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rookieJoe: "Do the rest of you adjust (based on expected tax rate) for whether or not the holdings are in a tax deferred account, or a tax free account?"

No. Do you know what your tax rate will be when you retire. Congress has played around with rates so many times, that I would not alter my basic allocation based solely upon future expected tax rate.

"Just as an example, if one has 10k in domestic stocks in a traditional IRA, and 10k in foreign stocks in a ROTH IRA… The effective allocation is not really 50% domestic / 50% foreign. In my mind, the only dollars that matter are the after tax dollars that go in my pocket. So if the expected tax rate during retirement is 25%, the allocation is really 43% domestic / 57 % foreign."

Effective rate of marginal rate? Accuracy of expected tax rate in retirement? What happens when Congress changes the law and makes Roth IRAs into equivalent of traditional IRA with after tax dollars -- basis equals contributions, taxes on withdrawals based on allocation of basis.
What if FIT is abolished and a national sales tax is added, a la FairTax?

I believe that you are making your life more complicated then need be based on predications that are too difficult to make accurately.

Regards, JAFO
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