Tax Loss Harvesting And Your Retirement

As you near retirement, tax strategies become increasingly important not only in your day to day life but also on your investments. An important concept to understand is tax loss harvesting, and how you can potentially minimize your investment tax obligation from year to year so that it impacts your retirement less.

What Is Tax Loss Harvesting?

At the most basic level, tax loss harvesting is a way to minimize the tax burden on your investment portfolio by reducing the tax owed each year. In a typical non-retirement investment portfolio, you’re issued a 1099 which you’ll report on your taxes. This form lists all of the income, capital gains and capital losses incurred that year on the investments. The bigger the portfolio, the bigger the tax obligation (typically). With the concept of tax loss harvesting, you’ll find ways to minimize or mitigate that tax obligation by either lessening the income generated within the portfolio or minimizing those capital gains in the short term throughout the year.