IRA Question?

Question

I have a 401k I converted into an IRA and want to invest it into a mutual fund. What type of tax exposure if any am I exposed to by selling one mutual fund and purchasing another. Does the IRS look at this as a distribution at which they would tax it the same rate or is it exempt from taxes until the time of retirement.

Answer 1

The money is now in an IRA. You don't have to pay taxes unless you take the money out. You can even sell the fund completely and hold the cash in your IRA without paying taxes (bad idea, since cash isn't a good investment, and to spend it, you whave to take the money out, which is taxable)

As long as the mutual funds (outgoing and incoming) are both held in the IRA, you have no tax issue.

However, you may have to pay a fee to sell the old fund or buy the new fund, depending upon your brokerage and the specific funds involved. Check your funds prospectus (both incoming and outgoing funds) and your broker's fee schedule.

Answer 2

Critical issue here. If you rolled your 401(k) assets into a traditional IRA, via the standard transfer procedures, you have not created a taxable event. On the other hand, if you received a check from the employer's plan - with your name on it - you will be penalized for what the IRS calls a pre-mature distribution.

There is never a tax consequence from selling funds or earning income and capital gains from securities as long as they remain under the tax-deferred umbrella of an IRA. One of its key benefits is that you can trade stocks, bonds, mutual funds and profit from selling opportunities without being taxed (again, that's inside the IRA)

As has already been mentioned, if you rolled your account over into a Roth IRA, you should get help from a tax consultant.

Hawk

Answer 3

None.

So basically, you left one company, took the 401(k) funds you'd accumulated while you were working there, and rolled it over into a "Rollover IRA." As long as you haven't cashed anything out this IRA account, where taxes and penalties would apply, it's exempt from taxes until time of retirement.

Answer 4

no tax penalty since its a retirement rollover. If you are in a Roth IRA you may have some tax to pay since a Roth is contributed too with after tax money. A traditional IRA is tax defered until retirement. The money in a ROTH is tax free.

Answer 5

You will not be taxed on the transactions that take place within the IRA. You will olybe taxed u[on removing your money from the IRA and you will be taxed at your ordinary income tax rate (+ penalty if it is before age 59.5).

Answer 6

the amount the gov takes for taxes on 401 u will get penalized cuz u converted now u want to do it again ask a stock broker tip Microsoft timewarner all fibro Ill get back what u lose good luck i know of others just cant remember back round to be precise