Discover the tips and strategies that will help you achieve your retirement goals.

I'm your host, James Canole, and this is the podcast dedicated to helping you retire well.

It all starts right here on Ready for Retirement. for retirement.

Hi, everyone, and welcome back to another episode of Ready for Retirement.

I'm your host, James Cannell.

Today's episode is all about asset location.

And asset location is a great way to save money on taxes, but if you do it wrong,

you may save a little bit in taxes in the short term, but it can cost you a whole lot of money over the long term. Today's episode is based on listener question, and this listener question

comes from Jeff. Jeff says, if one is fully diversified and has tax exempt, tax deferred,

and taxable investment accounts,

some experts discuss the idea of optimizing asset location to minimize tax burden and increase

returns. You have discussed this previously in podcast episode number 57 for starters,

and on the surface, it makes sense to place assets that generate fully taxable income, i.e. bonds and

CDs in a tax-protected account, Roth being most ideal, and non-dividend-bearing stocks

and taxable investment account, thus avoiding taxes in allowing the principle to optimally grow.

But why does it not make more sense to place the most aggressive investments in the

Roth, as those are the only ones that will likely grow the most, and all of this growth would be tax-free. Even though bond distributions

slash gains or taxed ordinary income rates, their growth would be much less. So despite the

increased tax burden of having taxable bonds in a taxable account, it seems to make more sense

to keep them out of the account that is completely tax-exempt

and leave that account for the most aggressive investments.

Would you please explain?

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