Monday, November 18, 1996
Don't Believe Everything You Read
by Hawthorn23

I love reading the Wall Street Journal ... interesting, informative ... it starts my day. Last week, however, they gave some advice on how to avoid tax problems that didn't sound very Foolish.

They argued that one shouldn't make contributions to an IRA that are not tax-deductible. (Unfortunately, if you make a decent buck, you can't deduct any of your IRA contributions!) When it comes time to draw your moola out at retirement, the IRS will expect that you allocate some of the withdrawn dollars to your annual after-tax contributions (said contributions can be up to $2,000 annually for a working person), and some to the tax-deferred earnings those dollars have generated. Their reasoning is that this can be a real nightmare to figure out. I guess it could, but being a Fool, I thought further:

I guess they figure the alternative is paying capital gains taxes on all of those investment earnings each year, when you're in a higher tax bracket, is a better idea? Ho Ho! Have all those gains, year after year, eaten up by taxes and not compounding and working for you? Ho Ho Ho!

I'll just be a Fool and worry about how to figure my taxes when I retire with a couple million in the bank, instead of having the peace of mind that I avoided a tax issue and retired with considerably less. Gee, maybe I could PAY somebody to wade through my records and do it for me! Yeah, that's it!

Transmitted: 11/18/96