Capital Gains on IRA v Roth IRA

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Topic Author
Dukie12345
Posts: 11
Joined: Wed Nov 16, 2016 8:11 am

Capital Gains on IRA v Roth IRA

Post by Dukie12345 »

Hi everyone,

Could someone help me with this? I know you don't pay income tax on the Roth IRA compared to traditional IRA, but what about the capital gains/dividends accrued over decades when you take it out for retirement? Are they both taxed or not taxed? I have my capital gains set on 're-invest.'

Thanks!
mcraepat9
Posts: 1827
Joined: Thu Jul 16, 2015 11:46 am

Re: Capital Gains on IRA v Roth IRA

Post by mcraepat9 »

Dukie12345 wrote:Hi everyone,

Could someone help me with this? I know you don't pay income tax on the Roth IRA compared to traditional IRA, but what about the capital gains/dividends accrued over decades when you take it out for retirement? Are they both taxed or not taxed? I have my capital gains set on 're-invest.'

Thanks!
Assuming withdrawn after age 59.5, for cap gains/dividends held in IRAs:

Roth IRA: No tax
Traditional IRA: Taxed at ordinary income tax rate when withdrawn (same treatment as withdrawals of contributions from tIRA)

Setting to reinvest has no impact.
Amateur investors are not cool-headed logicians.
Sailor36
Posts: 21
Joined: Mon May 04, 2015 7:15 pm

Re: Capital Gains on IRA v Roth IRA

Post by Sailor36 »

Dukie12345 wrote:Hi everyone,

Could someone help me with this? I know you don't pay income tax on the Roth IRA compared to traditional IRA, but what about the capital gains/dividends accrued over decades when you take it out for retirement? Are they both taxed or not taxed? I have my capital gains set on 're-invest.'

Thanks!
By current tax law, Roth contributions and gains are not taxed if you take the money out after age 59 1/2, and any money left in the account when you die can be passed to heirs Federal tax free. Heirs do have to take minimum distributions however. Withdrawals of your original contributions before 59 1/2 are also tax free if you have had any Roth account for at least 5 years.

No one knows what the rules might be 40 years from now.
Spirit Rider
Posts: 13977
Joined: Fri Mar 02, 2007 1:39 pm

Re: Capital Gains on IRA v Roth IRA

Post by Spirit Rider »

Sailor36 wrote:Withdrawals of your original contributions before 59 1/2 are also tax free if you have had any Roth account for at least 5 years.
You can withdraw Roth IRA contributions at anytime. It is only the earnings that are subject to taxation if before 59 1/2 and < 5 years from 1/1 of the first Roth contribution.
Topic Author
Dukie12345
Posts: 11
Joined: Wed Nov 16, 2016 8:11 am

Re: Capital Gains on IRA v Roth IRA

Post by Dukie12345 »

Thank you all for the quick responses!
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