UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: Mark0Young Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76392  
Subject: Re: IRA Recommendations? Date: 3/28/2002 3:51 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 1
I would tend to agree with the other reply about tax-efficient investments (such as a major stock index fund) would probably be better held in a regular (taxable) account--the withdrawals of gains of a non-deductable traditional IRA would be taxed at your ordinary income tax rates, whereas selling stocks or tax-efficient mutual funds that you have held for the long run would be taxed at long-term (or the newer very long term) capital gains rates, which are (under present law) at a lower rate than ordinary income tax rates.

If you have an asset allocation plan that calls for some tax-inefficient investments (such as bonds, a bond fund, or a REIT), it would generally be better to hold that tax-inefficient investment in a "tax favored" account (even a non-deductable Traditional IRA) so that the gains thrown off each year from such investments wouldn't be taxed each year but rather be allowed to grow until you make your withdrawals.

There are other advantages of IRAs that may go beyond just the federal tax laws:

1. Depending on the state laws, funds in an IRA might or might not be protected from creditors.

2. Likewise, money in retirement accounts may be treated differently for figuring financial aid than money in regular accounts. Be sure to look into this if you or your children plan on applying for financial aid--my imperfect knowledge of this is rather dated.

3. If you practice Asset Allocation With Periodic Rebalancing, rebalancing (selling some of one asset to buy more of another asset) would have taxable consequences in a regular (taxable) account, but no tax consequences in a "tax favored" account (such as an IRA). Or if you are an active trader, same story.
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
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.
Post of the Day:
Dividend Growth Investing

Good Time for Dividend Champions?
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
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