I need to make a withdrawal from my taxable PP to help fund a large purchase and I'm torn between two options:
Option 1: withdraw cash
Withdrawing cash wouldn't require selling any volatile assets and dilute the taxable PP's "punch", and it also wouldn't trigger any serious capital gains taxes. After selling the cash, I would contribute only to cash for a few months to build it back up again, avoiding any rebalancing fees and taxes.
Option 2: sell appreciated stocks and rebalance
The taxable PP's stock allocation has gone bananas this year and given that I have to withdraw something anyway, I'm tempted to sell the stocks to lock in my very nice 30% gains. After this, I would rebalance.
Thoughts?
Withdraw from stocks or cash?
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Withdraw from stocks or cash?
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Re: Withdraw from stocks or cash?
You can always accomplish a rebalance in accounts where you don't have a tax-punishment for doing so (401k, Roth IRA, your new SEP Plan with your business!!)
If I were inclined to make a purchase, I would always shy away from engaging in a premature taxable event that can be deferred. If I want to rebalance, I always want to prioritize using tax-sheltered accounts.
I'd rebalance in your Roth or 401(k) (or whatever), and use cash to make the purchase. Then replenish your cash over time.. if you have an emergency in the meantime, THEN you can sell stocks.
If I were inclined to make a purchase, I would always shy away from engaging in a premature taxable event that can be deferred. If I want to rebalance, I always want to prioritize using tax-sheltered accounts.
I'd rebalance in your Roth or 401(k) (or whatever), and use cash to make the purchase. Then replenish your cash over time.. if you have an emergency in the meantime, THEN you can sell stocks.
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Re: Withdraw from stocks or cash?
If you have any 0% taxable gains space, I'd use it.
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Re: Withdraw from stocks or cash?
Option 2: Stocks. I don't know what you should do, but I've been trimming stocks to pay for an expensive home renovation. Mostly VP stocks, but if necessary, I will rebalance at the current 32.5% stocks share instead of 35%. I'm not rich enough to have a large tax bill.
Re: Withdraw from stocks or cash?
Would go with cash, and just add back to it. Unless you love that sub 1% yield.
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