Planning Ahead vs. Damage Control

?         ?I had an enjoyable conversation with an aspiring real estate and note investor. The best part was that we were focusing on the future, specifically investment strategies and other tactics to employ in 2020. Believe me, I’m not trying to rush through 2019, but planning how to do something is sure a lot more fun than cleaning things up after the fact.

?         ?When this new client, a well-paid professional, could accurately predict what his 2020 gross income was going to be, it made it easy to calculate how much of his 403(b) and traditional IRA he could convert into Roth accounts during 2020 and how much he should set aside to pay the taxes come April 15th of 2021.

?         ?Contrast that with a conversation I had a few months ago with an investor who looked at me and said, “I’m in trouble with the IRS because I did a conversion last year, and I don’t have the money to pay the taxes.” I apologetically informed that investor that there was really nothing I could do so far after the fact in the form of damage control. I urged this investor to seek me out in the future when they were going to convert more money so that certain investments could be done differently to better facilitate the conversion from traditional to Roth.

?         ?Some of you might be saying, “Watson, why are you sending me this email right at the beginning of the summer?” Well, this is that lull in the year when the April 15th tax deadline is two months behind us, and the September and October deadlines are still a few months away. This is a good time to have those strategy sessions with your tax advisors and accountants to ask those “what-if” questions so you can figure out the impact and consequences of various decisions you want to make in the next 6-18 months. 

?    ?In my opinion, it’s far better to plan ahead than to do damage control.