An anonymous caller is brooding over a mistake he made in 2023 when he decided to contribute to his Roth instead of a pre-tax account. How does he get over this?
June is annoyed that she triggered short-term capital gains and wash sales when she sold assets in her taxable brokerage last year. How does she avoid these issues in the future?
Zerai wants to add mid and small-cap exposure, but his 457 plan has a limited selection of mutual funds. What’s the proper way to select the best fund among the available options?
Former financial planner Joe Saul-Sehy and I tackle these questions in today’s episode.
Enjoy!
P.S. Got a question? Leave it here.
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Anonymous asks (at 01:13 minutes): I’ve been following your recent discussions on the Roth versus pre-tax decision with great interest. After reviewing my 2023 and 2024 choices, I think I made a mistake, and I’d love your take on it.
In 2023, I maxed out my 401(k) in Roth dollars while in the 32 percent tax bracket, even though I knew my bracket would drop to 24 percent in 2024. Wouldn’t it have been better to contribute pre-tax in 2023 and then do a Roth conversion the following year?
I can already hear Joe saying, “It’s just 8 percent. You can’t optimize everything.” But for those of us who enjoy fine-tuning our finances, this feels like a big misstep. My 2023 contribution would’ve been my only pre-tax contribution, so the conversion would’ve been limited to $23,000.
Did I truly make an error here? And more broadly, how do you move past the frustration of making an optimization mistake? Any personal insights or experiences from your own past financial mistakes would be great to hear.
June asks (at 28:22 minutes): As I prepare for tax season, I realized that in selling some assets in my taxable brokerage, I triggered both short-term capital gains and wash sales. While most of my gains were long-term, I’d like to avoid unnecessary taxes and wash sale issues in the future.
Do you have any advice on how to better recognize and prevent these when managing a taxable brokerage account? I use Vanguard, which I know many of your listeners also use, so any insights specific to their platform would be especially helpful.
Zerai asks (at 48:16 minutes): I have a 457 plan through my job with a limited selection of mutual funds. Right now, my allocation is 65 percent in the S&P 500 and 35 percent in international equities, but I’d like to add some mid-cap or small-cap exposure.
Two options are available: the Fidelity Extended Market Index Fund (FSMAX) and the Wellington CIF II SMID Cap Research Fund (SMICRX). There isn’t much publicly available information on SMICRX, and its fees are slightly higher than FSMAX.
Between these two, which would be the better choice to diversify my portfolio?
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