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Eli Mitcham speaks out on common
financial planning concerns. Information provided here is meant to be general in
nature and should not be construed as a solicitation to
effect transactions in securities, or the rendering of
personalized investment advice for compensation, over
the Internet.
Disclosure to Consumers
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- How to Leverage your IRA
- Don't Make this Mistake with Your IRA
- Particulars of the Stretch IRA
- Missed Your RMD? Better Get out your checkbook
- What to Do if your IRA is the bulk of your estate?
- Which Investments are best for your IRA?
Filled with Timely Tips to help you get the most out of your finances!
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Which Investments are best for your IRA? The latest tax law change has reduced the long-term capital gains tax and the tax on qualifying dividends to 15%. However, interest income, nonqualified dividends, and short-term capital gains will still be considered ordinary income and therefore taxed as high as 35%. In light of these changes, you may want to reevaluate which of your investments should be in your IRA and which ones should be held in taxable accounts. The IRS considers all distributions from your IRA as ordinary income and therefore taxed as high as 35%. On the other hand, withdrawals from a taxable account might be treated at the more favorable 15% rate if they are qualifying dividends or long-term capital gains. Based on these numbers, you could conclude that you would be better off putting bond funds in your IRA and stock funds into a taxable account. But the answer may not always be that simple. Suppose that you own a stock fund in a taxable account, and the manager trades frequently and creates short-term gains? The gains will be passed on to you and taxed at the ordinary income rate. Therefore, in this case, a stock fund held in a taxable account, was not tax efficient. Would you be better off holding it in an IRA? It's possible; especially when you consider that the tax deferral within an IRA can enhance the compounding of the earnings. But there is another point to consider. If the fund is held in a taxable account it will receive the step-up in basis when you die. This will eliminate any capital gains tax that your heirs would pay on your investment's accumulated profit. In addition, you can deduct losses within a taxable account yet cannot for an IRA. Saving money on taxes is certainly important, but you need to take your full financial picture into consideration before making any decisions. If you are not sure whether your investments are making the best of the recent tax changes, let's set up a time to talk. If you would like to meet either in person or by telephone, or simply would like to receive my free "IRA Guide", please use the CONTACT US link and let me know. I look forward to meeting you!
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