Unrealized Capital Gains Taxes

[colfax_m]

So you say in order to pay the taxes on your traditional IRA that you don't have to pay on Roth you need to open another after tax account and pay capital gains taxes so your opportunity realization will be basically money you have to give to the government.

Or you can use a pre-tax account such as a 401k which most people have access to. Also, not everyone has to pay capital gains, people with incomes below $40k or $80k are exempt.

But the main thing is that most people pay higher marginal tax rates during their working years than in their retirement years. Furthermore, the tax benefits of the traditional IRA is on marginal rates and the tax rate on the distributions of the account are less given standard deductions and the various tax brackets.

 

[colfax_m]

I'm done wasting my time with you.

I've really tried educating you, but every time you seem to start to get it, you slip back to same misconceptions.

A traditional 401(k) is better than a Roth 401(k) â except in this surprising situation

A traditional 401(k) has the advantage of more options later on, but a Roth may be the smarter choice for big savers.

www.marketwatch.com

Trust me, I've done the math on this.

https://money.usnews.com/money/retirement/articles/deciding-between-a-roth-vs-traditional-ira

"Most people are better off taking a tax hit now," says Steve Frazier, president of financial firm Frazier Investment Management in Wakefield, Rhode Island. According to him, the gains earned by money in a Roth IRA should easily make up for paying taxes upfront.


The only reason to take a Traditional over a Roth is if you think you will be in a lower tax bracket but that's not going to be the case.

In my examples both people were making 50K a year and we can safely assume they had children or a mortgage so got additional tax breaks but in retirement the dependent tax write offs are gone and the mortgage should be paid off.

And the RMD in the first year of retirement was over 100,00 dollars that puts both of them into a higher tax bracket than they were during their working lives.

So the Roth is once again the best choice.

It says exactly what I've been saying:

If you expect that your tax rate will decrease when you retire, opt for a traditional IRA. Since traditional IRAs mean immediate tax savings, it's best to contribute to one if you think your tax rate is higher now than it will be after retirement.

 

[Blues Man]

So you say in order to pay the taxes on your traditional IRA that you don't have to pay on Roth you need to open another after tax account and pay capital gains taxes so your opportunity realization will be basically money you have to give to the government.

Or you can use a pre-tax account such as a 401k which most people have access to. Also, not everyone has to pay capital gains, people with incomes below $40k or $80k are exempt.

But the main thing is that most people pay higher marginal tax rates during their working years than in their retirement years. Furthermore, the tax benefits of the traditional IRA is on marginal rates and the tax rate on the distributions of the account are less given standard deductions and the various tax brackets.

And you assume that the guy with t he Roth won't contribute to a 401k?

FYI you can choose a Roth in a 401K too.

And I just showed you how the required minimum withdrawal of a traditional IRA can put a person into a higher tax bracket that he was during his working years.

Go back and you'll see that the RMD in my example in the first year of retirement was over 100K and the guy only made 50K a year during his working life and don't forget that there will be no more tax breaks for dependents and most likely no mortgage interest deductions anymore.

The guy with the Roth has no required minimum withdrawals and can take out just what he needs to live on and pay no income tax. So he can leave more money in his portfolio and reap even more gains.

 

[Blues Man]

I'm done wasting my time with you.

I've really tried educating you, but every time you seem to start to get it, you slip back to same misconceptions.

A traditional 401(k) is better than a Roth 401(k) â except in this surprising situation

A traditional 401(k) has the advantage of more options later on, but a Roth may be the smarter choice for big savers.

www.marketwatch.com

Trust me, I've done the math on this.

https://money.usnews.com/money/retirement/articles/deciding-between-a-roth-vs-traditional-ira

"Most people are better off taking a tax hit now," says Steve Frazier, president of financial firm Frazier Investment Management in Wakefield, Rhode Island. According to him, the gains earned by money in a Roth IRA should easily make up for paying taxes upfront.


The only reason to take a Traditional over a Roth is if you think you will be in a lower tax bracket but that's not going to be the case.

In my examples both people were making 50K a year and we can safely assume they had children or a mortgage so got additional tax breaks but in retirement the dependent tax write offs are gone and the mortgage should be paid off.

And the RMD in the first year of retirement was over 100,00 dollars that puts both of them into a higher tax bracket than they were during their working lives.

So the Roth is once again the best choice.

It says exactly what I've been saying:

If you expect that your tax rate will decrease when you retire, opt for a traditional IRA. Since traditional IRAs mean immediate tax savings, it's best to contribute to one if you think your tax rate is higher now than it will be after retirement.

And I showed you that the guy with the traditional IRA would be in a higher tax bracket because of the required minimum withdrawals

 

[colfax_m]

And you assume that the guy with t he Roth won't contribute to a 401k?

FYI you can choose a Roth in a 401K too.

And I just showed you how the required minimum withdrawal of a traditional IRA can put a person into a higher tax bracket that he was during his working years.

Go back and you'll see that the RMD in my example in the first year of retirement was over 100K and the guy only made 50K a year during his working life and don't forget that there will be no more tax breaks for dependents and most likely no mortgage interest deductions anymore.

