How much tax loss harvesting is your robo-advisor doing lately?

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jacoavlu
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How much tax loss harvesting is your robo-advisor doing lately?

Post by jacoavlu » Wed Oct 31, 2018 10:17 am

Curious what sort of recent tax loss harvesting folks using Betterment, Wealthfront, Schwab Intelligent Advisor, etc have seen in their accounts lately. Clearly lots of us have been harvesting losses recently in international equities. I even recently harvested some losses in total US stock index. I would think that anyone making periodic deposits in taxable accounts would have quite a few lots with losses and I’m curious is they’ve seen much auto tax loss harvesting happening in their accounts.

Personally I've harvested losses in international equal to about 15% of the total international holdings value. Just a small percent for total US. Probably will pull the trigger and harvest some losses in bond index pretty soon too.

michaeljc70
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Re: How much tax loss harvesting is your robo-advisor doing lately?

Post by michaeljc70 » Wed Oct 31, 2018 11:08 am

Are there mechanisms within these services to accommodate fluctuations in non-investment income? For example, I am self employed and my income varies. I want my losses applied in years when my income is higher. I'm not really considering these services as I do it on my own, but I am curious.

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White Coat Investor
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Re: How much tax loss harvesting is your robo-advisor doing lately?

Post by White Coat Investor » Wed Oct 31, 2018 11:11 am

The thing about losses is they become progressively less valuable. The first $3K are very valuable, but then it goes down from there. Given my account size now, I've got enough losses from the last 6 months that I may not benefit from much more tax loss harvesting for a decade or two. So even if Betterment could get me 50% more, it's not going to be worth paying any fee just for that.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

jacoavlu
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Re: How much tax loss harvesting is your robo-advisor doing lately?

Post by jacoavlu » Wed Oct 31, 2018 11:18 am

michaeljc70 wrote:
Wed Oct 31, 2018 11:08 am
Are there mechanisms within these services to accommodate fluctuations in non-investment income?
No, not that I know of. Far as I know you can turn the auto TLH on or off, but that's it.

jacoavlu
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Re: How much tax loss harvesting is your robo-advisor doing lately?

Post by jacoavlu » Wed Oct 31, 2018 11:20 am

White Coat Investor wrote:
Wed Oct 31, 2018 11:11 am
The thing about losses is they become progressively less valuable. The first $3K are very valuable, but then it goes down from there. Given my account size now, I've got enough losses from the last 6 months that I may not benefit from much more tax loss harvesting for a decade or two. So even if Betterment could get me 50% more, it's not going to be worth paying any fee just for that.
Agreed. I don't want or need to pay 0.25% for the portfolio and loss harvesting.

But if the service is going to generate that "extra" return that they claim, I would think that the present volatility has to be a time where a customer would be seeing that happen. Just curious to what extent folks are seeing that now.

wootwoot
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Re: How much tax loss harvesting is your robo-advisor doing lately?

Post by wootwoot » Wed Oct 31, 2018 11:23 am

My robo is always looking for TLH opportunities and has taken advantage of these throughout the year. It's great having less than 10k at Wealthfront, no charges but you still get the full robo experience.

jacoavlu
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Re: How much tax loss harvesting is your robo-advisor doing lately?

Post by jacoavlu » Wed Oct 31, 2018 11:26 am

wootwoot wrote:
Wed Oct 31, 2018 11:23 am
My robo is always looking for TLH opportunities and has taken advantage of these throughout the year. It's great having less than 10k at Wealthfront, no charges but you still get the full robo experience.
Do you mind sharing more details? Along the lines of, what stock:bond ratio you hold, and a relative amount/percent of TLH you've seen this year?

wootwoot
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Re: How much tax loss harvesting is your robo-advisor doing lately?

Post by wootwoot » Wed Oct 31, 2018 11:42 am

jacoavlu wrote:
Wed Oct 31, 2018 11:26 am
wootwoot wrote:
Wed Oct 31, 2018 11:23 am
My robo is always looking for TLH opportunities and has taken advantage of these throughout the year. It's great having less than 10k at Wealthfront, no charges but you still get the full robo experience.
Do you mind sharing more details? Along the lines of, what stock:bond ratio you hold, and a relative amount/percent of TLH you've seen this year?
9% bonds and the rest are stocks, I'm using an 8.5 (out of 10) risk level. It's hard to relate a percentage of TLH since I've been adding money to the account monthly throughout the year. At the beginning of the year I held ~4k in the account and have almost 9k now. $216 has been harvested throughout the year but this will vary widely based on the number and dollar amounts of your deposits. The first 10k in my account is charged a fee of 0%, any money past that is charged .25% so if I had 20k in there the overall fee would be .125% on my account. With fees so low I have no issue building the account for a few more years.

