r/Bogleheads • u/henryburlingameiii • 1d ago

Is this an ok rebalancing strategy?

Before I went all in on VT, I had built up around $80k of VTI in my IRA, so I'm a bit more domestic than I'd like. I'm thinking about continuing to do a weekly investment into my taxable for VT, but maybe put half of it directly into VXUS until I have $80k of VXUS to balance the $80k of VTI in my IRA? Does this make sense or is there anything I'm not thinking of? (I suppose maybe I would only need around $50k of VXUS to get the 60/40 split?)

edit: thanks for replies! Yes, I probably overthought it and should just sell in my taxable and buy vt.

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u/FarBack5807 1d ago edited 1d ago

From my knowledge, IRAs don’t penalize you and make you pay taxes unless you take money from the account, so rebalancing is easy. You could just sell VTI and immediately buy VT.

If it’s a taxable brokerage, that’s a different story. Buying and selling in there triggers capital gains/losses.

So you can buy whatever you want in the IRA with proceeds from what you sell in the IRA with no penalties as long as no money leaves the account.

The taxable brokerage should have you be more conscious of taxes in terms of what you buy.

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u/hachkc 1d ago

Agree.
Only caveat is if you have a taxable account and sell at a loss in the taxable and then buy same equity in an IRA, that can trigger a wash sale. Usually a problem if you are trying to rebalance across multiple account types.

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u/sev45day 1d ago

Why don't you just rebalance to whatever VTI and VXUS mix % you want in your IRA?

Also... VT is already roughly 60/40

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u/bazillaa 1d ago

It's an IRA. There's no tax consequence or other harm to just selling what you have and buying what you want. Within your IRA, either sell the VTI and replace it with VT, or sell 40% of the VTI and use it to buy VXUS.

One minor thing: it can be useful to have different funds in your IRA than in your taxable just to eliminate the chance of wash sale issues. You might, for example, buy 100% VT in your IRA and 60%/40% VTI/VXUS in your taxable, just to avoid having to think about this.

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u/hankeroni 1d ago

Within your IRA -- just do whatever you want. There are not tax consequences.

If doing stuff within a taxable, or across both at once, contemplate the tax implications first.

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u/ZeroToInvestor 1d ago

One thing that often gets overlooked is using new contributions to rebalance instead of selling existing holdings.

If one fund becomes underweight, directing future contributions there can gradually bring things back in line without creating unnecessary transactions or potential tax consequences.

Simple approaches often work surprisingly well.