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Author: gemini1 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76398  
Subject: Roth Ira Excess? Date: 8/19/1998 3:21 PM
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Hi....
I opened a self directed Roth Ira with $2000.... Question is, if I buy shares in a company and the amount invested goes over a 2000 limit ( for example , by the time my order goes thru the share price may go up) what happens with my Roth ? Am I penalized etc. or what?....any help with this confusion would be appreciated......debbie
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Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 5068 of 76398
Subject: Re: Roth Ira Excess? Date: 8/19/1998 4:21 PM
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Greetings, Debbie, and welcome. You asked:

I opened a self directed Roth Ira with $2000.... Question is, if I buy shares in a company and the amount invested goes over a 2000 limit ( for example , by the time my order goes thru the share price may go up) what happens with my Roth ? Am I penalized etc. or what?

Let's say you buy 100 shares of GeeGaw at $20 per share. You have a kind broker who charged no commission, so you used up the entire $2,000. Five minutes later the shares are worth $40 each, or $4,000 total, and you have turned a quick profit of $2K. You sell for that gain. What happens? Nothing. The money is still inside the IRA, so no taxes are due. Leave it there for five years and until you're 59 ½, and it all comes out tax free.

I think that's what your question was driving at. However, if you really meant what happens if the price rises before your order actually gets filled, that's another story. You won't have enough cash in the account to cover the order, so most likely the broker will just cancel the order. That's why with market orders you should always leave a little cash in the account to cover an unexpected price rise between the time your order is placed and the time it's executed. That way the order gets filled.

Regards….Pixy


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