KM
Recycles dryer sheets
- Joined
- Jan 1, 2007
- Messages
- 481
I have two questions that I was hoping someone might have some opinions on.
First, does it ever make sense to sell taxable mutual funds (paying a gain) to move them into a Traditional IRA, even if the contribution itself is not deductible? Assume I have no other way to get money into the Traditional IRA, as we are maxing out pre-tax contributions wherever we can, so we have no extra money laying around. I either sell taxable mutual funds or nothing goes in. Right now I am thinking of selling $10,000 a year ($5,000 for each of us) for the next 6 years. Also assume I would not need to touch these Traditional IRAs for at least 15 years. I am thinking that the tax on the gain will be offset by the reduction in taxes over the next 15 years on the dividend income??
Second, does it ever make sense to sell off a taxable mutual fund and pay the gain to consolidate with another fund and reduce expenses. I currently hold a mutual fund with fees at 1.18%. I hold a number of mutual funds with Vanguard and would like to move this small growth fund over to Vanguard’s Small Growth Index. But I would end up paying capital gains on about $9000. At 15%, that would be $1350 in taxes. Somehow this doesn’t feel good. Is there a better way to do this or should I just leave the money where it is? There is nothing particularly wrong with this mutual fund – I am just looking to start consolidating my accounts to Vanguard. Or is this something better to do when I retire in 6 years? Or is this just an all-around bad idea?
First, does it ever make sense to sell taxable mutual funds (paying a gain) to move them into a Traditional IRA, even if the contribution itself is not deductible? Assume I have no other way to get money into the Traditional IRA, as we are maxing out pre-tax contributions wherever we can, so we have no extra money laying around. I either sell taxable mutual funds or nothing goes in. Right now I am thinking of selling $10,000 a year ($5,000 for each of us) for the next 6 years. Also assume I would not need to touch these Traditional IRAs for at least 15 years. I am thinking that the tax on the gain will be offset by the reduction in taxes over the next 15 years on the dividend income??
Second, does it ever make sense to sell off a taxable mutual fund and pay the gain to consolidate with another fund and reduce expenses. I currently hold a mutual fund with fees at 1.18%. I hold a number of mutual funds with Vanguard and would like to move this small growth fund over to Vanguard’s Small Growth Index. But I would end up paying capital gains on about $9000. At 15%, that would be $1350 in taxes. Somehow this doesn’t feel good. Is there a better way to do this or should I just leave the money where it is? There is nothing particularly wrong with this mutual fund – I am just looking to start consolidating my accounts to Vanguard. Or is this something better to do when I retire in 6 years? Or is this just an all-around bad idea?