Question: Should my retirement funds should be in my taxable or 401(k) accounts?
Answer: Mutual funds that pay out interest, dividends and capital gains are considered less tax efficient. In theory, you should have your tax-efficient funds in your taxable account and the tax-inefficient funds in your 401(k) or IRA, if you have one. If you are following my recommendations your portfolio is made up of index funds that have very little turnover, so most of the stock funds are relatively tax efficient. Taxable bond funds, Treasury inflation-protected securities, real estate investment trusts (REITs), small cap and value funds will tend to pay out more tax-triggering events than large cap U.S. and international stock funds. Some fund families (e.g., Vanguard and Dimensional) offer tax-managed funds to minimize the taxable events in typically less tax-efficient asset classes.