Locked In

DEFINITION of 'Locked In'

A situation where an investor is unwilling or unable to exit a position because of the regulations, taxes or penalties associated with doing so. This may be an investment vehicle, such as a retirement plan, which can not be accessed until a specified retirement date.

BREAKING DOWN 'Locked In'

If there is an increase in value of stocks held by an individual they will be subject to a capital gains tax (with some exceptions). To reduce their tax burden, an investor could shelter these gains in a defined retirement account. The individual is considered locked in because if a portion of this investment is withdrawn prior to maturity the owner will be taxed at a higher rate than if they waited.

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