Wealthfront lets you customize your allocation now? You aren’t limited to their pre-selected mix? That’s pretty neat. But as long as brokerages give me bonuses for housing my holdings, I’ll continue to self manage.
At least since 04/2021:
I self-manage my retirement accounts. I only have a small after-tax account at WF to bank on automatic tax-loss harvesting.
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Interesting! Do you continuously contribute to it? Do you think you’ve TLH’d more than you would have without using them? You don’ do the Direct Indexing?
They generate a 1099 (B?) with long and short losses and gains combined (by type), so you have at most 4 numbers for your schedule D = (cost and proceeds) x (long and short). You don’t have to worry about every transaction.
Does this apply for both taxable and non-taxable (e.g., IRA) accounts?
edit: In another post you said you self manage your retirement accounts so I assume the “so you have at most 4 numbers for your schedule D = (cost and proceeds) x (long and short)” applies at least to the taxable accounts.
How does Wealthfront do the tax loss harvesting on the index funds you pick? For each selected index fund is there a “companion” index fund that is auto-selected/recommended for purchase when the selected index fund is sold at a loss (and vice versa)?
I do not continuously contribute, which is probably why TLH was only good for me in 2022. I didn’t know how to do TLH before I saw how they were doing it, and to be frank I’d rather have them do it. I don’t have all that much $ in there, not enough for Direct Indexing, which requires $100K (below $100K it goes into VTI instead).
I’ve never received a 1099 for any of my non-taxable accounts. And I don’t have one at WF. The 4 numbers for schedule D is for taxable accounts.
Correct. Most of mine are Vanguard and Schwab ETFs that are equivalent, and WF just sells one and buys the other on the same day to harvest losses. They show this equivalence when you edit your portfolio, also I think it shows at the link I provided earlier. You just select the investment category and they select the equivalent ETFs within that category automatically.
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Why bother with the account, then? IF it hasn’t TLHed since 2022, you just pay them the fee in perpetuity for nothing?
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It’s aspirational 
. I’m thinking if or when I start regularly contributing, there will be more opportunity for TLH.
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We get 1099-R forms annually due to Backdoor Roth IRA contributions. But not for any other activity in tax-deferred accounts. Maybe if you took distributions subject to penalty but I don’t have experience with that.
Same here, though for my backdoor 401k contributions instead of an IRA.
It’s issued with code G and $0 of taxable activity. FreeTaxUSA puts the entire amount on line 5a, $0 on line 5b with “ROLLOVER” written there as the reason.
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Any distribution, regardless of if it is subject to penalty, is going to generate a 1099-r
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This got me thinking. Given that the market generally goes up, generally only the “newer” money you put into the robo advisor will be useful for TLH. The “older” money will likely have cost bases so far below the current market that the chances for TLH diminishes towards zero. Yet you’re still paying the higher fees (vs self managing index funds) on all the “older” money w/o the TLH advantage.
Does it make sense to occasionally pull out “older” money from robo advisors into a lower-cost self-managed account and only keep “newer” money in the robo advisor? How much of a mess/hassle would it be to do this occasional re-allocation between accounts? Is it even possible to do this occasional re-allocation w/o violating wash sale rules given the robo advisor will continue to TLH on money left in the account while you’re trying to “unwind” all the assets you moved out?
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That’s true, it does make sense to pull older holdings if you can do so without liquidating them. I think you can enable or disable the TLH feature at any time, so you can prevent wash sales while unwinding those older holdings in another account.
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Sounds like a lot of work though considering the point of robo advisors is to reduce hands-on work for investors.
It may also depend on what specific robo advisor you’re using. If you’re using some like Betterment who basically invest in 10 ETFs, you could relatively easily replicate that with a 3-5 ETF portfolio in a separate account. But some like Empower invest in a fairly long list of stocks directly so unwinding these positions while maintaining asset allocation/diversification could be a hassle.