International funds in IRA, tax-efficiency

[pdxvandal]

I understand there is greater tax-efficiency with international funds in taxable accounts.

I have a decent-sized chunk, roughly 25k, in a Vanguard international fund in my tax-deferred IRA. What are my options with this fund? Is it wise to move some of the international allocation in my tax-deferred IRA to more tax-friendly funds? Or best to leave it alone?

[irastache]

Here is a link to a longish writeup on the boggle wiki about fund placement and taxes:

http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement

I think the short answer is you can better take advantage of the foreign tax credit by changing your allocation to place (*) foreign funds in a taxable account. This would mean selling the foreign funds in tax advantaged accounts and replacing them with domestic indexes.

(*) Certain kinds of funds will not qualify for the tax credit.