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Where can I get a Tux? Nothing too crazy <$1500
How do you find in-house positions?
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Tendies? 😊 🤚💎🤚
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Where do you buy dogecoin?
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Here we go again.
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Short the vix?
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If you’re holding these funds outside a tax advantage account like a 401k or it’s, the disadvantage is double taxation. Ira and 401k shields you from capital gains tax. Normal taxable brokerage does not.
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Makes sense, thanks for the explanation. One small caveat though, the capital gains tax is lower than income tax rates (for long term) so you wouldn’t suffer as big of a double tax hit.
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Let’s look at a simple example. We will assume: you are in the 24% marginal tax bracket, and you get a 10% return made up of 7% appreciation and 3% in dividends. To make things easy assume a constant rate of return and reinvestment at the end of the year.
$10,000 goes into an index fund in a Roth 491(k). In the first year, you have $11,000, all reinvested st the end of the year and all tax free when you are eligible to withdraw.
Now do the same in a standard brokerage account. At the end of the first year, you’ve made $300 in dividends and will pay income tax on that, leaving $228 to reinvest. In addition, you have $700 in growth but that would be subject to capital gains tax when you sell. So you have $10,928 invested at the end of that first year, it with a $70 tax liability waiting for you in the future. So if your retirement was at the end of that first year, you’d walk away with $10,858 instead of $11,000, and that gap would grow each year.
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Agree, and, of course, you lose the growth in the dividends that were used to pay your income tax bill each year instead of being reinvested.
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In other words tax sheltered accounts allow your snowball to keep rolling (and compound interest to do its thing) whereas taxable accounts you’re continuously taxed therefore reducing your snowball and compound interest effects... over time this is significant
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Agree SC1 - I.e., taxable accounts have more taxable events thereby reducing your snowball :)
And to be fair, you will still have to pay taxes on your gains in 401k (if traditional), but because you are only taxes once your snowball is bigger and compound interest has more momentum.
Start with tax advantaged accounts, then go to taxable once you've maxed them all out.