About 20 years ago we began putting money aside because we owned no real estate. We knew then that with retirement on the distant horizon, we needed to plan to buy a house when retirement time came. Rather than in a savings account at the bank, we invested in mutual funds and such, and were pleased to watch the original “chunk” grow by over the years. We’re not smart enough to do this ourselves, so we hired a “guy” at one of those companies that does this stuff to watch over us and our money. Approaching retirement, we naively assumed that we’d just cash out the investments and buy a home.
It didn’t turn out that way. Our “guy” (who managed the investments) put together a package that involved raiding a retirement account that he DIDN’T supervise to get a big chunk of money. Certain severance payments we had received formed another big chunk of what went into buying a house, then he borrowed money “on margin” using our investments to guarantee repayment. We cannot fault him. In fact, when we learned, in 2018, how easy it was to borrow money that way, we hit it up a couple times in 2019, once for upgrades on the house and once to pay a surprise tax bill on the money we’d taken from our pension to buy the house in the first place.
But we have to pay interest on what we’ve borrowed, so the sooner the debt disappears, the better. We had originally assumed that it was as simple as selling assets that have appreciated, reaping the profits, and offsetting the debts.” We were wrong. Doing that will incur capital gains taxes. Instead, our “guy” now looks at our accounts regularly for things that have lost value. He sells, or “harvests” those losses, and pays down the loan with what he gets for them, and counts what we’ve lost against what we might owe in taxes next year.
In that way, the big dip in the stock market on February 24th was good for us. On the 25th we learned that some of our stuff took a real hit, so we sold, paid off debt, and did so in a manner that avoids a bunch of taxes. It all seems upside down. Sometimes we think that we should have just stacked the cash under the mattress. But we can’t complain. We have a nice house, and more money than we owe. However it works out, we give thanks to God.
David Alexander now resides in Holland, MI after 39 years in Taiwan.