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colesull writes:

Is it better or cheaper to invest money in stocks through a Roth IRA account from a online broker and withdrawing the gains, therefore paying the penalty and not having to pay the capitol gains tax like you would in a taxable account? Or to invest in a normal taxable account and pay the capitol gains tax. (If I did the Roth I would open two and use the other one to invest in the Vanguard Index fund for long term growth.)

I reply:

The 10% penalty imposed upon premature withdrawals of earnings from a Roth IRA is imposed in addition to income tax on those earnings, assessed at ordinary income tax rates, not capital gains rates. If you're going to withdraw the earnings before age 59 1/2 for any reason other than a qualified withdrawal (see the Taxes FAQ), put it in a taxable account. But the best option of all in a taxable account is to buy and hold, thereby avoiding tax (until you sell or you die, whichever comes first). --Bob
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