I critique the logic and math used by the finance industry to support their asset location advice. It is not so much their conclusions I care about, as how they get there. I present a list of arguments commonly used, why they are wrong, and some issues that are never discussed.

Most Americans keep their retirement savings in an employer-sponsored 401(k) or in a traditional IRA that works the same way. To manage that money well, it is critical that the account’s benefits are understood: What is the net, after-tax outcome when you access your money?

This article is in response to Kerry Pechter’s article, The Ambiguity of Tax Deferral. In contrast to the idea that there are different, but valid, ways to look at traditional tax-deferred 401(k) and IRA accounts, I show that there are right and wrong conceptual models. Wrong models lead to wrong decisions and do not explain outcomes.