Hypothetically let's say you had a brokerage account with $100k that probably has some substantial gains.
You earn $100k per year but your expenses are also $100k, meaning you're not contributing to 401(k), HSA, or IRA.
Would it be wise to max all 3 and sell from the brokerage account to fund everyday expenses until it was depleted?
Basically tax arbitraging your brokerage to tax deferred or tax sheltered accounts.
Does anyone do this?
Do people use taxable brokerage to fund 401(k), HSA and IRA? Like tax arbitrage?
byu/iloveu3thousand ininvesting
Posted by iloveu3thousand
3 Comments
I think you might want to reevaluate the definition of arbitrage. Your use of the word is a bit unconventional.
Anyways, yes, shifting investments from taxable space to tax advantaged space in the way you describe is generally recommended. There are some nuances to consider (like LTCG tax). But it’s a generally recommended strategy in this sub.
Why would you do this….?
Sure. You can arbitrage that if you don’t mind the taxes. Makes sense if you trying to move into tax-advantaged accounts but income is insufficient to do so. Really has to be math’d out with current vs future taxes to see how much.