What is the guaranteed long term account (no ticker) yielding? Just the yield, not the expense ratio in that fund. By law the yield must be specified net of expenses, so the expanse ratio becomes irrelevant.
If it is anything more than 3%, I would not hesitate to pile on into that fund. If it is less than that, I would compare 4.5% (expected yield on T bills) * (1 - your marginal Federal tax bracket), and see which is higher. If this is higher than the yield from Guaranteed Long Term Account, it means you are better off building the fixed income portion in taxable account, than swallowing Boglehead orthodoxy that fixed income MUST be pushed into tax deferred.
Keep away from bond funds like FXNAX, if you value safety of your principal. If you aren’t aware, bonds lost 3% in just the last two months, or an annualized loss of 18%. In 2022 too they lost 17%. Are you ok with such stomach churning double digit losses in your fixed income bucket? WHY are you investing in bond funds in the first place?
Which would you prefer? Your $1000 investment shrinking to $900 in tax deferred account, and “yay I don’t have to pay taxes!”? Or your $1000 growing to $1045 in taxable account, and pay 24% taxes on that $45 growth ($10 in taxes) but the $1000 returned safely back to you?
UNDERSTAND THE PURPOSE of your fixed income first. Don’t just drink Boglehead KoolAid about Total Bond fund.
Edited to add: I would use FXAIX alone in your lineup. I don’t see a good international equities fund in the lineup so I would simply skip it altogether. As my rant above suggests, build up some stash in VUSXX or T bills in a taxable account for fixed income portion of your portfolio. Buy Series I Savings Bonds for $10,000 per person per year. These options preserve your principal while also providing growth, not subject to Mark-to-Market like the FXNAX and lose 3% in the blink of an eye.
If it is anything more than 3%, I would not hesitate to pile on into that fund. If it is less than that, I would compare 4.5% (expected yield on T bills) * (1 - your marginal Federal tax bracket), and see which is higher. If this is higher than the yield from Guaranteed Long Term Account, it means you are better off building the fixed income portion in taxable account, than swallowing Boglehead orthodoxy that fixed income MUST be pushed into tax deferred.
Keep away from bond funds like FXNAX, if you value safety of your principal. If you aren’t aware, bonds lost 3% in just the last two months, or an annualized loss of 18%. In 2022 too they lost 17%. Are you ok with such stomach churning double digit losses in your fixed income bucket? WHY are you investing in bond funds in the first place?
Which would you prefer? Your $1000 investment shrinking to $900 in tax deferred account, and “yay I don’t have to pay taxes!”? Or your $1000 growing to $1045 in taxable account, and pay 24% taxes on that $45 growth ($10 in taxes) but the $1000 returned safely back to you?
UNDERSTAND THE PURPOSE of your fixed income first. Don’t just drink Boglehead KoolAid about Total Bond fund.
Edited to add: I would use FXAIX alone in your lineup. I don’t see a good international equities fund in the lineup so I would simply skip it altogether. As my rant above suggests, build up some stash in VUSXX or T bills in a taxable account for fixed income portion of your portfolio. Buy Series I Savings Bonds for $10,000 per person per year. These options preserve your principal while also providing growth, not subject to Mark-to-Market like the FXNAX and lose 3% in the blink of an eye.
Statistics: Posted by lakpr — Thu Nov 07, 2024 12:59 am — Replies 3 — Views 164