This article pertains to investors who have a tax-advantaged account (such as an IRA or 401(k)) and a taxable investment account.

If you don’t have a taxable investing account, we’re not suggesting you open one and invest money there instead of via your tax-advantaged IRA or 401(k). Further, unless you’re close to retirement age and using a strictly buy-and-hold (no turnover) strategy, you’re almost always better off filling your tax-advantaged accounts before using a taxable one.

You’ve saved the maximum allowed in your 401(k). You’ve dutifully contributed to an IRA each year. You’ve even saved extra beyond these plans in a regular taxable brokerage account. Your stock/bond allocation is perfect for your age and risk tolerance. You have faithfully followed SMI’s strategy recommendations as soon as they were published.

You’ve covered all the possible bases, right? Perhaps. But one crucial question remains — are your stocks and bonds held in the right accounts? Make a mistake here and you could pay thousands — even tens of thousands — of dollars more than necessary in income taxes.

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