Roth Conversions and Tax Loss Harvesting: Is This The Year?
It's been almost a decade and a half since we've seen a market downturn like we have in 2022. And while you may not be happy when you look at your investments, our current environment may provide some opportunities that investors haven't seen in some time. Today, Ed Lambert and Alex Cabot of Birch Run Financial explain.
First, Ed tackles Roth Conversions. On a traditional IRA, you pay the taxes on the way out. On a Roth, you pay them on the way in. This is also true at the time of a conversion - that's when you pay the taxes. And while every individual's situation is different, reasons to do a Roth conversion could include people who are young, people with lower incomes, and in 2022's case, when the value of your investments are down. Ed explains all of this with examples, and also tells us why it's a good idea to have the money to cover the taxes come from elsewhere.
Next, Alex talks about tax loss harvesting. Again, this is a complex strategy, and you should always consult with a professional before executing it. Essentially, if you want to sell securities at a loss, you can use those losses to offset any capital gains you have - for tax purposes. There are many caveats here, too, though. Alex cautions us not to prioritize tax strategy above overall investment strategy. And there are other factors to consider, like the IRS Wash Sale Rule. He shares one particular horror story involving this strategy.
As the year winds down and you consider your financial future, Alex, Ed, and the team at Birch Run Financial are always happy to have a complimentary conversation with you.
You can always email them at info@birchrunfinancial.com or give them a call at 484-395-2190.
Or visit them on the web at https://birchrunfinancial.com/
Alex and Ed's Book: Mastering The Money Mind: https://www.amazon.com/Mastering-Money-Mind-Thinking-Personal/dp/1544530536
You can always email Alex and Ed at info@birchrunfinancial.com or give them a call at 484-395-2190.
Or visit them on the web at https://www.birchrunfinancial.com/
Alex and Ed's Book: Mastering The Money Mind: https://www.amazon.com/Mastering-Money-Mind-Thinking-Personal/dp/1544530536
Any opinions are those of Ed Lambert and Alex Cabot and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. The examples throughout this material are for illustrative purposes only. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional. Diversification and asset allocation do not ensure a profit or protect against a loss. Past performance is not indicative of future returns. CDs are insured by the FDIC and offer a fixed rate of return, whereas the return and principal value of investment securities fluctuate with changes in market conditions. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Birch Run Financial is not a registered broker/dealer and is independent of Raymond James Financial Services. Birch Run Financial is located at 595 E Swedesford Rd, Ste 360, Wayne PA 19087 and can be reached at 484-395-2190.
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