In a traditional IRA, all investments are taxed the same. If you withdraw in a 24% tax bracket, the IRS will take 24% of all your gains.
This is actually equivalent to a Roth IRA. If you withdraw in a 24% tax bracket, then $10,000 in a traditional IRA and $7600 in a Roth IRA will have the same after-tax value if invested the same way. (It's still slightly better to hold stocks in the Roth account if all else is equal; if you hold stocks in the traditional IRA, you might pay 32% tax on some of the withdrawals if the stock market booms, or have the IRS give back only 22% of some of your losses if the stock market crashes.)
In a taxable account, investments are taxed differently, so you should prefer to hold those investments with the lowest tax cost. Stock index funds which are likely to be left to your heirs have a very low tax cost, since the capital-gains tax will probably never be paid; therefore, they are very good investments for a taxable account.
This is actually equivalent to a Roth IRA. If you withdraw in a 24% tax bracket, then $10,000 in a traditional IRA and $7600 in a Roth IRA will have the same after-tax value if invested the same way. (It's still slightly better to hold stocks in the Roth account if all else is equal; if you hold stocks in the traditional IRA, you might pay 32% tax on some of the withdrawals if the stock market booms, or have the IRS give back only 22% of some of your losses if the stock market crashes.)
In a taxable account, investments are taxed differently, so you should prefer to hold those investments with the lowest tax cost. Stock index funds which are likely to be left to your heirs have a very low tax cost, since the capital-gains tax will probably never be paid; therefore, they are very good investments for a taxable account.
Statistics: Posted by grabiner — Wed May 29, 2024 9:22 pm