- quote -

If your income is below the Roth IRA limit, that is a better
choice than #2, since all earnings inside a Roth are
tax-free, not tax-deferred. Right now, the non-IRA
investment may well be the best choice; however, tax laws
can change (there was a time not so long ago when all
long-term capital gains were taxed at 28% unless you were in
a lower tax bracket).

If you are in a 15% or lower tax bracket, and you have IRA
balances, you could convert some or all of the IRA to a
Roth; then even if your tax rate increases in the future,
you've got some investments in a tax-free account.

--
Thomas E Healy, CPA, PC
1650 38th St., Ste 202W
Boulder, CO 80301
Please send email to: tom[at]tomhealycpa.com, since I block all email at my
newsgroup address.
phone (303) 443-1804
fax (720) 489-3772

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I am trying to figure out if there are easy heuristics with
respect to the question of better returns - for the exact
same kind of stock/bonds mix investment:

1) 401K,
2) non-deductible IRA,
3) non IRA investment account

Both capital gains and dividends are now taxed at a max 15%
rate (will apply to #3 above)

Income tax can be 28% or higher, and applies to all funds in
#1 above, and all gains in #2 above.

Does this make #1 and #2 obsolete now, and so we should keep
our money in #3?

#1 still seems it might be better in the long run since
pre-tax money is used, and compounding of that money each
year might be better.

#2 seems not that useful - the initial deposit is taxed,
only the gains compound tax free yearly.

I understand that this is a very tricky question, so please
feel free to reply adding any assumptions you want to make,
if a general reply is not possible.

Thanks!

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