Taxes on Cap Gain Distributions and Dividends in a self directed IRA. How to handle at age 65 ?

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Gaspar18
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Taxes on Cap Gain Distributions and Dividends in a self directed IRA. How to handle at age 65 ?

Post by Gaspar18 » Fri Sep 14, 2018 3:23 pm

Hello everyone,

If my question is a little basic, it's because I am a novice investor..

I am likely to roll over my old 401k into a self directed IRA at either Vanguard or Merrill Edge.

The funds that I will choose will be similar to the Bogleheads recommended 3-fund portfolio, as recommended by people in this forum.

Most stock funds have three taxable events: capital gains distributions, capital gains, and also dividends. Am I correct in thinking that in a traditional IRA, I don't have to worry about taxes incurred by these three taxable events until I am 65 ?

Also, when I am 65, how do I handle the taxes that are generated by these taxable events ?

Thanks for your time and info.
Last edited by Gaspar18 on Fri Sep 14, 2018 3:48 pm, edited 1 time in total.

FactualFran
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Re: Cap Gain Distributions and Dividends in a self directed IRA. How are Taxes Handled at 65 ?

Post by FactualFran » Fri Sep 14, 2018 3:37 pm

You do not have to worry about taxes on the distributions of investments held in a IRA. You do not have to worry about taxes until you take money from the IRA, ignoring extreme circumstances, such as contributing too much to an IRA.

Gaspar18
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Re: Taxes on Cap Gain Distributions and Dividends in a self directed IRA. How to handle at age 65 ?

Post by Gaspar18 » Fri Sep 14, 2018 3:52 pm

At age 65, when I withdraw money out of the IRA, do I have to figure out all the gains and distributions for the taxes, or is the withdrawal treated as if it were a salary/wages ?

jebmke
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Re: Taxes on Cap Gain Distributions and Dividends in a self directed IRA. How to handle at age 65 ?

Post by jebmke » Fri Sep 14, 2018 3:53 pm

Gaspar18 wrote:
Fri Sep 14, 2018 3:52 pm
At age 65, when I withdraw money out of the IRA, do I have to figure out all the gains and distributions for the taxes, or is the withdrawal treated as if it were a salary/wages ?
It will be reported on the 1040 (or whatever form is the main form) as ordinary income.
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Raybo
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Re: Taxes on Cap Gain Distributions and Dividends in a self directed IRA. How to handle at age 65 ?

Post by Raybo » Fri Sep 14, 2018 3:55 pm

The money taken out of an IRA after 65 has a separate line on the 1040. It is neither salary (no Social Security taxes are due on it) nor investment income, which has separate tax rules. Every dollar you take out of an IRA is taxed the same regardless of what it is: gain, loss, original contribution.
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Gill
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Re: Taxes on Cap Gain Distributions and Dividends in a self directed IRA. How to handle at age 65 ?

Post by Gill » Fri Sep 14, 2018 4:02 pm

Raybo wrote:
Fri Sep 14, 2018 3:55 pm
The money taken out of an IRA after 65 has a separate line on the 1040. It is neither salary (no Social Security taxes are due on it) nor investment income, which has separate tax rules. Every dollar you take out of an IRA is taxed the same regardless of what it is: gain, loss, original contribution.
Original contribution is not taxed if it wasn’t deductible.
Gill

Gaspar18
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Re: Taxes on Cap Gain Distributions and Dividends in a self directed IRA. How to handle at age 65 ?

Post by Gaspar18 » Fri Sep 14, 2018 4:19 pm

Do I have to take taxes into consideration when setting up a self-directed IRA ? I'm rolling over an old 401k into this IRA.
FactualFran wrote:
Fri Sep 14, 2018 3:37 pm
You do not have to worry about taxes on the distributions of investments held in a IRA. You do not have to worry about taxes until you take money from the IRA, ignoring extreme circumstances, such as contributing too much to an IRA.
Raybo wrote:
Fri Sep 14, 2018 3:55 pm
The money taken out of an IRA after 65 has a separate line on the 1040. It is neither salary (no Social Security taxes are due on it) nor investment income, which has separate tax rules. Every dollar you take out of an IRA is taxed the same regardless of what it is: gain, loss, original contribution.
Thanks for your input.

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