Optimizing Investment Placement Across Roth, Taxable & Traditional Accounts

By: Joe Morgan

Sep 25, 2025 | RetirementFinancial PlanningLong-Term PortfolioStock PortfolioCompany Stock

How to Use Traditional Retirement Accounts

Traditional Retirement Accounts are tax-deferred. This means you get a tax deduction when you put money in, and you pay tax when you take money out (usually in retirement). The most common types are Traditional 401(k)s and Traditional IRAs.

When to Use These Accounts

You should only put money in these accounts that you won’t need until retirement. The penalty for withdrawal is too high to pay.

Optimizing Investments

If you have Taxable and Roth accounts, you can improve your investments in Traditional accounts. Hold investments that pay higher dividends and capital gains in traditional retirement accounts. They aren't taxed now, so it's a smart move. This typically includes:

  • Fixed-income investments
  • High-yield investments
  • Large-cap stocks that pay higher dividends
Balancing Tax Strategy and Risk Tolerance

Your tax strategy should not overrule your risk tolerance. You might need to keep some low-dividend investments in your tax-deferred accounts. But, try to limit them.

Investment allocation is more of an art than a science.

Your Thoughts?

So, what do you think?

  • Do you have most of your retirement savings in tax-deferred accounts?
  • Does it make sense to have so much in a single type of account?
  • How will tax law changes between now and retirement affect you?
To share your comments, send me a direct email at Joe@BestFinLife.com
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