The guy with the Roth has no required minimum withdrawals and can take out just what he needs to live on and pay no income tax. So he can leave more money in his portfolio and reap even more gains.

I assume that the guy with the Roth has less money to contribute to the 401k because he has to pay taxes. Again, you need to pull "human behavior" out of the equation, this is just math. It's not what people will or won't do, it's about the math.

In your example, the RMD was not over 100k.

The RMD for year 1 is 67524 Taxes owed 7928

Mortgage interest deductions are pretty much for the very wealthy these days given the standard deduction is so high. There's no individual deductions anymore either. There is a child tax credit, but that's gone a long time before retirement.

You're not accounting for inflation which changes tax brackets annually, so assuming everything is stable over 40 years is going to distort your information and those taxes at the end are going to be falsely higher.

 

[BlindBoo]

So do you get a tax credits for unrealized capital losses?

Sounds unworkable.

However long term capital gains should be treated as income in the year you realize the gain/loss, just like the 401 K's.

 

[Blues Man]

And you assume that the guy with t he Roth won't contribute to a 401k?

FYI you can choose a Roth in a 401K too.

And I just showed you how the required minimum withdrawal of a traditional IRA can put a person into a higher tax bracket that he was during his working years.

Go back and you'll see that the RMD in my example in the first year of retirement was over 100K and the guy only made 50K a year during his working life and don't forget that there will be no more tax breaks for dependents and most likely no mortgage interest deductions anymore.

The guy with the Roth has no required minimum withdrawals and can take out just what he needs to live on and pay no income tax. So he can leave more money in his portfolio and reap even more gains.

I assume that the guy with the Roth has less money to contribute to the 401k because he has to pay taxes. Again, you need to pull "human behavior" out of the equation, this is just math. It's not what people will or won't do, it's about the math.

In your example, the RMD was not over 100k.

The RMD for year 1 is 67524 Taxes owed 7928

Mortgage interest deductions are pretty much for the very wealthy these days given the standard deduction is so high. There's no individual deductions anymore either. There is a child tax credit, but that's gone a long time before retirement.

You're not accounting for inflation which changes tax brackets annually, so assuming everything is stable over 40 years is going to distort your information and those taxes at the end are going to be falsely higher.

OK right I meant 50K but the guy is still in a higher tax bracket than he was when he was working and there are no more dependent deductions or mortgage interest write offs.

The guy with the Roth will still make out better with inflation because he pays no taxes on his withdrawals and he is not forced to take out a required amount every year so he can have more of his money working for him and growing tax free.

 

[bendog]

Biden’s treasury secretary, the kook that she is, is in favor of taxing unrealized capital gains. How dumb can these folks be?

Mac1958 you voted for theve geniuses. What do you think about this ridonkulous idea?

Oaktree's Howard Marks says this tax proposal in the U.S. makes investing less attractive

That would be a shitty idea. But I've never heard her say that, so I'd need to know more. And I very much doubt that, if she did think it, it would go anywhere.

No reason to make assumptions on such thin evidence.

the google search links are to "dubious" sites. But she has said that raising (or even having) and estate tax is in the Biden wheelhouse. And if we don't have an estate tax, and if we don't tax "unrealized" cap gains, the result was/is the Mellons and the Fisks end up owning pretty much all of us.

 

[Blues Man]

Biden’s treasury secretary, the kook that she is, is in favor of taxing unrealized capital gains. How dumb can these folks be?

Mac1958 you voted for theve geniuses. What do you think about this ridonkulous idea?

Oaktree's Howard Marks says this tax proposal in the U.S. makes investing less attractive

That would be a shitty idea. But I've never heard her say that, so I'd need to know more. And I very much doubt that, if she did think it, it would go anywhere.

No reason to make assumptions on such thin evidence.

the google search links are to "dubious" sites. But she has said that raising (or even having) and estate tax is in the Biden wheelhouse. And if we don't have an estate tax, and if we don't tax "unrealized" cap gains, the result was/is the Mellons and the Fisks end up owning pretty much all of us.

The politicians know that the middle class is where the money is so that's who ends up paying.

 

[bendog]

Yellen leaves door open to tax increase on wealthy Americans (detroitnews.com)

 

[DBA]

Bumping this thread. The idiot Democrats are pushing this again. Don’t worry, this will only affect billionaires.

The reality is that if this ridiculous policy is passed it will trickle down to everyone who owns anything. Democrats are criminals and those that vote for them are ignorant, useful idiots.

The New Billionaire Tax in Democrats’ Sights

 

[Who_Me?]

So if the proposal is to tax unrealized capital gains what happens when the asset is sold? Are the realized gains taxed again? This has stupid written all over it. The Democrats are relying on funny money to justify their social agenda.

 

[Blues Man]

So if the proposal is to tax unrealized capital gains what happens when the asset is sold? Are the realized gains taxed again? This has stupid written all over it. The Democrats are relying on funny money to justify their social agenda.

What happens if there are unrealized losses?

When you have billions you can actually plan to have losses and gains balance out and still pay nothing

 

[JustAGuy1]

That would be a shitty idea. But I've never heard her say that, so I'd need to know more. And I very much doubt that, if she did think it, it would go anywhere.

No reason to make assumptions on such thin evidence.

I watched Yellen say it.