Move brokerage losses to Roth IRA

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Topic Author
too_rich
Posts: 38
Joined: Sun Sep 15, 2019 7:27 pm

Move brokerage losses to Roth IRA

Post by too_rich »

hello guys, I have stocks and mutual funds in my brokerage account that show long and short-term capital losses.

I would like to roll these over into my Roth IRA. I know this would trigger a taxable event however I don't think I would have any tax due.
Am I correct on this?
"Life is hard, but it's harder when you're stupid!" | John "Duke" Wayne | | "The child is the father of the man" Wordsworth
sailaway
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Re: Move brokerage losses to Roth IRA

Post by sailaway »

You can only rollover from a traditional account to a Roth IRA.

Or are you meaning you want to sell from your taxable brokerage to fund your Roth IRA this year?

If you have losses in a brokerage account, you will not owe taxes. However, be sure you understand which system you are are using to identify what you want to sell (average/FIFO/LILO/ Spec ID).
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retired@50
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Re: Move brokerage losses to Roth IRA

Post by retired@50 »

too_rich wrote: Wed Jun 22, 2022 2:45 pm hello guys, I have stocks and mutual funds in my brokerage account that show long and short-term capital losses.

I would like to roll these over into my Roth IRA. I know this would trigger a taxable event however I don't think I would have any tax due.
Am I correct on this?
There are two ways to add money to a Roth IRA.

1. Contribution.
2. Conversion (from a Traditional tax-deferred IRA).

Which do you have in mind?

See links:
Contributions are covered in this page (including info about annual contribution limits)
https://www.bogleheads.org/wiki/Roth_IRA

Conversions are covered in this page:
https://www.bogleheads.org/wiki/Roth_IRA_conversion

Regards,
This is one person's opinion. Nothing more.
Topic Author
too_rich
Posts: 38
Joined: Sun Sep 15, 2019 7:27 pm

Re: Move brokerage losses to Roth IRA

Post by too_rich »

Thank you yes I do want to sell from my brokerage account my stocks and bonds that have losses and then use the proceeds to contribute to my Roth IRA.
I am over 60 years old so I think I can contribute a total of $7000 per year to my Roth IRA.

Please explain how the lifo fifo affects transactions like this
"Life is hard, but it's harder when you're stupid!" | John "Duke" Wayne | | "The child is the father of the man" Wordsworth
sailaway
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Re: Move brokerage losses to Roth IRA

Post by sailaway »

too_rich wrote: Wed Jun 22, 2022 2:58 pm Thank you yes I do want to sell from my brokerage account my stocks and bonds that have losses and then use the proceeds to contribute to my Roth IRA.
I am over 60 years old so I think I can contribute a total of $7000 per year to my Roth IRA.

Please explain how the lifo fifo affects transactions like this
Depending on the accounting method, you could accidentally sell lots that have gains, rather than the ones that have losses.

You mention age as a factor for Roth contributions, but do you also have earned income?
Longdog
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Re: Move brokerage losses to Roth IRA

Post by Longdog »

too_rich wrote: Wed Jun 22, 2022 2:58 pm Thank you yes I do want to sell from my brokerage account my stocks and bonds that have losses and then use the proceeds to contribute to my Roth IRA.
I am over 60 years old so I think I can contribute a total of $7000 per year to my Roth IRA.

Please explain how the lifo fifo affects transactions like this
Don’t purchase the same securities in your Roth IRA that you are selling at a loss in your taxable account, unless you wait at least 30 days to do so. If that’s your intention, I’d encourage you to familiarize yourself with wash sale rules.
Steve
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celia
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Re: Move brokerage losses to Roth IRA

Post by celia »

Why would you even want losses in a Roth? This is where you want to maximize your growth since it will be tax-free when you withdraw (after you are 59.5 and the Roth is at least 5 years old).

It is not clear if you already realized the loss or are planning to. If the potential loss is in taxable, why wouldn’t you want to realize the loss there so it can cancel out future gains (or lower your taxable income)? Having a loss in tax-deferred is also ok since that will keep your tax-deferred from growing too fast and possibly giving you larger RMDs that might push you into higher tax brackets.

Also note that contributions to tIRAs or Roth IRAs must be in cash, not shares. However, you can convert shares in a tIRA to the same shares in a Roth.
Last edited by celia on Wed Jun 22, 2022 3:08 pm, edited 1 time in total.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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CAsage
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Re: Move brokerage losses to Roth IRA

Post by CAsage »

Selling taxable brokerage assets is a completely separate transaction from funding a Roth IRA. There's no connection, no transfer. Sell the brokerage assets, pay taxes on any gains, deduct any losses against other income (and enjoy a tax break?). Then, you take CASH (from there, or your pocket, or under the mattress...) and fund your Roth IRA, up to the limits based on your age and employment earnings. To avoid wash sales, buy the nearest equivalent thingy in your Roth (similar fund, ETF, whatever). With stocks down, this is probably a good time to rebalance or buy more stock but that's anyone's guess.....
Salvia Clevelandii "Winifred Gilman" my favorite. YMMV; not a professional advisor.
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BL
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Re: Move brokerage losses to Roth IRA

Post by BL »

If you are qualified (working) to contribute to a Roth IRA, it doesn't matter where the money comes from.

If you are talking about converting an IRA to a Roth IRA, then I think the answer is no.

A second issue is how to sell to get the most out of your losses. Most here use Specific Id (set up not immediately before selling) so you can pick out each lot of new or reinvested purchases that has a loss. If the whole fund is sold, it doesn't matter.

Depending on your tax bracket, etc., you may want to sell every lot with a loss or just $3000 which you can use against this year's income if it is not used up off-setting capital gains. If you have re-invested or purchased more of this fund 30+ days before/after the sale (and don't sell it), you may have a wash sale and don't get credit for the loss, so don't buy the same fund in the Roth.
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cchrissyy
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Re: Move brokerage losses to Roth IRA

Post by cchrissyy »

do you (or a spouse) have earned income this year?

you can't contribute to a roth ira without earned income.

you can convert from another ira, but you can't contribute new money just whenever you want to.
comfortable being all stock until age 40, now working towards 60-20-20 us-intl-bond
Topic Author
too_rich
Posts: 38
Joined: Sun Sep 15, 2019 7:27 pm

Re: Move brokerage losses to Roth IRA

Post by too_rich »

Hi guys, thanks for all the great answers I have to reconsider some things

I'm retired but run a small business so I have business income and I need to project what my income will be this year
"Life is hard, but it's harder when you're stupid!" | John "Duke" Wayne | | "The child is the father of the man" Wordsworth
an_asker
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Re: Move brokerage losses to Roth IRA

Post by an_asker »

too_rich wrote: Wed Jun 22, 2022 2:45 pm hello guys, I have stocks and mutual funds in my brokerage account that show long and short-term capital losses.

I would like to roll these over into my Roth IRA. I know this would trigger a taxable event however I don't think I would have any tax due.
Am I correct on this?
If you have lost money, then having the mentality that "I wouldn't have any tax due" is not correct. You should be thinking along the lines of "how do I harvest this tax loss?" as you should be able to use this to reduce your taxes.
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