September 10, 2024

Episode 143: The Importance of Asset Location and Asset Allocation

40 minutes

In this episode, Alex and Wade discuss the importance of asset location in addition to asset allocation. They explain that asset location involves strategically placing assets in different types of accounts based on their tax efficiency. They discuss the tax efficiency spectrum, with tax-exempt bonds being the most tax efficient and REITs being the least tax efficient. They also discuss the tax advantages of different types of accounts, such as Roth IRAs, 529 plans, health savings accounts, and non-qualified annuities. Listen now to learn more!

Takeaways

Tax location is an important consideration in addition to tax allocation.

Assets should be strategically placed in different types of accounts based on their tax efficiency.

The tax efficiency spectrum ranges from tax-exempt bonds (most tax efficient) to REITs (least tax efficient).

Different types of accounts offer different tax advantages, such as tax deductions, tax deferral, and tax-free distributions.

Asset allocation should drive the decision of where to place assets for tax efficiency.

Chapters

00:00 Introduction to Tax Efficiency

05:49 Understanding Asset Allocation and Tax Efficiency

09:39 Exploring the Tax Efficiency Spectrum

18:45 Placing Assets in Taxable, Tax-Deferred, and Tax-Exempt Accounts

27:30 The Importance of Asset Allocation in Tax Location Decisions

33:58 Other Considerations: Annuities, Life Insurance, and More

Links

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This episode is sponsored by Retirement Researcher https://retirementresearcher.com/. Download their free eBook, 8 Tips to Becoming A Retirement Income Investor at retirementresearcher.com/8tips

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By Wade Pfau & Alex Murguia

3.9

152152 ratings