Using the market drop to collect free money!Submitted by Miller Premier Investment Planning, LLC on April 8th, 2020
Good Afternoon, I am Michael Miller the founder of Miller Premier Investment Planning where we provide retirees with the intellectual framework to make sound financial decisions and simplify their lives. This allows them to spend their time on things that matter most. One key component is tax efficient investment strategies.
Every retiree should be focused on maximizing their net retirement income. One of the easiest ways to accomplish this is thru minimizing taxes. There are several strategies and tools that I use to help clients accomplish this goal. Even if you are in the wealth building stage you can benefit from this video. In fact, you can most likely benefit much more thru the compounding effects of tax efficient investing. Today I am going to cover how the recent bear market has created an excellent opportunity for investors to collect free money. Over the past few weeks we have been putting this strategy to work with HUGE SUCCESS!
As a wealth manager specializing in the retirement planning space I am always surprised at the number of investors oblivious to the tax consequences of their investment decisions. This is a HUGE MISTAKE! Over time a typical high net worth investor is likely to pay over a million dollars in total taxes. This makes taxes one of what I call — the three biggest enemies to every investor. Therefore, it is crucial to minimize tax impact on your investments. One technique or tool we use is tax loss harvesting and this bear market has handed you an excellent opportunity to take advantage of the free money it offers.
Tax loss harvesting allows you to make moves that give you a chance to buy undervalued stocks that can save you thousands of dollars in taxes and cost you nothing. We have done this over the past few weeks with excellent results.
Here is how it works. The IRS allows you to offset realized capital gains and up to $3,000 per year in earned income by realizing capital losses.
Historically, there have been 3 objections to this:
1) The investor didn’t want to miss a rebound in the market
2) The investor wasn’t sitting on realized gains to offset
3) The investor didn’t want to pay trading costs.
I will address each one of these. Starting with #3 —trading costs are history. Most discount brokerage firms such as TD Ameritrade (the company our client’s use) charge zero commissions. Objection #2 is faulty logic because even if you don’t have realize gains today you can still benefit in a big way by carrying forward realized capital losses indefinitely as there is no expiration.
This leaves us with how to address objection #1: missing out on a market rebound. By selling your existing investments at a loss and immediately replacing them with similar holdings you can keep your existing allocations in tact and participate in the market rebound. Better yet, you may find even more attractive opportunities like the ones we have uncovered over the past few weeks. Just yesterday I was going over this strategy with a client where we not only significantly lowered the taxes from harvesting but since we replaced those securities they are up more than the losses! In other words, their portfolio is up by double digits but they will be able to reduce their taxes with this strategy.
So why is it smart to switch now vs. later? 5 Reasons:
1) We just had the fastest bear market in history so the sooner you act the more free money you stand to gain.
2) It cost nothing to implement
3) You don’t risk being out of the market for a rebound. In fact, careful repositioning opens you up to potentially better returns and income opportunities
4) You lower your cost basis on your investments
5) You generate free money because you save thousands of dollars in future taxes on income and capital gains
After the markets fully rebound this free opportunity will be lost. So get out there and do it now before it is too late. If you need help, you do not have to go it alone. You can call to schedule a free introductory call with me. I can also help you assemble a battle tested plan thru video chat and screen share in the safety and convenience of your home or office.
Here is wishing you and your loved ones the best of blessings. In the spirit of Romans 8:28 and Jeremiah 29:11 God is good all of the time and I believe we will look back on this moment and see how he has moved according to his perfect plan for us.