Hi Fools,I appreciate any help you can give me. It is always good to get advice to get a person thinking. Also, please excuse me if this is a little lengthy, I want to give as much info and personal thoughts as possible. I had read an article last week by Ann Coleman and just now read a reply post(#19610) by TMF Pixy about contributing to a tax deferred plan like a 401K/403b or a long term taxable account to withdraw from for retirement. This is taking in consideration that an IRA is not available or it is maxed out. I would appreciate some personal thoughts on my situation. I am single with no children and currently maxing out a Roth IRA($2000). I am a teacher and I am contributing into a 403b non-matching(of any sort) plan through Vanguard(through my doing). Reading the article and the post, makes me wonder if I retire, is it in my best interest to contribute to my 403b non-matching plan or just contibute the same amount of money to a long-term capital appreciating taxable account? I know that the 403b is giving me a tax deduction and I can switch funds or companies(I don't know why I would switch away from Vanguard) without tax consequences. However, the fact that is making me think about contributing to a taxable long term account for retirement only is that when I withdraw money I will be taxed only on a long-term capital gain rate 20%(I did hear that the government is thinking about reducing this to 18% if held over 5 years, Correct?) When I withdraw 403b money for retirement, I will be taxed at my income tax rate at that time taking in consideration I am receiving my State retirement income only is going to probably be 28%. Would it not be Foolish for me to stop my 403b and just contribute to a long-term taxable account? Any thoughts are greatly appreciated. If you need for info, please ask. Again, sorry for the length. Thanks in advance! Tag
The flaw with the long term buy and hold strategy is that you must successfully select stocks that you can truely hold long term. If they mature or fall on hard times in mid career while your tax rates are high, you face tough decisions: sell and pay capital gains or hold on and pray.Many do this sucessfully, but it can be tricky.Your 403b gives you far more flexibility to respond to changes in the market without paying taxes. So its not quite as risky from my point of view--thoough taxes will be higher.So I would be inclined to do some of both. Long term buy and hold as much as you dare and especially when you spot good stock opportunities and 403b for security.
Market returns with no tax year after year. SPY - S&P 500 Depository Receipts. A good choice for that long term hold taxable account.
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