Replies to post #218880 on Biotech Values

[xavierprivas]

If I have 100 shares of stock A bought at $10 ($1000), then if I sell
it a year later at $20 I have to pay long term capital gain at 20%
which means I have only $1600 (100 sh * $20 = $2000 - $400 tax) to
buy stock B.

All depends on how much stock A goes up vs stock B. If stock B goes
up a lot more than stock A then you make more money by selling A to
buy B, if B only goes up slightly more than A then it might be
better to keep stock A.

This only comes up with taxable account, not 401k or IRA of any kind.

[Biowatch]

Roth IRA... 100% tax free for ever

Agreed.

As long as you are more than 59.5 years old and have had the ROTH IRA for more than five years, all withdrawals are tax free.

No minimum or maximum withdrawal requirements.

You can continue to contribute or withdraw money, paying tax on that cash up front, without paying taxes on any capital gains, dividends, or interest (or benefiting from losses) on the back end.

The idea behind a traditional IRA is that you will earn far less money in retirement when you need to withdraw cash from that account, hence it won't be such an expensive source of cash, i.e., you'll be in a much lower tax bracket, so capital gains won't matter as much.

With a ROTH, if some of your investments have such a high return that selling them would nail you on capital gains tax and bump you into a higher tax bracket, you needn't worry so much, as since you paid full taxes on the cash up front before you made a fortunate investment, you don't have to pay taxes on capital gains, interest, or interest.

I am not a tax lawyer. Check with someone who is before making relevant decisions.

[DewDiligence]

For large gains, the US federal tax rate is 23.8% (for long-term gains), which brings the combined federal/state rate to about 30% for many investors. But the exact tax rate is immaterial to the basic argument against triggering a capital gain: The tax you pay reduces your asset base from which future investment returns accrue, so deferring the tax as long as possible is the mathematically proper (in)action.

…better alternative that I have followed last few years has been to use my Roth IRA to grow my portfolio.

Well done; however, many investors invest more money in “growth” stocks than their IRAs (and other tax-exempt accounts) will accommodate.

[biotech_researcher]

OT- ROTH- an interesting note that I just found out about this week from a tax advisor; your spouse of course can inherit your ROTH with no concerns in taking the MRD’s, however, a non spouse who inherits a ROTH will be required to take MRD’s based on the original owner’s age.

Also, with a regular IRA, you can “generation skip” without penalties to the next generation..

[zipjet]

>>Roth IRA ... will be 100% tax free for ever is big bonus.

I think that works for older folks, provided you do not live too long.

But my bet is that withdrawals will eventually be taxed as the government, desperate for revenue, looks for new ways to tax people. It could take to form of "means testing" as many including Republicans have proposed for SS or an excise tax.

We are on a track that will lead to taxing the tree, not just the fruit. It would take a radical change to avoid this.

ij