"Brablo" <gestureofrespect[at]yahoo.com> wrote:

- quote -

No you don't. You receive a check for $100 dividend, you put
$30 asid to pay the tax on that dividend, and you do what you
like with the other $70. You only have to sell off securities
if you automatically reinvested the dividend, and you don't
have any other source of cash to pay your taxes with. If
you're so short on cash, it might be more advantageous to take
some of your dividends in cash rather than reinvesting them --
this becomes more of a financial planning issue than just a
tax issue.

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***

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"Brablo" <gestureofrespect[at]yahoo.com> writes:

- quote -

Interest/dividends/capital gain distributions are taxed
every year. Any actual share price appreciation is only
taxed when you sell.

- quote -

See above.

- quote -

Dividends and interest absolutely get taxed as ordinary
income every year, regardless of whether or not you trade
the positions.

- quote -

So?

- quote -

Under current law, TRUE.

- quote -

Under current law, TRUE. However, you have to keep in
mind that the person had all those years the use of the
money saved because their taxes were reduced because of the
contribution deduction.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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Brablo wrote:

- quote -

Your dividends, interest and capital gain distributions are
taxable in the year distributed, even if reinvested into
additional mutual fund shares. Trades are taxable to the
extent that there is a gain (sell for more than basis),
regardless of whether they are "exchanged" into different
mutual funds.

- quote -

See #1, same answer.

- quote -

Certain "qualified" dividends will be taxed at either 5% or
15% (depending on other income), but the rest will be taxed
as ordinary income. This is a surprise to you? This is for a
retail/taxable account.

- quote -

Only if you reinvest all earnings and don't keep a cash
account to pay the taxes.

- quote -

TRUE, as long as the Roth IRA has been open for at least 5
years prior to distribution. Withdrawal of contributions can
be done tax and penalty free at any time. No mandatory
withdrawals are ever required, no matter what age you are.

- quote -

FALSE. All withdrawals from a 401K account (usually only
after terminating employment or retiring) are taxed as
ORDINARY income. NO capital gains treatment, except in
certain situations involving employer stock. Withdrawals
before age 59.5 are subject to a 10% penalty. Mandatory
withdrawals (based on life expectancy) are required when you
turn 70.5 or older, unless you continue to work for that
employer.

- quote -

Go to http://www.fairmark.com and get all the answers.

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Brablo wrote:

- quote -

Given the S&P was 1455 then, and 1380 now, even with
dividends, many people are just breaking even from purchases
back then. You must have chosen well.

- quote -

Any dividend distributions and cap gain distributions from
mutual funds are taxed the year they are distributed. Then
when you sell the mutual fund you may have a gain or loss
and that's taxed accordingly.

- quote -

No different at a bank or broker. Banks offer mutual funds,
brokers offer CDs, the taxation depends on the product not
the institution.

- quote -

If you are long term, only the distributed dividend/ cap
gains from the fund are taxed, as I stated for (1). The
appreciation of the fund itself isn't taxed until you sell
it. You can pay the tax out of the distributions, you
wouldn't have to sell any fund shares.

- quote -

TRUE. (it was already taxed the once upon earning it, no
further tax)

- quote -

FALSE - The money is taxed as ordinary income as it's
withdrawn, you do not have to take it all out at 59.5. The
presumption is that the withdrawals will be spread over the
person's remaining lifespan. (of course the choice is still
yours)

- quote -

The Roth will always beat the 'retail' account, as it's
never taxed again. The 401 gets a tax break up front, but is
taxed coming out. Say you are in the 28% bracket. You put in
a dollar, but it just cost you 72 cents. Next year, you are
59.5 and retire. You are in the 15% bracket and the dollar
comes out and is taxed, you now have 85 cents (plus whatever
growth you got in the year). This difference is magnified
over the long term. Playing with a spreadsheet and different
scenarios can confirm whether the pretax 401 beats the
retail account. For some huge savers, they may retire in a
higher bracket and post tax savings makes more sense for
them. (But most 401 accounts have a matching provision, and
one should deposit enough to get the maximum match is almost
all circumstances.) JOE

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"Brablo" <gestureofrespect[at]yahoo.com> wrote:

- quote -

Both. Mutual funds must distribute their income each year,
and it's usually a mix of ordinary income and LTCG. That
income is taxable to you whether you take it in cash or
reinvest, which is the equivalent of buying more shares with
the cash you got.

When you sell shares of a fund, you have a cap gain/loss.

- quote -

The type of institution has no effect on the taxation. It's
the type of investment that matters.

- quote -

We already covered the taxable income part. Where you get
the money to pay the taxes is up to you.

- quote -

True, assuming the Roth IRA is at least 5 years old.

- quote -

It all gets taxed as ordinary income when it comes out.

- quote -

Extremely individual question. You can find lots of guides
on the Internet, or you might benefit from a session with a
fee-for-service financial planner.

--
Phil Marti
Clarksburg, MD

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I know finance and investments quite well. However, I can't
understand what the advantages of 401K/Roth IRAs *VS* the
retail accounts are. Here are my questions using an example.

On January 1st, 2000, I invested $100,000 in many different
mutual funds. My cost basis was $100,000. As of November 8,
2006, my investment has increased in value to $170,000.

1. If this were in a retail account (not in a tax-sheltered
vehicle such as a IRA or 403B), when does it get taxed -
every year, or only when I cash out or make a trade?

2. If this were in a retail account at a bank, does only the
*earnings* get taxed?

3. I understand short/long term capital gains. Suppose that
I don't do a trade, but that I'm a buy/hold investor. You
mean to tell me that every year, the
dividends/earnings/interest would get taxed at the long term
rates or as earning? This implies that i'd have to sell
some securities to pay off the taxes.

4. In a Roth IRA, the investor puts in money *POST* taxes.
The money grows to $170,000. Upon distribution (assuming
the person is more than 59.5), NONE of the money gets taxed.
Is this TRUE/FALES?

5. For a 401K, the money gets put on a pre-tax basis. The
money grows to $170K. *ALL* the money gets taxed as
earnings when she's 59.5. Is this TRUE/FALSE?

6. Using numbers, how is one better than another (how is the
401K/Roth IRA better than a retail account)?

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