Author Topic: Market Drop and Roth IRA / HSA timing  (Read 417 times)

smoghat

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Market Drop and Roth IRA / HSA timing
« on: October 11, 2018, 05:07:02 PM »
Iíve got a lot of money in the plain vanilla investment accounts. Am I better selling shares now to fund my Roth IRA and HSA or should I wait for a likely bounce before the end of the year. I know, timing the market doesnít work, but letís ignore that. Letís assume it will bounce back to some degree, probably not all the way but maybe half way back. The point is really, better to sell and buy on a dip or on a high?

I know I could solve this in a few seconds by thinking about it, but I have a cold so forgive me, my brain is at 33%.

ILikeDividends

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Re: Market Drop and Roth IRA / HSA timing
« Reply #1 on: October 11, 2018, 05:16:28 PM »
The point is really, better to sell and buy on a dip or on a high?
Ignoring tax consequences, and volatility risk, I don't really think it matters when you do it.

Now if you liquidate at a loss in a taxable account, and then buy back into the same ticker symbol in your Roth account, that would disqualify your tax loss in the taxable account.

I would probably wait for a calmer market to do it though.  In fast moving markets and big swing days, like today and yesterday, you could exit at one price, and buy back in at a very different price, even if only a few minutes apart.

Apart from those caveats, I don't see any advantage at all to trying to time the move.  You sell x number of shares in your taxable account and buy x number of shares in your Roth.  You still end up with roughly the same number of shares working for you.

It's the time gap between when you sell and when you buy back in that volatility could help or hurt you; the smaller the time gap, the less chance volatility has to exert a material effect.  If you extend that time gap wider than you need to, then that would be skating into market timing territory.

This is one of those rare circumstances where I would recommend using margin judiciously, if you needed to in order to pre-stage the funds in your Roth account before executing the two trades.  You could then sell and buy seconds or minutes apart, and only pay margin interest for the few days it takes for the sale in your taxable account to settle.  It's probably the cheapest way to hedge volatility risk, in this kind of maneuver, on offer.

Alternatively, you could "borrow" from your emergency fund to pre-stage the funds in the Roth, and repay it 3 days later when your sale in the taxable account settles.  No margin interest at all.
« Last Edit: October 11, 2018, 09:23:15 PM by ILikeDividends »

smoghat

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Re: Market Drop and Roth IRA / HSA timing
« Reply #2 on: October 12, 2018, 06:43:08 AM »
Thank you. I didnít realize that liquidating at a loss and buying back the same ticker symbol disqualifies the loss. Yes, taxes were the only reason I was thinking this.