Traditional vs. Roth IRA

1
Traditional vs. Roth IRA

• Traditional
• 2,000/year, 30 years, 10 return, 30 tax
• Value in 30 years 328,988
• Annual withdrawal for 20 years 38,642.81
• Taxes _at_ 30 11,592.84
• Aftertax withdrawal 27,049.97

2
Roth

• Deposit 2,000(1 - .30) 1,400
• Value in 30 years 230,291.63
• Annual withdrawal (tax-free) 27,049.97
• The advantage of a Roth is increased deposits,
  not the tax-free withdrawals

3
Distributions

• Ordinary dividends
• Capital gains
• Long-tern
• Short-term
• Nontaxable distributions
• Return of principal (rare)

4
Selling Shares

• FIFO
• Specific identification
• Average cost - single category
• Average cost double category
• Short-term shares
• Long-term shares

5
Taxes

• Dont buy distributions
• Step-up at death
• Kiddie tax
• First 650 of passive income free
• At 14, kids tax rate

6
Tax Efficiency

• Size of income distributions
• Turnover
• Total return
• Fund flows