Re: IRA Help for a Professional Poker Player
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I'm thinking of just putting into a taxable account and paying a capital gains tax of 15% when I withdraw it.... am I correct in this thinking?
What about paying taxes on the gains each year.. is this an option?
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In taxable investment accounts you have to pay the taxes every year. As a professional poker player, you will have to pay at the highest rates. If you make $200k+ per year you should contact a reputable accountant and look into SEP-IRA's and Individual IRA's. The benefits are that you'll be able to save up to $40k per year, pre-tax (so you pay less taxes), if you file correctly.
Once in those accounts any gains will accumulate tax free until you retire. Of course you'll have to pay the 10% penalty to withdraw before age 59.5. At your income levels it's worthwhile to max out your IRA/401k, and save some more on the side for houses and emergencies.
Let's say you can earn 10% investing in the stock market, but pay 2% per year taxes in a taxable account. The difference between between getting 10% and 8% turns $40k into $270k in 20 years, instead of 186k. Now imagine how much money you'll have if you save $40k a year in your SEP-IRA for 20 years? I don't have time to do the calculation, but it's a lot...
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