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Index Funds: Jack Bogle has convinced me....sort of

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beegee
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Index Funds: Jack Bogle has convinced me....sort of  Reply with quote  

Newbie here. Confused

I have a 401K through my work and a Roth IRA through Edward Jones and I'm thinking of moving both into a handful of index funds.

If I invest after tax dollars into index funds, can I make tax free withdrawls? Will I get taxed on my index fund's earnings?

If so I would think the roth ira would be the way to go......right?

Thanks for the help.
Post Fri Jun 21, 2013 5:49 pm
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oldguy
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quote:
thinking of moving both into a handful of index funds.


Good. But you won't need a handful, one index fund will do. (I use the Vanguard SP500 Index Fund, but every fund company has one.)

quote:
If I invest after tax dollars into index funds, can I make tax free withdrawls? Will I get taxed on my index fund's earnings?


You can choose to be taxed first (Roth IRA), taxed when you sell (401k) or taxed on your profits when you sell (brokerage account). In all cases you'll be taxed - you get to select when.

quote:
If so I would think the roth ira would be the way to go......right?

Maybe - if you are in a low tax bracket, it is better to pay the tax now. If you are in a higher bracket, it is better wait and pay the taxes a little bit each year after you are retired.
Post Fri Jun 21, 2013 6:51 pm
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coaster
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Addenda #1: The Roth IRA is taxed and penalized on the gains if you take them out pre-retirement; you can withdraw the contributions any time, but the gains cannot.

Addenda #2: You only need one index fund to represent the US stock market; if you want exposure to international you'll need another.

~Tim~
Post Fri Jun 21, 2013 8:39 pm
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