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Rebalancing when you mainly have high gain Taxable accounts
Old 12-28-2017, 08:01 PM   #1
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Rebalancing when you mainly have high gain Taxable accounts

I retired early and am 48. 92% of my portfolio is in taxable accounts. 8% is in a IRA. Over the years I have sold tax lots that result in losses first or lowest gains first. But now basically all stock "lots" have huge gains of at least 300% so anything I rebalance is going to be taxed heavily. My instinct tells me to let the rebalancing slide for as long as possible. Is there any other better ideas?
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Old 12-28-2017, 08:50 PM   #2
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I don't think so.
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Old 12-28-2017, 09:10 PM   #3
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Originally Posted by outofratrace View Post
I retired early and am 48. 92% of my portfolio is in taxable accounts. 8% is in a IRA. Over the years I have sold tax lots that result in losses first or lowest gains first. But now basically all stock "lots" have huge gains of at least 300% so anything I rebalance is going to be taxed heavily. My instinct tells me to let the rebalancing slide for as long as possible. Is there any other better ideas?
I hope you are happy with an equity heavy portfolio. If not, Start small and take some capital gains within the 0 or 12% brkts.
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Old 12-28-2017, 10:57 PM   #4
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If your total taxable income, including LTCG is within the 15% tax bracket ($75,900 or less of taxable income for MFJ in 2017) then the LTCG tax rate is 0%.

If you have cash, buy an inverse ETF to derisk your equity % above your target?
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Old 12-29-2017, 07:13 AM   #5
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Originally Posted by pb4uski View Post
If your total taxable income, including LTCG is within the 15% tax bracket ($75,900 or less of taxable income for MFJ in 2017) then the LTCG tax rate is 0%.

If you have cash, buy an inverse ETF to derisk your equity % above your target?
Not a big believer in this:
If you have cash, buy an inverse ETF to derisk your equity % above your target?
Check the hit inverse ETF's took this year. Better off to take the tax hit.
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Old 12-29-2017, 07:51 AM   #6
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Quote:
Originally Posted by outofratrace View Post
I retired early and am 48. 92% of my portfolio is in taxable accounts. 8% is in a IRA. Over the years I have sold tax lots that result in losses first or lowest gains first. But now basically all stock "lots" have huge gains of at least 300% so anything I rebalance is going to be taxed heavily. My instinct tells me to let the rebalancing slide for as long as possible. Is there any other better ideas?
I’m in the same boat. However, my portfolio is 100% equity and have no desire to rebalance my AA. Have pretty well stopped rebalancing between names as well.
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Old 12-29-2017, 07:56 AM   #7
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what's in IRA?
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Old 12-29-2017, 08:25 AM   #8
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You can stop reinvesting dividends. You pay taxes in the dividend, whether you reinvest or not.

Either take the dividend and invest it in bonds (or ??), or move them to a different style of investment.
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Old 12-29-2017, 10:21 AM   #9
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Originally Posted by VanWinkle View Post
Not a big believer in this:
If you have cash, buy an inverse ETF to derisk your equity % above your target?
Check the hit inverse ETF's took this year. Better off to take the tax hit.
I agree it would be better to sell and take the tax hit, but the OP seems very reluctant to do that.... the inverse ETF would be better than nothing... if stock take a hit presumably the inverse ETF would gain and offset the hit.. derisking his portfolio without selling.

I presume that inverse ETFs took a hit this year because stocks did well.... just as they are designed to do.
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Old 12-29-2017, 10:51 AM   #10
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Originally Posted by pb4uski View Post
I agree it would be better to sell and take the tax hit, but the OP seems very reluctant to do that.... the inverse ETF would be better than nothing... if stock take a hit presumably the inverse ETF would gain and offset the hit.. derisking his portfolio without selling.

I presume that inverse ETFs took a hit this year because stocks did well.... just as they are designed to do.
Your presumption is correct!!! It is just hard for me to be a pessimist
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Old 12-29-2017, 10:58 AM   #11
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Quote:
Originally Posted by pb4uski View Post
If your total taxable income, including LTCG is within the 15% tax bracket ($75,900 or less of taxable income for MFJ in 2017) then the LTCG tax rate is 0%.

.....
And any sales above that are at only 15% marginal rate for quite a while, depending upon your filing status.

So sell away.......and buy CD's or Bonds, before your 0% space gets taken up with SS and RMD's.
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Old 12-29-2017, 01:26 PM   #12
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If you're also looking to make charitable donations, giving highly appreciated stock would be the way to go. You can donate it directly or to a Donor Advised Fund, get a deduction for the market value (if you itemize) and also avoid the cap gains.
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Old 12-29-2017, 01:32 PM   #13
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Originally Posted by outofratrace View Post
I retired early and am 48. 92% of my portfolio is in taxable accounts. 8% is in a IRA. Over the years I have sold tax lots that result in losses first or lowest gains first. But now basically all stock "lots" have huge gains of at least 300% so anything I rebalance is going to be taxed heavily. My instinct tells me to let the rebalancing slide for as long as possible. Is there any other better ideas?
How far out of balance are you?

What is your desired asset allocation? What is your current (unbalanced) asset allocation?
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