Financial Planning Opportunities

In times of heightened market volatility, it can be challenging to stay focused on the long-term plan. As planners and advisors, we are always on the lookout for opportunities that clients can take advantage of throughout the market cycle.

Here are some opportunities that we have been looking at for clients this month:

Review your financial plan with your advisor

We believe strongly in making financial decisions in context of your overall financial life plan. Having a plan can help you stay focused on the long-term when experiencing challenges like market volatility.

Tax Loss Harvesting in taxable investment accounts

At Tenet, we actively look for Tax Loss Harvest opportunities throughout the year and especially during times of heightened volatility like we are experiencing today. Tax Loss Harvesting involves selling securities that are down and immediately reinvesting the proceeds into other positions. Investors may be able to use these harvested losses to offset realized capital gains in the current year or carry the losses forward to offset gains in future years. You also may be able to take $3,000 of realized losses as a Capital Loss Deduction. Investors should be mindful of triggering the Wash Sale Rule by not reinvesting the funds back into a “substantially identical security” within 30 days before or after the sale.

Roth Conversions

If you are considering making a Roth conversion this year, executing it while investment values have come down from recent highs may present an attractive opportunity.
A Roth conversion is a taxable transfer of some or all Traditional IRA into a Roth IRA. Since Traditional IRAs are tax-deferred, the amount that you convert becomes taxable at your ordinary income tax rates. In return, Roth IRAs offer the potential for tax-free growth as well as tax-free distributions in retirement. They also do not have required distributions at age 72 like Traditional IRAs and 401(k)s, so not having these can technically help save on future income tax.

Gifting to reduce taxable estate

For investors who are concerned that they will have a taxable estate, consistent gifting strategies can be an important part of a legacy and tax reduction plan. Gifting investments in-kind can be one way to not only fulfill annual gifting goals, but also to remove future growth from an estate. Executing in-kind gifts when the market has declined may provide an opportunity to gift more shares relative to the price. However, it is important to point out that it is generally not advisable to gift securities that have unrealized losses.

Consistency is key

Continuing to save and invest in the market throughout the year is a critical key to long-term success. Don’t put savings and investment plans on hold because of market volatility.
Every family’s financial situation is unique, and it is important to work with qualified financial professionals to help you determine what makes sense for your situation and how it should be implemented. At Tenet, our planners help families navigate the complexities of financial planning throughout their life stages. We invite you to reach out to us to learn more about our unique approach to financial planning and wealth management.