Cashing out investments to pay taxes

[Anonymous]

Great day!

Cash out of investments (down 17% YTD!) to pay taxes on last year's gains.

Bonus Vanguard "Tax Managed" fund that generates 2% in unwanted dividends.


Silver-lining: tax-lost harvesting for next year?

[Anonymous]

When 85% of your income eventually goes to taxes in some form or another (fees, licenses, permits, registrations, schools, etc.), there's really no bright side.

[Anonymous]

I don't manage my own stuff. So I’m not crowing here.

That said, I actually asked the account person about this question and she said they look at it at the end of the year (re timing losses) and they use the least bad option to generate cash if they need to. So I wonder if maybe you’re just too heavily in stocks if this happened and it was a big deal. Like maybe this year, when you know you realize big gains, you should rebalance a little.

[Anonymous]

This is a separate issue, but I was shocked when I noticed that my advisor sold about $500K worth of investments during the dip and put it in a money market. The plan was to save those investments in case of further loses and reinvest later. The move is triggered when there are more than 10% in loses in a short amount of time. Unfortunately it didn't work because the market stabilized. Total loss was only $20K, but still I am pissed. I never authorized it, and when I confronted him, he said because our investment strategy is conservative (we are retiring soon), that is something he does when there are extreme dips within a small period of time with only only on 3 separate funds. The rest of the $2.5M portfolio was left alone. I am going to chat with him next week about this, but I don't think this is a good strategy. Apparently he did this in 2020 and it paid off. But not this time.

Anyone else familiar with this tactic?

FWIW, we have other large investment portfolios elsewhere, namely in deferred comp, 401K, and company stocks/stock options. It's not like we are going to need the money in his portfolio in the near future. Maybe I need to clarify that with him.

Also before anyone chimes in about what a waste of money it is, we have a pretty good deal at .05%.

[Anonymous]

Sorry to hear. Live and learn. Luckily I had an issue with them the very first month. I recognized fast that they have no idea what's best for me.
Learned to do it all on my own. I have no tax liability to speak of as a consequence. My two tax free accounts returned 100% last year.
The company doesn't have the balls to make that happen for me. They have to follow rules.
Consider being more involved and hands on going forward.
Isn't tax loss harvesting only $3k? Why bother.

[Anonymous]

Anonymous wrote:I don't manage my own stuff. So I’m not crowing here.

That said, I actually asked the account person about this question and she said they look at it at the end of the year (re timing losses) and they use the least bad option to generate cash if they need to. So I wonder if maybe you’re just too heavily in stocks if this happened and it was a big deal. Like maybe this year, when you know you realize big gains, you should rebalance a little.

So is reinvesting dividends a mistake?

I assumed that tax-manahes funds would do smart things like use shell securities to make dividends behave like unrealized appreciation, but I guess not

[Anonymous]

Anonymous wrote:Sorry to hear. Live and learn. Luckily I had an issue with them the very first month. I recognized fast that they have no idea what's best for me.
Learned to do it all on my own. I have no tax liability to speak of as a consequence. My two tax free accounts returned 100% last year.
The company doesn't have the balls to make that happen for me. They have to follow rules.
Consider being more involved and hands on going forward.
Isn't tax loss harvesting only $3k? Why bother.

Tax loss harvesting can cancel up to $3K/yr PLUS all your realized gains.

So you can
1. Collect dividends or Sell stock A to realize gains
2. Sell stock B to realize losses, canceling A's gains, plus $3K of other (wage) income
4. Reinvest in similar-but-not-"wash sale" securities to re-establish position.

[Anonymous]

Anonymous wrote:When 85% of your income eventually goes to taxes in some form or another (fees, licenses, permits, registrations, schools, etc.), there's really no bright side.

What in the world

You need to unpickle your mind from whatever libertarian solution you have been swimming it in