Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Taxable investing before tax deferred?
Old 08-08-2009, 08:52 PM   #1
Recycles dryer sheets
 
Join Date: Mar 2009
Posts: 357
Taxable investing before tax deferred?

I used to assumed that it was better to max your tax deferred before going taxable. However, after reading this thread (What proportion do you save after tax?) I realized that is't always the case.

A lot probably has to do with personal circumstances and preferences. For me, the three big tax deferred advantages are:
1. allows me to invest ~37% more
2. lowers my AGI allowing for more tax deductions and IRA contributions
3. it's still tax advantageous even if I have to pay the 10% early withdrawal penalty

I'm curious to hear how other members on here feel.
__________________

__________________
bank5 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-08-2009, 09:11 PM   #2
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,869
For me tax-deferred has been the higher priority until it is maxed out, and any savings beyond that I invest in my taxable accounts. I am making the highest income of my career so the immediate tax advantages have been substantial. I am 61 so my withdrawals will not be held back by age restrictions. Overall, for me this is a no-brainer.

Three months from tomorrow I will retire, so I don't have much longer to save for retirement.
__________________

__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is online now   Reply With Quote
Old 08-09-2009, 06:25 AM   #3
Thinks s/he gets paid by the post
Coach's Avatar
 
Join Date: Nov 2005
Location: Colorado, USA
Posts: 1,127
bank5, I think the strategy of maximizing tax-deferred saving is, for most people, the correct one. The limits on such savings are such that it's hard to save enough that way for a really early retirement anyway. Assuming your ability to save grows as you grow older, you are likely to be able to save more that than the tax-deferred limits later in your working life, so you can naturally develop some after-tax savings.

It is anathema to me to voluntarily pay taxes when I can legally avoid them. Taxes paid are my money that I lose control of, forever.

I can imagine exceptions to my strategy -- perhaps very early, low-cost retirement is one -- but I think they are rare. I'd have to find a very convincing scenario to talk myself into paying taxes I can avoid or defer.

Back when IRAs first became available, I calculated that I would come out ahead after not too many years if I had to withdraw from my IRA and pay the penalty. That was before spreadsheet software had been invented so who knows how good my math was, but I sure am glad it convinced me to start my IRA.

Coach
__________________
Coach is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Tax deferred and after tax asset allocations nun FIRE and Money 9 10-20-2008 12:53 PM
Help with how to manage WD from variety of taxable and tax deferred accounts chinaco FIRE and Money 28 04-03-2007 03:08 PM
taxable vs. tax-deferred accounts - revise my plan? WM FIRE and Money 3 03-19-2007 08:49 AM
Rebalancing taxable vs. tax-exempt/deferred accounts AV8 FIRE and Money 22 02-08-2007 08:02 AM
Taxable vs. Tax Deferred Accounts Theo FIRE and Money 1 06-03-2004 07:42 PM

 

 
All times are GMT -6. The time now is 11:27 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.