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No. of Recommendations: 1
billjam writes,

I think the real benefit of the IRA is allowing dividends and capital gains to compound tax-free all those years, at least for me. I'm not a day trader but I traded within my IRA without worrying about short term or long term. I had mutual fund dividends and capital gains I could reinvest without paying tax. I have a taxable brokerage account too but it never grew as fast as the IRA because I had to keep paying taxes on the income and cap gains. Compounding is a great thing. Compounding without annual taxes is a fabulous thing.


Don't forget that you'll pay ordinary income tax rates on withdrawals from a traditional IRA. While a tax-efficient investment in a taxable account like Berkshire Hathaway would be taxed as capital gains. (0% tax on first $36,250 in gains for singles, $72,500 for a married couple).

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