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Vanguard Roth IRA: Reinvest vs Transfer to settlement fund.

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  • Vanguard Roth IRA: Reinvest vs Transfer to settlement fund.

    Which options if preferred for Roth IRA account's dividend and capital gains: (a) Reivesting vs (b) Transfer to settlement fund (Vanguard Federal Money Market Fund).


    I used "transfer to settlement fund" option this year and have $100 in this settlement fund now. I chose this option to use TLH (but have not used TLH yet).

    Should I move this $100 to taxable account. Any tax implications. Vanguard informed me that I need to file 8606 if I move money out of IRA account.


  • #2

    Please do not move out of rIRA. There will be taxes, penalties.



    • #3
      Agreed with Peds.  Were you planning on using your Roth IRA for Tax Loss Harvesting?


      • #4
        If you hold identical funds in your IRAs that you hold in taxable accounts, and you plan to use tax loss harvesting, sending dividends and capital gains to the settlement fund is okay, so as not to inadvertently cause a wash sale. Just depends how much manual management you want to do.

        @peds is correct, do not move the money out of the IRA. This would be a distribution, subject to all the applicable rules and taxes.


        • #5
          In case there is some confusion on the OPs part, it is not possible to TLH in a tax-deferred account (IRA, Roth IRA, 401k, etc.). TLH is only a thing for taxable accounts.