Portfolio construction and tax-loss harvesting
Construction starts with the spending the portfolio must fund, not with an allocation model. Morningstar's current base case is a 3.9% starting withdrawal rate over 30 years at a 90% success rate, and notably it comes from a portfolio with only 30% to 50% in equities, because pushing equity higher raises volatility faster than it raises the sustainable rate (Morningstar). Households still accumulating can and should hold more equity; households drawing income usually should not.
Harvesting rules we follow
- Scan often, act rarely. Vanguard's optimal case scans daily; the practical version reviews weekly and harvests when a lot shows a loss worth more than the trading friction.
- Reinvest every tax saving. Vanguard identifies this as the single most important behavior driving harvesting value. Losses banked and spent add nothing.
- Respect the wash-sale rule. Stay out of substantially identical securities in the 30-day window on either side of the sale, including in an IRA and a spouse's account.
- Use the deduction, then carry forward. Net capital losses offset gains, then up to $3,000 of ordinary income, $1,500 if married filing separately, with the excess carried to later years per IRS Topic 409.
- Scale expectations honestly. A 47 basis point benefit on taxable equity assets is only 12 basis points portfolio-wide when a quarter of the portfolio is taxable equity.
Harvesting is deferral, not elimination. Selling at a loss lowers your basis, so the tax often returns on the eventual sale. It is genuinely valuable when the rate you save now exceeds the rate you pay later, when the position is held to a step-up in basis at death, or when losses offset a one-time gain such as a business sale, which Vanguard estimates at roughly 50 basis points for an owner selling a company.
Asset location and concentrated stock
Asset location
Same holdings, different accounts, different result. The general order: put taxable bonds, REITs, high-turnover strategies and TIPS in traditional IRAs and 401(k)s where interest is not taxed annually; keep broad-market equity index funds and ETFs in taxable accounts where qualified dividends and long-term gains get preferential rates and losses are harvestable; and reserve the Roth for your highest expected-return assets, because that growth is never taxed again and Roth IRAs have no required distributions during the owner's life (IRS).
Concentrated stock
Equity compensation and legacy holdings create the most common large risk we see. A workable unwind uses several tools at once rather than one big sale:
| Tool | What it does | Main constraint |
|---|---|---|
| Scheduled sales, 10b5-1 style | Removes timing judgment with a written plan and fixed dates | Requires committing in advance |
| Harvested losses elsewhere | Offsets realized gains dollar for dollar | Needs unrealized losses to exist |
| Charitable gift of appreciated shares | Avoids the gain entirely and may deduct fair market value | Only if you were giving anyway |
| Donor-advised fund in a high-income year | Bunches multiple years of giving into one deduction | Irrevocable once funded |
| Exchange or completion funds | Diversifies around the position rather than selling it | Cost, lockups and complexity |
| Hold to step-up in basis | Heirs receive a new basis at death | Concentration risk for the remaining years |
Every one of these interacts with your bracket, and a large realization can also raise Medicare surcharges two years later. In 2026, joint MAGI above $218,000 raises Part B from $202.90 to $284.10 a month per person and adds $14.50 to Part D, with tiers continuing to $689.90 above $750,000 (CMS).
Trust, estate and family governance
Documents fail in predictable ways, and almost none of them involve the drafting. The four we find most often: a revocable trust that was signed but never funded, so assets still pass through probate; beneficiary designations naming an ex-spouse or a deceased parent, which override the will regardless of what the will says; no successor trustee or an unwilling one; and no durable power of attorney, which turns a stroke into a court proceeding.
- Title and fund the trust. Deeds, taxable accounts and business interests retitled, with a written schedule of assets.
- Refresh beneficiary forms annually. Primary and contingent, on every retirement account, annuity and life policy.
- Coordinate the tax character of bequests. Leave traditional IRAs to charity or low-bracket heirs and Roth or stepped-up taxable assets to high-bracket heirs, since most non-spouse beneficiaries face a ten-year distribution window.
- Name people for the non-financial roles. Health care agent, guardian, digital asset access and a letter of instruction.
- Hold a family meeting. One hour a year, with the adult children, covering where documents live, who to call and the values behind the plan, not the balances.
Family governance sounds soft and behaves financially. Heirs who have met the advisor and understand the structure liquidate less, argue less and preserve more. For households making significant lifetime gifts, coordinating annual exclusion gifting, 529 funding for grandchildren and trust distributions in the same calendar keeps the tax return and the estate plan telling the same story.
We work alongside your CPA and estate attorney rather than replacing them; we do not draft documents or file returns. Advisory fees and any conflicts are disclosed in Item 5 and Item 10 of our Form ADV Part 2A brochure, and services vary by state.
Sources & further reading
- Kitces.com — Independent Financial Advisor Fee Comparison: All-In Costs
- Vanguard — Tax-loss harvesting: Why a personalized approach is important
- Morningstar — What's a Safe Retirement Withdrawal Rate for 2026?
- IRS — Topic no. 409, Capital gains and losses
- IRS — Retirement topics: required minimum distributions (RMDs)
- CMS — 2026 Medicare Parts A & B Premiums and Deductibles
- SEC Investor.gov — How Fees and Expenses Affect Your Investment Portfolio