Replenish investment loss in IRA
If I have made some investments in IRA that resulted in a loss, can I make a contribution to recover from that loss?
Thanks,
If I have made some investments in IRA that resulted in a loss, can I make a contribution to recover from that loss?
Thanks,
Permalink Submitted by Alan Spross on Tue, 2012-03-20 01:45
No. The contribution rules are the same regardless of investment gains or losses within the IRA.
That said, there is a situation under which you could replenish your IRA faster if a loss occurs after making a new contribution, usually earlier in the year. If you ask to have that contribution returned to you adjusted for the loss, you can make a new contribution for the full amount. The new contribution can be made before or after withdrawing the first contribution.
Example: Assume you contributed 5,000 to an IRA that was worth 15,000 after you made the contribution. 9 months later that account value dropped to 10,000, a loss of 33.3%. If you ask to have the contribution returned adjusted for the loss, you will get back 1/3 less than 5,000 or 3,333. You then make a new contribution of the full 5,000, thereby increasing your IRA value by 1,667. But there are time limits in which you must make these transactions.
1) The return of contribution must be done before the extended due date, ie 10/15 of the year following the year of the contribution.
2) The new contribution must be made no later than 12/31 of the year of the first contribution.
If you make the new contribution before you withdraw the first contribution, it is better to make it to a new IRA account to simplify the earnings calculation for the returned contribution.
Most people would not want to go through all these transactions, but it can be done if you wish and are willing to report things correctly on your tax return.