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Simple Rebalancing Question

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  • Avatar KMAC 
    Participant
    Status: Dentist
    Posts: 14
    Joined: 12/26/2017

    So in most of the WCI articles it recommends rebalancing within a tax protected account so that there are no capital gains or tax consequences.

    So am I correct to assume that any buying and selling in a Roth IRA, a 401(k) or HSA will not have any tax consequences in the year the rebalancing was done or in retirement when the money is withdrawn??

    Thanks in advance!!

    #232496 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4410
    Joined: 01/08/2016

    Yes.
    Unless it’s a wash sale.

    #232497 Reply
    Liked by KMAC
    Avatar KMAC 
    Participant
    Status: Dentist
    Posts: 14
    Joined: 12/26/2017

    And a wash sale is when I’m tax loss harvesting and inadvertently buy the exact same stock refund 30 days before or after I sell that exact same stock or fun correct?

    So as long as I don’t accidentally trigger a wash sale there should be no tax consequences to rebalancing in a tax protected account?

    #232499 Reply
    ENT Doc ENT Doc 
    Participant
    Status: Physician
    Posts: 3502
    Joined: 01/14/2017
    So as long as I don’t accidentally trigger a wash sale there should be no tax consequences to rebalancing in a tax protected account?

    Click to expand…

    Correct.  If you are TLHing in taxable this may be an issue if timed inappropriately.  However, dividend reinvestment in those tax-protected accounts is included in “purchases” in that 61 day window (30 before and 30 after the date of sale).  So you don’t even have to rebalance to induce a wash sale.

    In regards to tax-protected accounts, the basis is either zero (401k, TIRA) or adjusts to the net proceeds at time of sale (Roth), so you’d never get a wash sale problem within a tax-protected account.  It’s only in a taxable account where your basis is changing and can be affected.

    #232500 Reply
    Liked by Lordosis, Peds

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