[PopAlongKid]

>get an IRA if you're income is low enough.

There is no high-income restriction on contributing to a traditional IRA. Only the possible tax deduction is limited, however earnings on any contribution are still fully tax deferred.

>, you won't be able to sell that in any year where you make income above 40K because of "capital gains"

Let's clarify: for U.S. tax purposes, if your taxable income (which is much lower than gross income) as a single filer is below about $40K (double that if married filing jointly), your tax rate on long term capital gains is zero (for now). But even if you go over that, you still receive a highly favorable rate of only 15%, it doesn't go higher than that until taxable income gets up around $450K, so if you must sell with a gain, it's still quite tax-friendly. (Unfortunately, some states such as California have no special capital gains tax rate).

[ericmay]

> There is no high-income restriction on contributing to a traditional IRA. Only the possible tax deduction is limited, however earnings on any contribution are still fully tax deferred.

Yep. Which is why I think it's a great little bucket for REITs and perhaps dividend stocks where distributions would have counted toward your annual income but don't when you use the TRAD IRA.

Dividends are taxed at max 20% (AFAIK) but REIT dividends are taxed like income at your highest marginal rate, so if your marginal rate is high enough (above 20%) you may want to buy REITs in a traditional IRA.

This is not financial advice.

[throw8383833jj]

15%+ (CA has more added on) is not favorable when it's on your principle. If your $$ go up by x10 but your purchasing power remains the same, then 90% of your principle is being taxed at 15%. The term "capital gains" is becoming antiquated, going forward. Sure, the last 50 years have been great but no one is expecting the future to look anywhere near as rosy as the last 50 yrs. and so, the pizza keeps getting sliced into more pieces but you still have the same amount. The dollars in your retirement account may increase drastically but if the purchasing power is exactly the same, then you haven't actually gained anything. It's only in terms of accounting, that it's said to have made a capital gain: it's not a real gain.