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Re: How much tax loss harvesting is your robo-advisor doing lately?

Post by White Coat Investor » Wed Oct 31, 2018 1:46 pm

wootwoot wrote:
Wed Oct 31, 2018 11:42 am
jacoavlu wrote:
Wed Oct 31, 2018 11:26 am
wootwoot wrote:
Wed Oct 31, 2018 11:23 am
My robo is always looking for TLH opportunities and has taken advantage of these throughout the year. It's great having less than 10k at Wealthfront, no charges but you still get the full robo experience.
Do you mind sharing more details? Along the lines of, what stock:bond ratio you hold, and a relative amount/percent of TLH you've seen this year?
9% bonds and the rest are stocks, I'm using an 8.5 (out of 10) risk level. It's hard to relate a percentage of TLH since I've been adding money to the account monthly throughout the year. At the beginning of the year I held ~4k in the account and have almost 9k now. $216 has been harvested throughout the year but this will vary widely based on the number and dollar amounts of your deposits. The first 10k in my account is charged a fee of 0%, any money past that is charged .25% so if I had 20k in there the overall fee would be .125% on my account. With fees so low I have no issue building the account for a few more years.
That doesn't seem very good to me. That's 2-4% of what you have. I also have an account I've mostly funded just this year. I think I've tax loss harvested 5-10% of it manually. I guess I expected you to have twice as many harvested losses as me as a percentage of assets.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

michaeljc70
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Re: How much tax loss harvesting is your robo-advisor doing lately?

Post by michaeljc70 » Wed Oct 31, 2018 1:55 pm

White Coat Investor wrote:
Wed Oct 31, 2018 1:46 pm
wootwoot wrote:
Wed Oct 31, 2018 11:42 am
jacoavlu wrote:
Wed Oct 31, 2018 11:26 am
wootwoot wrote:
Wed Oct 31, 2018 11:23 am
My robo is always looking for TLH opportunities and has taken advantage of these throughout the year. It's great having less than 10k at Wealthfront, no charges but you still get the full robo experience.
Do you mind sharing more details? Along the lines of, what stock:bond ratio you hold, and a relative amount/percent of TLH you've seen this year?
9% bonds and the rest are stocks, I'm using an 8.5 (out of 10) risk level. It's hard to relate a percentage of TLH since I've been adding money to the account monthly throughout the year. At the beginning of the year I held ~4k in the account and have almost 9k now. $216 has been harvested throughout the year but this will vary widely based on the number and dollar amounts of your deposits. The first 10k in my account is charged a fee of 0%, any money past that is charged .25% so if I had 20k in there the overall fee would be .125% on my account. With fees so low I have no issue building the account for a few more years.
That doesn't seem very good to me. That's 2-4% of what you have. I also have an account I've mostly funded just this year. I think I've tax loss harvested 5-10% of it manually. I guess I expected you to have twice as many harvested losses as me as a percentage of assets.
For a $216 loss, if you are in the 12% bracket, that equals $26. It may not be worth the record keeping hassle.

ivk5
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Re: How much tax loss harvesting is your robo-advisor doing lately?

Post by ivk5 » Wed Oct 31, 2018 4:10 pm

michaeljc70 wrote:
Wed Oct 31, 2018 11:08 am
Are there mechanisms within these services to accommodate fluctuations in non-investment income? For example, I am self employed and my income varies. I want my losses applied in years when my income is higher. I'm not really considering these services as I do it on my own, but I am curious.
How would that work? When you have an unrealized loss on a particular lot, you have a choice whether to TLH or not. If you don’t, of course, you may not have the opportunity in future years. But from tax perspective, you don’t decide when to apply a realized or carried forward loss of up to $3k against your income.

michaeljc70
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Re: How much tax loss harvesting is your robo-advisor doing lately?

Post by michaeljc70 » Wed Oct 31, 2018 5:17 pm

ivk5 wrote:
Wed Oct 31, 2018 4:10 pm
michaeljc70 wrote:
Wed Oct 31, 2018 11:08 am
Are there mechanisms within these services to accommodate fluctuations in non-investment income? For example, I am self employed and my income varies. I want my losses applied in years when my income is higher. I'm not really considering these services as I do it on my own, but I am curious.
How would that work? When you have an unrealized loss on a particular lot, you have a choice whether to TLH or not. If you don’t, of course, you may not have the opportunity in future years. But from tax perspective, you don’t decide when to apply a realized or carried forward loss of up to $3k against your income.
You'd have to make a judgement call. Obviously, the more clarity you have into your taxable income in advance, the better. Last year I capital gain harvested as it was at 0%. I increased my basis because my income was low enough to get it in in the 0% rate. That was around $36k. I certainly didn't need a robot creating losses for me.

