Some general advantages with owning taxable bonds in a qualified account over holding municipal bonds in a taxable account are as follows:
- Less risk of negative impact due to tax law changes
- No AMT exposure
- No geographic risk
- Better credit quality control
- Better liquidity
- Lower transaction costs
During the non-IRA withdrawal stage the taxable bonds will generally produce higher pre-tax returns. During the withdrawal phase of IRA assets, municipals may provide a slight after-tax advantage, but probably no more than .1% to .5% annually.
98%+ tax efficient return (estimate)
100% tax efficient return
- Gain is taxed at maximum 15% federal and your state rate
- May select tax lots - capital is not taxed
- Tax-loss harvesting is available
- Step up on basis at death
- Withdrawal taxed at maximum marginal state/federal rates
- No tax lot selection
- No tax-loss harvesting
- No step-up at death
Astute asset class placement between accounts, utilizing tax loss harvesting, and employing tax-managed index funds can provide the optimal benefits of tax-efficiency with maximum effective diversification. The rigorous application of these powerful tax-minimization techniques can help an investor retain more of their hard-earned wealth and be able to have more spendable income.
Don't Settle for Any Financial Advisor And Risk Your Retirement
Find the Right Financial Advisor for You
WiserAdvisor has over 20 years experience in successfully matching interested investors to financial advisors and is a trusted source in this field.
Matched Advisors are screened for experience, fee schedules, registered with FINRA and SEC and hold clean records
Free Initial Consultation. No Match Fees. No Obligation