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Volvagia
LSU Fan
Baton Rouge
Member since Mar 2006
41499 posts

re: Contribute to an IRA or not

Should be noted however that depending on his situation, a taxable may be preferable.

If he is going to be pulling a lot in retirement, the 15% long term capital gains would be less than income taxes.


slackster
LSU Fan
Houston
Member since Mar 2009
6942 posts

re: Contribute to an IRA or not
quote:

Should be noted however that depending on his situation, a taxable may be preferable. If he is going to be pulling a lot in retirement, the 15% long term capital gains would be less than income taxes.


Meh, that's assuming you only experience the long-term gains once throughout owning the asset. It's also unlikely that long-term gains will maintain their luster in the future, IMO.


Spirit of Dunson
Columbia Fan
Member since Mar 2007
21898 posts

re: Contribute to an IRA or not
Thanks for the advice. I will continue to contribute to the company 401k and a traditional IRA.

Question about 401k's:
What is the max annual contribution to one?
Does a company match and independent contribution count toward that limit?
Should I contribute beyond the company match amount?


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Volvagia
LSU Fan
Baton Rouge
Member since Mar 2006
41499 posts

re: Contribute to an IRA or not
quote:

Meh, that's assuming you only experience the long-term gains once throughout owning the asset. It's also unlikely that long-term gains will maintain their luster in the future, IMO.


Image: http://i1.kym-cdn.com/photos/images/original/000/173/576/Wat8.jpg


You obviously are not a buy and hold investor then....and would shake your head at my index ridden portfolio.


slackster
LSU Fan
Houston
Member since Mar 2009
6942 posts

re: Contribute to an IRA or not
quote:

You obviously are not a buy and hold investor then....and would shake your head at my index ridden portfolio.


Not saying that at all. I'd advocate buying and holding as well. However, in my experience, most people do NOT do this in taxable accounts. Also, people tend to be more apt to use funds that are in a taxable fund before retirement due to the accessibility of said funds.

Nice meme though.


highcotton2
Auburn Fan
Alabama
Member since Feb 2010
2220 posts

re: Contribute to an IRA or not
quote:

So, should we still contribute to a traditional IRA even if we can't receive any tax benefit for doing so? Is there any benefit to this situation?


Why can you not recieve a tax benefit? I contribute the maximum for my wife and I and deduct it from my taxes. There is no income limit.

Never mind, I see where there is a limit if both spouses work.
This post was edited on 6/5 at 7:37 pm


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lsu13lsu
LSU Fan
Member since Jan 2008
2541 posts

re: Contribute to an IRA or not
quote:

Tax deferred growth. That's kind of a big deal.


Broke, if someone contributes to a traditional IRA and does not get to take the tax deduction because of high income, how is this tracked so that when it is withdrawn it is not taxed again?


Volvagia
LSU Fan
Baton Rouge
Member since Mar 2006
41499 posts

re: Contribute to an IRA or not
quote:

However, in my experience, most people do NOT do this in taxable accounts. Also, people tend to be more apt to use funds that are in a taxable fund before retirement due to the accessibility of said funds.


I can see this, but I did precede the statement with a "limited situation" qualifier. People who make so much money that they either are illeligible for or have already maxxed out tax advantaged contributions seem the most unlikely to feel the need to break into a taxable account.

Their paychecks are giving them enough for whims.

However, that isn't what you said originally.

You said that long term gains lose their luster over time.

How?


slackster
LSU Fan
Houston
Member since Mar 2009
6942 posts

re: Contribute to an IRA or not
quote:

How?


Long-term gains tax rates, specifically for high-income earners, is one of the tax breaks that is on the forefront of tax reform. Obviously it is impossible to know what your income tax rate will be in the future as well, but I think we will see a rise in the long term gains tax rates in the next decade.


Volvagia
LSU Fan
Baton Rouge
Member since Mar 2006
41499 posts

re: Contribute to an IRA or not
True....

But the gains aren't realized until they are sold, which in this case would be in retirement, which would have lower income.


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Dreamweaver
Member since Aug 2011
49 posts

re: Contribute to an IRA or not
I'll answer that for you, it's tracked on IRS Form 8606. It's called your "basis" in the IRA, this has no relation to cost basis. When you withdraw funds from the IRA, a pro-rata portion of the withdrawal will not be considered taxable and that amount will go to reduce your basis, until eventually you use us all the basis.


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