and checked the statements from when a "pro" (national registered broker and investment advisor) everyone would recognize managed the accounts, they had access to taxable and tax advantaged accounts, and to get a 80/20 portfolio there was plenty of room to put all bond funds in the IRA account, but they put both mutual funds and bond mutual funds in the taxable account- doh!. I think between reading really good books and watching videos like this, I'll be way ahead doing things myself. At a minimum I save the ~1% AUM fee.

[tomn]

Very informative video. I'm just wondering if you have any video or cheat sheets to list out which investment funds go to which buckets (Taxable, IRA and Roth) for retired people? Thanks

[ralphwaters]

Your videos always seem much more useful to me than other "investment" channels. It might be lucky timing in regard to my current situation, but I think you do a good job explaining the material. One video that I would find helpful would be an overview (or checklist) of ALL the factors involved in retirement and cash flow planning. Income tax is always there, but there's a long list of other considerations like ordinary-vs-long-term gains, the SS Tax Torpedo, IRMAA, NIIT/Obamacare, state taxes, etc. I would expect only a 2-minute overview of each item, but you could insert an on-screen link to your detailed videos on each one. This top-level video would then be like a Table-of-Contents to all the factors involved in planning, and would give people like myself some confidence we didn't overlook something big.

[abky]

Great video. Very informative. The only thing I disagree with slightly is dividends. For high income earners those annual dividends don’t really change my tax bracket. And if I max out my tax deferred account contributions and I don’t need to save that money from the dividends then I reinvest those dividends not by drip but by what I pick and choose to buy. Those dividends help me buy more shares of both dividend stocks and nondividend stocks. So every year I get taxable income (again high income earner regardless) but it’s already in my account that I use to buy more stock. I don’t have to take my savings from my job income to put in every year. That compounding over the years from buying more stocks that have growth (invest in good businesses for the most part) and more dividends that allows me to buy more stocks has grown my portfolio without adding that much more taxes. In addition my income has fallen over the years because I chose to go part time so the dividends dont even push me back up to my previous career high tax bracket. But imagine getting 10k a year to invest in the market, over the next 20 years that’s 200k of additional money you invested.

[BarbHurley-sm]

Came back to this video! Fixed my taxable acct 2 yrs ago from this video! Thank you! THANK YOU!!

[ladylyonteeth]

This is great. Thanks for putting this out, and not degrading everyone who didn’t know all this.

[TallDarkStranger]

This is so useful. Thank you. I have been clearly making mistakes the past 30 years, but better late than never.

[jackmasa]

Thank you very much for crystalling all of these intersecting rules for tax efficient retirement investing!

[Michael_W]

thanks so much for all the videos, they are always helpful. I am a self- directed investor for my retirement, the guidance is so helpful

[SchmittycocoPop]

You are on the money. I explain the mutual fund disadvantages to my friends till I'm blue in the face. Well done

[keithmachado-ppfv]

Great video. One exception to holding bonds in a taxable account. If you don’t have enough room in your tax deferred to get to your preferred % of bonds, you can buy t notes with low interest rates. You can then sell them before maturity and pay long term cap gain rates.

[StupidGoodProduction]

I think I'm going to quit my job to avoid the forced income every two weeks

[alphamale]

I just recently discovered this channel and it is my new favorite channel. Your videos are excellent in both content and presentation. Thanks.

[tyuzgbv]

Learned from YouTube today:

Buy dividend stock

Dont buy dividend stock

[jeffdavis]

Good video and very much in alignment with my own realization. I did learn some new perspectives, which is nice. I’ll say it a different way. How much you make is important but how you get to keep and grow over time is the the real game changer.

[ericgold]

The rule of thumb to not hold high DIV stocks in post-tax is a good one, but I'm pretty sure that I am an example where it makes sense to not follow the rule.

I am 65 and have a large pre-tax account. These are the years I try to max my Roth conversions while still trying to stay in stocks and be able to weather a stock market downturn and not have to sell depressed stocks. If my living expenses are covered by fixed income, that is income subject to ordinary income taxes that reduce my Roth conversion ceiling given any specific tax bracket I want to not exceed. My solution is to hold enough high DIV stocks in post-tax to cover my annual expenses, thereby also being able to max my Roth conversion. Since DIVs are poorly correlated with the stock price, I'll have a good chance of getting through a down market without much damage. I'll pay 15% capital gains tax on the extra amount, but that is a good deal compared to the 24% - 32% I would otherwise have paid on that money to get it out of the pre-tax account.