Originally Posted by LOL!
You missed the point. You don't even need your emergency fund in taxable. And you don't need enough fixed in taxable to provide income through age 59.5. Go read the link carefully. Very carefully. Otherwise you will be paying more in taxes than you need to. If you pay lower taxes, that means you get to keep more money.
I was thinking about this a little more. I agree it is a good way to approach it. And it will work for me.
But there is one small caveat. It is really not about the basic technique but individuals situations where they might try to apply it.
You must have enough taxable funds to ride out a bad market dip or bear.
For example: I need a $3k emergency fund or $3k for retirement income.
Taxable: $5k in stock
Tax Deferred: $5k Stock and $5k Bonds
Market Drops by 50% (of course that never happens
Taxable: $2.5k in stock
Tax-Deferred: $2.5k Stock and $5K bonds
Now the taxable account has insufficient funds until the market recovers.
It seems to me that the technique depends somewhat on how much assets you have in taxable and that there is a sizable cushion for temporary (maybe a few years) paper loss scenarios.
This may be more the case with emergency funds. The market and economy are interlinked. (But the economy and markets are a bit out of phase... market is a bit forward looking). For example right now if you lost your job and needed those emergency funds with the stock market drop... You would have insufficient funds.
On the other hand... if you have 2 or 3x the funds (in taxable) you plan to need in a certain time period... the risk is probably mitigated.