Random financial questions.

[Zebedee DuBois]

Things that I should know, but somehow don't:

1.) How are short term and long term capital gains different?(other than the time of ownership) Are they taxed at different rates? Why?

2.) When the day comes to start taking money out of IRAs and 401ks, how is that money taxed. Will I need a cost basis? (bless my spotty record keeping)

3.) Why would I pose these questions to an internet football forum, instead of some reputable source?

4.) What happens to all the helium when it reaches the top of the atmosphere?

Thank you for your consideration.

[Simplex3]

I have a couple of ideas on #3...

[Zebedee DuBois]

Well sure....that's a gimme.

[jrowe]

Things that I should know, but somehow don't:

1.) How are short term and long term capital gains different?(other than the time of ownership) Are they taxed at different rates? Why?

2.) When the day comes to start taking money out of IRAs and 401ks, how is that money taxed. Will I need a cost basis? (bless my spotty record keeping)

3.) Why would I pose these questions to an internet football forum, instead of some reputable source?

4.) What happens to all the helium when it reaches the top of the atmosphere?

Thank you for your consideration.


1. Long term gains taxed at 15 or 5% depending on your tax bracket. Taxed at lower rates to encourage investment in the economy. Short term gains taxed as ordinary income.

2. IRA and 401k money is taxed as ordinary income at your regular tax rates. No need for cost basis unless you have non-qualified contributions (very rare).

3. B/C I know what I'm talking about.

4. Joins other atmospheric gases for a great party - they all talk in high pitched voices to one another.

[alnorth]

3. B/C I know what I'm talking about.

I concur, these answers are correct.

To add a couple other wrinkles, in general if you take money out before you reach 59 1/2, you will have to pay a 10% penalty in addition to the taxable ordinary income.

There are creative exceptions around this penalty, such as making a 72(t) election on an IRA, where you calculate a specific amount of money to take out based on life expectancy as ordinary income, but doing that usually commits you to receiving this money for several years. (5 years or 59 1/2, whichever is longer)

I believe there may also be specific exceptions in Roth accounts for things like first-time home buyers under a certain amount of money, but I dont know the specific numbers on that rule.

[chubychecker]

If you have a Roth you can remove the Principal at any time at no penalty or taxes, just can't touch the interest. Like alnorth said you can take principal and interest for certain qualified expenses. This is why many people fund their Roth's with the idea to be used for education expenses for children.