UnThreaded | Threaded | Whole Thread (18) | Ignore Thread Prev | Next
Author: makumar11 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76237  
Subject: Diff between 401K,regular IRA, brokerage account Date: 3/31/2008 4:16 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Hello,
I am currently maxing out on my 401K. I was looking at my portfolio options being offered by my company, which are:

BGNMX - American Century Ginnie Mae
BOGRX - American Century Income and Growth
PEOPX - Dreyfus S&P 500 index
NPRTX - Neuberger Berman Partners
OAKMX - Oakmark 1
JAWWX - Janus Worldwide

I chose to put 70% of my monthly deductions into NPRTX, and 30% into PEOPX, as I did not like the other options.

So currently my portfolio is 100% Large Blend. I have atleast 30 years for retirement. I want to create a supplement for my retirement investments, so I was looking into opening a regular IRA account. I already have a roll-over IRA account.

My CPA informed me that adding to a rollover IRA creates confusion when its time to start making withdrawals during retirement. For withdrawals from 401K, you pay federal tax, but for withdrawals from a regular IRA, you pay federal and state taxes.

For a rollover IRA, because the money came from a 401K, you pay only federal taxes on withdrawals during retirement. If you add money to a rollover account, then, unless you keep track of the sources throughout the life of that account, what happens is that you will be taxed state and federal taxes when you start taking withdrawals. So, for that purpose, its better to separate a rollover IRA with any other IRA accounts.

Does this sound right ?

My other question is regarding opening a regular IRA account, compared to a regular investment account. If I want this to be a long-term investment plan, opening an IRA will force me to use it just for retirement (I don't like to borrow money from my investment accounts), but having a regular brokerage account will give me the flexibility to use the money if I need to, while still treating it as a long term investment vehicle.

Are there other differences between a regular IRA and a brokerage account as investment vehicles for long term ? Of course, I understand that the money in IRA will grow tax-free, that is, the dividends and capitals gains do not get taxed. So if you reinvest the dividends, you will be increasing the value of your investments, but not pay taxes when its growing in an IRA.

Thanks,
Mallika.
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (18) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Saul's Investing Discussions

Why Did I Buy a Bunch of PFIE Today?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement