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Re: End of year tax planning for wage slaves....
Old 12-22-2006, 07:55 AM   #21
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Re: End of year tax planning for wage slaves....

I've maxed out the 401k but may get some money back from that as I'm considered a highly compensated employee. Finished up all my donations and the only thing left to do is gather all my information together and wait for account year end statements. I wish I could contribute to an IRA or a Roth but I'm above the limits
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Re: End of year tax planning for wage slaves....
Old 12-22-2006, 09:08 AM   #22
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Re: End of year tax planning for wage slaves....

Quote:
Originally Posted by justin
I've only got about $6500 in capital losses left to use (hanging on to the Lucents and nortels from 2000!).
Don't forget that your losers haven't done anything to increase your net worth in the last few years. If you had booked your losses earlier, you could've used the proceeds to double your money in the last few years in other investments. My rule of thumb: Always book losses. That philosophy has saved my butt from worse disasters a number of times.

Loss aversion (and realization) is a big bugaboo in behavioral finance.
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Re: End of year tax planning for wage slaves....
Old 12-22-2006, 09:39 AM   #23
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Re: End of year tax planning for wage slaves....

Quote:
Originally Posted by LOL!
Don't forget that your losers haven't done anything to increase your net worth in the last few years. If you had booked your losses earlier, you could've used the proceeds to double your money in the last few years in other investments. My rule of thumb: Always book losses. That philosophy has saved my butt from worse disasters a number of times.
The majority of my losses are from lucent and nortel - basically throw away stocks where I have lost 95% or so of my principal and only have a very small value left (~$270 total). To me it is obvious that booking my losses now and avoiding 5% taxation on $6500 instead of waiting a few years and avoiding 15-25% taxation on $6500 is a poor choice. Besides, my $270 position in lucent and nortel could always double before I sell it. It happened to another "loser" for which you would have recommended that I sell to book a loss. HPQ has tripled in value since its low point a few years ago. I've actually made a positive return on what I thought was a stinker. The losers don't identify themselves until after the fact.

I am glad you said something though because it reminded me that I need to (long-term) sell these small individual stock holdings (the winners and the losers!) since they don't really fit into my portfolio plan going forward. And they are ~1% of my portfolio so they have almost no impact on my total returns.
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