What tax drag are you talking about?While I am at my desired asset allocation, I have too much cash in taxable which creates a tax drag (I am in a 24% bracket). It seems like the right thing to do is to buy the desired number of VTI shares in taxable and sell the same number in tax-deferred. I know that we should not worry about current asset prices, but I thought that it would be better to adjust the asset location during a downturn. That way, I buy low, if I have to sell, I am less likely to sell at a loss. However, now I think that it may be the other way around. Assuming I have a good emergency fund (2 years), and don't plan on selling VTI for 10 years, now may be a perfect time to do it because I will be locking in high basis for those VTI shares. If I sell at a gain, the gain will be smaller hence less taxes, if I sell at a loss, I take advantage of a loss that I can use to offset future gains (since I have other lots of VTI purchased at low prices). If I need the money, just sell, take that loss for future use, and buy the same number of shares in tax deferred. So maybe, I got it all wrong near all-time high prices are actually good for this.
"I have too much cash in taxable which creates a tax drag (I am in a 24% bracket"
Your cash holding in your taxable account is not your income so the amount of cash in your taxable account is just your asset.
Your asset is not being taxed as income. So I am not sure what you mean by tax drag with your 24% bracket.
Statistics: Posted by LeslieSmiley — Fri Apr 19, 2024 6:15 am — Replies 5 — Views 554