The little that I understand tells me that if I take money out from a particular fund, I have x number of days to "roll it over" into a new investment, eg, a mutual fund, ohterwise I will be taxed on the amount.Please explain. If the answer is yes, Does this apply only to IRAs? Can I roll the money into stocks, for example, Johnson and Johnson or some other company?Thank you,GilbertPS: where can I read more about this topic?
Not quite.Assuming you are talking about retirement savings accounts, such as a 401k or an IRA, moving money in and out of a particular investment (mutual fund or equity position) within the account is not a taxable event. If you take a distribution out of the account, then it because a taxable (and if under age 50 1/2 a penalized) event. Bottom line is you can invest in anything your IRA account allows, from CDs to mutual funds to ETFs to equities. You can sell under performers and buy into investments with greater potential. You can do this as often as you want, although each transaction will likely cost you a transaction fee. Note that with a 401k, you may not have access to a full range of mutual funds or the ability to trade equities and ETFs. But the same rules apply - you can move funds around between investment options without incurring any tax liabilities or penalties, you just can't pull money out until you reach retirement age.FuskieWho cautions that most mutual funds have penalties for selling positions within a 90 days of purchase (or other specified time period)...
Fuskie has explained it well, but, let me say it another way to make sure you are not confused.First of all, the source of information about IRAs is IRS Publication 590.http://www.irs.gov/pub/irs-pdf/p590.pdfThe term “rollover” is generally used when a 401k (or similar) account is moved to an IRA or sometimes when a change is made to the custodian that holds an IRA.The rule you are perhaps referring to is the fact that if money is taken out of a tax deferred account (401k or IRA) you have 60 days to put it back into another tax deferred plan or you will be taxed on the amount and perhaps be subject to a penalty.Within a tax deferred account money can be moved between investment without penalty or being subject to tax. So you can sell one fund and replace it with another or with individual stocks, bonds, CDs, etc.Transactions of buying, selling, and transferring investments within a taxable account does create a taxable event so you would be subject to capital gains (if any) tax.Bob
Thank you, Bob. Thank you for your "sense" of persons whose investing knowledge is very much lacking and go the extra mile to simplify.
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