Investment Tax Efficiency Calculator
Optimize asset location across account types to minimize tax drag.
Account Distribution
Taxable
$ 200000
40%
Traditional
$ 150000
30%
Roth
$ 150000
30%
Tax Drag Analysis
Current Tax Drag:$ 1152/yr
Optimal Tax Drag:$ 0/yr
Annual Savings:$ 1152
Tax drag: taxes paid annually on dividends/interest in taxable accounts reduce compound growth.
Compound Benefit Over 20 Years
Compound Tax Savings:$ 5369
Efficiency Gain:$ 4.066705886850912e+21
Asset location optimization compounds over time, potentially adding significant wealth.
Optimal Asset Location
Stocks
→ Roth first, then Traditional
High growth, tax-free gains preferred
Bonds
→ Traditional IRA/401k
Lower growth, tax-deferred interest
REITs
→ Roth or Traditional
High dividends taxed as ordinary income
Cash/Money Market
→ Taxable OK
Low yield, minimal tax impact
Asset Location Principles
- High-growth assets (stocks) → Roth (tax-free gains)
- Income-producing assets (bonds) → Traditional (defer interest tax)
- High-dividend assets (REITs) → Tax-advantaged accounts
- Tax drag is ~0.5-1.5% annually on taxable accounts
- Rebalancing in tax-advantaged accounts avoids tax costs
- Asset location matters more as tax rates and horizon increase