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Life insurance is one of the most controversial and, in my opinion, convoluted personal finance topics today. Even once you get past the eternal debate of term vs. permanent life insurance, then you must move on to determining how much life insurance you need, what method do you use to calculate that amount, and who do you buy it from?

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We have been riding this wave of volatility long enough that 7%-9% market swings do not have the same shock and awe impact they had a few weeks ago.  This acceptance of the wild swings has provided me with an opportunity to step away from the initial emotional feelings that came from this roller coaster.... anger at the politicians in Washington, anger with the SEC (remember I had a visit paid to my firm last year by the SEC, and now looking back I can not help but wonder if they should have been using their resources on Wall Street instead of Fiduciary Planning firms like mine), amazement at how people claim to be victims when they purchased $300,000 homes making $60,000, and of course the big fish at the investment banks that packaged up the oh so appealing poo poo mortgage backed securities.  However, I am past all of that, and now focusing on where we are with this market and economy.

I want to discuss two quick points:

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Last show we talked about the silver lining of a financial crisis. This week I talk about the special opportunities that these down markets can offer. More specifically, if you did not catch it from the title of this post, I am talking about harvesting tax losses. More than likely, and probably by no fault of you or your adviser, you have experienced some significant losses this year. When the markets behave this way, it hurts everyone, even those investors doing everything right.

There is an old adage that says you never lose money in the markets until you sell. This is true, but should not be the only way you look at your taxable accounts. Now remember, harvesting only works in taxable accounts. Tax advantaged or tax deferred accounts won't allow you to harvest because of their special tax treatment of current income. What you want to if you have significant losses is sell out of your loss position and, not go to cash, but rather lock in those losses and immediately buy back into a similar type of asset or a different asset that you need in your allocation. There are special rules when implementing these strategies such as the wash sales rules that I describe in depth on the show.

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