You've confused a Roth and Traditional IRA as far as taxes go.

To correct another poster, many people can't deduct their
contributions to a Traditional IRA, so there's zero tax
advantage to them over a Roth during the contribution phase.

Finally, while you would be happier if you could use capital
losses to off-set your IRA withdrawals, what you've
forgotten about the accumulation stage of your IRA is that
it grew for years and years w/o paying a dime in taxes. Had
you invested the same money in a non-tax deferred account,
and had paid taxes on gains every year while it grew, the
ending balance would be substantially smaller than that
achieved by your IRA in the very same investments.

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<snip> ------------------------------------------------------------
- quote -

From www.glock.com:

"The main advantage of the GLOCK "Safe Action" system is
that is has no external safeties. Because of this, the user
can fully concentrate on the tactical tasks required whilst
being in a stress situation and does not need to think about
any safeties to be deactivated."

Hank Murphy
speaking only for myself

================================================== ==========
Moderator:
Thank you, Hank. A Luger was used in the original joke.
However, some people around here thought a Luger was
out of date. So I alternated between a Glock and a Uzi.
But an Uzi is probably to large to be under a pool.
================================================== ==========

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shagnasty wrote:

- quote -

First, you are still working? (grin) Thought you were
retired.

Anyway, GMTA. I love the ROTH's and recommend them
wholeheartedly to clients who qualify. My corporation
funds my SEP-IRA for the 25% on my greatly reduced pay these
days, so some little amounts gets tax deferred to the days
and years ahead when I won't even have to file a 1040.
However Alabama will still take a piece of my action.

ChEAr$,
Harlan Lunsford, EA n LA
Tue 8 Mar 2005

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D. Stussy wrote:

- quote -

And I never said differently. <grin
Actually, ANY comments about the wisdom of making an IRA
contribution are simply "opinions" (not "facts") because no
one knows what Congress may do in the future. Any such
"opinion" is only as good as the assumptions and
speculations upon which it is based.

Note, for example, that now even Alan Greenspan is
advocating at least a partial shift to some form of
"consumption" tax. Such a shift would generally be
detrimental to the concept of Roth IRAs, since the amount of
income tax that you stand to avoid in the future will
inevitably be reduced. In my "opinion" a Roth only makes
sense (when compared to a traditional IRA) if you are
relatively certain of being in a HIGHER tax bracket when you
retire.

In you (or anyone) chooses to disagree with my opinions,
that is certainly your right. But please try to "prove" that
your crystal ball is any better than mine. <grin
MTW

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Barry Margolin wrote:
- quote -

Sorry, Barry, but that is exactly what he said. He said he
would have been better off if he hadn't opened the IRA but
invested the money in a taxable account. My point was, if
he had done that, he probably would not have invested the
funds in the same type investments he had in the IRA.
People tend to be more conservative with there IRA
investments, in general. He probably would have taken on
more risk had he not had the IRA and may have wound up with
even bigger losses.

--
Alan
http://taxtopics.net

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C.G. tax rates have yo-yo'd several times since the 1970s.
Carter cut them, Reagan raised them, Clinton lowered them.
Hard to say what things might be like after the next "tax
simplification" the administration it touting.

The conventional wisdom is diversification to protect
against tax law changes. Go for the "easy wins" like 401K
matching. Maybe save some in other kinds of accounts beyond
that.

---------------------------- Moderator:
Whenever someone says "tax simplification", I reach under
my pillow and click off the safety catch on my Glock.
-----------------------------
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"MTW" <mtwingcpa[at]yahoo.com> wrote:
- quote -

more income than I need for living expenses and am over 70½
so I can't take a traditional IRA. I could use the extra
money to pay on my mortgage, but I can deduct the mortgage
interest. I can, instead, put it in a Roth IRA and earn
about the same interest rate as my mortgage rate with an ETF
( symbol TIP) (Treasury inflation Protection). The interest
income would be tax free. The interest expense is tax
deductible.

I didn't contribute to my 2004 IRA last year, so this yaer I
can contribute $ 7000--for 2004 and 2005 both. I've just
written the check for the 2004 contribution to a broker,
Brownco, that only charges $ 5.00 for the purchase of TIPs.

