I was born in 1977, so I missed the nasty bear market from 1973 to 1974.
But I’ve heard stories…
I’ve talked to portfolio managers who lived through that brutal experience.
All their stories sound the same.
It wasn’t the size of the drawdown that made it unique.
The 1973 bear market, the 2000s tech bust and the 2008 meltdown were all about the same size in terms of drawdown.
What made the ‘70s crash so miserable is that it seemed to drag on forever.
When the Bad Seemed to Only Get Worse
The bear market that started in 1973 was miserable with little in the way of relief.
It dragged on for the better part of two years.
I don’t know if our current bear market will drag on that long. I hope it doesn’t.
But regardless, investing is a rough endeavor these days, and there doesn’t seem to be an end to the selling in sight.
But you can make other portfolio moves to help your bottom line.
I know it isn’t the season yet, but let’s go over some tax moves to consider today.
Tax Move No. 1: You Might as Well Get a Break
As far as I’m concerned, a dollar saved in taxes is every bit as spendable as a dollar earned via capital gains or dividends.
And for most Americans, the easiest way to lower your tax bill is to dump as much money as possible into a 401(k) or other retirement plan.
The infrastructure is already in place.
Upping your contribution is as easy as logging in to your account and increasing the contribution amount from your paycheck.
It’s important to remember that your 401(k) plan is not a stock plan.
You can keep your 401(k) balance in a money market or stable value fund.
But the important thing here is that you’re getting the tax break.
If you’re in the 32% tax bracket, you’re “earning” $0.32 in tax savings for every dollar you dump into the account.
And then it’s there, ready to invest when you’re comfortable doing so.
In 2022, you can put $20,500 into your 401(k), excluding employer matching.
And you can put in as much as $27,000 if you’re 50 or older.
Tax Move No. 2: A More Efficient Way to Give to Charity
You shouldn’t give to charity just to get a tax break.
But if you’d like to give to a worthwhile cause, you might as well get the biggest tax benefit possible from it.
Let’s say you’re retired and already taking the required minimum distributions (RMDs) from your 401(k) or IRA.
Rather than take the money and write a check to your church or favorite charity, you can benefit from a direct donation from your retirement account.
Once you take a distribution from a retirement account, that shows up as income on your tax return.
Of course, you can also write off any charitable donations.
But given that the standard deduction now is $25,900 for a married couple, you may not get a tax benefit from the donation. (Charitable contributions are only deductible if you itemize.)
You could satisfy your RMD without claiming the income if you donate straight from your retirement account.
That means more money for you and for the cause you want to support.
Bottom line: I recommend you talk to a tax planner for something like this.
I never cut corners when getting tax advice, as mistakes can be expensive.
But you can run these ideas by your CPA to see if these tips make sense for you.
To safe profits,
Charles Sizemore, Co-Editor, Green Zone Fortunes
Charles Sizemore is the co-editor of Green Zone Fortunes and specializes in income and retirement topics. He is also a frequent guest on CNBC, Bloomberg and Fox Business.