Mutual Funds for Retirement

One reason to consider saving for retirement with mutual funds is the tax implications of doing so.  In particular, the focus is on equity- or stock-oriented mutual funds.  Some stocks pay dividends, and if those dividends are first taxed at the corporate level (meaning that the company pays federal income taxes), then the dividends paid to you are considered “qualified” dividends. 

 

When you purchase an asset and sell it for a price greater than the price you paid for it, the difference (profit) is known as a capital gain.  When you’ve owned that asset for more than twelve (12) months, that capital gain is considered a long-term capital gain.  Conversely, owning an asset for less than twelve (12) months and selling it for a profit is considered a short-term capital gain.

 

It’s important to know that the tax rates for income earned from qualified dividends and long-term capital gains is less than ordinary income tax rates.  Sources of ordinary income include income such as 401(k) withdrawals, IRA withdrawals, pension and/or annuity payments, and rental income. 

 

Ordinary income tax rates can be as high as 37%, but qualified dividend and long-term capital gains tax rates are substantially lower.

 

For 2024:

                If you are single and your income is less than $47,025

                If you are married, file a joint tax return, and your income is less than $94,050

                If you are head of household and your income is less than $63,000

                If you are married, file separate tax returns, and your income is less than $47,025, then

               

The maximum tax rate on qualified dividends and capital gains is zero percent (0%). 

 

For persons that earn more than the amounts listed above, the maximum tax rate on qualified dividends and long-term capital gains is only fifteen percent (15%), and for high-income earners, those in the 37% tax bracket (single earners at $518,901 and above; married, filing jointly earners at $583,751 and above), the maximum tax rate for qualified dividends and long-term capitals gains is 20%.

 

To learn more about whether you can benefit by saving for retirement with mutual funds, please contact Jones Wealth Management Group at 901-312-9166 and schedule a no-cost, phone or in-person consultation or click here.  Jones Wealth Management Group does not provide tax advice.  Please consult your tax professional as it pertains to your situation.  As always the final decision is always the client’s.  This information should not be used as a basis for tax advice. In any specific case, the parties involved should seek the guidance and advice of their own tax counsel.​

​

Investors should consider the investment objectives, risks and charges and expenses of the funds carefully before investing. The prospectus contains this and other information about the funds. Contact Martavius D. Jones at 280 Hernando Street, 2nd Floor, Memphis, TN 38126 or 901-312-9166 to obtain a prospectus, which should be read carefully before investing or sending money.