Retirement Year End Planning: Tax-Loss Harvesting
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The show is a proud member of the retirement podcast network. What can be the show dedicated to help you not just survive retirement but to have the confidence because you're in the to really lean day after election day? Hopefully, we are all at peace and can get on with building a great country, continue that journey today.

On the show, we are going to begin to explore year and action items from an optimization perspective when to talk about tax loss harvesting in today with iron co, a planner on our team. She's awesome, her first time on the show. In addition to that, we going to answer some of your questions tomorrow.

We are going to have a live event online about should you do a rough conversion or not? How do you think through that in an organized way if you're listening to this on the day of the release wednesday, you go to live with Roger dot com or even thursday because it's thursday night. We're going to do this if you can't make IT alive, but you do want to have access to IT sign up for a six shot saturday email can do that.

Roger witt com or six shots saturday dot com will sunday replay of IT. In addition to talking about raw conversions tomorrow, we are opening enrollment to the rock retirement club, our last open enrollment for this year and also the last time it's gonna offered at this cost is going to go up in two thousand twenty five. In the required mic club, we've organized all of the resources, the the financial planning tools, the education and the worksheets for you to be able to build your retirement plan of record following the ajo process.

In addition to that, we put together a group of coaches and some professionals to have a safe place for you to ask questions and empower you to rock retirement, so you can check all that on a rock retirement club that com. With that said, let's get on with tax loss harvesting. So that were into tax season.

We're going to do a primer on tax loss harvesting. And to assist me in, this is iron co A E A, which is in role agent, which means this is a tax ek. And he just sit completed all of your C, F, P. kring. How long go did you do that?

That was actually completed in twenty.

twenty. Oh, so it's so it's been .

a while working on those experience ours.

yes. So well, how does that work? Nowaday experience ours. You passed everything, but you can use the Marks and .

use the Marks and to get all eight hours in. And there was two separate paths for that once in apprenticeship, and one is just a regular path. So it's to four thousand hours or six thousand.

okay? So this is a pretty high bar to be able to use A C, F, P Marks.

That's prety cool. Here is, yeah.

I like that. And you have recently started on our advisory firm and have been a rockstar. So thank you. Although you can take that nickname .

that's in a old neck, I, but I haven't .

been given a new yeah they have to be the nicknames just come to us. We can't figure .

out we have impossible .

is a tea dog, Tracy is mrs. T. I. whatever. So i'll figure out your some point, but you're going to help help guide through tax loss harvesting is one of those year and items that should be from attacks .

management perspective.

So what exactly we're going to build this from the first step? So what exactly is tax loss harvesting?

So tax loss harvesting is the act of intentionally selling capital assets at a loss in an effort to reduce your current or future to expert. So first one, you need to know what a capital asset is. It's property that you own use for investments.

In this case, I would not be personal. So when I talk about your house, to your count, to your car, anything like that, I could be collectively like baseball cards, ds stamps. But today we're just gonna talk about stocks, etf, things that would be in your portal.

Okay, just as a side question. So I have these two lots in colorado I purchased and initially had the intended building when I saw, wanted both of them. Will I have a capital gainor loss on those?

Was IT held us an investment?

How is that defined? You could. Aru, yes or no? Now that i'm not building, I guess they are.

You could ask your auditor.

my auditor.

do I have I S so I would.

So it's up to me to present IT as this is an investment vehicle and I lost money in IT. And then they would have to argue, know, that was personal use. So that's the area of negotiation if you ever came up and if you got audited, correct? okay. So let's define what a loss is. So give me a basic example.

So an example would be you buy A B, C stock for ten dollars. That's your basis in IT is what you paid for IT and you sell IT for eight after it's lost some money, you have a two dollar capital loss on that stock.

S so in practical purposes ah, it's been great markets the last couple years from an equity standpoint. But when you look at your portfolio, if you have some fixed income investment, whether an individual bond or a bond fun, you likely have some classes on the books depending on how long you own them because band Prices have come down over the last year a half. So that would be an example of that, right?

yes.

