Michael Kitces

I'll respond in more detail later but here is a paper that examines it: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2324930:

"Accordingly, as the results support, for those looking to maximize their level of sustainable retirement income, and/or to reduce the potential magnitude of any shortfalls in adverse scenarios, portfolios that start off in the vicinity of 20% to 40% in equities and rise to the level of 60% to 80% in equities generally perform better than static rebalanced portfolios or declining equity glidepaths. Though as the results also reveal, in particular scenarios where the equity risk premium is depressed, the optimal glidepath includes less equity, and in scenarios where the goal is to withdraw at a level that stresses the portfolio and its expected growth rate, higher overall levels of equity are necessary; with such high-risk goals, having a relatively high-risk portfolio, with the danger that entails, is still the optimal solution (and for clients who cannot tolerate that level of risk, the ideal solution is to choose not a less risky portfolio, but a less risky and aggressive goal). Nonetheless, for everyone else looking to maximize a sustainable income level, or determine the amount of assets to support a (reasonable) target income level, rising equity glidepaths appear to both maximize the likelihood of success and sustainable income and reduce the magnitude of shortfalls when they occur."

There is a a lot of discussion of this here:…

Very interesting. The Retirement Industry Trust has a long page:

https://ritaus.org/how-to-avoid-prohibited-transactions/

It's also confusing. In their "do's":

> Don’t provide more than ministerial services (e.g., decision-making) to your IRA or IRA owned entity (e.g., no “sweat equity”);

But in the "Don'ts":

"Do consider using an IRA when you, a relative or friend starts a new business."

Here's another writeup around that provision by a CFP:

https://www.kitces.com/blog/self-directed-ira-prohibited-transaction-fiduciary-disqualified-person-irc-section-4975/

Key quote:

> "However, if someone establishes a self-directed IRA with the aim to invest IRA dollars into a small private held business that they control or own – such that the business entity, and/or their role in the business, can cause it to be a disqualified person – there is a risk that allocating IRA dollars to own that business can cause the IRA itself to become disqualified (and treated as fully distributed as a taxable event). After all, if the IRA puts money into the business, and the business then uses that money to pay a salary to the IRA owner (as an officer of the business), the IRA owner has effectively used the assets of the IRA to enrich themselves."

That addresses the self-dealing part of a transaction like this that would be a common-sense red flag. This is all clear as mud; I'm definitely confused enough that I'll be asking my CPA for a recommendation.

I wonder where that page gets its information. Its own quote links to an IRS document that doesn't seem to mention this case. Other places online recommend against it.

>There has been no IRS ruling on whether ETFs from two different companies that track the same index are considered substantially identical.

https://www.fidelity.com/learning-center/investment-products/etf/tax-rules-for-losses-etfs

>Investment advisors and tax planners recommend against selling an index mutual fund from one fund company and buying another index fund tracking the same stock index from another mutual fund company.

https://finance.zacks.com/substantially-identical-mutual-funds-5850.html

>And while arguably swapping from index funds like SPY to IVV are almost certainly a wash sale abuse (or at least, a transaction that should trigger the wash sale rules)

https://www.kitces.com/blog/the-wash-sale-problem-when-tax-loss-harvesting-almost-substantially-identical-mutual-funds-and-etfs/

If you look at Wealthfront's own documentation, when they do tax loss harvesting with ETFs, they find ETFs that track similar but not identical indexes:

https://research.wealthfront.com/whitepapers/tax-loss-harvesting/#5-wealthfront's_daily_tax-loss_harvesting_service

Yes, what you want to look into if you have existing traditional-IRA dollars is the "Pro-Rata Rule". See: https://www.kitces.com/blog/the-impact-of-the-ira-aggregation-rule-on-after-tax-distributions-roth-conversions-60-day-rollovers-rmds-and-72t-payments/

Backdoor Roth: Contribute $6,000 in after-tax dollars to IRA, Immediately convert IRA --> Roth IRA. File Form 8606.

Mega Backdoor Roth: Contribute a total of ($56,00 - ($19,500 + Employer Match)) as After Tax contributions to a 401K. Convert those funds to a Roth 401k.

Another detail, you may see discussion about avoiding the "Step Doctrine" for backdoor Roth contributions. This is no longer required as the IRS has blessed Back Door contributions, after an obscure footnote in a 2018 congressional report.

- Footnote Commentary: https://www.forbes.com/sites/ashleaebeling/2018/01/22/congress-blesses-roth-iras-for-everyone-even-the-well-paid/

- IRS Explicitly Acknowledges: https://www.napa-net.org/news-info/daily-news/case-week-de-villainizing-backdoor-roth-iras

- More: https://www.fa-mag.com/news/irs-finally-says-back-door-roth-s-are-ok-39697.html

- https://www.physicianonfire.com/backdoor/

- https://www.biglawinvestor.com/backdoor-roth-ira-step-by-step-guide/

well.. it depends. You didn't really specify goals, which is the most important thing.

In many cases you are correct. Somewhat related see Vanguard's research "Dollar-cost averaging just means taking risk later" [1] which finds lump sum investing is better in ~2/3 of the cases they considered. They had a specific time horizon.

Individual's have unique situations and goals and should consider those instead of just dumping everything into an s&p index fund asap. Maybe an individual is more sensitive to sequence risk at different points in his life? There is an entire profession (financial planners) which allows you to outsource these decisions to if you want. Same for the spending part of retirement (hint: most common advice (bond/stock mix) is exactly the opposite of what it should be e.g. "Rising Equity Glidepath" [2])

[1] https://pressroom.vanguard.com/nonindexed/7.23.2012_Dollar-cost_Averaging.pdf
[2] https://www.kitces.com/blog/should-equity-exposure-decrease-in-retirement-or-is-a-rising-equity-glidepath-actually-better/

Bengen's 1994 paper (which kicked off the (so-called) "Four Percent Rule") recommended asset allocations with no less than 50% in equities, but no more 75% for retirement savings when you have retired:

* PDF: https://web.archive.org/web/20120417135441/http://www.retailinvestor.org/pdf/Bengen1.pdf

* https://en.wikipedia.org/wiki/William_Bengen

60/40 would be in the middle of that. More recent research shows that the range is still valid with thirty years more data:

* https://en.wikipedia.org/wiki/Retirement_spend-down#Withdrawal_rate

You may wish to be a bit more bond-heavy a little before retirement and for the first few years to counter sequence of returns risk (see Kitces' "bond tent" concept):

* https://www.kitces.com/blog/managing-portfolio-size-effect-with-bond-tent-in-retirement-red-zone/

(The 4% Rule should not necessarily be taken literally, but is a good mental rule of thumb and starting point: best to hire a (fee-only) advisor to run the numbers for an actual plan.)