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Tax Deferred Versus Tax Paid 

By: Zimbler0 in BAF | Recommend this post (2)
Fri, 03 Sep 21 9:25 PM | 63 view(s)
Boardmark this board | Bash-a-Farter 		Msg. 05808 of 06530
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I made the statement that 'OCU ain't too bright' because
at his (pre-retirement) income level he should have had
at least some of his income in 'tax paid' investments.

And I've been doing some thinking along those lines.

Perhaps, for the lower income types an IRA or 401K -
especially one with a 'company match' - it should make a
LOT of sense to pack as much as one can into it.
Because if one is and stays in a low tax bracket one
doesn't gain much. (If I'm wrong please tell me and
explain why.)

But for Middle Class dudes like me (and dudettes) having
money both tax deferred and tax paid makes the most sense.

Take my Dominion Resources. It is currently worth 1.8
times what I paid for it. If it was in tax deferred I
would have netted a smaller tax break when I 'bought' it.
But should I sell it I would pay the higher tax rate on ALL
of it.

If 'Big D' was bought tax paid - as I did - Should I sell
it a little over half of it would be 'no tax' as that
much I paid taxes on before I bought it. And what is
taxable is at the lower long term capital gains tax rate.

McCormick - worth a little over three times what I paid
for it. Should I sell I'd much rather pay the long term
capital gains tax rate than the higher tax bracket I'd be
in from a 'deferred tax' account sale.

Another bonus is in the form of 'Qualified Dividends'.
Most of what I own pays out in qualified dividends - taxed
at a lower rate than 'normal income tax' rates for my
income level. Put them in a tax deferred account and
pay the higher tax rate for the privilege of spending my
own money?

And by the way. Being a long term share-holder . . .
My Dominion says the yield is about 3.2% . . . Based
on what I spent to buy it 'my yield' is about 5.6%.

McCormick? Yield of 1.5% versus a return of 5.3% based
on what I spent to buy it.

And then there are tax free municipal bonds. Put those
in a 'tax deferred' account and the dividends are no longer
'tax free'.

Zim.




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Mad Poet Strikes Again.

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