Podcast Show Notes – The Architecture of Wealth
Date: 6/5/2022
Name of podcast: The Architecture of Wealth
Episode Title: 4 Ways to Make the Most of a Market Downturn
By taking inventory of your risk tolerance, you can take advantage of this lower market. Here are four ways to make the most of a market downturn.
For information about Sona Wealth Advisors: www.SonaWealthAdvisors.com
Summary:
In the wake of a bad week for the market, now is a good time to evaluate your risk tolerance. And checking your risk tolerance via your financial plan and investment strategy can help you find ways to leverage a lower market. You should be doing this on an ongoing basis. Then, these things will affect you less and less.
Here are four ways to take advantage of this market downturn:
Frontloading: Contribute to your retirement account early in the year. Historically, the market doesn’t go substantially lower than 20% down in any given year – where it is currently – meaning now might be a good time to frontload. The con is the 401K match: most companies will require you contribute every month to get your full match.
Also, small business owners may not know their full income for the year and how much they can afford to frontload.
Put Cashflow to Work: If your job is secure and your emergency fund is well stocked, now might be a good time to put your cash to work.
Tax Loss Harvesting: Capital gains were a big deal in last year’s market. When the market is down, you can take advantage of losses. Keep the wash-sale rule in mind when doing this. Separately Managed Accounts (SMA) are popular because the technology has improved. They can harvest capital losses at the individual stock level.
Roth Conversions: If you were going to convert, the tax burden may be lower now because valuations are lower. This also works if your income is low. Converting during a 20% pullback might be a good idea. Increasing your income from a Roth conversion may have unintended consequences. There are tax deductions that rely on income. You may lose loss credits and deductions by increasing your income through a ross conversion.
Anything with a Roth has a five-year rule, including each Roth conversion. Each conversion has its own five-year rule.
One strategy is to convert higher-risk, higher-growth potential assets from your traditional IRA with the idea that they will grow more inside your Roth. Lower-risk assets will be in your traditional IRA.
Timestamps:
0:00 Introduction
2:25 Self-Check with Risk Tolerance
3:26 First: frontloading
6:12 Second: put cashflow to work
7:57 Third: tax loss harvesting
9:07 Fourth: Roth Conversions
Mark Struthers
www.SonaWealthAdvisors.com
Chanhassen, MN 55317
The Architecture of Wealth Podcast is for educational purposes only. Investment Advisory Services are offered through Sona Financial LLC (DBA Sona Wealth and Sona Wealth Management), a registered investment adviser authorized to do business in states where registered or otherwise exempt from registration. Nothing discussed during this show/episode should be viewed as investment advice. If you have questions pertaining to your specific situation, please consult your own financial professional.