Not that I will do anything like this. But it was more of a mental exercise. Please feel free to tell me if I have gotten any of this wrong.
So with all of the craze of buying meme stocks like AMC or GME. I got to thinking. What if I gambled a bit, just to see what would happen. You never know. A very few of those folks did become millionaires in a very short amount of time. But then I realized, if you did this in a brokerage account, it would actually be a foolish move.
Because let’s say you lucked out and hit it big. Like millions sorta big. Well if you try to get your money out, gonna get hit with a 37% tax. That is a lot of money to lose. You could let it ride for a year to get to long term capital gains tax of 20%, still a lot, and never gonna stay that high for that long.
And then I thought… what about purchasing this inside of my ROTH IRA? Tax free forever, and if I did in fact hit it big, the very next day I could transfer it all into a money market fund and not loose it. And inside of the ROTH it is not a taxible event to move to a different fund. So at 59.5 I would get ALL of it 100% tax free. Not 37% tax, or 20% tax… NO tax! [emoji3][emoji106]
And even if I wanted to get to it early, I still still pull out smaller amounts at a time. So that would be my standard tax rate, plus 10% penalty. But that would not be on the entire amount, just the amount I would withdraw.
Thanks for taking a look at this. It was fun to think about for a few… [emoji3]
So with all of the craze of buying meme stocks like AMC or GME. I got to thinking. What if I gambled a bit, just to see what would happen. You never know. A very few of those folks did become millionaires in a very short amount of time. But then I realized, if you did this in a brokerage account, it would actually be a foolish move.
Because let’s say you lucked out and hit it big. Like millions sorta big. Well if you try to get your money out, gonna get hit with a 37% tax. That is a lot of money to lose. You could let it ride for a year to get to long term capital gains tax of 20%, still a lot, and never gonna stay that high for that long.
And then I thought… what about purchasing this inside of my ROTH IRA? Tax free forever, and if I did in fact hit it big, the very next day I could transfer it all into a money market fund and not loose it. And inside of the ROTH it is not a taxible event to move to a different fund. So at 59.5 I would get ALL of it 100% tax free. Not 37% tax, or 20% tax… NO tax! [emoji3][emoji106]
And even if I wanted to get to it early, I still still pull out smaller amounts at a time. So that would be my standard tax rate, plus 10% penalty. But that would not be on the entire amount, just the amount I would withdraw.
Thanks for taking a look at this. It was fun to think about for a few… [emoji3]