How to Allocate a Three-Account Portfolio Across Tax Types in Retirement

Full analysis

Chris Stein and Jacob discussed how to position a $2.8 million portfolio split equally among taxable (regular brokerage), tax-deferred (IRA/401(k)), and tax-free (Roth) accounts when drawing down in retirement. Their core recommendation is to maintain a 'liquidity account' — easily accessible dollars, such as cash, Roth IRA funds, or brokerage holdings with modest capital gains — that can be spent freely throughout the year. Each fall, retirees review their income so far and decide how to refill that liquidity account for the coming year: via a Roth conversion, a pre-tax distribution, or waiting until January. On account-type matching: pre-tax (IRA/401(k)) dollars may be a natural fit for funding a future annuity purchase to cover essential spending, partly because RMDs (required minimum distributions — mandatory annual withdrawals the IRS requires starting in your 70s) are already forcing withdrawals from those accounts anyway, and partly because SECURE 2.0 allows large annuity payments to offset RMD requirements from other accounts. Pre-tax dollars earmarked for long-term care costs may also receive tax benefits when spent on qualifying expenses. The hosts cautioned against over-engineering the allocation: chasing perfect tax efficiency across every position in every account type can create overwhelming complexity for minimal gain.