With both stocks and bonds being down double digits this year and talk about a recession next year, it can feel like nothing but bad news. In reality, it means there are some opportunities available to us right now that aren't always around. Here are a few tips to think about when it comes to making opportunity with your money as we head into 2023.
- Boost your funding. The effect of compounding growth is the most amazing thing I've seen in this business. The longer our dollar is at work for us in investments, the less dollars we ultimately need to save. Whether it’s a boost of $200 a month or two or three times that, any dollar that you can increase in investments in times like this has the chance of really boosting your progress towards your long term savings goals. And this goes for the little people in your lives too with their 529's and other investments for kids!
- Look for places to stash your cash: High Yield savings is again high yield savings. For the last few years, high yield savings accounts have not been true to the name. My joke with many of them has been that they "round to zero"…very few paid much more than that. With rate changes this past year, we are now seeing interest rates that are paying around 3%, with other options like some bond investments getting above 4%. At those rates, it's now time to re-evaluate where you're stashing your cash to see if it makes sense to make some changes to get a little return.
- Tax loss harvesting. Do you have investments in a taxable account? While paying taxes for activity in those accounts can become pesky, years like this can create opportunity. Though harvesting losses can only allow a deduction of up to $3000 a year on taxable income, it can offset much more than that in taxable capital gains from investments, including real estate. If you're planning to receive a capital gain in the future this could be the time to bank some losses to offset it. If this is something that may be right for you, rules are complicated, don't hesitate to reach out for details.
- Rollovers from pensions. If you're no longer working in a pension system, can and have decided to roll that pension balance you have into your rollover IRA, with the stock market being down so much this year, this could be the time to do it. There are a number of things to consider with this decision, if you aren't sure about the in's and out's, I can help.
- Roth Conversions. While its too late to get these done for this year, this is still something to keep on your radar. Converting traditional IRA dollars to Roth allows you to pay taxes today, for an asset that will grow and in the future be a tax free income stream. Down markets give us the chance to convert these dollars paying less in taxes since IRA balances are lower.
Cheers to finding new opportunities in the New Year!
~Wendi