I have a friend who’s goal is to be self supporting through Forex trading. She plans to start with a small investment and grow it until she can be self suporting, then “retire”. I thought, this sounds like a Roth IRA and a US taxpayer could trade tax free for the rest of their life.
Has anyone explored this?
I could really enjoy doing that:53:
Trading Forex is incredibly risky. The mass majority of traders lose. Furthermore, I know of no way to spot trade Forex in the fashion it’s done on a retail level within a Roth IRA.
The purpose of a Roth IRA is to accummulate a retirement savings while the earnings grow tax deferred, as well as obtain the funds tax free after the age of 59 1/2. Her funds within the Roth IRA should be properly diversified based on her age and personal risk assessment.
Thank You for your response. You are, of course, right because you did not know she has a 401k equivalent and an annuity at retirement, all properly diversified. This would be a further diversification. I would not want someone to get the wrong impression that this is easy or for everyone.
I am still interested in whether anyone else has tried this.
I have been doing this for less than a month, but she has done this much longer. She had started trading with $50, and has made over 2% per month. She has just added another $500 and is learning to extend her profits. As I said before, she could do this in the shelter of a Roth IRA and pay no taxes.
The scenario I see is that she will be tradiing forex anyway and could hit her goal faster. I think, if she loses everything, even after 20 years, she has lost $500, which she can afford to lose. It will be the same whether she paid taxes on it or not. If she does not pay taxes, she will be able to move the “extra” funds into a more traditional account.
She still has $4,500 this year and $5000 each consecutive year to place into a Roth IRA, which she has no plans to do. No lost opportunity.
Tell your friend she will need a lot more than $500. Forex only exists on a retail level due to leverage. And you cannot use any part of your IRA as collateral. In doing, it is no longer a qualified account and will be subject to taxation.
Just take the earnings, pay taxes on them, and then just toss them into a mutual fund within the IRA.