[FoRK] Clarification on 401k, also further details of Obama's position re: investment income

[Russell Turpin]

Jeff Bone:
> Per Russell's comment re: 401k, Obama did not specifically mention
> such funds. However it's important to note that eventual
> distributions stemming from vanilla 401k contributions, unlike Roth
> 401k contributions and their corresponding distributions, are taxed.

Yes. And as ordinary income, even if all the gains would otherwise
be long-term capital gains. That is the trade-off for delaying the tax.
In addition to the benefit of delaying tax until funds are withdrawn,
the benefit is a bit from a human lifecycle calculation. As things 
stand now, I will be in a lower tax bracket when I retire than I am
now. That might not be the case, if some efforts work out as I hope.
In which case, my ordinary retirement accounts will prove not to be 
as good a tax shelter, but things will have gone well otherwise, it 
won't matter so much.

> And note that most higher income-earners are not actually eligible 
> to use the Roth...

To my sorrow. Though keep in mind that you can convert regular IRAs 
to Roths in the years when your income is low, paying tax up front.

You're really haven't touched on the real issue, whish is the 
international aspects of tax policy. There's a very real sense in 
which nations are locking their citizens into their tax and 
retirement policies, and where picking an alternative later faces
all sorts of bureaucratic barriers. 


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