If I contribute $5500 into my Roth IRA at the beginning of 2014, but sell $5500 in July, does my contribution amount go to $0, and I can reinvest $5500 later the same year? Or does the contribution amount stay at $5500, and I can't contribute until 2015?

  • 5
    Are you selling and withdrawing (taking a distribution) from the IRA? You can buy/sell as much as you want within an IRA without affecting your annual contribution limit. Commented May 28, 2014 at 0:57

1 Answer 1


I suspect you have a Vanguard IRA. They use terms like "buy" and "sell" for contributions and possibly distributions.

So lets make it more clear for you.

You have $5500 at your checking account. You bought into a Vanguard Roth IRA fund clicking "Buy" button and using the checking account as the source. You contributed $5500. Your contribution amount is now fixed, and cannot be changed (unless you do what is called "recharacterization", but we'll leave it out of the scope).

Now, you want to change funds. You clicked the "Sell" button on the fund you own, and "cashed out" of it. But the transaction has to have a destination. So what is on the other side? When you chose to "Sell" - where did you direct your distribution?

There are 2 choices:

  1. You directed it to the same bank account, on which some money appeared. In this case you withdraw $5500 from your Roth IRA. Your contribution amount, as I mentioned, hasn't changed, and you've maxed out your limits. But, you also withdrew from your Roth IRA, and you cannot (unless you do it within 60 days) replenish this. In addition, if you withdrew more than you deposited - the difference will be taxable as ordinary income + 10% penalty.

  2. You directed it to another fund in your Vanguard Roth IRA account (or another IRA account). In this case, you rebalanced, but your total IRA worth remained the same, and you didn't withdrew anything. Regardless, as before, your contribution amount remains unchanged. But, you didn't incur any taxes or penalties.

In any case you can only contribute $5500 per year. If you contributed and then invested into some fund that went down and you're now below the amount you originally invested - tough luck. That happens, but it doesn't affect your contribution limitations.

  • "In addition, if you withdrew more than you deposited - the difference will be taxable as ordinary income + 10% penalty." As long as he withdraws up to the contributions from that year + earnings from that contribution, there is no penalty.
    – user102008
    Commented May 28, 2014 at 20:15
  • @user102008 I'm not familiar with such an exception. Can you please point to it on this table: irs.gov/Retirement-Plans/Plan-Participant,-Employee/… ?
    – littleadv
    Commented May 28, 2014 at 23:37
  • It's not an exception. It's not counted as an early distribution. Here is the text for Traditional IRAs: irs.gov/publications/p590/… and for Roth IRAs: irs.gov/publications/p590/…
    – user102008
    Commented May 29, 2014 at 0:06

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