Holding bonds in taxable account

[REAL WORLD EXPAT]

Hi - So I have a taxable account that holds bonds (Vanguard Total Bond Admiral) and have read how this can be inefficient from a tax perspective if you can hold them in tax deferred. This makes sense to me if I plan to draw down on my taxable and tax deferred at the same time when I retire at say 60 but what if I plan to stop working at say 46 - 48 and my taxable accounts will fund my life until I can draw on my tax deferred accounts. I'd like some protection against volatility in my taxable (as well as some growth opportunity in my deferred) but everything I read on here seems to point to not holding bonds in taxable. I'm not quite sure how else I can protect my revenue streams that are going to needed at different times in my life?

Current allocation is 60%/40% and I'm 43 now.

Any advice on how to handle this in the most efficient manner?

[seattlecyclone]

Have you read http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/? You don't need to think of your money in terms of pre-60 and post-60 pots.

[mizchief]

I think it'll work even if you draw down totally from taxable.

You don't need to think about volatility in your taxable if you consider your stock:bond ratio (60:40) across all of your accounts (taxable and tax-advantaged).  So you have 100% stock in your taxable and less in your tax-advantaged.

So when you retire you draw down your taxable by selling stocks.  This changes the ratio of stocks: bonds of your total assets.  To compensate  sell some bonds and buy some stocks in your tax-advantaged until your total stock:ratio (across all accounts) is back to 60:40.  Make sense?

Another consideration though is that you probably want to draw down from your tax-advantaged accounts earlier so that you can take advantage of your lower tax bracket.  (see the link above on how to do that).