Technical FAQ: Spacers above stems
How much space, if any, should be left between the top of the stem and the steerer tube on a carbon fork? Some shops cut it just below the steerer tube, other let steerer tube protrude 1cm – what do you say? Also, how does it change for aluminum or steel?
You should always leave some length of the steering tube above the stem and put a spacer above the stem so that the entire stem clamp is clamped around a cylinder of constant diameter. The extension above the stem clamp can be as little as 1mm. Obviously, you need to put a spacer above the stem clamp that extends above it by at least 3mm to allow the top cap to push down on the stem via the spacer; otherwise, the top cap would bottom out on the steerer.
If you do not extend the steerer out of the top of the stem clamp, the fibers will be damaged at the top, because the stem clamp will pull down tighter at the top bolt, forcing the top of the steerer to curve inward, thus delaminating some of those fibers at the top.
With an aluminum or steel steering tube, it is less critical, but still, the stem clamp works better if its slot is a constant gap, indicating that it is fully wrapped around a constant-diameter cylinder.