ripvanwinkle
Well-Known Member
All that is necessary for evil to succeed is that good men do nothing - Edmund Burke 1729 -1797
Joined: Jan 9, 2011 22:36:42 GMT -5
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Post by ripvanwinkle on Nov 16, 2015 20:50:49 GMT -5
I have a few questions about my Roth IRA. I know a few basics (tax free withdrawal, no contribution credit etc) but not clear on a few other things. I'm 64.
1. Capital gains - If I buy 100 of xyz stock at $20 and it goes up to $40, I don't pay anything on upon cashing out. Is it because I pay the taxes on my gains each year before I cash out?
2. Dividend reinvesting - Is this the same scenario?
3. My heirs - Say I accumulate $100k and cash out. It's 100% tax free to them. Same scenario?
Thanks
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Ombud
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Joined: Jan 14, 2013 23:21:04 GMT -5
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Post by Ombud on Nov 16, 2015 21:56:01 GMT -5
Roth IRAS grow tax free (cap gains + dividends)
Heirs get a stepped up basis in all investments to date of death and wouldn't pay cap gains on those investments either
Scenario: buys 100 xyz @ 20, sells at 40. Gain of 20 per share = 2000 A) sold by investor = 2k taxable B) sold by heir at date of death = 2k not taxable. Sold a little while later for 41 = 2100 gain = 2000 stepped up basis not taxed + 100 long term capital gains taxable (all inherited assets are LT gains) C) in Roth = irrelevant
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ripvanwinkle
Well-Known Member
All that is necessary for evil to succeed is that good men do nothing - Edmund Burke 1729 -1797
Joined: Jan 9, 2011 22:36:42 GMT -5
Posts: 1,327
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Post by ripvanwinkle on Nov 16, 2015 23:54:13 GMT -5
Roth IRAS grow tax free (cap gains + dividends) Heirs get a stepped up basis in all investments to date of death and wouldn't pay cap gains on those investments either Scenario: buys 100 xyz @ 20, sells at 40. Gain of 20 per share = 2000 A) sold by investor = 2k taxable B) sold by heir at date of death = 2k not taxable. Sold a little while later for 41 = 2100 gain = 2000 stepped up basis not taxed + 100 long term capital gains taxable (all inherited assets are LT gains) C) in Roth = irrelevant ?? hmmm... I thought all Roth withdrawals were tax free because I paid all income taxes on my gains each year! "Roth IRAs provide no tax break for contributions, but earnings and withdrawals are generally tax-free. So with traditional IRAs, you avoid taxes when you put the money in. With Roth IRAs, you avoid taxes when you take it out in retirement". Explain where I'm mistaken.
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justme
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Post by justme on Nov 17, 2015 8:50:15 GMT -5
You don't pay taxes each year on gains. It's simply you pay taxes on the money you put in so you pay no taxes when you pull it out. It's what makes Roth IRAs advantageous over a taxable account. There'd be no point to Roth accounts if they were just like taxable.
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Ombud
Junior Associate
Joined: Jan 14, 2013 23:21:04 GMT -5
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Post by Ombud on Nov 17, 2015 9:18:30 GMT -5
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ripvanwinkle
Well-Known Member
All that is necessary for evil to succeed is that good men do nothing - Edmund Burke 1729 -1797
Joined: Jan 9, 2011 22:36:42 GMT -5
Posts: 1,327
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Post by ripvanwinkle on Nov 17, 2015 20:02:21 GMT -5
You don't pay taxes each year on gains. It's simply you pay taxes on the money you put in so you pay no taxes when you pull it out. It's what makes Roth IRAs advantageous over a taxable account. There'd be no point to Roth accounts if they were just like taxable. Sorry. I was confused. The income taxes I paid were for my regular investment account. Not my Roth. Oops. Still not clear on withdrawals. If I have $100k in my Roth I can take it all out for a trip around the world and pay no taxes. Correct?
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justme
Senior Associate
Joined: Feb 10, 2012 13:12:47 GMT -5
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Post by justme on Nov 17, 2015 20:13:51 GMT -5
Assuming you're eligible to take it out penalty free, yes no taxes.
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