Tips on how we can take advantage of our losses in the market:
So end of the year and end of the year is a great time to start looking at your taxes because you got, you have an idea of how much income you're gonna have earned for this year, and that gives you the ability to actually do some real tax planning and to really.Really take steps to minimize your tax bill. There are things that you can do after December 31st, but the vast majority and the best stuff is before December 31st. And so highly recommend, right? Something that I do for all my clients is, end of year tax planning. And we, we look for, what we can do to maximize.Exclusions, our deductions, our credits, and then we look forward and say, okay, what can we change for next year? Knowing that this is, what we've done and the things that we wish we could have taken advantage of that we can do for next year to further decrease our. Tax bill because let's face it the markets, we don't control the markets.We can manage our investments as best as we can, but the markets will do what the markets will do, right? And in retirement, we need, every penny we can. So let's, we're gonna try to manage that as best as possible. But taxes is something that, once you owe it, it's forever gone,And so we need to, every penny that we can save on taxes is a penny. More in our pockets market. Come up and down. Inflation, nothing we can do about it. Taxes, there's always something you can do about taxes.
What is Tax Loss Harvesting
tax loss harvesting probably one of the best things to do and I should preface this by saying you need to be in a position where it'll do you some good, right?And that requires, that's one of those things that doesn't happen overnight. It takes, years of working to get yourself into a position where tax loss harvesting is something that really pays off dividends. And that's a little bit of a pun and you'll see in a second, but, Tax law is harvesting and it's most basic.My, my account is down in value. Let me harvest all those losses, right? This thing, you're going through the field and you're harvesting those losses and you're not gonna pocket those and you're gonna use them for some time in the future to reduce your future tax bill. And you can do this with gains, and you can do this with losses, but losses are the most beneficial because it offsets those gains.And even a small part of that can be used to offset ordinary. Now, here's the best thing, right? I said, it takes some years to get into a position where you can really use that tax loss harvesting and really benefit you. . But vast majority of people have their money in retirement accounts.If you're, if you move, and you work to get your money out of those retirement accounts, so you're not subject to require minimum distributions, what you can. Is, make it so that all of your gains in your taxable accounts are completely offset by losses. Because what's the one thing that, that we know for certain about the markets?The markets are volatile. They go up and down, and so in the moments where the market goes down, it doesn't have to stay down for very long, but let's say it goes down 5% one day, right? If we harvest that loss and capture. And we ride the market back up, right? But we harvest that loss, put it in our pocket, we can offset it again in the future.We can offset it when we're selling for income so that our taxable income in our taxable base in retirement is much lower. It sounds like a lot of work. It's definitely work. Saving, saving money on taxes and making money in the markets is not easy work, right? It's not say a fire and forget it, but it's something that can make a huge difference in your retirement if you do it properly and you shouldn't do this yourself, right?This is why you pay advisors is to do things like this.
(P.S. Here's a great article I wrote on Tax-Loss Harvesting: https://www.yields4u.com/blog/turn-your-paper-losses-in-to-tax-savings)
What is a Roth Conversion
So a Ro