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Energy Transfer Equity, L.P. Message Board

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  • lner2512 lner2512 Apr 2, 2007 2:21 AM Flag

    ETE inside an IRA??

    I'm 67, now looking at how to get $ OUT of an IRA. Do not forget that every $ coming out will be taxed at ordinary income tax rates (assuming no major tax law changes), regardless of whether it was capital gains, return of capital, etc. when that $ went into your IRA. You may be OK if you're assuming your ordinary income tax rate will be substantially lower after you retire, but I doubt that. Mine isn't.

    I use my IRA now for short-term trades and put long-term investments in taxable accounts where I can take advantage of capital gains--and losses--treatment not available in tax-deferred accounts.



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    • lner2512;
      Many of us still-working stiffs will end up with a majority of our retirement savings inside some sort of an IRA. The traditional, defined benefit pension is an endangered species that is not likely to survive anywhere in the private sector much longer. By and large it is being replaced with some variant of a defined contribution plan, typically a 401k with a corporate match. Everything going into a 401k is pre-tax. We WILL pay income tax on all that at some point, unless we insist on dying first.

      For many folks those 401k funds will become a major part of our financial wealth. Whether we keep the funds in the 401k, roll them to a conventional or Roth IRA at retirement (or leaving the company), the objective remains the same. We must manage our investments to maximize the future value with an investment strategy having an appropriate level of risk. And whenever we take the funds out we will pay income tax. Inside that 401/IRA, tax considerations don't matter; it is all about total return and risk.

      I have concluded that MLPs (and their related sisters) offer an attractive return for the risk, and have decided to own MLPs inside my IRA. My target is about 1/6 of my total 401k/IRA investments. I am continually struggling to meet that goal, however, because the returns on my MLPs are far outpacing the aggregate rest of my portfolio. Sigh...what a problem!!

      Yes, I am foregoing the tax postponement features on the MLPs. Yes, I will pay full income tax on not only my investment returns from the MLPs, but on the very $$ I invest in MLPs in the first place. Yes, I wish I had serious investment capital outside of my 401/IRA pools, which I might happily invest in MLPs. No, I do not expect my future income tax rates will be lower than my current rates (true for both my average and marginal tax rates). But in the meantime, I am paying 2 college tuitions, putting new money in my 401k (matched by my company), and investing some of my existing IRA funds in MLPs.

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