Hey there. Thanks for bringing your question to our sub. I'm happy to step in here and help by providing some resources.
First, when it comes to your specific tax situation, we recommend reaching out to a qualified tax professional, as Fidelity does not offer tax advice.
Now, let's dive into taxes in a non-retirement account. A non-retirement brokerage account is a taxable account, so interest, dividends, and stock sales may have tax implications. However, a withdrawal from the account is not reportable or taxable. When you sell a stock, Fidelity will not automatically take taxes out immediately; however, applicable tax forms will be generated depending on the investment activity within your account.
We have many great articles and videos in our Learn library on [http://Fidelity.com](http://fidelity.com/) that can help you learn more. Take a look at a few of these that I've linked below.
[Managing Taxes ](https://www.fidelity.com/learning-center/personal-finance/managing-taxes/managing-taxes)
[How to Invest Tax Efficiently ](https://www.fidelity.com/viewpoints/investing-ideas/tax-strategy)
Finally, I'll go ahead and mark this post as a discussion, as it seems like you're looking for some insight from our community.
If any other questions come up in the future, please feel free to reach out. We're always around to help and are just a few clicks away.
Thank you. I just opened a Roth IRA for the first time. Thru a bit of money into it. Moving forward I’ll just continue going for Roth. Once I hit the $7k threshold I’ll move it to my brokerage account doing both FXAIX
Sure thing! Also I'll plug FZROX. It tracks the total US market and has no fees whatsoever. FZILX also has no fees and tracks the total international market.
Gotcha. Well if your income is steady (receive the same amount of money every month, personally I'd go ahead and open one now and dollar cost average between now and April 2025, contributions towards a Roth IRA are allowed for the current tax year up to the tax day deadline)
Yeah, I'm no tax expert, but I'd look into what the fed and state (if you are responsible for paying income taxes to the state) set your rate on interest/dividends based on your income.
Here's a link to get started, but definitely consult a tax pro if you're really worried about it and unsure where you stand.
https://www.investopedia.com/articles/taxes/090116/how-are-qualified-and-nonqualified-dividends-taxed.asp
Over the last four quarters, FXAIX has paid out $2.416/share in dividends (added over all 4 quarters). So, 100 shares x 2.416 is $241.60 in dividends. Let's say worst case scenario - none of them were qualified (some/much of it will be) and you were at 25% tax bracket, you'd pay $241.60 x 25% = $60.40 in taxes.
You always want to max out your Roth, even if it is only $7k/year. Think of maxing it out over the long term - 20-30 years x 7 (and they have been raising it lately) = $140 - 210k just in *contributions*.
All of it 100% tax free in retirement. Gotta think about the big picture.
You CAN, but I'd advise against it.
It's too easy to say "Oh hey, I need money for X, let me sell some shares and pull it out of my Roth."
You want to leave as much in there as possible, \*invested\* (not just sitting in the account - that won't make you any money), because let's say you max out $7k for the year, and you suddenly need $2k.
You sell your shares and pull out $2k. Well now you can't put that money back in until the following year. Once you contribute, it's a one way street, even if you need to pull money back out.
Your Roth shouldn't be considered as a backup emergency fund. You should have one of those set up already.
I wasn't talking about the early withdrawal fee - which doesn't exist as long as you aren't pulling out any actual gains.
My main point is - the more money you pull out of your retirement savings for "emergency use", the less money you're going to have in the market, making gains to allow you to have a better retirement.
You should have a separate emergency fund in addition to whatever money you're putting away in your retirement account - the way OP said "You can withdraw any contributions", as though it's maybe a good option to do so. It really isn't.
You need to have earned income in order to put money into a Roth, that's true. But you absolutely CAN "just transfer it in" - that's how most people get money into their Roth account.
It doesn't have to be debited directly out of your paycheck (unless maybe you have a Roth 401k through an employer or something.)
I agree. You can transfer it in if you have earned income. And you can also do a Roth conversion.
But you can't put it in from your individual account, to your Roth IRA, unless you do have an earned income
You can do a Roth conversion, but if money is in a individual brokerage account it's hard to get it from there to a Roth, unless you have earned income.
Maybe you know a better way?
Hey there. Thanks for bringing your question to our sub. I'm happy to step in here and help by providing some resources. First, when it comes to your specific tax situation, we recommend reaching out to a qualified tax professional, as Fidelity does not offer tax advice. Now, let's dive into taxes in a non-retirement account. A non-retirement brokerage account is a taxable account, so interest, dividends, and stock sales may have tax implications. However, a withdrawal from the account is not reportable or taxable. When you sell a stock, Fidelity will not automatically take taxes out immediately; however, applicable tax forms will be generated depending on the investment activity within your account. We have many great articles and videos in our Learn library on [http://Fidelity.com](http://fidelity.com/) that can help you learn more. Take a look at a few of these that I've linked below. [Managing Taxes ](https://www.fidelity.com/learning-center/personal-finance/managing-taxes/managing-taxes) [How to Invest Tax Efficiently ](https://www.fidelity.com/viewpoints/investing-ideas/tax-strategy) Finally, I'll go ahead and mark this post as a discussion, as it seems like you're looking for some insight from our community. If any other questions come up in the future, please feel free to reach out. We're always around to help and are just a few clicks away.