And so how if I if I have a last on, let's A A B C band fund, let's say, at a loss of ten thousand dollars, if I sell IT, even though I want to have a long term position if I sell IT, i'm going to realize a ten thousand dollar loss. How does that help me? Or how does that impact taxes? So we can impact .

them in several ways. So the first way would be if you were to, say, harvest ten thousand dollars worth of gains that year, they would let each other out so you would not have any capital gain set you could they be upset by your losses so you'd be getting money in your pocket, but you wouldn't actually be tax on them? The second way is say, you take a ten thousand hour loss and you have five thousand games. Now you ve got three thousand or five thousand dollars a totos, three thousands that can be used to offset other income.

okay, whatever happens to the other two thousand.

So the other two gets Carried forward to the next year. So the next year, if you have capital gains, you can use that again. Or if you don't have cap gains, you can deduct that against other types of loss or other types of income OK.

So if I sell a lot, number one, but an investment for a million dollar profit, that's all gonna tax that long to with the difference will get tax capital games. But if I saw lot two at a million dollar loss, they will offset each other. And i'll have net no capital gain because they offset each other .

will set you. So that's .

unlimited on on the upside of all setting. But you can only deduct up to three thousand dollars per year just off of any income after you've done that reconciliation right .

against the ordinary and come usually no.

And then that loss that I can't use in a given year because of that three thousand dollar cap can be rolled over for next year, can be rolled LED over for next year.

And if you don't use IT, all IT can be rolled over over again. And a can and can until you die, IT can not be passed on to your spouse or ears, or even to your state.

even to your state, because everything has a step up in basis .

as a IT dies with you.

So why we even talking about this? What are we trying to do from a tax perspective?

What you're basic intent and any time can you do this is to reduce your taxable income, which reduces your tax liability. Your strategy might be different. Your strategy could be to reduce your income this year, and that's IT.

IT could be to generate a three thousand dollar loss this year or IT could be to generate large losses that you can Carry forward for many years to come. IT can also have kind of side effects. When you do this by reducing your taxable income, you flowering your overall capital gains rates, you could reduce or eliminate IT, which is net investment income tax.

That's one of those sneaky taxes for higher income earners that we don't even think about. But it's what? Three point eight percent.

Three point eight percent. Yeah, yeah, I had. 你看。 You can also reduce amount of your social security benefits that are subject to taxation because that increases with income.

You might reduce or eliminate armor charges and stay under one of those hurdles. You could possible increase your eligibility for or the amount of europe mim tax credit if you use A C A subsidies. And you know you could increase your eligibility for other tax products of their subject .

to income face out. It's a lever to have to help control these downstream impacts to all these other things that are calculated and just gross income.

right? right? exactly.

So how do you gauge the intent of this? Are the the the impact of this actually? I mean.

so the impact is first all did your strategy me your in like did you actually offset all of your capital gains? Or did you actually create a three thousand dollops did ura three thousand dollars deduction against other ordinary income? Did you actually create this Carry forward? Or you could check and see if you got any of those answering benefits and the way you want to do that is you can either create a spread sheet and put those numbers together to yourself. There are some online calculators out there that will calculate some of this information for you, or you can use a website like thinky down to kind of create a fake tax return and then make another copy of IT showing those losses. It'll show .

you the difference. What was the name of this? What D I N K Y T O.

W N T O W N? Yes.

I familiar with that, but I always laugh when I hear the name. And so what what .

is that down in?

Okay, that's the tagline, obviously.

And what does he do? So thinky tongue lets you play with a bunch of different tax scenario and see what kind of impact you would have.

