From
Your Perspective:
Retirement catch-up for late starters
Taxable investment
accounts
If you’ve made the maximum contribution to any
tax-deferred
accounts for which you’re eligible, and you’re able to put aside more
for retirement, you might consider investing in
equities
through
a
taxable
investment account
with a
brokerage
firm.
With
a taxable account, you pay no income tax on paper profits — or
increases in an investment’s value while you own it — until you sell
the investment and realize the profit. If you’ve held the investment
for more than a year when you sell, you owe tax on any gain at the
long-term capital gains rate — 15% if your income tax bracket is 25% or
higher, and 5% if your income tax rate is 10% or 15%. For people in the 10% and
15% brackets, tax rates on long-term capital gains drop to 0% in tax years 2008,
2009, and 2010. These low rates also apply to qualified
dividends
and mutual fund
distributions,
which used to be taxed at your income tax rate. In 2008, 2009, and 2010, these
tax rates will fall to 0% for people in the 10% and 15% tax brackets.
