Episode 177: Making Investment Losses Work FOR You
Today’s Prep:
What’s the silver lining in a down market? David shares what might be a benefit to you, despite the losses you may currently face.
Equipping Points:
With the recent market volatility, you might be wondering why a loss could ever be a good thing. On today’s show, David talks about how you can make losses work for you and your financial plan.
To start, identify the three basic types of accounts. Your IRA or 401(k) doesn’t tax you until you withdraw it. With a Roth IRA there’s never a tax bill. A non-qualified account like a brokerage account has a tax bill every year, which shows interest earned, dividends paid into your account, and any gains or losses you took during the year. This is where there is something you can do regarding the losses for your tax bill.
A short-term capital gain is on a stock you’ve had less than a year, but if you hold it for more than a year then you get a preferential tax rate. So, it’s super important to know what you own and how long you’ve owned it. Anything you sell at a loss goes to offset the tax liability you would otherwise owe on your gains. Tax loss carryforward is an asset of yours you get to use to reduce future tax liabilities.
If you’ve owned stock since January 2022, then you have some losses and you might really like the stocks you own that have losses. Is the market going to go somewhere good over the next two or three months? It’s hard to imagine that. This might be a relatively safe time to sell at a loss, get into an index for the 30-day waiting period, and buy back what you sold at about what you sold it for.
Tax losses can be really useful to you moving forward, but it requires that you actually sell and realize the loss at some point. Reach out to your advisor to see if now is a good time to do that with some of your investments.
Listen to the entire episode or skip ahead using the timestamps below.
If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at [email protected]
0:49 - Listener feedback is always welcome.
1:49 - How should we look at taking losses in our portfolio?
3:12 - What are the basic types of accounts and which one are we talking about?
7:41 - Why talk about it now?
Today’s Takeaway:
"It’s super important to know what you own and how long you’ve owned it. Anything you sell at a loss goes to offset the tax liability you would otherwise owe on your gains."
– David Dickens
KC Financial Advisors Blog


