Gary wrote:

- quote -

An employer offering the IRA rollover to their 401(k) is likely to only
accept a transfer of untaxed money. I understand your question/concern,
but I do know that you must track your nondeductible IRA deposits
through the life of the accounts, and my suggestion on how to 'hide' the
pre-tax money is the only way I've seen to avoid having a huge tax hit
when converting to Roth, now, or in 2010.
I'm certainly interested in hearing others' comments on this approach.
JOE

Will Trice wrote:
- quote -

Yes, a person has a choice of stocks, bonds, or stock options within
IRAs. I meant investing outside of an IRA or 401k where you may have to
pay a tax if you realize a gain. Long term capital gains and dividends
may be taxed at a lower rate than earned income or withdrawals from a
non-Roth IRA or a 401k.

--
Ron

Ron Peterson wrote:
- quote -

Just to clarify, most regular investments are available within IRAs.

-Will

- quote -

I second that. A rule of thumb is that if you consistantly save and
invest
between 15% and 20% you''ll meet most of your "big ticket" needs
like your college education, a home down payment,
your children's education, and retirement.
You first want to put this savings into tax-advantaged places.
But dont let the regulated amounts be a ceiling on what you save.

dapperdobbs wrote:

- quote -

Good point. There is no way to know what tax rates will be in the
future so it makes sense to spread your investments among the various
vehicles including regular investments, Roth IRA, and 401k's.

--
Ron

Sgt.Sausage wrote:

- quote -

The article appears to be mostly bunk (although with some vaild points),
though we've discussed this before. His main point seems to be that he
doesn't like the use of core CPI. Great. Most people here do not quote
the core CPI (I don't think). Certainly food and fuel figure into my
personal inflation.

-Will

Sgt. Sausage wrote:
- quote -

coat-hanger in the window of his car. [Guy walks up, says "Lock your
keys in your car?" Answer: "Nah. I just washed it, I'm getting ready to
hang it up to dry."])

I read most of the article, and noticed something about how foreigners
seem to be pouring money in UST issues. Seems to me that may be a
flight to quality, and I wonder how the strongest economy (ours) is
going to turn into the "dollar crash" basket case the guy describes -
the facts he gives seem to contradict themselves, in that respect.

There's some truth in everything ... I've wondered about CPI in the
face of rising home prices, and concluded the CPI is different for
those who own homes already, and those who do not own homes already.
Believe me, there is a difference. And it depends on where one lives.
And what one eats. The age of one's kids. One's own age.

Back to the CPI "basket" computation, eventually I'll get around to
look what they include in it, how they mix it, and so on. A few years
ago, the price of butter went through the roof, doubling within a few
months. I wrote the American Dairy Association - some secretary handed
me manure about how rising prices for ice-cream and yogurt drove up the
price of milk which drove up the price of butter. Problem is, the price
of ice-cream and yogurt remained unchanged during that time. So I
figured some "smart" dairy farmers decided they wanted a piece of the
million-dollar-paycheck, too. Maybe I'm wrong, but I still think there
was something funny going on with the price of butter.

- quote -

also needs better examples. For example, the arithmatic vs geometric
calculations within the index is leaving me hanging.

OTOH, the cases about substitutions, hedonics and few other subjects
made great sense.

"Sgt.Sausage" <nobody[at]nowhere.com> wrote:

- quote -

I read it. All of it. It was one of the best examples of the use of logical
fallacies that I have ever seen. I recommend it for anyone interested in
critical reading.

The government may or may not be deliberately understating the CPI. But he does
not make the case.

-- Doug

"Douglas Johnson" <johnson[at]classtech.NOTPARTOFADDRESS.com> wrote in message
news:kh5ke2hkle8n59g592r813ic62nr3ph493[at]4ax.com...
- quote -


- quote -

Here's your sign:

http://www.financialsense.com/stormwatch/2005/0624.html

Read it. All of it. It's an eye-opener if you thought your
Uncle Sugar was looking out for you by keeping inflation
rates low. They're not low. Uncle Sam's lying to you.

CAUTION: As with everything, take it with a grain of salt
The Internet's full of nutcases and cuckoos. Do your own
research, keep your own data, but most importantly: Make
an *informed* decision. Do not simply accept the numbers
thrown out to the public by a government with an inherent
conflict of interest in reporting the actual, real numbers. Do
not simply accept the information at the above cited link.
Use your own observations and you're own brain. It's the
only way to go.

BreadWithSpam[at]fractious.net wrote:

- quote -

All of this is true. In my case, if I were to start liquidating my
holdings today in a manner that didn't throw me into the next tax
bracket, my taxable account would beat the pants off of a non-deductible
IRA. Of course, I don't rebalance, I don't buy mutual funds in IRAs or
my taxable account, I don't need the psychological advantage, I'm not
sending anyone to college (yet), and I like not having my money tied up
in case I need it to invest in a small business or use for catastrophic
emergencies.

