Last week, we took a look at tax loss harvesting and reviewed how to avoid capital gains, but we also saw examples of how this could benefit you in a specific scenario.
This week, we will look at the investment strategy of tax loss harvesting.
Look at the big picture of your investment strategy
Remembering tax rules and strategies, such as tax loss harvesting, can be a hassle. Thankfully, these rules are irrelevant in tax-favored accounts such as traditional IRAs, Roth IRAs, and similar retirement accounts.
Most people should be more aggressive and active inside a retirement account to minimize trading that triggers capital gains. Emergency funds should be composed of guaranteed investments like CDs, money markets, or Treasury Bonds. Taxable brokerage accounts should be set up to buy and hold to minimize realizing gains that could be taxable.
Those with workplace retirements, like 401(k)s, may notice their investment options are limited. If you’d like to be more active in a retirement account, we’d recommend first contributing enough to your retirement plan to get the full match from your employer. Then, additional investments can be shifted to a traditional IRA or Roth IRA. The IRAs will have more investment options, allowing you to be more active with your trading. Remember, Dave Ramsey and his team at Ramsey Solutions recommends always saving at least 15% of your income into retirement accounts such as 401(k)s and IRAs.
For those who have maxed out their retirement accounts and still haven’t hit their 15% savings rate, we recommend adding funds to a brokerage account. We all hope each of our investments gains value each year, but the market does not go up in a straight line. If you have a brokerage account, you may find yourself with holdings that have lost value. Tax loss harvesting refers to selling these holdings in order to realize losses, which can help offset other gains and save you on taxes.
Seek professional guidance
We recommend consulting with financial advisors and accountants to help navigate the tax loss harvesting minefield. Even if you feel like you have a good grasp of the tax laws, having a second set of eyes and ears to look through and help evaluate and affirm various moves can be very helpful in giving you confidence that you are making both legal (in tax reporting) and fundamentally sound moves. Striking a balance of making good decisions on entering and exiting which positions and minimizing the tax impact of those moves simultaneously can be challenging to get right without the proper understanding, insight, and experience.
Even if you are the rare investor who feels comfortable navigating the tax implications of buying and selling stocks efficiently in a brokerage account, hiring a fee-only advisor would be well worth the small investment to ensure you make the best possible moves in tax loss harvesting each calendar year. A good advisor will keep you from being so hyper-focused on tax loss harvesting that you either make moves that do not make sense or fail to make moves that do make sense within your securities portfolio.
If you have questions and don’t have an advisor, reach out to our team of financial advisors today!
How can I benefit from tax loss harvesting? - PART II
March 24, 2025
Matthew Harris
Whitaker-Myers Wealth Managers is an SEC-registered investment adviser firm. The information presented is for educational purposes only and intended for a broad audience. The information does not intend to make an offer or solicitation to sell or purchase any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Whitaker-Myers Wealth Managers reasonably believes that this marketing does not include any false or misleading statements or omissions of facts regarding services, investment, or client experience. Whitaker-Myers Wealth Managers has a reasonable belief that the content will not cause an untrue or misleading implication regarding the adviser’s services, investments, or client experiences. Please refer to the firm’s ADV Part 2A for material risks disclosures.
Past performance of specific investment advice should not be relied upon without knowledge of certain circumstances of market events, the nature and timing of the investments, and relevant constraints of the investment. Whitaker-Myers Wealth Managers has presented information in a fair and balanced manner.
Whitaker-Myers Wealth Managers is not giving tax, legal or accounting advice, consult a professional tax or legal representative if needed.
Copyright (c) 2023 Clearnomics, Inc. and Whitaker-Myers Wealth Managers, LTD. All rights reserved. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete and its accuracy cannot be guaranteed. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness, or correctness of the information and opinions contained herein. The views and the other information provided are subject to change without notice. All reports posted on or via www.clearnomics.com or any affiliated websites, applications, or services are issued without regard to the specific investment objectives, financial situation, or particular needs of any specific recipient and are not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. Past performance is not necessarily a guide to future results. Company fundamentals and earnings may be mentioned occasionally, but should not be construed as a recommendation to buy, sell, or hold the company's stock. Predictions, forecasts, and estimates for any and all markets should not be construed as recommendations to buy, sell, or hold any security--including mutual funds, futures contracts, and exchange traded funds, or any similar instruments. The text, images, and other materials contained or displayed in this report are proprietary to Clearnomics, Inc. and constitute valuable intellectual property. All unauthorized reproduction or other use of material from Clearnomics, Inc. shall be deemed willful infringement(s) of this copyright and other proprietary and intellectual property rights, including but not limited to, rights of privacy. Clearnomics, Inc. expressly reserves all rights in connection with its intellectual property, including without limitation the right to block the transfer of its products and services and/or to track usage thereof, through electronic tracking technology, and all other lawful means, now known or hereafter devised. Clearnomics, Inc. reserves the right, without further notice, to pursue to the fullest extent allowed by the law any and all criminal and civil remedies for the violation of its rights.
