Originally Posted by audreyh1
Because of the monthly (or quarterly) dividends. Bond dividends are taxed at your max income tax bracket.
I believe the flip-side of this argument is so you have money available to hold your
equity allocation in taxable accounts. Which is advantageous because hopefully much
of the distributions will be capital gains distributions and qualified dividends, both taxed
at a much lower rate than ordinary income. And when you start liquidating these
equities for retirement spending, the capital gains also will be taxed at a very low rate.
If your equities are in a tax-deferred account, all this income will ultimately be taxed as
Of course, with a Democratic congress, as well as the fact that eventually someone
must take responsibility for the deficits (Democrats or not), it's reasonable to suspect
this advantageous treatment may go away or at least be lessened. Most people here
don't seem to think that capital gains will ever be taxed as ordinary income, however.
It's an interesting thought experiment how the conventional wisdom (about what
assets to hold in which accounts) might change *IF* capital gains started getting
treated as ordinary income !