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Subject:  Re: Taxable vs tax Defered Date:  9/5/2001  11:31 PM
Author:  rkmacdonald Number:  31811 of 88775

Author: Sonnet Date: 9/5/01 10:10 PM Number: 31806
I read in one of those investing rags recently that it would be better if you are within five years of retirement to put the money into a taxable account because the advantages of a lower capaital gains tax rate in the taxable account begin to out weigh the ordinary income tax rate of the 401k even with the deferal.

I think that this may thoeretically true, but the big disadvantage is the flexibility. In a 401k (or IRA), you can move money around from growth funds, to value funds, or to bond funds any time you want to with no tax consequences. If you do this in the taxable account, you'll constantly be worrying about the taxes. In fact, you may worry so much that you decide not to take capital gains when you really should. Then, you could suffer a big capital loss when you eventually liquidate.

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