10/24 If I trade my 401K stock on a quarterly basis (reshuffle/reallocate),
are the gains considered capital gains? How much is taxed on 401K gains?
\_ You don't pay taxes on your 401k until you withdraw it.
\_ Plus you can re-invest your gains again and again without being
taxed first. E.g. if you invest $1000 and gain $100, you can
re-invest the whole $1100, without being taxed on the $100 first,
to gain another $110. Then you can re-invest $1210 to gain
$121. At the end you are only taxed once on the total gain of
$331.
\_ Presuming that the initial investment was not taxed, you will
actually end up being taxed on the whole $1331 as it is
withdrawn. Is this a Roth 401k? Depending on your age, a
Roth 401k might make more sense. A standard 401k is taxed
as income (not capital gains) as it is withdrawn, so it kind
of depend on how rich you expect to be in retirement. |
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