Michael rebalances his portfolio every year. But he’s worried that triggering capital gains taxes on his brokerage account will cancel out the benefits of reallocation. Is there a better approach?
Sam has an opportunity to switch jobs, but she’s confused about how an Employee Stock Ownership Plan stacks against her current employer’s 401(k). Is she getting a good offer?
Carlos is excited about early retirement in Brazil, but he’s worried about the tax implications for his U.S.-based retirement accounts. How should he prepare for this move?
Former financial planner Joe Saul-Sehy and I tackle these questions in today’s episode.
Enjoy!
P.S. Got a question? Leave it here.
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Michael asks (at 02:03 minutes): As part of my financial plan, I rebalance my portfolio once a year—on my birthday, for lack of a better time. But I’ve been wondering about the best way to handle rebalancing in my taxable brokerage account.
If I sell assets to rebalance, I’ll trigger capital gains, which have tax implications while I’m still working. The main purpose of my taxable account is to invest extra money I don’t need immediately, letting it compound until I have a use for it.
Right now, I rebalance by directing new contributions toward underweighted assets to bring my allocation closer to my target. But I’m not sure if there’s a better approach. How do I build an effective rebalancing strategy?
Sam asks (at 10:43 minutes): What are the pros and cons of an Employee Stock Ownership Plan (ESOP) compared to a traditional 401(k)?
I received a job offer from a company that doesn’t offer a 401(k) but has an ESOP. They can’t guarantee contributions, but they’ve consistently contributed the maximum annual amount—13.5 percent—for the past six years.
At my current job, I receive a five percent 401(k) match, so this seems like an increase. The company offering the ESOP has been around for 75 years and has performed well, especially over the past decade.
There’s significant growth potential, but I realize there’s also a risk since all contributions go into company stock. How should I evaluate this opportunity?
Carlos asks (at 38:00 minutes): I don’t completely agree with your take about traditional versus Roth because, in the real world, you rarely can make the same contributions post-tax as pre-tax. Of course, post-tax contributions’ bite on your paycheck is much larger and you feel that.
That said, I’d love to hear your thoughts on my situation.
I’ve lived in the U.S. for 10 years as a green card holder, earning a solid income. I’ve been maxing out my traditional 401(k) and Roth IRA while contributing as much as possible to a taxable brokerage account.
In about five years, I plan to retire early and return to my home country of Brazil, which doesn’t have a tax treaty with the U.S. What should I expect regarding taxation and account withdrawals once I move there?
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