Colorad1984ParticipantStatus: PhysicianPosts: 7Joined: 02/08/2019
I’ve decided to start tax loss harvesting in my taxable brokerage vanguard account. I turned off reinvest and I’m two weeks out from anything that would trigger a wash sale. In 17 days, I’ll sell some total international fund at a loss and buy some all world ex us fund. However I just got hit with a relatively unexpected bill for about $10,000. I’d prefer not to tap into my emergency savings fund. My thought was, in 17 days, to sell the total international fund, take out $10,000 to pay the bill, and then use the remainder to buy all world ex us fund. Is this a reasonable strategy and will it interfere with my TLH? thanks.March 13, 2019 at 7:01 am MST #198096treesrockParticipantStatus: PhysicianPosts: 280Joined: 08/14/2017
Whats the point of an emergency fund if you aren’t going to use it for unexpected bills?
The whole point of tax loss harvesting is that you don’t “realize” the losses on your investment, rather you just exchange your investment to another of similar type (and take advantage of the tax benefits of the paper loss). If you sell a fund at a loss, and then use that money to pay off a bill, you just sold an investment for a loss.ZZZParticipantStatus: SpousePosts: 425Joined: 06/18/2018
At that point you are not tax loss harvesting, you’re simply realizing a loss.
Congrats on joining the large contingent that misunderstand TLH. If you don’t keep your same exposure to similar assets at the new, lower basis, you’ve changed your allocation and realized a loss.
You’ll be decreasing your international exposure and increasing your relative cash position doing what you propose. Nothing wrong with that, but, fundamentally that’s not tax loss harvesting.CordMcNallyParticipantStatus: PhysicianPosts: 2130Joined: 01/03/2017
I would use your emergency fund for what it’s intended to be used for and I would also separately tax loss harvest.
“But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
― Benjamin Graham, The Intelligent InvestorPedsParticipantStatus: PhysicianPosts: 3604Joined: 01/08/2016Is this a reasonable strategyClick to expand…
no. you are selling equities for a loss, to pay a debt, and not re-invest.will it interfere with my TLH?Click to expand…
no. you still get to claim the loss.
1- TLH when able, so it sounds like now.
2- re-invest that money in a partner, which it sounds like you are.
3- use your EFund….to pay off an unexpected bill (taxes?). like.an.emergency.Colorad1984ParticipantStatus: PhysicianPosts: 7Joined: 02/08/2019
That makes sense. I think I’ll use the emergency fund. Thanks guys. To change the question a little bit; at some point If I need to tap into the brokerage account funds, should I be selling the shares with a lower basis or higher basis first?March 13, 2019 at 8:38 am MST #198122angeladiaz99ParticipantStatus: PhysicianPosts: 72Joined: 09/30/2018
You should sell shares with the smallest long term gain to minimizes taxes when needing to extract money from your brokerage account
But ideally, you wouldn’t be investing money you needed to tap into within 5 years. Perhaps a larger cash allocation, a larger emergency fund, or better cash flow planning would help minimize the need to tap your brokerage accountsMarch 13, 2019 at 9:15 am MST #198133LordosisParticipantStatus: PhysicianPosts: 793Joined: 02/11/2019
Ideally you want to pull out the highest basis first.
Everyone is going to tell you never to spend any of it but sometimes you have too. It is best if it can wait until you are at a lower income so you can pull the funds out in a more tax efficient way.
“Never let your sense of morals prevent you from doing what is right.”CraigyParticipantStatus: SpousePosts: 1863Joined: 09/16/2016
It’s called “selling low.”
You’re technically still harvesting a loss but, in this instance, not in the beneficial way that TLH is usually practiced.
For what it’s worth, regardless of whether or not you’ve “realized” the loss, this is your current economic reality. If you want to change your asset allocation, selling some assets at a loss wouldn’t be the worst. Just try not to realize more loss than you can deduct.
LEVEL 1 WCI FORUM MEMBER.March 13, 2019 at 2:09 pm MST #198216LordosisParticipantStatus: PhysicianPosts: 793Joined: 02/11/2019
Just think about it this way. When you TLH you wait for a slump and change funds to lock in the loss but the new fund is going to track almost the same so when the market recovers you are good.
If you wait for a loss and sell the yes you get the loss but you end up with less money.
If you have 10k in and the market dips 10% you can take the 1k loss which is worth a few hundred bucks but you just lost a thousand dollars.
If you need the money before someone cuts off your thumbs then do it but if you have cash on hand use that first.
“Never let your sense of morals prevent you from doing what is right.”March 13, 2019 at 7:01 pm MST #198272