I think you're misunderstanding... it's only the Taxable account against all tax-advantaged accounts (his and hers). If you each have Taxable accounts that's also a concern, but I thought you only had one joint account (but perhaps I'm confusing you with another poster). If you only have one Taxable account this this (just as an example) would be fine.1) Both my partner and I have equivalent accounts (e.g. individual 401ks, individual Roth IRAs, etc). Would it really make sense to find alternative holdings (e.g. VTSAX, VFIAX, etc) for each holding to avoid wash sales? Or is it easier to stick to the same holding and be mindful (wait 60 days) when selling? Looking at US stock holding alone, worst case scenario we'd need to cover 8 different accounts: my 401ks, partner's 401k, my Roth IRA, partner's Roth IRA, my HSA, partner's HSA, my taxable brokerage, partner's taxable brokerage. Or am I fundamentally misunderstanding the problem?
Taxable: Total Stock Market
His & Her 401k/Trad IRA/Roth IRAs: S&P-500 Index
The wash sale only comes into play if you have "substantially identical" holdings in Taxable (where you sold at a loss) and any other account besides that one Taxable account. Subsequently if you have VTSAX in Taxable, then holding anything but VTSAX is Ok in all the other accounts (both his and hers). Does that make sense?
Trad/Roth 401ks and IRAs certainly do NOT generate tax implications for swaps within the account (withdrawals from the account might trigger taxes).2) Exchanges in 401k, Roth IRA, and HSA do not generate tax implications, correct? California taxes HSAs, would exchange trigger a kind of a taxable event?
HSAs should be similar to Trad 401k/IRA... no tax consequences for fund changes within the HSA account, only on withdrawal (which should not be taxed if used for qualifying medical expenses). I can't speak to CA-specific treatment of HSAs so that's probably worth a Google search (maybe with CA department of taxation in the keywords?). My attempts to search HSA rules for CA only turned up bills that seem to have not been passed into law that would've made them follow Federal rules (currently that are treated like ordinary investment accounts?).
Fidelity's article on taxes for bonds and bond funds implies that loses from sale of a bond fund can be used to offset gains on sale of other securities (e.g., stocks). Since you're lining up a tax advisor, this is a good question to confirm with them.3) We'll be sending taxable bonds at a loss. I stopped reinvesting dividends for taxable bond accounts (AFAIK dividend reinvestment can trigger a wash sale too?), I'm planning to sell them after 31 days, and offset some gains with the losses. Is this the basic principle of tax loss harvesting?
The difference in fees is typically 1-2 basis points, which isn't enough to be the primary driver of your decision. Some like ETFs and some like mutual funds. You'll have to make your own call on this one, but some discussion is given below that might help you decide.4) Where possible, I'd want to have ETFs, right? Those have lower fees, so e.g. if my Roth IRA allows it - I'd favor ETFs over mutual funds when rebalancing. I imagine I can't just exchange my US stock/INT stock for ETFs without generating a massive tax bill, so I'd just stop buying mutual fund versions and will continue purchasing ETFs instead.
MFs vs ETFs
Wiki topic on ETFs vs MFs
If you're dealing with a brokerage that allows fractional share transactions of ETFs, there's not a lot of difference. The biggest thing to me is that a mutual fund (MF) order can be placed at any time of day or night and will execute at close of business at the same NAV for everyone that placed orders. MFs are traded in dollars so every penny you wanted invested is deployed (nothing left sitting in the settlement fund). If your brokerage allows ETF transactions in dollars (rather than shares), there's no significant difference at all.
ETFs have a tiny, but non-zero, bid/ask spread. They should only be traded during Market Open (9a to 4p EDT). You should probably avoid trading during times of high price volatility (typically first and last hour of market open) since the price can change since you last calculated the number of shares you need for the approximate dollar purchase/sale you want to make and price changes between lookup and execution can make you buy more (or less) than you wanted. Buying shares, instead of dollars, likely means some residual is not deployed and ends up sitting in the settlement fund. None of these ETF traits are show-stoppers, and I deal with them all the time for individual stocks (fun money), but I don't see any need to deal with it for my MF investments (an ETF is just a packaged MF that trades like a stock). ETFs certainly are portable whereas MFs may or may not be transferrable to a different brokerage "in kind," which is a valuable attribute to some, but I'm not leaving Vanguard so a non-factor to me.
It's also my understanding that ETFs in a Taxable account are more tax-efficient if the underlying fund has any churn due to trading (rather than churn due to changes in the underlying index). Since the ETF is directly trading on an exchange between buyers and sellers, the ETF manager can be hands off, but a mutual fund manager has to match buy and sell orders to try and minimize capital gains distributions for those that did not sell any shares (I always get a capital gains distribution for my taxable mutual fund even if I sold nothing that year). This might be a pretty small efficiency as I've heard it said that VTSAX is pretty tax-efficient (but likely not as efficient as VTI).
Statistics: Posted by bonesly — Fri Feb 14, 2025 12:09 am — Replies 17 — Views 3388