If you manually do the selling/buying, you get to decide when it is applied as you are controlling when the capital loss occurs. Of course, you are right that the loss may not be there next year. However, if we are in a downward turn, it may very well be there. If not, these losses (indicated by some of the posts I've read) can be rather small. Keep in mind the capital loss you are taking today is going to be an additional gain next time (well, if it goes up which is the goal).

ivk5
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Re: How much tax loss harvesting is your robo-advisor doing lately?

Post by ivk5 » Thu Nov 01, 2018 1:04 am

michaeljc70 wrote:
Wed Oct 31, 2018 5:17 pm
ivk5 wrote:
Wed Oct 31, 2018 4:10 pm
michaeljc70 wrote:
Wed Oct 31, 2018 11:08 am
Are there mechanisms within these services to accommodate fluctuations in non-investment income? For example, I am self employed and my income varies. I want my losses applied in years when my income is higher. I'm not really considering these services as I do it on my own, but I am curious.
How would that work? When you have an unrealized loss on a particular lot, you have a choice whether to TLH or not. If you don’t, of course, you may not have the opportunity in future years. But from tax perspective, you don’t decide when to apply a realized or carried forward loss of up to $3k against your income.
You'd have to make a judgement call. Obviously, the more clarity you have into your taxable income in advance, the better. Last year I capital gain harvested as it was at 0%. I increased my basis because my income was low enough to get it in in the 0% rate. That was around $36k. I certainly didn't need a robot creating losses for me.

If you manually do the selling/buying, you get to decide when it is applied as you are controlling when the capital loss occurs. Of course, you are right that the loss may not be there next year. However, if we are in a downward turn, it may very well be there. If not, these losses (indicated by some of the posts I've read) can be rather small. Keep in mind the capital loss you are taking today is going to be an additional gain next time (well, if it goes up which is the goal).
Got it. Yes, clearly in years when you are TGHing you do not want to TLH. You’d want to turn off TLH at your robo. I don’t think they offer auto TGH though of course that’s more trivial to do manually.

Momus
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Re: How much tax loss harvesting is your robo-advisor doing lately?

Post by Momus » Thu Nov 01, 2018 1:41 am

White Coat Investor wrote:
Wed Oct 31, 2018 11:11 am
The thing about losses is they become progressively less valuable. The first $3K are very valuable, but then it goes down from there. Given my account size now, I've got enough losses from the last 6 months that I may not benefit from much more tax loss harvesting for a decade or two. So even if Betterment could get me 50% more, it's not going to be worth paying any fee just for that.
Agree with this. Maybe up to max $120-150k carry over loss for 40-50 yrs is really beneficial (age 70-80), assuming you even live that long. After that you don't need more TLH, you gonna start withdrawing and pay tax or die/donate to pass along the step up basis.

wootwoot
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Re: How much tax loss harvesting is your robo-advisor doing lately?

Post by wootwoot » Thu Nov 01, 2018 9:43 am

White Coat Investor wrote:
Wed Oct 31, 2018 1:46 pm
wootwoot wrote:
Wed Oct 31, 2018 11:42 am
jacoavlu wrote:
Wed Oct 31, 2018 11:26 am
wootwoot wrote:
Wed Oct 31, 2018 11:23 am
My robo is always looking for TLH opportunities and has taken advantage of these throughout the year. It's great having less than 10k at Wealthfront, no charges but you still get the full robo experience.
Do you mind sharing more details? Along the lines of, what stock:bond ratio you hold, and a relative amount/percent of TLH you've seen this year?
9% bonds and the rest are stocks, I'm using an 8.5 (out of 10) risk level. It's hard to relate a percentage of TLH since I've been adding money to the account monthly throughout the year. At the beginning of the year I held ~4k in the account and have almost 9k now. $216 has been harvested throughout the year but this will vary widely based on the number and dollar amounts of your deposits. The first 10k in my account is charged a fee of 0%, any money past that is charged .25% so if I had 20k in there the overall fee would be .125% on my account. With fees so low I have no issue building the account for a few more years.
That doesn't seem very good to me. That's 2-4% of what you have. I also have an account I've mostly funded just this year. I think I've tax loss harvested 5-10% of it manually. I guess I expected you to have twice as many harvested losses as me as a percentage of assets.
So "good" to you is more losses? I have no idea what you've been invested in but if you are in tech or emerging markets you will naturally have more losses and more to harvest than someone with broader market exposure.

jacoavlu
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Re: How much tax loss harvesting is your robo-advisor doing lately?

Post by jacoavlu » Thu Nov 01, 2018 9:48 am

he means "good" in the sense that he (and I too) would expect the auto tax loss harvesting touted by the robo-advisor to have harvested more losses than only $216, on a portfolio that held $4,000 at year beginning and $9,000 presently

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