Author Topic: I'm thinking that I dont need a Roth anymore  (Read 2202 times)

leighb

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I'm thinking that I dont need a Roth anymore
« on: January 29, 2016, 09:39:48 AM »
Background on me: I've been investing a long time under the tutelage of my father, since high school. He passed a little bit more than a year a ago. Since then, I've come to realize that my risk tolerance is way way lower than his and I want to be less involved daily with my investments. He owed 100% OTC penny stocks, and 80% of that portfolio was invested in one stock in particular. Because of this particular education, I have a bunch of newbie questions about investing like regular folk.

Here's the interesting bit. While I've done my best to get thing moved over to index funds, I have huge losses. They have all occurred since his passing. That one stock in which he had all of his money in is currently delisted. So, I have losses that are currently equivalent or more than my entire net worth, high 6 figures.

Now it's not much of a silver lining, but I'm pretty sure, I will be able to right off all of my future investment gains for the rest of my life.  Does this mean I should be dropping the Roth?

Able was I ERE

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Re: I'm thinking that I dont need a Roth anymore
« Reply #1 on: January 29, 2016, 12:50:01 PM »
Not necessarily.  A Roth IRA would still provide the following advantages:

Geekenstein

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Re: I'm thinking that I dont need a Roth anymore
« Reply #2 on: January 29, 2016, 04:37:29 PM »
+1

While it may seem that you have an endless supply of losses to offset gains, if you are a long-term investor you may never see all that much in gains as you accumulate.  For this reason, as noted above, it may be wiser to let your accumulations grow tax-deferred if you can. 

dandarc

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Re: I'm thinking that I dont need a Roth anymore
« Reply #3 on: January 29, 2016, 04:47:14 PM »
In the re-education area, the stock series is instructive:

http://jlcollinsnh.com/stock-series/

And yeah - there might not be much value to the Roth in sheltering capital gains for you, but there are other benefits as Able posted.  As always, it depends on your specific situation.

MustacheAndaHalf

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Re: I'm thinking that I dont need a Roth anymore
« Reply #4 on: January 29, 2016, 07:31:44 PM »
After thinking about it too much, I think there's one use for a Roth IRA in your situation: bond funds.  Think about it - your massive capital loss has no impact on bond income, because it's treated as ordinary income.  You could benefit from putting bond index funds into a Roth IRA (paying the tax once when you contribute).  That helps you avoid paying tax as bond funds compound, with the added bonus that Roth IRA won't be taxed in the future.

If your assumption is correct, that you will never have more capital gains than your capital losses, then stock index funds belong in taxable.  When you realize short-term or long-term capital gains, you wind up paying $0 in tax.  If you put the stock index funds in a Traditional IRA instead, you pay ordinary income tax upon withdrawal.  So taxable makes sense for your case.

Note that Roth IRA space for bonds has one additional advantage.  Right now you consider the capital losses massive, and you think cars cost $30,000.  But decades from now when that same car costs $100,000 owing to inflation, your capital losses might not look so massive.  If you do run out of capital losses, you could appreciate having some space to put investments in a Roth IRA.
« Last Edit: January 29, 2016, 07:33:56 PM by MustacheAndaHalf »

leighb

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Re: I'm thinking that I dont need a Roth anymore
« Reply #5 on: January 29, 2016, 07:49:36 PM »
Thanks for the replies. Let's see if I get it...

- Read that article to help in my re-education
- Put Bonds in my Roth
- Put the index funds in my taxable
- Remember that inflation exists

Sound about right?