Securities recently heard from a client who had decided to
purchase several growth stocks and needed to decide whether to buy
them for his Individual Retirement Account or for a “regular”
(non-retirement) account. The
client believes that over the long term, growth stocks should gain
value. Because gains
in IRAs are not taxed until withdrawal, he was leaning towards
using that account. Are
IRAs the best “pocket” for growth stocks?
best vehicle for growth stocks is usually a non-retirement
account. If the
stocks do appreciate and you hold them in an IRA, then, upon
withdrawal, the profits will be taxed at ordinary income rates.
If those same equities were owned in your “regular”
account, the profits would be taxed at the lower rate afforded to
what if a growth stock declines?
If you hold it in your regular account, then the decline
will produce a capital loss, which you can use to offset capital
gains. But if you
hold it in your IRA, you cannot realize that loss as a capital
if all other factors are equal, growth stocks should be held in a
“regular” account. Conversely, we would advise that assets
that create highly taxed stable income be included in your IRA.
article and other articles are provided for
information purposes only. They are not intended to be
an offer to engage in any securities transactions or to
provide specific financial, legal or tax advice. Articles
may have been rendered partly inaccurate by events that have
occurred since publication. Investors should consult
their advisers before acting on any topics discussed herein. |