Taking money out of a mutual fund?

I want to take some money out of a mutual fund to pay down some debt. The money isn't "retirement money". It's from an accident I was in when I was younger.

Anyway - I don't know much about the laws/rules involving mutual funds.

If I take money out, I think I have to pay tax on it, right? Do I pay it right away or at tax time?

Also, about how much in taxes should I expect to pay? 10%? More?

I'm afraid I'll take money out to pay down my debt and then get hit with a huge bill come tax time.

TIA!

Re: Taking money out of a mutual fund?

You can pay it when you take it out...

Re: Taking money out of a mutual fund?

I THINK you can pay when you take it out OR pay at tax time.

And I'm pretty sure it's 10%.

I know more about retirement funds than mutual funds so I'm not 100% positive.

Re: Taking money out of a mutual fund?

Re: Taking money out of a mutual fund?

I'd ask when you call to do it.. are you working with an advisor?

It will likely depend on the share class the fund is in & whether there is a gain or a loss since you bought it.

Re: Taking money out of a mutual fund?

Re: Taking money out of a mutual fund?

The following applies because you mentioned that it's a non-retirement account. (if it were a retirement account things would be different).

You pay tax only on the profit that you've made. I'm not sure on the percentage that you pay.

So, if the original amount was 100 shares at $50 and you take out all $100 shares at lets say $60 you pay tax on the $1000 profit that you made over the years.
How much you paid for the shares plays a huge part in the tax you owe at redemption.


If you have been receiving dividends and reinvesting them over the years, things get a little more complicated. Same applies if you have been adding your own funds to the account.

You pay the tax at tax time.

I'm figuring that it wasn't a mutual fund that you received as settlement but rather the settlement money was put in a mutual fund for you. Is that correct?

Also keep in mind that it's possible you paid more for the fund than it's worth now. I say this only because of the hit the market and economy have taken in recent years.

Message edited 5/11/2011 12:24:53 PM.