Mutual Funds/Mutual funds


This is a lame question, but I'm drawing a blank. I have 2 investment accounts, four IRA mutual funds are in one and 4 non-qualified (I call them 'regular') mutual funds are in the other. In doing my taxes, I owe a lot because my regular mutual funds paid a lot in capital gains this year. Since IRA's are tax-deferred until the money is distributed, why wouldn't someone want all of their funds in a tax-deferred IRA account instead of having regular funds that are taxed on earnings from the beginning?  Thanks

Hi. The quick answer to this question is that you don't want to "convert" capital gains (which are taxed at a lower rate) into taxable income, which is how IRA accounts are taxed when dollars are withdrawn. With this being said, it does make sense to put certain tax inefficient investments into IRA accounts as long as the benefits from tax deferral exceeds what may be a higher tax later on. This "asset placement" decision is different for each person and their unique tax situation.  I hope this helps.  

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John D Smith, CFP


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