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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. 
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2 comments:

  1. Zendo DebJuly 21, 2021 at 12:46 PM

    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

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  2. RogerJuly 21, 2021 at 4:01 PM

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

    ReplyDelete