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URL:  https://boards.fool.com/abhasi-wrote-ltltinvesting-years-needed-to-11372645.aspx

Subject:  Re: Maximum IRA Contribution for 2? Date:  10/14/1999  2:39 PM
Author:  TMFPixy Number:  14544 of 103822

Abhasi wrote:

<<Investing Years Needed to Make IRA Over-contributing
more Profitable than a Taxable Account:

Capital Gains Tax
10% 15% 20% 28% 36%

10% 20 16 13 10 7
15% 12 9 7 4 3
Invest- 20% 8 5 4 2 1
ment 25% 6 4 3 1 1
Rate of 30% 4 3 2 1 1
Return 35% 3 2 1 1 1
40% 3 2 1 1 1
45% 2 1 1 1 1
50% 2 1 1 1 1
55% 2 1 1 1 1
60% 1 1 1 1 1

So if you're investing Foolishly for 5 years or more in
the Foolish4 (20% return, let's say), it makes more
sense to over-contribute to your IRA instead of putting
it in a taxable account. The difference is even more
dramatic if you're Foolishly investing in one of the
Workshop Strategies (40%+), or if you're in it for the
really long haul (20 years).

What do you think, Pixy? Am I missing any subtle tax
nuances? (I've sent the spreadsheet to you
seperately). This could be the end of my
taxable-account investing.>>


While it makes an interesting exercise, I discovered a flaw in your spreadsheet and am returning it in a separate message. If you use a 10% return and a capital gains rate of 20%, you can't catch the taxable account with an overcontribution. With a 15% return, it takes 18 years. The higher the return, the shorter time it takes.

What's really of interest is whether the custodian would allow the overcontribution and how long it would take before the IRS said enough's enough and voided the IRA. I can't answer that question, but maybe the goo-roos on the Tax Strategies board can.

It was a great mental exercise, though. :-)

Regards..Pixy
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