Yes, Ruda Financial is a fiduciary, which means I am legally and ethically obligated to act in your best interest at all times. I do not sell financial products or accept commissions or referral fees.

What makes you different from other financial advisors?

Unlike many advisors who focus primarily on investments, I take an integrated approach that starts with tax planning. Drawing on my experience as an IRS economist, I help clients make decisions that minimize lifetime taxes while aligning their investments, retirement planning, and financial strategy. I'm also fee-only, meaning I don't earn commissions or sell products.

What services do you offer?

I offer two main services: ongoing financial planning and investment management starting at $6,500 per year, or project-based planning for $2,500. Both focus on tax-efficient strategies for professionals and business owners in the DC area.

What types of clients do you serve?

I work with professionals and business owners in Silver Spring, Bethesda, and throughout the Washington DC metro area. Typical clients include high-income professionals navigating complex tax situations, business owners planning for retirement, and pre-retirees optimizing their strategies before RMDs begin. There are no asset minimums - what matters most is that we're a good fit in terms of goals, values, and approach.

Do you work with clients outside Maryland?

Yes. While I'm based in Silver Spring, MD, and many of my clients are in the Washington, DC area, I work virtually with clients across the country.

What is your investment philosophy?

I focus on what you can control: costs, taxes, diversification, and discipline. I build portfolios using low-cost index funds and ETFs from Vanguard, Schwab, and Fidelity. Tax efficiency is central to my approach - minimizing the tax drag on your returns over time.

Who will hold custody of my assets?

Your assets are always held in your name at a third-party custodian. I recommend that my investment management clients custody at Charles Schwab & Co., an independent, SEC-registered broker-dealer with whom Ruda Financial is unaffiliated.

For ongoing financial planning and investment management, there is a flat quarterly fee that starts at $1,650, which equals $6,500 per year. For project-based financial planning, there is a one-time fee of $2,500.

What are the ongoing costs beyond your fees?

All mutual funds, even low-cost index funds, have a small yearly fee called an expense ratio. In the portfolios I typically recommend, these expenses are very low, usually under 0.05% per year, or $500 per $1 million invested.

Can I cancel or pause services if needed?

For project-based planning, there's no ongoing commitment. For ongoing clients, services are billed quarterly with 30 days' notice required for termination. There are no long-term contracts or penalties for ending the relationship.

Do you offer a free initial consultation?

Yes. I offer a complimentary introductory call to learn more about your goals and see if we're a good fit.

How often, and how, will we meet?

We'll meet regularly throughout the year, especially during the first year when we'll develop your financial plan over a series of structured meetings. In subsequent years, we typically have quarterly in-depth check-ins, plus additional meetings as needed. Most clients prefer virtual meetings for convenience and flexibility, but I'm also happy to meet in person in Maryland, Washington, DC, or Northern Virginia.

What if I already have a financial advisor?

Some clients come to me for a second opinion or project-based planning on a specific decision. Others transition to working with me ongoing after comparing our approaches. I'm happy to discuss your current advisory relationship and help you determine whether a change makes sense for you.

Are You Holding the Right Investments in the Right Accounts?

Feb 18

Written By Alex Ruda

Asset Location Strategies for DC Area High Earners

If you're a high earner in the Washington, DC area, you likely have accumulated retirement savings across multiple account types. Maybe you're maxing out your workplace 401(k), making backdoor Roth IRA contributions, and investing additional savings in a taxable brokerage account. You're doing the right things, but there's a critical question many investors overlook: are you holding the right investments in the right accounts?

As a former IRS economist, asset location is one of the strategies I find most consistently underutilized. The tax code rewards people who pay attention to where they hold their investments, and the benefit compounds over time.

The default approach is to treat each account as its own self-contained portfolio, building a balanced mix of stocks and bonds in every account independently. That structure creates a tax drag that compounds quietly over decades. Many investors are familiar with asset allocation, the decision about what to own, but asset location, how to distribute those investments across taxable, tax-deferred, and Roth accounts, is a less commonly discussed concept.

What follows is a practical framework for thinking about asset location, covering which investments belong in which accounts, how to prioritize when the ideal structure isn't possible, and where the right answer depends on your specific situation. Whether you're still accumulating wealth or approaching retirement, the decisions covered here can meaningfully shape your lifetime tax bill.

Understanding the Three Account Types

Asset location strategy rests on one foundational idea: different accounts tax your investments differently, and that difference matters enormously over time.

Traditional 401(k)s, 403(b)s, and IRAs are tax-deferred accounts. You contribute pre-tax dollars, the investments grow without annual taxation, and you pay ordinary income tax when you withdraw in retirement.

Roth accounts, whether a Roth 401(k) or a backdoor Roth IRA, work in reverse. You contribute after-tax dollars, but qualified withdrawals in retirement are completely tax-free, including all the growth. Roth IRAs also carry no required minimum distributions, giving you more control over the timing and size of withdrawals in retirement.

Taxable brokerage accounts offer no special tax treatment on contributions or withdrawals, but they're governed by more favorable rules than many people realize. Long-term capital gains are taxed at preferential rates, unrealized gains are never taxed until you sell, and assets passed to heirs receive a step-up in basis that can eliminate embedded gains entirely.

Each account type has structural advantages and limitations. The goal of asset location is to exploit those differences.

