When it comes to retirement planning, most people have heard of asset allocation — the mix of stocks, bonds, and other investments that make up your portfolio. But almost no one talks about asset location — and it could be the difference between a comfortable retirement and one filled with unnecessary tax bills. 

Here’s the truth: you can get your allocation “right,” but if your location is wrong, you may be giving away tens of thousands of dollars to the IRS. 

Let’s break down the difference, why both matter, and how to make them work together in your retirement plan. 

What Is Asset Allocation? 

Asset allocation is the what of investing. It’s the strategy of spreading your money across different types of investments to balance risk and reward. 

Typical allocation mixes might include: 

• Stocks (Equities): For long-term growth. 

• Bonds (Fixed Income): For stability and income. 

• Alternatives or Real Assets: Real estate, commodities, private equity, etc. 

Your allocation should reflect your goals, timeline, and comfort with risk. For example, a 45-year-old might lean toward more stocks for growth, while a retiree might prefer a more balanced mix with bonds and cash. 

 What Is Asset Location? 

Asset location is the where of investing. It’s about choosing the right accounts to hold those investments for maximum tax efficiency. 

The three main account types are: 

• Taxable Accounts (brokerage accounts) 

• Tax-Deferred Accounts (Traditional IRA, 401k) 

• Tax-Free Accounts (Roth IRA, Roth 401k) 

Each account type is taxed differently, and placing the wrong investment in the wrong account can create a hefty tax bill down the road. 

 Asset Allocation vs. Asset Location: Why Both Matter 

Think of it this way: 

• Allocation decides what’s in your toolbox. 

• Location decides which drawer you put each tool in. 

You need both to build something that lasts. 

Example: 

• Holding bonds in a Roth IRA might not be efficient — because bonds produce lower returns and the Roth is your most valuable, tax-free account. 

• Holding growth stocks in a taxable account can be beneficial — since long-term capital gains are taxed at lower rates than ordinary income. 

• Holding income-producing assets (like bonds or REITs) in a Traditional IRA often makes more sense — because they’re taxed as ordinary income anyway. 

This simple shift in location can save retirees thousands in taxes over their lifetime. 

 Common Mistakes with Asset Location 

1.  Ignoring location entirely. Many investors only hear about allocation, leaving location unaddressed. 

2. Putting high-growth assets in a Traditional IRA. This creates large RMDs (Required Minimum Distributions) later and bigger tax bills. 

3. Not updating after life changes. Inheritance, a job change, or a Roth conversion can all change the right location strategy. 

How to Optimize Asset Location 

Here are a few practical steps: 

1. List out all your accounts — taxable, IRA, Roth, HSA. 
2. Classify your assets — stocks, bonds, alternatives, real estate, etc. 
3. Match investments to accounts based on tax efficiency: 
   • Stocks → often better in taxable accounts (capital gains treatment). 
   • Bonds → often better in Traditional IRAs (ordinary income). 
   • High-growth investments → ideal for Roth accounts (tax-free growth). 
4. Work with a fiduciary planner to test different strategies and withdrawal sequences. 

Why This Matters for Retirement 

In retirement, your portfolio isn’t just about growth — it’s about turning savings into a sustainable, tax-efficient income stream. 

Getting allocation right helps manage market risk. 

Getting location right helps minimize taxes. 

Together, they maximize how much of your money you actually get to keep. 

 The Bottom Line 

Asset allocation vs. asset location isn’t an either/or. You need both. Allocation makes sure your portfolio is built to last. Location ensures you don’t lose what you’ve built to unnecessary taxes. 

Most investors — and unfortunately, many advisors — only talk about allocation. But true fiduciary planning means optimizing both. 

And if you’d like to see how this applies to your unique plan, book a Retirement Readiness Call at fitwealthadvisors.com/contact. 

The Fit Wealth Show is brought to you by Plan Group Financial, Inc. (PGF) d/b/a Fit Wealth Advisors. PGF d/b/a Fit Wealth Advisors is an investment adviser registered under the Investment Advisers Act of 1940. Registration as an investment adviser does not imply any level of skill or training. This presentation has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Past performance is not indicative of future results.