Hi! I’ve learned so much from this community and now re-balancing my investments. I’m planning to move money held in stocks into target date index funds in my Roth IRA. Are there any considerations with cost basis I should bear in mind?
Thanks!
Jen
Jen, if the stocks you’re planning to sell are in a Roth account, it doesn’t matter what cost basis you sell by - your market value (cash you’ll get) will be the same with any cost method. Cost basis for selling should be considered if the stocks are not in Roth - cost basis is used to calculate capital gains which is used to determine the tax liability you have to pay. But you don’t need to worry about tax in a Roth account.
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Awesome, thanks!
I’m also consolidating my accounts and transferred TRP mutual funds into a Vanguard brokerage account. The expense ratio is 0.7% and I’d like to move this into a Vanguard target date index fund. With it newly transferred, how does that impact cost basis and plans to sell?
Transferring from one brokerage to another doesn’t affect the cost basis. Cost is determined at the time you buy and cost basis determines which shares you want to sell first (first in first out, or average cost, etc). But if you’re selling everything at once, I don’t think cost basis really matters (unless I’m misunderstanding your question).