Bonds pay interest taxed as ordinary income every year while stocks mostly defer their tax, so holding bonds in tax-deferred accounts and stocks in Roth and taxable accounts can leave more after tax from the same overall mix.
How it works
Enter what you hold in taxable, tax-deferred and Roth accounts, your horizon, and your filing status, state and taxable income.
Set the overall stock and bond split you want, and the calculator keeps that mix identical in both versions.
The first version holds the same mix inside every account; the second fills the tax-deferred account with bonds first, gives the Roth the faster-compounding assets, usually stocks, and puts the rest in the taxable account.
Each year it taxes the interest and dividends paid in the taxable account at your federal and state rates, including the net investment income tax where it applies.
At the horizon it taxes everything as if cashed out: the taxable account’s gain at long-term rates, the tax-deferred balance as ordinary income, and the Roth not at all. It then compares what is left under each version, in dollars and as a yearly cost in basis points.
Updated September 2026
Updated for the 2026 tax year. Federal brackets and the capital gains bands are the 2026 figures; state brackets are each state’s 2025 schedule.
A worked example
A couple married filing jointly in California, with $400,000 of taxable income, holds $1 million in a taxable account, $750,000 tax-deferred and $250,000 in a Roth, adds nothing, and compares the two versions over 20 years. The example uses the tool's defaults: a 70%/30% stock and bond split, with stocks compounding at 8% a year and bonds at 4% a year, both yours to change in the tool below.
Hypothetical result
Located, after tax
$5.5M
Year 20
Mirrored, after tax
$5.4M
Year 20
Difference
$152,867
Located less mirrored, year 20
Per year
14 basis points
Over 20 years
Where the located version puts today’s dollars.
Holding
Taxable
Tax-deferred
Roth
Total
Stocks
$1,000,000
$150,000
$250,000
$1,400,000
Bonds
—
$600,000
—
$600,000
Account total
$1,000,000
$750,000
$250,000
$2,000,000
In this example, locating by tax character leaves about $152,867 more after tax at year 20, about 14 basis points a year: the tax-deferred account holds all of the bonds, and the Roth and taxable accounts hold only stocks. Both figures are what is left after every account is taxed as if cashed out at year 20. The tax-deferred balance pays a combined federal and California ordinary rate of 33.3%.
The calculator
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Traditional 401(k), 403(b) or IRA.
The rest is bonds. The mix is the same in both versions.
After deductions, before any investment income.
More detail
Before investment income. Leave blank to use taxable income.
Hypothetical result
Where the located version puts today’s dollars
Tax-deferred fills with bonds first, the Roth takes the faster-compounding assets left, and the taxable account holds the rest. The mirrored version holds your split in every account.
Holding
Taxable
Tax-deferred
Roth
Total
The after-tax gap over time
Located less mirrored, with every account taxed as if cashed out at the end of each year.
After-tax gap, located over mirrored
Year by year
After-tax wealth at the end of each year under each version, and the gap between them.
Year
Located
Mirrored
Gap
Where the tax falls
Balances and taxes at the horizon under each version.
At the horizon
Located
Mirrored
This piece is general education, not individual advice.
Nothing here is individual tax, legal, or investment advice, and no outcome shown is certain. Results are hypothetical, vary with each use and over time, and are not a prediction of what any account will realize. Whether any placement fits your situation depends on your holdings, cost basis, liquidity, and risk tolerance. Aspirean Wealth, LLC is an SEC-registered investment adviser; registration does not imply a certain level of skill or training.
Assumptions and limitations
Criteria and methodology. The calculator holds one stock and bond mix two ways. The mirrored version holds the same mix inside the taxable, tax-deferred and Roth accounts. The located version fills the tax-deferred account with bonds first and stocks after that, fills the Roth with whichever of the two you assume compounds faster, and puts the rest in the taxable account; the overall mix is the same in both. Placement is refreshed every year as balances drift, assumed to happen through additions and reinvested income with no sale to rebalance, and additions arrive at the start of each year. Each asset’s tax character is fixed. Stocks pay out 1.8% of their value each year as dividends, 90% of them qualified, and defer the rest until sale. Bonds pay out their whole assumed rate each year as interest taxed as ordinary income. In the taxable account those payments are taxed each year under the 2026 federal ordinary and long-term capital gains schedules, stacked on your taxable income, and under your state’s 2025 income tax schedule; what is left is reinvested and adds to cost basis, and today’s taxable holdings start at full cost basis. The 3.8% net investment income tax applies to investment income above $250,000 of modified adjusted gross income for joint filers, $200,000 for single filers and heads of household, and $125,000 for married couples filing separately. At the horizon every account is valued as if cashed out. The taxable account’s embedded gain is taxed at federal and state long-term capital gains rates plus the net investment income tax. The whole tax-deferred balance is taxed as ordinary income at your combined federal and state marginal rate at today’s income, with no net investment income tax. The Roth is not taxed. The result compares after-tax wealth under each version, and the yearly figure in basis points is the difference in how fast each version’s after-tax wealth compounds over the horizon. The fields under More detail start at these values: yearly additions to each account, $0; modified adjusted gross income, the same as taxable income; the rate stocks compound at, 8% a year; the rate bonds compound at, 4% a year. Those last two are the assumed stock and bond returns: round, generic figures for you to replace with your own, not Aspirean’s forecasts. The stock share opens at 70% and the horizon at 20 years. State tax on each year’s payouts uses the state’s ordinary schedule; a state’s capital gains exclusions, caps and surtaxes apply only to the gain at the horizon, and a state that taxes only capital gains takes nothing from the yearly payouts or the tax-deferred balance. Not modeled: required minimum distributions, Medicare premium surcharges, qualified charitable distributions, the step-up in cost basis at death, Roth conversions, state exclusions for retirement income, the foreign tax credit, fund expenses, local income taxes and the alternative minimum tax.
