Rebalancing at the top

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Hederal
Posts: 13
Joined: Thu Apr 27, 2017 8:18 am

Rebalancing at the top

Post by Hederal » Thu Jan 16, 2020 10:44 am

Hi,
If one were to rebalance within a tax deferred account at the top of the market, would that give one a step up in basis so that when one eventually withdrew funds at the time of retirement the capital gains would be lower?

Silk McCue
Posts: 3864
Joined: Thu Feb 25, 2016 7:11 pm

Re: Rebalancing at the top

Post by Silk McCue » Thu Jan 16, 2020 10:53 am

Hederal wrote:
Thu Jan 16, 2020 10:44 am
Hi,
If one were to rebalance within a tax deferred account at the top of the market, would that give one a step up in basis so that when one eventually withdrew funds at the time of retirement the capital gains would be lower?
There is no step up basis nor capital gains in tax deferred accounts. Regardless of what occurs within the account from a trading and growth perspective all withdrawals are taxed as ordinary income.

Cheers

Pocanutin
Posts: 91
Joined: Mon Aug 16, 2010 10:08 am

Re: Rebalancing at the top

Post by Pocanutin » Thu Jan 16, 2020 10:54 am

not applicable in a tax deferred account.
P

Pocanutin
Posts: 91
Joined: Mon Aug 16, 2010 10:08 am

Re: Rebalancing at the top

Post by Pocanutin » Thu Jan 16, 2020 10:54 am

oops, you beat me to it.....

livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: Rebalancing at the top

Post by livesoft » Thu Jan 16, 2020 11:10 am

Hederal wrote:
Thu Jan 16, 2020 10:44 am
Hi,
If one were to rebalance within a tax deferred account at the top of the market, would that give one a step up in basis so that when one eventually withdrew funds at the time of retirement the capital gains would be lower?
Nope, absolutely not. That's not the way tax-deferred accounts and taxes work. Well, I mean sure, capital gains would be realized by selling, but one doesn't pay capital gains taxes when dealing with a tax-deferred account. All withdrawals are treated as ordinary income with at least one exception: Qualified Charitable Distributions or QCDs.
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Topic Author
Hederal
Posts: 13
Joined: Thu Apr 27, 2017 8:18 am

Re: Rebalancing at the top

Post by Hederal » Thu Jan 16, 2020 5:38 pm

Thanks- had to rebalance and it feels like were at a highpoint in the market and I just wondered what the implications of rebalancing would be, but forgot that the withdraws would all be treated as ordinary income.

Thanks for the reminders.

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