No. of Recommendations: 2
Hi AJ --

Fair point on the mandatory corporate reorganizations being a case where a sale can be forced. In my experience with a portfolio that's in the neighborhood of 50 or so stocks, I see in around one or two 'events' in a typical year, of which maybe a third to a half are mandatory taxable in nature. You're right that could very well increase in the future, particularly now that the disincentives against corporate US domestic investments have been lessened.

I've come to accept that there are trade offs in investing accounts. Traditional retirement accounts are great for accumulation years but lousy when it comes to mid-career flexibility and can be problematic choices late in distribution years and in inheritance situations. Roth retirement accounts are great for distribution years and inheritance situations and have better flexibility, but can be trickier and far more expensive on a tax-equivalent basis for mid- and late-career professionals to fund than traditional retirement accounts. Standard investing accounts have the best flexibility, but you have to be mindful of the more immediate tax consequences of actions.

Having over-saved in traditional retirement accounts relative to the other types, I've faced a few cases where I've lost opportunities or had to take a very convoluted (and expensive) route to get at cash when I've needed it. I've come to see the 'less immediately tax efficient' nature of taxable investment accounts as acceptable places for some of our money, valuing the flexibility over the near-term tax efficiency of traditional retirement accounts. I still try to be tax-smart within those taxable accounts, but I've also made active choices to fund after-tax accounts instead of traditional retirement accounts to try to get a better balance of asset location and build better flexibility than I had in the past.

I'm all for tax efficiency, but I learned the hard way that it's sometimes better to pay a little tax now to avoid a bigger set of total costs (including taxes) later.

Regards,
-Chuck
Discovery/HR Home Fool
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