The type of account that holds your investments can make a big difference when it comes to maximizing your after-tax returns – taxable vs. tax-deferred accounts.
If you have money in both taxable and tax-deferred accounts, then an asset location strategy may be right for you when it comes to optimizing your after-tax investment performance.
For example, some investments may be more suitable for a taxable account like low turnover funds (ETFs and mutual funds), growth stocks that reinvest dividends rather than pay them out to the investor and municipal bonds that pay out tax-free interest income. These types of investments generally experience low tax consequences and may be best positioned in a taxable account.
On the other hand, some investments may be more suitable for tax-deferred accounts (IRA or Roth) like fully taxable bonds and bond funds, preferred stocks or higher turnover investment funds that create larger amounts of realized short-term gains.
At PNC Investments, we feature a program called Multi-Account Management that can help you determine how to allocate your overall investment portfolio across your taxable and tax-deferred accounts to help remain diversified and tax-efficient.
Neither PNC Investments nor your Financial Advisor provide tax advice. You should review your tax situation with your own independent tax professional to fully evaluate how you may benefit.
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