401K/IRA *VS* a retail account

Both. Mutual funds must distribute their income each year, and it's usually a mix of ordinary income and LTCG. That income is taxable to you whether you take it in cash or reinvest, which is the equivalent of buying more shares with the cash you got. When you sell shares of a fund, you have a cap gain/loss.

The type of institution has no effect on the taxation. It's the type of investment that matters.

We already covered the taxable income part. Where you get the money to pay the taxes is up to you.

True, assuming the Roth IRA is at least 5 years old.

It all gets taxed as ordinary income when it comes out.

Extremely individual question. You can find lots of guides on the Internet, or you might benefit from a session with a fee-for-service financial planner.

-- Phil Marti Clarksburg, MD

Given the S&P was 1455 then, and 1380 now, even with dividends, many people are just breaking even from purchases back then. You must have chosen well.

Any dividend distributions and cap gain distributions from mutual funds are taxed the year they are distributed. Then when you sell the mutual fund you may have a gain or loss and that's taxed accordingly.

No different at a bank or broker. Banks offer mutual funds, brokers offer CDs, the taxation depends on the product not the institution.

If you are long term, only the distributed dividend/ cap gains from the fund are taxed, as I stated for (1). The appreciation of the fund itself isn't taxed until you sell it. You can pay the tax out of the distributions, you wouldn't have to sell any fund shares.

TRUE. (it was already taxed the once upon earning it, no further tax)

FALSE - The money is taxed as ordinary income as it's withdrawn, you do not have to take it all out at 59.5. The presumption is that the withdrawals will be spread over the person's remaining lifespan. (of course the choice is still yours)

The Roth will always beat the 'retail' account, as it's never taxed again. The 401 gets a tax break up front, but is taxed coming out. Say you are in the 28% bracket. You put in a dollar, but it just cost you 72 cents. Next year, you are

Your dividends, interest and capital gain distributions are taxable in the year distributed, even if reinvested into additional mutual fund shares. Trades are taxable to the extent that there is a gain (sell for more than basis), regardless of whether they are "exchanged" into different mutual funds.

See #1, same answer.

Certain "qualified" dividends will be taxed at either 5% or

Only if you reinvest all earnings and don't keep a cash account to pay the taxes.

TRUE, as long as the Roth IRA has been open for at least 5 years prior to distribution. Withdrawal of contributions can be done tax and penalty free at any time. No mandatory withdrawals are ever required, no matter what age you are.

FALSE. All withdrawals from a 401K account (usually only after terminating employment or retiring) are taxed as ORDINARY income. NO capital gains treatment, except in certain situations involving employer stock. Withdrawals before age 59.5 are subject to a 10% penalty. Mandatory withdrawals (based on life expectancy) are required when you turn 70.5 or older, unless you continue to work for that employer.

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Interest/dividends/capital gain distributions are taxed every year. Any actual share price appreciation is only taxed when you sell.

See above.

Dividends and interest absolutely get taxed as ordinary income every year, regardless of whether or not you trade the positions.

So?

Under current law, TRUE.

Under current law, TRUE. However, you have to keep in mind that the person had all those years the use of the money saved because their taxes were reduced because of the contribution deduction.

-- Rich Carreiro snipped-for-privacy@animato.arlington.ma.us

No you don't. You receive a check for $100 dividend, you put $30 asid to pay the tax on that dividend, and you do what you like with the other $70. You only have to sell off securities if you automatically reinvested the dividend, and you don't have any other source of cash to pay your taxes with. If you're so short on cash, it might be more advantageous to take some of your dividends in cash rather than reinvesting them -- this becomes more of a financial planning issue than just a tax issue.