Capital gains tax penalty-portfolio asset reallocation
Hi Terry;
I have my investment management consultant (J.P. Morgan/Chase) advising that I cannot reduce my 70% stock (30% bond/cash) allocation to what I prefer to be more 50/50 without sustaining significant capital gains penalties. This account is all in a taxed investment portfolio we inherited from my father-in-law (that he also handled for him). Problem is, I’m 71 and I don’t want to be that heavily invested in equities but he says I can’t change that allocation without significant capital gains penalties. So am I stuck in never being able to reduce my equities percentage because of the capital gains penalty? Plus performance at his 70% equities allocation is much further behind than my other investment portfolio (Vanguard) that has only 50% in equities that is performing much better. He seems to be kind of obscure with an explanation for all this and his commission is about 3x as high as Vanguard (.099 vs . 033). I kind of feel I’m being taken advantage of as a senior. He insists JPM is a better management company than Vanguard. Any suggestions? Thanks!
Terry Says
If ever there was a case for an independent FIDUCIARY review of your situation, this is it! And quickly. Please watch this video and contact Wealthramp to make an introduction to a fee-only FIDUCIARY you can trust. Even one meeting will set everything in a new perspective.
OK, to answer the specific question. Yes, your “cost basis” is the value of stock (and it’s easy to find historical share prices — just input the symbol at CNBC.com and create a price chart) on the date of your father’s death. Any gains since that date are taxed at the lowest capital gains rates. But yes, the gains are taxed.
And, I’ll be your advisor didn’t even bother to tell you that taking enough gains could raise your Medicare Part B premiums. A fee-only fiduciary would certainly bring that to your attention. But your new advisor should find all the costs basis for each investment, and see if there are any losses. Selling those could offset the gains.
Now your big question, is whether you’d rather pay 20% in taxes, or perhaps be vulnerable to losing 20% in the stock market!@! I suggest you hurry to get that independent review, which will take into account your entire financial picture and the impact of a change. That’s a small price to pay for sleeping well.
PS I’m dying to know what you find out and decide to do! Please write back and let me know!
