Accretive On: Six Planning Strategies to Consider in Difficult Markets

March 11, 2020

During turbulent times in the market it’s often hard to redirect your attention away from the media and refocus on things that are important, like your long-term financial goals and objectives. In response, we’re going to share 6 financial planning strategies to consider during market downturns.

  1. Reassess Risk – The market has appreciated significantly since the 2008/2009 recovery. Last year left many investors wondering if they’re taking enough risk. Now that we’re experiencing a pullback, investors are wondering if they have too much risk in their portfolios. Use this time to reassess and reappraise your expectations, and make sure those expectations and goals are in line with your long-term financial plan.
  1. Roth Conversions – Use the market pullback to your advantage. While it’s painful to think about paying more in taxes during turbulent times, and you believe the downturn you’re experiencing is temporary, then it may be an opportunity to convert assets at depressed prices. By converting pre-tax IRA assets into a Roth IRA, you pay tax on the conversion with after-tax money, and all of the growth in the Roth IRA is now tax-free. Note – the Roth IRA account has to be open for 5 years before you are permitted to withdraw investment earnings; otherwise, you will be subject to a 10% penalty on the investment earnings.

          Example: You own shares of stock valued at $100, but due to a temporary setback in the market they’re now only worth $80. You should           consider converting the $80 into your Roth, pay tax, and all of the growth above $80 is tax free in the Roth IRA.

  1. 529 Plan Contributions – They say cash is king, and that’s especially true in market corrections. If you have a regular savings goal into a child or grandchild’s 529 plan, then consider making a larger than normal contribution or accelerate your contribution strategy during market corrections.
  1. Gifting Out of Your Estate – The 2020 lifetime gift tax exemption amount is $11.58MM per person. If you’re considering making a large gift to a child, grandchild, or trust, then consider making more significant gifts when asset prices are depressed. After you make the gift you are getting all of the appreciation out of your estate since you hopefully gifted assets that are only temporarily lower in price.
  1. Grantor Retained Annuity Trusts (GRAT) – Similar to #4, a GRAT is a trust established for a specified period of time, and to the extent the growth in the assets exceeds the IRS 7520 rate, then the appreciation goes to your beneficiaries without reducing your lifetime gift exemption amount.  

          Example: You fund a two-year GRAT with $1,000,000 at March 2020’s Section 7520 rate of 1.8% and the assets grow by 8%/year. At the end           of the first year you will receive a payment back to yourself of $513,531. At the end of the second year you’ll receive a payment back to           yourself in the same amount. Any remainder will pass to the beneficiaries named in the trust. In this example it’s slightly more than           $98,000.

  1. Stay Focused on Savings Goals – Market downturns are ultimately a saver’s friend.  The media, friends, colleagues, and family may lead you to believe it’s easy to time the market. Trying to time the market is a loser’s game. If you have savings goals in place, then stay focused on them as they are likely in place for the long term. Averaging into the market in a disciplined manner is still one of the best long-term savings strategies one can employ. Don’t lose sight of the long term despite the short-term setback.

Not all of these strategies are applicable or appropriate for everyone, and some of them require the assistance of a tax professional or legal counsel. If you have questions on whether they’re applicable to you then please feel free to reach out to us and we’d be pleased to have a conversation with you.

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Accretive Wealth Partners, LLC (“Accretive Wealth”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where Accretive Wealth and its representatives are properly licensed or exempt from licensure.This commentary is a general communication and the information contained herein is being provided for educational and informational purposes only. This commentary does not constitute investment advice and it should not be relied on as such. It is not intended to be and should not be considered a solicitation to buy or an offer to sell a security or a recommendation for any specific investment product, strategy, security or any other purpose. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. Any examples used are generic, hypothetical and for illustration purposes only. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor’s own situation.Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions that are solely the opinion of Accretive Wealth and should not be construed as indicative of actual events that will occur.Any performance presented herein is for illustrative purposes only. Past performance shown is not indicative of future results, which could differ substantially.  Current data may differ from data quoted.The views and strategies described herein may not be suitable for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities or gain exposure to such asset classes and financial markets.Information contained herein that is not proprietary to Accretive Wealth has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Accretive Wealth.For additional information, please visit our website at