Never Let a Tariff War Go to Waste – 2025 Edition

Dear Clients and Friends,

Given the recent market turmoil, I want to reiterate some strategies that we at MORWM consider when bear markets are upon us. During times like these, discipline and patience are paramount as we all weather the storm together. It’s easy to get lost in the finite details and miss the bigger picture, which includes your financial goals. Although we always consider the traditional and fact-based side of finance, the more subjective behavioral side grows in importance and popularity during these chaotic market gyrations.

While no one enjoys seeing the financial markets go down, this can be a strategic time to take advantage of market weakness and consider various financial planning strategies. The numbers below have been updated since our first “Never Let a Good Crisis Go to Waste” reading.

1) Boosting Contributions – When you shop for your groceries, you’re in constant pursuit of discounts. Why should investing be any different? A popular and common adage in investing is to “buy low, sell high.” By increasing your contributions during a bear market, whether it’s to a retirement plan (401K, 403B, IRA) or an investment account, you acquire additional shares on the cheap. When the market eventually recovers, you reap the rewards. This strategy also helps avoid trying to time the market, which is a popular behavioral bias when it comes to investing. (However, if anyone has a good algorithm for market timing, I’m all ears!)

2) Roth Conversions – A Roth conversion is when you transfer money from a pre-tax retirement plan (such as a traditional 401K or IRA) into a Roth 401K or IRA account. Since no taxes were ever paid while the funds were in the pre-tax retirement plan, the conversion is considered to be income and gets reported on your tax return. Aside from the tax-free growth of Roth accounts, the beauty of doing a Roth conversion when the markets are down is that you save some tax dollars on the conversion since your investments have depreciated. Some other perks of conversions are that Roth-style accounts aren’t subject to Required Minimum Distributions, you gain access to tax-free withdrawals after you meet certain requirements, and they are excellent for estate and legacy planning.

3) Gifting - For 2025, the annual exclusion amount was raised to $19,000 per person, or $38,000 per married couple. You can leverage your gifting ability by transferring shares from your portfolio, which allows the recipient to enjoy the market appreciation when the market rebounds. You can also help with educational goals by contributing to a 529 plan. If you really want to up the ante and turbocharge your gifting, you can make a lump-sum gift of five years’ worth of the exclusion amount. Based on the $19,000 limit, that’s $95,000 worth of gifts. The caveat is that you’re unable to gift any more funds until five years have passed.

The government also has a lifetime exemption amount of ~$13,990,000 per person, so make any gifts below this threshold and you won’t pay a penny in gift tax. Starting in 2026, the lifetime exclusion reverts to ~$6,995,000 per person and it becomes a use-it-or-lose-it situation.

4) Tax Loss Harvesting - This strategy allows you to sell investments in your nonretirement accounts at a loss so that you can offset any gains you’ve made from selling other investments. When you file your tax return, you’re allowed to report a capital loss and deduct up to $3,000 against your income if your losses outweigh your gains. Any losses in excess are carried forward to the following years. Over time, tax loss harvesting has been proven to help in terms of portfolio returns, reduce risk and enhance portfolio diversification (according to a white paper from Vanguard). Over the past few weeks, we at MOR Wealth Management have been very active and have harvested losses for our clients. Stay tuned a weekend reading that covers the ins and out of this

5) Time for a Gut Check? – This may be an opportune time to rethink your risk tolerance. During periods of market turbulence, people tend to reexamine and reevaluate how much risk they believe they can withstand. This is something we at MORWM review on an annual basis when we update your financial plan and review your portfolios.

6) Funding Accounts – If you have some cash sitting on the sidelines not earning any interest, consider putting that money to work! If you have a child that has earned income, you can open a custodial account (we prefer a Roth IRA for kids) and fund their account so that they can get a head start on their retirement journey. If you utilize a Health Savings Account, consider investing your hard-working dollars. According to the Employee Benefit Research Institute (EBRI), only 13% of accountholders have invested their funds as of 2022.

As fraught as they are, market declines are an inevitable part of the investing game. That’s why it’s important to integrate all aspects of your financial plan with your investments, so that when market downturns present themselves, you’re ready to pounce and take advantage of opportunities. Even during market declines, opportunities such as increased tax savings and leveraging unused cash are still positives in your overall financial journey.

Onward and Upward,

Devin