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Scott, any money in an IRA will remain tax free, (Including dividends and all capital gains) until the day that you withdraw the funds. On that day you will pay taxes at your ordinary income tax rate on all profits. If you put your money into a non IRA account you must pay your taxes on all income, (dividends, capital gains, etc.) in the year in which they occur. This would in effect lower the value of those accounts by the amount of your tax bill assuming that you are withdrawing the money to pay your taxes. You could pay the taxes out of your pocket, but that would reduce your liquid spending money accordingly. Also as your investment grows your additional tax liability could well be into the tens or even hundreds of thousands of dollars.Your investment decisions on which account to place your money in should be made taking all factors into consideration, including what your tax bracket will be at retirement. As a general rule a regular IRA will probably only benefit you if you will be in a lower tax bracket at retirement. I plan on being in the highest bracket and not even blinking an eye at tax time. Good luck
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