bonesly wrote: Fri Sep 26, 2025 2:45 pm
I’d suggest one or both of the exercise below to come up with a target AA, that considers your risk-tolerance (as well as your time-frame).
I omitted the two exercises I mentioned in my earlier post… hopefully these are helpful to you to self-determine an appropriate AA based on your tolerance for risk-based outcomes.
Control Your Risk
1) Read the Wiki article for Assessing Risk Tolerance, take the Vanguard Investor Questionnaire, then tailor the asset allocation (AA) that was recommended by the quiz based on your knowledge of your personal risk tolerance having read the Wiki article.
2) Alternatively (or in addition to), ask “How much of a drop in portfolio value as a % of total value can I handle?” cut that % in half to get standard deviation, then lookup that std. dev. on the X-Axis of the chart below, and finally scan up to see what AA that corresponds to. As an example, if you can only stomach a -24% drop in portfolio value, that’s a ±12% std. dev, which corresponds to an AA of 60/40. The return you get is an average and you’ll get what you get with your unique sequence of returns (there’s a lot of variance in outcomes due to the associated volatility of stocks so it probably will NOT be the average, but something more or less).
a. For a long time-frame (>10 years) AAs below 20% stock are dominated (red dots) by another AA with similar risk but higher reward (blue dots).
b. The dotted line represents a hypothetical linear risk-reward from 100% stocks down to 100% bonds; the historical risk-reward curve has an improvement for risk-adjusted return due to the lack of correlation between stocks & bonds.
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Vanguard’s Target Date Retirement Glide-Path Design is a also a good starting point for choosing an AA. The choice of a specific TDF year should not solely be based on age, but could be ahead or behind your expected retirement age based on your personal risk-tolerance.
nyboglevestor wrote: Sun Sep 28, 2025 4:43 pm
re ~$50k dividendsIf that’s nearly all qualified stock dividends, that’s fine. If that’s mostly from ordinary interest generated by bonds & cash, then that’s not tax-efficient placement of bonds & cash (which should be in Trad Tax-Deferred accounts if feasible).
-I think it’s probably 60% taxable 40% qualified.
-Not totally sure what I should do here. I have some municipal bond funds in the taxable brokerage accounts and about 150k cash in the settlement funds. The muni bond funds have spit out tax free dividends each month but have lost money over the past 10 years.
-I no longer live in NY state so not sure it even makes sense to own the NY municipal bond fund.
Per Tax-Efficient Fund Placement, ideally all your nominal (unqualified) bonds & cash would be held in Trad Tax-Deferred accounts, while Taxable and Roth would be 100% stocks. Sometimes that’s not possible (all tax-deferred accounts could be 100% bonds & cash, yet you still need more bonds to meet your desired AA). In that case, it’s probably better to keep Roth at 100% stocks (the tax-free earnings attributed is maximized by keeping the asset class with the highest long-term total return here, and that’s stocks), then add bonds to Taxable to meet your AA (you’d probably want national municipal bonds, possibly state bonds if you live in NY or CA or some other state with a high tax rate, and for cash that won’t fit in Trad Tax-Deferred, you’d probably want a near-100% Treasury MMF like VUSXX at Van, SNSXX at Schwab, or FDLXX at Fido.
You’ll also want to look at the Wiki topic on Holding Cash in a Tax-Deferred Account. In this concept, your cash & bonds are ideally all in Trad Tax-Deferred while Taxable is 100% stocks. When you need some “cash” for spending, you sell X$ of stocks, which is likely only taxed at 15% LTCG rather than your 24% Fed marginal rate, and then in a Tax-Deferred account you move X$ from cash into stocks (which is no tax consequence), to maintain your overall AA.
–I no longer live in NY state so not sure it even makes sense to own the NY municipal bond fund.
If you’re no longer living in NY then yes, exchange the NY municipal bond fund for a national bond fund like VTEB (or a NJ municipal like
VNJUX if your state tax rate is high).
-The muni bond funds have spit out tax free dividends each month but have lost money over the past 10 years.
If you exchange any funds into stocks (or a different state muni) and that sale is at a loss, then be sure to claim that capital loss on your tax-return to offset up any capital gains or up to $3K of ordinary income (and you can carry-forward losses in excess of $3K to claim in future tax years until completely used up). You can still “claim the loss,” wait 31 days, and then re-purchase the same national muni if it still fits your need (i.e., not all bonds will fit in Tax-Deferred)… see Tax-Loss Harvesting (TLH).
nyboglevestor wrote: Sun Sep 28, 2025 4:43 pm
Tax Rate: unsure. household annual income was ~$500k in 2024, will be ~$300k in 2025
I estimated your Fed marginal rate for $300K AGI at 24% using Engaging Data’s Tax-Visualization (assumes $0 capital gains and doesn’t include NJ taxes).
