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I don't understand the rationale behind the strategy for trading stocks in taxable brokerage accounts vs an IRA. With a 25-30 year time horizon until retirement why does it matter? If the money you have is in an IRA and you want the greatest chance for growth shouldn't you be in stocks??

You're mixing a couple of issues here. Let's first look at allocation, IOW, how you spread your investment dollars. Even in stocks there are a number of subcategories which you might want to consider for diversification. As you get closer to retirement you'll also want to think about reducing your risk (and potential for gain) as preservation of capital becomes more important. Taxable vs retirement account isn't part of this decision.

As you have more cash to invest for retirement you'll hopefully have more to invest than the annual limits for retirement accounts, so you'll want to choose the most tax-effecient places for the investments called for my you then current allocation. Under current tax law long-term cap gains and qualified dividends are taxed at a lower rate than ordinary income. LTCG's aren't taxed until you sell (except for mutual fund distributions). Some investments, e.g., bonds and REIT's, give off a lot of ordinary income. When you have a choice of where to put an investment, keep those that give off ordinary income and short-term trading in retirement accounts and use taxable accounts for stocks you plan to hold for the long haul.

Phil
Rule Your Retirement Home Fool
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