Photo: Jill Wellington. Source: Pixabay.
Lots of folks have traditions they observe this time of year around decorations, or gift-giving, or – especially – food. In Scandinavia they decorate a straw Christmas goat and place it in their living rooms, celebrating a time when a goat, not Santa, delivered Christmas gifts. My Jewish friends in grade school brought their Hanukah dreidels to school for show-and-tell, and we would guess which letter they would land on when they would spin them.
Some families have a “Christmas pickle” they hang on their Christmas trees. This tradition is of doubtful origin, perhaps going back to a Civil War prisoner who escaped starvation by a Christmas gift of a pickle, perhaps invented by retailers who began importing glass ornaments from Europe in the late 19th century. In our family, we always have Swedish Meatballs for Christmas dinner, along with noodles, peas, red potatoes, and lingonberries – a tart Swedish berry that’s a lot like cranberries.
Julebukk, or Christmas goat. Photo: Avery Jensen. Source: Wikimedia.
Attentive investors have a year-end tradition that they can celebrate, too. It’s called tax-loss harvesting. It involves selling investments at a loss and reinvesting the proceeds into another similar instrument. The “loss” isn’t an economic loss since we’re not taking money out of the market. But we can deduct loss on our taxes. Most taxpayers can claim up to $3,000 against ordinary income, and larger amounts count against capital gains in that year or in the future. And these tax-losses can be carried forward indefinitely, sheltering future gains. Tax-loss harvesting is truly a gift that keeps on giving.
There are other year-end traditions people observe around their investments: making year-end forecasts and budgeting, evaluating 401(k) and 403(b) contributions during the “open-season” for benefits, and sending off year-end charitable contributions. These are mostly driven by the calendar year, rather than any special Yuletide spirit. But it always makes sense to observe traditions that can improve your finances.
By paying attention to our portfolios and our larger financial circumstances, we can give ourselves a year-end gift of lower taxes and an improved outlook. No matter what our other traditions may be, that’s something everyone – except perhaps the IRS – can celebrate.
Douglas R. Tengdin, CFA
Charter Trust Company
“The Best Trust Company in New England”