July 18, 2024

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T. Rowe Price Says These 3 Money Moves Could Up Your Retirement Savings

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An hourglass sits next to a stack of coins. T. Rowe Price recently published its year-end tips for retirement savers.

T. Rowe Price says there are several moves that people saving for retirement should make by the end of the year. The investment management giant says harvesting losses for tax purposes, reassessing your asset allocation and making catch-up contributions to your retirement plan are three ways to cap the year and position yourself for success in 2022.

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Harvest Your Tax Losses

A couple looks over their investment portfolio. T. Rowe Price recently published its year-end tips for retirement savers. A couple looks over their investment portfolio. T. Rowe Price recently published its year-end tips for retirement savers.

A couple looks over their investment portfolio. T. Rowe Price recently published its year-end tips for retirement savers.

Tax-loss harvesting is a strategy for offsetting investment gains by selling assets that have resulted in losses. Selling assets that have fallen in value can reduce an investor’s tax liability after they’ve sold assets that have produced capital gains.

“Tax-loss harvesting is one strategy that investors can consider, which involves selling certain positions in a portfolio at a loss, usually in order to offset either short-term or long-term capital gains,” T. Rowe Price wrote in its yearend tips for retirement savers. “Since tax rates on short-term gains are generally higher, offsetting those gains could be particularly valuable.”

For example, an investor in the 24% tax bracket realizes $25,000 in long-term capital gains this year, resulting in a $3,750 tax bill ($25,000 x 15%). However, if the investor also sold a long-term asset that declined in value by $8,000 since its purchase, their gains would effectively drop to $17,000. As a result, the loss would lower the investor’s tax liability to $2,550 and save them $1,200 at tax time.

However, the investment management firm notes that tax-loss harvesting should only be one component of a successful and broad investment strategy. For instance, maintaining a diversified portfolio and staying committed to the long term are…



2023-12-02 09:55:59

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