Results vary. Every figure changes with each input you enter, and the same inputs would produce different figures as tax law and markets change. The tax tables are a point in time: the 2026 federal schedules and each state’s 2025 schedule, applied unchanged to every year of the comparison with no inflation adjustment. The tax-deferred balance is taxed at the marginal rate your income sets today, which may be higher or lower than the rate that applies when the money is actually withdrawn. Results vary with each use and over time.
Investments considered. The calculator works with two generic sleeves, stocks and bonds, each compounding at a rate you set. It does not consider, select or recommend any specific investment, fund or portfolio, it does not use Aspirean’s portfolios, and it does not place sub-classes such as municipal bonds, international stock funds or REITs, whose tax treatment differs. Other investments not considered may have similar or superior characteristics.
Hypothetical. The outcomes shown are hypothetical. They do not reflect actual trading or the results of any account, and they are not a prediction of what any household will hold. Real results will differ, possibly by a lot, and the order in which markets move can change which version comes out ahead.
Definitions
Asset location
Deciding which account, taxable, tax-deferred or Roth, holds each part of a portfolio, without changing the overall mix.
Tax-deferred account
A traditional 401(k), 403(b) or IRA. Nothing is taxed while the money stays in, and withdrawals are taxed as ordinary income.
Qualified dividends
Dividends from most U.S. and many foreign stocks held long enough, taxed at the lower long-term capital gains rates rather than as ordinary income.
Basis point
One hundredth of one percent. A yearly cost of ten basis points on a $1 million portfolio is $1,000.
Mirrored allocation
Holding the same stock and bond mix inside every account, which is simple to run but ignores how each account is taxed.
Frequently asked questions
Should bonds go in my 401(k) or my taxable account?
For taxable bonds, the tax-deferred account is usually the better home, because their interest is taxed as ordinary income every year it sits in a brokerage account. Stocks in a taxable account mostly pay qualified dividends and defer the rest until sale. The exceptions are municipal bonds, which usually suit taxable accounts, and stretches when bond yields are very low. The calculator sizes the difference for your balances.
What should I hold in a Roth IRA?
Generally the assets likely to compound the most over a long stretch, which for most households means stocks. Qualified Roth withdrawals are not taxed, so the account is most valuable holding whatever would otherwise build the largest taxable gain. Bonds in a Roth are not a mistake, but they spend scarce tax-free room on the part of the portfolio that usually compounds least.
What is the difference between asset location and asset allocation?
Asset allocation is the mix: how much of the whole portfolio sits in stocks, bonds and cash. Asset location is where each piece of that mix is held: a taxable account, a tax-deferred account such as a 401(k), or a Roth. Allocation sets the risk you carry. Location changes the tax you pay on it, which is why it comes second and should not override the mix.
Does asset location change how risky my portfolio is?
No. It changes where the tax falls, not how much market exposure the household carries, because the overall stock and bond mix stays the same. One refinement is worth knowing: part of a tax-deferred balance will eventually go to tax, so measured after tax, bonds in the 401(k) tilt the household slightly toward stocks. The calculator holds the pre-tax mix constant and reports the tax difference only.
How much can asset location save?
It depends on how evenly your money is split across account types, how much of the mix is in bonds, your bracket and your state. A household with nearly everything in one kind of account has little to move, and the difference in any single year is small. Over long horizons it compounds. The calculator shows the dollar gap and the yearly cost in basis points for your numbers.
Where should international stock funds and REITs go?
International stock funds often suit a taxable account, because foreign tax withheld on their dividends can be claimed as a credit there and is lost inside an IRA. REITs pay mostly nonqualified dividends taxed as ordinary income, so they usually suit a tax-deferred or Roth account. This calculator works at the level of stocks and bonds and does not place these sub-classes separately.
Meet with us
Numbers this size deserve a second set of eyes.
If your savings are spread across taxable, retirement and Roth accounts, where each holding sits is worth settling alongside the mix itself, before the next contribution or rebalance.
