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IRA is a tax deferred account. You are only taxed when you withdraw from your traditional IRA. It doesn't matter what funds you buy in your ira (except for maybe MLPs)
To add and continue. Your 401, 403, 457 and traditional IRAs are your primary tax deferred retirement accounts. They enable you to defer your salary (compensation) before taxes and grow your money with tax deferred appreciation. You are able to start withdrawing at 59.5 and must start withdrawals by 70.5 (in some situations, you can start making withdrawals earlier - wifey started at 50). When you make withdrawals, the amount withdrawn is taxed at your then current marginal tax rate.
The Roth IRA is available to most wage earners and enables you to start $5K odd per year AFTER taxes into a fully tax exempt acct. This is a very wise thing to do as it gives you a pot of tax free money at some future date.
Normally, when offered thru your workplace, you should defer sufficient monies to fully captu re any employer match - then fund your Roth IRA for the year - and then start funding your deferred acct again until you either run out of calendar or max it out for the year. I think the annual deferred limit is around $15K.
You want to have various pots of retirement monies each with differing tax and withdrawal rules and limits. Maximize your fiscal flexibility.
Not to put too fine a point on it, but all returns in a retirement account - except for a Roth - are taxed as ordinary income. That rate's often higher than the current capital gains rate, in which case your tax would be higher in an IRA than out. It's particularly pressing if you put a tax-free bond fund in a retirement account, and accrue tax liabilities as a result.
www.fairmark.com is the best site I know of for answers to questions of this sort. Answers provided by CPAs, enrolled agents, tax attorneys. A large chunk of the site is devoted to tax treatment of investment incomes inside (and outside) retirement vehicles.
Reply to @InformalEconomist: I agree about Fairmark. I would also include misc.taxes.moderated on Usenet as a source of high quality (and not so high quality responses.
The paper shows that there have been five debt crises over the past hundred years, including the latest one, and the last two, since World War II, have both been accompanied by financial repression. The key to these measures, which are many and varied in nature, are to keep nominal interest rates lower than would otherwise be the case, which reduces the interest payable by governments. If you add in inflation this can lead to effective negative interest rates, and the rapid erosion of the debt mountain.
A “negative interest rate” is simply where the interest we get on our cash is less than the prevailing rate of inflation. The beauty of these measures, from a politician’s perspective, is that they’re not obvious to the general public – as the authors state:
“The financial repression tax has some interesting political-economy properties. Unlike income, consumption, or sales taxes, the “repression” tax rate (or rates) are determined by financial regulations and inflation performance that are opaque to the highly politicized realm of fiscal measures. Given that deficit reduction usually involves highly unpopular expenditure reductions and (or) tax increases of one form or another, the relatively “stealthier” financial repression tax may be a more politically palatable alternative to authorities faced with the need to reduce outstanding debts.”
There are above board taxable accounts and below board taxable accounts. Tax deferred is to accounts as jumbo is to shrimp, they are taxed while one is asleep whether awake or resting. See buying groceries, paying utility bills, insurance etc. this year compared to last and the year before.
"The beauty of these measures, from a politician’s perspective, is that they’re not obvious to the general public.."
And so institutionalized, a targeted 2% debasement in normal times plus negative real interest rates, whatever more in New Abnormal times, they aren't even obvious to politicians. The serruptitious is _taken_ for granted, not even a silly season talking point or debate topic by candidates deemed 'serious' and serious only to those deemed fringy wackjobs. As a saver and investor one will find the point is nonfrivolous over time as contrasted with The Issues of The Day which invariably are shown to be in the fullness of time synonymous with forgotten for good reason.
Former TreasSec John Snow? You can't make this stuff up.
Comments
To add and continue. Your 401, 403, 457 and traditional IRAs are your primary tax deferred retirement accounts. They enable you to defer your salary (compensation) before taxes and grow your money with tax deferred appreciation. You are able to start withdrawing at 59.5 and must start withdrawals by 70.5 (in some situations, you can start making withdrawals earlier - wifey started at 50). When you make withdrawals, the amount withdrawn is taxed at your then current marginal tax rate.
The Roth IRA is available to most wage earners and enables you to start $5K odd per year AFTER taxes into a fully tax exempt acct. This is a very wise thing to do as it gives you a pot of tax free money at some future date.
Normally, when offered thru your workplace, you should defer sufficient monies to fully captu
re any employer match - then fund your Roth IRA for the year - and then start funding your deferred acct again until you either run out of calendar or max it out for the year. I think the annual deferred limit is around $15K.
You want to have various pots of retirement monies each with differing tax and withdrawal rules and limits. Maximize your fiscal flexibility.
peace,
rono
David
I agree about Fairmark. I would also include misc.taxes.moderated on Usenet as a source of high quality (and not so high quality
The paper shows that there have been five debt crises over the past hundred years, including the latest one, and the last two, since World War II, have both been accompanied by financial repression. The key to these measures, which are many and varied in nature, are to keep nominal interest rates lower than would otherwise be the case, which reduces the interest payable by governments. If you add in inflation this can lead to effective negative interest rates, and the rapid erosion of the debt mountain.
A “negative interest rate” is simply where the interest we get on our cash is less than the prevailing rate of inflation. The beauty of these measures, from a politician’s perspective, is that they’re not obvious to the general public – as the authors state:
“The financial repression tax has some interesting political-economy properties. Unlike income, consumption, or sales taxes, the “repression” tax rate (or rates) are determined by financial regulations and inflation performance that are opaque to the highly politicized realm of fiscal measures. Given that deficit reduction usually involves highly unpopular expenditure reductions and (or) tax increases of one form or another, the relatively “stealthier” financial repression tax may be a more politically palatable alternative to authorities faced with the need to reduce outstanding debts.”
http://www.psyfitec.com/2012/01/how-sneaky-governments-steal-your-money.html?
There are above board taxable accounts and below board taxable accounts. Tax deferred is to accounts as jumbo is to shrimp, they are taxed while one is asleep whether awake or resting. See buying groceries, paying utility bills, insurance etc.
this year compared to last and the year before.
"The beauty of these measures, from a politician’s perspective, is that they’re not obvious to the general public.."
And so institutionalized, a targeted 2% debasement in normal times plus negative real interest rates, whatever more in New Abnormal times, they aren't even obvious to politicians. The serruptitious is _taken_ for granted, not even a silly season talking
point or debate topic by candidates deemed 'serious' and serious only to those deemed fringy wackjobs. As a saver and investor one will find the point is nonfrivolous over time
as contrasted with The Issues of The Day which invariably are shown to be in the fullness of time synonymous with forgotten for good reason.
Former TreasSec John Snow? You can't make this stuff up.