Okay, we will have a link to that in six shot saturday. And I assume if you're using a turbo tax, you can also play with what what if I have an extra loss or what if I don't? How often if you using the actual tax, often like A A turbo tax or other options, do they have enough releases out in order to do your taxes? Are they good on the releases? Can I use a twenty four so you could do a .

twenty twenty three tax return? Right now we say turbo tax, and I will probably give you a pretty good idea, pretty good estimate. However, with the sofa is not officially updated until taxes and begins. And honestly, even then, releases are rolling out. If first legislation that that's late coming, if there's certain irs rules that haven't been fully shaken out, you know IT could be january and see that .

you weary so leases yeah yeah.

you're not gonna perfect until taxes.

We're just entering in our practice doing tax estimates four year and decisions like rough conversions and qualified distributions and so forth. And we're using software that's relatively up the day. It's pretty good software and iron, you've been a big help in building the standard Operating procedure for this, and there's just a lot of gaps, right?

Because we don't know exactly how much interest we're going to get or yeah, we have instances I think we found on the other day and we were someone was getting unemployment insurance for a period of time. And that is a factor. This is getting good data as also hard. Even if you're on top of this .

IT can be IT can be really hard to get good data. And even if you know everything that happened here today, I mean, how many times you see a mutual fund in december, throw off a Christmas surprise look, you know suddenly we've sold a bunch of things and you have capital again.

Yeah you in no forecasts that the good the Better companies will forecasts IT. That doesn't mean it's correct still. So it's difficult. This is it's difficult.

Need a buffer yeah .

yeah that that is the key there is leave some buffer to to be careful. Like a good example would be on erma surcharges, right? Because certain certain charges like irma, which is the extra you'll pay for part b and part d for medicare, if you're above certain limits and there's a there's a tear structure, it's just one dollar and then you're all in on the other limit, it's not progressive and that can have A. No material impact.

That's right. Those are clifts and you want to avoid those clifts at all.

Don't get too close to gate the erma limit. So I I digit about this. Let's go back to that bad example. So i'm assuming we have to do this in taxable accounts, not I rs or four in case. First off, right.

exactly exactly. IT doesn't work in a four one k or I R A or any of those qualified accounts because those are treated differently for tex purposes. Those don't experience any capital gains. They just come out as income.

So I have a bond fund as part of a broader portfolio. In my aftertaste count, I heavy last ten thousand dollar loss on that bad fund, but IT fits in my acid. So I don't want to say because I want to have a bond allocation, but oh, I sure could use that ten thousand dollar loss.

So the default would be, well, it's part of my long term portfolio, so i'm going to do nothing. But another strategy I wants to talk about this. I could sell that bond fund A, B, C, in by bond fund X, Y, Z, and capture that loss. But there are some problematic things there as well. What are my options in harvest in this loss, but not losing my allocation?

So what you're talking about there is the washroom, and that means that you can sell a care for elsa and claim that laws. And then we purchase IT within thirty days either way of the cell of that. So either thirty days prior day of thirty days after, it's a sixty one day window. So although the error doesn't really get clear on what you can do theyve online things you I cannot do, so you cannot sell that position in one account and they go purchase in others. So you can sell IT in your broker, go buy IT in right right?

That's a watch stale a is a .

watch style violation exactly um you can't sell IT in your account and purchase IT in responses account that violate wash over all. You can sell the stock. You can sell and then go buy an option on stock that would be a violation and you can buy what they call substantially identical.

So define that very specifically for me.

Wouldn't nice if the iron did so essentially .

is if I have a bad fund that is tied to, I call the lime and aggregate index, it's probably the barkly somebody that the bond index, the M P5 o if I if I sell A B C bard fund， that is a tie to the living aggregate index and I buy and I sell that capital now by X, Y, Z bond fund that's tied to the leave and aggregate index, totally different fund companies or etf providers. Eta, that is a wassail. They're substantially equal.

They may be considered substantially .

identical.

So you want to you want to avoid these situations that are kind of walking like what you can do is say you're holding coke, you want to get rid of that. And by pepi, that's fine. There are totally different company to have different management.

Those are not going to be substantive identical. If you would say as rosa and you want to sell that and buy a biotech etf, you know those are going to move in very similar patterns, not exactly um but that would not be substantially identical. You do start to get a little questionable when you have, say, an S M P index is offered by being guard and you saw that and you go get um a swab S M P index you're mixing the same thing that .

probably is gonna violate.

