Tax Advantages of ETF’s over Mutual Funds.
Once a person reaches 70 1/2 years of age and must start withdrawing from his/her IRA, the urgent question is: What investments can I use in my taxable account to minimize the federal income tax? (Florida has no state/city income taxes.) Do ETF's offer any tax advantages over Mutual Funds? Thank you in advance for your kind reply.
Terry Says
Mutual funds held OUTSIDE a retirement account do distribute income and capital gains on an annual basis; so you'll have to include that on your tax returns. ETFs also payout dividends on shares held in the fund -- typically quarterly. But since they hold a fixed basket of stocks, and don't sell them, you won't get hit with a capital gains distribution (or loss) at year end. The gain or loss comes when you sell the shares of the ETF.
