Should I sell taxable account?

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TMCD75
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Should I sell taxable account?

Post by TMCD75 » Fri Aug 05, 2016 12:21 pm

I need to fund my wife's Roth and my Roth IRA for this year. I've got 41k in a money market account, it's my emergency fund. I was going to tap into it and fund our Roths, but we are moving next month and the job prospects are dicey. I'm scared to take 11k out of that money, we might need it until we get on our feet.

Question, I've got 21k in a Franklin Templeton mutual fund that is a taxable account. I'm firmly in the 15% tax bracket and even if I sold this account, I would still be in the 15% tax bracket. Shouldn't I sell this off and use that money to fund our Roth IRAs?? I guess I could sell half of it? Thoughts?

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Christine_NM
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Re: Should I sell taxable account?

Post by Christine_NM » Fri Aug 05, 2016 12:36 pm

I would cash out the FT fund and add to the emergency fund for now.

When you are settled and do not need the emergency fund, do the Roth contributions for this year. You have until April 2017 I believe. With any luck you can make the 2017 contributions early. It is nice to make early Roth contributions, but not if you really need the money to live on.

One of the worst mistakes IMO is to put too much in a Roth retirement fund, and get in the habit of taking withdrawals from it, i.e., treating it like an emergency fund. Put in what you can afford, when you can afford it, and leave it there to grow.

GL
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livesoft
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Re: Should I sell taxable account?

Post by livesoft » Fri Aug 05, 2016 12:57 pm

I think you should sell the F-T fund because F-T funds have high fees and poor returns.

Yes, you should contribute to your Roth IRAs, but you have until April 2017 to do so.

Do you see that your taxable account is just an extension of or another tier of your emergency fund?
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TMCD75
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Re: Should I sell taxable account?

Post by TMCD75 » Fri Aug 05, 2016 1:06 pm

Yes I see that, especially if you are in the lower tax brackets where you owe zero capital gains tax if you choose to tap into the money. I have always been reluctant to cash out my FT account because my grandfather started it for me 28 years ago with a $500 investment, I'm very emotionally attached to it.

I still think it's the correct thing to do because I'm in the 15% bracket and will be for the foreseeable future. I just don't want to sell it and get blindsided with a big tax hit.

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Christine_NM
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Re: Should I sell taxable account?

Post by Christine_NM » Fri Aug 05, 2016 1:39 pm

Cap gains rate may not always be zero for 15% income tax bracket. Sell FT while you can do it tax-free and put the proceeds into Roths, also tax-free. Your grandfather would want you to do this. :happy
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tampaite
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Re: Should I sell taxable account?

Post by tampaite » Fri Aug 05, 2016 5:17 pm

TMCD75 wrote:but we are moving next month and the job prospects are dicey.
Thoughts?
Do nothing. Since you are moving in about a month and you have until year-end to fund Roth - Wait - see how the moves goes.

Stonebr
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Re: Should I sell taxable account?

Post by Stonebr » Fri Aug 05, 2016 8:08 pm

Christine_NM wrote:Cap gains rate may not always be zero for 15% income tax bracket. Sell FT while you can do it tax-free and put the proceeds into Roths, also tax-free. Your grandfather would want you to do this. :happy

+1 Zero tax is a gift. Assuming you see the light and want to Bogle-ize your future, ditching the Franklin-Templeton fund is the thing to do. Fund the Roths. You have a healthy emergency fund to protect yourself in the case of a dicey employment future.
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