It’s possible but if you’ve had significant gains, you also have to factor in what gains would have been lost by not investing that extra 20% a year in tax savings originally. I agree there could be limited circumstances where it does t come out ahead, but to me, taxable only makes sense when you want money prior to 59 1/2.No, 123 can be right. There is a lot hidden in the unrealistic assumption that tax bracket stays the same in this logic. Here, the original poster wants to take a large withdrawal out of an IRA to buy a house and will need to pay at the maximum tax bracket to do so. It may well have been cheaper to pay income taxes 20 years ago in a significantly lower bracket and then capital gains taxes now.I think he’s missing that because the income taxes wasn’t paid upfront, there’s no loss when it’s paid now. Yes, you’re paying the tax but you’re also paying it in a taxable account, too… you just pay it upfront. But then you also pay capital gains.I'm sorry, but you have it exactly backwards. Tax-deferred accounts don't rob you of the capital gains treatment of stock investments. They let you get away without paying capital gains tax on the gains at all. The income tax has nothing to do with that -- whether you use taxable account or a tax-deferred account, you are eventually paying the income tax, and that will be the same fraction of the account whether you do it on the front end or the back (assuming your tax bracket stays the same before and after, of course). Only the tax-deferred account lets you avoid the capital gains tax, though.Diligent savers can often accumulate higher after-tax level of assets by avoiding tax favored accounts (except for Roth). Tax deferred accounts rob you of the capital gains tax treatment of stock investments since all the gains get taxed as regular income. And taxable accounts don't have RMD issues. However few people will have the discipline to grow and maintain sizeable taxable accounts. Just about everyone succumbs to the siren call of "save money on taxes" by contributing to tax-deferred retirement accounts.
The tax on a distribution from a tax deferred account is really the tax on the income you didn’t pay upfront. It’s not an extra income tax.
For most people, in most situations, IRAs are better. But by the time you get to $7MM of assets it makes sense to have some money in brokerage accounts too, if you can. Too late for this poster, unfortunately.
Statistics: Posted by gtrplayer — Fri Jun 07, 2024 5:09 pm