I would think there's some grey area, which is a big reason. I this is not tax advice and you want to speak with your tax professional about that. But yeah, there there's still many different ways you can hold a similar enough position in in your portfolio that is not going to drastically um change things until such time as you can go back after that thirty day period, we purchase your particular fund or stock if you so choose to.

So an example of this is let's go back to A B C bond fun that mimics the major bond index. The bark lays aggregate them an aggregate. If you're old school guy, if you sell that in by a high yellow band fund that is focused on the high yield segment of the market or a short term duration ban fund, our treasury bond fund, they likely will act eighty ninety percent of the way there. But they're different. The problem with this, I think iron isn't IT, is that this is all self reporting on the tax return and really only comes up if the iron is asking questions, if they're going to audit you, right?

And this is where I have to tell you that S M E A, I am not supposed to comment on the odds being oddie. They like that.

But it's a self reporting thing that like with almost all tax, all the tax information and you could walk the line to everyone to walk the line on these non specific rules. But if he gets ordered and they ask a question about IT, you're going to have to deal with IT and have to .

explain your stance.

You're going to have to explain your stance. And from a walk the line stand point, i'm trying to use a kid analogy because they are always the best for the things like this. It's a little bit like a coke road.

So they came just innocently asking a question. And if they see a wash sale in order, that is S P to S M P, just different providers. Everybody knows what's going on there, right? And that's a cockroach. And when you see one cockroach, Jerry, what do you Normally see?

A lot.

So maybe I need to go dig deeper. And I ve dealt with as A C. co. And back in the day, I was ordered by the our firm was ordered by the cc. IT is trying to justify everything. A lot of IT is showing that you're trying to be a faithful actor within the realm.

And so great. exactly. And so you know, again, there are so many alternatives out there that can easily be argued that that they would not be a violation, number one, to a rule that I think that it's easy enough to stay away from the line, so shouldn't be problem. But you know, if you do violate a large salle, it's not the end of the world is that that losses disable out temporarily IT gets added to the replacement holding. And then when you do eventually sell that in a long washout, violate and kind of way that loss will be captured in there.

Yeah, but that's the severity of IT going wrong. What are some gadgets that we need to watch out for in because the goal of this is will get to the end is we should evaluate our our portfolios every year to just look for the low hanging fruit, to use things as productively as possibly so. But what are the gadgets .

and thinking the biggest one is that run to find another one. We touch on the capital losses with you. So if you're one hundred and two and you're like i'm gonna harvest, the whole point of losses might not be the best time if you're gonna use them all up in that year.

Let's take on that one role briefly because I encounter situations generally, it's in real estate or other private type of investments where they'll be people that will come in with substantial loss Carry for us. The you know in the six sometimes seven figure age. And it's easy to want to bank those and use them productively.

But they die with you. They go away and essentially so sad. Yes, you can tell you a tax person when that's sad to you, but if you have a half million dollars in a tax loss Carry for that means you can go earn or realize half million dollars gained free of tax, tax free and .

you're reset in your basis, are you I want to make sure .

he that point o what is the matter? Got just the three .

thousand dollar maximum limit that we talked about that can be applied to just ordinary income, other type of income. There's three thousand dollars whether made filing during or single, but if you are married, finding separately is only fifteen hundred. So that's another one of those penalties that hits the the M F S. crowd. So if you are very finding separate cargan of that, another problem is those Carry forwards.

Yes.

if you have a Carry forward loss every year, you have to put that amount on your tax return and and just kind of keep tracking IT, whether you're using IT or not. So say you generate a big loss, ten thousand, thousand or ross in the year two thousand and six, seven years go by. You haven't harder said any games, you haven't touched their loss.

So you having been putting IT on your return, maybe you switch cps, you forgot to tell the new guy, whatever two thousand and eleven, you have gains that you do want accounted guests. Well, the IOS has come out and said, sorry, you can't. That's gone.

