Question: Having just read several of your articles on retirement planning, I have these questions regarding tax deferred and taxable accounts during retirement:
I have chosen an asset allocation of 50% stocks and 50 % bonds. But I have two retirement accounts (a taxable and a tax-deferred), and I'm not sure how to divide them up. Should I keep both of my accounts split down the middle between stocks and bonds? Or keep the stocks in one account and bonds in the other?
The Mole's Answer: You have done the right thing by first picking an asset allocation that is right for you with the 50/50 split between stocks and bonds. The question you pose runs a close second in importance; Where should you locate those assets between your taxable accounts and your tax-deferred accounts, such as an IRA or 401(k)?
We finance types talk about asset allocation ad-nauseam. But locating our assets where they are most tax-efficient can be every bit as important as asset allocation. And, as a matter of fact, it can result in more wealth, regardless of what the market is up to, or down to.