We have been getting a lot of questions on financial planning as it relates to who our next president will be. I thought it would be helpful to answer a few of the most common questions.
With two candidates having such divergent views on future taxes, how do Americans make investment decisions now that might have future tax consequences?
The two candidates indeed have polarizing views on future taxes and policy. We are currently in a wait-and-see mode, but that does not mean we should do nothing. The goal between now and the election is to be proactive, understand your options and know what action is needed after the results are in. Then, implementing the plan will be easy. We also must anticipate an election month not an election day. We might not know who our next president is until the beginning of December.
What tax/investing moves would investors generally make around this time of year?
Year-end tax planning is important in the October/November time frame. This includes looking at your capital gain and loss harvesting and making projections for 2020 taxes. Decide if a ROTH conversion from a traditional IRA could make sense. If applicable, review required minimum distributions (RMDs) and decide if making qualified charitable distributions (QCDs) is beneficial for your financial plan.
Which moves should investors make now?
Now is the time to assess your risk tolerance and rebalance your investments to ensure they match your risk profile. Risk mitigation plans should be in place before – not during or after – a major market event, to stay on track with your plan. We have already experienced increased volatility due to the election and it may get worse before it gets better.
Which moves should investors postpone?
Currently, I would recommend postponing realizing capital losses. If taxes are going up in the future, it might be best to realize capital gains in 2020 and realize losses in future years. I recommend waiting until after the election, though, to make these decisions.
Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.
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