Hey guys,
Wanted to get your thoughts on rebalancing and tax implications… When I rebalance my accounts to my target asset allocation, I’ll take into account the tax implications and try to minimize the taxes I’ll be generating. For example, I’ll rebalance within my traditional IRA accounts whenever possible, or consider the cost basis when I sell shares in a taxable account.
While recently rebalancing my accounts, generating a significant capital gain (~$75K) seemed unavoidable. After some hesitation, I went ahead and pulled the trigger, reminding myself that maintaining proper asset allocation is fundamental to long-term investment success.
I’m left, however, with some shred of doubt… Are there circumstances where tax implications might impact your rebalancing decisions? For example, my asset allocation wasn’t terribly far from its target (couple of percentage points); should I have waited for a bigger deviation before voluntarily signing on to add $10K+ to my 2024 tax bill? Are there other factors you might consider as well? Or should rebalancing be considered sacrosanct and be done even if significant tax implications exist?
Thanks!
Wanted to get your thoughts on rebalancing and tax implications… When I rebalance my accounts to my target asset allocation, I’ll take into account the tax implications and try to minimize the taxes I’ll be generating. For example, I’ll rebalance within my traditional IRA accounts whenever possible, or consider the cost basis when I sell shares in a taxable account.
While recently rebalancing my accounts, generating a significant capital gain (~$75K) seemed unavoidable. After some hesitation, I went ahead and pulled the trigger, reminding myself that maintaining proper asset allocation is fundamental to long-term investment success.
I’m left, however, with some shred of doubt… Are there circumstances where tax implications might impact your rebalancing decisions? For example, my asset allocation wasn’t terribly far from its target (couple of percentage points); should I have waited for a bigger deviation before voluntarily signing on to add $10K+ to my 2024 tax bill? Are there other factors you might consider as well? Or should rebalancing be considered sacrosanct and be done even if significant tax implications exist?
Thanks!
Statistics: Posted by RWB63 — Tue Sep 10, 2024 10:43 am — Replies 8 — Views 217