We have you haven't provided the information on that, so be careful. Make sure you always recording those. Make sure if you change C, P, S, that they get a copy of your last year tax return.

Make sure you're filling out the attacks organizer. They don't just have you do that because it's a fun activity. You need that information. That's the most funny activity.

Well, that's why I love people like you earn. And so just can you put in on one extra turn, you got to keep put in IT on. There is the point.

If you want to keep moving that forward to be able to use in future years, you have to keep make sure that on your text turn each year OK.

What else? Any other got you? We need to think .

about the multiple funds. Those can turn out so much. I got you as they can be a surprise at the end of year again.

That's why we want to have leave ourselves buffers, things like that. You know that these are estimated y're not written until your tax return n is actually done. And lastly, related party transactions for any people that wants to thought they get sneaky.

And i'm going to sell this to my brother, my sister, my kid, my grandparent. Related party transactions are not eligible for up the law treatment. So OK.

now a couple areas where you can use this and we'll talk about some closing behaviors is one is obviously, we're thinking about this near the end of the year, right? As because it's taxes, you're in accounting of looking to how do we use some losses productively. Another time to think about this, and this is one that a lot of us forget.

I think iran is during market stresses, right? And good example would have been the COVID bear market, which is a very, very quick bear market in hindsight, right? IT happened in a mother. So and IT was drastic.

And we were relatively on the ball during that in the only selling we did during that covered bear market, which happened, I believe, in march, April, right? Was to actively harvest losses and purchase either non substantially equal assets in march just simply to book the losses. So when you're under in in a market, stressor could be just the general stock market, but IT could be the fixed income market, IT could be any asset.

So I think those are the two big opportunities year. And and when things are really stressful, the markets mean they're going down substantially very quickly. Is that the time that oh, maybe I make some lemonade, still maintain roughly my position but within enough margin that you're not worry about the R S, and just book the loss because you can use those at in later times.

That text less harm is not just a december activity. That is a year on sport when you see a big pull back like that. If IT affects report, consider harvesting those losses. If you have certain holdings that have just turned to dogs and you you just show even want to keep on harvester losses if you want.

If some people even set up like a sep paramor, they say, you know, if I have any holding set, drop ten percent more, you pick whatever number i'm going to harvest losses. Just don't let your emotions start the decision. Make sure that you have a well thought out plan for when you're going to do this and why you're doing.

yes. And there's a lot more opportunity is, I think with individual stocks, intel purch l hathaway win war and dies, that stock will go down, right? And if you are a believer in butcher hathaway, regardless of warn or past warn, you could sell IT, reset your basis lower by a back or buy something relatively similar.

But it's a productive thing to have. This was a great detailed discussion here. And I love, love that you're on our team. And I love, love, love that you love taxes.

Well, I love that you invited me on to talk about them. Thanks for her.

Now is time to answer some your questions if you have a question for the sugar to ask Roger that M E. Our first question comes from greg related to an optimization question for his older relative. So here's a sit.

His older relative is seventy seven, has two million and pretax I A type accounts does not have and has never had a rough account. So greg question is, if he were to start a RAV account today via a raf conversion, would he be subject to the five year? He's trying to figure out if converting some of his array to a rough is a good idea at his age.

I greg. So let's think through this. First off, whatever he converts is going to be text as ordinary income realized that he can't use his R, M, D to be part of the conversion, so he's already taking requirement of distributions.

He would have to take those distributions and then choose to convert some pretax assets in addition to the R M D. And the next year's R M D would likely be lower because he would had lower monts in the pretext assets. So understand that at his age he meets one of the two requirements of what we call the golden rule, which is, number one, he is over fifty nine and a half.

He hit that. He's seventy seven, but he doesn't hit the second part of IT. He's not had at least the dollar in a row, I ray, ever, or for at least five years.

