If I keep div reinvestment ON in the VTSAX IRAs and turn it OFF in the main non-tax advantaged account where I would be withdrawing from for the foreseeable future, would this alleviate the issue?
Much simpler. But if you feel it costs you time out of the market with dividends just sitting in cash...
A possibility if you want to reinvest dividends is to exchange VTSAX in those tax-advantaged accounts to VFIAX (S&P 500 index fund). Exchanges of funds in tax-advantaged accounts have no capital gains*. That way you'd have separate funds in taxable (VTSAX) vs. tax-advantaged (VFIAX/VBTLX). Any wash sale of VTSAX in taxable account (not illegal) would be accounted by Vanguard brokerage on tax lots and end of year tax forms (but not if you and your wife have separate taxable accounts).
*a couple states, I think, tax capital gains in HSA accounts. Find out about yours.
I know you know, but I'll say it just in case someone else is reading and doesn't: don't do a mass exchange of VTSAX to VFIAX in taxable account until ready to realize all those taxable capital gains!
Yes, it could work. A guaranteed way to steer clear of tax messes is to be sure to always sell VTSAX lots in a taxable account for only postive capital gains. Every single lot that is sold in the taxable account must be positive using VTSAX's closing NAV.If I keep div reinvestment ON in the VTSAX IRAs and turn it OFF in the main non-tax advantaged account where I would be withdrawing from for the foreseeable future, would this alleviate the issue?
CAREFUL: a limitation of mutual funds like VTSAX is they only have one closing NAV price per day for which all the shares are transacted. You could put in a sale order of VTSAX lots with minimal capital gains while the market is up, but around 3:30PM Eastern the US Stock Market takes a dive and those lots are then going to sell at a capital loss. The Vanguard brokerage system will not allow you to cancel the sale order late in the afternoon.
Your plan to reinvest VTSAX in IRAs could create a wash sale. Read about wash sales. A wash sale involves selling any lots of VTSAX for a loss in your taxable account after buying/reinvesting VTSAX shares in an IRA within 30 days before the sale or reinvesting within 30 days after the sale. https://www.bogleheads.org/wiki/Wash_sale
Statistics: Posted by Global100 — Sat Oct 26, 2024 12:05 am — Replies 9 — Views 841