-Will

rick++ wrote:

- quote -

I can understand your view, though I don't necessarily agree (with the
tax breaks part, I agree with the saving part). Nevertheless, neither
the non-deductible IRA nor the taxable account generate tax breaks "at
the moment."

-Will

jIM wrote:
- quote -

Just so.

- quote -

Taking Woessner's situation as an example, let's say he's deciding on
where to put $4000 after-tax, either a non-deductible IRA or plain
vanilla taxable account. He invests in an S&P 500 index that grows 10%
every year and throws off 2.5% in long-term capital gains and/or
qualified dividends each year. His starting and ending income tax rates
are the same and if he's in the 15% income tax bracket, then his
long-term capital gains / qualified dividends tax rate is fixed at 5%,
otherwise it is fixed at 15%. After 28 years, he begins drawdowns and
is very conservative with his assets such that they grow at 0% once he
retires. These drawdowns are taxed at his income tax rate regardless of
whether they came from the IRA or the taxable account (since he will
generate some short-term gains, we'll jut call all the final gains
short-term). So for various income tax rates he'll have the following
final after-tax withdrawal amount:

Tax rate IRA taxable account
15% $49031 $55314
25% $43263 $51572
35% $37495 $51231

As always, check my math, I've gotten busted several times here...
-Will

I think we are splitting hairs here.
Tax rates have changed significantly the past 30 years
and they will change again. For example, capital gains
was taxed at the same rate as earned income from
1986 (Reagan) to 1994 (Clinton). The maximum tax
bracket been between 50% and 28% that period;
currently 35%.

http://www.truthandpolitics.org/top-rates.php

The important thing is to save steadily and take advantage
of any apparent tax breaks at the current moment.

Joe:

Early in IRA days I had two separate accounts: before-tax and
after-tax. Then the government decided that all IRA balances were to
be dealt with as a single amount. At that point I joined the balances
together. All withdrawals (in my case, MRDs) are on the merged
amount. How will you be able to transfer only pre-tax money into a
401k? From the government's point of view, you will have transferred
an amount, some proportion of which is pre-tax, some after-tax.

On Tue, 22 Aug 2006 09:35:28 -0500, joetaxpayer
<joetaxpayer[at]nospam.com> wrote:

- quote -

On Tue, 22 Aug 2006 10:08:04 -0500, "jIM" <noreplysoccer[at]hotmail.comwrote:


- quote -

The tax rates for long-term capital gains and qualified dividends in a
taxable account are capped at 15%. Thus the higher one's marginal
rate, the greater the savings.

For taxpayers who are already in the 15% marginal bracket, LTCG and
qualified dividends are taxed at 5%. Thus for all marginal tax
brackets there is a savings. (This assumes no problems with
Alternative Minimum Tax.)

-HW "Skip" Weldon
Columbia, SC

Bill -

What would you do with the after-tax money if you did not put it into
savings for retirement? Especially if you want to vacation your
retirement, it would seem that although government incentives may help,
you want your spreadsheets and plans to indicate planned lifestyles and
savings necessary.

I know very little about IRA's and 401k's and Keogh's - one thing I do
know is, referring to the subject of overall returns, there are (were
when I looked) limitations on the types of investments you can make in
an IRA (and of course the tax rates on withdrawals, which enable you to
convert long-term capital gains into ordinary income ;-). Your income
tax bracket in retirement may not be low.

woessner[at]gmail.com wrote:
- quote -

Bill,
It sounds like you're talking about a "72(t)" distribution plan. That's
the tax code section allowing these early withdrawals, if you take
"substantially equal periodic payments".

This isn't an easy topic to summarize...if you google those terms you'll
find all sorts of lengthy explanations and this calculator from the CCH
site, which will give you a sense of how much you might access at
different ages:

http://www.finance.cch.com/sohoApplets/Retire72T.asp

-Tad

jIM wrote:

- quote -

Then my point was moot for you. Mostly. The earnings, which for you may
or may not be significant, are taxed at conversion. So you may be 80/20
the other way, only having a bit taxed. Me, I had a pension cash out
which rolled into an IRA. Either way, my point above was important to
not overlook.
JOE

woessner[at]gmail.com wrote:
- quote -

I THINK it's because in a traditional IRA, it is withdrawn and taxed at
ordinary income tax rates.

If in a taxabale account, it is taxed at capital gains rates, which are
(usually?) lower than income tax rates. I think for higher tax
brackets, this becomes more true. I would be interested in seeing
someone run some numbers with various tax brackets on this.