Inside Look

Should I Turn On WiseHarvesting?

The answer to the title of this article is a wholehearted yes! However, as is the case with anything, there are a few caveats.

Should you eat a delicious piece of cheese?

Should you run that extra mile?

SHOULD YOU TELL YOUR MOTHER YOU LOVE HER?

The answer to the title of this article and each of these questions is a wholehearted yes! However, as is the case with anything, there are a few caveats.

WiseHarvesting is WiseBanyan’s first premium investment service. It’s completely optional and also available for all clients. WiseHarvesting lets you turn negatives into positives by taking advantage of losses in the stock market. First off, if you want to understand more about WiseHarvesting and how it works with the WiseBanyan investment strategy, read this article.

Once you become excited about WiseHarvesting (do you feel giddy yet?), it’s time to ask the question of whether it’s right for you.

Here are some key questions to consider:

How Long Are You Planning To Invest?

WiseHarvesting is most worth it when you’re investing for a long time. That’s because WiseHarvesting doesn’t eliminate taxes on your gains, it delays them. The idea here is that if you save tax money now, you’ll be able to reinvest that money and enjoy more compound returns. The longer you’re investing, the more you can put your WiseHarvesting returns to work. When you eventually sell off your securities, you will have to pay capital gains taxes on the increase in price.

Is Your Auto-Deposit On?

WiseHarvesting works its magic best when there are more and more opportunities to harvest small losses. Therefore, WiseHarvesting will probably bring you more value if you’re investing consistently with auto-deposit as opposed to making few and far between deposits. Having a frequent auto-deposit creates several tax lots (records of an opening transaction) and therefore lots of tax opportunities. Just another great reason to turn on auto-deposit!

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Are All Of Your Accounts With WiseBanyan?

If you’re going to turn on WiseHarvesting, we recommend making sure all of your investment accounts are with WiseBanyan. No, not because we’re possessive jerks, but because WiseHarvesting may be ineffective otherwise due to wash sales.

Wash sales occur when you sell a fund at a loss and then buy it 30 days before or after the sale. So, if you use WiseHarvesting to sell a fund but you hold the same fund in another account, there’s a possibility your other account will trade that fund at around the same time we’re selling it. That wash sale will negate the capital loss you’ve captured through WiseHarvesting, which means you won’t be able to use it to offset taxes.

Do You Have a Taxable Account?

While we’re on the topic of investment accounts, remember that we can only turn on WiseHarvesting for your taxable accounts. That’s because your IRAs are already “tax-free” in the sense that you don’t pay taxes on capital gains. Get a similar tax benefit for your taxable accounts with WiseHarvesting.

It’s important to note that while monitoring your taxable account, we’ll also monitor your WiseBanyan IRAs to prevent wash sales. Another reason to bring all your funds under one roof!

How Much Does WiseHarvesting Cost?

WiseHarvesting’s pricing is based on a sliding-to-flat-fee structure. So what does that mean?

When WiseHarvesting is turned on, the annual cost is 0.25% of your taxable assets (i.e. your non-IRA funds), charged monthly. HOWEVER, we cap the cost at $20 a month once your account reaches $96,000. This is a super unique approach to the financial industry, and it’s significant for three primary reasons:

  1. Most firms charge fees based on total assets, but with WiseHarvesting, you’re only charged based on the funds that are actually using the service. Why would we charge you a service fee on your IRA funds for something they’re not even using?
  2. Many financial institutions continue to collect more fees as their clients’ assets grow – even though the same amount of work is involved. But since WiseBanyan was designed to be fully aligned with our clients, we cap our monthly fee so our clients’ accounts can grow indefinitely while their fees won’t.
  3. The sliding part of our approach means anyone can start taking advantage of WiseHarvesting the minute they earn their first dollar!

Bottom Line

We designed WiseHarvesting to help you save more money than you spend over the long term. You shouldn’t have to worry about paying higher fees than the value your service provides in return. Because uh, frankly, that doesn’t make any sense. If you meet the right criteria, WiseHarvesting can be an awesome way to give yourself a nice cash bump in your tax return.

Photo by Danielle MacInnes on Unsplash

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Aliza Kellerman Aliza Kellerman is the Manager of Content Strategy at WiseBanyan. When she's not writing about the life and times of the IRA, she's hanging out with her pug.