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This is probably a really stupid question but if I set up a Roth account with an online broker, am I free to buy/sell stocks as much as I want within this account without being charged taxes from the govt on its growth? I've never had the opportunity to actually buy stocks with a retirement account because my 401K has always been in Vanguard Mutual Fundss offered with my company's plan. A year ago I started putting month into a Roth and decided I would rather have control over it than letting the financial planner collect on the front end of the Mutual Fund he recommended.

So, I set up a Roth account at FolioFN.com and had the funds from the other Roth account sold to cash and transfered into this new Roth account I have added onto my FolioFN account (it is separate from my non-retirement stuff there).

I do understand the difference between retirement investing/funding and regular investing accounts. I just wanted to make sure I was free to buy/sell anything (such as stocks) with the Roth just like I do with my regular (non-retirement) account so long as I don't take money out of it due to the penalties.

Thanks in Advance,
Andre
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>> This is probably a really stupid question but if I set up a Roth account with an online broker, am I free to buy/sell stocks as much as I want within this account without being charged taxes from the govt on its growth? <<

For once, a tax question with a simple answer!

Yes.

As long as you withdraw until age 59.5 *and* after you've had the account open for five tax years, anyway. Which goes to show that the answer to tax questions is almost never one word!

#29
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Hi Andre,

Yes, you can buy and sell stocks with no tax consequences. The only restriction I know is that you can't sell something you don't have possession. That is, you can't buy a stock today and sell it tomorrow. The buy has to clear the 3 day settlement period before it can be sold. If you violate this, your account can be suspended for 90 days.

Calvin
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Thanks for the quick responses 29 and Calvin! I figured that would be the answer, but just wanted to make sure. :)

Thanks,

-Andre
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I just wanted to make sure I was free to buy/sell anything (such as stocks) with the Roth just like I do with my regular (non-retirement) account so long as I don't take money out of it due to the penalties.

ziggy answered your main question. Unfortunately the full answer isn't as easy as it looks. You appear to be trading in both a Roth IRA and a regular taxable account. When you do that, you should be aware of wash rules. It is unclear at this time that if you sell a stock in your taxable account at a loss and then rebuy the same stock in your Roth IRA within 30 days, you can declare the loss on your tax return without violating the wash rule. Some people say yes and some say no. As far as I know, this issue has not been settled by the IRS yet.

IF
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One more thing I can think of. IRAs can't be used as collateral, so you can't buy on margin or sell short. (Most brokers deal with this automatically so you can't go astray inadvertently.)

Phil
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The trading costs are also taken out of the retirement funds so in a Roth your trading costs will be significantly higher if you are an active trader in a Roth account since you will be paying these with after tax dollars.

It's not clear-cut, but an argument can be made that your most aggressive and risky stock choices should be made in a non-retirement account so that you can take the capital loss if it doesn't work out.

Greg
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It's not clear-cut, but an argument can be made that your most aggressive and risky stock choices should be made in a non-retirement account so that you can take the capital loss if it doesn't work out.

I actually take the opposite approach. My view is that my more aggressive and risky choices are things I may want to get out of quicker once my target price is reached - or if I fear a pullback. Since there are no taxes to be paid currently in a retirement account, I try to put the riskier things there since taxes (i.e. think gains) aren't a consideration. In the taxable account, I take more of a buy and hold approach since the long term cap gains benefit is always a consideration.
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