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Author: spirit11 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75379  
Subject: Money Market Fund Date: 7/7/2000 2:49 PM
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I have $5,000 sitting in a savings account, which I realize is not Foolish - so I intend to put $3,000 in a money market account with Janus (where I have my IRA). I am investing maximum in my 401K (no match yet) and have started collecting social security since there is no income limit. I have two questions. Is there any disadvantage in opening a regular account at the same place my IRA is? Would I do better with a Tax Exempt money market (even though the rate is more than half less)? I have done some research and Janus is comparable to other money markets - and I like dealing with them. I also have some drips and am thinking of opening an account with Buy and Hold or E-trade. I know there will be a heavy tax bite, but my feeling is I can put the money into something now. I guess that may be 3 questions.
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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 23161 of 75379
Subject: Re: Money Market Fund Date: 7/7/2000 3:48 PM
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There is advantage in having both a taxable account and IRA at the same place. They will have different account numbers and Janus won't screw up. It may be advantageous to be able to call up and ask for $2000 next year, or whenever, to be transferred from one account to another, and Janus will know you have more money under their management. At some point there can be perks associated with being a larger customer.
To figure whether you do better with taxable or tax exempt money markets, figure rate x (1-tax rate) and if that is more than the tax free, you do better with the taxable, if not, better with tax free.
It is not clear why you think there would be a big tax bite in opening an account with Buy and Hold or E-trade. Taxes come when you sell a stock at a profit, not when you open an account. If you buy and hold a stock you can put capital gains taxes off indefinitely.
Best wishes, Chris

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Author: spirit11 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 23164 of 75379
Subject: Re: Money Market Fund Date: 7/7/2000 5:57 PM
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Thanks Chris - does that mean if I don't take any money out until I stop working - then the capital gains tax would be based on a lower rate (lower income)? So, I can keep buying, without selling or taking distributions and not pay any tax on investments?

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 23169 of 75379
Subject: Re: Money Market Fund Date: 7/7/2000 9:56 PM
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If you buy a stock like MSFT that does not pay a dividend in cash, and you don't sell it, you don't pay any capital gains tax. If you sell it after you retire, you would pay capital gains tax at the rate then in effect (unless, of course, Congress changes the law). If you own a stock like General Electric, which pays a dividend in cash, you pay tax every year on the dividend, which is taxed as ordinary income, although you do not pay Social Security or Medicare tax on that dividend.
If you die without selling your stock and your son inherits your stock, he inherits it at its value on the day of your death and never does pay any capital gains tax on the appreciation while you owned the stock.
You can keep buying without selling and not pay any tax on your investments, even in a taxable account. If there are distributions like dividends, paid into your account, in a taxable account you will pay tax on those as of the year you receive them. If there is a distribution like a stock split, that is not taxable until you sell.
So there are ways to avoid tax, legally, while you are in your top earning years, apart from having money in an IRA, 401k or the like.
Best wishes, Chris

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