How to Optimize Asset Location

[@mpcorera]

thank you, very clearly explained

[@BasicPoke]

Thanks Andy for this. What faces would you give international stock funds?

[@bobbydazzler8051]

Thank you! One of the best and straightforward explanations of this strategy on youtube and without hype! I struggle with bond funds in my 401k because my employer sponsored plan only gives us two options and both are almost 100% government backed treasuries with no municipal weight to them. Also, both have high fees (or at least higher than I like to pay in my 401k). In this case, would key guaranteed fund (basically cash), or their Nuveen Lifecycle retirement date fund (higher in bond mix) be a better choice or just keep in equities? I know you cannot give financial advice but for those who have terrible options in regards to 401k bond funds, it's like we're sitting ducks for equity volatility. It's very disappointing to get terrible bond choices in a 401k and with 10-13 years to go to retirement, I feel like my 90% equities in my 401k is threatened in the overvalued market we're in. I relegated to 50% small caps, 40% large caps and 10% key guaranteed (cash) and still feel vulnerable.

[@RetirementPlanningEducation]

I'm glad you liked the video, thanks! I unfortunately can't give any guidance about what investments you should or shouldn't select within the plan, what allocation you should have, etc. But I can say it may be worth talking to your company's HR and/or 401(k) plan administrator to see if they can add better bond funds. Your company and the plan administrator have a fiduciary requirement on behalf of you and all plan participants to make sure the investment options within the plan are as good and low cost as they reasonably can be. If you feel there are better and/or lower cost alternatives, it's worth bringing it up to your plan.

[@AlexFlavell]

Awesome video Andy! I’m 25, and have a little ways to go before really focusing on asset location…but good to know! Mostly S&P500 and growth ETFs for me at the moment across my 3 buckets…

[@tosborn56]

Really great content on your channel! Your presentation and graphics are well organized, straightforward, and understandable. Keep up the good work. Thanks.

[@jmnthe3rd]

I still don't really understand "bonds in tax-deferred, stocks in ROTH." I see this a lot. Is this assuming your tax rate will be different in retirement? If the tax you pay or defer is equal to the tax you save or pay on withdrawal, wouldn't both tax deferred and ROTH perform identically, regardless of asset type?

[@RetirementPlanningEducation]

It's mainly because stocks are assumed to have more growth than bonds over the long-term. And, all else equal, you'd rather that growth be eventually tax-free (such as in a Roth account). As for why bonds in tax-deferred, it's basically the opposite reason; you'd rather your lower growth stuff in tax-deferred accounts because it's all going to be taxable eventually. So, if possible, you'd rather keep that account balance from growing too much and instead have the growth in your Roth where it will eventually be tax-free Also, since bonds (other than municipal bonds) throw off interest that's taxable as ordinary income tax rates, it could be good to NOT have that in a normal brokerage account so you don't have to realize the tax burden of those interest payments each year But, like basically everything in financial planning, it all depends... Everyone situations and circumstances are different and could warrant different approaches than typical rules of thumb

[@paulharvey9961]

Andy, I just started following you and this advice is great! Have you ever taken a look at an asset class that is tax-free, doesn't lose value when the market is down and has lower cost than stocks/bonds/real estate?

[@RetirementPlanningEducation]

Yes.

[@paulharvey9961]

@@RetirementPlanningEducation your thoughts please, because I haven't seen you mention this asset class.

[@RetirementPlanningEducation]

@@paulharvey9961 It's on my list of topics to cover in a video here. Separately, it's been discussed at length within my Facebook group, but just not yet in video format

[@kevinsmith4559]

Great video… What about MLP’s?

[@RetirementPlanningEducation]

It's probably best to view them as equities in terms of hoped for long-term growth. As such, Roth should be good. And perhaps a taxable brokerage account. Though as a side note - MLPs will complicate or at least slow down your tax return as you'll have to wait for the K-1 forms from them.

[@kevinsmith4559]

@@RetirementPlanningEducation Tks Andy… yah… waiting on some K1’s to materialize for them. Keep up the great work in educating us all.

[@gatesfamily92]

Be aware that an MLP investment inside a Roth could trigger the unrelated business income tax (UBTI).

[@RajReviewsDualSportPhotoGadget]

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