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URL:  http://boards.fool.com/greetings-sam-and-welcome-ltltheres-our-10204469.aspx

Subject:  Re: Tax-free retirement investing Date:  6/12/1998  3:11 PM
Author:  TMFPixy Number:  3759 of 76238

Greetings, Sam, and welcome.

<<Here's our situation; hopefully someone can shed some light on our best course of action:

My fiance and I are 21 and 22 years old respectively, so we have a long term horizon. Our joint income is ~$115,000. We currently both invest 10% in our company's employee stock purchase program and 10% to 401K. We have planned to save 30%/yr., so this leaves us 10% or ~$11,000 more to put somewhere.

I would like some sort of tax-deductible (but high growth) vehicle for obvious reasons; do we qualify for either the Roth IRA or ordinary IRA? Apparently even then that will use only $4K of this $11K.. Any way to eek a little more tax-free investing out of that?

Any help is appreciated.. Trying to keep as much of this away from the government as I can :)>>

The contributions to an IRA for either of you will be nondeductible based on your income, but the growth will be tax deferred. If you use a Roth, the earnings will also be tax-free many years from now. Thus, the latter is the route to go for that $4K.

As to the remaining $7K, you have exhausted your tax deferred vehicles unless you want to use an after-tax annuity product of some sort. I do NOT recommend that approach. You can do better in the long run in most cases even after you take taxes into account.

I commend you on your approach to savings at your age. You are doing the right things early, and it will pay off bigtime for both of you come age 50 or so. You have maxed out on the tax-favored investments, and there is absolutely nothing the matter with using taxable investment accounts after that. That's especially true when the only thing left are mediocre to poor annuities.

Yeah, yeah, I know. For the purists out there perhaps there are one or two that are okay, but only if you hold them for 20 years or longer. Even then, I'll wager a sound Dow method will still beat them after taxes.

Regards....Pixy
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