Tax Loss Harvesting w/ Advisory Fee
This sheet simulates your asset growth over time with compounding and compare the difference between with or without tax loss harvesting. In addition, by adjusting the advisory fee, the user can understand whether letting an advisor to manage your asset is worth the fee, which is usually an avoided topic by any advisors.
Content article
Tax Loss Harvesting with Advisory Fee provides a detailed comparison of financial outcomes over a span of 30 years, highlighting the impact of tax loss harvesting (TLH) strategies against traditional investment approaches.
In the first tab, "TLH v2 without decompose effects," the data begins with a capital balance of $100,000 in year one, which grows to $1,586,309 by year 30, without any advisory fees. The annual harvestable balance starts at $100,000, yielding an annual harvest of $5,000, which accumulates to $2,000 in the first year. The ordinary income tax savings for the first year amount to $720, which is reinvested, resulting in a saving reinvestment balance of $720. By year 10, the capital balance reaches $235,795, with accumulated harvests totaling $169. The tax savings effect remains consistent, with a tax loss deduction of $6,108 by year 30.
The second tab, "TLH," presents a more aggressive investment strategy, starting with a capital balance of $500,000 in year one. This balance increases to $7,931,546 by year 30. The harvestable balance in year one is $500,000, with an annual harvest of $23,250, which grows to an accumulated harvest of $20,250. The ordinary income tax saving for the first year is $855, and the reinvestment capital also sees significant growth. By year 10, the capital balance reaches $1,178,974, with an annual contribution of $12,000. The tax bracket in year 30 is noted at 20%, with a tax of $16,373 calculated on the capital gains.
In the third tab, "TLH v1 wo harvest window," the data illustrates a steady growth trajectory for a capital balance starting at $1,000,000. By year 30, the balance is projected to be $6,611,634, while the accumulated harvest reaches $1,709,880. The ordinary income tax saving remains at $720 each year, contributing to a total tax of $659,920 by the end of the period.
Across all tabs, the analysis emphasizes the importance of tax loss harvesting strategies, showcasing how they can lead to substantial tax savings and increased capital growth over time. The data reflects a nuanced understanding of the financial implications of investment strategies, particularly in the context of tax efficiency and long-term wealth accumulation.