Wednesday, March 26, 2008

Saner Savings

Forbes has a recent article, Seven Steps to Saner Savings, that lays out the different ways an individual can save for retirement.

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.


asgreen said...

Thanks for passing this article on!

PiggyBankBlues said...

you're welcome :)