Author Topic: Personal Capital - Tax Harvesting?  (Read 4970 times)

Lifeblood

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Personal Capital - Tax Harvesting?
« on: June 03, 2014, 10:15:28 PM »
Personal Capital promotes their financial advising services using this claim (among others):

Tax Management: We manage to each client’s individual tax return, including asset location across different tax status accounts. We do tax loss harvesting, as do some robo-advisors. Tax loss harvesting can be valuable, but it can quickly become counterproductive if it is on autopilot. The use of individual stocks for the US equity portion of portfolios allows for improved tax reduction.

Since I am not planning on using Personal Capital, but rather putting retirement funds in a Vanguard fixed date fund, what should I be concerned about regarding tax management? Any tips?

butchmonkey

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Re: Personal Capital - Tax Harvesting?
« Reply #1 on: June 03, 2014, 11:19:45 PM »
You cannot harvest losses from a fixed date fund as it is a "fund of funds," (unless the whole fund depreciates and you sell it for less than you bought it for(( it's basis ) )

Furthermore if your money is in retirement accounts you can not tax loss harvest.



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butchmonkey

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Re: Personal Capital - Tax Harvesting?
« Reply #2 on: June 03, 2014, 11:23:32 PM »
Translation: do not worry about tax loss harvesting unless you have already maxed out all of your tax advantaged accounts for retirement and you do not have a sizeable taxable account. (401k, hsa, Roth, IRA)

Here is a nice article on tax loss harvesting:

http://www.madfientist.com/tax-loss-harvesting/



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Lifeblood

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Re: Personal Capital - Tax Harvesting?
« Reply #3 on: June 04, 2014, 11:32:19 AM »
Thanks for the link - very helpful. Looks like tax harvesting is a few years off for me.

butchmonkey

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Re: Personal Capital - Tax Harvesting?
« Reply #4 on: June 04, 2014, 01:59:08 PM »
No problem.

I think the bigger point here is that when a financial adviser trumpets the importance of such a function they are saying 2 things to your subconscious.

1.  This investing stuff is very complex.

2. You should pay us to do it for you.

I think of you just save more, invest in low cost funds, and prioritize tax advantaged savings, then by the time you need to understand such concepts, as TLH you will.

Personal capital is a great website, but a poor choice for a financial advisor.

Too expensive.



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Kevin Aster Tin Obin

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Re: Personal Capital - Tax Harvesting?
« Reply #5 on: June 04, 2014, 02:24:54 PM »

Personal capital is a great website, but a poor choice for a financial advisor.

Too expensive.


Can you elaborate more on personal capital?  I listened to the 20 minute spcheel presentation of my assets and they said they beat the indexes (VTSAX) by 1-2%.. would cover their 1% fee..


butchmonkey

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Re: Personal Capital - Tax Harvesting?
« Reply #6 on: June 04, 2014, 02:30:10 PM »
Sadly It's the same old story. Active investing. Higher costs.

If you want to try to beat VTSAX tilt your portfolio to small, value, momentum, and quality with low cost index funds.

Just buying the whole market you'll beat 80% of the field long term.



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rmendpara

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Re: Personal Capital - Tax Harvesting?
« Reply #7 on: June 04, 2014, 08:24:48 PM »
Personal Capital promotes their financial advising services using this claim (among others):

Tax Management: We manage to each client’s individual tax return, including asset location across different tax status accounts. We do tax loss harvesting, as do some robo-advisors. Tax loss harvesting can be valuable, but it can quickly become counterproductive if it is on autopilot. The use of individual stocks for the US equity portion of portfolios allows for improved tax reduction.

Since I am not planning on using Personal Capital, but rather putting retirement funds in a Vanguard fixed date fund, what should I be concerned about regarding tax management? Any tips?

Not sure if this helps, but focus first on saving and putting money in (including developing an asset allocation target). If you save and invest well, "tax harvesting" and other similar items will only be useful in limited situations.

Tax loss harvesting only applies to a taxable brokerage/investment account anyway. So, if most of your money is in 401k/Roth/other IRAs, it's basically useless.

It's a good strategy, but again I would worry more about 1) saving, and 2) investing, than I would about minimizing taxes through tax loss harvesting.

You can also just be tax efficient from the beginning by buying dividend stocks inside a Roth/IRA account, and investing in market tracking ETFs in a taxable account since they have limited dividends anyway.

Then, if a big correction or recession comes along, switch your S&P fund for a Dow fund.

Personally, I like the Personal Capital software which I use extensively for my own use, but I don't know that I would ever pay them. If I need an advisor, I would just pay a real person a few hundred dollars once a year to review my portfolio and give me suggestions to make sure I'm not missing anything, rather than pay someone $1,000+ per year on an ongoing basis.