Stocks in a roth ira

[Guest silver$]

If you have stocks in a roth ira and you sell them and make a profit how long do the proceeds have to remain in the account? Does the five year rule come into play?

[John G]

Kind of a funny question. The Roth is a tax shelter where you normally want to put money to work and keep the result (gains) in the shelter working for you. The whole idea is to maximize the time funds are sheltered. You lose those benefits when you remove funds from a Roth.

There is no relationship between the transactions you might make in a Roth and any withdrawals. Apples vs. shoes. You can buy/sell stocks, bonds, mutual fund shares, etc. inside a Roth without regard the the amount earned, frequency of transaction, length of holding period, etc. Long term, short term capital gains, interest or dividends have no meaning other than that the result changes your total Roth assets. You don't even report internal Roth transactions.

You can always withdraw contributions to a Roth without penalty or tax. Gain on initial contributions is a completely different matter. There are also a few special categories - like first time homebuyers - where some withdrawals may be supported. You may want to review IRS Publication 590 for more details and examples.