Should I sell stock and put the money into an IRA?

Should I sell stock and put the money into an IRA?
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#1

I am 70 years old and retired. I have an IRA (not Roth) and would like to sell stock that I have from the company I retired from and put it in that IRA. I am married and my husband is also retired. I am not a fan of being in the stock market.


#2

Hi! If I am reading your question right, there are two issues you are writing about.

  1. You are worried about having too much money in the stock market in case you lose money you’ve earned there or even lose your principal since you are retired and not earning money any more
  2. You want to add cash from the sale of stock to the IRA you currently have.
    Your first question makes great sense. At age 70 and retired, you are thinking that you don’t want the money you’ve saved to live on during the 20 or 30 years of your retirement to lose value. If it’s in the stock market, you can lose the gains you’ve made over the years, and if you don’t sell the stock, run the risk of losing even the amount you put in ( the principal) if the stock price drops below what you paid for it. Regardless of what you do with the cash you get from selling that company stock, by selling it you will lock in your gains and prevent losses, assuming that you don’t get back into the stock market with that money. You can prevent losing your principal by keeping the money in a bank, money market fund, or certificate of deposit. In 2016, it will earn almost nothing in interest, but you will not run the risk of losing it.
    I’m not sure about your second question. I am assuming that the company stock you own was bought with after-tax dollars and is not in any IRA, 401(k) or other tax-deferred retirement account, meaning that you’ve already paid taxes on the money you used to buy it and you will pay taxes on the profit you make from it when you sell it. In that case, you wouldn’t want to put it in an IRA because the money there is tax-deferred money. Although you could put post-tax money in an IRA account, it really wouldn’t make sense to do so. Instead, you’d just take the cash from the sale of that stock and put it in your bank account or one of the safe accounts described above.
    I hope I understood your question correctly! Please write back if not.

#3

At your age I would not suggest doing that. If you want to be out of the stock market, then you can sell your stock and simply keep the balance in cash. Assuming that this stock is not held in a retirement account, you would simply owe capital gains tax on the amount of the gain from the sale.
As far as your IRA is concerned, although the stock market can be a scary place, it can still make sense to maintain some kind of investment in the asset class. If you need some help contextualizing this please feel free to reach out.
Best,
Adam C. Harding, CFP
Disclosure: For informational purposes only. Not to be considered investment, tax, or legal advice. My responses on Nerdwallet are for educational purposes only and action should not be taken until a thorough analysis has been done by me or your financial advisor. Investing involves risk of loss and diversification does not ensure protection against risk of loss.


#4

This is an excellent question.
First, it is very important to diversify your assets and avoid any volatility from a single stock.
Second, if your company stock appreciated over the years, you may some serious tax consequences, when you decide money from your IRA.
Third, since you are approaching 70 1/2 you will be subject minimum distribution requirements and you must start withdrawing money from your IRA.
Fourth, owners of company stocks in 401k plans can use the Net Unrealized Appreciation provision and moved them to a special Taxable account for a better tax treatment. Not sure if that is still applicable in your case.
I would suggest speaking with a financial advisor and explore all your options.


#5

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