Looking ahead to 2018

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Pilgrim211
Posts: 16
Joined: Sat Apr 01, 2017 7:34 pm

Looking ahead to 2018

Post by Pilgrim211 » Wed Dec 13, 2017 11:47 am

I'm debating on plans for a 2018 Roth contribution. We've had a good year, and I'll be required to take an RMD from an inherited traditional IRA next year. Uncle Sam will get his share, of course, then I've thought about immediately using the balance toward funding the Roth for 2018, investing immediately for growth. (It won't be enough to fully fund $6500 but will make a dent toward it.)

However, I had another thought, and wanted an opinion or two. With the talk of a likely correction coming, would it be worth waiting up to a few months for a significant correction to possibly harvest losses in a taxable account, then move those funds into the Roth to buy during the downturn when things are "on sale"?

In one moment I see it as watching for opportunities to be aware of better tax efficiency, then I argue the other side, saying it's too much market timing. Thoughts? Either way, the Roth needs to be funded for 2018. That's a given.

The Wizard
Posts: 12349
Joined: Tue Mar 23, 2010 1:45 pm
Location: Reading, MA

Re: Looking ahead to 2018

Post by The Wizard » Wed Dec 13, 2017 12:01 pm

If you are confident when the correction will be happening, then yes, that could be a sound strategy...
Attempted new signature...

Pilgrim211
Posts: 16
Joined: Sat Apr 01, 2017 7:34 pm

Re: Looking ahead to 2018

Post by Pilgrim211 » Wed Dec 13, 2017 4:27 pm

Of course I'd not claim to know the when, which is why I said "waiting up to a few months..." (Now if I knew the when for sure, I'm guessing I could make some good money!) :D I thought of setting a limit, perhaps end of first quarter, or by the time taxes are filed, act if there had been no correction yet. Just thinking, wondering.

Thesaints
Posts: 1619
Joined: Tue Jun 20, 2017 12:25 am

Re: Looking ahead to 2018

Post by Thesaints » Wed Dec 13, 2017 4:32 pm

How does waiting a few months help you ? Wouldn't this impending correction be even more likely to come if market moves higher ?

Pilgrim211
Posts: 16
Joined: Sat Apr 01, 2017 7:34 pm

Re: Looking ahead to 2018

Post by Pilgrim211 » Wed Dec 13, 2017 10:14 pm

I was trying to sort it out in my mind, but might be confused. If I press pause, rather than move funds the first week of January, then if there's a correction I'd have room to take a loss in taxable, then fund Roth while funds are down ("on sale"). However, as I was researching, it seems I would have to be careful about choice of funds to avoid a wash sale, so it might be more trouble than it's worth. Just trying to sort it out in my mind before the beginning of January.
Some things are much clearer than they were a year ago, while others are still a bit murky. At times it is overwhelming, and I'd lost some of my notes (including projections and IPS) in a computer crash, so am trying to wade back through portions with limited time before the end of the year.

JBTX
Posts: 4091
Joined: Wed Jul 26, 2017 12:46 pm

Re: Looking ahead to 2018

Post by JBTX » Wed Dec 13, 2017 10:20 pm

There is always the possibility of a correction. I don’t have any evidence that there is any greater or less probability of a correction in 2018 vs any other year.

You could have a correction or you could have an additional run up due political events, macroeconomic events or nothing in particular. Who knows.

SimplicityNow
Posts: 477
Joined: Fri Aug 05, 2016 10:31 am

Re: Looking ahead to 2018

Post by SimplicityNow » Wed Dec 13, 2017 11:47 pm

Pilgrim211 wrote:
Wed Dec 13, 2017 11:47 am
I'm debating on plans for a 2018 Roth contribution. We've had a good year, and I'll be required to take an RMD from an inherited traditional IRA next year. Uncle Sam will get his share, of course, then I've thought about immediately using the balance toward funding the Roth for 2018, investing immediately for growth. (It won't be enough to fully fund $6500 but will make a dent toward it.)

However, I had another thought, and wanted an opinion or two. With the talk of a likely correction coming, would it be worth waiting up to a few months for a significant correction to possibly harvest losses in a taxable account, then move those funds into the Roth to buy during the downturn when things are "on sale"?

In one moment I see it as watching for opportunities to be aware of better tax efficiency, then I argue the other side, saying it's too much market timing. Thoughts? Either way, the Roth needs to be funded for 2018. That's a given.
Couch it anyway you want, It's market timing.

Afty
Posts: 827
Joined: Sun Sep 07, 2014 5:31 pm

Re: Looking ahead to 2018

Post by Afty » Thu Dec 14, 2017 7:19 am

Yeah, this is market timing, the idea that a correction is more likely to happen now than at other times. Stay the course. I will do what I always do and make the Roth contribution as early in the year as possible, to maximize time in the market.

Incidentally, I would also delay the inherited IRA RMD until the end of the year, to maximize tax-deferred growth.

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