Hopefully you can file joint (MFJ) rather than separate (MFS), for your tax-year 2025 filing. Because MFS is probably going to require a backdoor Roth contribution since the contribution limit for MFJ is $236 AGI to put the full $7K in, but the limit for MFS is only $10K (for each of you, which is a pretty steep penalty). Additionally, the ordinary tax-bracket income limits are doubled for MFJ compared to MFS (e.g., 24% ends at $197,300 Single, but $394,600 Joint). If not for 2025, then hopefully this is a priority to get to MFJ for 2026.my wife and I recently got married and are in the process of consolidating finances.
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Tax Rate (married filing separately):
His: 24% Federal, 5.5% State
Her: 35% Federal, 6.2% State
Your Current layout has Wash Sales between Taxable and other accounts (highlighted in red). There are bonds in Taxable which is not in adherence with Tax-Efficient Fund Placement as well as bonds in Roth accounts which diminishes the tax-free earnings attribute (both highlighted in purple). There's a pair of moderately high-cost funds that should be replaced by low-cost index funds (highlighted in yellow with the ER in red). Both Apple and the Employer Stock represent a single-company risk (highlighted in blue) and should be swapped into a broadly diversified, low-cost index. It's incredibly complicated at 46 holdings and has ~10% bonds (plus some gold which is speculative), while your desired AA is 0% bonds, plus the int'l stock allocation is a bit low of your 20% desired exposure.One of the challenges we’re facing is that her taxable brokerage and Roth IRA are actively managed, and seem to be diversified across many overlapping assets. Ideally I’d like to pare this down for simplicity if we are going to take over management.
The Proposed layout eliminates the wash sales & single-company risk, adheres to tax-efficient placement, and greatly simplifies from 46 holdings down to 6 and yet is fully diversified. This AA meets your desired AA of 100/0 with 20% of stocks in int'l. I've omitted mid/small caps as those are simply not going to make a big difference since they're only 15% of the weighting of Total US Stock while S&P-500 is 85% of the weighting so S&P-500 is effectively interchangeable with Total Stock Market (mid/small would have to outperform large by a huge margin and have a big overweighting tilt in your portfolio relative to the market weight of 15% to make a difference, which seems like an unwarranted gambling risk). "Simplicity is the master key to financial success." -- John C. Bogle
As @livesoft says, you can cleanup the tax-advantaged accounts right away. I'd wait 31 days after the initial cleanup to start working on cleaning up Taxable, just to clear as many wash sale concerns as feasible You'll want to prioritize by reducing cost. It's great to reduce clutter too, but there's a tax-cost for changes in Taxable, so you typically come up with a ranked order to unwind undesired holdings and do that over successive tax years up to your annual "tax pain threshold" until it's cleaned up to your satisfaction (which might leave some low-cost clutter in place or not). When you get around to selling S&P-500 funds in Taxable, you'll still likely have the potential for wash sales, so if you do end up with a realized loss, just be careful not to claim the entire loss on your tax return if you repurchased any S&P-500 in the 401k or 403b (which "washes" some/all of the loss away).
The table below suggests a prioritization order ranked by the product of the balance ($) and the expense ratio. Ditching the highest-cost fund (FUNL highlighted in yellow) is #1, followed by USMV, ACWV, etc. The S&P-500 funds are highlighted in red as reminder these could trigger wash sales because S&P-500 is retained in Her 401k and His 403b. I proposed keeping VEA in Taxable so that's highlighted in bold (i.e., don't sell if your plan is to keep that one). The individual stocks don't cost anything to hold so they're at the bottom but you should perhaps move this up in the priority based on your concern about individual company risk (i.e., consider risk in addition to cost in the ranking). You obviously can't have her unwind company stock that isn't fully vested yet, but as shares do become vested, she should sell and redirect proceeds to VTI in Taxable and S&P-500 in Her 401k.
On Single-Company Risk...
All stocks and stock mutual funds/ETFs have the risk of companies being held having a significant decline or outright collapse. If that risk were hypothetically 1% for all companies (it's not), then the risk of holding Stock XYZ becoming worthless is 1%. If we have a mutual fund/ETF tracking the S&P-500 and each company in that index has the same 1% independent risk of collapse, then the risk of holding that fund is 1%/500 = 0.002%, which is far, far less risky than 1.000%. If we had a fund like VTI/VTSAX holding 3,544 stocks, the risk is 1%/3,544 = 0.00028%. Both the S&P-500 and Total Stock Market (TSM) have negligible risk when compared to a single company stock (left chart). TSM is much lower risk than S&P-500 but they're both effectively no risk of collapse (right chart). Despite the risk of all stocks not actually being equal the principle stands that a broadly diversified index is less risky than any individual stock holding.
The reasoning above is a large part of why we don't' recommend holding individual stocks (unless you're holding at least 100 such stocks, which is complex!). If one holds employer stock (options or vsted RSUs), there is a double-jeopardy because if it collapses: a) your stocks is worthless; and b) you probably lost your salary too.
Statistics: Posted by bonesly — Tue Sep 23, 2025 2:13 pm — Replies 4 — Views 580