So he doesn't meet that part of the rule, which means if you were to convert, let's say, hundred thousand dollars, you would pay tax on one hundred thousand dollars in the year that he did IT, and then that hundred thousand dollars would start the clock on the five year old, and he would have to wait at least five years to do a qualified distribution from his raw account. So what does that mean? talk.

He really needs to draw money from the raw account. So that's a good thing. Who cares? It's five years. It's really for legacy.

But what if he did want to draw money from the rough account prior to five years? How would that work? Well, if you were to take, let's say, fifty thousand dollars out of his roth ira after he converted one hundred thousand dollars prior to the five year rule, he's not going to have an attack and penalty because it's less than what he converted initially.

So you can always take the money you put in out once you exceed your contributions or conversions, then need the five year old starts to apply in terms of either the early withdrawal penalty, which he is not going to hit, or taxes on the growth. So worst case scenario, hair, greg, is that he puts the convert to hundred thousand dollars. He pays the tax on that.

And then if he takes out more than the conversion within the first five years, there's going to be some tax implications as a result of that. So in the situation that is then you have to what will he be doing that? Will he actually be taking money out because he got to hit that five clock in order to take out any of the earnings?

Are growth on the conversion, but it's calculated on the first in first thought. So they assuming the first money coming out of the contribution or the conversion in this case, which is not going to have any tax consequence. Now here we are torsen into the year as we're thinking about roth conversions greek.

So if he were to do a rough conversion in two thousand and twenty four, the five year clock starts january first of this year even though were in november. So because it's done on a calendar year basis. So if he does the conversion before the end of the year, the five year clock actually started january first of this year.

Some things to consider as you're doing this, greg, with your relative is one, by doing a conversion is going na impact erma the medicare third charge for two thousand twenty four erma third charges star if he single, if he makes over one hundred and three thousand as a single file or over two hundred and six thousand in one dollar as a joint follow, if you still married, and these arma levels are clifts. So he had, lets assume, a zero income. If he converted three hundred thousand dollars, you would calculate the modified to justice gross income, and that may kick him up into an arma rate, meaning he'll pay more for medicare part B N D intially.

So will include the two thousand twenty four important numbers were cheat that has all these brackets and the tax brackets in the capital gains brackets extra in our sik shot saturday email that probably should go effect the calls listening to this SHE draft the sick shot saturday right at so cold that include the end of your worksheet and the important number work sheet as links in all of our six shot saturdays this months. That way, people can have access to this quickly as we talk about questions. So greg, understand that you could have second order consequences of erma and different tax brackets that he might go up into.

Ultimately, the question greg comes down to what is the intent of doing a roth conversion. This is a little bit about what we're going to talk about tomorrow. So maybe you watch that this replay.

What is this his intent for this? Because we're little late in the game. And is this for his ears? Is this for him to reduce future ARM? S because he's worked about tax rates.

The Better you can define what the intended for this, the Better that you'll get to a solution. And perhaps you watch the replay for tomorrow that will give you more fleshed out version of how to think through this logically. Our next question comes from standing related to a mega, which is a multi year guaranteed annuity that were pretty popular as a tactical step when into structure extremely low.

And now they're starting to come do so, Stanley says. My wife is seventy five, has a taxable mega. What year guarantee? The newly fixed the newly lee's call IT that started long ago as a deferred in committee, which is a basis of thirty six thousand dollars and estimated end value of fifty thousand dollars.

And this is matching. So these work a little bit like A C D. And that they have a maturity date where the interest rate is guaranteed.

And at maturity, you have some choices and your choices are either to exchange this to a new annuity, whether a fixed unity or any either kind of annuity or take a distribution from IT surrender IT. And in this case, in a multi year guaranteed annuity, all of the growth is taxable because it's an attack. The third vehicle that gain from thirty six thousand and fifty thousand has been growing tax effort.

So if they surrender this annuity, it'll become taxable income. But if they roll IT into a new annuity, IT will not it'll be deferred, though we have a sizable taxable liquid asset. I got a eighty thousand note pension.

