Is there a downside to using Tax Coordination?

Asset location is a long-term strategy. While it may lower taxes in the short-term, the greater benefits come from a longer investment period. If you’re not planning to invest over a longer horizon, you may still benefit from paying fewer annual taxes, but are likely to see less benefit when it comes time to withdraw your money.

If all of the accounts you are including for Tax Coordination have the same allocation and time horizon, there is little risk to using Tax Coordination. Note that Tax Coordination will still be subject to market risk. If you choose to include a goal that has a different allocation than your tax-advantaged accounts, just know that you are changing the time horizon on that goal. Tax Coordination is not designed for investors who qualify for a marginal tax bracket of 12% or below.

You can read more about these and other Special Considerations in our white paper.