Trading using 401K

Discussion in 'Risk Management' started by Adobian, Oct 6, 2008.

  1. Adobian


    Does anyone here trades in your 401K? I wonder if you have to report all transactions if this was supposed to be tax- deferred.
  2. 401K or IRA?

    I doubt you can do much in a employer-sponsored 401K except move money around among mutual funds.
  3. Report transactions to whom?

    There is no requirement to report 401(k) or IRA trades.
  4. clacy


    You have to roll your 401k into a self managed IRA, which you can trade through IB or any number of brokerages.
  5. My understanding is that you don't have to report transactions when you start to actually draw from your tax-deferred accounts at retirement. You just pay yourself from the accounts and it's taxed as regular income at whatever your tax rate is at that time.
  6. The trades in an IRA/401k are NOT reported in schedule B or anywhere else on the tax return
  7. I am not an accountant or a tax lawyer by any strech of imagination. Having said that, my understanding is that when one trades using 401K, 403b, IRA moyney, first it has to be placed in a self managed IRA then, and only then will you be able to tap the funds and trade whatever your broker offers. As to the tax part, If you take out all or part of the profits, you will pay a 10% penalty and the rest it will be treated as regular income. If you are 59 or older there is no penalty just the tax for the income. Again, this is my take on it and thus it may and might not be accurate. :D :D
  8. example 1.

    you have 250K in IRA account. It gets converted into self managed IRA and thus it is still 250K. Now you trade the account and at the end of the year you got 300K. You decide to take out that 50K. If you are < 59 years old then 5K is the penalty and then you will get a statement for your taxes where it would say that you had an income of 45K (on top of wahever else you had made that year) which will be added to your total income on your 1040 sheet.

    Example 2: same scenario except for the age. If you are >59 then there is no penalty and you get to keep the 5K. However, you do end up paying income tax on the amount no mater the age.

    Good Luck!
  9. Adobian


    I heard from my employer that this is a special 401K account that I can buy and sell stocks. But maybe these people don't know what they are talking about.

    Anyhow, I am going to call Charles Schwab to inquire about this. I'll let you know.

    I planned to borrow from mo\y 401K account in the future, if I make enough. The borrowed money will be invested in a house. Then I will make monthly payment back to my 401K account. Is this a good scenario?
  10. I'm in a roth 401k at the small shop I trade for. We can do stocks/options , and I believe futures as well, but don't quote me on the futures.
    #10     Oct 6, 2008