leagacy nisa maturing this yr-bad timing!

[banders]

Yes, the risk at expiration exists.
The point is, when we bought the funds in these old NISA accounts, the period they could be held tax-free was maximum 10 years.
5 years plus another 5 with the rollover. That changed when the new NISA was introduced.

It is of course possible for the value of your 1.2M to be lower in 2031 when the rollover is up, so no tax-free benefit.
Likelihood is higher with the shorter period of only 5 years, though.

That's all.

For clarity, when I said ‘rollover’, I meant selling and rebuying at the year end. You haven’t addressed it, but do you have income to fill the NISA from next year and you are saying you have to let it go into taxable in January and it’s less than you hoped? As you said, that could happen if the market dived at the end of a 10-year period (and it could be a massive dive). If no, then sell/buy at the year end and hopefully the rate won’t jump in the new year. If yes, then you will face a future CGT bill but you will also be buying at a low cost with your new money.

[Tsumitate Wrestler]

Ok. I’ve been confused too.
Surely that timing risk exists no matter the value of the old nisa when it expires.

Yes, the risk at expiration exists.
The point is, when we bought the funds in these old NISA accounts, the period they could be held tax-free was maximum 10 years.
5 years plus another 5 with the rollover. That changed when the new NISA was introduced.

It is of course possible for the value of your 1.2M to be lower in 2031 when the rollover is up, so no tax-free benefit.
Likelihood is higher with the shorter period of only 5 years, though.

That's all.

I'm treating the reduction in term from 10 to 5 years as a misnomer. I don't see any relevance to the topic in hand..

Especially because if more tax-free time in the market was the focus, then they would have presumably selected the Legacy Tsumitate NISA over the Legacy Normal NIsa. Those accounts will be still going strong for a many more years.

[beanhead]

For clarity, when I said ‘rollover’, I meant selling and rebuying at the year end.

In the NISA context, rollover does not involve any selling or rebuying.
See this from RJ:

https://www.retirejapan.com/blog/rollin ... a-account/

[beanhead]

Thanks for all of the replies on this topic.
I have thought it through a bit.
My comment was that the change of regular NISA from possible 10 years including rollover to 5 years without rollover was slightly annoying and introduced a bit of extra risk.
The feedback has been that the value of your funds could dip after 10 years just as it could dip after 5 years. So no real difference there. Point taken.

The second point of pushback is that for a long-term investor, you actually want the value to fall after 5 years as you can then buy more if you re-buy immediately. We just need to ignore the fact that the funds have to be sold and re-purchased.
With the new NISA, if the value of the funds falls at some point, we would generally not sell, so we have to approach this situation in the same way.
I think I would still be somewhat miffed if my funds did fall after 5 years and I sold at a loss to re-buy, but I get it. In the long term, this should not matter.

And to Banders, no, sadly, I will not be able to fund the 3.6M in the new NISA every year completely with new money. So I will sell at the end of December and re-buy early in January.

[adamu]

Surely that timing risk exists no matter the value of the old nisa when it expires.

If you're at a loss in the NISA and sell after the NISA expires, if the price rises to still less than your original purchase price between when the NISA expires and you sell, you'll be liable for CGT on the 'gain', even though you didn't make any gains. If the NISA was up and rises further before you sell, you'll have to pay some some tax, but it'll be on a genuine gain and you'll still make money.

So being at a loss is worse.

[adamu]

if the price rises to still less than your original purchase price between when the NISA expires and you sell,

Sorry, should be if the price rises at all. Original purchase price is not relevant.

[Moneymatters]

Surely that timing risk exists no matter the value of the old nisa when it expires.

If you're at a loss in the NISA and sell after the NISA expires, if the price rises to still less than your original purchase price between when the NISA expires and you sell, you'll be liable for CGT on the 'gain', even though you didn't make any gains. If the NISA was up and rises further before you sell, you'll have to pay some some tax, but it'll be on a genuine gain and you'll still make money.

So being at a loss is worse.

And noted on your clarification.
But for future reference, this has bent the needle on my 'nuance-o-meter'* (patent pending)...

From my perspective, whenever you sell or are forced to sell that just resets everything. Whilst it might be nice to make more money sooner I'm not sure how this connects to "bad timing"..
I wonder if this was actually the bad timing Banders was referring to...

* For vital context.
Until very recently my personal finance flow chart was just a box with:-
"Has Money?"
No --> Get Money.
Yes --> Spend Money.

[adamu]

From my perspective, whenever you sell or are forced to sell that just resets everything. Whilst it might be nice to make more money sooner I'm not sure how this connects to "bad timing"..

In beanhead's scenario of 1.2M dropping to 1M in the NISA. If it then rises back to 1.2M in your taxable account, you pay tax on the 200k, even though you didn't make any money. Whereas if you'd sold it before it expires in anticipation of this, you'd miss out on the 200k gain at all. In both cases you're worse off due to the timing, than you would be if the NISA hadn't expired and you could just ride it out.

[Moneymatters]

From my perspective, whenever you sell or are forced to sell that just resets everything. Whilst it might be nice to make more money sooner I'm not sure how this connects to "bad timing"..

In beanhead's scenario of 1.2M dropping to 1M in the NISA. If it then rises back to 1.2M in your taxable account, you pay tax on the 200k, even though you didn't make any money. Whereas if you'd sold it before it expires in anticipation of this, you'd miss out on the 200k gain at all. In both cases you're worse off due to the timing, than you would be if the NISA hadn't expired and you could just ride it out.

a. you have unallocated space new NISA so it doesn't grow in taxable account.
or
b. you don't have space so you benefit form buying more units at a lowered value.

So I don't/won't see the risk/bad timing for people still accumulating.
It's probably better to just leave me to my ignorance.. ha ha..

[adamu]

From my perspective, whenever you sell or are forced to sell that just resets everything. Whilst it might be nice to make more money sooner I'm not sure how this connects to "bad timing"..

In beanhead's scenario of 1.2M dropping to 1M in the NISA. If it then rises back to 1.2M in your taxable account, you pay tax on the 200k, even though you didn't make any money. Whereas if you'd sold it before it expires in anticipation of this, you'd miss out on the 200k gain at all. In both cases you're worse off due to the timing, than you would be if the NISA hadn't expired and you could just ride it out.

a. you have unallocated space new NISA so it doesn't grow in taxable account.
or
b. you don't have space so you benefit form buying more units at a lowered value.

a) That's true. But there is still out of market risk, so the price could go up between your sell + buy order. It's probably not a major risk, but it's still there.
b) This doesn't work - now you have 1M of taxable assets, and have to pay gains on that, even though you invested 1.2M.