taxable vs. tax-exempt in a roth ira

#6 06-28-2007, 05:03 PM

On Jun 27, 4:30 pm, "catalpa" <cata...[at]entertab.org> wrote:
- quote -

> High risk investments don't belong in an IRA.

I don't follow, please explain. Are you suggesting that mid and small-
cap value investments should not go into a tax advantaged account
also?

I can see how one might want to put high risk investments in a taxable
account so that the losses can be realized, but then so are the gains.
I'm being a bit dense today, please clarify.

Thanks

#5 06-27-2007, 11:46 PM

catalpa wrote:
- quote -

> High risk investments don't belong in an
> IRA.

Why not? While it makes sense that you may not want to put a
tax-advantaged investment into a tax-advantaged account, I'm sure there
are many non-tax-advantaged mutual funds, not to mention individual
securities, with the same risk as your hypothetical high-return,
tax-advantaged investment. I would guess that these are still
appropriate for IRAs.

-Will

#4 06-27-2007, 09:30 PM

"rick++" <rick303[at]hotmail.com> wrote in message
news:1182969437.179269.175350[at]g4g2000hsf.googlegroups.com...
- quote -

> > Don't hold any tax advantaged investment in a tax advantaged account.
> > This is true of either Roth IRA or regular IRA.
> If it had a higher return than a taxabIe investment I would.
> However nearly all of the tax advantaged investments I am aware
> pay out less as a taxable investment for the same asset class.

Be very careful about only focusing on returns. If a tax advantaged
investment has a higher return than a taxable investment in the same asset
class it has a much higher risk. High risk investments don't belong in an
IRA.

#3 06-27-2007, 06:37 PM

- quote -

> Don't hold any tax advantaged investment in a tax advantaged account.
> This is true of either Roth IRA or regular IRA.

If it had a higher return than a taxabIe investment I would.
However nearly all of the tax advantaged investments I am aware
pay out less as a taxable investment for the same asset class.

#2 06-27-2007, 05:19 PM

Pete wrote:
- quote -

> just double checking but isn't it correct that if one has funds in a
> vanguard taxable money-market (ie. VMMXX) fund in a roth ira, since
> there are no taxes if held 5 years and after 59.5 years, it makes no
> difference versus a tax-exempt money-market (ie. VMSXX) ?

Pete-
As someone else already posted, you should never hold a tax-exempt
investment (such as a municipal bond, or a tax-exempt municipal
money-market fund) within a Roth IRA.

"Tax exempt" means that the interest you receive each year isn't taxable
on your federal or state tax return. But all interest earned from the
investments in a Roth IRA is free from tax, regardless of what type of
investment it comes from. And whether a Roth IRA withdrawal is taxed or
not has nothing to do with the source of the income within the IRA --
it's based only on the rules for Roth distributions.

So there's no benefit to earning tax-exempt interest within a Roth, and
in fact there' a penalty...tax-exempt rates are always lower than
taxable rates, so you should to for the higher-interest (taxable)
alternatives.

-Tad

#1 06-27-2007, 04:09 PM

On Jun 27, 5:13 am, "Pete" <p...[at]te.cn> wrote:
- quote -

> just double checking but isn't it correct that if one has funds in a vanguard taxable
> money-market (ie. VMMXX) fund in a roth ira, since there are no taxes if held 5 years
> and after 59.5 years, it makes no difference versus a tax-exempt money-market (ie.
> VMSXX) ?
> since this is in a roth ira, there's no issue about the tax either way, so it's only a
> matter of better return in one money-market account versus the other?
> or is there something else to be aware of?

Don't hold any tax advantaged investment in a tax advantaged account.
This is true of either Roth IRA or regular IRA. In a Roth you will
not be taxed with you withdraw your funds for retirement. In a
regular IRA funds from a taxable MMF or a tax exempt MMF will both be
taxed the same way.

06-27-2007, 01:18 PM

Pete wrote on [Wed, 27 Jun 2007 07:13:59 -0500]:
- quote -

> or is there something else to be aware of?

Not really.

#-1 06-27-2007, 12:13 PM

just double checking but isn't it correct that if one has funds in a vanguard taxable
money-market (ie. VMMXX) fund in a roth ira, since there are no taxes if held 5 years
and after 59.5 years, it makes no difference versus a tax-exempt money-market (ie.
VMSXX) ?

since this is in a roth ira, there's no issue about the tax either way, so it's only a
matter of better return in one money-market account versus the other?

or is there something else to be aware of?

Similar Threads
Thread	Forum	Replies	Last Post
IRA taxable vs. non taxable amounts Ignoramus25712: I am in a little bit of a quandary. I have two IRAs, one made before I got married, and one created after that. The problem is that the money...	Financial Planning	14	04-11-2006 04:53 AM
taxable/non taxable dividends qazwsx: using ms money 2005. I am trying to get a report on my stocks showing the total taxable dividends and the total non taxable divinends in two...	Microsoft Money	1	07-03-2005 08:26 PM
Does the 5-year wait period still apply in Roth conversion after age 59.5 or 70.5 and a question of how many days you have to roll from trad IRA to Roth. David Jensen: Does the 5-year holding period still apply in a traditional IRA to ROTH IRA conversion if you do so after age 59 1/2? What about if done after age...	Taxes	1	03-25-2005 04:28 AM
Roth IRA Conversion - What amounts are taxable in the conversion year. David Jensen: If one converts an Sep-IRA to a Roth IRA and the Sep-IRA contains growth from dividends that were classed as "return of capital" and therefore not...	Taxes	11	01-24-2005 05:07 AM
414H Taxable or Non Taxable MArk Ronald: Hi my wife is a buffalo public school teacher and i'm doing our taxes this year. I'm using the taxcut software and in box 14 there is an amount...	Taxes	4	02-10-2004 03:30 AM

Thread Tools
Show Printable Version Email this Page
Display Modes
Linear Mode Switch to Hybrid Mode Switch to Threaded Mode