Trading In An IRA
Q: I have an IRA brokerage account. Is there any issues with selling a stock, and then purchasing the same stock within 31 days, as there is with NON IRA trades? Is this called a wash trade, or something like that?
A:
An IRA is pretty bad tax-wise for active trading.
It is like an infinite-day wash rule - you never get to deduct loses.
If you win, you pay income tax rates, which are 50% to 100% higher
than capital gains tax rates, depending on your tax bracket.
The IRA works best for long-term strategies.
Speculate in the market with taxable savings
My understanding is that when you withdraw from an IRA, it is taxed as ordinary
income, and capital gains rates do not apply, but when you trade in the
account, it's not a taxable event. That's where you want to be doing your
trading. If that's not right, I'd sure appreciate being enlightened.
Speculation and short-term are not at all synonymous. Holding long
term speculative stocks outside an IRA makes sense. Buy and hold can
be quite speculative. Short term trading can be quite conservative.
I agree with the first part of your response, I disagree on the last
sentence. It would be better usually to have your long term stocks
outside of the IRA and short term trading stocks inside. This
assumes you think your short term trades will have net gains.