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"Vic Dura" <vpdura[at]XXXhiwaay.net> wrote:
- quote -

What would be the advantage of having put your money in
something other than a Roth IRA? If you have gains on the
Roth IRA you have no capital gain to offset those losses.
But if you had the same gains outside of the Roth IRA they
would use up your capital loss carryover quicker, which
would be of no value whatsoever and would give you no extra
capital losses at all and would decrease the period you
could take those $ 3000-per-year carry forwards.

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MTW wrote:
- quote -

......Only to pay more taxes (i.e. higher rates) in the
future when the distributions occur.... [We are in a period
where the federal rates are low as compared to their
history, and with our current deficit, taxes will probably
have to go up in the future.] What you're doing is
deferring taxes. With a Roth IRA, one is avoiding taxes on
the investment (as contributions are already post tax).

- quote -

That does make comparisons more difficult, but not impossible.

- quote -

Suzy Orman (from MSNBC, who was on PBS this weekend) who
advise just the opposite, as contributions can be withdrawn
tax-free at anytime after meeting the 5-year holding period
for the account. [I'm not necessarily supporting her
ideas.]

By converting my IRA back in 1998, I estimate that if I were
to withdraw the whole thing today, I would have saved myself
about $12.5k in taxes than if I had left it as a traditional
IRA with non-deducted contributions (disregarding any excise
taxes for not being 59.5 yet). [Yes, I did take a couple
hits in 2001, but I had other investments in the IRA that
grew in that period too.]

In this case, Congress were the "boneheads" - they got taxes
collected for the conversions but AT THE PRICE of never
collecting anything on the future profits of the IRAs
converted. Maybe they simply figured that much of the
public doesn't know how to manage their finances (and that
my results are the exception). Look at the windfall that
was generated off the TRA'86 when personal (credit card)
interest became non-deductible.

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"A.G. Kalman" <glendale202-mtm[at]yahoo.com> wrote:

- quote -

That's not what he's saying. If his investments in the
taxable account didn't pay dividends then he never has to
pay taxes until he sells them (well, if they're mutual funds
he may pay taxes as a result of the sales within the fund).
And when he does sell, he pays taxes at the capital gain
rate instead of the regular rate.

One issue that hasn't been mentioned, though, is what tax
bracket you're likely to be in when you start taking
withdrawals. One assumption behind the IRA concept is that
your income is expected to drop significantly when you
retire. The result of this is that your tax rate on the
withdrawals should be relatively low, perhaps as low as your
capital gain rate was when you had a regular paycheck.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA

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"tooradical2" <jwgrace99[at]netscape.net> wrote:

- quote -

It depends on what you invested in. If you invest only in
tax-efficient securities (e.g. mutual funds that don't
invest in dividend-producing companies) then you might
indeed come out ahead by investing normally rather than in a
retirement account.

But using a tax-deferred account like an IRA allows you more
freedom in what you invest in. You can invest in companies,
bonds, and mutual funds that pay dividends, and avoid having
to pay taxes on these dividends each year. This leaves more
money for you to invest, so the savings are compounded over
the years. If you do this for long enough, it may make up
for the difference in tax rates.

I think that when Congress created IRAs, the difference
between capital gains tax rates and ordinary income tax
rates was not nearly as much as it is today. So at the
time, it probably didn't take too long for the benefit of
tax-deferred compounding to be realized. Now that capital
gains rates are so low, you may be right that IRAs don't
have much benefit.

But those of us who aren't yet close to retirement can't
depend on capital gains rates staying as low as they
currently are. If they go back up, we might end up ahead
again.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA

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tooradical2 wrote:

- quote -

Before we talk about what is missing, your facts are
confusing. In paragraph 1 you state you have started to take
distributions from a ROTH IRA. In paragraph 2 you state
that you made deductible contributions to a traditional IRA.
Qualified distributions from a Roth IRA are not taxable.
Distributions from an IRA that does not have a cost basis
are taxable at ordinary rates. Which is it? A Roth? An IRA?
or both?

