What Is Asset Location, and Why Should I Use It?

One of the considerations in developing a good portfolio is asset location.

Most people have different kinds of accounts. They have IRAs. They have after-tax accounts. All of these have a different kind of tax treatment, so where you put assets can be very important. For example, if you have a Roth IRA, where the growth is tax-free forever, you would want to put in assets that really grow.

If you have an IRA and you’re getting close to age 70, when you have to take your required minimum distribution, maybe you don’t want to have your most aggressive assets there. The larger your IRA grows, the bigger your distribution for taxes is going to be.

Maybe you want some of your assets that are growing to be in your after-tax account. The tax rate currently is 15% federal, and if you’re in the 15%, and now the 12% tax bracket, those gains are tax-free.

So where you put your assets can have a significant outcome.

Parkshore Wealth Management is a family-owned, independent, fee-only Registered Investment Advisor serving the greater Sacramento area with an office in Roseville, CA. We partner with financially responsible individuals and families who are eager to take positive steps that will allow them to use their money to build the life they desire. The firm is led by Harold Anderson, CFP®, and Daniel Andersen, CFP®, both members of NAPFA, the country’s leading professional association of fee-only financial advisors.