U.S. CitiesCity-Data Forum Index
Covid-19 Information Page
Go Back   City-Data Forum > General Forums > Economics > Personal Finance
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 08-13-2016, 12:32 PM
 
5,051 posts, read 6,114,715 times
Reputation: 2566

Advertisements

If you are allowed to voluntarily put aside more of your income into a tax sheltered account, but that account has very limited and mediocre investment choices, what would you choose?

Tax sheltered account can save you money in current taxes, but you still have to pay the tax later in retirement.

If you keep the money in taxable account, you can get much better investment results from all the investment choices out there. There is also no restriction about withdrawal.

I know an obvious reply would be it depends on how bad the tax sheltered account investment choices are, and how capable you are in choosing investment among all that are available in a taxable account. But in general, what's your take?
Rate this post positively Reply With Quote Quick reply to this message

 
Old 08-13-2016, 02:28 PM
 
Location: Santa Rosa
486 posts, read 705,251 times
Reputation: 497
When do you need the money? If only for retirement I would put it in the tax sheltered account since that money doesn't count for finicial aid and is protected from bankruptcy. There is also a chance that you could roll the money over to a different company in the future with better investment choices.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 08-13-2016, 03:51 PM
 
Location: Florida
5,181 posts, read 4,551,380 times
Reputation: 5382
taxable
Rate this post positively Reply With Quote Quick reply to this message
 
Old 08-13-2016, 03:59 PM
 
21,434 posts, read 15,594,021 times
Reputation: 16687
I wouldn't find a Roth and put the money into a money market
Rate this post positively Reply With Quote Quick reply to this message
 
Old 08-14-2016, 08:55 AM
 
Location: Forests of Maine
32,101 posts, read 52,273,165 times
Reputation: 21640
Our investments have been strictly in non-passive activities. They build equity every month and due to depreciation they are in the red every year. That 'red' or loss carries over to provide tax-sheltering for my salary income.

The tax sheltering of our investments shelter my salary from income tax.

The ROI tends to be pretty good, but it is a little complicated to figure on paper. As most of the money going into each is sourced from tenants and not from me. Other people pay us from their salaries to build our equity and to shelter my salary from tax.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 08-14-2016, 12:35 PM
 
5,051 posts, read 6,114,715 times
Reputation: 2566
Quote:
Originally Posted by Lowexpectations View Post
I wouldn't find a Roth and put the money into a money market
Do you mean to write "would've" instead of "wouldn't"?

Quote:
Originally Posted by Submariner View Post
Our investments have been strictly in non-passive activities. They build equity every month and due to depreciation they are in the red every year. That 'red' or loss carries over to provide tax-sheltering for my salary income.

The tax sheltering of our investments shelter my salary from income tax.

The ROI tends to be pretty good, but it is a little complicated to figure on paper. As most of the money going into each is sourced from tenants and not from me. Other people pay us from their salaries to build our equity and to shelter my salary from tax.
Thanks, but I can't figure out your opinion re my question.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 08-14-2016, 12:57 PM
 
Location: Forests of Maine
32,101 posts, read 52,273,165 times
Reputation: 21640
The OP builds an artificial box and then makes assumptions that are confined within that box. It assumes that your only choices for investing are: tax-sheltered investments of low ROI, and fully taxable investments that perform better.

I guess this box and it's assumptions make sense if the investor insists on only using passive investments.

I am not big on passive investments, so I have not paid income taxes in a long time. As such I find it difficult to advise anyone on how to perform while they stand inside such a box.

Trying to guess what tax bracket you will be in somewhere in the future is likewise difficult. Tax brackets change.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 08-16-2016, 11:30 PM
 
365 posts, read 421,079 times
Reputation: 751
Quote:
Originally Posted by snowmountains View Post
If you are allowed to voluntarily put aside more of your income into a tax sheltered account, but that account has very limited and mediocre investment choices, what would you choose?

Tax sheltered account can save you money in current taxes, but you still have to pay the tax later in retirement.

If you keep the money in taxable account, you can get much better investment results from all the investment choices out there. There is also no restriction about withdrawal.

I know an obvious reply would be it depends on how bad the tax sheltered account investment choices are, and how capable you are in choosing investment among all that are available in a taxable account. But in general, what's your take?
Just as an aside:

Point 1: There are tax managed mutual funds and index funds that throw off relatively few capital gains or dividends out there. Also remember qualified dividends and long term capital gains get preferential tax treatment.

Point 2: Taxes in a taxable account only become relevant in your lifetime if your investments throw off dividends or distributions (in part mitigated by point #1 above) and as mentioned what is generated will likely be taxed below your marginal rate (unless you are really well off and start hitting the Obama surcharges). And you can avoid actual taxation of the your own capital gains simply by not selling. As in your heirs will get the stepped up value at the time of your death.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 08-18-2016, 08:08 PM
 
17,576 posts, read 9,823,481 times
Reputation: 31572
Quote:
Originally Posted by snowmountains View Post
If you are allowed to voluntarily put aside more of your income into a tax sheltered account, but that account has very limited and mediocre investment choices, what would you choose?

Tax sheltered account can save you money in current taxes, but you still have to pay the tax later in retirement.

If you keep the money in taxable account, you can get much better investment results from all the investment choices out there. There is also no restriction about withdrawal.

I know an obvious reply would be it depends on how bad the tax sheltered account investment choices are, and how capable you are in choosing investment among all that are available in a taxable account. But in general, what's your take?
If this "sheltered account" is a 401(k), that happens all the time. Tons of people have lousy choices in their 401(k) plan. When you leave that job, you roll it into an IRA brokerage account. You can do anything you want with it there. Using Vanguard gets you the lowest fees for index funds.

I've been pushing $2K/month into RGACX for the last year+. It's a very high fee fund but the others I have to pick from are even worse. The financial services industry feeds on smaller companies that don't have the savvy to insist on a good mix of low fee index funds. The employees get porked.
Rate this post positively Reply With Quote Quick reply to this message
 
Old 08-18-2016, 10:52 PM
 
5,051 posts, read 6,114,715 times
Reputation: 2566
Quote:
Originally Posted by usagisan View Post
Just as an aside:

Point 1: There are tax managed mutual funds and index funds that throw off relatively few capital gains or dividends out there. Also remember qualified dividends and long term capital gains get preferential tax treatment.

Point 2: Taxes in a taxable account only become relevant in your lifetime if your investments throw off dividends or distributions (in part mitigated by point #1 above) and as mentioned what is generated will likely be taxed below your marginal rate (unless you are really well off and start hitting the Obama surcharges). And you can avoid actual taxation of the your own capital gains simply by not selling. As in your heirs will get the stepped up value at the time of your death.
I should clarify, it's meant to be extra salary reduction (voluntary), so the main tax concern is not capital gains or dividends, but the income tax

Quote:
Originally Posted by GeoffD View Post
If this "sheltered account" is a 401(k), that happens all the time. Tons of people have lousy choices in their 401(k) plan. When you leave that job, you roll it into an IRA brokerage account. You can do anything you want with it there. Using Vanguard gets you the lowest fees for index funds.
Agreed, should always remember the options of rollover and conversion upon leaving the job (though if the "end" is not in sight it won't help much ).
Rate this post positively Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Economics > Personal Finance
Follow City-Data.com founder on our Forum or

All times are GMT -6.

© 2005-2020, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Contact Us - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37 - Top