UnThreaded | Threaded | Whole Thread (29) | Ignore Thread Prev | Next
Author: LaughingRaven Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75829  
Subject: Re: What are your thoughts? Date: 8/14/2007 5:01 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
why you use 10% for capital gains? isn't it now 15% (and was 20% recently)?

D'oh! You're right. If your marginal rate is 15% or lower, you only pay 5% tax on capital gains. If your marginal rate is 25% or higher, you pay 15% tax. So assuming our example occurs within a higher tax bracket, that $6,600 is closer to $9,900.

2) Traditional IRA distributions get taxed at your marginal tax rate

well, while this is true, some people usually note (and I agree with them), that, depending on how much income you have that year from different sources, your effective tax rate can [be] much smaller.


Very true. If the IRA distributions were your primary source of income, the taxpayer's effective tax rate would be somewhat lower, which would dampen the effect of the higher tax rate. I would expect that, all things being equal, the capital gains would still come out ahead; if the taxpayer had little or no other income, then the capital gains would be taxed at a mere 5%, and that's hard to beat. But the IRS rules aren't clear enough to allow for a quick-n-easy simulation here.

I personally have nothing against IRA's and 401(k)'s, traditional or otherwise; saving regularly is probably the best chance a working Joe or Jane has of retiring comfortably, and these vehicles help that to happen. But asset allocation can save you a lot of money when tax time comes around.

--
Raven
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (29) | 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."
Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
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:
Apple

The Saddest Place on iPhone Day
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