We got a so security. All of our essential spending and most of our fun and wish spending is covered by our guaranteed income sources. I have two other notes, one in an area and the other in a taxable account with guaranteed lifetime benefit. We are gifting our children and parts of these annual annually and either spending or saving in the rest. We don't really need the guaranteed income as you see, but I low simply taking the lump sum and paying taxes on IT, probably at the twenty two percent tax rate.

What would you recommend? Take the lump on payout, take some former annuity income or rolled over to another mega annuity or something else? What's a great question standing? I actually I can't give you a recommended the idea because I can't I don't know you, I can't give you a recommendation, but let me summarize this.

You have a new ties now. You have ample income for anything that you want to do. Basic, great life wants in wishes. And so this fifty thousand dollars in the annuity is access money that you don't necessarily need.

So if you were to take the money and pay tax on a in the twenty two percent bracket, which is not a bad bracket, all of this money is going to be text at some point standing. And that's important to remember. It's just a matter when you decide to have a text and understanding that helps reframe IT a little bit as you're not avoiding taxes.

If you were to roll IT over into another mult, you're guaranteed and new IT, you're differ ring the taxes to another day. And so the question really becomes, is IT Better to pay the tax now, have the money or defer the tax and either iron my ears, deal with IT later? That's really the question. And some of that around what will be the tax bracket that you or your ears will be.

And when this tax is getting realized, is twenty two percent good now, because you could, option one, have the new city surrendered, what would give you a fourteen thousand other again? What would be taxed at twenty two percent? Which means you would have almost thirty one hundred dollar tax bill, which means that after tax, as you would have forty six thousand nine hundred dollars in your hand that you could use to gift to your children, that may be the best use of this money.

Twenty two percent is a bad rate, depending on what your situation looks like. This is why multiple tax planning is important. Go down to what is the intent for this money.

If you have a plane of record, this is access capital that can neither grow for the future and be given to your ears, grow for the future for your own use, or perhaps starting to distribute to your family. I would think that surrendering IT and distributing the money to your family might be a good use. You could work in some charitable giving there. That's a home.

Another topic, when you get into some of these tactical questions, that starts to get very multifactorial, why it's hard to answer these black or White in a show like this because I don't only have limited information on the quality native and the quantitative side, given how what you said I probably would not block in more guaranteed in comment, sounds like you have enough. I would probably lean towards just in this moment surrendering IT paying attacks and either investing IT after tax assets because that will get a step up custom basis or start to distribute to the kids in this moment. But there may be some other options that demand later.

I guess one other one that comes to mind is you could look at exchanging this into another unity that has some estate multiple er some newly will have features where they have a death benefit that has a multiple er attached to IT. That might be an interesting thing to consider. That would take some more bespoke planning to see if okay, you put fifty thousand into a new annuity, but IT has a multiplier that if you were to die, pays out a hundred or whatever IT is.

You'd have to search to see what is available out there, but that might be an option to consider as well. Next is j on timing. okay. Hey, writing on my questions about the pie or bucket approach. So we put five years worth of savings into our first pyle ice that we have in safe vehicles like cities.

Check, I take IT that as you spend IT down your plane from the next slice for funds needed more than five years and and that's going to come from investors and bombs and equity exedra. Do you suspend moving funds from the growth side bucket if there's a market downturn? And if so, how we wind? Do you resume moving money from one slice to another? So essentially, the question is he has his structure in place.

He has a contingency fund. He has his next five years of spending refunded in cds, and then he has upside portfolio that's more growth or IT. And so j, if I understand the question correctly, okay, I get I can rebaLance this on an annual basis.

But what happens if the market is down twenty percent this next year? Do I refill the bucket? If so, how? And the answer is maybe, jay, option one is you just hard reveal the bucket and you do that as part of your realm within your upside portfolio.

