The Motley Fool Discussion Boards
Investing/Strategies / Retirement Investing
|Subject: Re: What to do with a losing IRA||Date: 11/26/2004 11:08 PM|
|Author: Mark0Young||Number: 43299 of 78299|
1. Hold onto the fund indefinitely, continuing to contribute, thus lowering my average cost.
If your investment plan calls for holding this fund, hold it.
But if today you would purchase another fund, then sell and buy the desired fund inside your Roth IRA. Depending on who your Roth IRA custodian is, this might involve transferring your Roth IRA over to a new custodian (e.g., when I moved my Roth from a load fund family over to Vanguard).
It is a mistake to hold on to an investment until it recovers if one intends on selling it anyway.
2. Cash out and reinvest the money in my brokerage account. I am not sure though if there is a penalty for me cashing out since I have sustained a loss. Anyone know?
If you transfer your Roth IRA over to your brokerage, there is no tax penalty.
If you pull your money out of the Roth IRA (as opposed to transferring the Roth IRA), that money will no longer be available for tax-free growth. And the tax deduction for liquidating all your Roth IRA accounts and withdrawing all your money is small because you can only deduct the difference between the total of all contributions and the total of all withdrawals (assuming the total of all withdrawals is less than the total of all contributions) and that goes on Schedule A in the section subject to 2% AGI exclusion, and even then the bottom line of Schedule A has to exceed your standard deduction before you receive any benefit. So, if the dollar amount of the total loss is less than 2% of your AGI, you have no benefit from liquidating your Roth IRA account.
3. Roll what is left into a different