I am going to invest several hundred thousand dollars as an inital step into the PP. I have the option of making this investment in a taxable account or an IRA.
Can you help me understand the pros/cons of doing either?
Thanks.
Ed
PP in an IRA?
Moderator: Global Moderator
Re: PP in an IRA?
At the risk of pointing out the obvious, if you wish to spend the money, you won't want it in an IRA.
"All men's miseries derive from not being able to sit in a quiet room alone."
Pascal
Pascal
Re: PP in an IRA?
Adam is right, but a Roth IRA you can pull the money out of as long as it's no more than what you put in.
A recent analysis I've done has shown the benefits that can be gained by contributing to Roth & IRA accounts through your lifetime and using them properly in retirement to significantly increase your "NRV" (net realizable value) over taxable accounts.
I haven't got the time to go through it now, but I'd say probably at least contribute it to a Roth IRA, as the contributions are liquid without tax or penalty. A traditional IRA tends to look more appealing than a Roth if your marginal tax rate today is higher than what it will be in retirement, but it's less liquid, as you'll have to pay tax and 10% penalty on any early distributions from it.
I'll post a more detailed analysis soon, but just know that a combination of Roth & IRA funds at retirement can provide a lot of increased realizable wealth over taxable accounts. I have a general "rule" that outside your emergency fund, you should max out your Roth IRA before ever starting up taxable investment accounts.
A recent analysis I've done has shown the benefits that can be gained by contributing to Roth & IRA accounts through your lifetime and using them properly in retirement to significantly increase your "NRV" (net realizable value) over taxable accounts.
I haven't got the time to go through it now, but I'd say probably at least contribute it to a Roth IRA, as the contributions are liquid without tax or penalty. A traditional IRA tends to look more appealing than a Roth if your marginal tax rate today is higher than what it will be in retirement, but it's less liquid, as you'll have to pay tax and 10% penalty on any early distributions from it.
I'll post a more detailed analysis soon, but just know that a combination of Roth & IRA funds at retirement can provide a lot of increased realizable wealth over taxable accounts. I have a general "rule" that outside your emergency fund, you should max out your Roth IRA before ever starting up taxable investment accounts.
Last edited by moda0306 on Mon Aug 29, 2011 9:03 am, edited 1 time in total.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
Re: PP in an IRA?
How do you find yourself with the option of investing several hundred thousand dollars in a taxable account OR an IRA?EdwardjK wrote: I am going to invest several hundred thousand dollars as an inital step into the PP. I have the option of making this investment in a taxable account or an IRA.
Can you help me understand the pros/cons of doing either?
Thanks.
Ed
I would think the money would either already be in an IRA (in which case taking it out would trigger a large tax bill), or if the money is not in a tax deferred account there wouldn't really be any way to get that much money into an IRA all at once.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”
Re: PP in an IRA?
My wife has an IRA account created by rolling over her cash balance account from a former employer. Seperate from that, we have stock investments inside a brokerage account.
I was going to sell the stocks inside the brokerage account and buy into the PP using ETFs. As I reviewed our accounts, I saw that the IRA value was just about the amount I was going to invest in the PP. So, I can invest in the PP either through the IRA or the brokerage account.
If I sell the stocks in the brokerage account, I will generate tax losses, so no taxes will be paid as a result of the sale.
Now I want to understand wheter investing in the PP through the IRA makes more sense than doing so in the brokerage account.
Thanks.
I was going to sell the stocks inside the brokerage account and buy into the PP using ETFs. As I reviewed our accounts, I saw that the IRA value was just about the amount I was going to invest in the PP. So, I can invest in the PP either through the IRA or the brokerage account.
If I sell the stocks in the brokerage account, I will generate tax losses, so no taxes will be paid as a result of the sale.
Now I want to understand wheter investing in the PP through the IRA makes more sense than doing so in the brokerage account.
Thanks.
Re: PP in an IRA?
Okay, thanks for clarifying that.
I would probably do half of the PP in the IRA and half in the taxable accounts (with all four PP assets on each side).
This approach basically guarantees many years of tax free rebalancing.
I would probably do half of the PP in the IRA and half in the taxable accounts (with all four PP assets on each side).
This approach basically guarantees many years of tax free rebalancing.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”