Planning & decision tool
Asset location optimizer
Which account holds each investment decides how much of your return survives a lifetime of taxes. This ranks your holdings by how much tax they throw off in a taxable account, ranks your accounts by how well they shelter, and shows where the general rule would steer each asset, so you can see the reasoning behind putting the right pieces in the right places.
Background reading: Investing the rest
This ranks assets by their tax drag and shows the account type each tends to prefer; it is not your placement. Your actual placement, given your lots, the tax cost of selling, and your goals, is a personalized decision.
Estimated annual tax in a taxable account, per dollar held, most inefficient first. Rates: ordinary 24.0%, long-term 15.0%, NIIT 3.8%.
Ordinary-income basis · yield 4.5% · general rule steers toward Tax-deferred. Its distributions are taxed at the ordinary rate each year, the highest drag, so it gains the most from a tax-deferred account.
Ordinary-income basis · yield 4.0% · general rule steers toward Tax-deferred. Its distributions are taxed at the ordinary rate each year, the highest drag, so it gains the most from a tax-deferred account.
Long-term / qualified basis · yield 1.5% · general rule steers toward Taxable. Tax-efficient (low yield, mostly qualified), so it carries little drag in a taxable account.
Long-term / qualified basis · yield 1.0% · general rule steers toward Roth. Highest expected growth, so a Roth account, where the growth is never taxed, captures the most benefit.
Federally exempt basis · yield 3.0% · general rule steers toward Taxable. Already federally tax-exempt, so sheltering it wastes the shelter.
Shelters tax-inefficient income (bonds, REITs) from the ordinary rate each year.
Best for the highest-expected-growth assets, since the growth is never taxed.
Fine for tax-efficient broad equity and already-exempt municipals.
That placement decision is a conversation with a CFP.
Assumptions and simplifications
- Tax drag is the estimated annual tax on an asset held in a taxable account, as a fraction of its value: interest at your ordinary rate, qualified dividends and long-term gains at the long-term rate, plus NIIT where it applies. Municipal interest is treated as federally exempt.
- Location is distinct from allocation: this does not change your mix, only which account type holds each piece.
- Yields and turnover are representative assumptions you can change; state tax is not modeled in this version.
- This shows the general principle applied to the inputs; the actual placement, constrained by existing lots and the tax cost of selling, is a personalized decision.