For Maximum Retirement Income You Need Tax Diversification
One of the most important tenets of investing for retirement is to diversify broadly for the best possible long-term returns in your portfolio. However, for the best possible outcome in generating maximum retirement income, special attention needs to be given to achieving optimal tax diversification. Conventional portfolio diversification focuses on blending together a mix of assets from across the spectrum of asset classes that creates the best opportunities to capture returns in any market environment while reducing portfolio volatility. Tax diversification focuses on blending together various types of investment vehicles with varying tax properties in order to minimize taxation on retirement income.
Two Retirement Investors and Two Very Different Paths
Jason, who has targeted $100,000 net income for retirement, converted his 401k plan, to which he made maximum contributions for most of his working life, to a Rollover IRA. Of course, he enjoyed significant tax deductions on his 401k contributions.