There's little question as to if one wants to save, it's a matter of in what account?
- "Most investors ignore the asset-location issue. They fail to recognize the significant impact of placing the right assets in the right buckets," says John Nersesian of Nuveen Investments' Wealth Management Services. General advice: Use taxable accounts to hold individual stocks (these present better opportunities for loss harvesting) and index funds or exchange-traded index funds that don't throw off much taxable income. Put your assets with the highest growth potential in a Roth. Taxable bonds and REITs belong in a pretax 401(k) or IRA; the income they generate is taxed at ordinary rates anyway, and this way the tax is deferred. Also good for your pretax 401(k) or IRA are assets that generate short-term gains, which are taxed at ordinary income rates--stocks you trade a lot and actively managed small-company or international funds.
Phew! The article breaks down each vehicle, from a 401k, to a Roth, to a taxable account (ie brokerage account such as Sharebuilder). It's one of the shortest guides I've seen, and pretty easy to digest.