Taxable Accounts Can Win Near Retirement
Investor's Business Daily (02/16/01) No. 3719 p.B5; Weinstein, Grace W.

Generally, it is better to invest on a tax-deferred basis, but two things should be considered. First, is tax-deferred investing still advantageous when retirement is near? Second, if so, do growth or income investments belong in your tax-sheltered accounts? If the time until retirement is short, tax-deferred earnings growth are minimized. According to Martin Nissenbaum, Ernst & Young's director of retirement planning, the key issue is the potential conversion of capital gains into ordinary income. Typically, when you invest in a taxable account, capital gains on assets held more than one year are taxed at a top rate of 20 percent. If money comes out of a tax-deferred account, it is taxed at ordinary income rates as high as 40 percent.


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