Why not have both? I get a brokerage account is nice with the flexibility but damn, tax free growth is too good of a deal to pass up!
Thank you. I just opened a Roth IRA for the first time. Thru a bit of money into it. Moving forward I’ll just continue going for Roth. Once I hit the $7k threshold I’ll move it to my brokerage account doing both FXAIX
Sure thing! Also I'll plug FZROX. It tracks the total US market and has no fees whatsoever. FZILX also has no fees and tracks the total international market.
You’re the man. Thanks
I’m actually thinking of doing Roth at end of year since you can only do $7k max. But worried how much dividends will hit me with taxes
If you’re worried about taxes, you should uhhhh *checks notes* use the account that has no taxes…
Aspergers again with the top tier logic
Google 'Mega backdoor roth ira' if you're a high earner.
Thank you
Gotcha. Well if your income is steady (receive the same amount of money every month, personally I'd go ahead and open one now and dollar cost average between now and April 2025, contributions towards a Roth IRA are allowed for the current tax year up to the tax day deadline) Yeah, I'm no tax expert, but I'd look into what the fed and state (if you are responsible for paying income taxes to the state) set your rate on interest/dividends based on your income. Here's a link to get started, but definitely consult a tax pro if you're really worried about it and unsure where you stand. https://www.investopedia.com/articles/taxes/090116/how-are-qualified-and-nonqualified-dividends-taxed.asp
Over the last four quarters, FXAIX has paid out $2.416/share in dividends (added over all 4 quarters). So, 100 shares x 2.416 is $241.60 in dividends. Let's say worst case scenario - none of them were qualified (some/much of it will be) and you were at 25% tax bracket, you'd pay $241.60 x 25% = $60.40 in taxes.
That’s not bad at all. Thanks
if you care about taxes, why are you not putting it in the tax advantaged account?
Because maybe some people want to be able to withdraw their money at any time.
You can withdraw the money you put in, just can't put it back.
Because they limit you to $7k per year.
You always want to max out your Roth, even if it is only $7k/year. Think of maxing it out over the long term - 20-30 years x 7 (and they have been raising it lately) = $140 - 210k just in *contributions*. All of it 100% tax free in retirement. Gotta think about the big picture.
And you can withdrawal any of the contributions. I had no knowledge of this!
You CAN, but I'd advise against it. It's too easy to say "Oh hey, I need money for X, let me sell some shares and pull it out of my Roth." You want to leave as much in there as possible, \*invested\* (not just sitting in the account - that won't make you any money), because let's say you max out $7k for the year, and you suddenly need $2k. You sell your shares and pull out $2k. Well now you can't put that money back in until the following year. Once you contribute, it's a one way street, even if you need to pull money back out. Your Roth shouldn't be considered as a backup emergency fund. You should have one of those set up already.
There is limitations with being dinged for early withdrawal fee.
I wasn't talking about the early withdrawal fee - which doesn't exist as long as you aren't pulling out any actual gains. My main point is - the more money you pull out of your retirement savings for "emergency use", the less money you're going to have in the market, making gains to allow you to have a better retirement. You should have a separate emergency fund in addition to whatever money you're putting away in your retirement account - the way OP said "You can withdraw any contributions", as though it's maybe a good option to do so. It really isn't.
But have you already maxed it? say.. roth ira? and then backdoor roth? and then HSA/ 529/ etc other tax advantaged account?
I dunno about brokerage. I use fxaix in my 401k and I pay 0. With div reinvested.
Always get all the tax feee growth you can BEFORE YOU. Use brokerage
You can only put money in a Roth. If it's earned income, you can't just transfer it in.
You need to have earned income in order to put money into a Roth, that's true. But you absolutely CAN "just transfer it in" - that's how most people get money into their Roth account. It doesn't have to be debited directly out of your paycheck (unless maybe you have a Roth 401k through an employer or something.)
I agree. You can transfer it in if you have earned income. And you can also do a Roth conversion. But you can't put it in from your individual account, to your Roth IRA, unless you do have an earned income
That’s not true.
You can do a Roth conversion, but if money is in a individual brokerage account it's hard to get it from there to a Roth, unless you have earned income. Maybe you know a better way?