Posted on May 11, 2005 at 17:04:21:
So you’ve carefully balanced your holdings in your 401(k) or other retirement account over the years, with so much in equities, so much in bonds. Ditto the money that you’ve put away in a taxable account. But have you considered the tax ramifications?
Consider that everything you take out of your IRA will be taxed as ordinary income, currently at up to 35 percent. If your holdings include stock that has appreciated, ordinarily taxed at only 15 percent, you might be overpaying 20 percent!
In your taxable account, income from bonds get taxed at, say, 35 percent each year. It’s more advantageous to keep that income in a tax-deferred account, letting it grow for years and pay the 35 percent later. Meanwhile, if stocks in your taxable account grow in value, the tax owed is only 15 percent. Should you need to take a loss, you can deduct it from other gains, even from income. The loss is not deductible in a retirement account.