Retirement Weekly: Should I do a Roth conversion to offset stock losses?

by | Nov 11, 2022 | Stock Market

Q.: Dear Dan, We have roughly $45,000 in short-term & long-term losses this year from our brokerage accounts. Is the best move to sell some of our positive stock positions in our brokerage accounts to offset these losses? We are doing a Roth conversion and need to raise capital to pay taxes anyway, so we think that is the best move. Is that the right strategy? A.: You are smart to think about this. Those losses have value and just selling because there are losses that would offset gains may not be wise. I’ve seen many people make tax-motivated decisions that were suboptimal choices for their portfolios or financial planning strategies

You said you will need to raise some cash to pay the taxes from a conversion. That’s a decent reason to sell some of your holdings. Paying the taxes from the brokerage account rather than through withholding from the conversion is typically better because it maximizes the amount that resides in the Roth account. Another decent reason to sell is if you have a holding that you no longer want. This could be a good time to do that. Regardless, you might not want to sell so much as to offset all the loss because $3, …

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