The Core Principle: Match Tax Treatment to Asset Behavior

Not all investments generate the same kind of taxable events. Some throw off significant annual income in the form of dividends or interest. Others distribute capital gains annually due to high portfolio turnover. Growth stocks and low-turnover stock index funds, by contrast, generate minimal taxable events until you sell.

This variation is what makes asset location possible. Assets that generate frequent, highly-taxed income or distributions belong in tax-advantaged accounts. Assets with low annual tax drag are better suited to taxable accounts.

Consider a taxable bond fund. It generates interest income every year, taxed at ordinary income rates. Between federal and state taxes, high earners in the DC metro area can pay nearly half of every dollar of interest income in taxes annually. Holding that same bond fund inside a traditional IRA or 401(k) defers that tax entirely until withdrawal.

Contrast that with a broad stock index fund. It distributes modest qualified dividends taxed at preferential rates, rarely distributes capital gains due to low turnover, and allows unrealized gains to compound untouched for decades. That behavior is well-suited to a taxable account, where the step-up in basis rules may eventually eliminate the embedded gain altogether if the asset is held until death.

The practical framework that follows from this principle is not complicated, but applying it thoughtfully across your specific accounts requires knowing both what you own and where you own it.

What Belongs Where

With the core principle established, here is how it translates into practice across the three account types.

Tax-Deferred Accounts (Traditional 401(k), IRA)

Taxable bonds and bond funds are the classic candidate. Their interest income is taxed at ordinary rates in a taxable account, so deferring that income inside a traditional 401(k) or IRA is a straightforward win. There is a second reason to favor bonds here: lower expected growth means a smaller account balance subject to required minimum distributions in retirement, giving you more control over your future tax exposure.

Roth Accounts

Your highest expected growth assets belong in Roth accounts. Because qualified withdrawals are completely tax-free, you want those assets compounding in an environment where neither the growth nor the eventual withdrawal will ever be taxed again.

Taxable Accounts

Low-turnover stock index funds and individual stocks you intend to hold long term are well-suited to taxable accounts. Qualified dividends are taxed at preferential rates, turnover is minimal, and you control when gains are realized. Assets held until death receive a step-up in basis, which can eliminate embedded capital gains entirely for your heirs.

The International Equity Question

International stock funds tend to distribute higher dividends than comparable US equity funds, which creates a tax drag in taxable accounts. However, foreign taxes withheld on those dividends generate a foreign tax credit that is only available when the fund is held in a taxable account. How you resolve that tradeoff depends largely on your income level and the size and balance of your accounts, which is where real-world constraints come into play.

When the Ideal Structure Isn't Possible

The framework above assumes you have enough money in each account type to house every asset class where it belongs. Many people don't. A federal employee who has diligently maxed out their TSP for years might hold most of their investments in a single tax-deferred bucket with little Roth or taxable space to work with. Someone who has inherited significant assets may face the opposite imbalance, with a large taxable account and limited tax-advantaged space available.

When account balances don't align neatly with the ideal structure, prioritization matters. The general principle is to shelter the assets with the highest tax drag first. If you can only fit one asset class in a tax-advantaged account, bonds generate the most taxable income annually and benefit most from deferral.

The second priority is keeping your highest expected growth assets out of tax-deferred accounts if possible. Growth in a traditional 401(k) or IRA will eventually be taxed as ordinary income at withdrawal. If those assets had instead been held in a Roth or allowed to compound in a taxable account with an eventual step-up in basis, the tax outcome could be meaningfully different.

It is also worth noting that asset location decisions interact with your overall asset allocation. If your tax-deferred accounts are fully occupied by bonds but your target allocation calls for more fixed income than those accounts can hold, you may need to hold some bonds in taxable accounts regardless. The goal is to get as close to the ideal structure as your account balances allow, not to distort your allocation chasing perfect location.

Finally, the math changes as your accounts grow. Asset location is not a one-time decision but something to revisit as contributions accumulate, accounts rebalance, and your tax situation evolves.

Common Mistakes to Avoid

The most common asset location error is treating each account as its own self-contained portfolio. An investor who holds a balanced mix of stocks and bonds in every account is paying unnecessary taxes on income and gains that could have been deferred or eliminated entirely. The whole portfolio is the unit of analysis, not the individual account.

A second mistake is setting an asset location strategy once and never revisiting it. Contributions, withdrawals, market movements, and tax law changes all shift the picture over time. A location strategy that made sense five years ago may no longer reflect your current account balances, tax situation, or investment mix.

Putting It All Together

Asset location is one of those planning decisions that is easy to overlook but compounds meaningfully over time. It requires looking at your entire portfolio as a single system rather than a collection of separate accounts, each managed in isolation.

The core hierarchy is straightforward. Asset allocation comes first and should never be compromised in pursuit of better location. Within that allocation, shelter your most tax-inefficient assets in tax-deferred accounts, reserve Roth space for your highest expected growth assets, and use taxable accounts for investments that benefit from preferential capital gains rates and the step-up in basis.

The right structure for your situation depends on the size and balance of your accounts, your current and expected future tax rates, and how your portfolio is likely to be used, whether during your lifetime or passed on to heirs. Those variables make asset location a highly individual exercise rather than a formula anyone can apply uniformly.

Every portfolio is different, and the right asset location strategy depends on details that a general framework can only take so far. If you'd like a second set of eyes on how your accounts are structured, I'd be glad to help. You can also learn more about my approach to investment management and tax planning.

Alex Ruda