Planning Opportunities in Today’s Environment

As you’ve heard us say multiple times at this point, we are in the midst of an unprecedented time – economically, financially, medically, personally. But for purposes of this post, we’re going to focus on the financial aspects.

We’re not just dealing with a market downturn, we’re also in the midst of two historically low environments: tax rates and interest rates. In many ways, this trifecta presents several pockets of opportunity from a financial planning standpoint that, if you’re able to take advantage of, can pay dividends well into the future, regardless of exactly what that may look like.

 Market Downturn Opportunities

  • Give Away Your Losers: If gifting to family is something you’re already doing, or that you’ve had on your radar for a while, then now is a great time to gift some of your most beat up stock. Why, you might ask, would I want to give my poorest-performing investments? Well, it’s because we still believe in the long-term outlook of these companies. So if you wanted to give up to the maximum annual gift tax exclusion1 ($15,000 for 2020) you can give away a stock position worth that amount and hopefully by sometime next year, that $15,000 originally-valued gift will be worth substantially more.
  • Take Your Losses (and Gift Cash): On the flip side of the above coin, you can sell your losers and harvest those tax losses to offset your capital gains and potentially even ordinary income2. Then, you can take those proceeds and make a gift in cash.
  • Leverage Your Company Match: Hopefully you’re doing this anyway, but if not, now is the perfect time to get started. Not only are you taking advantage of additional savings, you’re also buying more stock when it’s on sale. Essentially, you’re dripping money into the market over time, so while things are low, you’re buying more shares and when those funds rebound, you may have the opportunity to experience significant growth on your balance.

Low Tax Rate Opportunities

  • Make Roth IRA Contributions: If you’re not making any IRA contributions currently, or you’re making Traditional IRA contributions, consider starting with, or switching to, the Roth option3. With Roth IRAs, while you don’t receive an up-front tax deduction (you’re making contributions with after-tax dollars), the funds within will grow tax-free and once you begin taking distributions4, that income will be tax-free. Why forego a tax deduction today to save on taxes tomorrow? Well, because it has become increasingly likely that tax rates will increase in the future. So, mathematically, pre-paying a smaller tax bill today can buy you potentially significant tax savings in the future.
  • Consider Roth Conversions (of Existing IRAs): Similar to the above, if you have significant Traditional IRA balances and smaller or even non-existent Roth balances, you may want to consider performing some Roth conversions. This strategy involves taking all or a portion of your Traditional IRA balance and moving or “converting” it to a Roth IRA while also paying taxes on that amount5. By shifting some of your income from a pre-tax asset to a tax-free asset, you are increasing the tax diversification of your accounts and providing yourself and your family greater tax flexibility in the future.

 Low Interest Rate Opportunities

  • Look into Re-Financing: Due to the current low interest rate environment, mortgage interest rates have also taken a dip in the past several months. While you may see them fluctuate on a week-to-week and even day-to-day basis, lenders will let you lock in current rates for 30 days. If you’re thinking of re-financing, don’t just work with your current lender – put your feelers out with their competitors to see if you can get a better price. And remember, for a re-finance to make sense, you typically should plan to stay in your current home for at least another 5 or so years to break-even on the up-front cost of this transaction.
  • Consider an Intentionally Defective Grantor Trust (“IDGT”)6: This type of Trust is used to freeze certain assets for estate tax purposes (but not for income taxes) thereby allowing the assets within the Trust to grow tax-free and avoid gift taxes. The reason this is such a good idea now is because the promissory note that is involved with this strategy will have an incredibly low interest rate attached to it.

Other Considerations

  • Review Your Estate Plan: Lost in the midst of all the coronavirus and market news is the passage of the SECURE Act at the end of last year.
  • Check in on Your Life Insurance: Considering we’re in the midst of a pandemic, adequate life insurance is even more important regardless of your age. If you currently have coverage, do a quick review to make sure there have been no significant changes to the underlying values or guarantees. If you don’t have coverage, speak with a financial professional about identifying the right type of coverage for you (if any).
  • Shop Your Home & Auto Insurance: Many Americans have seen their commute times reduced or even completely eliminated at this time. And if you’re driving less, you likely don’t be needing to pay as much right now to insure yourself and your vehicle. So, to see if you’re getting the best combination of coverage and cost, reach out to your financial professional for an insurance broker referral. These individuals can review your policies and shop around for the best coverage for your needs.


1 For individual taxpayers, $15,000 is the maximum amount you can gift per beneficiary, per year, without having to file a Form 709 – United States Gift Tax Return. If you’re married and your spouse agrees to “gift-splitting” then you may, as a couple, gift $30,000 per beneficiary, per year, without having to file said return.
2 Losses are first used to offset any gains. If any losses remain, taxpayers may deduct up to $3,000 against ordinary income; any remaining unused losses can be carried forward indefinitely.
 3 Roth IRAs have income limits after which you are phased out from being able to make these contributions. Please consult with your tax professional before making any changes to your current strategy.
 4 There are also certain holding period requirements for Roth IRA distributions to be tax-free, including being age 59½ and having the account opened for at least 5 years.
 5 There are many things to consider performing a Roth conversion. Typically, you would convert an amount up to the top of the 22% bracket and be able to pay the tax with non-qualified/after-tax assets. Please consult your tax professional before utilizing this strategy.  Additionally, each converted amount may be subject to its own five-year holding period. Converting a traditional IRA into a Roth IRA has tax implications.
 6 IDGTs are a complex estate planning tool and typically only used for wealthier individuals who may incur estate tax issues. Unless your net worth exceeds $12 million as a married couple (or $6 million as a single individual), this strategy will not provide a benefit. For more information on this strategy, please consult a qualified estate planning attorney.


You should consider all of your available options and the applicable fees and features of each option before moving your retirement assets. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Like Traditional IRAs, contribution limits apply to Roth IRAs. In addition, with a Roth IRA, your allowable contribution may be reduced or eliminated if your annual income exceeds certain limits. Contributions to a Roth IRA are never tax deductible, but if certain conditions are met, distributions will be completely income tax free.
 Opinions expressed are those of Aspen Wealth Strategies and not necessarily those of RJFS or Raymond James. All opinions are as of this date and are subject to change without notice. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
Raymond James does not provide tax or legal services.
 Please discuss these matters with the appropriate professional.
See All

Take Advantage of Our Comprehensive Investment Guidance

Connect with an Advisor

External Link Notice

The following website is being provided for informational purposes only. Raymond James is not affiliated with and does not endorse, authorize, or sponsor the following website or their respective sponsors. Raymond James is not responsible for the content of the websites or the collection or use of information regarding the websites’ users and/or members.

Continue Cancel