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American Capital Agency Corp. Message Board

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  • profquill profquill Feb 6, 2013 4:54 PM Flag

    Traditional IRA holding AGNC

    Not to be snippy or anything, but having an IRA and obviously having had your earnings put into it, your company should have clearly explained how IRAs work, I'm sure your HR department has brochures or something.

    But, to be helpful - you can hold most anything you want, in any proportion, within an IRA, with (and this is not fully inclusive), exceptions like collectibles, certain options, maybe futures(?), but in general, regular stocks, bonds, are all fair game.

    Anything your IRA makes OR looses has NO immediate tax consequences, no matter what kind of dividends, interest, capital gains or losses. Nothing you do is reported on any tax forms to the IRS until you withdraw.

    Assuming you are referring to a traditional fully-deductible IRA, when you take a distribution, 100% of that is taxed as ordinary income, regardless of whether the gains (or losses) came from capital, interest, dividends, etc.

    So, all depending on how close you are to taking money out (have to be 59.5 to avoid penalty), it's important to figure out what kind of things to put into it; problem with investments that generate 'qualified' dividends or capital gains, is that you don't get to take advantage of the lower tax rates (now, anyway) on such gains.

    That's one good reason that mREITs such as AGNC are good for IRAs, even though the current dividend is NOT qualified, thus taxable at full rates, that doesn't matter for an IRA, again you're going to pay full rates on distributions anyway.

    I'd say, if you have that option, high-income payers are even better in a ROTH IRA, where although you don't get a tax deduction up front for your contribution, ALL proceeds can be withdrawn totally tax-free, regardless of how the gains were made. So once you have a Roth IRA funded, the money can just grow, compound, go crazy for itself and you'll never pay any tax on it. Well, can't speak for all STATE tax rules, and there are some odd rules about how long you've had a Roth IRA, so even if you can't dedicate much money into one right now, it's a good idea to get an account established early.

    Sentiment: Buy

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