Originally Posted by bigla
Maurice, the Vanguard website says it's 4k for tax year 07' (My son is 35). I will check with IRS website. Where do i get more info about IBonds?
1) IBonds you can find out about at US Treasury site--google "treasurydirect". Also info on the other series Treasury/savings bonds bills. If he is in an income tax state, US Treasury interest earned is state tax free.
2) IRA limit for under 50 age is $4000 for 2007 and $5000 for 2008. Those 50 and over can put in $5000 2007 and $6000 2008.
Since your son makes too much for Roth IRA, that means his contributions to Trad IRA will not be tax deductible either, even though he can contribute to one.
3) Your son could look at equity investment with taxable dollars, and in a taxable account, as providing some shelter. This simply by being a "buy and hold" longterm type investor. No sell the stocks for gain--no pay the IRS for realized profits! So, by buying stock in growing companies who reinvest their profits back into the business, your son can realize indirectly some tax deferred growth.
At the end, when it is time to start tapping some of those equity profits, he pays capital gains tax rate which is favorable, and he can control the timing of when and how much he realizes those profits. Not an opportunity to be sneezed at!!
4) There is always real estate with its very powerful tax advantages. Now may be an opportune time to be on the buy side. Again, I would advise only being a very longterm investor.
5) Tax deferred annuities, while they do have higher expenses than other vehicles, do provide another avenue for tax deferred compounded earnings within the annuity. You son should be warned to look at only the very lowest cost providers, if he looks at them at all. Vanguard is near the top of the "low cost", USAA may have some as well, not sure who else is ultra low cost, perhaps TIAA-CREF.
If your son looks at tax-deferred annuities, he should be warned to think of them as only the very longest of term investments. Something he should not think of touching in less than 15 years minimum.
Annuities have their disadvantages not the least of which is higher investment and management costs, but for people with no other tax deferred growth opportunities, they do provide that.
Hope this gives you/him some ideas.