That said, hindsight is great! However, it is highly
likely, that if you never had invested in the IRA where you
made more prudent investments, you probably would have
invested those funds in the same type of high risk
investments that have generated the losses!

Your investment choices in the IRA apparently performed
well. Your investment choices in your taxable account did
not. This does not mean that a decision to have the IRA was
wrong. It means that you should have made better investment
choices in your taxable account.

--
Alan
http://taxtopics.net

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tooradical2 wrote:

- quote -

No, I think you've hit the nail on the head. I have never
been a fan of Roth IRAs because the tax "benefit" is
deferred (and may never be realized). Traditional deductible
IRAs rate higher in my book because at least you are assured
of receiving the tax benefit.

Also, the reduction of capital gain tax rates in recent
years has placed a cloud over the wisdom of tying up money
in accounts that convert EVERYTHING to ordinary income.

Lastly, I would note that just because Congress ALLOWS you
to do something doesn't mean that you SHOULD it. In my
opinion, the Roth IRA was designed by Congress as a
budget-balancing gimmick, and it should generally be avoided
at all costs. <grin
MTW

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"tooradical2" <jwgrace99[at]netscape.net> wrote:

- quote -

The only thing you're missing is that you're crying over
spilt milk. Had you made money on your tech investments,
which I'm sure was your goal, you'd be singing a different
tune.

--
Phil Marti
Clarksburg, MD

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jwgrace99[at]netscape.net (tooradical2) wrote:

- quote -

Well, one thing that's definitely going on, is that you're
mixed up about Roth and traditional IRAs. You start out by
explaining how your withdrawals from your Roth IRA are
creating tax problems for you. That can't be so, since Roth
IRAs (funded by "after-tax" contributions) are free of tax
when you make withdrawals of contributions -- or even all
gains, once you reach the eligible age of 59 1/2.

So it appears you're talking about traditional IRAs, which
-- since you deducted the funding contributions -- are
taxable when you make withdrawals.

Now that's clear, it seems you should look to timing your
withdrawals to best advantage. There is no compulsion to
withdraw until you reach age 70 1/2. So, since your
$3,000-per-year loss carryover will still offset your
regular income, why not postpone taking money out of the
IRAs? Unless you need it to live on, in which case, you have
no choice.

The IRAs can live on, by passing to your spouse or another
heir upon your death. When money is withdrawn, it will
still be taxable -- but maybe at a lower rate for your
beneficiary.

The entire concept of the traditional IRA is that you
postponed taxes on that $2,000 per year (now $3,000 or more,
depending on age) and it grew without taxing the gains ...
until you needed to draw cash at when older and --
presumably -- having a lower tax rate.

Given the dotcom bust and 9/11, you are suffering from the
combination of two unpredictable events which came at the
wrong time, for you.

Sorry 'bout that.

Bill

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<jwgrace99[at]netscape.net> wrote:

- quote -

Well, don't forget that those non-ira capital loss
carry-overs can offset non-ira capital *gains*. Surely you
expect to make some non-ira capital gains in the coming
years? If not, you need to replace that investment advisor.

--
To reply to me directly, remove the XXX characters from my
email address.

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I'm 62, and recently started making withdrawals from my Roth
IRA. I've discovered that IRA's don't seem to work for me.

My investment advisor always told me what a great deal IRA's
are, and I that should contribute to the limit. So I made my
pre-tax contribution for several years. So far so good.

Thing is, my IRA withdrawals are treated as ordinary income
on my 1040. Bad news. I have tons of capital loss
carry-overs from the internet bubble, but I can't use them
to off-set my taxes on my IRA withdrawals, even though both
my IRA gains and my capital lose carry-overs are the result
of common stcok investments. The maximum capital loss I can
use against ordinary income is $3,000 per year. I hope I
live long enough to exhaust my carry-over.

Seems to me I would have been much better off investing my
after-tax money the old-fashioned way, rather than putting
pre-tax money in an IRA. Then I would be able to off-set
realized capital gains with my internet bubble losses. My
current effective tax rate would be MUCH lower.

Is there something going on here that I'm missing....?

John in Oakland

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