Wednesday, July 21, 2021

I Mentioned a Few Weeks Back That Money Not in an IRA or 401k Has Some Advantages

Primarily that selling mutual funds, stocks, or bonds tonly produces a capital gains tax, unlike IRA distribution which are treated as regular income with the typical income tax rate.

I decided that I could use a bit more income to spend on travel.  I discovered that one of my mutual funds in my non-IRA account has actually lost value since I invested in it.  This means that withdrawing 0.5% every month will produce a capital loss.  This will offset any capital gains elsewhere.   I doubt it will be enough to reach the $3000 annual carryover but still nice way to reduce total income tax. 


  1. The other advantage is having access to the money before you reach 65, or whatever the "approved" withdrawal date. The penalty/tax for early withdrawal date is fairly steep.

    I wouldn't have been able to retire early if all my funds were in an IRA/whatever

  2. Roth IRAs are funded with after-tax money, so their distributions are tax-free.