Smarter Bear Newsletter #5

For clients and friends of Smarter Bear

Tax-gain harvesting

Some folks know about tax-loss harvesting; we wrote about it in newsletter #4. Tax-gain harvesting can also be advantageous in circumstances where your marginal capital gains rate is low. This might happen if you have carried over losses or when your income is low in a year due to time not working. You can sell an asset that has increased in value to enable the gain to be recognized and then immediately buy the asset back, creating a new, higher-cost basis. Unlike tax-loss harvesting, there are no wash sale rules to worry about.

Key decisions when approaching retirement

When planning for retirement and seeking to optimize after-tax retirement income, Smarter Bear recommends careful planning for three key decisions: the timing of the beginning of Social Security payments for you and your spouse, whether and when Roth conversions make sense for you, and the order of withdrawals of assets from taxable, tax-deferred, and tax-free accounts. Individual circumstances will determine the right decisions. Important factors include cash flow considerations, the age and health of you and your spouse, the amount of assets in the various account types, and legacy and gifting intentions.

Beware-of-gift-cards-sold-in-retail-stores

It is not clear whether clever thieves or someone accessing the computer systems of the company selling and managing the card programs are responsible, but some gift cards show $0 balances immediately after purchase on cards that should have $25, $50, or $100 balances. These are the cards for various retailers and restaurants like Home Depot, Nordstrom, Apple, or Olive Garden, usually sold on racks near the checkout at drug stores and department stores. In-store thieves might record and register the card serial numbers and wait for them to be sold, showing a balance that they immediately withdraw. Or it could be an inside job - which the company denies. Either way, finding different methods to give a gift and avoid an unpleasant surprise is best.

Change in trade settlement rules

Trade settlement is now happening in one day (it was two days) as of May 28. To avoid potential margin charges on purchases that require moving funds from your Money Market Funds to settlement funds, you must sell your money market funds before 4 p.m. on the day of the trade. The good news is that the proceeds are available more quickly when you sell an asset.

Smarter Bear is always available for a free consultation to answer questions and discuss whether our services can help your needs. You can reach us at smarterbear.net. We also offer no-cost second opinions for DIYers or people working with another investment or financial advisor. 

We write our own newsletter, so we know these topics well.  Many advisors and firms employ marketing departments, generative AI, or third-party content services to produce their newsletters.

If you know others who would like to be added to our list, feel free to add them. We aim to write short, helpful, and easy-to-read items on financial topics of interest. We welcome any suggestions for topics to cover in future newsletters.

None of the above is intended as a substitute for tax or legal advice.  Your personal situation will determine what's best for you, and we recommend you consult an appropriate professional advisor.