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Author: gastrolith Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: Tax Advantages beyond IRAs? Date: 1/15/2004 10:24 PM
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Greetings,

I've also posted this at Investing for Beginners board.

Once we've maxed my wife's and my IRA contributions and our daughters ESA, are there any other tax-advantaged investments for us? I'm active duty, so don't get matching in the TSP (as I understand.) Wife is SAHM, not 401k or equivalent for her.

Are annuities an idea?

Thanks for any suggestions or pointing me in the proper direction.

G
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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: 38561 of 75340
Subject: Re: Tax Advantages beyond IRAs? Date: 1/15/2004 10:42 PM
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With very few exceptions, annuities are a bad idea.
You can put after-tax money into growth stocks that don't pay dividends and simply buy and hold. No tax consequences until you sell, and that can be decades away.
Once you reach retirement age, a problem with the large IRA is getting the money out. If you put before-tax money in, then Uncle Sam wants his due--and your required distributions can amount to lots of tax. You probably don't have a huge income now, so paying the tax now is probably at a better rate than you'll be paying, say 20 years from now.
If you REALLY want an annuity, look at Vanguard and TIAA-CREF, but you are really better off with just buy and hold. You can even give appreciated shares to your favorite charity and avoid the tax on the appreciation.
Yes, contribute the maximum to your and your wife's IRA and your child's ESA, but then you really do better to just pay your taxes, focusing on whether you are making an investment that will earn you money rather than on whether you'll owe some tax on April 15.
Best wishes, Chris

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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38567 of 75340
Subject: Re: Tax Advantages beyond IRAs? Date: 1/16/2004 10:05 AM
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Are annuities an idea?

Annuities are an idea, a bad idea.

The only other "tax-advantaged" account I could think of would be a Medical Savings Account. Don't know much about them so can't make much of a comment and monies taken out are limited to medical expenses.

As far as strictly saving for retirement, I would buy S&P 500 Index fund (or some other index fund) and hold for long term. As the law stands now, you would benefit from a much lower capital gains rate at time of sale.

JLC


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Author: 2old4bs Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38591 of 75340
Subject: Re: Tax Advantages beyond IRAs? Date: 1/16/2004 4:33 PM
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Oh how everyone just hates annuities! I happen to have one, but you really have to be in a very specific situation to gather any benefit from them, and most people aren't in that situation. For example, is your combined income tax rate (city, state, Fed) higher than 50%? If not, then an annuity is not for you. Also, since the long term cap gains rate has been decreased until 2008, holding investments within a taxable account has become more lucrative--more people should be doing it--I certainly am!

Just the 2 cents of,
2old


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Author: WPatch Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 38598 of 75340
Subject: Re: Tax Advantages beyond IRAs? Date: 1/16/2004 8:54 PM
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Once we've maxed my wife's and my IRA contributions and our daughters ESA, are there any other tax-advantaged investments for us? I'm active duty, so don't get matching in the TSP (as I understand.) Wife is SAHM, not 401k or equivalent for her.

The TSP is a great 401k fund, even without a match. Its administrative costs to participants are microscopic(very low institutional rates on primarily index funds). The Motley Fool has justifiably pointed out the advantages of index funds with low fees(even if they prefer to market stock picking now. A diversified portfolio of US stocks, foreign stocks, and bonds in the TSP is one of the best tax-advanage investment portfolios.

Another tax-advantaged investment to consider is the 529 plan. a state sponsered college savings plan which offers tax-free savings for college spending. Very high amounts of savings can be invested. I believe that the best low cost plans are those of Vanguard, TIAA-CREF, and Fidelity; they are each active in several states.

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