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Subject:  Re: Please Help me Optimize! Date:  12/11/2001  10:31 PM
Author:  jbking Number:  32807 of 87983

Greetings PlanningMoose,

1) Is is possible to place additional income in tax-deferred vehicles?

Yes, there are variable annuities that may be worth a thought if you are sure there is some high-yielding asset class you want to invest in and don't want it in your 401k or Roth. Note this defers taxes on gains and may or may not be worthwhile after costs and taxes upon withdrawal are factored into things.

2) Should I actively look for a house for the tax benefits? My girlfriend is a home owner and I will likely be living there 18-24 months from now. Premarital cohabitation is not an option (her father is good with a gun).

I agree with the others in discussing this with your girlfriend and even then after you are married.

3) Should I pay off my car loan at 13% instead of making an incremental equity investment in my taxable brokerage account?

How confident are you at getting over 13% post-tax investment returns on your stocks?

4) One big expense is insurance. I pay about $200 a month, despite a clean driving record (more a function of age). I'm very happy with the quality of service of my insurance provider and would rather not switch, but for a $500 annual savings, I might. Any thoughts on how I can get this rate down?

Again, I'd side with other replies in the general answer of shop around.

5) Should I hold my more aggressive investments in a different account? I currently have my most aggressive and most volitile investments in my Roth IRA. I figure I can sell these stocks for a quick gain if they rapidly appreciate and avoid the tax liability..... My most conservative investments, over time, will be in my taxable account, where I want to minimize turnover, thus capital gains.

Depending on YOUR strategy for turnover in stock holdings, the answers would vary as if someone planned on holding Berkshire Hathaway and REITs for their investment approach, I'd say put the REITs into the Roth and hold Berkshire in a taxable account.

6) Am I getting the diversity I need through multiple mutual fund holdings?

There are 2 parts to that and you didn't list the funds so it is kinda hard to answer what degree of diversification the funds give which is one part. The other is what in the world is necessary diversification for you?

7) At what age should I start looking for yield in the stocks I select?

Depends on what approach you plan on having in retirement as in some cases I could picture a case here being never. The investor would hold non-dividend paying stocks and use a bond ladder for an income cushion if you want one example. OTOH, some people may plan their retirement to use dividends from stocks as income at the other extreme.

When should I start allocating funds to fixed income holdings?

Once again, this should be a function of your risk tolerance, time horizon, investment approach and savings rate, IMO. Some people may suggest gradually easing into bonds over the whole time you invest and others may say if you are aggressive to wait till you are 5 years from retirement.

Any other thoughts or advice are GREATLY appreciated!

Is the cash in the taxable brokerage account your e-fund or don't you have one?

I am always looking for ways to improve my savings plans and ways to avoid paying Uncle Sam that extra dollar.

So, your cash is in a municipal money market fund? Are you sure you want to cut what the taxes are no matter what? For example, if after taxes you'd have more from a prime money market fund you would not want this? Also, will you never sell the taxable holdings until they are part of a Charitable Remainder Trust to avoid paying any dollars in capital gains?

Just checking on what the objective is here as I tend to maxmize my money which while it factors in post-tax returns, I don't let the taxes dominate my portfolio construction.

Those would be my thoughts,
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