"So here is a question..granted it would be totally dependent on one's personal situation.
If one is in a tax bracket where they are paying no cap gains tax on long-term gains and no tax on qualified dividends, is there a point where it doesn't make sense to fund an IRA (as opposed to putting money in a taxable acc)? Especially as one gets nearer to retirement?'
One can always put it in a ROTH, and ensure no taxes on gains for yourself and heirs many years into the future. But then, if the ROTH IRA goes down in value, you lose the capital loss deduction. (Actually for the first year you can undo a ROTH contribution, but after that you are stuck, but to keep that option open for best effect you need to have more than one ROTH account open).
For a traditional IRA, you get a deduction. If your marginal tax rates are higher now than you figure they will be in the future, it might make sense.
For investments in Bonds and REITS, which have ordinary tax dividends, it might make sense.
Also, while capital gains and dividends may not be taxable federally, they normally are taxable to the state.
Another factor, capital gains and dividends may not be taxable federally, their amount can affect how much social security is taxed, and how much Obamacare subsidy you qualify for.
It sure does get complicated. Fallback position if there is a lot of uncertainty, I think, is invest in the ROTH. |
