Here’s a wonky-sounding phrase: “asset location.”
But the meaning is simple - and important. Asset location refers to the type of accounts you use to hold investments in stocks, bonds and cash in order to reduce the drag of taxes. It’s something to consider during the years when you accumulate savings, and also after you retire and draw down funds.
Joining me on the podcast this week to explain asset location is Christine Benz, director of personal finance for Morningstar and senior columnist for Morningstar.com. In that role, Christine focuses on retirement and portfolio planning for individual investors. She also co-hosts Morningstar’s podcast The Long View, which features in-depth interviews with thought leaders in investing and personal finance.
The idea with asset location is that you’re being thoughtful about which types of assets you put in which types of accounts- tax-deferred, Roth and taxable accounts. The fit of these account types from a tax standpoint can make a difference in how much you keep or pay in taxes. It is one of the things about investing and saving that you can control, at least a bit - so it’s worth doing.
A key element of this is tax diversification during your accumulation phase - making sure you don’t have all of your assets in one basket. Most of us accumulate in 401(k) accounts, but Christine lays out ways to diversify along the way, such as using a Roth K option. Then, we shifted our discussion to what people who are near retirement, or already retired, can do to diversify.
Listen to the podcast by clicking the player icon at the top of this page. You also can find the podcast on Apple Podcasts, Spotify and Stitcher.
Watch: A chat about traditional Medicare versus Advantage
Speaking of Christine Benz and Morningstar, I stopped by there last week to chat with Christine about my recent New York Times column on the rising privatization of Medicare. Click here to view our conversation.
New guide: How to time your retirement
If you’re a paid subscriber to the newsletter, you know I’ve been publishing a series of guides on key retirement topics.
The latest was just issued last month - a guide on timing retirement decisions. This can be a really important inflection point for your financial success in retirement, so it’s worth thinking about carefully.
The guides are downloadable, quick reads, each paired with a podcast interview on the subject at hand. My aim is to create a series of just-in-time retirement education modules - read the guide, listen to the podcast and you’re good to go. The series already includes guides on claiming Social Security, transitioning to Medicare and how to hire a financial planner.
Becoming a subscriber is easy - to sign up, click the little green button at the bottom of the newsletter page, or visit my website to learn more. The subscription price is just $5 month, and you can cancel easily at any time if you’re not happy. Once you subscribe, you’ll have access to the entire retirement guide series, including this new one on retirement timing. Plus, you’ll get links to all the articles I publish for Reuters, The New York Times, Morningstar and Wealthmanagement.com. I also publish links to the most interesting new research in the field, and links to work by other journalists that I find compelling.
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Thanks for listening - and I hope to see you over on the subscriber side soon!
