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Tax diversification is crucial from "summary" of The Power of Zero, Revised and Updated by David McKnight
Tax diversification is crucial because it allows you to hedge against the uncertainty of future tax rates. By having a mix of taxable, tax-deferred, and tax-free accounts, you are able to adapt to whatever the tax landscape may look like in the years to come. This strategy provides you with flexibility in retirement to withdraw funds from the most advantageous account based on your tax situation at that time. In retirement, you may find yourself in a higher or lower tax bracket than you were during your working years. Having a variety of accounts to draw from can help you manage your tax liability and maximize your income. For example, if tax rates are low, you may choose to withdraw funds from your tax-deferred accounts. On the other hand, if tax rates are high, you can tap into your tax-free accounts to avo...
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