Tip for reducing your tax bill...
 

I have long had a 'blind eye' to the tax man. As I've gotten older and make a little more and saved a little more, I've started to pay attention to reducing my tax load.

The one thing that escaped me until recently, was the concept of putting 'tax efficient' assets (index funds, low turnover funds, munis, equities) in taxable accounts and tax-inefficient stuff (bonds, bond funds, etc) into deferred account allocations (401ka, IRAs etc).

This was contrary to my instincts when 'investing' since i preferred to have 'safe' (tax inefficient) stuff in my taxable (easily accessible) accounts and the riskier (tax efficient) stuff in my longer term 401k/IRA etc.

Just thought I'd share my stupidity and minor revelation. Better late than never.

-Bernie

The problem is they will just change the tax code, then what do ya do?

Ponzi scheme. Then it doesn't matter what they do with the tax code, you just stay one step ahead of them and get more investors to pay the difference in taxes.

That is why I don't believe in the Roth IRA. I know that at some point, someone is going to means test it and then tax the tax-free gains.

I agree completely. It's just a matter of time before means testing hits Roth accounts. They already means test social security so if you think Roths will be off limits to taxation you are just whistling in the dark....

The deferred comp will "hide" the money until after age 59 1/2, when you can start to withdraw without penalty after retirement. But the tax is still owed, as you well know. So, for example, you have accumulated $1M by the time you retire. As you withdraw funds from the account, you pay the tax man(and the state tax man, depending on the state.) In NY, which for certain individuals forgives $20K per year for state tax, you really have about $800K or less, not the $1M as the statements show, depending how you pull it out and how often. Just thought I would add that the discussion.