Everyone has his or her own
plans and dreams, so part of Barnett & Company's
initial process in setting up a portfolio is
working with our client to articulate and quantify
investment goals and objectives.
If the investor has funds in both taxable and
tax-deferred accounts, we often recommend that
he or she consider putting income-oriented assets
into existing IRA and tax-deferred accounts
and appreciation-oriented assets into personal
accounts.
• Theoretically, there is no difference
to an investor whether returns generated from
a tax-deferred account come from income or from
appreciation since, with the exception of Roth
IRAs, all returns are taxed as ordinary income
when they are distributed. In reality, however,
income is generally more predictable than appreciation.
• Should appreciation become depreciation,
capital loss from a taxable account can be used
to offset capital gains elsewhere. No such offset
is available to a tax-deferred investor.
• Since capital loss in a tax-deferred
account cannot be replaced by larger contributions
in future periods, any principal lost in a tax-deferred
investment represents an immediate loss as well
as a loss of the capital's earning power during
future periods.
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