Looking viewtopic.php?t=248114 or https://www.wallstreetphysician.com/tax ... necessary/ it would seem that if your tax at retirement is 25% and you want and AA of 50/50, you could have 50k in stocks in your Roth and 67k on bounds in your pre-tax.
But I don't agree.
AA allocation means you rebalance often, and certainly after any distribution of a particular account. You can move freely your AA between pre-tax and Roth (no taxes). I want my AA to give me the before-tax Roth+pre-tax I want (i.e. a given return with a given level or risk). If I look at the compound rate of return, it would not care whether a bond/stock fund is in pre-tax or Roth. It's similar to the concept of not taking into account cost basis when doing rebalancing viewtopic.php?t=238676.
There is an advantage (and also risk) in having stocks on your Roth. On average, you'd expect stocks to grow more, so you'll have to pay less taxes. But this has nothing to do with compound growth, it's just about a discount you may get when paying taxes at withdrawal time. AA has to do with the compound return you want.
But I don't agree.
AA allocation means you rebalance often, and certainly after any distribution of a particular account. You can move freely your AA between pre-tax and Roth (no taxes). I want my AA to give me the before-tax Roth+pre-tax I want (i.e. a given return with a given level or risk). If I look at the compound rate of return, it would not care whether a bond/stock fund is in pre-tax or Roth. It's similar to the concept of not taking into account cost basis when doing rebalancing viewtopic.php?t=238676.
There is an advantage (and also risk) in having stocks on your Roth. On average, you'd expect stocks to grow more, so you'll have to pay less taxes. But this has nothing to do with compound growth, it's just about a discount you may get when paying taxes at withdrawal time. AA has to do with the compound return you want.
Statistics: Posted by international001 — Mon Oct 21, 2024 7:47 pm — Replies 6 — Views 359