Asset Location vs. Asset Allocation

… big skim savings (i.e taxes) in knowing where to place which asset, and which bucket to draw from when you need money.

Why Asset Location Trumps Asset Allocation For Retirees…



This article headline is clickbait BS about an important subject.

Screw up your asset location (e.g., put bonds in taxable and stocks in tax-deferred) & you pay some more taxes in retirement.
Screw up your asset allocation (go 10/90 stock/bonds AA) & you go broke in retirement because inflation ate up your portfolio.

Asset location ‘trumps’ asset allocation? OK.

Asset location is definitely important- look at the sad investors who used taxable accounts to buy Vanguard’s Target Date mutual funds & suffered huge LTCG bills when VG screwed them over in late 2021 with double digit cap gains distributions.…

Reminds me of the classic line from Animal House: Otter telling Flounder- “You f*cked up, you trusted us.” Those investors found out too late that Target Date MFs belong in tax-deferred accounts (assuming they belong anywhere).

That said, if those investors had instead screwed up their AA by being too bond-heavy in the accumulation phase, they’d be worse off.
YMMV, but I’d rather have high tax bills because of lots of gains instead of low taxes because I didn’t make any money.
Obviously, there’s a happy medium in there somewhere.

The key is not merely smart asset location, but also having a smart withdrawal strategy to capitalize on your asset location.
Your asset location might be top-notch, but if you withdraw from the wrong accounts in a given year (100% TIRA w/d, for example), your taxes could be a lot higher than if you had done a mix of taxable TLH, Roth & Trad IRA withdrawals.

The SECURE Act further muddied the waters by killing the inherited stretch IRA. Now, some advisors are saying to purposely spend down your TIRA in retirement (incurring extra taxes for yourself) & pass on taxable & Roth accounts to heirs.


This article headline is clickbait BS about an important subject.

I don’t know. There’s an extra $100,000 for you if you have the asset allocation and asset location to maximize your Obamacare tax credits. Regard that as mere clickbait, and you’re paying full price for crap health insurance.



Didn’t say the subject wasn’t important, just that “trump” is a pretty strong word. The headline implies asset location is more important than AA. On average, it isn’t.
Obviously, it isn’t a binary choice- folks need to pay attention to both AA & asset location. Plus, asset location gets less press than AA, so any publicity is probably a good thing.

WRT Obamacare, I’m retired Navy- as a taxpayer, you’re already (partially) paying for my health insurance, so- thanks, John!

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