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Simple IRA vs Brokerage withdrawals

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Money Talk > Investing, Stocks and Bonds

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Simple IRA vs Brokerage withdrawals  Reply with quote  

Ill try to make this quick. By my math, if there is any chance you will want to dip into your saving before retirement (in my case to purchase rental property) then its not worth it to grab the tax saving associated with said account. Since any withdrawal (in my case) would have an effective 35% tax rate (with penalty), vs a 15% cap gains tax rate with a withdrawal from a normal brokerage account. (assuming your putting the same amount into and withdrawing the same amount from each account) and again, by my math, lifetime savings would be less using the simple ira.

however, using the brokerage account, does have the effect of putting less cash in your pocket on a yearly basis due to tax liability. in my case, I would pocket about 2k less per year. Im thinking If i were to also invest this 2k into a different vehincle (Roth ira) that the verdict might start leaning towards paying the penalty. (this would be investing 16500 per year vs 12500. (the other 2 is employer match,)

Basically, this is just all confusing. and based on current tax rates. is it really just a complicated spreadsheet and you have to type it all out and do all the math, or is there some simple rule of thumb or trick to make it a little easier? 2k a year over 30 years is a good chunk of money! I just want to do the right thing.
Post Tue Oct 24, 2017 4:06 am
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If you save $2k/yr for 30 y you'll have about $60k. If you invest $2k/yr at 11%/yr you"ll have about $640k.

Don't overlook the 25% tax that you prepaid before you buy the stock at your brokerage

When I buy rental houses, I make the smallest down payment possible - sometimes I borrow the 'down' - and leave my own money invested. Ie, I try to keep all 3- the IRA, the brokerage money. and the rental.
Post Tue Oct 24, 2017 8:14 pm
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