Flex Your 401(k): Allocation

So it makes sense to put investments that generate the biggest tax bills, such as taxable bond funds or funds that turn over their stock holdings frequently, in tax-deferred accounts.

Fran Kinniry, a principal at Vanguard's investment counseling and research department, says the fund company tries to teach clients that they have a limited amount of tax-deferred "shelf space" and that it should be used wisely.

Coming up tomorrow: avoiding withdrawals.