Most know they need to save money. Whether it is for an emergency, retirement, or some other goal, saving is essential. One of the big decisions in the planning process is what vehicles you should save in. Should you use a traditional 401(k)/IRA or Roth 401(k)? Should you use a 529 plan? What about an HSA? How much should be going in taxable accounts? What other types of accounts should be used?
In this article, we’re going to talk about a form of diversification that is not mentioned enough, tax diversification. Like stock diversification, the purpose of tax diversification is to reduce your risk and improve efficiency of an investment.