Opportunities even when the sky is falling?

Right now the precipitous drop of the markets along with fears over the spread of COVID-19 may make it feel like the sky is falling. However, two major opportunities are there if you act.

In the midst of sell-offs that may be giving you a combination of motion sickness and flashbacks to 2008, your first reaction may be to “let it be and ride it out”. Now we are major proponents of a long-term approach but some small moves could make a major difference. So where is the opportunity we speak of? Lets take a look:

1: Roth Conversions

A Roth conversion can make a lot of sense right now for two very compelling reasons. The first is that the dip in your portfolio value will allow you to convert a larger percentage of the balance. The second very compelling case is our current tax rates. With having the tax rates dropped from the Tax Cuts And Jobs Act there are some of the lowest rates you may see. Add to that the additional potential COVID-19 government debts it wouldn’t be a surprise to see taxes rise again in the future. By converting now you would pay today’s rates and pay zero tax for qualified retirement withdrawals. In addition, Roth IRAs will not cause taxation headaches for your estate and therefore are gaining popularity following the SECURE Act legislation.

2: Tax Loss Harvesting

No one likes to loose money. For this reason it can cause a block for us to take action that could be saving you money every year. However, not using the write-off of an investment sold at a loss leaves investors cutting larger tax checks. Be aware that these losses can only be used in non-retirement accounts and you must not trigger a wash sale. Yet strategically using these losses can give you current year as well as carry-forward losses. Take the opportunity during re-balancing of your portfolio to reap the markets write-offs.

Due to the complexity of evaluating these opportunities we strongly advise you partner with tax and financial professionals. Our team will be able to illustrate the impacts of these decisions during our planning process.

Note: the information presented herein is not to be considered individual financial advice. Contact us for an evaluation of your unique situation.


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