Okay. If I can only put 5000 into a traditional IRA a year. what if i want to invest more than 5000 dollars into the same fund. can i not just invest more than the 5000 and get no tax break for the additional funds? or do i really need to buy a separate identical mutual fund?
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You can invest as much as you want outside of an IRA. I do it.
You are correct that there is no tax break. In fact any dividends and capital gains will be taxed as earned. I max out my 401k, Roth IRA and still invest more in mutual funds and other accounts. To me, the taxes are a small price to pay for the flexibility to do whatever I want with the money when I want to do it.
If you really like a fund, you could by it in an IRA and outside the IRA. You would have to open separate accounts though. You can not commingle the money.
You can invest in stocks and funds outside if the IRA. The max contribution if you’re under 50 is $5,000. You pay regular income tax on traditional IRA withdrawals at retirement.
That’s why ROTH IRAs are better.
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