9.10.2023 I Strategies Are More Important Than Investments

Your Money Radio

Roth IRA and Roth conversions

• The tax benefits of a Roth IRA are likely to be far greater influence on your wealth accumulation than picking the right stock or bond funds to put in them.
• Converting all or some of your traditional IRA to a Roth now could be a good move
• Conversions are on sale until the Tax Cuts and Jobs Act sunsets in Dec. 2025, when today’s lower tax brackets return to their 2018 levels (unless Congress acts)
• Note: Roth IRA conversions are permanent. You can no longer recharacterize back to a traditional IRA

Time, not timing

• Market timing is not easily achievable, even for professional investors who are in the market 24/7 and spend their entire day monitoring their investments
• By staying in the market, you participate in the market recoveries in real time
• By dollar-cost averaging (DCA), you buy more of what you own at lower prices when markets are down

Spend the smartest money first (Smart Money Strategy)

• The decision to take withdrawals from a tax-advantaged account or sell appreciated securities from a taxable account isn’t always straightforward
• Spending smart money first means seeking to balance tax consequences with investment performance. Sometimes more art than science.

Reducing taxes are one of the best ways to reduce your ROI

• So much of the financial industry tries to encourage people to put most of their wealth into qualified plans including IRAs and 401(k)s
• Pretax retirement plans are inefficient
• Paying the taxes dues on traditional IRA or 401(k) withdrawals will probably be your biggest investment expense during your lifetime

Tax diversification

• Set up near-term, medium-term and long-term buckets
• Income strategy and tax plan need to support your goals and values
• Money Matrix