Asset Location: A Tax Lens on Retirement Investing

Nov 12

You’ve built a retirement nest egg by saving consistently and investing carefully. An asset allocation that allowed growth but gradually reduced risk as you got closer to retirement was probably part of the plan. But once you’re in retirement, your focus shifts a bit. The value of having accounts with differing tax statuses becomes apparent when you set out to create an income stream and start withdrawing money. The return profile of the asset and how it is taxed can make a great deal of difference to both the overall return of the portfolio over time, and the amount of taxable income generated each year.

You’ll be dependent on the income generated by your portfolio, so any strategy that minimizes taxes keeps more money in your pocket and allows you to leave more money invested. Over a multi-decade retirement, this can make a big difference. And since income levels govern how... ...