Withdrawal Strategies to Make Your Nest Egg Last Longer

by William Reichenstein

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In a series of three articles in 2005, I established three principles for tax-efficient investing.

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  • When saving for retirement, individuals should maximize contributions to Roth IRA and qualified retirement accounts like the 401(k). (See “Tax-Efficient Investing and What It Means to Your Portfolio” in the February 2005 AAII Journal.)
  • When managing stocks in taxable accounts, individuals should aggressively realize capital losses (that are large enough to offset transaction costs) and hold onto unrealized gains. (See “The Great Tax Fight: Managing Stocks in Taxable Accounts” in the July 2005 AAII Journal.)
  • In terms of locating assets between taxable accounts and retirement accounts, when possible while attaining the desired asset allocation, individuals should place bond holdings in retirement accounts and stocks, especially passively held stocks, in taxable accounts (with the exception of liquidity reserves and tax-free municipals, which should be held in taxable accounts). (See “Tax-Efficient Investing: Picking the Right Pocket for Your Assets” in the November 2005 AAII Journal.)

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