So an example might be in your upside portfolio if we have a really bad bear market, not all of the assets in that asset allocation, you're onna go down, assume x bonds would assume stocks go down in bonds stay the same. Well, now you're realities if IT was fifty, fifty is not fifty fifty anymore. Maybe it's sixty percent bonds, forty percent stocks because the stocks went down in value.

You're gonna want want to maintain a relatively close asset allocation, which means you would sell bonds and bystry ks, and that would get your upside portfolio back to the allocation that you had predetermined. Well, another way to do that is just to sell some of your bombs, not sell the stocks. And that gets you back to your fifty fifty allocation.

And then you peel off some of that money to refund the outer years of your five year layer. So that's one option. Another option, jay, is that you do not refill the five year income floor that you go through a year of a bear market and you say, okay, now I have four years of spending, i'm gona choose not to refund and just maintain a four year income floor in order to allow this to calm you too.

We have another bear market, maybe you choose not to refill. And now you have a three year cash reserve in order to let the seas calm. That is an option that you have.

That is a legitimate option. And one thing that we forget, j, as we're making these decisions in an Angel way, we're recasting what are spending actually is so you're one of the bear market. Not only are you gone to look at the value of your portfolio, you're also going to look at what your actual spending is on your base. Great life wants and wishes, because when you build out that five year income floor, you have to decide, and I just going to refund my bed, great life.

Or am I going to add in some of the extra spice of life, like the extra trips in the extra purchases? And am I gonna refund that as well? Because if we get through a bear market after year one, part of the decision is, well, what is my actual spending? And because we're turbulent times, maybe we battled down the hatches and not do some of the extras, the extra spending, the extra travel or we moderate some of the extra spending and extra travel, which actually would extend the income floor a little bit more because you're moderating because of bad seas, very similar to when we have our steak salad here at the house.

So I will buy steak well with inflation. SHE doesn't buy full lay anymore. SHE buys either cuts of meat because she's making a swap to try to manage expenses during a time when food inflation is particularly high.

God willing, that will subside. So I can hand fully again and we can have play again. So it's a little bit more dynamic than just simply tweak the portfolio because maybe you're just naturally spending less than what you estimated is always a moving target.

So there's that factor in there as well. The important point of all of this exercise, j, is the intentionality of systematically paying attention to IT because you're also gonna testing at the end of the bear market. You're gonna testing your feasibility again to say how impact for was this bare market to my long term feasibility of my current spending plan? And if IT was not very impactful, then maybe you don't refill the bucket.

If IT was impacted tl, well, you have some negotiations that you need to do on your portfolio, but also you're spending side. So it's a very dynamic thing. The important part is being an intentional about IT and getting ahead of the curve for some perspective.

Back in two thousand eight, that vintage of Roger as a retirement planner with clients that we work with, we went through all of two thousand eight with about two years cash reserve and navigated a fifty percent peak to trough drop in equity markets. We didn't just own all equity with two years cash reserves. And we came out just fine.

I didn't have any crash burns. We moderated spending a little bit more than perhaps we could have had. We had built bigger buffers in there. So I think I don't know how much you have to pay plan this.

J, I think running the feasibility will help guide you, as well as what your life situation looks like at the time to make a decision. Now let's get to a smart brain. Only Marks get set.

And now we're off to a little baby step you can take in the next seven days. It's not just rock retirement but rock life. And this is gna be a tactical step in the optimization pillar. And that is to review your after tax accounts looking for unrealized losses.

Likely it's going to be in the bond portion of your portfolio, but look at unrealized losses and start examining whether you can use those productively either by selling them and realizing the laws are doing a sale of the loss and buying something somewhat similar but not too similar to the investment in order to maintain your investment position, in order to realize the loss to offset gains. See if that is something that tactically is going to help in hanchen plan and provide literally a dollar payoff by saving dollars and taxes. When I think the team that puts all of us together, iron and a coal and alison and roy and Scott and gram, see when I start naming, naming is getting so big, it's hard to remember everybody.

We have such an amazing team that works to put all of this together. Tracy, everybody, thank you so much. Hope you have a wonderful day. Will talk you next week.

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