Do You Consider Taxes As You Invest?

A few astute moves could help promote a better after-tax return.

As you weigh risk vs. return, you may risk taking an eye off taxes. A focus on tax efficiency could help you improve the effective yield from your portfolio.

Diversification is an important part of a well balanced portfolio. That includes having a mix of investments in tax-deferred growth accounts, such as a Roth IRA and tax-free withdrawals accounts. At the very least, look into your tax-deferred retirement accounts such as 401(k)s or 403(b)s.

Tax-loss harvesting can be a smart move any time of year.

By selling securities for less than what you originally paid for them, you incur/realize capital losses. These losses can offset capital gains and you can deduct them against regular income for tax savings. You can deduct as much as $3,000 in capital losses each year and carry forward additional losses to the following tax year. You just have to remember two things: 1) Tax-loss harvesting is only allowed in taxable accounts. 2) You must abide by the “wash sale” rule: you cannot claim a loss on a security if you buy the same or substantially identical security within a 60-day window of liquidating your shares.

If you or someone you know would like to have a conversation about retirement readiness, please contact us at 302.234.5655.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. 

The examples provided are hypothetical and are not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.