Tax Diversification in Retirement Planning
Tax diversification means holding retirement assets across accounts with different tax treatments.
Three common account categories
- Taxable accounts
- Tax-deferred retirement accounts
- Potentially tax-free retirement accounts
Why flexibility matters
Different accounts can provide different options for managing taxable income, future distributions, and major spending needs.
Tradeoffs
Tax diversification does not guarantee lower taxes. Contribution rules, income limits, investment choices, fees, and future law changes all matter.