Liquidating Taxable Account to Fund Roth IRA?

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CryingHawaiian
Posts: 61
Joined: Thu Nov 09, 2017 2:14 pm
Location: Honolulu, HI

Liquidating Taxable Account to Fund Roth IRA?

Post by CryingHawaiian »

Hi all,

Was wondering if I could get some input/advice on how to fund my Roth IRA contributions for next year.

I want to be able to contribute the maximum annual amount to my Roth IRA in January. I'm currently debating funding it by either liquidating my taxable brokerage account or using funds from my savings account.

My savings account currently has 6-8 months of emergency funds while my taxable brokerage account has positions that I could liquidate with short-term capital losses.

I'm leaning towards liquidating the brokerage account but I also thought: If I use my savings account (emergency fund), I would still have 3-4 months of emergency funds leftover and could fully liquidate the taxable account in case of a real emergency. Unless the taxable account loses 96% of its value, I would be able to liquidate the taxable account to cover a year's worth of emergency funds.

Thanks in advance for any input!
You get what you get and you don’t get upset
bloom2708
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Joined: Wed Apr 02, 2014 2:08 pm

Re: Liquidating Taxable Account to Fund Roth IRA?

Post by bloom2708 »

It is perfectly fine to sell taxable to fund your Roth in January.

Just note your short/long gains as it will likely create a taxable gain.

After our Emergency Fund, I funnel anything extra to taxable. I then sell a bit in early January to fund Roth x 2.
livesoft
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Re: Liquidating Taxable Account to Fund Roth IRA?

Post by livesoft »

You should sell your taxable account shares that have short-term losses before the end of the year regardless of what you do with the money for the tax deduction AND clearing out losers every year. If you sell for a loss, do not buy the same shares in your Roth within 30 days (wait 31 days). You can buy something that is not substantially identical though without any waiting.
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Jerry55
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Re: Liquidating Taxable Account to Fund Roth IRA?

Post by Jerry55 »

And don't forget...you can take two distributions from your taxable accounts. One in 2017, and another in 2018 for two separate tax years.

Then, You can fund your 2017 ROTH IRA in full by April 15, 2018, then fund your Roth IRA for 2018 anytime after that,
or even during that 4 month time period I believe
Retired CSRS on 12/19/2012 @ age 57 w/39 years | Good Bye Tension, Hello Pension !!!
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